SCHEDULE 14C
INFORMATION REQUIRED IN INFORMATION STATEMENT
SCHEDULE 14C
Information Statement Pursuant to Section 14(c) of the Securities Exchange
Act of 1934
Check the appropriate box:
[] Preliminary Information Statement
[] Confidential, for Use of the Commission Only (as permitted by Rule
14c-5(d)(2))
[X] Definitive Information Statement
ANGELES PARTNERS IX
A CALIFORNIA LIMITED PARTNERSHIP
(Name of Registrant as Specified in Its Charter)
Payment of Filing Fee (Check the appropriate box):
[] No fee required
[X] Fee computed on table below per Exchange Act Rules 14c-5(g) and 0-11
(1) Title of each class of securities to which transaction applies: Limited
Partnership Units
(2) Aggregate number of securities to which transaction applies: 20,000
(3) Per unit price or other underlying value of transaction computed pursuant to
Exchange Act Rule 0-11 (set forth the amount on which the filing fee is
calculated and state how it was determined): $6,450,000
(4) Proposed maximum aggregate value of transaction: $6,450,000
(5) Total fee paid: $521.81
[X] Fee paid previously with preliminary materials.
[] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
INFORMATION STATEMENT
FOR
ANGELES PARTNERS IX
A CALIFORNIA LIMITED PARTNERSHIP
c/o THE ALTMAN GROUP, INC.
1275 Valley Brook Avenue
Lyndhurst, New Jersey 07071
Dear Limited Partner:
We are sending you this information statement to inform you that Angeles Realty
Corporation, a California corporation, the general partner (the "General
Partner") of Angeles Partners IX, a California limited partnership (the
"Partnership"), has agreed to sell the Partnership's interest in an apartment
complex known as Forest River Apartments, in Etowah County, Alabama (the
"Property") to American Opportunity for Housing - Forest River, LLC (the
"Buyer"), an unaffiliated third party, for $6,450,000 cash. As more fully
described below, the General Partner and holders of greater than 50% of the
limited partnership units intend to consent to the sale of the Property by
Houston Pines, a California limited partnership ("Houston Pines"), in which the
Partnership holds a 99% limited partnership interest. After the sale closes, we
estimate that there will be approximately $61 (after non-resident withholding
tax) per limited partnership unit to distribute to the limited partners. This
amount is an estimate, and as explained below, it is based on a number of
assumptions. We expect the distribution will occur one to three months after the
sale closes. This information statement contains information about the sale and
the reason that the General Partner has decided that the sale is in the best
interests of the limited partners. The General Partner has conflicts of interest
in the sale as described in greater detail herein.
WE ARE NOT ASKING YOU FOR A PROXY AND YOU
ARE REQUESTED NOT TO SEND US A PROXY.
The date of this information statement is December 5, 2003.
This information statement is being mailed on or about the date hereof to all
holders at the close of business on December 4, 2003 of the limited partnership
units of the Partnership.
Very truly yours,
ANGELES PARTNERS IX,
a California limited partnership
By: ANGELES REALTY CORPORATION,
a California corporation,
its General Partner
By:
----------------------------------------
Name:
--------------------------------------
Title:
-------------------------------------
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SUMMARY OF THE TRANSACTION
The following is a summary of the transaction:
The Buyer or an affiliate thereof will acquire the Property for $6,450,000 cash
pursuant to a purchase and sale agreement dated as of June 18, 2003, as amended
on June 10, 2003 and June 13, 2003, between the Buyer and Houston Pines
(collectively, the "Agreement"). The completion of the sale is scheduled to
occur approximately December 30, 2003 (subject to extension pursuant to the
Agreement to February 13, 2004 and March 12, 2004).
REASONS FOR THE SALE
The general partner of Houston Pines, which is an affiliate of us, has
determined that the sale is in the best interest of the limited partners after
considering a number of factors, including the following:
o The tax benefits of continued investment in the Property have been
substantially eliminated for most limited partners due principally to
declining depreciation deductions from the Property.
o The Property was completed in 1979, and given its age, the Property
probably will require substantial capital expenditures in the future
for which existing reserves will not be adequate.
o Market conditions are currently favorable for selling properties of
this type because of the availability of favorable financing terms and
the general withdrawal of capital from the stock markets and into
alternative investments such as real estate.
o The current economic downturn may make it difficult to find a buyer at
a future date or to sell the Property at as favorable a price.
o The Property's occupancy rate and rental rates have been declining
since 2001 due to the economic downturn or the age of the Property.
For these reasons, the general partner of Houston Pines has approved the sale
and the Agreement, and, as described more fully below, it is anticipated that
limited partners holding a majority of the limited partnership units also will
approve the sale and the Agreement.
THE SALES PROCESS
On September 9, 2002, Houston Pines hired The Apartment Group, a national real
estate brokerage firm, to market the Property. They marketed the Property
nationally and regionally to prospective buyers known to be interested in the
acquisition of multifamily housing projects similar to the Property. The broker
received offers from eight potential purchasers. Houston Pines evaluated
prospective purchasers and offers in terms of price offered, feasibility of the
proposed transaction, credibility of the prospective purchaser and ability of
the prospective
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purchaser to close. Houston Pines chose to accept the offer described in this
letter based on these criteria.
The broker has received brokerage fees from us and our affiliates from time to
time. Neither we nor our affiliates bid on the Property.
THE BUYER
American Opportunity for Housing - Forest River, LLC, which is not affiliated
with the Partnership or Houston Pines, agreed to acquire the Property through an
arms-length negotiation. We or our affiliates have conducted business with the
Buyer or its affiliates from time to time. American Opportunity for Housing -
Forest River, LLC has an office located at 2161 NW Military Highway, Suite 111,
San Antonio, TX 78312, and its phone number is (210) 341-8097.
THE PROPERTY
Houston Pines (or its affiliates) has owned and operated the Property, a
248-unit apartment complex located in Etowah County, Alabama, since December 29,
1980. The Partnership's interest in Houston Pines constitutes 100% of the
Partnership's outstanding assets. There is a first mortgage loan on the Property
with an unpaid balance of approximately $4,780,903. The loan encumbering the
Property will be paid in full at closing, with the costs of all fees and costs
of such payment-in-full to be paid by Buyer.
APPROVAL OF THE SALE
The general partner of Houston Pines approved the sale and determined that it is
in the best interests of the Partnership and the limited partners.
Section 3.2.2 of the agreement of limited partnership of Houston Pines, dated
December 1, 1986, permits Houston Pines to sell its interest in the Property if
the sale is approved by the general partner and all limited partners of Houston
Pines. Section 8.2(g) of the Partnership's amended and restated certificate and
agreement of limited partnership, dated February 30, 1980, permits the
Partnership to sell all or substantially all of its assets if the sale is
approved by the limited partners holding a majority of the limited partnership
units entitled to vote thereon.
As of September 30, 2003, the Partnership has approximately 662 limited partners
who collectively own 19,975 outstanding limited partnership units. Each limited
partnership unit represents approximately 0.005% of the outstanding limited
partnership units. Our affiliates currently own approximately 13,501 limited
partnership units, or approximately 67.59% of the outstanding limited
partnership units.
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These holders have agreed to give their written consent approving and adopting
the sale and the Agreement. The following limited partners have agreed to
execute such written consent:
<Table>
<Caption>
NAME AND ADDRESS NUMBER OF LIMITED PERCENT OF
OF BENEFICIAL OWNER PARTNERSHIP UNITS CLASS
------------------- ----------------- --------------
Insignia Properties L.P.
55 Beattie Place, Greenville, SC 29602 981 4.91%
Broad River Properties, L.L.C.
55 Beattie Place, Greenville, SC 29602 2,529 12.66%
AIMCO Properties, L.P.
Stanford Place 3, 4582 S. Ulster St. Parkway, Suite 1100, 8,631 43.21%
Denver, CO 80237
Cooper River Properties, L.L.C.
55 Beattie Place, Greenville, SC 29602 1,360 6.81%
TOTAL: 13,501 67.59%
</Table>
Upon receipt of these consents, the holders of a majority of the limited
partnership units will have approved the approval by the Partnership (in its
capacity as the 99% limited partner of the Partnership) of the sale and the
Agreement, and, as a result, no vote of any other limited partnership unit
holder will be necessary to approve the sale and the Agreement. Accordingly, the
Partnership is not soliciting any other votes. Such written consent shall have
an effective date as of December 25, 2003, which is 20 days after the mailing
of this information statement. The consent will give the general partner of
Houston Pines the right to (i) enter into an amendment to the Agreement as long
as the aggregate consideration (including assumed indebtedness, if any), less
any loan prepayment costs, to be paid to Houston Pines thereunder is not less
than 90% of the aggregate consideration (including assumed indebtedness, if
any), less any loan prepayment costs, to be paid to the Partnership pursuant to
the current Agreement, and (ii) negotiate and execute, among other things,
amendments and other agreements deemed necessary, appropriate or desirable in
the opinion of the general partner of Houston Pines in connection with the sale
of the Property.
Subject to the terms and conditions of the Agreement, Houston Pines contemplates
that the sale will be consummated on approximately December 30, 2003 (subject to
extension pursuant to the Agreement to February 13, 2004 and March 12, 2004),
but no sooner than 20 days after the mailing of this information statement and
following satisfaction or waiver of the conditions contained in the Agreement.
See "Summary of Agreement."
INTEREST OF CERTAIN PERSONS IN THE SALE
Both we and the general partner of Houston Pines have conflicts of interest with
respect to the sale. A general partner generally is liable for all recourse
debts and other liabilities of a partnership when the partnership's assets are
insufficient. A sale of the Property reduces our liability for existing and
future Partnership debt and liabilities and reduces the Houston Pines general
partner's liability for existing and future debt and liabilities with respect to
Houston Pines.
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USE OF PROCEEDS
It is estimated that the gross proceeds from the sale will be used as follows
(subject, however, to such reductions in the purchase price and reallocations in
the proceeds as determined by the general partner of Houston Pines, in its
reasonable discretion, to address objections made by the Buyer to the condition
of the Property):
<Table>
Gross purchase price $ 6,450,000
Plus: Cash and cash equivalents 105,343
Plus: Other Partnership assets 258,075
Less: Mortgage debt, including accrued interest (4,780,903)
Less: Accounts payable, accrued expenses and other liabilities (84,716)
Less: Estimated state entity and withholding taxes (276,299)
Less: Reserves for contingencies (193,500)
Less: Closing costs/sales commissions (193,500)
------------
TOTAL $ 1,284,500
Net proceeds distributable to all partners $ 1,284,500
Percentage of proceeds allocable to limited partners 98.023%
Net proceeds distributable to limited partners $ 1,259,109
Total number of units 19,975
Distributable net proceeds per unit $ 63
</Table>
In addition, the sale of the Property may require the general partner of Houston
Pines to escrow part of the proceeds from the sale for some period of time if
the general partner of Houston Pines agrees with the Buyer to do so.
These estimates assume that the closing occurs as of September 30, 2003 and are
based on information known to us at this time. These figures will adjust based
on the fact that closing will occur after September 30, 2003. Of course, many
factors could cause the actual use of proceeds to vary from this estimate,
including delays or unforeseen complications with the closing or contingent
liabilities of Houston Pines or the Partnership. Additionally, the authority
given to the general partner of Houston Pines to amend the Agreement may change
the actual proceeds available from the sale of the Property.
FEDERAL INCOME TAX CONSEQUENCES
The tax consequences to you of a sale of the Partnership's indirect interest in
the Property may be significant. The following discussion briefly summarizes the
typical material aspects of the federal income tax consequences for the limited
partners that should be considered in connection with the sale; however, the tax
consequences to you could be materially different.
EACH LIMITED PARTNER SHOULD CONSULT AND MUST RELY UPON HIS, HER OR ITS OWN TAX
ADVISOR IN ORDER TO UNDERSTAND FULLY THE FEDERAL, STATE, LOCAL AND FOREIGN
INCOME AND ESTATE AND GIFT TAX CONSEQUENCES TO HIM, HER OR IT ARISING FROM THE
SALE.
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The discussion is based on current law, which is subject to change (possibly
with retroactive effect), and does not consider state, local and foreign income
tax aspects of the sale. For purposes of this tax discussion, references to
"I.R.C. Section" are to sections of the Internal Revenue Code of 1986, as
amended. THIS DISCUSSION DOES NOT ADDRESS SPECIAL CONSIDERATIONS AND RULES
APPLICABLE TO LIMITED PARTNERS THAT ARE TAX-EXEMPT OR FOREIGN ENTITIES.
No ruling will be requested from the Internal Revenue Service on any of the tax
matters discussed herein. The federal income tax consequences to the limited
partners from the sale cannot be predicted with absolute certainty. We cannot
assure that the Internal Revenue Service will not audit or question the
treatment of any item discussed herein.
The following discussion also assumes that Houston Pines and the Partnership are
characterized as partnerships for federal income tax purposes. If either Houston
Pines or the Partnership is treated for federal income tax purposes as an
association, any cash available for distribution after the sale would be
substantially reduced and the tax consequences would be materially different
than as described below.
TAX CONSEQUENCES IF THE PROPERTY IS SOLD. Houston Pines will recognize gain from
a sale of its interest in the Property to the extent that the amount Houston
Pines realizes from that sale exceeds its adjusted basis in its interest in the
Property. Houston Pines' amount realized from the sale includes the sum of cash
it receives from the Buyer plus the fair market value of any property it
receives other than money. If the Buyer assumes or takes the Property subject to
liabilities which encumber the Property, the face amount of those liabilities
also is included in the amount realized as though the Buyer had made a cash
payment to Houston Pines in the same amount. Selling expenses of Houston Pines,
such as brokerage commissions, legal fees and title costs, reduce Houston Pines'
amount realized. Any gain recognized by Houston Pines will be allocated to its
partners, including the Partnership, in accordance with the Houston Pines'
partnership agreement. If the Partnership possesses suspended tax losses or
other items of tax benefit, such items may be used to reduce the gain recognized
by the Partnership that arises from the sale of Houston Pines' property and is
allocated to the Partnership. Additionally, any unreduced gain recognized by the
Partnership arising from Houston Pines' sale of the Property then will be
allocated to the Partnership's partners, including the limited partners, in
accordance with the Partnership's partnership agreement. We estimate that
approximately $196 gain will be allocated per unit to the limited partners. Any
allocated gain to a limited partner of the Partnership will increase the basis
that such limited partner has in its partnership interest in the Partnership.
This amount is an estimate based on a number of assumptions with respect to
closing costs discussed under "Use of Proceeds."
Any gain allocated to the Partnership's limited partners in excess of
"depreciation recapture gain" (discussed below) and "unrecaptured I.R.C. Section
1250 gain" (discussed below) generally will be taxed as gain arising from the
sale of property used in Houston Pines' or the Partnership's trade or business
under I.R.C. Section 1231 ("I.R.C. Section 1231 gain"). Each limited partner
will be allocated its share of the Partnership's I.R.C. Section 1231 gain, which
gain will include the Partnership's allocable share of Houston Pines' I.R.C.
Section 1231 gain. In general, if the combination of all I.R.C. Section 1231
gains and losses of a particular limited partner for a
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taxable year results in a net gain, all of such gains and losses will be
characterized as long-term capital gains and losses. If the combination results
in a net loss, all of such gains and losses will be characterized as ordinary
gains and losses. However, notwithstanding the foregoing, net I.R.C. Section
1231 gains will be treated as ordinary gains to the extent of a limited
partner's unrecaptured net I.R.C. Section 1231 losses for the five most recent
prior years. As a result, all or a portion of any I.R.C. Section 1231 gain from
the sale of the Partnership's property allocated to a limited partner may be
treated as ordinary income, rather than long-term capital gain, if the limited
partner has had net I.R.C. Section 1231 losses in prior years.
Under I.R.C. Section 1245, gain recognized by Houston Pines from the sale of any
of its depreciable or amortizable personal property and certain statutorily
designated real property, i.e., "depreciation recapture gain," is
re-characterized as ordinary income and will be allocated to its partners,
including the Partnership, as such. In turn, that depreciation recapture gain of
Houston Pines that is allocated to the Partnership will be allocated to the
partners of the Partnership, including its limited partners. The amount of
Houston Pines' depreciation recapture gain equals the amount by which the lower
of the (i) amount realized or (ii) recomputed basis (i.e., the property's basis
plus all amounts allowed for depreciation) of the transferred property exceeds
that property's adjusted basis.
Under I.R.C. Section 1250, no portion of the gain recognized by Houston Pines
upon the disposition of its residential rental real property generally is
re-characterized as ordinary income because such property is depreciated using
the straight-line method. However, under I.R.C. Section 291(a)(1), a portion of
a corporation's capital gain from the disposition of residential rental real
property is re-characterized as ordinary income. The portion that is
re-characterized equals 20% of the amount that would have been treated as
ordinary income under I.R.C. Section 1245 if the transferred property were
I.R.C. Section 1245 property (which generally would be all depreciation
deductions previously claimed). Therefore, under I.R.C. Section 291(a)(1),
corporate limited partners of the Partnership allocated gain from the
Partnership attributable to Houston Pines' disposition of its residential rental
real property may recognize ordinary income as a result of such disposition.
In the case of limited partners of the Partnership that are individuals, estates
or trusts, the application of I.R.C. Section 1250 will not require those
taxpayers to recognize gain taxable as ordinary income; however, those limited
partners may be allocated gain indirectly arising from Houston Pines' sale of
the Property that is taxed as "unrecaptured I.R.C. Section 1250 gain."
Unrecaptured I.R.C. Section 1250 gain generally is equal to the gain on the sale
of real property that is attributable to straight-line depreciation. The maximum
federal tax rate applicable to unrecaptured I.R.C. Section 1250 gain currently
is 25%.
In the case of limited partners that are individuals, trusts or estates, gain
allocated to them from the Partnership and attributable to the sale of the
Houston Pines' property that is not taxed as ordinary income or as unrecaptured
I.R.C. Section 1250 gain generally is taxed at a capital gains tax rate, the
current maximum rate of which is 15%. Gain from the sale of Houston Pines'
property that is indirectly allocated to limited partners of the Partnership
that are corporations is not subject to preferential capital gains tax rates.
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If a limited partner of the Partnership possesses suspended tax losses, tax
credits or other items of tax benefit, such items may be used to reduce any tax
liability that arises with respect to any gain resulting from the sale of
Houston Pines' property and indirectly allocated to that limited partner. The
determination of whether a limited partner possesses suspended tax losses, tax
credits, or other items of tax benefit that may reduce any gain resulting from
the sale will depend upon each limited partner's individual circumstances.
Limited partners are urged to consult with their tax advisors in this regard.
DISTRIBUTIONS OF CASH. A distribution of cash by Houston Pines to the
Partnership, its sole limited partner, will be treated as an amount realized
from a sale of the Partnership's interest in Houston Pines and will result in
taxable gain only to the extent that the distribution exceeds the Partnership's
adjusted tax basis in its partnership interest in Houston Pines. Any gain
recognized by the Partnership in that instance, to the extent not reduced by any
suspended tax losses or other items of tax benefit, will be allocated to the
Partnership's partners, including the limited partners, in accordance with the
Partnership's partnership agreement. Otherwise, Houston Pines' distributions to
the Partnership will be tax free, and the adjusted basis of the Partnership's
interest in Houston Pines will be decreased, but not below zero. If the
Partnership recognizes gain from Houston Pines' cash distribution to the
Partnership, which gain is then allocated to the Partnership's partners, each
partner of the Partnership will increase its respective basis in its interest in
the Partnership by the amount of such allocated gain.
Generally, any gain recognized by the Partnership arising from a cash
distribution by Houston Pines will be capital gain. Nevertheless, to the extent
that a portion of that gain is attributable to "unrealized receivables" of
Houston Pines, including depreciation recapture, or to certain inventory items
described in I.R.C. Section 751, such gain will be characterized as ordinary
income.
A distribution of cash by the Partnership to a limited partner will be treated
as an amount realized from a sale of the limited partner's interest in the
Partnership and will result in taxable gain only to the extent that the
distribution exceeds the limited partner's adjusted tax basis in his, her or its
Partnership interest. Otherwise, distributions will be tax free, and the
adjusted basis of the limited partner's Partnership interest will be decreased,
but not below zero.
Generally, any gain recognized by a limited partner arising from a cash
distribution by the Partnership will be capital gain. Nevertheless, to the
extent that a portion of that gain is attributable to "unrealized receivables"
of the Partnership, including depreciation recapture, or to certain inventory
items described in I.R.C. Section 751, such gain will be taxed as ordinary
income.
PROCEEDS AVAILABLE FOR DISTRIBUTION TO THE LIMITED PARTNERS FROM THE PROPERTY'S
SALE AFTER REPAYMENT OF HOUSTON PINES' AND THE PARTNERSHIP'S DEBTS MAY BE LESS
THAN THE GAIN ALLOCATED AND/OR RECOGNIZED BY THE PARTNERSHIP (AS A RESULT OF
HOUSTON PINES' SALE OF THE PROPERTY OR HOUSTON PINES' DISTRIBUTION OF CASH TO
THE PARTNERSHIP) THAT IS ALLOCABLE TO THE PARTNERS, GAIN RECOGNIZED BY THE
PARTNERS AS A RESULT OF ANY CASH DISTRIBUTIONS FROM THE PARTNERSHIP, AND ANY TAX
LIABILITY RESULTING FROM THE FOREGOING. ACCORDINGLY, LIMITED PARTNERS MAY BE
REQUIRED TO USE FUNDS FROM SOURCES OTHER THAN THE PARTNERSHIP IN ORDER TO PAY
ANY TAX LIABILITIES THAT MAY ARISE AS A RESULT OF THE RECOGNITION OF GAIN.
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TAX CONSEQUENCES IF THE PROPERTY IS NOT SOLD. The Property has depreciated
approximately 77% for United States federal income tax purposes. As a result, it
is likely that continued operation of the Property indirectly will generate
taxable income to the limited partners (as a result of income allocations to the
Partnership from Houston Pines), since it is unlikely that there will be
adequate depreciation and other deductions equal to or greater than the income
generated from the Property. However, it is anticipated that there will not be
any cash available for distribution since it is expected that all or
substantially all of the Property's cash flow will be used to service Houston
Pines' and the Partnership's liabilities. Accordingly, limited partners may be
required to use funds from sources other than the Partnership in order to pay
any tax liabilities that may arise as a result of the continued operation of the
Property. The Partnership also will continue to incur the administrative costs
of operating the Partnership, including the cost of preparing and filing a
Partnership tax return, and it and/or Houston Pines will continue to receive
management fees. If a limited partner possesses suspended tax losses, tax
credits, or other items of tax benefit, such items may potentially be used to
reduce any tax liability with respect to any taxable net income arising from the
continued operation of the Property. Limited partners are urged to consult their
tax advisors in this regard.
TAX CONSEQUENCES OF A LIQUIDATION OF HOUSTON PINES AND OF THE PARTNERSHIP.
Following the sale of the Property, it is anticipated that Houston Pines will be
liquidated, distributing its only asset at that time, cash, to its partners,
including the Partnership. When the Partnership's entire interest in Houston
Pines is extinguished upon receipt of the liquidating cash distribution, the
Partnership will recognize capital gain to the extent of any amount of cash in
excess of its basis in its partnership interest in Houston Pines. If the
Partnership possesses suspended tax losses or other items of tax benefit, such
items may be used to reduce the gain recognized by the Partnership that arises
from the liquidating cash distribution from Houston Pines. Conversely, if the
Houston Pines' liquidating cash distribution is less than the Partnership's
basis in its Houston Pines' partnership interest, the Partnership will recognize
the amount of unrecovered basis as capital loss. If at the time of the
liquidating cash distribution, the Partnership has a negative capital account
balance in Houston Pines, such negative balance may increase the amount of gain
recognized by the Partnership from the liquidating distribution or may reduce
the amount of loss recognized by the Partnership from the liquidating
distribution. Any net capital gain or loss recognized by the Partnership from
the Houston Pines' liquidating cash distribution will be long-term capital gain
or loss because the Partnership has held its Houston Pines' partnership interest
for longer than one year. Additionally, capital gain or loss recognized by the
Partnership arising from Houston Pines' liquidating cash distribution will be
allocated to the Partnership's partners, including its limited partners. If a
gain is allocated to a partner of the Partnership, the gain will increase the
partner's basis in its interest in the Partnership. If a loss in allocated to a
partner of the Partnership, the loss will reduce the partner's basis in its
interest in the Partnership, but not below zero. Loss allocated to a limited
partner of the Partnership in excess of its basis in its interest in the
Partnership will be suspended.
Following the liquidation of Houston Pines, it is anticipated that the
Partnership will be liquidated, distributing its only asset at that time, cash,
to its partners, including the limited partners. When the entire interest of a
partner in the Partnership is extinguished upon receipt of the liquidating cash
distribution, the partner will recognize capital gain to the extent of any
amount of cash in excess of its basis in its interest in the Partnership. If the
partner possesses
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suspended tax losses or other items of tax benefit, such items may be used to
reduce the gain recognized by the partner that arises from the liquidating cash
distribution from the Partnership. Conversely, if the Partnership's liquidating
cash distribution to a partner is less than the partner's basis in its interest
in the Partnership, the partner will recognize the amount of unrecovered basis
as capital loss. Such capital gain or loss recognized by the partner from the
Partnership's liquidating cash distribution will be either long-term capital
gain or loss or short-term capital gain or loss depending upon the period of
time that the partner held its interest in the Partnership. If at the time of
the liquidating cash distribution from the Partnership, a partner of the
Partnership has a negative capital account balance in the Partnership, such
negative balance may increase the amount of gain recognized by the partner from
the liquidating distribution or may reduce the amount of loss recognized by the
partner from the liquidating distribution.
The tax consequences described above arising from the liquidation of Houston
Pines and the Partnership is a general discussion. The tax consequences to you
from such liquidations could be materially different.
EACH LIMITED PARTNER SHOULD CONSULT AND MUST RELY UPON HIS, HER OR ITS OWN TAX
ADVISOR IN ORDER TO UNDERSTAND FULLY THE FEDERAL, STATE, LOCAL AND FOREIGN
INCOME AND ESTATE AND GIFT TAX CONSEQUENCES TO HIM, HER OR IT ARISING FROM THE
LIQUIDATIONS.
NO APPRAISAL RIGHTS
Limited partners are not entitled to dissenters' appraisal rights under
applicable law or the partnership agreement in connection with the sale.
REGULATORY APPROVALS
Other than the filing and distribution of this information statement, no
regulatory approvals are required for the sale.
PLANS AFTER THE SALE
After the sale of the Property, the Partnership and Houston Pines will be
dissolved and their affairs wound up.
PARTNERSHIP BUSINESS
The Partnership is a publicly held limited partnership organized under the
California Uniform Limited Partnership Act on September 12, 1979. We were wholly
owned by MAE GP Corporation. Effective February 25, 1998, MAE GP Corporation was
merged into Insignia Properties Trust. Effective February 26, 1999, Insignia
Properties Trust was merged into Apartment Investment and Management Company, a
publicly traded real estate investment trust. Thus, we are now a wholly owned
subsidiary of Apartment Investment and Management Company. The partnership
agreement provides that the Partnership is to terminate on December 31, 2035,
unless terminated before such date.
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The Partnership's primary business is to operate and hold real estate properties
for investment. Funds obtained during the public offering were invested in seven
existing apartment properties. The Partnership has now sold six of these
investment properties. See below for a description of the Partnership's
remaining property.
The Partnership, through its public offering of limited partnership units, sold
20,000 limited partnership units aggregating $20,000,000. We contributed capital
in the amount of $1,000 for a 1% interest in the Partnership. In addition, we
purchased 100 limited partnership units. Since the Partnership's initial
offering, we have not received, nor are the limited partners required to make,
additional capital contributions.
The Partnership has no employees. Management and administrative services are
performed by us and by agents retained by us. Our affiliate provides such
property management services.
For information on certain pending litigation, please refer to the Partnership's
most recent report on Form 10-QSB (for the quarterly period ended September 30,
2003 filed with the Securities and Exchange Commission.
PARTNERSHIP PROPERTIES
The following table sets forth the Partnership's current investment in real
property:
<Table>
<Caption>
PROPERTY DATE OF PURCHASE TYPE OF OWNERSHIP USE
-------- ---------------- ----------------- ---
Forest River Apartments, Fee ownership, subject to a
Gadsden, Alabama 12/29/80 first mortgage(1) Apartment - 248 units
</Table>
(1) Property is held by a limited partnership in which the Partnership
owns a 99% interest.
SUMMARY OF THE PURCHASE AND SALE AGREEMENT
The following summarizes the material terms and conditions of the Agreement. As
noted above, the consent to be executed by a majority of the limited partnership
units will give the general partner of Houston Pines the authority to amend the
Agreement, and, as a result, the ultimate terms of the Agreement may vary, in
some cases significantly, from the terms set forth below.
THE PURCHASED ASSETS
Houston Pines has agreed to sell to the Buyer all of Houston Pines' interest in
and to the Property, together with all the buildings and improvements located
thereon and certain associated property.
EXCLUSIONS FROM THE SALE OF THE PROPERTY
The sale transaction expressly excludes receivables, cash or other funds;
refunds, rebates or other claims, or any interest thereon, for periods or events
occurring prior to the closing; utility and similar deposits; insurance or other
prepaid items; the Partnership's proprietary books and
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records; any right, title or interest in or to certain intellectual property
rights; equipment leased by the Partnership and the interest of the Partnership
in any equipment provided to the Property for use, but not owned or leased by
the Partnership; property owned or leased by any tenant or guest, employee or
other person furnishing goods or services to the Property; property and
equipment owned by the Partnership, which in the ordinary course of business of
the Property is not used exclusively for the business, operation or management
of the Property; and certain computer hardware and software.
ASSUMED LIABILITIES
The Buyer agreed to assume the Partnership's liabilities and obligations under
certain Property contracts and tenant leases from and after the closing.
THE EXISTING LOANS
The Buyer and Houston Pines have agreed that, at the closing, the
then-outstanding principal balance of the outstanding first mortgage loan on the
Property shall be paid out of the proceeds of the purchase price due at the
closing. The Buyer shall pay any fees and expenses charged by Lender in
connection with the pay-off of the first mortgage loan and the amount of such
payment will be credited against the balance of the purchase price due at
closing.
PURCHASE PRICE
The purchase price for the Property is $6,450,000, payable as follows: (i) a
$50,000 deposit upon the execution of the Agreement to be held in escrow until
the closing, (ii) an additional non-refundable $14,500 deposit upon the
expiration of the Buyer's due diligence period for its examination of the
Property to be held in escrow until the closing, (iii) a $75,000 deposit no
later than three business days after the Buyer obtains approval of private
activity bonds for the acquisition and rehabilitation of the Property, as set
forth in the Agreement, to be held in escrow until the closing, and (iv) the
balance of the purchase price at the closing. As of the date of this information
statement, the Buyer has deposited a total of $139,500 into escrow with the
title company, which amount is, pursuant to the terms of the Agreement,
non-refundable (subject only to the satisfaction of the Buyer's conditions to
closing thereunder); provided, however, that if the Agreement is terminated due
to a default of or breach by Houston Pines of the Agreement and the Buyer
chooses to seek damages in lieu of specific performance, then the full $139,500
deposit shall be returned to the Buyer.
BOND APPROVAL
The Buyer is applying to the Alabama Housing Finance Authority for private
activity bond financing for the acquisition and rehabilitation of the Property.
Although the sale of the Property to the Buyer is not conditioned on the Buyer
receiving approval for such bond financing, the timing and receipt of such
approval may affect the purchase price of the Property and the closing date for
the sale. As of the date of this information statement, the Alabama Housing
Finance Authority has issued initial approval of the bond financing. If the
Alabama Housing Finance Authority issues final approval of the bond financing on
or before December 20, 2003, the closing date will be the earlier of ten days
after such final approval or December 30, 2003. If
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final approval is not issued on or before December 20, 2003, (i) the closing
date will be postponed to February 13, 2004, and (ii) the purchase price for the
Property will be reduced by $200,000 to $6,250,000. The Buyer will have the
additional option of extending the February 13, 2004 closing date to March 12,
2004 pursuant to the terms and conditions of the Agreement upon delivery of an
additional non-refundable deposit of $62,500. If the purchase price has been
reduced by $200,000 pursuant to the terms and conditions of the Agreement, then
(a) if the Buyer receives the final board approval prior to the closing, the
purchase price will be adjusted back to $6,450,000 (i.e., there will be no
$200,000 reduction in the purchase price), and (b) if the Buyer receives final
approval of the bond financing after the closing, the Buyer will be required to
pay Houston Pines $200,000 within five days of the Buyer's receipt of such final
approval.
CLOSING
The sale of the Property is scheduled to take place on December 30, 2003
(subject to extension pursuant to the Agreement to February 13, 2004 and March
12, 2004). Houston Pines shall have the option to extend the closing to the last
business day of the month in which the closing otherwise would occur or to such
other date as Houston Pines determines is desirable in connection with the loan
payoff. Houston Pines also shall have the option to extend the closing (i) for
up to 30 days to satisfy a condition to be satisfied by Houston Pines, or (ii)
such later date as is mutually acceptable to Houston Pines and the Buyer. If the
Buyer does not receive final approval for the private activity bonds on or
before December 20, 2003, then the closing date will be postponed to February
13, 2004, subject to an additional extension at Buyer's discretion to March 12,
2004.
REPRESENTATIONS AND WARRANTIES
The Agreement contains the customary seller representations and warranties by
Houston Pines, including, without limitation, representations and warranties
regarding corporate existence and qualification; corporate authority;
non-contravention of existing contracts; validity and enforceability of the
Agreement; possessory interest in the property; litigation; governmental
violations; and material defaults under property contracts. The Partnership's
aggregate liability for a breach of its representations and warranties is capped
at $50,000 and is limited to claims brought within six months after the closing.
The Agreement also contains customary purchaser representations and warranties
by the Buyer, including, without limitation, representations and warranties
regarding existence and qualification; corporate authority; non-contravention of
existing contracts; validity and enforceability of the Agreement; litigation;
and non-reliance upon the Houston Pines' representations and warranties other
than those in the Agreement.
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COVENANTS
Houston Pines has agreed that from the expiration of the Buyer's due diligence
period through the closing, it will continue to operate the Property in the
ordinary course of business and subject to the following covenants:
o Houston Pines may enter into new contracts or leases involving the
Property, renew existing leases or modify, terminate or accept the
surrender or forfeiture of any of the leases involving the Property,
modify any contracts involving the Property, or institute and
prosecute any available remedies for default under any such leases or
contracts without first obtaining the written consent of the Buyer, as
long as (i) any such new contracts or any new or renewed leases do not
have a term in excess of one year (or such longer period of time for
which such contracts or leases are entered into by Houston Pines in
the ordinary course of its operation of the Property) without the
prior written consent of the Buyer, and (ii) from and after August 18,
2003 (i.e., the expiration of Buyer's due diligence period), any such
new contracts are terminable upon 30 days' prior written notice,
unless otherwise agreed to in writing by the Buyer;
o except as necessary in Houston Pines' sole discretion to address (a)
any life or safety issue at the Property, or (b) any other matter
which in Houston Pines' reasonable discretion materially adversely
affecting the use, operation or value of the Property, Houston Pines
will not make any material alterations to the Property or remove any
material fixtures and tangible personal property without the prior
written consent of the Buyer; and
o other than utility easements and temporary construction easements
granted by Houston Pines in the ordinary course of business, Houston
Pines will not voluntarily create or cause any lien or encumbrance to
attach to the Property unless the Buyer approves such lien or
encumbrance.
CONDITIONS
Houston Pines' obligation to complete the sale of the Property is subject to
satisfaction of the following conditions on or before the closing unless waived
in whole or in part by Houston Pines:
o All of the documents and funds required to be delivered by the Buyer
to Houston Pines at the closing shall have been delivered;
o Each of the representations, warranties and covenants of the Buyer
shall be true in all material respects as of the closing;
o The Buyer shall have complied with, fulfilled and performed in all
material respects each of the covenants, terms and conditions to be
complied with, fulfilled or performed by the Buyer; and
o Houston Pines shall have received all consents and approvals to the
consummation of the transactions contemplated by the Agreement (a) of
Houston Pines' partners, members, managers, shareholders or directors
to the extent required by Houston Pines' (or Houston Pines'
affiliates') organizational documents, or (b) that are required by
law.
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The Buyer's obligation to complete the sale of the Property is subject to
satisfaction of the following conditions on or before the closing unless waived
in whole or in part by the Buyer:
o All of the documents required to be delivered by Houston Pines to the
Buyer at the closing shall have been delivered;
o Each of the representations, warranties and covenants of Houston Pines
shall be true in all material respects as of the closing;
o Houston Pines shall have complied with, fulfilled and performed in all
material respects each of the covenants, terms and conditions to be
complied with, fulfilled or performed by Houston Pines; and
o Neither Houston Pines nor the general partner of Houston Pines shall
be a debtor in any bankruptcy proceeding nor shall have been, in the
last six months, a debtor in any bankruptcy proceeding.
TERMINATION AND DEFAULT
The Agreement may be terminated at any time after the expiration of the Buyer's
due diligence period through the closing:
o By Houston Pines, if the Buyer defaults in its obligations hereunder
to (a) deliver any of the deposits, (b) deliver to Houston Pines the
required closing deliveries specified under the Agreement, or (c)
deliver the purchase price at the time required by the Agreement and
close on the purchase of the Property on the closing date. Houston
Pines may also terminate the Agreement if the Buyer defaults in any of
its representations, warranties or obligations, and such default
continues for more than 10 days after written notice from Houston
Pines; and
o By the Buyer, if Houston Pines defaults in its representations,
warranties, covenants or obligations under the Agreement, including
selling the Property and such default continues for more than 10 days
after written notice from the Buyer.
If Houston Pines terminates the Agreement due to a default of or breach by the
Buyer, then Houston Pines is entitled to keep all the Buyer's deposits as
liquidated damages. If the Buyer terminates the Agreement due to a default or
breach of Houston Pines, then the Buyer may choose to either (i) recover its
out-of-pocket costs up to an aggregate $20,000 (in which event, the Buyer's
deposits would be returned to the Buyer), or (ii) seek specific performance for
the conveyance of the Property to the Buyer (but not damages).
EXPENSES AND CLOSING COSTS
The Buyer shall pay any transfer, sales, use, gross receipts or similar taxes,
the cost of recording any instruments required to discharge any liens or
encumbrances against the Property, any premiums or fees required to be paid with
respect to Buyer's title policy for the Property (except
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the base premium for the title policy), and one-half of the customary closing
costs of the escrow agent for the sale of the Property. Houston Pines shall pay
the base premium for the title policy and one-half of the customary closing
costs of the escrow agent. The Buyer shall also pay all costs associated with
the payoff of the then-outstanding principal balance of the loan, and such
outstanding principal balance shall be paid out of the balance of the purchase
price due at the closing. Additionally, Houston Pines shall pay for the broker
commission of The Apartment Group, which has served as Houston Pines' broker, in
accordance with a separate written contract between The Apartment Group and
Houston Pines. Houston Pines intends to pay the commission out of the balance of
the purchase price payable on the closing, which payment shall reduce the cash
at closing to Houston Pines and, ultimately, the Partnership.
WHERE YOU CAN FIND MORE INFORMATION
We are subject to the informational requirements of the Exchange Act and are
required to file annual and quarterly reports, proxy statements and other
information with the SEC. You can inspect and copy reports and other information
filed by us with the SEC at the SEC's Public Reference Room at 450 Fifth Street,
N.W., Washington, D.C. 20549. You may also obtain information on the operation
of the Public Reference Room by calling the SEC at 1-800-SEC-0300. The SEC also
maintains an Internet site at http:\\www.sec.gov that contains reports, proxy
and information statements regarding issuers, including us, that file
electronically with the SEC.
You should only rely on the information incorporated by reference or provided in
this information statement or any supplement. We have not authorized anyone else
to provide you with information. You should not assume that the information in
this information statement or any supplement is accurate as of any date other
than the date on the front of this information statement or the supplement.
We are "incorporating by reference" into this information statement certain
information we have filed with the SEC, which means that we are disclosing
important information to you by referring you to those documents. The
information incorporated by reference is deemed to be part of this information
statement, except for any information superseded by information contained
directly in this information statement. These documents contain important
information about us and our finances. This information statement incorporates
by reference:
o Our annual report on Form 10-KSB for the year ended December 31, 2002.
o Our quarterly report on Form 10-QSB for the period ended March 31,
2003.
o Our quarterly report on Form 10-QSB for the period ended June 30,
2003.
o Our quarterly report on Form 10-QSB for the period ended September 30,
2003.
All documents we file with the SEC pursuant to Section 13(a), 13(c), 14 or 15(d)
of the Securities Exchange Act from the date of this information statement shall
also be deemed to be incorporated herein by reference and will automatically
update information in this information statement.
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You may request a copy of these filings, at no cost, by writing or calling us at
the following address or telephone number:
c/o THE ALTMAN GROUP, INC.
1275 Valley Brook Avenue
Lyndhurst, New Jersey 07071
Telephone: (800) 461-2657
DELIVERY OF DOCUMENTS TO SECURITY HOLDERS SHARING AN ADDRESS
Only one information statement is being delivered to multiple limited partners
sharing an address unless the Partnership has received contrary instructions
from one or more of the limited partners.
The Partnership will undertake to deliver promptly upon written or oral request
a separate copy of this information statement to a limited partner at a shared
address to which the Partnership delivered a single copy of the information
statement. If a limited partner wishes to notify the Partnership that he or she
wishes to receive a separate copy of this information statement, the limited
partner may contact the Partnership as follows:
By mail: c/o THE ALTMAN GROUP, INC.
1275 Valley Brook Avenue
Lyndhurst, New Jersey 07071
By telephone: (800) 461-2657
By facsimile: (201) 460-0050
A limited partner may also use the above telephone number, facsimile number or
mailing address to notify the Partnership that limited partners sharing an
address request delivery of a single copy of this information statement if they
are receiving multiple copies of information statements.
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