EXHIBIT (a)(1)
Offer to Purchase for Cash
AIMCO
AIMCO Properties, L.P.
is offering to purchase limited partnership units in
U.S. REALTY PARTNERS LIMITED PARTNERSHIP
FOR $2.35 PER UNIT IN CASH
Upon the terms and subject to the conditions set forth herein, we will accept
units validly tendered in response to our offer. If units are validly tendered
(and not properly withdrawn) and the purchase of those units would result in
there being fewer than 320 unitholders in your partnership, we will not purchase
any of the units tendered, terminate the offer and return all units to the
tendering parties. See "The Offer--Section 2. Acceptance for Payment and Payment
for Units" and "Section 17. Conditions of the Offer."
Our offer and your withdrawal rights will expire at midnight, New York City
time, on December 31, 2003, unless we extend the deadline.
You will not pay any partnership transfer fees if you tender your units. You
will pay any other fees and costs, including any transfer taxes.
Our offer price will be reduced by the amount of any distributions subsequently
made by your partnership prior to the expiration of our offer.
SEE "RISK FACTORS" BEGINNING ON PAGE 3 OF THIS OFFER TO PURCHASE FOR A
DESCRIPTION OF RISK FACTORS THAT YOU SHOULD CONSIDER IN CONNECTION WITH OUR
OFFER, INCLUDING THE FOLLOWING:
o We determined the offer price of $2.35 per unit without any arms-length
negotiations. Accordingly, our offer price may not reflect the fair market
value of your units.
o Your general partner and the residential property manager are affiliates of
ours, and the general partner therefore has substantial conflicts of
interest with respect to our offer.
o We are making this offer with a view to making a profit and, therefore,
there is a conflict between our desire to purchase your units at a low
price and your desire to sell your units at a high price.
o Continuation of your partnership will result in our affiliates continuing
to receive management fees from your partnership. Such fees would not be
payable if your partnership were liquidated.
(Continued on next page)
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If you decide to accept our offer, you should complete and sign the
enclosed acknowledgment and agreement as instructed in the letter of
transmittal, which is attached to this offer to purchase as Annex II. The signed
acknowledgment and agreement and any other documents required by the letter of
transmittal must be mailed or delivered to The Altman Group, Inc., which is
acting as Information Agent in connection with our offer, at one of its
addresses set forth on the back cover of this offer to purchase. QUESTIONS AND
REQUESTS FOR ASSISTANCE OR FOR ADDITIONAL COPIES OF THIS OFFER TO PURCHASE, THE
ACKNOWLEDGMENT AND AGREEMENT, OR THE LETTER OF TRANSMITTAL MAY BE DIRECTED TO
THE INFORMATION AGENT AT (800) 217-9608.
December 3, 2003
(Continued from prior page)
o It is possible that we may conduct a future offer at a higher price,
although we have no obligation or current intention to do so.
o For any units that we acquire from you, you will not receive any future
distributions from operating cash flow of your partnership or upon a sale
or refinancing of property owned by your partnership.
o The general partner makes no recommendation as to whether you should tender
your units.
o We and our affiliates own a majority of the outstanding units of your
partnership. As a result, we and our affiliates control voting decisions
with respect to your partnership, including but not limited to the removal
of the general partner, amendments to the partnership agreement, and the
sale of all or substantially all of your partnership's assets.
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THE INFORMATION AGENT FOR THE OFFER IS:
THE ALTMAN GROUP, INC.
By Mail: By Overnight Courier: By Hand:
1275 Valley Brook Avenue 1275 Valley Brook Avenue 1275 Valley Brook Avenue
Lyndhurst, New Jersey 07071 Lyndhurst, New Jersey 07071 Lyndhurst, New Jersey 07071
(800) 217-9608 (800) 217-9608 (800) 217-9608
By Facsimile: By Telephone:
(201) 460-0050 TOLL FREE (800) 217-9608
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TABLE OF CONTENTS
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Page
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SUMMARY TERM SHEET................................................................................................1
RISK FACTORS......................................................................................................3
We did not obtain a third-party valuation or appraisal and did not determine our offer price through
arms-length negotiation......................................................................................3
Our offer price may not represent fair market value............................................................3
Our offer price does not reflect future prospects..............................................................3
Our offer price may be less than liquidation value.............................................................3
Continuation of the partnership; no time frame regarding sale of partnership interests or properties...........3
Holding your units may result in greater future value..........................................................4
Your partnership may continue beyond its current termination date..............................................4
Your general partner faces conflicts of interest with respect to the offer.....................................4
Your general partner is not making a recommendation with respect to this offer.................................4
Your general partner faces conflicts of interest relating to management fees...................................4
We may make a future offer at a higher price...................................................................4
You will recognize taxable gain on a sale of your units and your tax liability may exceed our offer
price........................................................................................................5
If you tender units to us in this offer, you will no longer be entitled to distributions from your
partnership..................................................................................................5
We control your partnership....................................................................................5
You could recognize gain in the event of a reduction in your partnership's liabilities.........................5
We may delay our acceptance of, and payment for, your units....................................................5
THE OFFER.........................................................................................................6
Section 1. Terms of the Offer; Expiration Date; Proration..................................................6
Section 2. Acceptance for Payment and Payment for Units....................................................6
Section 3. Procedure for Tendering Units...................................................................7
Section 4. Withdrawal Rights..............................................................................10
Section 5. Extension of Tender Period; Termination; Amendment; No Subsequent Offering Period..............10
Section 6. Material Federal Income Tax Matters............................................................11
Section 7. Effects of the Offer...........................................................................14
Section 8. Information Concerning Us and Certain of Our Affiliates........................................15
Section 9. Background and Reasons for the Offer...........................................................18
Section 10. Position of the General Partner of your Partnership with respect to the Offer..................22
Section 11. Conflicts of Interest and Transactions with Affiliates.........................................23
Section 12. Future Plans of the Purchaser..................................................................24
Section 13. Certain Information Concerning Your Partnership................................................25
Section 14. Voting Power...................................................................................30
Section 15. Source of Funds................................................................................31
Section 16. Dissenters' Rights.............................................................................31
Section 17. Conditions of the Offer........................................................................31
Section 18. Certain Legal Matters..........................................................................33
Section 19. Fees and Expenses..............................................................................34
ANNEX I - OFFICERS AND DIRECTORS..................................................................................1
ANNEX II - LETTER OF TRANSMITTAL..................................................................................1
</Table>
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SUMMARY TERM SHEET
This summary term sheet highlights the most material information
regarding our offer, but it does not describe all of the details thereof. We
urge you to read this entire offer to purchase, which contains the full details
of our offer. We have also included in the summary term sheet references to the
sections of this offer to purchase where a more complete discussion may be
found.
o THE OFFER. Subject to the terms hereof, we are offering to acquire
depositary unit certificates ("units") of U.S. Realty Partners Limited
Partnership, your partnership, for $2.35 per unit in cash. See "The
Offer--Section 1. Terms of the Offer; Expiration Date; Proration", "The
Offer--Section 7. Effects of the Offer" and "The Offer--Section 9.
Background and Reasons for the Offer--Determination of Offer Price."
o FACTORS IN DETERMINING THE OFFER PRICE. In determining the offer price
per unit we principally considered:
o The per unit liquidation value of your partnership, which we
calculated to be $2.35, based on the operating results of your
partnership for the nine months ended September 30, 2003,
annualized, as capitalized using the direct capitalization
method and using a capitalization rate of 10.4% with respect
to Twin Lakes Apartments and 10.24% with respect to Governor's
Park Apartments.
o Prices at which units have recently sold to the extent such
information is available to us.
o The absence of a trading market for the units. See "The
Offer--Section 9. Background and Reasons for the
Offer--Comparison of Offer Price to Alternative
Consideration."
o EXPIRATION DATE. Our offer expires on December 31, 2003, unless
extended, and you can tender your units until our offer expires. See
"The Offer--Section 1. Terms of the Offer; Expiration Date; Proration."
o RIGHT TO EXTEND THE EXPIRATION DATE. We can extend the offer in our
sole discretion, and we will either issue a press release or send you a
notice of any such extension. See "The Offer--Section 5. Extension of
Tender Period; Termination; Amendment; No Subsequent Offering Period."
o HOW TO TENDER. To tender your units, complete the accompanying
acknowledgment and agreement and send it, along with any other
documents required by the letter of transmittal which is attached to
this offer to purchase as Annex II, to the Information Agent, The
Altman Group, Inc., at one of the addresses set forth on the back of
this offer to purchase. See "The Offer--Section 3. Procedure for
Tendering Units."
o WITHDRAWAL RIGHTS. You can withdraw your units at any time prior to the
expiration of the offer, including any extensions. In addition, you can
withdraw your units at any time on or after January 30, 2004 if we have
not already accepted units for purchase and payment. See "The
Offer--Section 4. Withdrawal Rights."
o HOW TO WITHDRAW. To withdraw your units, you need to send a notice of
withdrawal to the Information Agent, identifying yourself and the units
to be withdrawn. See "The Offer--Section 4. Withdrawal Rights."
o TAX CONSEQUENCES. Your sale of units in this offer will be a taxable
transaction for federal income tax purposes. The consequences to each
unitholder may vary and you should consult your tax advisor on the
precise tax consequences to you. See "The Offer--Section 6. Material
Federal Income Tax Matters."
o AVAILABILITY OF FUNDS. We currently have the necessary cash and a line
of credit to consummate the offer. See "The Offer--Section 15. Source
of Funds."
o CONDITIONS OF THE OFFER. There are a number of conditions of our offer,
including our having adequate cash and borrowings under a line of
credit, the absence of competing tender offers, the absence of certain
changes in your partnership, the absence of certain changes in the
financial markets, and there being at least
320 unitholders outstanding upon the consummation of the offer. See
"The Offer--Section 7. Effects of the Offer," and "Section 17.
Conditions of the Offer."
o REMAINING AS A UNITHOLDER. If you do not tender your units, you will
continue to remain a unitholder in your partnership. We have no plans
to alter the operations, business or financial position of your
partnership or to take your partnership private. See "The
Offer--Section 7. Effects of the Offer."
o WHO WE ARE. We are AIMCO Properties, L.P., the main operating
partnership of Apartment Investment and Management Company, a New York
Stock Exchange listed company. See "The Offer--Section 8. Information
Concerning Us and Certain of Our Affiliates." We and our affiliates
currently own 769,519 units, or 62.97%, of the outstanding units of
your partnership.
o CONFLICTS OF INTEREST; MANAGEMENT FEES. Our affiliate receives fees for
managing your partnership's residential properties and the general
partner of your partnership (which is also our affiliate) is entitled
to receive asset management fees and reimbursement of certain expenses
involving your partnership and its properties. As a result, a conflict
of interest exists between continuing the partnership and receiving
these fees, and the liquidation of the partnership and the termination
of these fees because if your partnership were liquidated, your general
partner would not continue to receive the fees it currently receives.
However, we are of the opinion that the liquidation of your partnership
is not in the best interest of the unitholders and therefore are of the
opinion that the fees paid to the general partner would continue even
if the offer were not consummated. See "The Offer--Section 11.
Conflicts of Interest and Transactions with Affiliates" and "The
Offer--Section 13. Certain Information Concerning Your Partnership."
o NO GENERAL PARTNER RECOMMENDATION. The general partner of your
partnership makes no recommendation as to whether you should tender or
refrain from tendering your units, and each unitholder should make his
or her own decision whether or not to tender. See "The Offer--Section
10. Position of the General Partner of your Partnership with respect to
the Offer."
o NO SUBSEQUENT OFFERING PERIOD. We do not intend to have a subsequent
offering period after the expiration date of the initial offering
period (including any extensions). See "The Offer--Section 5. Extension
of Tender Period; Termination; Amendment; No Subsequent Offering
Period."
o ADDITIONAL INFORMATION. For more assistance in tendering your units,
please contact our Information Agent at one of the addresses or the
telephone number set forth on the back cover page of this offer to
purchase.
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RISK FACTORS
Before deciding whether or not to tender any of your units, you should
consider carefully the following risks and disadvantages of the offer:
WE DID NOT OBTAIN A THIRD-PARTY VALUATION OR APPRAISAL AND DID NOT DETERMINE OUR
OFFER PRICE THROUGH ARMS-LENGTH NEGOTIATION.
We did not base our valuation of the properties owned by your
partnership on any third-party appraisal or valuation. We established the terms
of our offer without any arms-length negotiation. The terms of the offer could
differ if they were subject to independent third-party negotiations. It is
uncertain whether our offer price reflects the value that would be realized upon
a sale of your units to a third party.
OUR OFFER PRICE MAY NOT REPRESENT FAIR MARKET VALUE.
There is no established or regular trading market for your units, nor
is there another reliable standard for determining the fair market value of the
units. Our offer price does not necessarily reflect the price that you would
receive upon a sale of your units in an open market. Such prices could be higher
than our offer price. You should note in particular that we purchased 300 units
on June 20, 2002, in a private placement for $1.00 per unit. Also, units of your
partnership have been purchased since January 1, 2001 in secondary markets for
prices up to $3.50 per unit as reported by The Partnership Spectrum (see
"Section 9. Background and Reasons for the Offer - Prices on Secondary Markets")
and by us in tender offers for prices up to $1.00 per unit (see "Section 9.
Background and Reasons for the Offer - Prior Tender Offers").
OUR OFFER PRICE DOES NOT REFLECT FUTURE PROSPECTS.
Our offer price is based on your partnership's pro forma property
income for the nine months ended September 30, 2003, annualized. It does not
ascribe any value to potential future improvements in the operating performance
of your partnership's residential properties.
OUR OFFER PRICE MAY BE LESS THAN LIQUIDATION VALUE.
The actual proceeds obtained from liquidation are highly uncertain and
could be more or less than our estimate. Other persons could derive different
estimates of the liquidation value. If your partnership were to sell its assets
and liquidate, the value of the assets would be determined through negotiations
with third parties, who may use different valuation methods to determine the
price of your partnership's assets. Accordingly, our offer price could be higher
or lower than the net proceeds that you would realize upon an actual liquidation
of your partnership.
CONTINUATION OF THE PARTNERSHIP; NO TIME FRAME REGARDING SALE OF PARTNERSHIP
INTERESTS OR PROPERTIES.
Your general partner, which is our affiliate, is proposing to continue
to operate your partnership and not to attempt to liquidate it at the present
time. Your partnership's prospectus pursuant to which units in your partnership
were sold, indicated that your partnership was intended to be self-liquidating,
that it was anticipated that the partnership's properties would be sold within
five to nine years of their acquisition, provided market conditions permit, and
that it was anticipated that the partnership would be dissolved within twelve
years after the sale of the units. The prospectus also indicated that there
would be no assurance that the partnership would be able to so liquidate and
that, unless sooner terminated as provided in the partnership agreement, the
existence of the partnership would continue until December 31, 2005. It is not
known when the properties owned by your partnership may be sold. The units in
the partnership are illiquid, and it may be difficult to sell your investment in
the partnership in the future. The general partner of your partnership
continually considers whether a property should be sold or otherwise disposed of
after consideration of relevant factors, including prevailing economic
conditions, availability of favorable financing and tax considerations, with a
view to achieving maximum capital appreciation for your partnership. At the
current time, the general partner of your partnership is of the opinion that a
sale of the properties would not be advantageous given market conditions, the
condition of the properties and tax considerations. In particular, the general
partner considered the changes in the local rental market, the potential for
appreciation in the value of a property and the tax consequences to the partners
on a sale of property. Although the
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partnership agreement currently provides that the partnership will terminate on
December 31, 2005, we do not currently expect that any of your partnership's
properties will be sold in the foreseeable future, and we cannot predict when
your partnership's properties will be sold or otherwise disposed of.
HOLDING YOUR UNITS MAY RESULT IN GREATER FUTURE VALUE.
The partnership agreement currently provides that the partnership will
terminate on December 31, 2005, but we could amend the partnership agreement.
Although a liquidation of your partnership is not otherwise contemplated, you
might receive more value if you retain your units until your partnership is
liquidated. At the current time, the general partner of your partnership is of
the opinion that a sale of the properties would not be advantageous given market
conditions, the condition of the properties and tax considerations. If your
partnership's properties were sold in the future and the net proceeds were
distributed to the partners of your partnership, the amount of such distribution
might exceed our offer price.
YOUR PARTNERSHIP MAY CONTINUE BEYOND ITS CURRENT TERMINATION DATE.
Your partnership's agreement of limited partnership provides for the
termination of your partnership on December 31, 2005. However, because we
control a majority of the limited partnership interests, we have the power to
amend your partnership agreement to extend the term of your partnership without
the consent of other limited partners or unitholders. While we have no present
intention to cause such an amendment, we may decide to propose such an
amendment, based on a consideration of relevant factors such as prevailing
economic conditions and tax considerations. In general, we will vote the limited
partnership units owned by us in whatever manner we deem to be in our best
interests, which may not be in the interest of other partners or unitholders.
YOUR GENERAL PARTNER FACES CONFLICTS OF INTEREST WITH RESPECT TO THE OFFER.
The general partner of your partnership is our affiliate and,
therefore, has substantial conflicts of interest with respect to our offer. We
are making this offer with a view to making a profit. There is a conflict
between our desire to purchase your units at a low price and your desire to sell
your units at a high price. We determined our offer price without negotiation
with any other party, including any general or limited partner or unitholder.
YOUR GENERAL PARTNER IS NOT MAKING A RECOMMENDATION WITH RESPECT TO THIS OFFER.
The general partner of your partnership makes no recommendation as to
whether or not you should tender or refrain from tendering your units. You must
make your own decision whether or not to participate in the offer based upon a
number of factors, including several factors that may be personal to you, such
as your financial position, your need or desire for liquidity, your preferences
regarding the timing of when you might wish to sell your units, other financial
opportunities available to you, and your tax position and the tax consequences
to you of selling your units.
YOUR GENERAL PARTNER FACES CONFLICTS OF INTEREST RELATING TO MANAGEMENT FEES.
Because we or our affiliates receive fees for managing your partnership
and its residential properties, a conflict of interest exists between continuing
the partnership and receiving such fees, and the liquidation of the partnership
and the termination of such fees. Also, a decision of the limited partners of
your partnership to remove, for any reason, the general partner of your
partnership or the residential property manager of the properties owned by your
partnership would result in a decrease or elimination of the substantial fees to
which they are entitled for services provided to your partnership.
WE MAY MAKE A FUTURE OFFER AT A HIGHER PRICE.
It is possible that we may conduct a future offer at a higher price,
although we have no obligation or current intention to do so. Such a decision
will depend on, among other things, the performance of the partnership,
prevailing economic conditions, and our interest in acquiring additional units.
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YOU WILL RECOGNIZE TAXABLE GAIN ON A SALE OF YOUR UNITS AND YOUR TAX LIABILITY
MAY EXCEED OUR OFFER PRICE.
Your sale of units for cash will be a taxable sale, with the result
that you will recognize taxable gain or loss measured by the difference between
the amount realized on the sale and your adjusted tax basis in the units of
limited partnership interest of your partnership you transfer to us. The "amount
realized" with respect to a unit of limited partnership interest you transfer to
us will be equal to the sum of the amount of cash received by you for the unit
sold pursuant to the offer plus the amount of partnership liabilities allocable
to the unit. The particular tax consequences for you of our offer will depend
upon a number of factors related to your tax situation, including your tax basis
in the units you transfer to us, whether you dispose of all of your units, and
whether you have available suspended passive losses, credits or other tax items
to offset any gain recognized as a result of your sale of your units. Therefore,
depending on your basis in the units and your tax position, your taxable gain
and any tax liability resulting from a sale of units to us pursuant to the offer
could exceed our offer price. Because the income tax consequences of tendering
units will not be the same for everyone, you should consult your own tax advisor
to determine the tax consequences of the offer to you.
IF YOU TENDER UNITS TO US IN THIS OFFER, YOU WILL NO LONGER BE ENTITLED TO
DISTRIBUTIONS FROM YOUR PARTNERSHIP.
If you tender your units in response to our offer, you will transfer to
us all right, title and interest in and to all of the units we accept, and the
right to receive all distributions in respect of such units on and after the
date on which we accept such units for purchase. Accordingly, for any units that
we acquire from you, you will not receive any future distributions from
operating cash flow of your partnership or upon a sale or refinancing of the
properties owned by your partnership.
WE CONTROL YOUR PARTNERSHIP.
Decisions with respect to the day-to-day management of your partnership
are the responsibility of the general partner. Because the general partner of
your partnership is our affiliate, we control the management of your
partnership. Under your partnership's agreement of limited partnership, limited
partners holding a majority of the outstanding units must approve certain
extraordinary transactions, including the removal of the general partner, some
amendments to the partnership agreement and the sale of all or substantially all
of your partnership's assets. We and our affiliates own 769,519 or 62.97%, of
the outstanding limited partner units of your partnership. Because we and our
affiliates own a majority of the outstanding units, we have the ability to
control votes of the limited partners.
YOU COULD RECOGNIZE GAIN IN THE EVENT OF A REDUCTION IN YOUR PARTNERSHIP'S
LIABILITIES.
Generally, a decrease in your share of partnership liabilities is
treated, for federal income tax purposes, as a deemed cash distribution.
Although the general partner of your partnership does not have any current plan
or intention to reduce the liabilities of your partnership, it is possible that
future economic, market, legal, tax or other considerations may cause the
general partner to reduce the liabilities of your partnership. If you retain all
or a portion of your units and the liabilities of your partnership were to be
reduced, you would be treated as receiving a hypothetical distribution of cash
resulting from a decrease in your share of the liabilities of the partnership.
Any such hypothetical distribution of cash would be treated as a nontaxable
return of capital to the extent of your adjusted tax basis in your units and
thereafter as gain. Gain recognized by you on the disposition of retained units
with a holding period of 12 months or less may be classified as short-term
capital gain and subject to taxation at ordinary income tax rates.
WE MAY DELAY OUR ACCEPTANCE OF, AND PAYMENT FOR, YOUR UNITS.
We reserve the right to extend the period of time during which our
offer is open and thereby delay acceptance for payment of any tendered units.
The offer may be extended indefinitely, and no payment will be made in respect
of tendered units until the expiration of the offer and acceptance of units for
payment.
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THE OFFER
1. TERMS OF THE OFFER; EXPIRATION DATE; PRORATION
We are offering to acquire all limited partnership units in your
partnership for $2.35 per unit in cash, upon the terms and subject to the
conditions of the offer. The purchase price per unit will be automatically
reduced by the aggregate amount of distributions per unit, if any, made by your
partnership on or after the commencement of our offer and prior to the date on
which we acquire your units pursuant to our offer. If the offer price is reduced
in this manner, we will notify you and, if necessary, we will extend the offer
period so that you will have at least ten business days from the date of our
notice to withdraw the units.
If, prior to the expiration date, we increase the consideration offered
pursuant to the offer, everyone whose units are accepted in the offer will
receive the increased consideration, regardless of whether the units were
tendered prior to the increase in offer consideration.
Upon the terms and subject to the conditions of the offer, we will
accept (and thereby purchase) units that are validly tendered on or prior to the
expiration date and not withdrawn in accordance with the procedures set forth in
"The Offer--Section 4. Withdrawal Rights." For purposes of the offer, the term
"expiration date" shall mean midnight, New York City time, on December 31, 2003,
unless we in our sole discretion shall have extended the period of time for
which the offer is open, in which event the term "expiration date" shall mean
the latest time and date on which the offer, as extended by us, shall expire.
See "The Offer--Section 5. Extension of Tender Period; Termination; Amendment;
No Subsequent Offering Period," for a description of our right to extend the
period of time during which the offer is open and to amend or terminate the
offer.
The offer is not conditioned upon any minimum number of units being
tendered. However, the offer is conditioned on satisfaction of certain
conditions, including among other things, there being at least 320 unitholders
remaining after our purchase of all units validly tendered and not properly
withdrawn prior to the expiration date in accordance with the procedures set
forth in "The Offer--Section 4. Withdrawal Rights." See "The Offer--Section 17.
Conditions of the Offer," which sets forth in full the conditions of the offer.
We reserve the right (but in no event shall we be obligated), in our reasonable
discretion, to waive any or all of those conditions. If, on or prior to the
expiration date, any or all of the conditions have not been satisfied or waived,
we reserve the right to (i) decline to purchase any of the units tendered,
terminate the offer and return all tendered units to tendering parties, (ii)
waive all the unsatisfied conditions and purchase, subject to the terms of the
offer, any and all units validly tendered, (iii) extend the offer and, subject
to your withdrawal rights, retain the units that have been tendered during the
period or periods for which the offer is extended, or (iv) amend the offer. For
administrative purposes, the transfer of units will be effective as of November
30, 2003.
This offer is being mailed on or about December 3, 2003 to the persons
shown by your partnership's records to have been unitholders or, in the case of
units owned of record by individual retirement accounts and qualified plans,
beneficial owners of units as of December 2, 2003.
2. ACCEPTANCE FOR PAYMENT AND PAYMENT FOR UNITS.
Upon the terms and subject to the conditions of the offer, we will
purchase, by accepting for payment, and will pay for, units validly tendered as
promptly as practicable following the expiration date. A tendering beneficial
owner of units whose units are owned of record by an individual retirement
account or other qualified plan will not receive direct payment of the offer
price; rather, payment will be made to the custodian of such account or plan. In
all cases, payment for units purchased pursuant to the offer will be made only
after timely receipt by the Information Agent of a properly completed and duly
executed acknowledgment and agreement and other documents required by the letter
of transmittal. The purchase price per unit will automatically be reduced by the
aggregate amount of distributions per unit, if any, made by your partnership on
or after the commencement of our offer and prior to the date on which we acquire
your units pursuant to our offer. See "The Offer--Section 3. Procedure for
Tendering Units." UNDER NO CIRCUMSTANCES WILL INTEREST BE PAID ON THE OFFER
PRICE BY REASON OF ANY DELAY IN MAKING SUCH PAYMENT.
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We will, upon the terms and subject to the conditions of the offer,
accept for payment and pay for units validly tendered. In some circumstances, we
may pay you the full offer price and accept an assignment of your right to
receive distributions and other payments and an irrevocable proxy in respect of
the units and defer, perhaps indefinitely, the transfer of ownership of the
units on the partnership books.
Your partnership's agreement of limited partnership prohibits any
transfer of an interest if such transfer, together with all other transfers
during the preceding 12 months, would cause 50% or more of the total interest in
capital and profits of your partnership to be transferred within such 12-month
period. Because we or our affiliates control more than 50% of the total
partnership interests, we do not expect that this prohibition will be triggered.
If the number of units validly tendered and not properly withdrawn on
or prior to the expiration date is less than or equal to the maximum number we
can purchase under the partnership agreement, we will purchase all units so
tendered and not withdrawn, upon the terms and subject to the conditions of the
offer. But if more units than can be purchased under the partnership agreement
are so tendered and not withdrawn, we will accept for payment and pay for those
units so tendered which do not violate the terms of your partnership agreement,
pro rata according to the number of units so tendered, with appropriate
adjustments to avoid purchases of fractional units.
If proration of tendered units is required, then, subject to our
obligation under Rule 14e-1(c) under the Securities Exchange Act of 1934 (the
"Exchange Act") to pay unitholders the purchase price in respect of units
tendered or return those units promptly after termination or withdrawal of the
offer, we do not intend to pay for any units accepted for payment pursuant to
the offer until the final proration results are known. Notwithstanding any such
delay in payment, no interest will be paid on the offer price.
For purposes of the offer, we will be deemed to have accepted for
payment pursuant to the offer, and thereby purchased, validly tendered units,
if, as and when we give verbal or written notice to the Information Agent of our
acceptance of those units for payment pursuant to the offer. Payment for units
accepted for payment pursuant to the offer will be made through the Information
Agent, which will act as agent for tendering unitholders for the purpose of
receiving cash payments from us and transmitting cash payments to tendering
unitholders.
If any tendered units are not accepted for payment by us for any
reason, the acknowledgment and agreement with respect to such units not
purchased may be destroyed by the Information Agent or us or returned to you.
You may withdraw tendered units until the expiration date (including any
extensions). In addition, if we have not accepted units for payment by January
30, 2004, you may then withdraw any tendered units. After the expiration date,
the Information Agent may, on our behalf, retain tendered units, and those units
may not be otherwise withdrawn, if, for any reason, acceptance for payment of,
or payment for, any units tendered pursuant to the offer is delayed or we are
unable to accept for payment, purchase or pay for units tendered pursuant to the
offer. Any such action is subject, however, to our obligation under Rule
14e-1(c) under the Exchange Act to pay you the offer price in respect of units
tendered or return those units promptly after termination or withdrawal of the
offer.
We reserve the right to transfer or assign, in whole or in part, to one
or more of our affiliates, the right to purchase units tendered pursuant to the
offer, but no such transfer or assignment will relieve us of our obligations
under the offer or prejudice your rights to receive payment for units validly
tendered and accepted for payment pursuant to the offer.
3. PROCEDURE FOR TENDERING UNITS.
VALID TENDER. To validly tender units pursuant to the offer, a properly
completed and duly executed acknowledgment and agreement and any other documents
required by the letter of transmittal attached as Annex II must be received by
the Information Agent, at one of its addresses set forth on the back cover of
this offer to purchase, on or prior to the expiration date. You may tender all
or any portion of your units. No alternative, conditional or contingent tenders
will be accepted.
SIGNATURE REQUIREMENTS. If the acknowledgment and agreement is signed
by the registered holder of a unit and payment is to be made directly to that
holder, then no signature guarantee is required on the acknowledgment and
agreement. Similarly, if a unit is tendered for the account of a member firm of
a registered national securities exchange, a member of the National Association
of Securities Dealers, Inc. or a commercial bank, savings bank,
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credit union, savings and loan association or trust company having an office,
branch or agency in the United States (each an "Eligible Institution"), no
signature guarantee is required on the acknowledgment and agreement. However, in
all other cases, all signatures on the acknowledgment and agreement must be
guaranteed by an Eligible Institution.
In order for you to tender in the offer, your units must be validly
tendered and not withdrawn on or prior to the expiration date.
THE METHOD OF DELIVERY OF THE ACKNOWLEDGMENT AND AGREEMENT AND ALL
OTHER REQUIRED DOCUMENTS IS AT YOUR OPTION AND RISK, AND DELIVERY WILL BE DEEMED
MADE ONLY WHEN ACTUALLY RECEIVED BY THE INFORMATION AGENT. IF DELIVERY IS BY
MAIL, REGISTERED MAIL WITH RETURN RECEIPT REQUESTED IS RECOMMENDED. IN ALL
CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ASSURE TIMELY DELIVERY.
APPOINTMENT AS PROXY; POWER OF ATTORNEY. By executing the
acknowledgment and agreement, you are irrevocably appointing us and our
designees as your proxy, in the manner set forth in the acknowledgment and
agreement and each with full power of substitution, to the fullest extent of
your rights with respect to the units tendered by you and accepted for payment
by us. Each such proxy shall be considered coupled with an interest in the
tendered units. Such appointment will be effective when, and only to the extent
that, we accept the tendered units for payment. Upon such acceptance for
payment, all prior proxies given by you with respect to the units will, without
further action, be revoked, and no subsequent proxies may be given (and if given
will not be effective). We and our designees will, as to those units, be
empowered to exercise all voting and other rights as a unitholder as we, in our
sole discretion, may deem proper at any meeting of unitholders, by written
consent or otherwise. We reserve the right to require that, in order for units
to be deemed validly tendered, immediately upon our acceptance for payment of
the units, we must be able to exercise full voting rights with respect to the
units, including voting at any meeting of unitholders and/or unitholders then
scheduled or acting by written consent without a meeting. By executing the
acknowledgment and agreement, you agree to execute all such documents and take
such other actions as shall be reasonably required to enable the units tendered
to be voted in accordance with our directions. The proxy and power of attorney
granted by you to us will remain effective and be irrevocable for the maximum
period permitted by applicable law.
By executing the acknowledgment and agreement, you also irrevocably
constitute and appoint us and our designees as your attorneys-in-fact, each with
full power of substitution, to the full extent of your rights with respect to
the units tendered by you and accepted for payment by us. Such appointment will
be effective when, and only to the extent that, we pay for your units and will
remain effective and be irrevocable for the maximum period permitted by
applicable law. You will agree not to exercise any rights pertaining to the
tendered units without our prior consent. Upon such payment, all prior powers of
attorney granted by you with respect to such units will, without further action,
be revoked, and no subsequent powers of attorney may be granted (and if granted
will not be effective). Pursuant to such appointment as attorneys-in-fact, we
and our designees each will have the power, among other things, (i) to transfer
ownership of such units on the partnership books maintained by your general
partner (and execute and deliver any accompanying evidences of transfer and
authenticity it may deem necessary or appropriate in connection therewith), (ii)
upon receipt by the Information Agent of the offer consideration, to become a
substituted unitholder, to receive any and all distributions made by your
partnership on or after the date on which we acquire such units, and to receive
all benefits and otherwise exercise all rights of beneficial ownership of such
units in accordance with the terms of our offer, (iii) to execute and deliver to
the general partner of your partnership a change of address form instructing the
general partner to send any and all future distributions to which we are
entitled pursuant to the terms of the offer in respect of tendered units to the
address specified in such form, and (iv) to endorse any check payable to you or
upon your order representing a distribution to which we are entitled pursuant to
the terms of our offer, in each case in your name and on your behalf.
By executing the acknowledgment and agreement, you will irrevocably
constitute and appoint us and any of our designees as your true and lawful agent
and attorney-in-fact with respect to such units, with full power of substitution
(such power of attorney being deemed to be an irrevocable power coupled with an
interest), to withdraw any or all of such units that have been previously
tendered in response to any other tender or exchange offer, provided that the
price per unit we are offering is equal to or higher than the price per unit
being offered in the other tender or exchange offer. Such appointment is
effective upon the execution and receipt of the acknowledgment and agreement and
shall continue to be effective unless and until you validly withdraw such units
from this offer.
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ASSIGNMENT OF INTEREST IN FUTURE DISTRIBUTIONS. By executing the
acknowledgment and agreement, you will irrevocably sell, assign, transfer,
convey and deliver to us and our assigns all of your right, title and interest
in and to such units tendered that are accepted for payment pursuant to the
offer, including, without limitation, (i) all of your interest in the capital of
your partnership, and interest in all profits, losses and distributions of any
kind to which you shall at any time be entitled in respect of your ownership in
the units, including, without limitation, distributions in the ordinary course,
distributions from sales of assets, distributions upon liquidation, winding-up
or dissolution, payments in settlement of existing or future litigation, damages
paid in connection with any existing or future litigation and all other
distributions and payments made from and after the effective date, in respect of
the units tendered by you and accepted for payment and thereby purchased by us;
(ii) all other payments, if any, due or to become due to you in respect of the
units, under or arising out of your partnership's agreement of limited
partnership or any agreement pursuant to which the units were sold (the
"Purchase Agreement"), whether as contractual obligations, damages, insurance
proceeds, condemnation awards or otherwise; (iii) all of your claims, rights,
powers, privileges, authority, options, security interests, liens and remedies,
if any, under or arising out of your partnership's agreement of limited
partnership, the Purchase Agreement or your ownership of the units, including,
without limitation, any and all voting rights, rights of first offer, first
refusal or similar rights, and rights to be substituted as a unitholder of your
partnership; and (iv) all of your past, present and future claims, if any,
whether on behalf of your partnership, individually or on behalf of a putative
class (including without limitation any claims against unitholders, limited
partners of the partnership, the general partner(s) and/or any affiliates
thereof), under, arising out of or related to your partnership's agreement of
limited partnership, the Purchase Agreement, your status as a unitholder, the
terms or conditions of this offer, the management of your partnership, monies
loaned or advanced, services rendered to your partnership or its partners, or
any other claims arising out of or related to your ownership of the units. If,
after the unit is accepted for payment and purchased by us, you receive any
distribution from any source and of any nature, including, without limitation,
distributions in the ordinary course, distributions from sales of assets,
distributions upon liquidation, winding-up or dissolution, payments in
settlement of existing or future litigation and all other distributions and
payments, from your partnership in respect of such unit, you will agree to
forward promptly such distribution to us.
DETERMINATION OF VALIDITY; REJECTION OF UNITS; WAIVER OF DEFECTS; NO
OBLIGATION TO GIVE NOTICE OF DEFECTS. All questions as to the validity, form,
eligibility (including time of receipt) and acceptance for payment of any tender
of units pursuant to our offer will be determined by us, in our reasonable
discretion, which determination shall be final and binding on all parties. We
reserve the absolute right to reject any or all tenders of any particular unit
determined by us not to be in proper form or if the acceptance of or payment for
that unit may, in the opinion of our counsel, be unlawful. We also reserve the
absolute right to waive any defect or irregularity in any tender with respect to
any particular unit of any particular unitholder, and to waive or amend any of
the conditions of the offer that we are legally permitted to waive or amend as
to the tender of any particular unit, provided that if we waive or amend any
condition with respect to one unit, we will waive or amend such condition as to
all units. Our interpretation of the terms and conditions of the offer
(including the acknowledgment and agreement and the letter of transmittal) will
be final and binding on all parties. No tender of units will be deemed to have
been validly made unless and until all defects and irregularities have been
cured or waived. Neither we, the Information Agent, nor any other person will be
under any duty to give notification of any defects or irregularities in the
tender of any unit or will incur any liability for failure to give any such
notification.
BACKUP FEDERAL INCOME TAX WITHHOLDING. To prevent the possible
application of back-up federal income tax withholding with respect to payment of
the offer price, you may have to provide us with your correct taxpayer
identification number. See the instructions to the acknowledgment and agreement
set forth in the letter of transmittal attached as Annex II and "The
Offer--Section 6. Material Federal Income Tax Matters."
STATE AND LOCAL WITHHOLDING. If you tender units pursuant to this
offer, we may be required under state or local tax laws to deduct and withhold a
portion of the offer price. You should consult your tax advisor concerning
whether any state or local withholding would be required on a disposition of
your units and whether such amounts may be available to you as a credit on your
state or local tax returns.
FIRPTA WITHHOLDING. To prevent the withholding of federal income tax in
an amount equal to 10% of the amount realized on the disposition (the amount
realized is generally the offer price plus the partnership liabilities allocable
to each unit purchased), you must certify that you are not a foreign person if
you tender units. See the
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instructions to the acknowledgment and agreement set forth in the letter of
transmittal attached as Annex II and "The Offer--Section 6. Material Federal
Income Tax Matters."
TRANSFER TAXES. The amount of any transfer taxes (whether imposed on
the registered holder of units or any person) payable on account of the transfer
of units will be deducted from the purchase price unless satisfactory evidence
of the payment of such taxes or exemption therefrom is submitted.
BINDING AGREEMENT. A tender of a unit pursuant to any of the procedures
described above and the acceptance for payment of such unit will constitute a
binding agreement between the tendering unitholder and us on the terms set forth
in this offer to purchase and the related acknowledgment and agreement and
letter of transmittal.
4. WITHDRAWAL RIGHTS.
You may withdraw your tendered units at any time prior to the
expiration date, including any extensions thereof, or on or after January 30,
2004 if the units have not been previously accepted for payment.
For a withdrawal to be effective, a written notice of withdrawal must
be timely received by the Information Agent at one of its addresses set forth on
the back cover of the offer to purchase. Any such notice of withdrawal must
specify the name of the person who tendered, the number of units to be withdrawn
and the name of the registered holder of such units, if different from the
person who tendered. In addition, the notice of withdrawal must be signed by the
person who signed the acknowledgment and agreement in the same manner as the
acknowledgment and agreement was signed.
If purchase of, or payment for, a unit is delayed for any reason, or if
we are unable to purchase or pay for a unit for any reason, then, without
prejudice to our rights under the offer, tendered units may be retained by the
Information Agent; subject, however, to our obligation, pursuant to Rule
14e-1(c) under the Exchange Act, to pay the offer price in respect of units
tendered or return those units promptly after termination or withdrawal of our
offer.
Any units properly withdrawn will thereafter be deemed not to have been
validly tendered for purposes of our offer. However, withdrawn units may be
re-tendered at any time prior to the expiration date by following the procedures
described in "The Offer--Section 3. Procedure for Tendering Units."
All questions as to the validity and form (including time of receipt)
of notices of withdrawal will be determined by us in our reasonable discretion,
which determination will be final and binding on all parties. Neither the
Information Agent, any other person, nor we will be under any duty to give
notification of any defects or irregularities in any notice of withdrawal or
incur any liability for failure to give any such notification.
5. EXTENSION OF TENDER PERIOD; TERMINATION; AMENDMENT; NO SUBSEQUENT
OFFERING PERIOD.
We expressly reserve the right, in our reasonable discretion (i) to
extend the period of time during which our offer is open and thereby delay
acceptance for payment of, and the payment for, any unit, (ii) to terminate the
offer and not accept any units not theretofore accepted for payment or paid for
if any of the conditions of the offer are not satisfied or if any event occurs
that might reasonably be expected to result in a failure to satisfy such
conditions, (iii) upon the occurrence of any of the conditions specified in "The
Offer--Section 17. Conditions of the Offer," or any event that a reasonably
prudent investor might reasonably expect to result in such occurrence, to delay
the acceptance for payment of, or payment for, any units not already accepted
for payment or paid for, and (iv) to amend our offer in any respect (including,
without limitation, by increasing or decreasing the consideration offered,
increasing or decreasing the units being sought, or both). Notice of any such
extension, termination or amendment will promptly be disseminated to you in a
manner reasonably designed to inform you of such change. In the case of an
extension of the offer, the extension may be followed by a press release or
public announcement which will be issued no later than 9:00 a.m., New York City
time, on the next business day after the scheduled expiration date of our offer,
in accordance with Rule 14e-1(d) under the Exchange Act.
If we extend the offer, or if we delay payment for a unit (whether
before or after its acceptance for payment) or are unable to pay for a unit
pursuant to our offer for any reason, then, without prejudice to our rights
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under the offer, the Information Agent may retain tendered units and those units
may not be withdrawn except to the extent tendering unitholders are entitled to
withdrawal rights as described in "The Offer--Section 4. Withdrawal Rights,"
subject, however, to our obligation, pursuant to Rule 14e-l(c) under the
Exchange Act, to pay the offer price in respect of units tendered or return
those units promptly after termination or withdrawal of the offer.
If we make a material change in the terms of our offer, or if we waive
a material condition to our offer, we will extend the offer and disseminate
additional tender offer materials to the extent required by Rules 14d-4 and
14e-1 under the Exchange Act. The minimum period during which the offer must
remain open following any material change in the terms of the offer, other than
a change in price or a change in percentage of securities sought or a change in
any dealer's soliciting fee, if any, will depend upon the facts and
circumstances, including the materiality of the change, but generally will be
five business days. With respect to a change in price or, subject to certain
limitations, a change in the percentage of securities sought or a change in any
dealer's soliciting fee, if any, a minimum of ten business days from the date of
such change is generally required to allow for adequate dissemination to
unitholders. Accordingly, if, prior to the expiration date, we increase (other
than increases of not more than two percent of the outstanding units) or
decrease the number of units being sought, or increase or decrease the offer
price, and if the offer is scheduled to expire at any time earlier than the
tenth business day after the date that notice of such increase or decrease is
first published, sent or given to unitholders, the offer will be extended at
least until the expiration of such ten business days. As used in the offer to
purchase, "business day" means any day other than a Saturday, Sunday or a
Federal holiday, and consists of the time period from 12:01 a.m. through 12:00
midnight, New York City time.
Pursuant to Rule 14d-11 under the Exchange Act, subsequent offering
periods may be provided in tender offers for "any and all" outstanding units of
a partnership. A subsequent offering period is an additional period of from
three to twenty business days following the expiration date of the offer,
including any extensions, in which unitholders may continue to tender units not
tendered in the offer for the offer price. Because of the remote possibility
that we may purchase fewer than all units tendered, a subsequent offering period
is not available to us.
6. MATERIAL FEDERAL INCOME TAX MATTERS.
The following summary is our understanding of the United States federal
income tax consequences of the offer that are most likely to be relevant to (i)
unitholders who tender some or all of their units for cash pursuant to our
offer, and (ii) unitholders who do not tender any of their units pursuant to our
offer. This discussion is based on the Internal Revenue Code of 1986, as amended
(the "Internal Revenue Code"), Treasury Regulations, rulings issued by the
Internal Revenue Service (the "IRS"), and judicial decisions, all as of the date
of this offer to purchase. All of the foregoing is subject to change or
alternative construction, possibly with retroactive effect, and any such change
or alternative construction could affect the continuing accuracy of this
summary. This summary is based on the assumption that your partnership is
operated in accordance with its organizational documents including its
certificate of limited partnership and agreement of limited partnership. This
summary does not purport to discuss all aspects of federal income taxation which
may be important to a particular person in light of its investment or tax
circumstances, or to certain types of investors subject to special tax rules
(including financial institutions, broker-dealers, insurance companies, and,
except to the extent discussed below, tax-exempt organizations and foreign
investors, as determined for United States federal income tax purposes), nor
(except as otherwise expressly indicated) does it describe any aspect of state,
local, foreign or other tax laws. This summary assumes that the units constitute
capital assets in the hands of the unitholders (generally, property held for
investment). No advance ruling has been or will be sought from the IRS regarding
any matter discussed in this offer to purchase. Further, no opinion of counsel
has been obtained with regard to the offer.
THE UNITED STATES FEDERAL INCOME TAX TREATMENT OF A UNITHOLDER
PARTICIPATING IN THE OFFER DEPENDS IN SOME INSTANCES ON DETERMINATIONS OF FACT
AND INTERPRETATIONS OF COMPLEX PROVISIONS OF UNITED STATES FEDERAL INCOME TAX
LAW FOR WHICH NO CLEAR PRECEDENT OR AUTHORITY MAY BE AVAILABLE. ACCORDINGLY, YOU
SHOULD CONSULT YOUR TAX ADVISOR REGARDING THE UNITED STATES FEDERAL, STATE,
LOCAL AND FOREIGN TAX CONSEQUENCES OF SELLING THE INTERESTS IN YOUR PARTNERSHIP
REPRESENTED BY YOUR UNITS PURSUANT TO OUR OFFER OR OF A DECISION NOT TO SELL IN
LIGHT OF YOUR SPECIFIC TAX SITUATION.
TAX CONSEQUENCES TO UNITHOLDERS TENDERING UNITS FOR CASH. You will
recognize gain or loss on a sale of a unit of limited partnership interest of
your partnership equal to the difference between (i) your "amount
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realized" on the sale and (ii) your adjusted tax basis in the unit sold. The
"amount realized" will be equal to the sum of the amount of cash received by you
for the unit sold pursuant to the offer plus the amount of partnership
liabilities allocable to the unit (as determined under Section 752 of the
Internal Revenue Code). Thus, your taxable gain and tax liability resulting from
a sale of a unit could exceed the cash received upon such sale.
ADJUSTED TAX BASIS. If you acquired your units for cash, your initial
tax basis in such units was generally equal to your cash investment in your
partnership increased by your share of partnership liabilities at the time you
acquired such units. Your initial tax basis generally has been increased by (i)
your share of partnership income and gains, and (ii) any increases in your share
of partnership liabilities, and has been decreased (but not below zero) by (a)
your share of partnership cash distributions, (b) any decreases in your share of
partnership liabilities, (c) your share of partnership losses, and (d) your
share of nondeductible partnership expenditures that are not chargeable to
capital. For purposes of determining your adjusted tax basis in your units
immediately prior to a disposition of your units, your adjusted tax basis in
your units will include your allocable share of partnership income, gain or loss
for the taxable year of disposition. If your adjusted tax basis is less than
your share of partnership liabilities (e.g., as a result of the effect of net
loss allocations and/or distributions exceeding the cost of your unit), your
gain recognized with respect to a unit pursuant to the offer will exceed the
cash proceeds realized upon the sale of such unit.
CHARACTER OF GAIN OR LOSS RECOGNIZED PURSUANT TO THE OFFER. Except as
described below, the gain or loss recognized by you on a sale of a unit pursuant
to the offer generally will be treated as a long-term capital gain or loss if
you held the unit for more than one year. Long-term capital gains recognized by
individuals and certain other noncorporate taxpayers generally will be subject
to a maximum United States federal income tax rate of 15%. If the amount
realized with respect to a unit of limited partnership interest of your
partnership that is attributable to your share of "unrealized receivables" of
your partnership exceeds the tax basis attributable to those assets, such excess
will be treated as ordinary income. Among other things, "unrealized receivables"
include depreciation recapture for certain types of property. In addition, the
maximum United States federal income tax rate applicable to persons who are
noncorporate taxpayers for net capital gains attributable to the sale of
depreciable real property (which may be determined to include an interest in a
partnership such as your units) held for more than one year is currently 25%
(rather than 15%) with respect to that portion of the gain attributable to
depreciation deductions previously taken on the property. Certain limitations
apply to the use of capital losses.
If you tender a unit of limited partnership interest of your
partnership in the offer, you will be allocated a share of partnership taxable
income or loss for the year of tender with respect to any units sold. You will
not receive any future distributions on units tendered on or after the date on
which such units are accepted for purchase and, accordingly, you may not receive
any distributions with respect to such accreted income. Such allocation and any
partnership cash distributions to you for that year will affect your adjusted
tax basis in your unit and, therefore, the amount of your taxable gain or loss
upon a sale of a unit pursuant to the offer.
PASSIVE ACTIVITY LOSSES. The passive activity loss rules of the
Internal Revenue Code limit the use of losses derived from passive activities,
which generally include investments in limited partnership interests such as
your units. An individual, as well as certain other types of investors,
generally cannot use losses from passive activities to offset nonpassive
activity income received during the taxable year. Passive losses that are
disallowed for a particular tax year are "suspended" and may be carried forward
to offset passive activity income earned by the investor in future taxable
years. In addition, such suspended losses may be claimed as a deduction, subject
to other applicable limitations, upon a taxable disposition of the investor's
interest in such activity.
Accordingly, if your investment in your units is treated as a passive
activity, you may be able to reduce gain from the sale of your units pursuant to
the offer with passive losses in the manner described below. If you sell all or
a portion of your units pursuant to the offer and recognize a gain on your sale,
you will generally be entitled to use your current and "suspended" passive
activity losses (if any) from your partnership and other passive sources to
offset that gain. In general, if you sell all or a portion of your units
pursuant to the offer and recognize a loss on such sale, you will be entitled to
deduct that loss currently (subject to other applicable limitations) against the
sum of your passive activity income from your partnership for that year (if any)
plus any passive activity income from other sources for that year. If you sell
all of your units pursuant to the offer, the balance of any "suspended" losses
from your partnership that were not otherwise utilized against passive activity
income as described in the two preceding sentences will generally no longer be
suspended and will generally therefore be deductible (subject to any other
applicable limitations) by you against any other income for that year,
regardless of the character of that income.
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You are urged to consult your tax advisor concerning whether, and the extent to
which, you have available "suspended" passive activity losses from your
partnership or other investments that may be used to reduce gain from the sale
of units pursuant to the offer.
INFORMATION REPORTING, BACKUP WITHHOLDING AND FIRPTA. If you tender any
units, you must report the transaction by filing a statement with your United
States federal income tax return for the year of the tender which provides
certain required information to the IRS. To prevent the possible application of
back-up United States federal income tax withholding with respect to the payment
of the offer consideration, you are generally required to provide us with your
correct taxpayer identification number. See the instructions to the
acknowledgment and agreement set forth in the letter of transmittal.
Gain realized by a foreign person on the sale of a unit pursuant to the
offer will be subject to federal income tax under the Foreign Investment in Real
Property Tax Act of 1980. Under these provisions of the Internal Revenue Code,
the transferee of an interest held by a foreign person in a partnership which
owns United States real property generally is required to deduct and withhold
10% of the amount realized on the disposition. Amounts withheld would be
creditable against a foreign person's United States federal income tax liability
and, if in excess thereof, a refund could be claimed from the Internal Revenue
Service by filing a United States income tax return. See the instructions to the
acknowledgment and agreement set forth in the letter of transmittal attached as
Annex II.
STATE AND LOCAL WITHHOLDING. If you tender units pursuant to this
offer, we may be required under state or local tax laws to deduct and withhold a
portion of the offer price. You should consult your tax advisor concerning
whether any state or local withholding would be required on a disposition of
your units and whether such amounts may be available to you as a credit on your
state or local tax returns.
TAX CONSEQUENCES TO NON-TENDERING AND PARTIALLY-TENDERING UNITHOLDERS.
Section 708 of the Internal Revenue Code provides that if there is a sale or
exchange of 50% or more of the total interest in capital and profits of a
partnership within any 12-month period, such partnership terminates for United
States federal income tax purposes. Your partnership's agreement of limited
partnership prohibits such a sale or exchange of units. Because we and our
affiliates control more than 50% of the total partnership interests, we do not
expect that this prohibition will be triggered.
If your partnership is deemed to terminate for tax purposes, the
following federal income tax events will be deemed to occur: the terminated
partnership will be deemed to have contributed all of its assets (subject to its
liabilities) to a new partnership in exchange for an interest in the new
partnership and, immediately thereafter, the old partnership will be deemed to
have distributed interests in the new partnership to the remaining limited
partners in proportion to their respective interests in the old partnership in
liquidation of the old partnership.
You will not recognize any gain or loss upon such deemed contribution
of your partnership's assets to the new partnership or upon such deemed
distribution of interests in the new partnership, and your capital account in
your partnership will carry over to the new partnership. A termination of your
partnership for federal income tax purposes may change (and possibly shorten)
your holding period with respect to interests in your partnership that you
choose to retain. Gain recognized by you on the disposition of retained units
with a holding period of 12 months or less may be classified as short-term
capital gain and subject to taxation at ordinary income tax rates.
A termination of your partnership for federal income tax purposes may
also subject the assets of your partnership to longer depreciable lives than
those currently applicable to the assets of your partnership. This would
generally decrease the annual average depreciation deductions allocable to you
for certain years following our offer if you do not tender all of your interests
in your partnership (thereby increasing the taxable income allocable to your
interests in your partnership each such year), but would have no effect on the
total depreciation deductions available over the useful lives of the assets of
your partnership. Additionally, upon a termination of your partnership, the
taxable year of your partnership will close for federal income tax purposes,
which could result in the recognition of partnership income, gain, or loss in an
earlier taxable period than such income, gain, or loss would otherwise be
reported for income tax purposes had your partnership not terminated.
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7. EFFECTS OF THE OFFER.
Because the general partner of your partnership is our affiliate, we
have control over the management of your partnership. We also own the company
that currently manages the residential properties owned by your partnership. In
addition, we and our affiliates own 769,519 or 62.97%, of the outstanding
limited partnership units of your partnership. Because we and our affiliates own
a majority of the outstanding units and control your partnership's general
partner, we control the outcome of most voting decisions with respect to your
partnership, including the power to amend your partnership agreement. In
general, we will vote the units owned by us in whatever manner we deem to be in
our best interests, which may not be in the interest of other partners or
unitholders. This could (1) prevent non-tendering unitholders from taking action
that they desire but that we oppose and (2) enable us to take action desired by
us but opposed by non-tendering unitholders. We are also affiliated with the
company that currently manages, and has managed for some time, the properties
owned by your partnership. Because we own a majority of outstanding units and
control your partnership's general partner, removal of the property manager may
be difficult or impossible.
DISTRIBUTIONS TO US. If we acquire units in the offer, we will
participate in any subsequent distributions to limited partners to the extent of
the units purchased.
PARTNERSHIP STATUS. We are of the opinion that our purchase of units in
accordance with the terms of our offer should not adversely affect the issue of
whether your partnership is classified as a partnership for federal income tax
purposes.
BUSINESS. Our offer will not affect the operation of the properties
owned by your partnership. We will continue to control the general partner of
your partnership and the residential property manager, both of which will remain
the same. Consummation of the offer will not affect your agreement of limited
partnership, the operations of your partnership, the business and properties
owned by your partnership or any other matter relating to your partnership,
except it would result in us increasing our ownership of units. We have no
current intention of changing the fee structure for your general partner or the
manager of your partnership's residential properties.
EFFECT ON TRADING MARKET; REGISTRATION UNDER 12(g) OF THE EXCHANGE ACT.
If a substantial number of units are purchased pursuant to the offer, transfers
may be limited in the succeeding 12-month period because the partnership
agreement prohibits the transfer of units that would cause 50% or more of the
total interest in capital and profits of your partnership to be transferred
within a 12-month period, when taken together with all other transfers during
such 12-month period. Because we and our affiliates control more than 50% of the
total partnership interests, we do not expect any such limitation of transfers.
Further, if a substantial number of unitholders tender their units
pursuant to our offer, the result will be a reduction in the number of
unitholders in your partnership. In the case of certain kinds of equity
securities, a reduction in the number of securityholders might be expected to
result in a reduction in the liquidity and volume of activity in the trading
market for the security. In the case of your partnership, however, there is no
established public trading market for the units and, therefore, we are of the
opinion that a reduction in the number of unitholders will not materially
further restrict your ability to find purchasers for your units through
secondary market transactions.
The units are registered under Section 12(g) of the Exchange Act, which
means, among other things, that your partnership is required to file periodic
reports with the SEC and to comply with the SEC's proxy rules. We do not expect
or intend that consummation of the offer will cause the units to cease to be
registered under Section 12(g) of the Exchange Act. If the units were to be held
by fewer than 300 persons, your partnership could apply to de-register the units
under the Exchange Act. Your partnership currently has 444 unitholders. If units
are validly tendered (and not properly withdrawn) and the purchase of those
units would result in there being fewer than 320 unitholders in your
partnership, we will not purchase any of the units tendered, terminate the
offer, and return all tendered units to the tendering unitholders to assure that
there is no reasonable likelihood that the partnership would have fewer than 320
unitholders as a result of the offer. See "The Offer--Section 17. Conditions of
the Offer."
ACCOUNTING TREATMENT. Upon consummation of the offer, we will account
for our investment in any acquired units under the purchase method of
accounting. There will be no effect on the accounting treatment of your
partnership as a result of the offer.
-14-
8. INFORMATION CONCERNING US AND CERTAIN OF OUR AFFILIATES.
GENERAL. We are AIMCO Properties, L.P., a Delaware limited partnership.
Together with our subsidiaries, we conduct substantially all of the operations
of Apartment Investment and Management Company, a Maryland corporation
("AIMCO"). AIMCO is a real estate investment trust that owns and manages
multifamily apartment properties throughout the United States. AIMCO's Class A
Common Stock is listed and traded on the New York Stock Exchange under the
symbol "AIV." As of September 30, 2003, we owned or managed 297,917 apartment
units in 1,684 properties located in 47 states, the District of Columbia and
Puerto Rico. Based on apartment unit data compiled by the National Multi Housing
Council, we believe that we are one of the largest owners and managers of
multi-family apartment properties in the United States. As of September 30,
2003, we:
o owned or controlled (consolidated) 178,913 units in 697
apartment properties;
o held an equity interest in (unconsolidated) 67,157 units in
467 apartment properties; and
o provided services or managed, for third party owner, 51,847
units in 520 apartment properties, primarily pursuant to long
term, non-cancelable agreements (including 40,126 units in 418
properties that are asset managed only, and not property
managed).
Our general partner is AIMCO-GP, Inc., a Delaware corporation, which is
a wholly owned subsidiary of AIMCO. Our principal executive offices are located
at 4582 South Ulster Street Parkway, Suite 1100, Denver, Colorado 80237. Our
telephone number is (303) 757-8101.
The names, positions and business addresses of the directors and
executive officers of AIMCO and your general partner (which is our affiliate),
as well as a biographical summary of the experience of such persons for the past
five years or more, are set forth on Annex I attached hereto and are
incorporated herein by reference.
We and AIMCO are both subject to the information and reporting
requirements of the Exchange Act and, in accordance therewith, file reports and
other information with the Securities and Exchange Commission (the "SEC")
relating to our business, financial condition and other matters, including the
complete financial statements summarized below. Such reports and other
information may be inspected at the public reference facilities maintained by
the SEC at Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549.
Copies of such material can also be obtained from the Public Reference Room of
the SEC in Washington, D.C. at prescribed rates. The SEC also maintains a site
on the World Wide Web at http://www.sec.gov that contains reports, proxy and
information statements and other information regarding registrants that file
electronically with the SEC. In addition, information filed by AIMCO with the
New York Stock Exchange may be inspected at the offices of the New York Stock
Exchange at 20 Broad Street, New York, New York 10005.
For more information regarding AIMCO and AIMCO Properties, please refer
to our Annual Report on Form 10-K for the year ended December 31, 2002 and our
respective Quarterly Reports on Form 10-Q for the quarterly periods ended March
31, 2003, June 30, 2003 and September 30, 2003 (particularly the management's
discussion and analysis of financial condition and results of operations) and
other reports and documents we have filed with the SEC.
Except as described in "The Offer--Section 9. Background and Reasons
for the Offer", and "The Offer--Section 11. Conflicts of Interest and
Transactions with Affiliates" and "The Offer--Section 13. Certain Information
concerning your Partnership--Beneficial Ownership of Interests in your
Partnership," neither we nor, to the best of our knowledge, any of the persons
listed on Annex I attached hereto, (i) beneficially own or have a right to
acquire any units, (ii) has effected any transaction in the units in the past 60
days, or (iii) have any contract, arrangement, understanding or relationship
with any other person with respect to any securities of your partnership,
including, but not limited to, contracts, arrangements, understandings or
relationships concerning transfer or voting thereof, joint ventures, loan or
option arrangements, puts or calls, guarantees of loans, guarantees against loss
or the giving or withholding of proxies. Neither we nor our affiliates intend to
tender any units beneficially owned in this offer.
-15-
SUMMARY SELECTED FINANCIAL INFORMATION FOR AIMCO PROPERTIES, L.P. The
historical financial data set forth below for AIMCO Properties for the nine
months ended September 30, 2003 and 2002 is based on unaudited financial
statements. The historical financial data set forth below for AIMCO Properties
for the years ended December 31, 2002, 2001 and 2000 is based on audited
financial statements. In addition, (a) the audited financial statements for
AIMCO Properties' 2002 and 2001 fiscal years set forth in Part II, Item 6 of
AIMCO Properties' Annual Report on Form 10-K for the fiscal year ended December
31, 2002 filed with the SEC on March 25, 2003, and (b) the unaudited financial
statements for AIMCO Properties' Quarterly Report on Form 10-Q for the quarter
ended September 30, 2003 filed with the SEC on November 14, 2003 are hereby
incorporated by reference. This information should be read in conjunction with
such financial statements, including the notes thereto, and "Management's
Discussion and Analysis of Financial Condition and Results of Operations of the
AIMCO Operating Partnership" included in AIMCO Properties Annual Report on Form
10-K for the year ended December 31, 2002 and its Quarterly Report on Form 10-Q
for the quarter ended September 30, 2003.
<Table>
<Caption>
FOR THE NINE MONTHS ENDED
SEPTEMBER 30, FOR THE YEAR ENDED DECEMBER 31,
---------------------------------- -----------------------------------------------------
2003 2002 2002 2001(1) 2000(1)
--------------- --------------- --------------- --------------- ---------------
(UNAUDITED) (DOLLARS IN THOUSANDS, EXCEPT PER UNIT DATA)
OPERATING INFORMATION:
Rental and other property revenues .. $ 1,111,036 $ 960,998 $ 1,405,684 $ 1,224,667 $ 998,552
Property operating and owned
management expenses ............. (485,993) (378,327) (561,412) (465,721) (413,077)
Income from property operations ..... 625,043 582,671 844,272 758,946 585,475
Income from investment management
business ........................ 11,228 15,352 18,262 27,591 15,795
General and administrative expenses (19,538) (12,377) (20,344) (18,530) (18,123)
Depreciation of rental property (2) (247,682) (195,127) (288,589) (327,070) (287,809)
Interest expense .................... (283,487) (234,922) (339,737) (297,507) (260,133)
Interest and other income, net ...... 19,623 60,059 78,090 68,417 65,963
Operating earnings .................. 73,653 187,802 258,348 144,520 103,402
Distribution to minority partners in
excess of income ................ (21,503) (5,274) (26,979) (46,359) (24,375)
Income (loss) from discontinued
operations ...................... 62,674 11,156 (27,902) 18,848 26,335
Net income .......................... 136,327 198,958 206,202 121,064 109,717
BALANCE SHEET INFORMATION:
Real estate, before accumulated
depreciation .................... $ 10,693,302 $ 10,436,881 $ 10,633,358 $ 8,102,816 $ 7,012,452
Real estate, net of accumulated
depreciation .................... 8,887,140 8,780,340 8,924,604 6,587,624 5,887,518
Total assets ........................ 10,194,026 10,355,329 10,355,329 8,200,526 7,699,174
Total indebtedness .................. 6,334,785 6,136,303 6,233,727 4,585,913 4,198,045
Mandatorily redeemable preferred
securities ...................... 113,169 15,169 15,169 20,637 32,330
Partner's capital ................... 3,233,805 3,576,083 3,576,083 3,080,071 2,830,389
OTHER INFORMATION:
Basic earnings per unit ............. $ 0.52 $ 1.21 $ 1.00 $ 0.25 $ 0.53
Diluted earnings per unit ........... $ 0.52 $ 1.20 $ 0.99 $ 0.25 $ 0.52
Distributions paid per common
OP unit ......................... $ 2.24 $ 2.46 $ 3.28 $ 3.12 $ 2.80
Funds from operations(3) ............ $ 346,116 $ 431,450 $ 504,816 $ 528,653 $ 439,830
Net cash provided by operating
activities ...................... $ 381,137 $ 403,624 $ 496,670 $ 491,846 $ 400,364
Net cash (used in) provided by
investing activities ............ $ 180,556 $ (897,681) $ (873,832) $ (140,638) $ (545,981)
Net cash provided by (used in)
financing activities ............ $ (531,163) $ 503,454 $ 398,637 $ (430,245) $ 201,128
</Table>
-16-
- ----------
(1) Certain reclassifications have been made to the 2001 and 2000 amounts to
conform with the 2002 presentation. These reclassifications represent
certain eliminations of self-charged management fee income and expenses and
related receivables and payables in accordance with consolidation
accounting principles, as well as discontinued operations resulting from
the adoption of Statement of Financial Accounting Standard No. 144.
Effective January 1, 2001, we began consolidating our previously
unconsolidated subsidiaries. Prior to this date, we had significant
influence but did not have control. Accordingly, such investments were
accounted for under the equity method.
(2) Effective July l, 2001 for certain assets and October l, 2001 for the
majority of the portfolio, we extended the estimated useful lives of our
buildings and improvements from a weighted average composite life of 25
years to a weighted average composite life of 30 years. This change
increased net income by approximately $36 million or $0.42 per diluted unit
in 2001.
(3) Our management believes that the presentation of funds from operations or
"FFO", when considered with the financial date determined in accordance
with generally accepted accounting principles, provides a useful measure of
performance. However, FFO does not represent cash flow and is not
necessarily indicative of cash flow or liquidity available to us, nor
should it be considered as an alternative to net income or as an indicator
of operating performance. The Board of Governors of the National
Association of Real Estate Investment Trusts ("NAREIT") defines FFO as net
income (loss), computed in accordance with generally accepted accounting
principles, excluding gains and losses from extraordinary items and
disposals from discontinued operations, net of related income taxes, plus
real estate related depreciation and amortization (excluding amortization
of financing costs), including depreciation for unconsolidated partnership,
joint ventures and discontinued operations. We calculate FFO based on the
NAREIT definition, plus amortization of intangibles, plus distributions to
minority partners in excess of income, and less dividends on preferred
units. We calculate FFO (diluted) by adding back the interest expenses and
preferred distribution relating to convertible securities whose conversion
is dilutive to FFO. Our management believes that the presentation of FFO
provides investors with industry-accepted measurements which help
facilitate an understanding of our ability to make required dividend
payments, capital expenditures and principal payments on our debt. There
can be no assurance that our basis of computing FFO is comparable with that
of other REITs.
The following is a reconciliation of net income to funds from operations:
<Table>
<Caption>
FOR THE NINE MONTHS
ENDED SEPTEMBER 30, FOR THE YEAR ENDED DECEMBER 31,
------------------------------ -----------------------------------------------
2003 2002 2002 2001 2000
------------- ------------- ------------- ------------- -------------
(DOLLARS IN THOUSANDS)
Net income ................................... $ 136,327 $ 198,958 $ 206,202 $ 121,064 $ 109,717
Real estate depreciation, net of minority .... 223,733 172,225 260,507 316,101 256,917
interests
Real estate depreciation related to
unconsolidated entities .................. 19,331 26,022 33,544 57,506 70,188
Discontinued operations:
Depreciation, net of minority interests .. 9,712 18,254 10,015 13,534 9,997
(Gain) loss on dispositions of real
estate, net of minority interest ...... (66,930) 37 (1,437) -- --
Distributions to minority partners in
excess of income ...................... (4,650) 1,401 1,401 1,342 --
Income tax arising from disposals ........ 5,112 552 2,507 -- --
Amortization of intangibles .................. 4,716 3,194 4,026 18,729 12,068
Income tax arising from disposals ............ -- -- -- 3,202 --
Distributions to minority interest partners in
excess of income ......................... 21,503 15,274 26,979 46,359 24,375
(Gain) loss on dispositions of real estate ... (2,738) (4,467) 27,902 (18,848) (26,335)
Gain on disposition of land .................. -- -- -- 3,843 --
Deferred income tax benefit .................. -- -- -- -- 154
Interest expense on mandatorily redeemable
convertible preferred securities ......... 741 882 1,161 1,568 8,869
Preferred unit distributions ................. (65,711) (45,626) (67,991) (35,747) (26,120)
Funds from operations ........................ $ 346,116 $ 431,450 $ 504,816 $ 528,653 $ 439,830
============= ============= ============= ============= =============
</Table>
-17-
9. BACKGROUND AND REASONS FOR THE OFFER.
GENERAL. We are in the business of acquiring direct and indirect
interests in apartment properties such as the properties owned by your
partnership. Our offer provides us with an opportunity to increase our ownership
interest in your partnership's properties while providing you and other
investors with an opportunity to liquidate your current investment.
BACKGROUND. On October 1, 1998, AIMCO merged (the "Insignia Merger")
with Insignia Financial Group, Inc. ("Insignia"). As a result of the Insignia
Merger, AIMCO acquired approximately 51% of the outstanding common shares of
beneficial interest of Insignia Properties Trust ("IPT"). Through the Insignia
Merger, AIMCO also acquired a majority ownership interest in the entity that
manages the residential properties owned by your partnership. On October 31,
1998, IPT and AIMCO entered into an agreement and plan of merger, dated as of
October 1, 1998, pursuant to which IPT merged with AIMCO on February 26, 1999.
AIMCO then contributed IPT's interest in Insignia Properties L.P., IPT's
operating partnership, to AIMCO's wholly owned subsidiary, AIMCO/IPT, Inc. AIMCO
also replaced IPT as the sole general partner of Insignia Properties L.P. As a
result, the general partner of your partnership is an indirect wholly owned
subsidiary of AIMCO/IPT and the property manager is our indirect wholly owned
subsidiary. Together with its affiliates and subsidiaries, AIMCO currently owns,
in the aggregate, approximately 62.97% of your partnership's outstanding limited
partnership units, along with a 2.0% general partner interest held by the
general partner.
During our negotiations with Insignia in early 1998, we decided that if
the merger with Insignia were consummated, we could also benefit from making
offers for limited partnership interests of some of the limited partnerships
formerly controlled or managed by Insignia (the "Insignia Partnerships"). Such
offers would provide liquidity for the limited partners of the Insignia
Partnerships and would provide us with a larger asset and capital base and
increased diversification. While some of the Insignia Partnerships are public
partnerships and information is publicly available on such partnerships for
weighing the benefits of making a tender offer, many of the partnerships are
private partnerships and information about such partnerships comes principally
from the general partner. Our control of the general partner makes it possible
for us to obtain access to such information. Further, such control also means
that we control the operations of the partnerships and their properties.
Insignia did not propose that we conduct such tender offers; rather, we
initiated the offers on our own. As of the date of this offering, AIMCO
Properties, L.P. has made offers to many of the Insignia Partnerships, including
your partnership. We are making this offer with a view to providing you with
liquidity for your investment, but we might not make any more offers and will
not be bound to do so.
ALTERNATIVES CONSIDERED BY YOUR GENERAL PARTNER. Before we commenced
this offer, your general partner (which is our affiliate) considered a number of
alternative transactions. The following is a brief discussion of the advantages
and disadvantages of the alternatives that could have been pursued by your
general partner.
LIQUIDATION
One alternative would be for the partnership to sell its assets,
distribute the net liquidation proceeds to its partners in accordance with the
agreement of limited partnership, and thereafter dissolve. Partners would be at
liberty to use the net liquidation proceeds after taxes for investment,
business, personal or other purposes, at their option. If your partnership were
to sell its assets and liquidate, you would not need to rely upon capitalization
of income or other valuation methods to estimate the fair market value of
partnership assets. Instead, such assets
-18-
would be valued through negotiations with prospective purchasers (in many cases
unrelated third parties). The term of the partnership will continue until
December 31, 2005, unless the partnership is terminated sooner under the
provisions of the partnership agreement.
Because we control a majority of the limited partnership interests, we
have the power to amend your partnership agreement to extend the term of your
partnership without the consent of other limited partners or unitholders. While
we have no present intention to cause such an amendment, we may decide to
propose such an amendment, based on a consideration of relevant factors such as
prevailing economic conditions and tax considerations. In general, we will vote
the limited partnership units owned by us in whatever manner we deem to be in
our best interests, which may not be in the interest of other partners or
unitholders.
In the opinion of your general partner, which is our affiliate, the
present time may not be the most desirable time to sell the residential real
estate assets of your partnership in a private transaction, and the proceeds
realized from any such sale would be uncertain. Your general partner is of the
opinion that it currently is in the best interest of your partnership to
continue to hold its real estate assets. See "The Offer--Section 13. Certain
Information concerning your Partnership--Investment Objectives and Policies;
Sale or Financing of Investments."
CONTINUATION OF THE PARTNERSHIP WITHOUT THE OFFER
A second alternative would be for your partnership to continue as a
separate legal entity with its own assets and liabilities and continue to be
governed by its existing agreement of limited partnership, without our offer. A
number of advantages could result from the continued operation of your
partnership. Given improving rental market conditions or improved operating
performance, the level of distributions might increase over time. It is possible
that the private resale market for properties could improve over time, making a
sale of the partnership's properties at some point in the future a more
attractive option than it is currently. The continuation of your partnership
will allow you to continue to participate in the net income and any increases in
revenue of your partnership and any net proceeds from the sale of the properties
owned by your partnership. However, no assurance can be given as to future
operating results or as to the results of any future attempts to sell the
properties owned by your partnership.
The primary disadvantage of continuing the operations of your
partnership is that you would be limited in your ability to sell your units.
Although you could sell your units to a third party, any such sale would likely
be at a discount from your pro rata share of the fair market value of the
properties owned by your partnership.
ALTERNATIVE TRANSACTIONS CONSIDERED BY US. Before we decided to make
our offer, we considered a number of alternative transactions, including
purchasing your partnership's properties or merging your partnership with us.
However, both of these alternatives would require a vote of all the unitholders.
If the transaction were approved, all of the unitholders, including those who
wish to continue to participate in the ownership of your partnership's
properties, would be forced to participate in the transaction. If the
transaction were not approved, all of the unitholders, including those who would
like to dispose of their investment in your partnership's properties, would be
forced to retain their investment. We also considered an offer to exchange units
in your partnership for limited partnership interests in AIMCO Properties.
However, because of the expense and delay associated with making such an
exchange offer, we decided to make an offer for cash only. In addition, our
historical experience has been that most holders of limited partnership units,
when given a choice, prefer cash.
DETERMINATION OF OFFER PRICE. In establishing the offer price, we
principally considered:
o The per unit liquidation value of your partnership, which we
calculated to be $2.35, based on the operating results of your
partnership for the year ended December 31, 2002, as
capitalized using the direct capitalization method and using a
capitalization rate of 10.4% with respect to Twin Lakes
Apartments and 10.24% with respect to Governor's Park
Apartments.
o Prices at which the units have recently sold to the extent
such information is available to us; and
o The absence of a trading market for the units.
-19-
Our determination of the offer price was based on our review and
analysis of the foregoing information, the other financial information and the
analyses concerning the partnership summarized below, and we considered the
actual and pro forma operating results of the partnership.
VALUATION OF UNITS. We determined our offer price by: (i) applying a
capitalization rate to your partnership's pro forma operating results for the
nine months ended September 30, 2003; (ii) adjusting this value for liabilities,
non-real estate assets, and certain other costs; and (iii) determining the
proceeds that would be paid to limited partners in the event of a liquidation of
your partnership. A capitalization rate is a percentage (rate of return),
applied to property income by purchasers of residential real estate, to
determine the present value of income property. The lower the capitalization
rate, the higher the value produced, and the higher the capitalization rate, the
lower the value produced. We used property incomes based on the operating
results of your partnership for the nine months ended September 30, 2003. But in
determining the appropriate capitalization rate, we also considered the
following factors. Our method for selecting a capitalization rate begins with
each property being assigned a location and condition rating (for example, "A"
for excellent, "B" for good, and so on). We then adjusted the capitalization
rate based on whether the property's mortgage debt is above or below market
rates. We also consider recent changes in your partnership's property income and
occupancy rate. All these factors are subjective in nature, and others
evaluating the same property might use a different capitalization rate and
derive a different property value.
Although the direct capitalization method is an accepted way of valuing
real estate, there are a number of other methods available to value real estate,
each of which may result in different valuations of a property. We determined
our cash consideration in the following manner. First, we estimated the gross
property value of your partnership's properties by applying a capitalization
rate of 10.4% with respect to Twin Lakes Apartments and 10.24% with respect to
Governor's Park Apartments to the partnership's pro forma operating results for
the nine months ended September 30, 2003, to obtain its estimated gross property
value. We then calculated the value of the equity of your partnership by adding
to the aggregate gross property value the value of the non-real estate assets of
your partnership and deducting its liabilities and certain other costs,
including required capital expenditures, deferred maintenance and closing costs,
to derive its net equity value. Finally, using this net equity value, we
determined the proceeds that would be paid to limited partners in the event of a
liquidation of your partnership. Our offer price represents the per unit
liquidation proceeds determined in this manner.
<Table>
Gross valuation of partnership properties $ 13,553,387
Plus: Cash and cash equivalents 205,234
Plus: Other partnership assets, net of security deposits 127,781
Less: Mortgage debt, including accrued interest (10,383,282)
Less: Accounts payable and accrued expenses (17,165)
Less: Other liabilities (333,759)
--------------
Partnership valuation before taxes and certain costs 3,152,195
Less: Closing costs (277,639)
--------------
Estimated net valuation of your partnership 2,874,556
Estimated net valuation of units 2,874,556
Total number of units 1,222,000
--------------
Estimated valuation per unit $ 2.35
==============
</Table>
COMPARISON OF OFFER PRICE TO ALTERNATIVE CONSIDERATION. To assist
holders of units in evaluating the offer, your general partner, which is our
affiliate, has attempted to compare the offer price against: (a) prices at which
the units have sold on the secondary market and (b) estimates of the value of
the units on a liquidation basis. The general partner of your partnership is of
the opinion that analyzing the alternatives in terms of estimated value, based
upon currently available data and, where appropriate, reasonable assumptions
made in good faith, establishes a reasonable framework for comparing
alternatives. Since the value of the consideration for alternatives to the offer
is dependent upon varying market conditions, no assurance can be given that the
estimated values reflect the range of possible values.
The results of these comparative analyses are summarized in the chart
below. You should bear in mind that some of the alternative values are based on
a variety of assumptions that have been made by us. These assumptions
-20-
relate to, among other things, the operating results since December 31, 2002, as
to income and expenses of the properties, other projected amounts and the
capitalization rates that may be used by prospective buyers if your partnership
assets were to be liquidated.
In addition, these estimates are based upon certain information
available to your general partner, which is our affiliate, and no assurance can
be given that the same conditions analyzed by it in arriving at the estimates of
value would exist at the time of the offer. The assumptions used have been
determined by the general partner of your partnership or an affiliate in good
faith, and, where appropriate, are based upon current and historical information
regarding your partnership and current real estate markets, and have been
highlighted below to the extent critical to the conclusions of the general
partner of your partnership. Actual results may vary from those set forth below
based on numerous factors, including interest rate fluctuations, tax law
changes, supply and demand for similar apartment properties, the manner in which
your partnership's properties are sold and changes in availability of capital to
finance acquisitions of apartment properties.
Under your partnership's agreement of limited partnership, the term of
the partnership will continue until December 31, 2005, unless sooner terminated
as provided in the agreement or by law, or unless a majority of the limited
partners amend the partnership agreement to extend the term of the partnership.
We control a majority of the outstanding limited partnership units.
<Table>
<Caption>
COMPARISON TABLE PER UNIT
---------------- --------
Cash offer price ............................................. $2.35
Alternatives
Prior cash tender offer price............................ $0.65
Highest price on secondary market........................ $3.50
Estimated liquidation proceeds........................... $2.35
</Table>
PRIOR TENDER OFFERS. In August 2002, we commenced a tender offer to
purchase units of your partnership at a price of $0.65 per unit, which price was
determined using the same basic methodology as we are using in this current
tender offer. We acquired 9,294 units, representing approximately 0.76% of the
outstanding units of your partnership, pursuant to that offer.
In September 2001, we commenced a tender offer to purchase units of
your partnership at a price of $1.00 per unit, which price was determined using
the same basic methodology as we are using in this current tender offer. We
acquired 17,240 units, representing approximately 1.41% of the outstanding units
of your partnership, pursuant to that offer.
In May 2000, we commenced a tender offer at the price of $7.00 per
unit, which price was determined using the same basic methodology as we are
using in this current tender offer. We acquired 170,064 units, representing
approximately 13.92% of the outstanding units of your partnership, pursuant to
that offer.
We are aware that other tender offers may have been made by
unaffiliated third parties to acquire units in your partnership in exchange for
cash. We are unaware of the amounts offered, terms, tendering parties or number
of units involved in any pending tender offers.
PRICES ON SECONDARY MARKET. Secondary market sales information is not a
reliable measure of value because of the limited amount of any known trades.
Except for offers made by us and unaffiliated third parties, privately
negotiated sales and sales through intermediaries are the only means which may
be available to a unitholder to liquidate an investment in units (other than our
offer) because the units are not listed or traded on any exchange or quoted on
Nasdaq, on the Electronic Bulletin Board, or in "pink sheets." Secondary sales
activity for the units, including privately negotiated sales, has been limited
and sporadic.
Set forth below are the high and low sale prices of units for the
periods listed below as reported by The Partnership Spectrum, which is an
independent, third-party source. The gross sales prices reported by The
-21-
Partnership Spectrum do not necessarily reflect the net sales proceeds received
by sellers of units, which typically are reduced by commissions and other
secondary market transaction costs to amounts less than the reported price. The
Partnership Spectrum represents only one source of secondary sales information,
and other services may contain prices for the units that equal or exceed the
sales prices reported in The Partnership Spectrum. We do not know whether the
information compiled by The Partnership Spectrum is accurate or complete.
<Table>
<Caption>
SALES PRICES OF PARTNERSHIP UNITS, AS REPORTED BY THE PARTNERSHIP SPECTRUM
High Low
----- ------
Period Ended September 30, 2003: ........................... N/A N/A
Year Ended December 31, 2002: .............................. $3.50 $3.00
Year Ended December 31, 2001: ....................... $3.50 $3.50
</Table>
Set forth in the table below are the high and low sales prices of units
for the periods listed below, as reported by the American Partnership Board,
which is an independent, third-party source. The gross sales prices reported by
American Partnership Board do not necessarily reflect the net sales proceeds
received by sellers of units, which typically are reduced by commissions and
other secondary market transaction costs to amounts less than the reported
prices. The American Partnership Board represents one source of secondary sales
information, and other services may contain prices for units that equal or
exceed the sales prices reported by the American Partnership Board. We do not
know whether the information compiled by the American Partnership Board is
accurate or complete.
<Table>
<Caption>
SALES PRICES OF PARTNERSHIP UNITS, AS REPORTED BY THE AMERICAN PARTNERSHIP BOARD
High Low
------ -----
Period Ended September 30, 2003: ........................... N/A N/A
Year Ended December 31, 2002: .............................. $3.04 $3.04
Year Ended December 31, 2001: ....................... N/A N/A
</Table>
ESTIMATED LIQUIDATION PROCEEDS. Liquidation value is a measure of the
price at which the assets of your partnership would sell if disposed of by your
partnership in an arms-length transaction to a willing buyer that has access to
relevant information regarding the historical revenues and expenses of the
business. Your general partner, which is our affiliate, estimated the
liquidation value of the units using the same direct capitalization method and
assumptions as we did in valuing the units for the offer price. The liquidation
analysis assumes that your partnership's properties are sold to independent
third parties at the current property value, that other balance sheet assets
(excluding amortizing assets) and liabilities of your partnership are sold at
their book value, and that the net proceeds of sale are allocated to the
unitholders in accordance with your partnership's agreement of limited
partnership.
The liquidation analysis assumes that the assets of your partnership
are sold in a single transaction. Should the assets be liquidated over time,
even at prices equal to those projected, distributions to unitholders from cash
flow from operations might be reduced because your partnership's fixed costs,
such as general and administrative expenses, are not proportionately reduced
with the liquidation of assets. However, for simplification purposes, the sales
of the assets are assumed to occur concurrently. The liquidation analysis
assumes that the assets are disposed of in an orderly manner and are not sold in
forced or distressed in which assets might be sold at substantial discounts to
their actual fair market value.
ALLOCATION OF CONSIDERATION. We have allocated to the unitholders the
amount of the estimated net valuation of your partnership based on your
partnership's agreement of limited partnership as if your partnership were being
liquidated at the present time.
10. POSITION OF THE GENERAL PARTNER OF YOUR PARTNERSHIP WITH RESPECT TO THE
OFFER.
The partnership and the general partner of your partnership (which is
our affiliate) have provided the following information for inclusion in this
offer to purchase:
-22-
The general partner of your partnership is remaining neutral and makes
no recommendation as to whether you should tender or refrain from tendering your
units in the offer. You must make your own decision whether or not to
participate in any offer, based upon a number of factors, including several
factors that may be personal to you, such as your financial position, your need
or desire for liquidity, your preferences regarding the timing of when you might
wish to sell your units, other financial opportunities available to you, and
your tax position and the tax consequences to you of selling your units.
Without quantifying or otherwise attaching any particular weight to any
of the following factors or information, you may want to consider the following:
o The offer gives you an opportunity to make an individual
decision on whether to tender your units or to continue to
hold them.
o The offer price and the method used to determine the offer
price.
o The offer price is based on an estimated value of your
partnership's properties that has been determined using a
method believed to reflect the valuation by buyers in the
market for similar assets.
o The prices at which the units have recently sold, to the
extent such information is available.
o The trading market for your units may not be a reliable
measure of value.
o An analysis of possible alternative transactions, including a
property sale, or a liquidation of the partnership.
o The financial condition and results of operations of your
partnership.
o The fact that if your partnership were liquidated - as opposed
to continuing - the general partner (which is our affiliate)
would not receive the substantial fees it currently receives.
As discussed in "Section 9. Background and Reasons for the
Offer - Alternatives Considered by Your General Partner," we
are of the opinion that liquidation of the partnership is not
in the best interests of the unitholders. Therefore, we are of
the opinion that the fees paid to the general partner would
continue even if the offer was not consummated. We are not
proposing to change the current fee arrangements.
Except for this offer, neither the general partner of your partnership
nor its affiliates have any plans or arrangements to tender any units. Except as
otherwise provided in "The Offer--Section 12. Future Plans of the Purchaser,"
the general partner does not have any present plans or proposals which relate to
or would result in an extraordinary transaction, such as a merger,
reorganization or liquidation, involving your partnership; a purchase or sale or
transfer of a material amount of your partnership's assets; or any changes in
your partnership's present capitalization, indebtedness or distribution
policies. For information relating to certain relationships between your
partnership and its general partner, on one hand, and AIMCO and its affiliates,
on the other and conflicts of interests with respect to the tender offer, see
"The Offer--Section 9. Background and Reasons for the Offer" and "The
Offer--Section 11. Conflicts of Interest and Transactions with Affiliates." See
also "The Offer--Section 9. Background and Reasons for the Offer--Comparison to
Alternative Consideration--Prior Tender Offers" for certain information
regarding transactions in units of your partnership.
11. CONFLICTS OF INTEREST AND TRANSACTIONS WITH AFFILIATES.
CONFLICTS OF INTEREST WITH RESPECT TO THE OFFER. The general partner of
your partnership is an affiliate of AIMCO. As our affiliate, the general partner
of your partnership has substantial conflicts of interest with respect to the
offer. As a consequence of our ownership of units, we may have incentives to
seek to maximize the value of our ownership of units, which in turn may result
in a conflict for your general partner in attempting to reconcile our interests
with the interests of the other limited partners and unitholders. The conflicts
of interest include the fact that a decision to remove, for any reason, the
general partner of your partnership from its current position as a general
partner of your partnership would result in a decrease or elimination of the
substantial management fees paid to the
-23-
general partner of your partnership for managing your partnership. Additionally,
we desire to purchase units at a low price and you desire to sell units at a
high price. Such conflicts of interest in connection with the offer differ from
those conflicts of interest that currently exist for your partnership. YOU ARE
URGED TO READ THIS OFFER TO PURCHASE IN ITS ENTIRETY BEFORE DECIDING WHETHER TO
TENDER YOUR UNITS. The general partner makes no recommendation as to whether you
should tender or refrain from tendering your units.
CONFLICTS OF INTEREST THAT CURRENTLY EXIST FOR YOUR PARTNERSHIP. We own
both the general partner of your partnership and the property manager of your
partnership's residential properties. The general partner of your partnership
received total fees and reimbursements of $200,000 in 2000, $183,000 in 2001,
and $166,000 in 2002. Total fees and reimbursements paid to the general partner
for the nine months ended September 30, 2003 were $89,000. The property manager
is entitled to receive five percent of gross receipts from the partnership's
residential properties for providing property management services. It received
management fees of $156,000 in 2000, $176,000 in 2001, and $153,000 in 2002.
Total management fees for the nine months ended September 30, 2003 were
$115,000. We have no current intention of changing the fee structure for your
general partner or the manager of your partnership's residential properties.
COMPETITION AMONG PROPERTIES. Because AIMCO and your partnership both
invest in apartment properties, these properties may compete with one another
for tenants. Furthermore, you should bear in mind that AIMCO may acquire
properties in the general market areas where your partnership's properties are
located. We are of the opinion that this concentration of properties in a
general market areas will facilitate overall operations through collective
advertising efforts and other operational efficiencies. In managing AIMCO's
properties, we will attempt to reduce conflicts between competing properties by
referring prospective customers to the property considered to be most
conveniently located for the customer's needs.
FUTURE OFFERS. Although we have no current plans to conduct future
tender offers for your units, our plans may change based on future
circumstances, including tender offers made by third parties. Any such future
offers that we might make could be for consideration that is more or less than
the consideration we are currently offering.
TRANSACTIONS WITH AFFILIATES. During the year ended December 31, 2002
and 2001, an affiliate of the general partner advanced the partnership
approximately $167,000 and $120,000, respectively, to pay property tax bills and
other expenses. In accordance with your partnership's partnership agreement,
interest is to be charged at prime plus 2%. The partnership recognized and
accrued approximately $6,000 and $5,000 of interest expense related to these
advances during the years ended December 31, 2002 and 2001, respectively.
During the first eight quarters following the issuance of the units,
the general partner was obligated to loan to the partnership up to approximately
$811,000 to cover any deficiency in the quarterly cash distributions. The
general partner loaned the partnership $300,000 under this guarantee, which
expired August 26, 1988. A deficiency arose when the unit holders did not
receive annualized cash distributions equal to 10% of the average of their
Adjusted Capital Values (as defined in your partnership's partnership
Agreement). The loan bears interest at the lesser of the rates being paid by the
parent company of the general partner or two percentage points over the
Citibank, N.A. prime interest rate. The repayment of the loan would reduce the
amount subsequently available for distribution to the unit holders. During 2002,
this loan was repaid in full.
Beginning in 2001, the partnership began insuring its properties up to
certain limits through coverage provided by AIMCO which is generally
self-insured for a portion of losses and liabilities related to workers
compensation, property casualty and vehicle liability. The partnership insures
its properties above the AIMCO limits through insurance policies obtained by
AIMCO from insurers unaffiliated with the general partner. During the years
ended December 31, 2002 and 2001, the partnership paid AIMCO and its affiliates
approximately $51,000 and $56,000, respectively, for insurance coverage and fees
associated with policy claims administration.
12. FUTURE PLANS OF THE PURCHASER.
As described above under "The Offer--Section 9. Background and Reasons
for the Offer," your general partner is our affiliate and we therefore have the
ability to control the management of your partnership. In addition, we own the
manager of your partnership's residential properties. We currently intend that,
upon consummation of
-24-
the offer, we will hold the units acquired and your partnership will continue
its business and operations substantially as they are currently being conducted.
The offer is not expected to have any effect on partnership operations.
Although we have no present intention to do so, we may acquire
additional units or sell units after completion or termination of the offer. Any
acquisition may be made through private purchases, through one or more future
tender or exchange offers, by merger, consolidation or by any other means deemed
advisable. Any acquisition may be at a price higher or lower than the price to
be paid for the units purchased pursuant to this offer, and may be for cash,
limited partnership interests in AIMCO Properties or other consideration. We
also may consider selling some or all of the units we acquire pursuant to this
offer to persons not yet determined, which may include our affiliates. We may
also buy your partnership's properties, although we have no present intention to
do so. There can be no assurance, however, that we will initiate or complete, or
will cause your partnership to initiate or complete, any subsequent transaction
during any specific time period following the expiration of the offer or at all.
Except as set forth herein, we do not have any present plans or
proposals which relate to or would result in an extraordinary transaction, such
as a merger, reorganization or liquidation, involving your partnership; a
purchase or sale or transfer of a material amount of your partnership's assets;
any changes in composition of your partnership's senior management or personnel
or their compensation; any changes in your partnership's present capitalization,
indebtedness or distribution policy; or any other material changes in your
partnership's structure or business. We or our affiliates may loan funds to your
partnership which may be secured by your partnership's properties. If any such
loans are made, upon default of such loans, we or our affiliates could seek to
foreclose on the loan and related mortgage or security interest. However, we
expect that, consistent with your general partner's fiduciary obligations, the
general partner will seek and review opportunities, including opportunities
identified by us, to engage in transactions which could benefit your
partnership, such as sales or refinancings of assets or a combination of the
partnership with one or more other entities, with the objective of seeking to
maximize returns to limited partners. Your partnership's prospectus pursuant to
which units in your partnership were sold, indicated that your partnership was
intended to be self-liquidating, that it was anticipated that the partnership's
properties would be sold within five to nine years of their acquisition,
provided market conditions permit, and that it was anticipated that the
partnership would be dissolved within twelve years after the sale of the units.
The prospectus also indicated that there would be no assurance that the
partnership would be able to so liquidate and that, unless sooner terminated as
provided in the partnership agreement, the existence of the partnership would
continue until the year 2005. While the partnership agreement provides that the
partnership will terminate on December 31, 2005, we do not currently expect that
any of the partnership's properties will be sold in the foreseeable future.
We have been advised that the possible future transactions the general
partner expects to consider on behalf of your partnership include: (i) payment
of extraordinary distributions; (ii) refinancing, reducing or increasing
existing indebtedness of the partnership; (iii) sales of assets, individually or
as part of a complete liquidation; and (iv) mergers or other consolidation
transactions involving the partnership. Any such merger or consolidation
transaction could involve other limited partnerships in which your general
partner or its affiliates serve as general partners, or a combination of the
partnership with one or more existing, publicly traded entities (including,
possibly, affiliates of AIMCO), in any of which limited partners might receive
cash, common stock or other securities or consideration. There is no assurance,
however, as to when or whether any of the transactions referred to above might
occur. If any such transaction is effected by the partnership and financial
benefits accrue to its limited partners, we will participate in those benefits
to the extent of our ownership of units. The agreement of limited partnership
prohibits limited partners and unitholders from voting on actions taken by the
partnership, unless otherwise specifically permitted by the partnership
agreement. Limited partners may vote on a liquidation, and if we acquire a
substantial number of units in this offer, we and our affiliates will be able to
significantly influence or control the outcome of any such vote. Our primary
objective in seeking to acquire the units pursuant to the offer is not, however,
to influence the vote on any particular transaction, but rather to generate a
profit on the investment represented by those units.
13. CERTAIN INFORMATION CONCERNING YOUR PARTNERSHIP.
GENERAL. Your partnership was organized on January 24, 1986 under the
laws of the State of Delaware. Its primary business is real estate ownership and
related operations. Your partnership was formed for the purpose of acquiring,
holding, maintaining, financing, developing, operating, selling, loaning and
borrowing money in
-25-
connection with, improving, leasing, disposing of and otherwise acquiring,
investing in and dealing with commercial, residential and combined
office/warehouse real estate that offers cash distributions to partners from
operations and the potential for appreciation in value and to engage in other
related or incidental activities.
Your partnership's investment portfolio currently consists of the
following residential apartment complexes: Twin Lakes Apartments, a 262-unit
apartment complex, located in Palm Harbor, Florida, and Governor's Park
Apartments, a 154-unit apartment complex, located in Little Rock, Arkansas.
The managing general partner of your partnership is U.S. Realty I
Corporation, which is our affiliate. We are also a general partner of your
partnership. An affiliate of AIMCO also serves as manager of the residential
properties owned by your partnership. There are currently 1,222,000 units
outstanding, which are held of record by 444 unitholders. Your partnership's
principal executive offices are located at 55 Beattie Place, P.O. Box 1089,
Greenville, South Carolina 29602, telephone (864) 239-1000. The general
partner's principal executive offices are located at 4582 South Ulster Street
Parkway, Suite 1100, Denver, Colorado 80237, telephone (303) 757-8101.
For additional information about your partnership, please refer to the
annual report prepared by your partnership which was sent to you earlier this
year, particularly Item 2 of Form 10-KSB, which contains detailed information
regarding the properties owned, including mortgages, rental rates and taxes. In
addition, your partnership is subject to the information and reporting
requirements of the Exchange Act and information about your partnership can be
obtained in the same manner as information can be obtained about us, as set
forth in "The Offer--Section 8. Information Concerning Us and Certain of Our
Affiliates."
INVESTMENT OBJECTIVES AND POLICIES; SALE OR FINANCING OF INVESTMENTS.
Your general partner (which is our affiliate) regularly evaluates the
partnership's properties by considering various factors, such as the
partnership's financial position and real estate and capital markets conditions.
The general partner monitors each property's specific locale and sub-market
conditions (including stability of the surrounding neighborhood), evaluating
current trends, competition, new construction and economic changes. The general
partner oversees each property's operating performance and continuously
evaluates the physical improvement requirements. In addition, the financing
structure for the properties (including any prepayment penalties), tax
implications, availability of attractive mortgage financing to a purchaser, and
the investment climate are all considered. Any of these factors, and possibly
others, could potentially contribute to any decision by the general partner to
sell, refinance, upgrade with capital improvements or hold the partnership
properties. If rental market conditions improve, the level of distributions
might increase over time. It is possible that the private resale market for
properties could improve over time, making a sale of the partnership's
properties in a private transaction at some point in the future a more viable
option than it is currently. After taking into account the foregoing
considerations, your general partner is not currently seeking a sale of your
partnership's properties primarily because it expects the properties' operating
performance to improve in the long term. In making this assessment, your general
partner noted the occupancy and rental rates at the residential properties. In
particular, the general partner noted that it spent approximately $420,000 for
capital expenditures at the residential properties in 2002, and expects to spend
approximately $125,000 for capital improvements at the residential properties in
2003, to repair and update the properties. Although there can be no assurance as
to future performance, however, these expenditures are expected to improve the
desirability of the properties to tenants. The general partner is of the opinion
that a sale of the properties at the present time would not adequately reflect
the properties' future prospects. Another significant factor considered by your
general partner is the likely tax consequences of a sale of the properties for
cash. Such a transaction would likely result in tax liabilities for many
unitholders.
TERM OF YOUR PARTNERSHIP. Under your partnership's agreement of limited
partnership, the term of the partnership will continue until December 31, 2005,
unless sooner terminated as provided in the agreement or by law. Because we
control a majority of the limited partnership interests, we have the power to
amend your partnership agreement to extend the term of your partnership without
the consent of other limited partners or unitholders. While we have no present
intention to cause such an amendment, we may decide to propose such an
amendment, based on a consideration of relevant factors such as prevailing
economic conditions and tax considerations. In general, we will vote the limited
partnership units owned by us in whatever manner we deem to be in our best
interests, which may not be in the interest of other partners or unitholders.
Unitholders could take a variety of possible actions, including instructing the
limited partner of your partnership to vote to liquidate the partnership or
amend the
-26-
agreement of limited partnership to authorize limited partners to cause the
partnership to merge with another entity or engage in a "roll-up" or similar
transaction.
CAPITAL REPLACEMENTS. Your partnership has an ongoing program of
capital improvements, replacements and renovations, including floor covering,
water heater, appliance and roof replacements, electrical improvements, and
other replacements and renovations in the ordinary course of business. All
capital improvements and renovation costs, which totaled approximately $105,000
through September 30, 2003, are expected to be paid from operating cash flows,
cash reserves, or from short-term or long-term borrowings.
COMPETITION. There are other residential properties within the market
areas of your partnership's properties. The number and quality of competitive
properties in such areas could have a material effect on the rental market for
the apartments at your partnership's properties and the rents that may be
charged for such apartments. While AIMCO is a significant factor in the United
States in the apartment industry, competition for apartments is local. According
to data published by the National Multi-Housing Council, we are of the opinion
that AIMCO is one of the largest owners and managers of multifamily apartment
properties in the United States.
FINANCIAL DATA. The selected financial information of your partnership
set forth below for the years ended December 31, 2002, 2001 and 2000 is based on
audited financial statements. The selected financial information set forth below
for the periods ended September 30, 2003 and 2002 is based on unaudited
financial statements. This information should be read in conjunction with such
financial statements, including notes thereto, and "Management's Discussion and
Analysis of Financial Condition and Results of Operations of Your Partnership"
in the Annual Report on Form 10-KSB of your partnership for the year ended
December 31, 2002, and the Quarterly Report on Form 10-QSB for the period ended
September 30, 2003.
U.S. REALTY PARTNERS LIMITED PARTNERSHIP
(IN THOUSANDS, EXCEPT PER UNIT DATA)
<Table>
<Caption>
FOR THE YEAR ENDED FOR THE NINE MONTHS
ENDED
DECEMBER 31 SEPTEMBER 30
2002 2001 2000 2003 2002
----------- ---------- ----------- ----------- -----------
OPERATING DATA
Total Revenues 3,129 3,110 3,163 2,361 2,346
Net Income (Loss) 148 (50) 375 117 137
Net Income per depositary unit certificate 0.12 (0.04) 0.30 0.09 0.11
Distributions per depositary unit certificate 0.00 0.00 5.76 0.31 0.00
BALANCE SHEET DATA
Cash & Cash Equivalents 103 134 659 174 268
Real Estate, Net of Accumulated Depreciation 10,360 10,545 10,902 9,990 10,454
Total Assets 10,921 11,151 12,061 10,560 11,212
Notes Payable 10,523 10,783 11,023 10,314 10,590
General Partners' Capital (Deficit) (3) (4) (4) (10) (3)
Limited Partners' Capital (Deficit) (19) (166) (116) (280) (30)
Partners' Capital (Deficit) (22) (170) (120) (290) (33)
Total Distributions 0 0 (7,045) (385) 0
Net increase (decrease) in cash and cash
equivalents (31) (525) 659 71 134
Net Cash provided by operating activities 597 551 1,156 766 752
</Table>
-27-
DESCRIPTION OF PROPERTIES. The following shows the location, the date
of purchase, the nature of your partnership's ownership interest in and the use
of your partnership's properties.
<Table>
<Caption>
Date of Type of
Property Purchase Ownership Use
-------- -------- --------- ---
Governor's Park Apartments 08/29/86 Fee ownership subject to Apartment
Little Rock, Arkansas first mortgage 154 units
Twin Lakes Apartments 08/28/86 Fee ownership subject to Apartment
Palm Harbor, Florida first mortgage 262 units
</Table>
ACCUMULATED DEPRECIATION SCHEDULE. The following shows the gross
carrying value and accumulated depreciation of your partnership's properties as
of December 31, 2002.
<Table>
<Caption>
Gross
Carrying Accumulated Federal Tax
Property Value Depreciation Rate Method Basis
-------- -------- ------------ ---- ------ --------------
(Dollars In Thousands) (In Thousands)
Governor's Park Apartments $ 6,639 $3,363 5-35 yrs. S/L $1,437
Twin Lakes Apartments 12,170 5,086 5-35 yrs. S/L 3,950
-------- ------ ------
TOTAL $18,809 $8,449 $5,387
</Table>
SCHEDULE OF MORTGAGES. The following shows certain information
regarding the outstanding first mortgage encumbering your partnership's
properties as of December 31, 2002.
<Table>
<Caption>
Principal
Principal Stated Balance
Balance At Interest Period Maturity Due At
Property December 31, 2002 Rate Amortized Date Maturity
-------- ----------------- -------- --------- -------- --------
Governor's Park Apartments $ 3,608,000 7.93% 240 months 9/1/20 $ --
Twin Lakes Apartments 6,915,000 7.98% 240 months 9/1/20 --
---------------
TOTAL $ 10,523,000
</Table>
AVERAGE MONTHLY RENTAL RATES AND OCCUPANCY. The following shows the
average monthly rental rates and annual occupancy rates for your partnership's
properties during the periods indicated.
<Table>
<Caption>
Average Monthly Rental Rate Average Occupancy
--------------------------- -----------------------
Property 2002 2001 2002 2001
-------- ---- ---- ---- ----
Governor's Park Apartments $586 $599 94% 94%
Twin Lakes Apartments $651 $665 94% 95%
</Table>
PROPERTY MANAGEMENT. Your partnership's residential properties are
managed by an entity, which is an affiliate of AIMCO. Pursuant to the management
agreement between the property manager and your partnership, the property
manager operates your partnership's residential properties, establishes rental
policies and rates and
-28-
directs marketing activities. The property manager also is responsible for
maintenance, the purchase of equipment and supplies, and the selection and
engagement of all vendors, suppliers and independent contractors.
DISTRIBUTIONS. The following table shows, for each of the years
indicated, the distributions paid per unit for such years.
<Table>
<Caption>
YEAR ENDED DECEMBER 31, AMOUNT
----------------------- ------
2000 $5.76(1)
2001 --
2002 --
2003 (through September 30) 0.31
-----
Total $6.07
</Table>
(1) Distributions of $5.26 consisted of cash from operations and $0.50
consisted of refinancing proceeds.
BENEFICIAL OWNERSHIP OF INTERESTS IN YOUR PARTNERSHIP. We and our
affiliates, AIMCO and AIMCO-GP, Inc., collectively have voting and dispositive
power with respect to 769,519, or 62.97%, of the outstanding limited partner
units of your partnership, along with an approximate 2.0% general partnership
interest held by the general partners. Except as set forth in this offer to
purchase, neither we, nor, to the best of our knowledge, any of our affiliates,
(i) beneficially own or have a right to acquire any units, (ii) has effected any
transactions in the units in the past 60 days, or (iii) have any contract,
arrangement, understanding or relationship with any other person with respect to
any securities of your partnership, including, but not limited to, contracts,
arrangements, understandings or relationships concerning transfer or voting
thereof, joint ventures, loan or option arrangements, puts or calls, guarantees
of loans, guarantees against loss, or the giving or withholding of proxies. See
"The Offer - Section 9. Background and Reasons for the Offer - Prior Tender
Offers."
COMPENSATION PAID TO THE GENERAL PARTNER AND ITS AFFILIATES. The
following table shows, for each of the years indicated, amounts paid to your
partnership's general partner and its affiliates on a historical basis. The
general partner is reimbursed for actual direct costs and expenses incurred in
connection with the operation of the partnership. The property manager is
entitled to receive fees for transactions involving your partnership and its
properties and is entitled to receive five percent of the gross receipts from
the partnership's residential properties for providing property management
services.
<Table>
<Caption>
PARTNERSHIP PROPERTY
YEAR FEES AND EXPENSES MANAGEMENT FEES
---- ---------------------------- ------------------------------
2000 $200,000 $156,000
2001 $183,000 $176,000
2002 $166,000 $153,000
2003 (through September 30) $89,000 $115,000
</Table>
LEGAL PROCEEDINGS. On August 8, 2003, AIMCO Properties, an affiliate of
the general partner and a general partner of your partnership, was served with a
complaint in the United States District Court, District of Columbia, alleging
that AIMCO Properties willfully violated the Fair Labor Standards Act (FLSA) by
failing to pay maintenance workers overtime for all hours worked in excess of
forty per week. The complaint is styled as a Collective Action under the FLSA
and seeks to certify state subclasses in California, Maryland, and the District
of Columbia. Specifically, the plaintiffs contend that AIMCO Properties failed
to compensate maintenance workers for time that they were required to be
"on-call." Additionally, the complaint alleges AIMCO Properties failed to comply
with the FLSA in compensating maintenance workers for time that they worked in
responding to a call while "on-call." The complaint also attempts to certify a
subclass for salaried service directors who are challenging their classification
as exempt from the overtime provisions of the FLSA. AIMCO Properties has filed
an answer to the complaint denying the substantive allegations. Although the
outcome of any litigation is uncertain, in the opinion of the general partner
the claims will not result in any material liability to your partnership.
-29-
Your partnership may be a party to a variety of legal proceedings
related to its ownership of the partnership's properties, arising in the
ordinary course of the business, which are not expected to have a material
adverse effect on your partnership.
ENVIRONMENTAL. Various Federal, state and local laws subject property
owners or operators to liability for the costs of removal or remediation of
certain hazardous substances present on a property. Such laws often impart
liability without regard to whether the owner or operator knew of, or was
responsible for, the release of the hazardous substances. The presence of, or
failure to properly remediate, hazardous substances may adversely affect
occupancy at contaminated apartment communities and the partnership's ability to
sell or borrow against contaminated properties. In addition to the costs
associated with investigation and remediation actions brought by governmental
agencies, the presence of hazardous wastes on a property could result in claims
by private plaintiffs for personal injury, disease, disability or other
infirmities. Various laws also impose liability for the cost of removal or
remediation of hazardous or toxic substances at the disposal or treatment
facility. Anyone who arranges for the disposal or treatment of hazardous or
toxic substances is potentially liable under such laws. These laws often impose
liability whether or not the person arranging for the disposal ever owned or
operated the disposal facility. In connection with the ownership or operation of
properties, the partnership could potentially be liable for environmental
liabilities or costs associated with its properties or properties it may acquire
in the future.
The properties are subject to a Consent Agreement entered In the Matter
of Apartment Investment and Management Company, Docket No. HQ-2002-0003, before
the Environmental Appeals Board, United States Environmental Protection Agency,
and Final Order entered thereon on January 15, 2002, which may require, among
other things, lead-based paint disclosure to residents of properties and/or
certain remedial actions, which may result in costs to the partnership. In
addition to the costs associated with investigating and remediating, the
presence of lead-based paint on a property could result in claims by private
plaintiffs for personal injury, disease, disability or other infirmities. The
general partner is of the opinion that the properties are required to be covered
by adequate insurance provided by reputable companies and with commercially
reasonable deductibles and limits and that any costs not covered by insurance
are not expected to be material.
Any remaining costs are not expected to be material. The general
partner is of the opinion that the partnership's properties are covered by
adequate fire, flood and property insurance provided by reputable companies and
with commercially reasonable deductibles and limits.
ADDITIONAL INFORMATION CONCERNING YOUR PARTNERSHIP. Your partnership
files annual, quarterly and special reports, proxy statements and other
information with the SEC. You may read and copy any document your partnership
files at the SEC's public reference room in Washington, D.C. Please call the SEC
at 1-800-SEC-0330 for further information on the public reference rooms. Your
partnership's most recent SEC filings are also available to the public at the
SEC's web site at http://www.sec.gov.
The above discussion relating to environmental matters, capital
expenditures at the properties, and valuations of the properties is
forward-looking information developed by the general partner. These expectations
incorporated various assumptions including, but not limited to, revenue
(including occupancy rates), various operating expenses, general and
administrative expenses, depreciation expenses, and working capital levels.
While the general partner deemed such expectations to be reasonable and valid at
the date made, there is no assurance that the assumed facts will be validated or
that the results will actually occur. Any estimate of the future performance of
a business, such as your partnership's business, is forward-looking and based on
assumptions some of which inevitably will prove to be incorrect.
14. VOTING POWER.
Decisions with respect to the day-to-day management of your partnership
are the responsibility of the general partner. Because the general partner of
your partnership is our affiliate, we control the management of your
partnership. Under your partnership's agreement of limited partnership, limited
partners holding a majority of the outstanding units must approve certain
extraordinary transactions, including amendments to the partnership agreement
and the sale of all or substantially all of your partnership's assets. We and
our affiliates own 769,519 units, or 62.97%, of the outstanding units of your
partnership. Because we and our affiliates own a majority of the outstanding
units, we control such voting decisions made by the limited partners and
unitholders.
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15. SOURCE OF FUNDS.
We expect that approximately $1,063,330 will be required to purchase
all of the limited partnership units that we are seeking in this offer
(exclusive of fees and expenses estimated to be $11,000). For more information
regarding fees and expenses, see "The Offer--Section 19. Fees and Expenses."
We have a $445 million revolving credit facility with Bank of America,
Fleet National Bank and First Union National Bank with a syndicate comprised of
a total of ten lender participants. We are the borrower and all obligations
thereunder are guaranteed by certain of AIMCO's subsidiaries. The obligations
under the credit facility are secured, among other things, by our pledge of our
stock ownership in certain subsidiaries of AIMCO, and a first priority pledge of
certain of our non-real estate assets. The annual interest rate under the credit
facility is based on either LIBOR or a base rate which is the higher of Bank of
America's reference rate or 0.5% over the federal funds rate, plus, in either
case, an applicable margin. The margin ranges between 2.15% and 2.85% in the
case of LIBOR-based loans and between 0.65% and 1.35% in the case of base rate
loans, based upon a fixed charge coverage ratio. The credit facility expires on
July 31, 2005 and can be extended at AIMCO's option for a one-year term on a
one-time basis.
In addition to this offer, we are concurrently making offers to acquire
interests in other public and private partnerships. We are of the opinion that
we will have sufficient cash on hand and available sources of financing to
acquire all units tendered pursuant to such offers. As of September 30, 2003, we
had $126 million of cash on hand and $285 million available for borrowing under
existing lines of credit. We intend to repay any amounts borrowed to finance the
offer out of future working capital.
16. DISSENTERS' RIGHTS.
Neither the agreement of limited partnership of your partnership nor
applicable law provides any right for you to have your units appraised or
redeemed in connection with, or as a result of, our offer. In addition, we are
not extending appraisal rights in connection with the offer. You have the
opportunity to make an individual decision on whether or not to tender your
units in the offer.
No provisions have been made with regard to the offer to allow you or
other unitholders to inspect the books and records of your partnership or to
obtain counsel or appraisal services at our expense or at the expense of your
partnership. However, you have the right under your partnership's agreement of
limited partnership to obtain a list of the limited partners and unitholders.
17. CONDITIONS OF THE OFFER.
Notwithstanding any other provisions of our offer, we will not be
required to accept for payment and pay for any units tendered pursuant to our
offer, may postpone the purchase of, and payment for, units tendered, and may
terminate or amend our offer if at any time on or after the date of this offer
to purchase and at or before the expiration of our offer (including any
extension thereof), any of the following shall occur or may be reasonably
expected to occur:
o any change (or any condition, event or development involving a
prospective change) shall have occurred or been threatened in
the business, properties, assets, liabilities, indebtedness,
capitalization, condition (financial or otherwise),
operations, licenses or franchises, management contract, or
results of operations or prospects of your partnership or
local markets in which your partnership owns property,
including any fire, flood, natural disaster, casualty loss, or
act of God that, in our reasonable judgment, are or may be
materially adverse to your partnership or the value of the
units to us, or we shall have become aware of any facts
relating to your partnership, its indebtedness or its
operations which, in our reasonable judgment, has had or may
have a material adverse effect on the value of your
partnership or the value of the units to us, or the ability of
the general partners to assert full control over the assets,
privileges and immunities of the partnership, including
without limitation the ability of the general partners to
distribute the cash and cash equivalent to the limited
partners or the unitholders; or
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o there shall have occurred (i) any general suspension of
trading in, or limitation on prices for, securities on any
national securities exchange or the over-the-counter market in
the United States, (ii) a decline in the closing price of a
share of AIMCO's Class A Common Stock of more than 5.0%
measured from the close on the last trading day preceding the
date of this offer and the close on the last trading day
preceding the expiration of this offer, (iii) any material
adverse change in the financial, real estate or money markets
or major equity security indices in the United States such
that there shall have occurred at least a 25 basis point
increase in LIBOR, or at least a 5.0% decrease in the price of
the 10-year Treasury Bond or the 30-year Treasury Bond, or at
least a 5.0% decrease in the S&P 500 Index or the Morgan
Stanley REIT Index, in each case measured between the close on
the last trading day preceding the date of this offer and the
close on the last trading day preceding the expiration of this
offer, (iv) any material adverse change in the commercial
mortgage financing markets, (v) a declaration of a banking
moratorium or any suspension of payments in respect of banks
in the United States (not existing on the date hereof), (vi) a
commencement of a war, conflict, armed hostilities or other
national or international calamity directly or indirectly
involving the United States (not existing on the date hereof),
(vii) any limitation (whether or not mandatory) by any
governmental authority on, or any other event which, in our
reasonable judgment, might affect the extension of credit by
banks or other lending institutions, or (viii) in the case of
any of the foregoing existing at the time of the commencement
of the offer, in our reasonable judgment, a material
acceleration or worsening thereof; or
o there shall have been threatened in writing, instituted or
pending any action, proceeding, application or counterclaim by
any Federal, state, local or foreign government, governmental
authority or governmental agency, or by any other person,
before any governmental authority, court or regulatory or
administrative agency, authority or tribunal, which (i)
challenges or seeks to challenge our purchase of the units,
restrains, prohibits or delays the making or consummation of
our offer, prohibits the performance of any of the contracts
or other arrangements entered into by us (or any affiliates of
ours), or seeks to obtain any material amount of damages as a
result of the transactions contemplated by our offer, (ii)
seeks to make the purchase of, or payment for, some or all of
the units pursuant to our offer illegal or results in a delay
in our ability to accept for payment or pay for some or all of
the units, (iii) seeks to prohibit or limit the ownership or
operation by us or any of our affiliates of the entity serving
as general partner of your partnership or to remove such
entity as general partner of your partnership, or seeks to
impose any material limitation on our ability or the ability
of any affiliate of ours to conduct your partnership's
business or own such assets, (iv) seeks to impose material
limitations on our ability to acquire or hold or to exercise
full rights of ownership of the units including, but not
limited to, the right to vote the units purchased by us on all
matters properly presented to the limited partners and
unitholders, or (v) might result, in our reasonable judgment,
in a material diminution in the value of your partnership or
the units to be acquired; or
o there shall be any action taken, or any statute, rule,
regulation, order or injunction shall be sought, proposed,
enacted, promulgated, entered, enforced or deemed applicable
to our offer, your partnership, any general partner of your
partnership, us or any affiliate of ours or your partnership,
or any other action shall have been taken, proposed or
threatened, by any government, governmental authority or
court, that, in our reasonable judgment, might, directly or
indirectly, result in any of the consequences referred to in
clauses (i) through (v) of the immediately preceding
paragraph; or
o your partnership shall have, due to events beyond our direct
or indirect control, (i) changed, or authorized a change of,
the units or your partnership's capitalization, (ii) issued,
distributed, sold or pledged, or authorized, proposed or
announced the issuance, distribution, sale or pledge of (A)
any equity interests (including, without limitation, units),
or securities convertible into any such equity interests or
any rights, warrants or options to acquire any such equity
interests or convertible securities, or (B) any other
securities in respect of, in lieu of, or in substitution for
units outstanding on the date hereof, (iii) purchased or
otherwise acquired, or proposed or offered to purchase or
otherwise acquire, any outstanding units or other securities,
(iv) declared or paid any dividend or distribution on any
units or issued, authorized, recommended or proposed the
issuance of any other distribution in respect of the units,
whether payable in cash, securities or other property, (v)
authorized, recommended, proposed or announced an agreement,
or intention to enter into an
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agreement, with respect to any merger, consolidation,
liquidation or business combination, any acquisition or
disposition of a material amount of assets or securities, or
any release or relinquishment of any material contract rights,
or any comparable event, not in the ordinary course of
business, (vi) taken any action to implement such a
transaction previously authorized, recommended, proposed or
publicly announced, (vii) issued, or announced its intention
to issue, any debt securities, or securities convertible into,
or rights, warrants or options to acquire, any debt
securities, or incurred, or announced its intention to incur,
any debt other than in the ordinary course of business and
consistent with past practice, (viii) authorized, recommended
or proposed, or entered into, any transaction which, in our
reasonable judgment, has or could have an adverse affect on
the value of your partnership or the units, (ix) proposed,
adopted or authorized any amendment of its organizational
documents, (x) agreed in writing or otherwise to take any of
the foregoing actions or (xi) been notified that any debt of
your partnership or any of its subsidiaries secured by any of
its or their assets is in default or has been accelerated; or
o a new tender or exchange offer for any units shall have been
commenced or publicly proposed to be made by another person or
"group" (as defined in Section 13(d)(3) of the Exchange Act),
or the consideration offered in any tender offer or exchange
offer for any units so commenced or publicly proposed is
increased, or it shall have been publicly disclosed or we
shall have otherwise learned that (i) any person or group
shall have acquired or proposed or be attempting to acquire
beneficial ownership of more than five percent of the units,
or shall have been granted any option, warrant or right,
conditional or otherwise, to acquire beneficial ownership of
more than five percent of the units, other than acquisitions
for bona fide arbitrage purposes, or (ii) any person or group
shall have entered into a definitive agreement or an agreement
in principle or made a proposal with respect to a merger,
consolidation or other business combination with or involving
your partnership; or
o the offer to purchase may have an adverse effect on AIMCO's
status as a REIT; or
o we shall not have, as a result of events and circumstances
beyond our reasonable control, adequate cash or financing
commitments available to pay for the units validly tendered;
or
o there would be 320 or fewer unitholders outstanding as a
result of the consummation of the offer.
The foregoing conditions are for our sole benefit and may be asserted
by us regardless of the circumstances giving rise to such conditions or may be
waived by us in whole or in part in our reasonable discretion. The failure by us
at any time to exercise any of the foregoing rights shall not be deemed a waiver
of any such right, the waiver of any such right with respect to any particular
facts or circumstances shall not be deemed a waiver with respect to any other
facts or circumstances and each right shall be deemed a continuing right which
may be asserted at any time permitted by the securities laws. However, in
interpreting these conditions, we shall at all times comply with our obligations
under the securities laws, and where a condition is subject to our discretion or
judgment, we shall act as a reasonably prudent investor would act. If there is
any question as to whether a condition is satisfied or waived, then we will
exercise due care to ensure that the unitholders receive prompt notice of the
failure of any condition.
18. CERTAIN LEGAL MATTERS.
GENERAL. Except as set forth in this Section 18, we are not, based on
information provided by your general partner (which is our affiliate), aware of
any licenses or regulatory permits that would be material to the business of
your partnership, taken as a whole, and that might be adversely affected by our
acquisition of units as contemplated herein, or any filings, approvals or other
actions by or with any domestic or foreign governmental authority or
administrative or regulatory agency that would be required prior to the
acquisition of units by us pursuant to the offer, other than the filing of a
Tender Offer Statement on Schedule TO with the SEC (which has already been
filed) and any required amendments thereto. While there is no present intent to
delay the purchase of units tendered pursuant to the offer pending receipt of
any such additional approval or the taking of any such action, there can be no
assurance that any such additional approval or action, if needed, would be
obtained without substantial conditions or that adverse consequences might not
result to your partnership or its business, or that certain parts of its
business might not have to be disposed of or other substantial conditions
complied with in order to obtain such approval or action, any of which could
cause us to elect to terminate the offer without purchasing units thereunder.
Our
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obligation to purchase and pay for units is subject to certain conditions,
including conditions related to the legal matters discussed in this Section 18.
ANTITRUST. We are of the opinion that the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended, is not applicable to the acquisition of
units contemplated by our offer.
MARGIN REQUIREMENTS. The units are not "margin securities" under the
regulations of the Board of Governors of the Federal Reserve System and,
accordingly, those regulations generally are not applicable to our offer.
STATE LAWS. We are not aware of any jurisdiction in which the making of
our offer is not in compliance with applicable law. If we become aware of any
jurisdiction in which the making of the offer would not be in compliance with
applicable law, we will make a good faith effort to comply with any such law.
If, after such good faith effort, we cannot comply with any such law, the offer
will not be made to (nor will tenders be accepted from or on behalf of)
unitholders residing in such jurisdiction. In those jurisdictions with
securities or blue sky laws that require the offer to be made by a licensed
broker or dealer, the offer shall be made on behalf of us, if at all, only by
one or more registered brokers or dealers licensed under the laws of that
jurisdiction.
19. FEES AND EXPENSES.
You will not pay any partnership transfer fees if you tender your
units. Except as set forth herein, we will not pay any fees or commissions to
any broker, dealer or other person for soliciting tenders of units pursuant to
the offer. We have retained The Altman Group, Inc. to act as Information Agent
in connection with our offer. The Information Agent may contact holders of units
by mail, e-mail, telephone, telex, telegraph and personal interview and may
request brokers, dealers and other nominee unitholders to forward materials
relating to the offer to beneficial owners of the units. We will pay the
Information Agent reasonable and customary compensation for its services in
connection with the offer, plus reimbursement for out-of-pocket expenses, and
will indemnify it against certain liabilities and expenses in connection
therewith, including liabilities under the Federal securities laws. We will also
pay all costs and expenses of printing and mailing the offer and any related
legal fees and expenses.
---------------------------
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION ON BEHALF OF US NOT CONTAINED HEREIN, IN THE ACKNOWLEDGMENT AND
AGREEMENT OR THE LETTER OF TRANSMITTAL ATTACHED AS ANNEX II AND, IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED.
We have filed with the SEC a Tender Offer Statement on Schedule TO,
pursuant to Section 14(d)(1) and Rule 14d-3 under the Exchange Act, furnishing
certain additional information with respect to our offer, and may file
amendments thereto. Your partnership has filed with the SEC a
Solicitation/Recommendation Statement on Schedule 14D-9 pursuant to Section
14(d)(4) and Rule 14d-9 under the Exchange Act, furnishing certain additional
information about your partnership's and the general partner's position
concerning our offer, and your partnership may file amendments thereto. The
Schedules TO and 14D-9 and any amendments to either Schedule, including
exhibits, may be inspected and copies may be obtained at the same place and in
the same manner as described in "The Offer-Section 13. Certain Information
concerning your Partnership--Additional Information concerning your
Partnership."
The acknowledgment and agreement and any other required documents
should be sent or delivered by each unitholder or such unitholder's broker,
dealer, bank, trust company or other nominee to the Information Agent at one of
its addresses set forth below.
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THE INFORMATION AGENT FOR THE OFFER IS:
THE ALTMAN GROUP, INC.
By Mail, Overnight Courier or Hand Delivery:
1275 Valley Brook Avenue
Lyndhurst, New Jersey 07071
By Facsimile:
(201) 460-0050
For information please call:
(800) 217-9608
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ANNEX I
OFFICERS AND DIRECTORS
The names and positions of the executive officers of Apartment
Investment and Management Company ("AIMCO"); AIMCO-GP, Inc. ("AIMCO-GP"); and
the general partner of your partnership, are set forth below. The directors of
AIMCO are also set forth below. The two directors of AIMCO-GP are Terry
Considine and Peter Kompaniez. The director of the general partner of your
partnership is Patrick J. Foye. Unless otherwise indicated, the business address
of each executive officer and director is 4582 South Ulster Street Parkway,
Suite 1100, Denver, Colorado 80237. Each executive officer and director is a
citizen of the United States of America.
<Table>
<Caption>
NAME POSITION
---- --------
Terry Considine................................ Chairman of the Board of Directors and Chief Executive
Officer
Peter K. Kompaniez............................. Vice Chairman, President and Director
Harry G. Alcock................................ Executive Vice President and Chief Investment Officer
Miles Cortez................................... Executive Vice President, General Counsel and Secretary
Joseph DeTuno.................................. Executive Vice President - Redevelopment
Randall J. Fein................................ Executive Vice President - Student Housing
Patti K. Fielding.............................. Executive Vice President
Patrick J. Foye................................ Executive Vice President
Lance J. Graber................................ Executive Vice President - Acquisitions
Paul J. McAuliffe.............................. Executive Vice President and Chief Financial Officer
Ron Monson..................................... Executive Vice President and Head of Property Operations
Jim Purvis..................................... Executive Vice President - Human Resources
David Robertson................................ Executive Vice President - Affordable Properties
James N. Bailey................................ Director
Richard S. Ellwood............................. Director
J. Landis Martin............................... Director
Thomas L. Rhodes............................... Director
</Table>
Annex I - Page 1
<Table>
<Caption>
NAME PRINCIPAL OCCUPATIONS FOR THE LAST FIVE YEARS
---- ---------------------------------------------
Terry Considine..................... Mr. Considine has been Chairman and Chief Executive Officer of AIMCO
and AIMCO-GP since July 1994. Mr. Considine serves as Chairman of
the Board of Directors of American Land Lease, Inc. (formerly Asset
Investors Corporation and Commercial Asset Investors, Inc.), another
public real estate investment trust. Mr. Considine has been and
remains involved as a principal in a variety of other business
activities.
Peter K. Kompaniez.................. Mr. Kompaniez has been Vice Chairman and a director of AIMCO since
July 1994 and was appointed President in July 1997. Mr. Kompaniez
has also served as Chief Operating Officer of NHP Incorporated,
which was acquired by AIMCO in December 1997. From 1986 to 1993, he
served as President and Chief Executive Officer of Heron Financial
Corporation ("HFC"), a United States holding company for Heron
International, N.V.'s real estate and related assets. While at HFC,
Mr. Kompaniez administered the acquisition, development and
disposition of approximately 8,150 apartment units (including 6,217
units that have been acquired by AIMCO) and 3.1 million square feet
of commercial real estate.
Harry G. Alcock..................... Mr. Alcock served as a Vice President of AIMCO from July 1996 to
October 1997, when he was promoted to Senior Vice President -
Acquisitions. Mr. Alcock served as Senior Vice
President-Acquisitions until October 1999, when he was promoted to
Executive Vice President and Chief Investment Officer. Mr. Alcock
has held responsibility for AIMCO's acquisition and financing
activities since July 1994. From June 1992 until July 1994, Mr.
Alcock served as Senior Financial Analyst for PDI and HFC. From
1988 to 1992, Mr. Alcock worked for Larwin Development Corp., a Los
Angeles-based real estate developer, with responsibility for raising
debt and joint venture equity to fund land acquisition and
development. From 1987 to 1988, Mr. Alcock worked for Ford
Aerospace Corp. He received his B.S. from San Jose State
University.
Miles Cortez........................ Mr. Cortez was appointed Executive Vice President, General Counsel
and Secretary in August 2001. Since December 1997, Mr. Cortez has
been a founding partner and the senior partner of the law firm of
Cortez Macaulay Bernhardt & Schuetze LLC. From August 1993 to
November 1997, Mr. Cortez was a partner in the law firm of McKenna &
Cuneo, LLP. Mr. Cortez was the President of the Denver Bar
Association from 1982-1983; was Chairman of the Ethics Committee of
the Colorado Bar Association from 1977-1978, was President of the
Colorado Bar Association from 1996-1997, and was a member of the
American Bar Association House of Delegates from 1990-1995. Mr.
Cortez is a Life Fellow of the Colorado Bar Foundation and American
Bar Foundation. Mr. Cortez has been listed in the national
publication "The Best Lawyers in America" for business litigation
for the past ten years.
</Table>
Annex I - Page 2
<Table>
<Caption>
NAME PRINCIPAL OCCUPATIONS FOR THE LAST FIVE YEARS
---- ---------------------------------------------
Joseph DeTuno....................... Mr. DeTuno was appointed Executive Vice President-Redevelopment of
AIMCO in February 2001. Mr. DeTuno has been Senior Vice
President-Property Redevelopment of AIMCO since August 1997. Mr.
DeTuno was previously President and founder of JD Associates, his
own full service real estate consulting, advisory and project
management company that he founded in 1990.
Randall J. Fein..................... Mr. Fein was appointed Executive Vice President in October 2003. He
is responsible for Student Housing. Prior to joining AIMCO, Mr.
Fein was president of the general partner of Texas First L.P. and
Income Apartment Investors L.P. Mr. Fein is a 1977 graduate of the
University of Texas at Austin. He also received a J.D. from the
University of Texas at Austin in 1980.
Patti K. Fielding................... Ms. Fielding was appointed Executive Vice President in February
2003. She is responsible for securities and debt financing and the
treasury department. From January 2000 to February 2003, Ms.
Fielding served as Senior Vice President - Securities and Debt. Ms.
Fielding joined the Company in February 1997 and served as Vice
President-Tenders, Securities and Debt until January 2002. Prior to
joining the Company, Ms. Fielding was a Vice President with Hanover
Capital Partners from 1996 to 1997, Vice Chairman, Senior Vice
President and Principal of CapSource Funding Corp from 1993 to 1995,
and Group Vice President with Duff & Phelps Rating Co. from 1987 to
1993.
Patrick J. Foye..................... Mr. Foye was appointed Executive Vice President of AIMCO in May
1998. He is responsible for acquisitions of partnership securities,
consolidation of minority interests, and corporate and other
acquisitions. Prior to joining AIMCO, Mr. Foye was a merger and
acquisitions partner in the law firm of Skadden, Arps, Slate,
Meagher & Flom LLP from 1989 to 1998 and was Managing Partner of the
firm's Brussels, Budapest and Moscow offices from 1992 through
1994. Mr. Foye is also Deputy Chairman of the Long Island Power
Authority and serves as a member of the New York State Privatization
Council. He received a B.A. from Fordham College and a J.D. from
Fordham University Law School and was Associate Editor of the
Fordham Law Review.
Lance Graber........................ Mr. Graber was appointed Executive Vice President - Acquisitions in
October 1999. His principal business function is acquisitions.
Prior to joining AIMCO, Mr. Graber was an Associate from 1991
through 1992 and then a Vice President from 1992 through 1994 at
Credit Suisse First Boston engaged in real estate financial advisory
services and principal investing. He was a Director there from 1994
to May 1999, during which time he supervised a staff of seven in the
making of principal investments in hotel, multi-family and assisted
living properties. Mr. Graber received a B.S. and an M.B.A. from
the Wharton School of the University of Pennsylvania.
</Table>
Annex I - Page 3
<Table>
<Caption>
NAME PRINCIPAL OCCUPATIONS FOR THE LAST FIVE YEARS
---- ---------------------------------------------
Paul J. McAuliffe................... Mr. McAuliffe has been Executive Vice President of AIMCO since
February 1999 and was appointed Chief Financial Officer in October
1999. Prior to joining AIMCO, Mr. McAuliffe was Senior Managing
Director of Secured Capital Corporation and prior to that time had
been a Managing Director of Smith Barney, Inc. from 1993 to 1996,
where he was a key member of the underwriting team that led AIMCO's
initial public offering in 1994. Mr. McAuliffe was also a Managing
Director and head of the real estate group at CS First Boston from
1990 to 1993 and he was a Principal in the real estate group at
Morgan Stanley & Co., Inc. from 1983 to 1990. Mr. McAuliffe
received a B.A. from Columbia College and an MBA from University of
Virginia, Darden School.
Ron Monson.......................... Mr. Monson was appointed Executive Vice President and Head of
Property Operations of AIMCO on February 6, 2001. Mr. Monson has
been with AIMCO since 1997 and was promoted to Divisional Vice
President in 1998. Prior to joining AIMCO, Mr. Monson worked for 13
years in operations management positions in the lawn care and
landscaping industries, principally with True Green/Chemlawn. Mr.
Monson received a Bachelor of Science from the University of
Minnesota and a Masters in Business Administration from Georgia
State University.
Jim Purvis.......................... Mr. Purvis was appointed Executive Vice President in February 2003.
He is responsible for AIMCO's Human Resources and People
Initiatives. Mr. Purvis has over 20 years of executive strategic
human resources experience. Prior to joining AIMCO, he was Vice
President, HR at SomaLogic, a privately funded biotechnology
company. He was a principal in O3C Global Organization Solutions,
and has held executive human resources and operations management
positions in ALCOA (Aluminum Company of America), Texas Air/ Eastern
Airlines, Starwood/Westin Hotels and Resorts, and
Tele-Communications (TCI) Technology, Inc. Mr. Purvis holds a BA
in communications and modern languages from the University of Notre
Dame.
David Robertson..................... Mr. Robertson was appointed Executive Vice President - Affordable
Properties in February 2002. He is responsible for affordable
property operations, refinancing and other value creation within the
Company's affordable portfolio. Prior to joining the Company, Mr.
Robertson was a member of the investment-banking group at Smith
Barney from 1991 to 1996, where he was responsible for real estate
investment banking transactions in the western United States, and
was part of the Smith Barney team that managed AIMCO's initial
public offering in 1994. Since February 1996, Mr. Robertson has
been Chairman and Chief Executive Officer of Robeks Corporation, a
privately held chain of specialty food stores.
</Table>
Annex I - Page 4
<Table>
<Caption>
NAME PRINCIPAL OCCUPATIONS FOR THE LAST FIVE YEARS
---- ---------------------------------------------
James N. Bailey..................... Mr. Bailey was appointed a Director of AIMCO in June 2000. In 1973,
Cambridge Associates, Inc. Mr. Bailey co-founded Cambridge Associates, Inc., which is an
1 Winthrop Square, investment consulting firm for non-profit institutions and wealthy
Suite 500 family groups. He is also Co-Founder, Treasurer and Director of The
Boston, MA 02110 Plymouth Rock Company, Direct Response Corporation and Homeowners'
Direct Corporation, each of which is a United States personal lines
insurance company. He received his M.B.A. and J.D. degrees in 1973
from Harvard Business School and Harvard Law School.
Richard S. Ellwood.................. Mr. Ellwood was appointed a Director of AIMCO in July 1994 and is
12 Auldwood Lane currently Chairman of the Audit Committee and a member of the
Rumson, NJ 07660 Compensation Committee. Mr. Ellwood is the founder and President of
R.S. Ellwood & Co., Incorporated, a real estate investment banking
firm. Prior to forming R.S. Ellwood & Co., Incorporated in 1987,
Mr. Ellwood had 31 years experience on Wall Street as an investment
banker, serving as: Managing Director and senior banker at Merrill
Lynch Capital Markets from 1984 to 1987; Managing Director at
Warburg Paribas Becker from 1978 to 1984; general partner and then
Senior Vice President and a director at White, Weld & Co. from 1968
to 1978; and in various capacities at J.P. Morgan & Co. from 1955 to
1968. Mr. Ellwood currently serves as a director of Felcor Lodging
Trust, Incorporated and Florida East Coast Industries, Inc.
J. Landis Martin.................... Mr. Martin was appointed a director of AIMCO in July 1994 and became
199 Broadway Chairman of the Compensation Committee on March 19, 1998. Mr.
Suite 4300 Martin is a member of the Audit Committee. Mr. Martin has served as
Denver, CO 80202 President and Chief Executive Officer of NL Industries, Inc., a
manufacturer of titanium dioxide, since 1987. Mr. Martin has served
as Chairman of Tremont Corporation ("Tremont"), a holding company
operating though its affiliates Titanium Metals Corporation ("TIMET")
and NL Industries, Inc. ("NL"), since 1990 and as Chief Executive
Officer and a director of Tremont since 1988. Mr. Martin has served
as Chairman of TIMET, an integrated producer of titanium, since 1987
and Chief Executive Officer since January 1995. From 1990 until its
acquisition by a predecessor of Halliburton Company ("Halliburton")
in1994, Mr. Martin served as Chairman of the Board and Chief
Executive Officer of Baroid Corporation, an oilfield services company.
In addition to Tremont, NL and TIMET, Mr. Martin is a director of
Halliburton, which is engaged in the petroleum services, hydrocarbon
and engineering industries, and Crown Castle International
Corporation, a communications company.
</Table>
Annex I - Page 5
<Table>
<Caption>
NAME PRINCIPAL OCCUPATIONS FOR THE LAST FIVE YEARS
---- ---------------------------------------------
Thomas L. Rhodes.................... Mr. Rhodes was appointed a Director of AIMCO in July 1994 and is a
215 Lexington Avenue member of the Audit and Compensation Committees. Mr. Rhodes has
4th Floor served as the President and a Director of National Review magazine
New York, NY 10016 since November 1992, where he has also served as a Director since
1998. From 1976 to 1992, he held various positions at Goldman,
Sachs & Co. and was elected a General Partner in 1986 and served
as a General Partner from 1987 until November 1992. He is currently
Co-Chairman of the Board, Co-Chief Executive Officer and a Director
of American Land Lease, Inc. He also serves as a Director of Delphi
Financial Group and its subsidiaries, Delphi International Ltd., Oracle
Reinsurance Company and the Lynde and Harry Bradley Foundation.
</Table>
Annex I-Page 6
ANNEX II
LETTER OF TRANSMITTAL
TO TENDER UNITS OF LIMITED PARTNERSHIP INTEREST IN
U.S. REALTY PARTNERS LIMITED PARTNERSHIP (THE "PARTNERSHIP")
PURSUANT TO AN OFFER TO PURCHASE
DATED DECEMBER 3, 2003 (THE "OFFER DATE")
BY
AIMCO PROPERTIES, L.P.
- --------------------------------------------------------------------------------
THE OFFER AND WITHDRAWAL RIGHTS WILL
EXPIRE AT MIDNIGHT, NEW YORK TIME,
ON DECEMBER 31, 2003, UNLESS EXTENDED (AS EXTENDED FROM TIME TO TIME,
THE "EXPIRATION DATE")
- --------------------------------------------------------------------------------
TO PARTICIPATE IN THE OFFER, YOU MUST SEND A DULY COMPLETED AND EXECUTED COPY OF
THE ENCLOSED ACKNOWLEDGMENT AND AGREEMENT AND ANY OTHER DOCUMENTS REQUIRED BY
THIS LETTER OF TRANSMITTAL SO THAT SUCH DOCUMENTS ARE RECEIVED BY THE ALTMAN
GROUP, INC., THE INFORMATION AGENT, ON OR PRIOR TO THE EXPIRATION DATE, UNLESS
EXTENDED. THE METHOD OF DELIVERY OF THIS LETTER OF TRANSMITTAL AND ALL OTHER
REQUIRED DOCUMENTS IS AT YOUR OPTION AND RISK, AND DELIVERY WILL BE DEEMED MADE
ONLY WHEN ACTUALLY RECEIVED BY THE INFORMATION AGENT. IF DELIVERY IS BY MAIL,
REGISTERED MAIL WITH RETURN RECEIPT REQUESTED IS RECOMMENDED. IN ALL CASES,
SUFFICIENT TIME SHOULD BE ALLOWED TO ASSURE TIMELY DELIVERY. DELIVERY OF THE
ACKNOWLEDGMENT AND AGREEMENT OR ANY OTHER REQUIRED DOCUMENTS TO AN ADDRESS OTHER
THAN AS SET FORTH BELOW DOES NOT CONSTITUTE VALID DELIVERY.
--------------------------
IF YOU HAVE THE CERTIFICATE ORIGINALLY ISSUED TO REPRESENT YOUR
INTEREST IN THE PARTNERSHIP, PLEASE SEND IT TO THE INFORMATION
AGENT WITH THE ACKNOWLEDGMENT AND AGREEMENT.
---------------------------
FOR INFORMATION OR ASSISTANCE IN CONNECTION WITH THE OFFER OR THE
COMPLETION OF THE ACKNOWLEDGMENT AND AGREEMENT, PLEASE CONTACT THE INFORMATION
AGENT AT (800) 217-9608 (TOLL FREE).
<Table>
The Information Agent for the offer is:
THE ALTMAN GROUP, INC.
By Mail: By Overnight Courier: By Hand:
1275 Valley Brook Avenue 1275 Valley Brook Avenue 1275 Valley Brook Avenue
Lyndhurst, New Jersey 07071 Lyndhurst, New Jersey 07071 Lyndhurst, New Jersey 07071
(800) 217-9608 (800) 217-9608 (800) 217-9608
By Facsimile: By Telephone:
(201) 460-0050 TOLL FREE (800) 217-9608
</Table>
NOTE: PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY. THE INSTRUCTIONS
ACCOMPANYING THIS LETTER OF TRANSMITTAL SHOULD BE READ CAREFULLY BEFORE THE
ACKNOWLEDGMENT AND AGREEMENT IS COMPLETED.
Annex II - Page 1
Ladies and Gentlemen:
The Signatory (the "Signatory") executing the Acknowledgment and
Agreement relating to the captioned offer (the "Acknowledgment and Agreement"),
which is enclosed, upon the terms and subject to the conditions set forth in the
offer to purchase, hereby and thereby tenders to the Purchaser the units set
forth in the box entitled "Description of Units Tendered" on the Acknowledgment
and Agreement, including all interests represented by such units (collectively,
the "Units"), at the consideration indicated in the offer to purchase as
supplemented or amended. Capitalized terms used herein but not otherwise defined
herein shall have the meanings ascribed thereto in such Acknowledgment and
Agreement.
Subject to and effective upon acceptance for consideration of any of
the Units tendered hereby and thereby in accordance with the terms of the offer
to purchase, the Signatory hereby and thereby irrevocably sells, assigns,
transfers, conveys and delivers to, or upon the order of, the Purchaser all
right, title and interest in and to such Units tendered hereby and thereby that
are accepted for payment pursuant to the offer to purchase, including, without
limitation, (i) all of the Signatory's interest in the capital of the
Partnership, and the Signatory's interest in all profits, losses and
distributions of any kind to which the Signatory shall at any time be entitled
in respect of his ownership of the Units, including, without limitation,
distributions in the ordinary course, distributions from sales of assets,
distributions upon liquidation, winding-up, or dissolution, payments in
settlement of existing or future litigation, damages paid in connection with any
existing or future litigation and all other distributions and payments made from
and after the Expiration Date, in respect of the Units tendered by the Signatory
and accepted for payment and thereby purchased by the Purchaser; (ii) all other
payments, if any, due or to become due to the Signatory in respect of the Units,
under or arising out of the agreement and certificate of limited partnership of
the Partnership (the "Partnership Agreement"), or any agreement pursuant to
which the Units were sold (the "Purchase Agreement"), whether as contractual
obligations, damages, insurance proceeds, condemnation awards or otherwise;
(iii) all of the Signatory's claims, rights, powers, privileges, authority,
options, security interests, liens and remedies, if any, under or arising out of
the Partnership Agreement or Purchase Agreement or the Signatory's ownership of
the Units, including, without limitation, any and all voting rights, rights of
first offer, first refusal or similar rights, and rights to be substituted as a
limited partner OR A UNITHOLDER of the Partnership; and (iv) all past, present
and future claims, if any, of the Signatory whether on behalf of the
Partnership, individually or on behalf of a putative class (including without
limitation any claims against UNITHOLDERS, limited partners of the Partnership,
the general partner(s) and/or any affiliates thereof) under, arising out of or
related to the Partnership Agreement, the Purchase Agreement, the Signatory's
status as a limited partner OR UNITHOLDER, the terms or conditions of thE offer
to purchase, the management of the Partnership, monies loaned or advanced,
services rendered to the Partnership or its partners, or any other claims
arising out of OR related to the Signatory's ownership of Units in the
Partnership.
NOTWITHSTANDING ANY PROVISION IN THE PARTNERSHIP AGREEMENT OR ANY
PURCHASE AGREEMENT TO THE CONTRARY, THE SIGNATORY HEREBY AND THEREBY DIRECTS
EACH GENERAL PARTNER OF THE PARTNERSHIP TO MAKE ALL DISTRIBUTIONS AFTER THE
PURCHASER ACCEPTS THE TENDERED UNITS FOR PAYMENT TO THE PURCHASER OR ITS
DESIGNEE. Subject to and effective upon acceptance for payment of any Unit
tendered hereby and thereby, the Signatory hereby requests that the Purchaser be
admitted to the Partnership as a limited partner (or an assignee of a limited
partner if the Signatory is an assignee of a limited partner) under the terms of
the Partnership Agreement. Upon request, the Signatory will execute and deliver
additional documents deemed by the Information Agent or the Purchaser to be
necessary or desirable to complete the assignment, transfer and purchase of
Units tendered hereby and thereby and will hold any distributions received from
the Partnership after the Expiration Date in trust for the benefit of the
Annex II - Page 2
Purchaser and, if necessary, will promptly forward to the Purchaser any such
distributions immediately upon receipt. The Purchaser reserves the right to
transfer or assign, in whole or in part, from time to time, to one or more of
its affiliates, the right to purchase Units tendered pursuant to the offer to
purchase, but any such transfer or assignment will not relieve the Purchaser of
its obligations under the offer to purchase or prejudice the rights of tendering
unitholders to receive payment for Units validly tendered and accepted for
payment pursuant to the offer to purchase.
By executing the enclosed Acknowledgment and Agreement, the Signatory
represents that either (i) the Signatory is not a plan subject to Title I of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA"), or
Section 4975 of the Internal Revenue Code of 1986, as amended (the "Code"), or
an entity deemed to hold "plan assets" within the meaning of 29 C.F.R. Section
2510.3-101 of any such plan, or (ii) the tender and acceptance of Units pursuant
to the offer to purchase will not result in a nonexempt prohibited transaction
under Section 406 of ERISA or Section 4975 of the Code.
The Signatory recognizes that under certain circumstances set forth in
the offer to purchase, the Purchaser may not be required to accept for
consideration any or all of the Units tendered hereby. In such event, the
Signatory understands that any Acknowledgment and Agreement for Units not
accepted for payment may be returned to the Signatory or destroyed by the
Purchaser (or its agent). THIS TENDER IS IRREVOCABLE, EXCEPT THAT UNITS TENDERED
PURSUANT TO THE OFFER TO PURCHASE MAY BE WITHDRAWN AT ANY TIME PRIOR TO THE
EXPIRATION DATE OR ON OR AFTER JANUARY 30, 2004 IF UNITS VALIDLY TENDERED HAVE
NOT BEEN ACCEPTED FOR PAYMENT.
THE SIGNATORY HAS BEEN ADVISED THAT THE PURCHASER IS AN AFFILIATE OF
THE GENERAL PARTNER OF THE PARTNERSHIP AND THE GENERAL PARTNER DOES NOT MAKE ANY
RECOMMENDATION AS TO WHETHER TO TENDER OR REFRAIN FROM TENDERING UNITS IN THE
OFFER TO PURCHASE. THE SIGNATORY HAS MADE HIS OR HER OWN DECISION TO TENDER
UNITS. THE SIGNATORY ALSO REPRESENTS AND WARRANTS THAT HE OR SHE WAS ADVISED TO
CONSULT AN ATTORNEY WITH RESPECT TO HIS OR HER DECISION WHETHER TO TENDER
HIS/HER INTEREST(s).
The Signatory hereby and thereby represents and warrants for the
benefit of the Partnership and the Purchaser that the Signatory owns the Units
tendered hereby and thereby and has full power and authority and has taken all
necessary action to validly tender, sell, assign, transfer, convey and deliver
the Units tendered hereby and thereby and that when the same are accepted for
payment by the Purchaser, the Purchaser will acquire good, marketable and
unencumbered title thereto, free and clear of all liens, restrictions, charges,
encumbrances, conditional sales agreements or other obligations relating to the
sale or transfer thereof, and such Units will not be subject to any adverse
claims and that the transfer and assignment contemplated herein and therein are
in compliance with all applicable laws and regulations.
All authority herein or therein conferred or agreed to be conferred
shall survive the death or incapacity of the Signatory, and any obligations of
the Signatory shall be binding upon the heirs, personal representatives,
trustees in bankruptcy, legal representatives, and successors and assigns of the
Signatory.
The Signatory represents and warrants that, to the extent a certificate
evidencing the Units tendered hereby and thereby (the "original certificate") is
not delivered by the Signatory together with the Acknowledgment and Agreement,
(i) the Signatory represents and warrants to the Purchaser that the Signatory
has not sold, transferred, conveyed, assigned, pledged, deposited or otherwise
disposed of any portion of the Units, (ii) the Signatory has caused a diligent
search of its records to be taken and has been unable to locate the original
certificate, (iii) if the Signatory shall find or recover the original
certificate evidencing the Units, the Signatory will immediately and without
consideration surrender it to the Purchaser; and (iv) the Signatory shall at all
times indemnify, defend, and save harmless the Purchaser and the Partnership,
its successors, and its assigns from and against any and all claims, actions,
and suits, whether groundless or otherwise, and from and against any and all
liabilities, losses, damages, judgments, costs, charges, counsel fees, and other
expenses of every nature and character by reason of honoring or refusing to
honor the original certificate when presented by or on behalf of a holder in due
course of a holder appearing to or believed by the Partnership to be such, or by
issuance or delivery of a replacement certificate, or the making of any payment,
delivery, or credit in respect of the original certificate without surrender
thereof, or in respect of the replacement certificate.
Annex II - Page 3
INSTRUCTIONS FOR COMPLETING THE ACKNOWLEDGMENT AND AGREEMENT
1. REQUIREMENTS OF TENDER. To be effective, a duly completed and signed
Acknowledgment and Agreement (or facsimile thereof) and any other required
documents must be received by the Information Agent at one of its addresses (or
its facsimile number) set forth herein before midnight, New York Time, on the
Expiration Date, unless extended. To ensure receipt of the Acknowledgment and
Agreement and any other required documents, it is suggested that you use
overnight courier delivery or, if the Acknowledgment and Agreement and any other
required documents are to be delivered by United States mail, that you use
certified or registered mail, return receipt requested.
Our records indicate that you own the number of Units set forth in Box 2
entitled "Description of Units Tendered" on the Acknowledgment and Agreement
under the column entitled "Total Number of Units Owned (#)." If you would like
to tender only a portion of your Units, please so indicate in the space provided
in the box.
THE METHOD OF DELIVERY OF THE ACKNOWLEDGMENT AND AGREEMENT AND ALL OTHER
REQUIRED DOCUMENTS IS AT THE OPTION AND RISK OF THE TENDERING UNITHOLDER AND
DELIVERY WILL BE DEEMED MADE ONLY WHEN ACTUALLY RECEIVED BY THE INFORMATION
AGENT. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ASSURE TIMELY
DELIVERY.
2. SIGNATURE REQUIREMENTS.
INDIVIDUAL AND JOINT OWNERS -- After carefully reading the Letter of Transmittal
and completing the Acknowledgment and Agreement, to tender Units, unitholders
must sign at the "X" in the Signature Box (Box 1) of the Acknowledgment and
Agreement. The signature(s) must correspond exactly with the names printed (or
corrected) on the front of the Acknowledgment and Agreement. NO SIGNATURE
GUARANTEE ON THE ACKNOWLEDGMENT AND AGREEMENT IS REQUIRED IF THE ACKNOWLEDGMENT
AND AGREEMENT IS SIGNED BY THE UNITHOLDER (OR BENEFICIAL OWNER IN THE CASE OF AN
IRA). If any tendered Units are registered in the names of two or more joint
owners, all such owners must sign the Acknowledgment and Agreement.
IRAS/ELIGIBLE INSTITUTIONS -- For Units held in an IRA account, the beneficial
owner should sign in the Signature Box and no signature guarantee is required.
Similarly, no signature guarantee is required if Units are tendered for the
account of a bank, broker, dealer, credit union, savings association, or other
entity which is a member in good standing of the Securities Agents Medallion
Program or a bank, broker, dealer, credit union, savings association, or other
entity which is an "eligible guarantor institution" as the term is defined in
Rule 17Ad-15 under the Securities Exchange Act of 1934 (each an "Eligible
Institution").
TRUSTEES, CORPORATIONS, PARTNERSHIP AND FIDUCIARIES -- Trustees, executors,
administrators, guardians, attorneys-in-fact, officers of a corporation,
authorized partners of a partnership or other persons acting in a fiduciary or
representative capacity must sign at the "X" in the Signature Box and have their
signatures guaranteed by an Eligible Institution by completing the signature
guarantee set forth in Box 3 in the Acknowledgment and Agreement. If the
Acknowledgment and Agreement is signed by trustees, administrators, guardians,
attorneys-in-fact, officers of a corporation, authorized partners of a
partnership or others acting in a fiduciary or representative capacity, such
persons should, in addition to having their signatures guaranteed, indicate
their title in the Signature Box and must submit proper evidence satisfactory to
the Purchaser of their authority to so act (see Instruction 3 below).
3. DOCUMENTATION REQUIREMENTS. In addition to the information required to be
completed on the
Acknowledgment and Agreement, additional documentation may be required by the
Purchaser under certain circumstances including, but not limited to, those
listed below. Questions on documentation should be directed to the Information
Agent at its telephone number set forth herein.
DECEASED OWNER (JOINT TENANT) -- Copy of death certificate.
DECEASED OWNER (OTHERS) -- Copy of death certificate (see also
Executor/Administrator/Guardian below).
-1-
EXECUTOR/ADMINISTRATOR/GUARDIAN -- Copy of court appointment documents for
executor or administrator; and (a) a
copy of applicable provisions of the
will (title page, executor(s)' powers,
asset distribution); or (b) estate
distribution documents.
ATTORNEY-IN-FACT -- Current power of attorney.
CORPORATION/PARTNERSHIP -- Corporate resolution(s) or other
evidence of authority to act.
Partnerships should furnish a copy of
the partnership agreement.
TRUST/PENSION PLANS -- Unless the trustee(s) are named in the
registration, a copy of the cover page
of the trust or pension plan, along with
a copy of the section(s) setting forth
names and powers of trustee(s) and any
amendments to such sections or
appointment of successor trustee(s).
4. TAX CERTIFICATIONS. The unitholder(s) tendering Units to the Purchaser
pursuant to the Offer must furnish the Purchaser with the unitholder(s)'
taxpayer identification number ("TIN") and certify as true, under penalties of
perjury, the representations in Box 6 and Box 7 of the Acknowledgment and
Agreement. By signing the Signature Box, the unitholder(s) certifies that the
TIN as printed (or corrected) on Acknowledgment and Agreement in the box
entitled "Description of Units Tendered" and the representations made in Box 6
and Box 7 of the Acknowledgment and Agreement are correct. See attached
Guidelines for Certification of Taxpayer Identification Number on Substitute
Form W-9 for guidance in determining the proper TIN to give the Purchaser.
U.S. PERSONS. A unitholder that is a U.S. citizen or a resident alien
individual, a domestic corporation, a domestic partnership, a domestic trust or
a domestic estate (collectively, "U.S. Persons"), as those terms are defined in
the Code, should follow the instructions below with respect to certifying Box 6
and Box 7 of the Acknowledgment and Agreement.
BOX 6 - SUBSTITUTE FORM W-9.
Part (i), Taxpayer Identification Number -- Tendering unitholders must certify
to the Purchaser that the TIN as printed (or corrected) on the Acknowledgment
and Agreement in the box entitled "Description of Units Tendered" is correct. If
a correct TIN is not provided, penalties may be imposed by the Internal Revenue
Service (the "IRS"), in addition to the unitholder being subject to backup
withholding.
Part (ii), Backup Withholding -- In order to avoid 30% Federal income tax backup
withholding, the tendering unitholder must certify, under penalty of perjury,
that such unitholder is not subject to backup withholding. Certain unitholders
(including, among others, all corporations and certain exempt non-profit
organizations) are not subject to backup withholding. Backup withholding is not
an additional tax. If withholding results in an overpayment of taxes, a refund
may be obtained from the IRS.
When determining the TIN to be furnished, please refer to the following as a
guide:
Individual accounts - should reflect owner's TIN.
Joint accounts - should reflect the TIN of the owner whose name appears first.
Trust accounts - should reflect the TIN assigned to the trust.
IRA custodial accounts - should reflect the TIN of the custodian (not necessary
to provide).
Custodial accounts for the benefit of minors - should reflect the TIN of the
minor.
Corporations, partnership or other business entities - should reflect the TIN
assigned to that entity.
By signing the Signature Box, the unitholder(s) certifies that the TIN as
printed (or corrected) on the front of the Acknowledgment and Agreement is
correct.
-2-
BOX 7 - FIRPTA AFFIDAVIT -- Section 1445 of the Code requires that each
unitholder transferring interests in a partnership with real estate assets
meeting certain criteria certify under penalty of perjury the representations
made in Box 7, or be subject to withholding of tax equal to 10% of the
consideration for interests purchased. Tax withheld under Section 1445 of the
Code is not an additional tax. If withholding results in an overpayment of tax,
a refund may be claimed from the IRS.
FOREIGN PERSONS -- In order for a tendering unitholder who is a Foreign Person
(i.e., not a U.S. Person, as defined above) to qualify as exempt from 30% backup
withholding, such foreign unitholder must submit a statement, signed under
penalties of perjury, attesting to that individual's exempt status. Forms for
such statements can be obtained from the Information Agent.
5. VALIDITY OF ACKNOWLEDGMENT AND AGREEMENT. All questions as to the validity,
form, eligibility (including time of receipt) and acceptance of an
Acknowledgment and Agreement and other required documents will be determined by
the Purchaser and such determination will be final and binding. The Purchaser's
interpretation of the terms and conditions of the Offer (including these
Instructions for the Acknowledgment and Agreement) will be final and binding.
The Purchaser will have the right to waive any irregularities or conditions as
to the manner of tendering. Any irregularities in connection with tenders,
unless waived, must be cured within such time as the Purchaser shall determine.
The Acknowledgment and Agreement will not be valid until any irregularities have
been cured or waived. Neither the Purchaser nor the Information Agent are under
any duty to give notification of defects in an Acknowledgment and Agreement and
will incur no liability for failure to give such notification.
6. ASSIGNEE STATUS. Assignees must provide documentation to the Information
Agent which demonstrates, to the satisfaction of the Purchaser, such person's
status as an assignee.
7. TRANSFER TAXES. The amount of any transfer taxes (whether imposed on the
registered holder or such person) payable on account of the transfer to such
person will be deducted from the consideration unless satisfactory evidence of
the payment of such taxes or exemption therefrom is submitted.
8. SPECIAL PAYMENT AND DELIVERY INSTRUCTIONS. If consideration is to be issued
in the name of a person other than the person signing the Signature Box of the
Acknowledgment and Agreement or if consideration is to be sent to someone other
than such signer or to an address other than that set forth on the
Acknowledgment and Agreement in the box entitled "Description of Units
Tendered," the appropriate boxes on the Acknowledgment and Agreement must be
completed.
-3-
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
GUIDELINES FOR DETERMINING THE PROPER IDENTIFICATION NUMBER TO GIVE THE
PAYER - - Social Security numbers have nine digits separated by two hyphens:
i.e., 000-00-0000. Employer identification numbers have nine digits separated by
only one hyphen: i.e., 00-0000000. The table below will help determine the
number to give the payer.
<Table>
<Caption>
- ----------------------------------------------------------- --------------------------------------------------------------
FOR THIS TYPE OF ACCOUNT: GIVE THE TAXPAYER IDENTIFICATION
NUMBER OF - -
- ----------------------------------------------------------- --------------------------------------------------------------
1. An individual account The individual
2. Two or more individuals (joint account) The actual owner of the account or, if combined
Funds, the first individual on the account
3. Husband and wife (joint account) The actual owner of the account or, if joint funds,
Either person
4. Custodian account of a minor (Uniform Gift to The minor (2)
Minors Act)
5. Adult and minor (joint account) The adult or, if the minor is the only contributor,
the minor (1)
6. Account in the name of guardian or committee for a The ward, minor or incompetent person (3)
designated ward, minor or incompetent person (3)
7. a. The usual revocable savings trust account The grantor trustee (1)
(grantor is also trustee)
b. So-called trust account that is not a legal or The actual owner (1)
valid trust under state law
8. Sole proprietorship account The owner (4)
9. A valid trust, estate or pension trust The legal entity (Do not furnish the identifying number
of the personal representative or trustee unless the
legal entity itself is not designated in the account
title.) (5)
10. Corporate account The corporation
11. Religious, charitable, or educational The organization
organization account
12. Partnership account held in the name of the The partnership
business
13. Association, club, or other tax-exempt The organization
organization
14. A broker or registered nominee The broker or nominee
15. Account with the Department of Agriculture in The public entity
the name of a public entity (such as a State or
local government, school district, or prison)
that receives agricultural program payments
</Table>
(1) List first and circle the name of the person whose number you furnish.
(2) Circle the minor's name and furnish the minor's social security number.
(3) Circle the ward's or incompetent person's name and furnish such person's
social security number or employer identification number.
(4) Show your individual name. You may also enter your business name. You may
use your social security number or employer identification number.
(5) List first and circle the name of the legal trust, estate, or pension trust.
NOTE: If no name is circled when there is more than one name, the number will be
considered to be that of the first name listed.
-1-
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON
SUBSTITUTE FORM W-9
OBTAINING A NUMBER -- If you do not have a taxpayer identification number
or you do not know your number, obtain Form SS-5, Application for a Social
Security Number Card (for individuals), or Form SS-4, Application for Employer
Identification Number (for businesses and all other entities), at the local
office of the Social Security Administration or the Internal Revenue Service and
apply for a number.
PAYEES EXEMPT FROM BACKUP WITHHOLDING
Payees specifically exempted from backup withholding on ALL payments
include the following:
- A corporation.
- A financial institution.
- An organization exempt from tax under section 501(a) of the Internal
Revenue Code of 1986, as amended (the "Code"), or an individual
retirement plan.
- The United States or any agency or instrumentality thereof.
- A State, the District of Columbia, a possession of the United States, or
any subdivision or instrumentality thereof.
- A foreign government, a political subdivision of a foreign government, or
any agency or instrumentality thereof.
- An international organization or any agency or instrumentality thereof.
- A registered dealer in securities or commodities registered in the U.S.
or a possession of the U.S.
- A real estate investment trust.
- A common trust fund operated by a bank under section 584(a) of the Code.
- An exempt charitable remainder trust, or a non-exempt trust described in
section 4947 (a)(1).
- An entity registered at all times under the Investment Company Act of
1940.
- A foreign central bank of issue.
- A futures commission merchant registered with the Commodity Futures
Trading Commission.
Payments of dividends and patronage dividends not generally subject to
backup withholding include the following:
- Payments to nonresident aliens subject to withholding under section 1441
of the Code.
- Payments to Partnerships not engaged in a trade or business in the U.S.
and which have at least one nonresident partner.
- Payments of patronage dividends where the amount received is not paid in
money.
- Payments made by certain foreign organizations.
- Payments made to an appropriate nominee.
- Section 404(k) payments made by an ESOP.
Payments of interest not generally subject to backup withholding include
the following:
- Payments of interest on obligations issued by individuals. NOTE: You may
be subject to backup withholding if this interest is $600 or more and is
paid in the course of the payer's trade or business and you have not
provided your correct taxpayer identification number to the payer.
- Payments of tax exempt interest (including exempt interest dividends
under section 852 of the Code).
- Payments described in section 6049(b)(5) of the Code to nonresident
aliens.
- Payments on tax-free covenant bonds under section 1451 of the Code.
- Payments made by certain foreign organizations.
- Payments of mortgage interest to you.
- Payments made to an appropriate nominee.
Exempt payees described above should file a substitute Form W-9 to avoid
possible erroneous backup withholding. FILE THIS FORM WITH THE PAYER. FURNISH
YOUR TAXPAYER IDENTIFICATION NUMBER, WRITE "EXEMPT" ON THE FACE OF THE FORM, AND
RETURN IT TO THE PAYER. IF THE PAYMENTS ARE INTEREST, DIVIDENDS, OR PATRONAGE
DIVIDENDS, ALSO SIGN AND DATE THE FORM. IF YOU ARE A NONRESIDENT ALIEN OR A
FOREIGN ENTITY NOT SUBJECT TO BACKUP WITHHOLDING, FILE WITH PAYER A COMPLETED
INTERNAL REVENUE FORM W-8 (CERTIFICATE OF FOREIGN STATUS).
Certain payments other than interest, dividends, and patronage dividends,
that are not subject to information reporting are also not subject to backup
withholding. For details, see the regulations under sections 6041, 6041A(A),
6045, and 6050A of the Code.
PRIVACY ACT NOTICE - - Section 6109 of the Code requires most recipients of
dividend, interest, or other payments to give correct taxpayer identification
numbers to payers who must report the payments to the IRS. The IRS uses the
numbers for identification purposes. Payers must be given the numbers whether or
not recipients are required to file a tax return. Payers must generally withhold
30% of taxable interest, dividend, and certain other payments to a payee who
does not furnish a correct taxpayer identification number to a payer. Certain
penalties may also apply.
PENALTIES
(1) PENALTY FOR FAILURE TO FURNISH TAXPAYER IDENTIFICATION NUMBER - - If
you fail to furnish your correct taxpayer identification number to a payer, you
are subject to a penalty of $50 for each such failure unless your failure is due
to reasonable cause and not to willful neglect.
(2) CIVIL PENALTY FOR FALSE INFORMATION WITH RESPECT TO WITHHOLDING - - If
you make a false statement with no reasonable basis that results in no
imposition of backup withholding, you are subject to a penalty of $500.
(3) CRIMINAL PENALTY FOR FALSIFYING INFORMATION - - Willfully falsifying
certifications or affirmations may subject you to criminal penalties including
fines and/or imprisonment.
FOR ADDITIONAL INFORMATION CONTACT YOUR TAX CONSULTANT OR THE INTERNAL
REVENUE SERVICE.
-2-
The Acknowledgment and Agreement and any other documents required by the
Letter of Transmittal should be sent or delivered by each unitholder or such
unitholder's broker, dealer, bank, trust company or other nominee to the
Information Agent at one of its addresses set forth below.
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THE INFORMATION AGENT FOR THE OFFER IS:
THE ALTMAN GROUP, INC.
By Mail: By Overnight Courier: By Hand:
1275 Valley Brook Avenue 1275 Valley Brook Avenue 1275 Valley Brook Avenue
Lyndhurst, New Jersey 07071 Lyndhurst, New Jersey 07071 Lyndhurst, New Jersey 07071
(800) 217-9608 (800) 217-9608 (800) 217-9608
By Facsimile: By Telephone:
(201) 460-0050 TOLL FREE (800) 217-9608
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