SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
SCHEDULE TO/A
(AMENDMENT NO. 2)
TENDER OFFER STATEMENT UNDER SECTION 14(D)(1) OR 13(E)(1) OF THE
SECURITIES EXCHANGE ACT OF 1934
Angeles Income Properties, Ltd. II
- --------------------------------------------------------------------------------
(Name of Subject Company (Issuer))
Apartment Investment and Management Company
AIMCO-GP, Inc.
Angeles Realty Corporation II
AIMCO Properties, L.P.
- --------------------------------------------------------------------------------
(Names of Filing Persons - Offerors)
Limited Partnership Units
- --------------------------------------------------------------------------------
(Title of Class Securities)
None
- --------------------------------------------------------------------------------
(CUSIP Number of Class Securities)
Patrick J. Foye
Apartment Investment and Management Company
Colorado Center, Tower Two
2000 South Colorado Boulevard, Suite 2-1000
Denver, Colorado 80222
(303) 757-8101
- --------------------------------------------------------------------------------
(Name, address, and telephone numbers of person authorized
to receive notices and communications on behalf of filing persons)
Copy to:
Joseph A. Coco
Skadden, Arps, Slate, Meagher & Flom LLP
Four Times Square
New York, New York 10036
(212) 735-3000
and
Jonathan L. Friedman
Skadden, Arps, Slate, Meagher & Flom LLP
300 South Grand Avenue
Los Angeles, California 90071
(213) 687-5000
1
Calculation of Filing Fee
<Table>
<Caption>
Transaction valuation* Amount of filing fee
- ---------------------- --------------------
$3,168,423.50 $ 256.33
</Table>
* For purposes of calculating the fee only. This amount assumes the
purchase of 38,050 units of limited partnership interest of the subject
partnership for $83.27 per unit. The amount of the filing fee,
calculated in accordance with Section 14(g)(1)(B)(3) and Rule 0-11(d)
under the Securities Exchange Act of 1934, as amended, equals $80.90
per million of the aggregate amount of cash offered by the bidder.
[X] Check the box if any part of the fee is offset as provided by Rule
0-11(a)(2) and identify the filing with which the offsetting fee was
previously paid. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
Amount Previously Paid: $256.33 Filing Party: AIMCO Properties, L.P.
Form or Registration No.: Schedule TO Date Filed: November 14, 2003
[ ] Check the box if the filing relates solely to preliminary communications
made before the commencement of a tender offer.
Check the appropriate boxes below to designate any transactions to which the
statement relates:
[X] third-party tender offer subject to Rule 14d-1
[ ] issuer tender offer subject to Rule 13e-4
[X] going-private transaction subject to Rule 13e-3
[ ] amendment to Schedule 13D under Rule 13d-2
Check the following box if the filing is a final amendment reporting the results
of the tender offer: [ ]
2
AMENDMENT NO. 2 TO SCHEDULE TO
This Amendment No. 2 amends and supplements the Tender Offer Statement
and Rule 13e-3 Transaction Statement on Schedule TO, as amended by Amendment No.
1 thereto (the "Schedule TO"), relating to the offer by AIMCO Properties, L.P.,
a Delaware limited partnership, to purchase units of limited partnership
interest ("Units") of Angeles Income Properties, Ltd. II, a California limited
partnership (the "Partnership"), at a price of $83.27 per unit in cash, subject
to the conditions set forth in the Offer to Purchase dated November 14, 2003,
and in the related Letter of Transmittal (which, together with any supplements
or amendments, collectively constitute the "Offer"). Copies of the Offer to
Purchase and the Letter of Transmittal are filed as Exhibits (a)(1) and (a)(2),
respectively, to the Schedule TO. The item numbers and responses thereto below
are in accordance with the requirements of Schedule TO. Unless defined herein,
capitalized terms used and not otherwise defined herein have the respective
meanings ascribed to such terms in the Offer to Purchase.
ITEM 1. SUMMARY TERM SHEET.
Item 1 is amended and supplemented as follows:
(1) The following paragraph under "THE SUMMARY TERM SHEET" is
amended and restated as follows:
"Covenant Not to Sue. If you requested exclusion from the
settlement but tender your units in this offer, by signing the letter
of transmittal, you agree not to bring any action, claim, suit or
proceeding against us and those affiliates who were defendants in the
class and derivative litigation concerning any of the matters that are
the subject of the Stipulation of Settlement approved by the Court in
connection with the settlement of such class and derivative litigation,
including this Litigation Settlement Offer, other than for violations
of federal or state securities laws. If you do not request exclusion
from the settlement class, you will already have agreed not to bring
any such action, you will already have agreed not to bring any such
action, claim, suit or proceeding once the settlement."
(2) The following paragraph under "THE SUMMARY TERM SHEET" is
amended and restated as follows:
"Conflicts of Interest. NHP Management Company (which is our
affiliate) receives fees for managing your partnership's property and
the general partner of your partnership (which is our affiliate) is
entitled to receive asset management fees and reimbursement of certain
expenses involving your partnership and its property. 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. See "The Litigation Settlement Offer --
Section 13. Conflicts of Interest and Transactions with Affiliates" and
"-- Section 15. Certain Information Concerning Your Partnership."
(3) The following paragraph is added as the eighteenth
paragraph under "THE SUMMARY TERM SHEET":
"Fairness of the Offer. Although we, Apartment Investment and
Management Company ("AIMCO") and AIMCO-GP, Inc. (collectively, the
"AIMCO Entities") and your general partner have interests that may
conflict with those the partnership's unaffiliated limited partners,
each of the AIMCO Entities believes that the offer price and the offer
are fair to the unaffiliated limited partners of your partnership. This
determination is based on the information and the factors set
3
forth under "The Litigation Settlement Offer -- Section 12. Position of
Your General Partner of Your Partnership With Respect to the Offer."
ITEM 2. SUBJECT COMPANY INFORMATION.
Item 2(a) of the Schedule TO is amended and supplemented as
follows:
(1) The following paragraph under "THE LITIGATION SETTLEMENT OFFER -
Section 15. Certain Information Concerning Your Partnership" is amended and
restated as follows:
"Ownership and Voting. We, together with Cooper River
Properties, L.L.C., AIMCO IPLP, L.P. and Broad River Properties, L.L.C.
(which are our affiliates), own 61,754 units, or 61.88%, of the
outstanding units of your partnership. Because we and our affiliates
own a majority of the outstanding units, we have the ability to control
most votes of the limited partners. See "The Litigation Settlement
Offer -- Section 7. Effects of the Offer" and "-- Section 16. Voting
Power.""
(2) The chart under "THE LITIGATION SETTLEMENT OFFER - Section 15.
Certain Information Concerning Your Partnership - Financial Data" is amended by
adding the following line items:
<Table>
<Caption>
FOR THE NINE MONTHS
ENDED SEPTEMBER 30, FOR THE YEAR ENDED DECEMBER 31,
---------------------------- --------------------------------------
2003 2002 2002 2001 2000
------------- ------------- ------------- ------------- ---------
(DOLLARS IN THOUSANDS, EXCEPT PER UNIT DATA)
Income (loss) per unit from continuing operations $ 0.17 $ (0.94) $ 0.57 $ 3.48 $ 26.59
Ratio of earnings to fixed charges (deficit)....... 101.3% 93.6% 103.0% 120.8% 297.9%
Book value per limited partnership unit............ (175.11) (158.65) (157.14) (152.58) (69.96)
</Table>
ITEM 3. IDENTITY AND BACKGROUND OF FILING PERSON.
Item 3(a) - (c) of the Schedule TO is amended and supplemented
as follows:
(1) The Rule 13e-3 Transaction Statement on Schedule TO is being filed
by Apartment Investment and Management Company, a Maryland corporation
("AIMCO"), AIMCO Properties, L.P., a Delaware limited partnership ("AIMCO OP"),
AIMCO-GP, Inc. a Delaware corporation ("AIMCO-GP"), and Angeles Realty
Corporation II, a Delaware corporation ("Angeles Realty"). AIMCO-GP is the
general partner of AIMCO OP and a wholly owned subsidiary of AIMCO. Angeles
Realty is the managing general partner of the Partnership and a wholly owned
subsidiary of AIMCO. The principal business of AIMCO, AIMCO-GP, and AIMCO OP is
the ownership, acquisition, development, expansion and management of
multi-family apartment properties. The business address of AIMCO, AIMCO-GP and
AIMCO OP is 4582 Ulster Street Parkway, Suite 1100, Denver, Colorado 80237, and
their telephone number is (303) 757-8101. The principal address of Angeles
Realty is 55 Beattie Place, P.O. Box 1089, Greenville, South Carolina 29602, and
its phone number is (864) 239-1000.
During the last five years, none of AIMCO, AIMCO-GP, AIMCO OP
or Angeles Realty nor, to the best of their knowledge, any of the persons listed
in Annex I to the Offer to Purchase (i) has been convicted in a criminal
proceeding (excluding traffic violations or similar misdemeanors) or (ii) was a
party to a civil proceeding of a judicial or administrative body of competent
jurisdiction and as a result of such proceeding was or is subject to a judgment,
decree or final order enjoining further violations of or
4
prohibiting activities subject to federal or state securities laws or finding
any violation with respect to such laws.
(2) The fourth paragraph under "THE LITIGATION SETTLEMENT OFFER -
Section 10. Information Concerning Us and Certain of Our Affiliates" is amended
and restated as follows:
"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 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."
(3) The following chart under Annex I is amended and restated as
follows:
<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
Patti K. Fielding.......... Executive Vice President -- Securities and Debt
Patrick J. Foye............ Executive Vice President
Lance J. Graber............ Executive Vice President -- AIMCO Capital
Paul J. McAuliffe.......... Executive Vice President and Chief Financial Officer
Ronald D. Monson........... Executive Vice President and Head of Property
Operations
David Robertson............ Executive Vice President -- President and Chief Executive Officer
of AIMCO Capital
Jim Purvis................. Executive Vice President -- Human Resources
Randall J. Fein............ Executive Vice President -- Student Housing
James N. Bailey............ Director
Richard S. Ellwood......... Director
J. Landis Martin........... Director
Thomas L. Rhodes........... Director
</Table>
ITEM 4. TERMS OF THE TRANSACTION.
Item 4(a) of the Schedule TO is amended and supplemented as
follows:
(1) The following paragraph under "RISK FACTORS" is amended and
restated as follows:
"THE LIQUIDATION VALUE OF YOUR PARTNERSHIP UNITS EXCEEDS OUR OFFER
PRICE
If your partnership was liquidated, and the properties sold at a price
equal to their recently appraised value, we estimate that you would
receive a liquidating distribution of $217.71 per unit, which exceeds
our offer price of $83.27 per unit. However, the actual proceeds
obtained from a liquidation are highly uncertain and could be more or
less than our estimate."
(2) The following paragraph under "RISK FACTORS" is amended and
restated as follows:
"THERE MAY BE A POSSIBLE REDUCTION OF AVAILABLE INFORMATION ABOUT YOUR
PARTNERSHIP AS A RESULT OF THIS OFFER.
5
If there are less than 300 unitholders in your partnership
upon consummation of the offer, your partnership would no longer be
required to file periodic reports with the SEC, such as annual reports
on Form 10-KSB containing annual audited financial statements, and
quarterly reports on Form 10-QSB containing unaudited quarterly
financial statements. Such reports are publicly available and can be
obtained on the SEC's web site. The lack of such filings could
adversely affect the already limited secondary market which currently
exists for units in your partnership and may discourage offers to
purchase your units. In such a case, you would regularly have access
only to the information your partnership's agreement of limited
partnership requires your general partner (which is our affiliate) to
provide each year, which consists primarily of tax information. See
"The Litigation Settlement Offer - Section 7. Effects of the Offer -
Effect on Trading Market; Registration Under Section 12(g) of the
Exchange Act."
(3) Section 1 under "THE LITIGATION SETTLEMENT OFFER" is amended and
restated as follows:
"1. TERMS OF THE OFFER; EXPIRATION DATE
Upon the terms and subject to the conditions of the offer, we
will accept (and thereby purchase) any and all units that are validly
tendered on or prior to the expiration date and not withdrawn in
accordance with the procedures set forth in "The Litigation Settlement
Offer -- Section 4. Withdrawal Rights." For purposes of the offer, the
term "expiration date" shall mean midnight, New York City time, on
December 19, 2003, unless we in our sole discretion shall have extended
the period of time for which the offer is open (which may not exceed 90
business days from the date of commencement, as provided in the
settlement). See "The Litigation Settlement 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 purchase price per unit will automatically be reduced by
the aggregate amount of distributions per unit, if any, made or
declared 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
your units.
If, prior to the expiration date, we increase the
consideration offered pursuant to the offer, the increased
consideration will be paid for all units accepted for payment pursuant
to the offer, whether or not the units were tendered prior to the
increase in consideration.
The offer is conditioned on satisfaction of certain
conditions. The offer is not conditioned upon any minimum number of
units being tendered. See "The Litigation Settlement Offer -- Section
19. Conditions to 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 limited partners, (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. If we are unable to accept the units tendered
in this Litigation Settlement Offer due to a failure of any or all of
the conditions of our offer to be satisfied, we will conduct another
offer in
6
accordance with the terms of the settlement (which will occur no later
than six months after the date of the commencement of this offer). We
will continue this process until we have accepted for payment all units
properly tendered in an offer conducted in accordance with the terms of
the settlement. By executing the letter of transmittal, you will agree
that the transfer of units will be deemed to take effect as of the
first day of the calendar quarter in which the offer expires. Upon
expiration of the offer, the books and records of the partnership will
reflect the change in ownership as having occurred as of this date. For
tax, accounting and financial reporting purposes, the transfer of
tendered units will be deemed to take effect on the first day of the
calendar quarter. Accordingly, all profits and losses relating to any
tendered units will be allocated to us from and after this date. If we
waive any material conditions to our offer (other than those relating
to necessary governmental approvals), we will notify you and, if
necessary, we will extend the offer period so that you will have at
least five business days from the date of our notice to withdraw your
units.
This offer is being mailed on or about November 14, 2003 to
the persons shown by your partnership's records to be limited partners
or, in the case of units owned of record by Individual Retirement
Accounts and qualified plans, beneficial owners of units."
Section 2 under "THE LITIGATION SETTLEMENT OFFER" is amended and
restated as follows:
"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, any and all
units validly tendered promptly 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 letter of transmittal and other documents required by the
letter of transmittal. See "The Litigation Settlement 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.
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 limited partners for the purpose of receiving cash
payments from us and transmitting cash payments to tendering limited
partners.
If any tendered units are not accepted for payment by us for
any reason, the letter of transmittal 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 13, 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.
7
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."
(4) The first paragraph under "THE LITIGATION SETTLEMENT OFFER -
Section 3. Procedure for Tendering Units - Release of Claims" is amended and
restated as follows:
"Release of Claims. By executing the letter of transmittal,
effective upon acceptance for payment of the units tendered by you, you
will, on behalf of yourself, your heirs, estate, executor,
administrator, successors and assigns, and your partnership, fully,
finally and forever release, relinquish and discharge us and our
predecessors, successors and assigns and our present and former
parents, subsidiaries, affiliates, investors, insurers, reinsurers,
officers, directors, employees, agents, administrators, auditors,
attorneys, accountants, information and solicitation agents, investment
bankers, and other representatives, including but not limited to AIMCO
Properties, L.P. (collectively, the "Releasees"), from any and all
claims and causes of action, whether brought individually, on behalf of
a class, or derivatively, demands, rights, or liabilities, including,
but not limited to, claims for negligence, gross negligence,
professional negligence, breach of duty of care or loyalty, or breach
of duty of candor, fraud, breach of fiduciary duty, mismanagement,
corporate waste, malpractice, misrepresentation, whether intentional or
negligent, misstatements and omissions to disclose, breach of contract,
violations of any state or federal statutes, rules or regulations,
whether known claims or unknown claims that have been asserted or that
could have been asserted against the Releasees, that arise out of or
relate to (a) those matters and claims set forth in the class and
derivative litigation described in this Litigation Settlement Offer,
(b) the ownership of one or more units in your partnership, including
but not limited to, any and all claims related to the management of
your partnership or the properties owned by your partnership (whether
currently or previously), the payment of management fees or other
monies to the general partner of your partnership and its affiliates,
prior acquisitions or tender offers and the prior settlement, (c) the
purchase, acquisition, holding, sale, tender or voting of one or more
units in your partnership, or (d) any of the facts, circumstances,
allegations, claims, causes of action, representations, statements,
reports, disclosures, transactions, events, occurrences, acts,
omissions or failures to act, of whatever kind or character whatsoever,
irrespective of the state of mind of the actor performing or omitting
to perform the same, that have been or could have been alleged in any
pleadings, amended pleading, argument, complaint, amended complaint,
brief, motion, report or filing in the class and derivative litigation
described in this Litigation Settlement Offer (collectively, the
"Released Claims"); provided, however, that the Released Claims are not
intended to include (i) any unrelated claims that are unique to a
limited partner or settlement class member (e.g., a settlement class
member slips and falls on property owned by one of the defendants in
the class and derivative litigation, loses or did not receive a
distribution check distributed to other limited partners in such
partnership, or is an employee of one of the defendants and has an
employee related claim) or (ii) any claim based upon violations of
federal or state securities laws in connection with this offer."
(5) The paragraph under "THE LITIGATION SETTLEMENT OFFER - Section 3.
Procedure for Tendering Units - Covenant Not to Sue" is amended and restated as
follows:
"Covenant Not to Sue. By executing the letter of transmittal,
you agree not to bring any action, claim, suit or proceeding against us
and those affiliates who were defendants in the class and derivative
litigation concerning any of the matters that are the subject of the
Stipulation of Settlement approved by the Court in connection with the
settlement of such class and derivative litigation, including this
Litigation Settlement Offer, other than for violations of federal or
state securities laws."
8
(6) The paragraph under "THE LITIGATION SETTLEMENT OFFER -- Procedure
for Tendering Units - Section 3. Procedure for Tendering Units -- Determination
of Validity; Rejection of Units; Waiver of Defects; No Obligation to Give Notice
of Defects" is amended and restated as follows:
"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 or amend any of the
conditions of the offer that we are legally permitted to waive as to
the tender of any particular unit and to waive any defect or
irregularity in any tender with respect to any particular unit of any
particular limited partner. If we waive any of the conditions to the
offer with respect to the tender of a particular unit, we will waive
such condition with respect to all other tenders of units in this offer
as well. Our interpretation of the terms and conditions of the offer
(including 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."
(7) The first paragraph under "THE LITIGATION SETTLEMENT OFFER -
Section 5. Extension of Tender Period; Termination; Amendment; No Subsequent
Offering Period" is amended and restated as follows:
"We expressly reserve the right, in our reasonable discretion,
at any time and from time to time, (i) to extend the period of time
during which our offer is open (but not beyond 90 business days from
the date of commencement of the offer) 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 to 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 Litigation Settlement Offer -- Section 19.
Conditions of the Offer" relating to necessary governmental approvals,
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). We will not assert any of the conditions
to the offer (other than those relating to necessary governmental
approvals) subsequent to the expiration of the offer. 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."
(8) The third paragraph under "THE LITIGATION SETTLEMENT OFFER--Section
8. Valuation of Units -- Determination of Offer Price" is amended and restated
as follows:
"We relied on the direct capitalization method because we believe this
is the valuation methodology most often used by the real estate
industry to value income producing property. The
9
court appointed independent appraiser also utilized the direct
capitalization method as one its valuation methodologies. However, in
comparison to our methodology, the independent appraiser relied on pro
forma net operating income as opposed to the current property income of
your partnership."
(9) The following chart under "THE LITIGATION SETTLEMENT OFFER -
Section 8. Valuation of Units" is amended and restated in its entirety:
<Table>
<Caption>
COMPARISON TABLE PER UNIT
- ---------------- --------
Cash offer price $ 83.27
Alternatives
Highest prior cash tender offer price $ 165.00
Highest price on secondary market $ 113.00
Estimated liquidation proceeds (based on
appraised value) $ 217.71
</Table>
(10) The first paragraph and the first bullet point under "THE
LITIGATION SETTLEMENT OFFER - Section 19. Conditions to the Offer" are amended
and restated as follows:
"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 Litigation Settlement Offer and at or before
the expiration of our offer (including any extension thereof), any of
the following shall 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 or operates its
property, including any fire, flood, natural disaster,
casualty loss, or act of God that is or could reasonably be
expected to be materially adverse to your partnership or the
value of your units to us, which change would, individually or
in the aggregate, result in, or reasonably be expected to
result in, an adverse effect on net operating income of your
partnership of more than $10,000 per year, or a decrease in
value of an asset of your partnership, or the incurrence of a
liability with respect to your partnership, in an amount in
excess of $100,000 (a "Material Adverse Effect"), or we shall
have become aware of any facts relating to your partnership,
its indebtedness or its operations which has had or could
reasonably be expected to have a Material Adverse Effect; or"
(11) The third bullet point under "THE LITIGATION SETTLEMENT OFFER -
Section 19. Conditions to the Offer" is amended and restated as follows:
"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 the acquisition by
us of the units, restrains, prohibits or delays the making or
consummation of the offer, prohibits the performance of any of the
contracts or other arrangements entered into by us (or any of our
affiliates) seeks to obtain any material amount of damages as a result
of the transactions contemplated by the offer, (ii) seeks to make the
purchase of, or payment for, some or all of the units pursuant to the
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 your general partner (which is our affiliate) or to
remove such entity as the general partner of your partnership, or seeks
to impose any material limitation on our ability or any of our
affiliates to conduct your partnership's business or own such assets,
(iv) seeks to impose material limitations on our ability or any of our
affiliates 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 unitholders or (v)
could reasonably be expected to result in a Material Adverse Effect; or
10
(12) The fifth bullet point under "THE LITIGATION SETTLEMENT OFFER -
Section 19. Conditions to the Offer" is amended and restated as follows:
"o your partnership shall have (i) changed, or authorized a change of,
its 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 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, has or could
reasonably be expected to have a Material Adverse Effect, (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 (any changes to the offer
resulting from the conditions set forth in this paragraph will most
likely involve a change in the amount or terms of the consideration
offered or the termination of the offer); or"
(13) The seventh bullet point of "THE LITIGATION SETTLEMENT OFFER -
Section 19. Conditions to the Offer" is amended and restated as follows:
"o there shall have occurred any event, circumstance, change, effect or
development that, individually or in the aggregate with any other
events, circumstances, changes, effects or developments, has had or
would reasonably be expected to have an adverse effect on our financial
condition in an amount in excess of $10,000,000; or"
(14) The following bullet point under "THE LITIGATION SETTLEMENT OFFER
- - Section 19. Conditions to the Offer" is deleted in its entirety:
"o we shall not have adequate cash or financing commitments available
to pay for the units validly tendered, which is the result of events or
circumstances beyond our reasonable control."
(15) The second paragraph under "THE LITIGATION SETTLEMENT OFFER -
Section 19. Conditions to the Offer" is amended and restated as follows:
"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 at any time in our reasonable
discretion prior to the expiration of this offer. 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. All conditions to our
offer will be satisfied or waived on or before the expiration of our
offer."
11
(16) The first paragraph of the Letter of Transmittal is amended and
restated as follows:
"The undersigned hereto hereby acknowledges that he or she has
received (i) the Purchaser's Litigation Settlement Offer, dated the
date set forth above (the "Offer Date"), relating to the offer by AIMCO
Properties, L.P. (the "Purchaser") to purchase Limited Partnership
Interests (the "Units") in the Partnership and (ii) this Letter of
Transmittal and the Instructions hereto, as each may be supplemented or
amended from time to time (collectively, the "Offer")."
(17) The fourth paragraph of the Letter of Transmittal is amended and
restated as follows:
"By executing this Letter of Transmittal, the undersigned
hereby acknowledges that neither the court nor counsel for the parties
in the class and derivative litigation make any recommendation
regarding whether the undersigned should accept the Offer, and the
undersigned hereto represents and warrants to the Purchaser that the
undersigned (i) has received the Offer, including the executive summary
of the independent appraiser's report attached to the Litigation
Settlement Offer, and (ii) has had an opportunity to seek the advice of
such undersigned's attorney, tax advisor and/or financial advisor
before deciding whether or not to accept the Offer."
(18) The sixth paragraph of the Letter of Transmittal is amended and
restated as follows:
"The undersigned hereto, on behalf of himself or herself, his
or her heirs, estate, executor, administrator, successors and assigns,
and the Partnership, fully, finally and forever releases, relinquishes
and discharges the Purchaser and its predecessors, successors and
assigns and its present and former parents, subsidiaries, affiliates,
investors, insurers, reinsurers, officers, directors, employees,
agents, administrators, auditors, attorneys, accountants, information
and solicitation agents, investment bankers, and other representatives,
including but not limited to Apartment Investment and Management
Company and the general partner of the Partnership (collectively, the
"Releasees"), from any and all claims and causes of action, whether
brought individually, on behalf of a class, or derivatively, demands,
rights, or liabilities, including, but not limited to, claims for
negligence, gross negligence, professional negligence, breach of duty
of care or loyalty, or breach of duty of candor, fraud, breach of
fiduciary duty, mismanagement, corporate waste, malpractice,
misrepresentation, whether intentional or negligent, misstatements and
omissions to disclose, breach of contract, violations of any state or
federal statutes, rules or regulations, whether known claims or unknown
claims that have been asserted or that could have been asserted against
the Releasees, that arise out of or relate to (a) those matters and
claims set forth in the class and derivative litigation described in
the Litigation Settlement Offer, (b) the ownership of one or more Units
in the Partnership, including but not limited to, any and all claims
related to the management of the Partnership or the properties owned by
the Partnership (whether currently or previously), the payment of
management fees or other monies to the general partner of the
Partnership and its affiliates, prior acquisitions or tender offers and
the prior settlement, (c) the purchase, acquisition, holding, sale,
tender or voting of one or more Units in the Partnership, or (d) any of
the facts, circumstances, allegations, claims, causes of action,
representations, statements, reports, disclosures, transactions,
events, occurrences, acts, omissions or failures to act, of whatever
kind or character whatsoever, irrespective of the state of mind of the
actor performing or omitting to perform the same, that have been or
could have been alleged in any pleadings, amended pleading, argument,
complaint, amended complaint, brief, motion, report or filing in the
class and derivative litigation described in the Litigation Settlement
Offer (collectively, the "Released Claims"); provided, however, that
the Released Claims are not intended to include (i) any unrelated
claims that are unique to a unitholder or settlement class member
(e.g., a settlement class member slips and falls on property owned by
one of the defendants in the class and derivative litigation, loses or
did not receive a distribution check
12
distributed to other limited partners in such partnership, or is an
employee of one of the defendants and has an employee related claim),
or (ii) any claim based on violations of federal or state securities
laws in connection with the Offer."
(19) The tenth paragraph of the Letter of Transmittal is amended and
restated as follows:
"Subject to and effective upon acceptance for payment of any
Unit tendered hereby in accordance with the terms of the Offer, the
signatory agrees not to bring any action, claim, suit or proceeding
against the Purchaser and its affiliates who were defendants in the
class and derivative litigation described in the Litigation Settlement
Offer concerning any of the matters that are the subject of the
Stipulation of Settlement approved by the Court in connection with the
settlement of such class and derivative litigation, including the
Offer, other than for violations of federal or state securities laws."
(20) The eleventh paragraph of the Letter of Transmittal is amended and
restated as follows:
"The undersigned hereto irrevocably appoints the Purchaser and
its designees as his or her proxy, each with full power of
substitution, to the fullest extent of the undersigned's rights with
respect to the Units tendered by him or her and accepted for payment by
the Purchaser. Such proxy shall be considered coupled with an interest
in the tendered Units. Such appointment will be effective upon receipt
of this Letter of Transmittal. Upon receipt of this Letter of
Transmittal, all prior proxies and consents given by undersigned hereto
with respect to the Units will, without further action, be revoked, and
no subsequent proxies or consents may be given (and if given will not
be effective). The Purchaser and its designees are, as to those Units,
empowered to exercise all voting as a limited partner as the Purchaser,
in its discretion, may deem proper at any meeting of limited partners,
by written consent or otherwise. The Purchaser reserves the right to
require that, in order for Units to be deemed validly tendered,
immediately upon our acceptance for payment of the Units, the Purchaser
must be able to exercise full voting rights with respect to the Units,
including voting at any meeting of limited partners then scheduled or
acting by written consent without a meeting. By executing this Letter
of Transmittal, the undersigned agrees 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 the Purchaser's
directions. The proxy granted by the undersigned hereto to the
Purchaser will remain effective and be irrevocable for a period of ten
years following the Expiration Date of the Offer."
(21) The following paragraph in the Letter of Transmittal is deleted in
its entirety:
"The undersigned hereto irrevocably constitutes and appoints
the Purchaser and any designees of the Purchaser as the true and lawful
agent and attorney-in-fact of the undersigned 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 tender or exchange offer provided that the price per
unit being offered by the Purchaser is equal to or higher than the
price per unit being offered in the other tender or exchange offer.
This appointment is effective upon execution and receipt of this Letter
of Transmittal and shall continue to be effective unless and until such
Units are withdrawn from the Offer by the undersigned prior to the
Expiration Date."
ITEM 5. PAST CONTACTS, TRANSACTIONS, NEGOTIATIONS AND AGREEMENTS.
Item 5(a) and (b) of the Schedule TO is amended and
supplemented as follows:
13
(1) The first, second and third paragraphs of "THE LITIGATION
SETTLEMENT OFFER - Section 9. The Lawsuit and the Settlement - The Settlement of
the Nuanes and Heller Complaints" is amended and restated as follows:
"On December 20, 2002, the parties to the above-entitled
litigation executed a Stipulation of Settlement of the two actions.
That settlement was the result of over one year of negotiations and the
involvement of two separate settlement judges. Class counsel and
defendants' counsel first met with the Honorable William J. Cahill,
Retired California Superior Court Judge, on two separate occasions.
Counsel also met on four separate occasions with the Honorable Margaret
J. Kemp, California Superior Court Judge, before reaching a settlement
in principle. The parties initially met with Judge Cahill on two
occasions in the fall of 2000, but were ultimately unsuccessful in
reaching a definitive settlement agreement. At the Court's direction,
they renewed formal settlement discussions before Judge Kemp. The
parties first attended a settlement conference before Judge Kemp in
September or October 2002 and then subsequently met with her on October
28, 2002, November 26, 2002 and December 2, 2002. The parties reached
final agreement on the material terms of the settlement at the last
settlement conference with Judge Kemp on December 2, 2002 and put the
terms of that agreement on the record in open court.
In each of the conferences described above, counsel from Lieff
Cabraser Heimann & Bernstein LLP, Farella Braun & Martel LLP & Berman
Devalerio Pease & Tobacco attended on behalf of the named plaintiffs
and the putative settlement class; counsel from Skadden, Arps, Slate,
Meagher & Flom LLP attended on behalf of AIMCO and its affiliated
entities, including your general partner, and Orrick Herrington &
Sutcliffe attended on behalf of the remaining defendants. AIMCO
Executive Vice President Patrick Foye also attended each of these
meetings. Mr. Vincent Gresham of the Law Offices of Vincent Gresham
also participated on behalf of plaintiffs and the putative settlement
class in those settlement discussions before the Hon. Cahill, Retired.
At these meetings, discussions included possible transactions that
could provide liquidity to investors and form the basis of a
settlement, the use of a settlement fund and the amount of such fund,
the timing and distribution of any settlement fund, selection and use
of an appraiser and disclosures that would accompany any contemplated
transaction(s). The participants considered but ultimately rejected a
merger or roll-up of the various partnerships as possible alternatives
to cash tender offers. The parties ultimately concluded, however, that
a merger or roll-up could be potentially complicated and time consuming
and that a cash tender offer would be a less coercive form of providing
liquidity to those investors who desired it.
The Settlement Agreement requires each tender offer to attach
executive summaries of partnership property appraisals commissioned
specifically for the settlement tender offers and to provide an
explanation of how the appraised values of the properties compare to
the per Unit price(s) being offered. It also requires the payment of an
allocable portion of the settlement fund for each unit tendered
pursuant to the settlement fund, details the scope of the release and
covenants not to sue which will bind class members, requires that
tender offers be made no more than one year after final approval of the
settlement and imposes certain restrictions on the length of time in
which the tender offers can remain open, as well as with regard to
other disclosures made therein. On April 4, 2003, the Court
preliminarily approved the settlement and, on June 13, 2003, entered an
order finally approving the settlement and dismissing both the Heller
and Nuanes litigation with prejudice. On August 12, 2003, an objector
filed an appeal of the court's order approving the settlement and is
seeking to reverse or vacate the Court's order and the judgment entered
thereto. Although we reserve our right to terminate or amend our offer
if final court approval of the settlement is reversed or vacated, we
have nevertheless elected to proceed with this offer under the terms of
the settlement. On November 24, 2003, the objector appealing the
settlement and judgment entered thereto filed an application requesting
the Court order AIMCO to withdraw the settlement tender offers, refrain
from making further offers pending the appeal and auction any units
tendered to third parties. The objector contends that this offer does
not conform with the terms of the Settlement. Alternatively, counsel
for the objector has requested the Court on behalf of a settlement
class member order AIMCO to pay all non-tendering settlement class
members their pro rata share of the Settlement Fund whether or not the
settlement and judgment entered thereto is vacated on appeal and to
notify settlement class members that the releases and covenant not to
sue are not binding unless the settlement and judgment entered thereto
is affirmed on appeal. AIMCO asserts that such applications are without
merit and is opposing such applications."
14
(2) The second paragraph under "THE LITIGATION SETTLEMENT OFFER -
Section 11. Background and Reasons for the Offer - Alternatives Considered by
Your General Partner -- Liquidation" is amended and restated as follows:
"If your partnership was liquidated, and the properties sold
at prices equal to the values recently determined by the independent
appraiser (see Annex II), we estimate that your net liquidation
proceeds would be $217.71 per unit. See "The Litigation Settlement
Offer -- Section 8. Valuation of Units." However, in the opinion of
your general partner, which is our affiliate, the present time may not
be the most desirable time to sell the real estate assets of your
partnership in a private transaction, and the proceeds realized from
any such sale would be uncertain. Your general partner believes it
currently is in the best interest of your partnership to continue
holding its real estate assets. Although future operating results and
sales prices are uncertain, your general partner believes that the
operating performance of your partnership's property may improve in the
future. This improvement, should it occur, may result in higher
property values. Such values, however, are also a function of
capitalization rates in the market and the interest rate environment at
the time. However, because your general partner and property manager
(which are our affiliates) receive fees for managing your partnership
and its property, a conflict of interest exists between continuing the
partnership and receiving such fees, on the one hand, and the
liquidation of the partnership and the termination of such fees, on the
other. See "The Litigation Settlement Offer -- Section 15. Certain
Information Concerning Your Partnership -- Investment Objectives and
Policies; Sale or Financing of Investments" and "--Section 13.
Conflicts of Interest and Transactions with Affiliates." The term of
the partnership will continue until December 31, 2037, unless the
partnership is terminated sooner under the provisions of the
partnership agreement."
(3) The paragraph under "THE LITIGATION SETTLEMENT OFFER - Section 11.
Background and Reasons for the Offer - Alternative Transactions Considered by
Us" is amended and restated as follows:
"Alternative Transactions Considered by Us. At the present
time, we have decided to proceed with this offer pursuant to the court
approved settlement. From time to time in the past, we have considered
proposing a number of alternative transactions, including the purchase
of your partnership's property or a merger of your partnership in which
you would receive cash in exchange for your units. We decided not to
pursue these alternative transactions because, in each case, we
determined that a tender offer would be a less expensive means of
acquiring additional interests in your partnership, and would not
require the consent or approval of any limited partners (other than
those who elect to tender their units). In the future, however, we may
consider purchasing your partnership's property or effecting such a
merger. See "The Litigation Settlement Offer -- Section 14. Future
Plans of the Purchaser." We also considered an offer to exchange units
in your partnership for limited partnership interests in AIMCO
Properties, L.P. 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 when we
have offered limited partners an opportunity to receive cash or limited
partnership interests in AIMCO Properties, L.P., the limited partners
who tender usually prefer the cash option."
15
ITEM 6. PURPOSES OF THE TRANSACTION AND PLANS OR PROPOSALS.
Item 6(a), (c)(1) - (7) of the Schedule TO is amended and
supplemented as follows:
(1) The first two paragraphs under "THE LITIGATION SETTLEMENT OFFER --
Section 7. Effects of the Offer" are amended and restated as follows:
"Because the general partner of your partnership is our
affiliate, we have control over the management of your partnership. In
addition, we, together with Cooper River Properties, L.L.C., AIMCO
IPLP, L.P. and Broad River Properties, L.L.C. (which are our
affiliates), own 61,754, or 61.88%, of the outstanding 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. 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 limited partners. This could (1) prevent
non-tendering limited partners 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 limited partners. We are also affiliated with
the company that currently manages, and has managed for some time, the
property owned by your partnership. In the event that we acquire a
substantial number of units pursuant to this offer, removal of the
property manager may become more difficult or impossible.
If we acquire all of the units that we are seeking in the
offer, our interest in your partnership's net earnings ($16,967 for the
nine months ended September 30, 2003) and net book value ($(17,477,000)
as of September 30, 2003) will increase to 100%. AIMCO-GP owns a 1%
interest in AIMCO Properties, L.P. and AIMCO, through its subsidiaries,
owns an 89% in AIMCO Properties."
(2) The second paragraph under "THE LITIGATION SETTLEMENT OFFER -
Section 7. Effects of the Offer - Effect on the Trading Market; Registration
Under Section 12(g) of the Exchange Act" is amended and restated as follows:
"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 1,615 unitholders. The
lack of filing periodic
16
reports could affect the already limited secondary market which
currently exists for units in your partnership and may result in others
not tendering for such units. In such a case, you would regularly have
access only to the limited information your partnership's agreement of
limited partnership requires your general partner (which is our
affiliate) to provide each year, which information consists primarily
of tax information. In particular, you will continue to receive a
Schedule K-1 each year as well as audited financial statements with
respect to your partnership. See "The Litigation Settlement Offer --
Section 1. Terms of the Offer; Expiration Date.""
(3) The first, second and third paragraphs of "THE LITIGATION
SETTLEMENT OFFER - Section 9. The Lawsuit and the Settlement - The Settlement of
the Nuanes and Heller Complaints" is amended and restated as follows:
"On December 20, 2002, the parties to the above-entitled
litigation executed a Stipulation of Settlement of the two actions.
That settlement was the result of over one year of negotiations and the
involvement of two separate settlement judges. Class counsel and
defendants' counsel first met with the Honorable William J. Cahill,
Retired California Superior Court Judge, on two separate occasions.
Counsel also met on four separate occasions with the Honorable Margaret
J. Kemp, California Superior Court Judge, before reaching a settlement
in principle. The parties initially met with Judge Cahill on two
occasions in the fall of 2000, but were ultimately unsuccessful in
reaching a definitive settlement agreement. At the Court's direction,
they renewed formal settlement discussions before Judge Kemp. The
parties first attended a settlement conference before Judge Kemp in
September or October 2002 and then subsequently met with her on October
28, 2002, November 26, 2002 and December 2, 2002. The parties reached
final agreement on the material terms of the settlement at the last
settlement conference with Judge Kemp on December 2, 2002 and put the
terms of that agreement on the record in open court.
In each of the conferences described above, counsel from Lieff
Cabraser Heimann & Bernstein LLP, Farella Braun & Martel LLP & Berman
Devalerio Pease & Tobacco attended on behalf of the named plaintiffs
and the putative settlement class; counsel from Skadden, Arps, Slate,
Meagher & Flom LLP attended on behalf of AIMCO and its affiliated
entities, including your general partner, and Orrick Herrington &
Sutcliffe attended on behalf of the remaining defendants. AIMCO
Executive Vice President Patrick Foye also attended each of these
meetings. Mr. Vincent Gresham of the Law Offices of Vincent Gresham
also participated on behalf of plaintiffs and the putative settlement
class in those settlement discussions before the Hon. Cahill, Retired.
At these meetings, discussions included possible transactions that
could provide liquidity to investors and form the basis of a
settlement, the use of a settlement fund and the amount of such fund,
the timing and distribution of any settlement fund, selection and use
of an appraiser and disclosures that would accompany any contemplated
transaction(s). The participants considered but ultimately rejected a
merger or roll-up of the various partnerships as possible alternatives
to cash tender offers. The parties ultimately concluded, however, that
a merger or roll-up could be potentially complicated and time consuming
and that a cash tender offer would be a less coercive form of providing
liquidity to those investors who desired it.
The Settlement Agreement requires each tender offer to attach
executive summaries of partnership property appraisals commissioned
specifically for the settlement tender offers and to provide an
explanation of how the appraised values of the properties compare to
the per Unit price(s) being offered. It also requires the payment of an
allocable portion of the settlement fund for each unit tendered
pursuant to the settlement fund, details the scope of the release and
covenants not to sue which will bind class members, requires that
tender offers be made no more than one year after final approval of the
settlement and imposes certain restrictions on the length of time in
which the tender offers can remain open, as well as with regard to
other disclosures
17
made therein. On April 4, 2003, the Court preliminarily approved the
settlement and, on June 13, 2003, entered an order finally approving
the settlement and dismissing both the Heller and Nuanes litigation
with prejudice. On August 12, 2003, an objector filed an appeal of the
court's order approving the settlement and is seeking to reverse or
vacate the Court's order and the judgment entered thereto. Although we
reserve our right to terminate or amend our offer if final court
approval of the settlement is reversed or vacated, we have nevertheless
elected to proceed with this offer under the terms of the settlement.
On November 24, 2003, the objector appealing the settlement and
judgment entered thereto filed an application requesting the Court
order AIMCO to withdraw the settlement tender offers, refrain from
making further offers pending the appeal and auction any units tendered
to third parties. The objector contends that this offer does not
conform with the terms of the Settlement. Alternatively, counsel for
the objector has requested the Court on behalf of a settlement class
member order AIMCO to pay all non-tendering settlement class members
their pro rata share of the Settlement Fund whether or not the
settlement and judgment entered thereto is vacated on appeal and to
notify settlement class members that the releases and covenant not to
sue are not binding unless the settlement and judgment entered thereto
is affirmed on appeal. AIMCO asserts that such applications are without
merit and is opposing such applications."
(4) The second paragraph under "THE LITIGATION SETTLEMENT OFFER -
Section 11. Background and Reasons for the Offer - Alternatives Considered by
Your General Partner -- Liquidation" is amended and restated as follows:
"If your partnership was liquidated, and the properties sold
at prices equal to the values recently determined by the independent
appraiser (see Annex II), we estimate that your net liquidation
proceeds would be $217.71 per unit. See "The Litigation Settlement
Offer -- Section 8. Valuation of Units." However, in the opinion of
your general partner, which is our affiliate, the present time may not
be the most desirable time to sell the real estate assets of your
partnership in a private transaction, and the proceeds realized from
any such sale would be uncertain. Your general partner believes it
currently is in the best interest of your partnership to continue
holding its real estate assets. Although future operating results and
sales prices are uncertain, your general partner believes that the
operating performance of your partnership's property may improve in the
future. This improvement, should it occur, may result in higher
property values. Such values, however, are also a function of
capitalization rates in the market and the interest rate environment at
the time. However, because your general partner and property manager
(which are our affiliates) receive fees for managing your partnership
and its property, a conflict of interest exists between continuing the
partnership and receiving such fees, on the one hand, and the
liquidation of the partnership and the termination of such fees, on the
other. See "The Litigation Settlement Offer -- Section 15. Certain
Information Concerning Your Partnership -- Investment Objectives and
Policies; Sale or Financing of Investments" and "--Section 13.
Conflicts of Interest and Transactions with Affiliates." The term of
the partnership will continue until December 31, 2037, unless the
partnership is terminated sooner under the provisions of the
partnership agreement."
(5) The paragraph under "THE LITIGATION SETTLEMENT OFFER - Section 11.
Background and Reasons for the Offer - Alternative Transactions Considered by
Us" is amended and restated as follows:
"Alternative Transactions Considered by Us. At the present
time, we have decided to proceed with this offer pursuant to the court
approved settlement. From time to time in the past, we have considered
proposing a number of alternative transactions, including the purchase
of your partnership's property or a merger of your partnership in which
you would receive cash in exchange for your units. We decided not to
pursue these alternative transactions because, in each case, we
determined that a tender offer would be a less expensive means of
acquiring additional interests in your partnership, and would not
require the consent or approval of any limited partners (other than
those who elect to tender their units). In the future, however, we may
consider purchasing your partnership's property or effecting such a
merger. See "The Litigation Settlement Offer -- Section 14. Future
Plans of the Purchaser." We also considered an offer to exchange units
in your partnership for limited partnership interests in AIMCO
Properties, L.P. 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 when we
have offered limited partners an opportunity to receive cash or limited
partnership interests in AIMCO Properties, L.P., the limited partners
who tender usually prefer the cash option."
18
(6) The fourth and fifth paragraphs under "THE LITIGATION SETTLEMENT
OFFER - Section 14. Future Plans of the Purchaser" are amended and restated as
follows:
"We have been advised that the general partner does not
currently expect to consider, on behalf of your partnership any of the
following transactions: (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. As discussed under "The Litigation
Settlement Offer - Section 15. Certain Information Concerning Your
Partnership - Investment Objectives and Policies; Sale or Financing of
Investments," the general partner regularly evaluates the real estate
and capital markets. The general partner may consider refinancing the
partnership's existing indebtedness to the extent that the general
partner is able to obtain a lower interest rate or if such indebtedness
is approaching maturity. Furthermore, in the event that the general
partner receives an attractive offer for any of your partnership's
properties, the general partner would give due consideration to such an
offer.
If any of the transactions referred to above occur, and
financial benefits accrue to the limited partners, we will participate
in those benefits to the extent of our ownership of units. The
agreement of limited partnership prohibits limited partners from voting
on actions taken by the partnership, unless otherwise specifically
permitted therein. Limited partners may vote on a liquidation, and we
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."
ITEM 7. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
Item 7(a), (b) and (d) of the Schedule TO is amended and
supplemented as follows:
(1) The following sentence is added to the end of the first paragraph
under "THE LITIGATION SETTLEMENT OFFER -Section 21. Fees and Expenses":
"The partnership will not be responsible for paying any of the fees or
expenses incurred by us in connection with this offer."
(2) The second paragraph under "THE LITIGATION SETTLEMENT OFFER --
Section 21. Fees and Expenses" is amended and restated as follows:
"The following is an itemized statement of the aggregate
estimated expenses incurred and to be incurred in this offer by us:
<Table>
Information Agent Fees............... $ 7,500
Legal Fees........................... 11,000
Printing Fees........................ 9,825
Tax and Accounting Fees.............. 1,500
Postage.............................. 500
Appraiser............................ 6,675
Depositary........................... 500
------------
Total.............................. $ 37,500"
=============
</Table>
19
ITEM 8. INTEREST IN SECURITIES OF THE SUBJECT COMPANY.
Item 8 of the Schedule TO is amended and supplemented as
follows:
The following paragraph under "THE LITIGATION SETTLEMENT OFFER -
Section 15. Certain Information Concerning Your Partnership" is amended and
restated as follows:
"Ownership and Voting. We, together with Cooper River
Properties, L.L.C., AIMCO IPLP, L.P. and Broad River Properties, L.L.C.
(which are our affiliates), own 61,754 units, or 61.88%, of the
outstanding units of your partnership. Because we and our affiliates
own a majority of the outstanding units, we have the ability to control
most votes of the limited partners. See "The Litigation Settlement
Offer -- Section 7. Effects of the Offer" and "-- Section 16. Voting
Power.""
ITEM 11. ADDITIONAL INFORMATION.
Item 11(b) of the Schedule TO is amended and supplemented as
follows:
(1) The following bullet point of the cover page of the Litigation
Settlement Offer is amended and restated as follows:
"o Upon a liquidation of your partnership, if the properties were sold
at a price equal to the value determined by the independent appraiser,
we estimate that your liquidation proceeds would be approximately
$217.71 per unit, which is higher than our offer price of $83.27 per
unit. In order to understand the assumptions and methodology used to
determine the liquidation amount, please refer to the "The Litigation
Settlement Offer-- Section 8. Valuation of Units --Estimated
Liquidation Proceeds Based on Independent Appraisal."
(2) Section 16 under "THE LITIGATION SETTLEMENT OFFER" is amended and
restated as follows:
"16. 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 the removal of the general partner, most amendments to the
partnership agreement and the sale of all or substantially all of your
partnership's assets. We, together with Cooper River Properties,
L.L.C., AIMCO IPLP, L.P. and Broad River Properties, L.L.C. (which are
our affiliates) own 61,754 units, or 61.88%, of the outstanding units
of your partnership. Because we and our affiliates own a majority of
the outstanding units, we control most voting decisions made by limited
partners. See "The Litigation Settlement Offer -- Section 7. Effects of
the Offer.""
ITEM 12. EXHIBITS.
Item 12 of the Schedule TO is amended and supplemented as
follows:
(c)(1) Appraisal of Deer Creek
(c)(2) Appraisal of Georgetown
(c)(3) Appraisal of Landmark
20
ITEM 13. INFORMATION REQUIRED BY SCHEDULE 13E-3.
Item 13 of the Schedule TO is amended and supplemented as
follows:
(1) The thirteenth paragraph under "THE LITIGATION SETTLEMENT OFFER -
Section 6. Certain Federal Income Tax Matters" is amended and restated as
follows:
"Tax Consequences to Your Partnership of Our Offer. Section
708 of the 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. It is possible that our acquisition
of units pursuant to the offer alone or in combination with other
transfers of interests in your partnership could result in such a
termination of your partnership. If your partnership is not deemed to
terminate for tax purposes, there will be no tax effect to your
partnership. If your partnership is deemed to terminate for tax
purposes, however, 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.
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 following our offer, 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. Elections as to tax matters previously
made by the old partnership will not be applicable to the new
partnership unless the new partnership chooses to make the same
elections.
Tax Consequences to Non-Tending and Partially-Tendering
Limited Partners. As described above, if 50% or more of such interests
are sold or exchanged within a 12 month period, including as a result
of our acquisition of units, a deemed tax termination of your
partnership will occur for tax purposes. If less than 50% of the total
interest in capital and profits of your partnership are sold or
exchanged within any 12 month period, there will be no tax effect to
you from the offer.
You will not recognize any gain or loss upon a deemed tax
termination of your 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 deemed tax termination will also decrease the annual
depreciation deductions (as a result of the longer partnership
depreciation lives described above) allocable to you (thereby possibly
increasing the taxable income allocable to your interests in the
partnership each year)."
21
(2) The first two paragraphs under "THE LITIGATION SETTLEMENT OFFER --
Section 7. Effects of the Offer" are amended and restated as follows:
"Because the general partner of your partnership is our
affiliate, we have control over the management of your partnership. In
addition, we, together with Cooper River Properties, L.L.C., AIMCO
IPLP, L.P. and Broad River Properties, L.L.C. (which are our
affiliates), own 61,754, or 61.88%, of the outstanding 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. 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 limited partners. This could (1) prevent
non-tendering limited partners 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 limited partners. We are also affiliated with
the company that currently manages, and has managed for some time, the
property owned by your partnership. In the event that we acquire a
substantial number of units pursuant to this offer, removal of the
property manager may become more difficult or impossible.
If we acquire all of the units that we are seeking in the
offer, our interest in your partnership's net earnings ($16,967 for the
nine months ended September 30, 2003) and net book value ($(17,447,000)
as of September 30, 2003) will increase to 100%. AIMCO-GP owns a 1%
interest in AIMCO Properties, L.P. and AIMCO, through its subsidiaries,
owns an 89% in AIMCO Properties."
(3) The second paragraph under "THE LITIGATION SETTLEMENT OFFER -
Section 7. Effects of the Offer - Effect on the Trading Market; Registration
Under Section 12(g) of the Exchange Act" is amended and restated as follows:
"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 1,615 unitholders. The
lack of filing periodic reports could affect the already limited
secondary market which currently exists for units in your partnership
and may result in others not tendering for such units. In such a case,
you would regularly have access only to the limited information your
partnership's agreement of limited partnership requires your general
partner (which is our affiliate) to provide each year, which
information consists primarily of tax information. In particular, you
will continue to receive a Schedule K-1 each year as well as audited
financial statements with respect to your partnership. See "The
Litigation Settlement Offer -- Section 1. Terms of the Offer;
Expiration Date.""
(4) The following subsection under "THE LITIGATION SETTLEMENT OFFER -
Section 8. Valuation of Units" is amended and restated as follows:
22
ESTIMATED LIQUIDATION PROCEEDS BASED ON INDEPENDENT APPRAISAL
SELECTION AND QUALIFICATIONS OF INDEPENDENT APPRAISER. Under the terms
of the settlement, your partnership's property was appraised by American
Appraisal Associates, Inc. ("AAA"), an independent appraiser appointed by the
court. The information set forth below was provided to us by AAA with respect to
its appraisals.
AAA is an experienced independent valuation consulting firm with more
than 50 offices on four continents. AAA provides valuation and consulting
services for the real estate industry through its specialized industry focus and
operates through a team of professionals with different economical, financial,
statistical, legal, architectural, urban and engineering knowledge and
expertise.
FACTORS CONSIDERED. AAA performed complete appraisals of all of your
partnership's properties. AAA has represented that its report was prepared in
conformity with the Uniform Standards of Professional Appraisal Practice and the
Code of Professional Ethics and Standards of Professional Practice of the
Appraisal Institute. We furnished the appraiser with all of the necessary
information requested by AAA in connection with the appraisal. The information
furnished to the appraiser was true, correct and complete in all material
respects. No limitations were imposed on AAA by us or any of our affiliates. In
preparing its valuation of your partnership property, AAA:
o inspected and analyzed the exterior of all buildings and site
improvements and a representative sample of units;
o conducted neighborhood and area research, including major employers,
demographics (population trends, number of households, and income
trends), housing trends, surrounding uses, and general economic outlook
of the area;
o conducted market research of rental inventory, historical vacancy
rates, historical average rental rates, occupancy trends, concessions,
and marketing strategies in the submarket, and occupancy rates at
competing properties;
o reviewed leasing policy, concessions and history of recent occupancy;
o reviewed the historical operating statements for your partnership's
property and an operating budget forecast for 2003;
o prepared an estimate of stabilized income and expense (for
capitalization purposes);
o conducted market inquiries into recent sales of similar properties to
ascertain sales price per unit, effective gross income multipliers and
capitalization rates; and
o prepared sales comparison and income capitalization approaches to
value.
AAA was provided by us with the following management budgets for your
partnership's property:
<Table>
<Caption>
DEER CREEK GEORGETOWN LANDMARK
FISCAL YEAR 2003 FISCAL YEAR 2003 FISCAL YEAR 2003
MANAGEMENT BUDGET MANAGEMENT BUDGET MANAGEMENT BUDGET
PER PER PER
DESCRIPTION TOTAL UNIT TOTAL UNIT TOTAL UNIT
---------- ---------- ---------- ---------- ---------- ----------
Revenues
Rental Income $3,349,584 $ 11,631 $1,684,483 $ 8,422 $2,344,003 $ 8,027
Vacancy 99,000 344 72,569 363 191,784 657
Credit Loss/Concessions 39,444 137 23,510 118 37,200 127
Subtotal $ 138,444 $ 481 $ 96,078 $ 480 $ 228,984 $ 784
Laundry Income $ 41,048 $ 143 $ 0 $ 0 $ 34,476 $ 118
Garage Revenue 0 0 0 0 0 0
Other Misc. Revenue 282,081 979 75,295 376 29,211 100
Subtotal Other
Income $ 323,129 $ 1,122 $ 75,295 $ 376 $ 63,687 $ 218
Effective Gross Income $3,534,269 $ 12,272 $1,663,699 $ 8,318 $2,178,706 $ 7,461
Operating Expenses
Taxes $ 435,943 $ 1,514 $ 158,005 $ 790 $ 149,856 $ 513
Insurance 83,856 291 42,005 210 55,489 190
Utilities 148,725 516 59,420 297 120,432 412
Repair & Maintenance 64,675 225 26,582 133 191,712 657
Cleaning 35,650 124 39,715 199 0 0
Landscaping 74,520 259 19,594 98 63,648 218
Security 0 0 0 0 0 0
Marketing & Leasing 24,066 84 14,892 74 38,760 133
General Administrative 33,070 115 163,813 819 249,307 854
Management 178,686 620 84,095 420 128,820 441
Miscellaneous 168,688 586 0 0 0 0
Total Operating Expenses $1,247,879 $ 4,333 $ 608,121 $ 3,041 $ 998,024 $ 3,418
Reserves 0 0 0 0 0 0
Net Income $2,286,390 $ 7,939 $1,055,578 $ 5,278 $1,180,682 $ 4,043
</Table>
23
THE ABOVE MANAGEMENT BUDGETS ARE INTERNALLY PREPARED OPERATING
PROJECTIONS FOR THE PARTNERSHIP'S PROPERTIES. A MANAGEMENT BUDGET DOES NOT
REFLECT A PROPERTY'S ACTUAL PERFORMANCE, OR CHANGES IN THE CONDITION OF A
PROPERTY, IN THE LOCAL AREA SURROUNDING A PROPERTY OR IN THE ECONOMY IN GENERAL.
SUMMARY OF APPROACHES AND METHODOLOGIES EMPLOYED. The following summary
describes the material approaches and analyses employed by AAA in preparing the
appraisals. The partnership imposed no conditions or limitations on the scope of
AAA's investigation or the methods and procedures to be followed in preparing
the appraisal. AAA principally relied on two approaches to valuation: (1) the
sales comparison approach and (2) the income capitalization approach.
The sales comparison approach uses analysis techniques and sales of
comparable improved properties in surrounding or competing areas to derive units
of comparison that are then used to indicate a value for the subject property.
Under this approach, the primary methods of analysis used by the appraiser were:
(1) sales price per unit analysis; (2) net operating income analysis; and (3)
effective gross income analysis.
The purpose of the income capitalization approach is to value an
income-producing property by analyzing likely future income and expenses of the
property over a reasonable holding period. Under the income capitalization
approach, AAA performed: (1) a direct capitalization analysis and (2) a
discounted cash flow analysis to derive property value. The direct
capitalization analysis determines the value of a property by applying a
capitalization rate that takes into account all of the factors influencing the
value of such property to the net operating income of such property for a single
year. The direct capitalization method is normally more appropriate for
properties with relatively stable operating histories and expectations. The
discounted cash flow analysis determines the value of a property by discounting
to present value the estimated operating cash flow of such property and the
estimated proceeds of a hypothetical sale of such property at the end of an
assumed holding period. The discounted cash flow method is more appropriate for
the analysis of investment properties with multiple or long-term leases,
particularly leases with cancellation clauses or renewal options. It is
especially useful for multi-tenant properties in volatile markets.
AAA relied principally on the income capitalization approach to
valuation and secondarily on the sales comparison approach. Although the sales
comparison approach is considered a reliable method for valuing property, the
income capitalization approach is the primary approach used for valuing income
producing property, such as your partnership's property.
Summary of independent appraisals of your partnership's property. AAA
performed complete appraisals of all of your partnership's properties. The
summary set forth below describes the material conclusions reached by AAA based
on the values determined under the valuation approaches and subject to the
assumptions and limitations described below. The estimated total "as is" market
value of the fee simple estate of your partnership's property is $47,900,000,
which was determined by adding the estimated values determined by AAA for each
of your partnership's properties and which is higher than our estimated total
gross valuation of $33,748,056.
24
DEER CREEK APARTMENTS
Valuation Under Sales Comparison Approach. AAA compared four apartment
complexes with Deer Creek Apartments that were sold between January 2001 and
June 2002 and located in the property's real estate market area. Based on its
qualitative analysis, AAA rated the locations of one comparable property as
comparable and three comparable properties as inferior to the location of Deer
Creek Apartments. AAA rated the quality/appeal of one comparable property as
superior, one comparable properties as comparable and two comparable properties
as inferior to the quality/appeal of Deer Creek Apartments. AAA rated the
amenities of one comparable property as comparable and three comparable
properties as inferior to the amenities of Deer Creek Apartments.
AAA made adjustments to the sales price per unit of each comparable
property to reflect differences from Deer Creek Apartments in location, number
of units, quality/appeal, age/condition, occupancy at sale, amenities and
average unit size. Based on the available data, AAA concluded a value range of
$73,853 to $94,587 per unit with a mean or average adjusted price of $84,608 per
unit and a median adjusted price of $84,996 per unit. Thus, the estimated value
based on a $90,000 sales price per unit for the 288 units was approximately
$25,900,000 after adjustment for and present value of concessions.
As part of the sales comparison approach, AAA also conducted a net
operating income ("NOI") analysis. NOI effectively takes into account the
various physical, location and operating aspects of the sale. AAA compared Deer
Creek Apartments' NOI to the NOI of the four comparable properties and arrived
at a percentage adjustment. After applying the percentage adjustment to the
sales price per unit of each comparable property, the range of value was between
$60,799 and $107,909 per unit, with an average of $90,546 per unit. The
appraiser concluded a value of $90,000 per unit for the 288 units of the
property, resulting in an estimated "as is" market value of $25,900,000 using
the NOI analysis after adjustment for and present value of concessions.
AAA also performed an effective gross income multiplier ("EGIM")
analysis. The EGIM measures the relationship between the sales price of a
property and its effective gross income, which is the total annual income that a
property would produce after an allowance for vacancy and credit loss. AAA
estimated the operating expense ratio ("OER") of Deer Creek Apartments to be
36.85% before reserves, with the expense ratios of the four comparable
properties ranging from 29.17% to 51.21%, resulting in EGIMs ranging from 5.96
to 8.13. Thus, AAA concluded an EGIM of 7.50 for Deer Creek Apartments, and
applied the EGIM to the stabilized effective gross income for the property (see
Income Approach section below), resulting in a value conclusion of approximately
$25,500,000 after adjustment for present value of concessions.
AAA estimated the value using the price per unit analysis at
$25,900,000, the value using the NOI analysis at $25,900,000 and the value using
the EGIM analysis at $25,500,000. Based on these three valuation methods, AAA
concluded that the reconciled value for Deer Creek Apartments under the sales
comparison approach was $25,900,000. AAA assumed a marketing and exposure period
of 6 to 12 months.
Valuation Under Income Capitalization Approach. Under the income
capitalization approach, AAA performed: (1) a direct capitalization analysis and
(2) a discounted cash flow analysis to derive a value for Deer Creek Apartments.
AAA first utilized a discounted cash flow method to analyze the value
of the property. Under this method, anticipated future cash flow and a
reversionary value are discounted at an appropriate rate of return to arrive at
an estimate of present value. AAA also employed a direct capitalization analysis
on the property by dividing a forecast of net operating income ("NOI") by an
appropriate capitalization rate. AAA performed a market rent analysis for the
property to derive a projected rental income. The analysis included both a
review of the subject's current asking and actual rent rates as well as a
comparison with comparable apartment properties. AAA calculated Deer Creek
Apartments' effective gross income ("EGI") by adding apartment rental
collections to other income and then making an adjustment for vacancy and
collection loss. Under this analysis, AAA arrived at an EGI of $3,408,152. Once
the EGI was established, operating expenses were deducted from the EGI in order
to arrive at an NOI for Deer Creek Apartments of approximately $2,080,272. AAA
performed a pro forma analysis of revenue and expenses for the property to
derive the subject's stabilized NOI. AAA relied on the subject's historical and
budgeted income and expenses for this estimate. AAA derived appropriate
investment criteria, including an overall capitalization rate,
25
terminal capitalization rate and a discount rate based upon analysis of
comparable sales and a survey of real estate investors.
The assumptions employed by AAA to determine the value of Deer Creek
Apartments under the income approach included:
(1) stabilized vacancy and collection loss rate of 5.5%;
(2) replacement reserve of $250 per unit;
(3) overall capitalization rate of 8%;
(4) terminal capitalization rate of 8.5%;
(5) discount rate of 11%;
(6) 2% cost of sale at reversion; and
(7) holding period of 10 years.
No adjustment was made for lease-up costs because the property was near or at a
stabilized condition. An adjustment was made for concessions due to soft market
conditions, and AAA estimated the present value of concessions to be $60,000.
Based on these assumptions, AAA's estimate of cash flows for a 10-year period
resulted in an indicated value of $25,900,000 through the discounted cash flow
method. The reversion value contributed approximately 44% of the value.
Under the direct capitalization method, utilizing a capitalization rate
of 8%, the projected NOI resulted in a value (after rounding) of $25,900,000
after adjustments for present value of concessions.
Using the income capitalization approach, AAA determined on an as-is
basis that the direct capitalization method and the discounted cash flow method
indicated the value for Deer Creek Apartments was $25,900,000.
Reconciliation of Values and Conclusions of Appraisal. The final step
in the appraisal process was to reconcile the sales comparison approach and the
income capitalization approach values to arrive at a final value conclusion. The
reconciliation of the two approaches involved weighing the valuation techniques
in relation to their substantiation by market and other sources of data, the
relativity and applicability of the approaches to the property type, and the
purpose of the valuation. AAA concluded that the estimated market value under
the sales comparison approach was $25,900,000 and the estimated market value
under the income capitalization approach was $25,900,000. After reconciling the
various factors, AAA determined that the most appropriate technique for
estimating the value of income-producing property was an approach based
primarily on income, and thus arrived at a final "as is" market value for Deer
Creek Apartments of $25,900,000 as of June 3, 2003.
GEORGETOWN
Valuation Under Sales Comparison Approach. AAA compared five apartment
complexes with Georgetown that were sold between January 1998 and January 2003
and located in the property's real estate market area. Based on its qualitative
analysis, AAA rated the locations of two comparable properties as superior and
three comparable properties as comparable to the location of Georgetown. AAA
rated the quality/appeal of all five comparable properties as comparable to the
quality/appeal of Georgetown. AAA rated the amenities of two comparable
properties as comparable and three comparable properties as inferior to the
amenities of Georgetown.
AAA made adjustments to the sales price per unit of each comparable
property to reflect differences from Georgetown in location, number of units,
quality/appeal, age/condition, occupancy at sale, amenities and average unit
size. Based on the available data, AAA concluded a value range of $44,667 to
$50,000 per unit with a mean or
26
average adjusted price of $47,649 per unit and a median adjusted price of
$48,650 per unit. Thus, the estimated value based on a $49,000 sales price per
unit for the 200 units was approximately $9,700,000 after adjustment for present
value of concessions.
As part of the sales comparison approach, AAA also conducted a net
operating income ("NOI") analysis. NOI effectively takes into account the
various physical, location and operating aspects of the sale. AAA compared
Georgetown's NOI to the NOI of the five comparable properties and arrived at a
percentage adjustment. After applying the percentage adjustment to the sales
price per unit of each comparable property, the range of value was between
$41,441 and $55,137 per unit, with an average of $46,511 per unit. The appraiser
concluded a value of $50,000 per unit for the 200 units of the property,
resulting in an estimated "as is" market value of $9,900,000 using the NOI
analysis after adjustment for present value of concessions.
AAA also performed an effective gross income multiplier ("EGIM")
analysis. The EGIM measures the relationship between the sales price of a
property and its effective gross income, which is the total annual income that a
property would produce after an allowance for vacancy and credit loss. AAA
estimated the operating expense ratio ("OER") of Georgetown to be 41.00% before
reserves, with the expense ratios of the five comparable properties ranging from
44.90% to 51.85%, resulting in EGIMs ranging from 4.62 to 6.02. Thus, AAA
concluded an EGIM of 6.0 for Georgetown, and applied the EGIM to the stabilized
effective gross income for the property (see Income Approach section below),
resulting in a value conclusion of approximately $9,700,000 after adjustment for
present value of concessions.
AAA estimated the value using the price per unit analysis at
$9,700,000, the value using the NOI analysis at $9,900,000 and the value using
the EGIM analysis at $9,700,000. Based on these three valuation methods, AAA
concluded that the reconciled value for Georgetown under the sales comparison
approach was $9,800,000. AAA assumed a marketing and exposure period of 6 to 12
months.
Valuation Under Income Capitalization Approach. Under the income
capitalization approach, AAA performed: (1) a direct capitalization analysis and
(2) a discounted cash flow analysis to derive a value for Georgetown.
AAA first utilized a discounted cash flow method to analyze the value
of the property. Under this method, anticipated future cash flow and a
reversionary value are discounted at an appropriate rate of return to arrive at
an estimate of present value. AAA also employed a direct capitalization analysis
on the property by dividing a forecast of net operating income ("NOI") by an
appropriate capitalization rate. AAA performed a market rent analysis for the
property to derive a projected rental income. The analysis included both a
review of the subject's current asking and actual rent rates as well as a
comparison with comparable apartment properties. AAA calculated Georgetown 's
effective gross income ("EGI") by adding apartment rental collections to other
income and then making an adjustment for vacancy and collection loss. Under this
analysis, AAA arrived at an EGI of $1,621,178. Once the EGI was established,
operating expenses were deducted from the EGI in order to arrive at an NOI for
Georgetown of approximately $896,489. AAA performed a pro forma analysis of
revenue and expenses for the property to derive the subject's stabilized NOI.
AAA relied on the subject's historical and budgeted income and expenses for this
estimate. AAA derived appropriate investment criteria, including an overall
capitalization rate, terminal capitalization rate and a discount rate based upon
analysis of comparable sales and a survey of real estate investors.
The assumptions employed by AAA to determine the value of Georgetown
under the income approach included:
(1) stabilized vacancy and collection loss rate of 7%;
(2) replacement reserve of $300 per unit;
(3) overall capitalization rate of 9.00%;
(4) terminal capitalization rate of 9.50%;
(5) discount rate of 11.50%;
27
(6) 2% cost of sale at reversion; and
(7) holding period of 10 years.
No adjustment was made for lease-up costs because the property was near or at a
stabilized condition. An adjustment was made for concessions due to soft market
conditions, and AAA estimated the present value of concessions to be $57,000.
Based on these assumptions, AAA's estimate of cash flows for a 10-year period
resulted in an indicated value of $10,300,000 through the discounted cash flow
method. The reversion value contributed approximately 41% of the value.
Under the direct capitalization method, utilizing a capitalization rate
of 9.0%, the projected NOI resulted in a value (after rounding) of $9,900,000
after adjustments for present value of concessions, if any.
Using the income capitalization approach, AAA determined on an as-is
basis that the direct capitalization method and the discounted cash flow method
indicated the value for Georgetown was $10,100,000.
Reconciliation of Values and Conclusions of Appraisal. The final step
in the appraisal process was to reconcile the sales comparison approach and the
income capitalization approach values to arrive at a final value conclusion. The
reconciliation of the two approaches involved weighing the valuation techniques
in relation to their substantiation by market and other sources of data, the
relativity and applicability of the approaches to the property type, and the
purpose of the valuation. AAA concluded that the estimated market value under
the sales comparison approach was $9,800,000 and the estimated market value
under the income capitalization approach was $10,100,000. After reconciling the
various factors, AAA determined a final "as is" market value for Georgetown of
$10,000,000 as of May 9, 2003.
THE LANDMARK
Valuation Under Sales Comparison Approach. AAA compared five apartment
complexes with The Landmark that were sold between November 2000 and November
2001 and located in the property's real estate market area. Based on its
qualitative analysis, AAA rated the locations of four comparable properties as
superior and one comparable property as comparable to the location of The
Landmark. AAA rated the quality/appeal of four comparable properties as superior
and one comparable properties as comparable to the quality/appeal of The
Landmark. AAA rated the amenities of all five comparable properties as
comparable to the amenities of The Landmark.
AAA made adjustments to the sales price per unit of each comparable
property to reflect differences from The Landmark in location, number of units,
quality/appeal, age/condition, occupancy at sale, amenities and average unit
size. Based on the available data, AAA concluded a value range of $39,796 to
$47,986 per unit with a mean or average adjusted price of $43,178 per unit and a
median adjusted price of $42,424 per unit. Thus, the estimated value based on a
$42,000 sales price per unit for the 292 units was approximately $12,200,000
after adjustment for present value of concessions.
As part of the sales comparison approach, AAA also conducted a net
operating income ("NOI") analysis. NOI effectively takes into account the
various physical, location and operating aspects of the sale. AAA compared The
Landmark 's NOI to the NOI of the five comparable properties and arrived at a
percentage adjustment. After applying the percentage adjustment to the sales
price per unit of each comparable property, the range of value was between
$42,482 and $48,322 per unit, with an average of $45,716 per unit. The appraiser
concluded a value of $42,000 per unit for the 292 units of the property,
resulting in an estimated "as is" market value of $12,200,000 using the NOI
analysis after adjustment for present value of concessions.
AAA also performed an effective gross income multiplier ("EGIM")
analysis. The EGIM measures the relationship between the sales price of a
property and its effective gross income, which is the total annual income that a
property would produce after an allowance for vacancy and credit loss. AAA
estimated the operating expense ratio ("OER") of The Landmark to be 44.87%
before reserves, with the expense ratios of the five comparable
28
properties ranging from 38.00% to 45.00%, resulting in EGIMs ranging from 6.08
to 7.47. Thus, AAA concluded an EGIM of 5.50 for The Landmark, and applied the
EGIM to the stabilized effective gross income for the property (see Income
Approach section below), resulting in a value conclusion of approximately
$12,300,000 after adjustment for and present value of concessions.
AAA estimated the value using the price per unit analysis at
$12,200,000, the value using the NOI analysis at $12,200,000 and the value using
the EGIM analysis at $12,300,000. Based on these three valuation methods, AAA
concluded that the reconciled value for The Landmark under the sales comparison
approach was $12,200,000. AAA assumed a marketing and exposure period of 6 to 12
months.
Valuation Under Income Capitalization Approach. Under the income
capitalization approach, AAA performed: (1) a direct capitalization analysis and
(2) a discounted cash flow analysis to derive a value for The Landmark.
AAA first utilized a discounted cash flow method to analyze the value
of the property. Under this method, anticipated future cash flow and a
reversionary value are discounted at an appropriate rate of return to arrive at
an estimate of present value. AAA also employed a direct capitalization analysis
on the property by dividing a forecast of net operating income ("NOI") by an
appropriate capitalization rate. AAA performed a market rent analysis for the
property to derive a projected rental income. The analysis included both a
review of the subject's current asking and actual rent rates as well as a
comparison with comparable apartment properties. AAA calculated The Landmark's
effective gross income ("EGI") by adding apartment rental collections to other
income and then making an adjustment for vacancy and collection loss. Under this
analysis, AAA arrived at an EGI of $2,255,642. Once the EGI was established,
operating expenses were deducted from the EGI in order to arrive at an NOI for
The Landmark of approximately $1,170,500. AAA performed a pro forma analysis of
revenue and expenses for the property to derive the subject's stabilized NOI.
AAA relied on the subject's historical and budgeted income and expenses for this
estimate. AAA derived appropriate investment criteria, including an overall
capitalization rate, terminal capitalization rate and a discount rate based upon
analysis of comparable sales and a survey of real estate investors.
The assumptions employed by AAA to determine the value of The Landmark
under the income approach included:
(1) stabilized vacancy and collection loss rate of 10%;
(2) replacement reserve of $250 per unit;
(3) overall capitalization rate of 9.5%;
(4) terminal capitalization rate of 10.00%;
(5) discount rate of 11.5%;
(6) 3.00% cost of sale at reversion; and
(7) holding period of 10 years.
No adjustment was made for lease-up costs because the property was near or at a
stabilized condition. An adjustment was made for concessions due to soft market
conditions, and AAA estimated the present value of concessions to be $63,000.
Based on these assumptions, AAA's estimate of cash flows for a 10-year period
resulted in an indicated value of $12,000,000 through the discounted cash flow
method. The reversion value contributed approximately 39% of the value.
Under the direct capitalization method, utilizing a capitalization rate
of 9.5%, the projected NOI resulted in a value (after rounding) of $12,300,000
after adjustments for present value of concessions.
Using the income capitalization approach, AAA determined on an as-is
basis that the direct capitalization method and the discounted cash flow method
indicated the value for The Landmark was $12,000,000.
29
Reconciliation of Values and Conclusions of Appraisal. The final step
in the appraisal process was to reconcile the sales comparison approach and the
income capitalization approach values to arrive at a final value conclusion. The
reconciliation of the two approaches involved weighing the valuation techniques
in relation to their substantiation by market and other sources of data, the
relativity and applicability of the approaches to the property type, and the
purpose of the valuation. AAA concluded that the estimated market value under
the sales comparison approach was $12,200,000 and the estimated market value
under the income capitalization approach was $12,000,000. After reconciling the
various factors, AAA determined a final "as is" market value for The Landmark of
$12,000,000 as of May 13, 2003.
ASSUMPTIONS, LIMITATIONS AND QUALIFICATIONS OF AAA'S VALUATION. In
preparing the appraisal, AAA relied, without independent verification, on the
accuracy and completeness of all information supplied or otherwise made
available to it by or on behalf of the partnership. In arriving at the
appraisal, AAA assumed:
o good and marketable title to the property;
o validity of owner's claim to the property;
o no encumbrances which could not be cleared through normal processes,
unless otherwise stated;
o accuracy of land areas and descriptions obtained from public records;
o no subsurface mineral and use rights or conditions;
o no substances such as asbestos, urea-formaldehyde foam insulation,
other chemicals, toxic wastes, or other potentially hazardous materials
in existence or present on or in the property;
o full compliance with applicable federal, state and local environmental
regulations and laws, unless otherwise stated, defined and considered;
o possession of all required licenses, consents, or other legislative or
administrative authority from any local, state, or national government
or private entity organization and that the renewal of these items is
possible;
o compliance with all applicable zoning and use regulations and
restrictions, unless a nonconformity has been stated, defined, and
considered;
o utilization of the land and improvements within property boundaries and
no encroachment or trespass of the improvements, unless otherwise
stated;
o the structural integrity of the property including its conformity to
specific governmental code requirements, such as fire, building and
safety, earthquake, and occupancy, or any physical defects not readily
apparent during inspection; and
o compliance with the Americans with Disabilities Act of 1992.
COMPENSATION OF APPRAISER. AAA was appointed by the court to perform
all the real estate appraisals in connection with the settlement and this
Litigation Settlement Offer. AAA was paid a fee of $619,100 for the appraisals.
We have agreed to pay 50% of the costs of the appraisals, with the other 50% to
be paid from the settlement fund. AAA has conducted other appraisals of property
in connection with the other offers being made pursuant to the settlement
agreement. Other than the appraisals performed in connection with the settlement
agreement, during the prior two years, no material relationship has existed
between AAA and your partnership or any of its affiliates, including the AIMCO
Entities.
AVAILABILITY OF APPRAISAL REPORTS. You may obtain a full copy of AAA's
appraisals upon request, without charge, by contacting the Information Agent at
one of the addresses or the telephone number on the back cover of this
Litigation Settlement Offer. Copies of the appraisal for the property are also
available for inspection and copying at the principal executive offices of the
partnership during regular business hours by any interested unitholder or his or
her designated representative at his or her cost. In addition, a copy of the
appraisals has been filed with the SEC as an exhibit to the Tender Offer
Statement and Rule 13e-3 Transaction Statement on Schedule TO.
In estimating the net liquidation proceeds that would be payable per
unit based on the total appraised value of your partnership's properties, we
applied the same basic methodology as described under "Valuation of Units",
except that we did not deduct any amounts that were reflected in the total
appraised value nor did we include any payment from the settlement fund. As
indicated below, based on the total appraised value of the partnership
properties, the estimated net liquidation proceeds per unit is $218.68, which is
higher than our offer price of $83.27.
30
<Table>
Appraised value of partnership properties................... $47,900,000
Plus: Cash and cash equivalents (net of tenant security
deposits)................................................. 407,435
Plus: Other partnership assets, including any amounts
payable by the general partner and its affiliates upon
liquidation............................................... 541,035
Less: Mortgage debt, including accrued interest and any
prepayment penalty........................................ (25,400,062)
Less: Other liabilities..................................... (628,395)
-----------
Partnership valuation before taxes and certain costs........ $22,820,012
Less: Estimated closing costs............................... (872,000)
-----------
Estimated net liquidation proceeds of your partnership...... $21,948,012
Percentage of estimated net liquidation proceeds allocable
to holders of units based on the partnership agreement.... 99.00%
Estimated net liquidation proceeds of units................. $21,728,532
Total number of units..................................... 99,804.00
-----------
Estimated net liquidation proceeds per unit................. $ 217.71
===========
</Table>
(5) The second paragraph under "THE LITIGATION SETTLEMENT OFFER -
Section 11. Background and Reasons for the Offer - Alternatives Considered by
Your General Partner -- Liquidation" is amended and restated as follows:
"If your partnership was liquidated, and the properties
sold at prices equal to the values recently determined by the
independent appraiser (see Annex II), we estimate that your net
liquidation proceeds would be $217.71 per unit. See "The Litigation
Settlement Offer -- Section 8. Valuation of Units." However, in the
opinion of your general partner, which is our affiliate, the present
time may not be the most desirable time to sell the real estate
assets of your partnership in a private transaction, and the proceeds
realized from any such sale would be uncertain. Your general partner
believes it currently is in the best interest of your partnership to
continue holding its real estate assets. Although future operating
results and sales prices are uncertain, your general partner believes
that the operating performance of your partnership's property may
improve in the future. This improvement, should it occur, may result
in higher property values. Such values, however, are also a function
of capitalization rates in the market and the interest rate
environment at the time. However, because your general partner and
property manager (which are our affiliates) receive fees for managing
your partnership and its property, a conflict of
31
interest exists between continuing the partnership and receiving such
fees, on the one hand, and the liquidation of the partnership and the
termination of such fees, on the other. See "The Litigation
Settlement Offer -- Section 15. Certain Information Concerning Your
Partnership -- Investment Objectives and Policies; Sale or Financing
of Investments" and "--Section 13. Conflicts of Interest and
Transactions with Affiliates." The term of the partnership will
continue until December 31, 2037, unless the partnership is
terminated sooner under the provisions of the partnership agreement."
(6) The paragraph under "THE LITIGATION SETTLEMENT OFFER - Section
11. Background and Reasons for the Offer - Alternative Transactions Considered
by Us" is amended and restated as follows:
"Alternative Transactions Considered by Us. At the present
time, we have decided to proceed with this offer pursuant to the
court approved settlement. From time to time in the past, we have
considered proposing a number of alternative transactions, including
the purchase of your partnership's property or a merger of your
partnership in which you would receive cash in exchange for your
units. We decided not to pursue these alternative transactions
because, in each case, we determined that a tender offer would be a
less expensive means of acquiring additional interests in your
partnership, and would not require the consent or approval of any
limited partners (other than those who elect to tender their units).
In the future, however, we may consider purchasing your partnership's
property or effecting such a merger. See "The Litigation Settlement
Offer -- Section 14. Future Plans of the Purchaser." We also
considered an offer to exchange units in your partnership for limited
partnership interests in AIMCO Properties, L.P. 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 when we have offered limited
partners an opportunity to receive cash or limited partnership
interests in AIMCO Properties, L.P., the limited partners who tender
usually prefer the cash option."
(7) Section 12 under "THE LITIGATION SETTLEMENT OFFER" is amended and
restated as follows:
"12. 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 Litigation Settlement Offer:
Factors in Favor of Fairness Determination. The general
partner of your partnership believes the offer price and the
structure of the transaction are fair to the unaffiliated limited
partners. In support of such determination, the general partner
considered the factors and information set forth below, but did not
quantify or otherwise attach particular weight to any such factors or
information:
o the Court's approval of the settlement pursuant to which the
offer is being made;
o the fact that the interests of the unaffiliated limited partners
were represented by counsel in the negotiation of the settlement
agreement;
o the method we used to determine our offer price is a method
commonly relied upon by investors to value income producing
property;
o the offer gives limited partners an opportunity to make an
individual decision on whether to tender their units or to
continue to hold them;
32
o there is no established trading market for the limited
partnership units, and the offer would provide immediate
liquidity for tendering limited partners;
o the uncertainty of the resulting proceeds from the possible
alternative transactions, particularly a property sale or a
liquidation of the partnership,
o the fact that no unaffiliated limited partners would be able to
participate in the future performance of the partnership
following such alternative transactions;
o the offer price exceeds the book value per unit of ($175.11) at
September 30, 2003;
o the fact that our offer price does not reflect any discount for
minority interests; and
o the absence of any other firm offers by third parties for all or
substantially all of the partnership's assets, a merger or other
extraordinary transaction during the past two years with which
to compare the Litigation Settlement Offer.
Factors Not in Favor of Fairness Determination. In addition
to the foregoing factors, the general partner considered the
following countervailing factors:
o the recent valuation of your partnership's property by American
Appraisal Associates, Inc., an independent appraiser appointed
by the Court, which results in an estimate of net liquidation
proceeds per unit of $217.71, which is higher than our offer
price of $83.27;
o the fact that offer prices in our prior tender offers were
higher than our current offer price; and
o prices at which the units have recently sold were higher than
our current offer price.
The general partner believes that consideration of the offer was
procedurally fair because, among other things, (1) the Court approved
the settlement agreement pursuant to which the offer is being made,
(2) limited partners are provided the opportunity to retain their
units, (3) the unaffiliated limited partners were represented by
counsel in the negotiation of the settlement agreement, and (4)
limited partners can evaluate our offer price by comparing it to the
net liquidation proceeds per unit derived from the independent
appraiser's property valuation.
While the general partner believes our offer is fair, the general
partner also believes that 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.
Consequently, the general partner makes no recommendation as to
whether or not you should tender or refrain from tendering your units
in this offer. YOU ARE ENCOURAGED TO CAREFULLY REVIEW THIS LITIGATION
SETTLEMENT OFFER, THE EXECUTIVE SUMMARY OF THE INDEPENDENT
APPRAISER'S REPORT (ATTACHED AS ANNEX II) AND ANY OTHER INFORMATION
AVAILABLE TO YOU AND TO SEEK ADVICE FROM YOUR INDEPENDENT LAWYER, TAX
ADVISOR AND/OR FINANCIAL ADVISOR BEFORE DECIDING WHETHER OR NOT TO
ACCEPT THIS LITIGATION SETTLEMENT OFFER.
Neither the general partner of your partnership or its affiliates
have any plans or arrangements to tender any units. Except as
otherwise provided in "The Litigation Settlement Offer -- Section 14.
33
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 Litigation
Settlement Offer -- Section 11. Background and Reasons for the Offer"
and "-- Section 13. Conflicts of Interest and Transactions with
Affiliates." See also "The Litigation Settlement Offer -- Section 8.
Valuation of Units -- Comparison to Alternative Consideration" for
certain information regarding transactions with respect to units of
your partnership.
Your partnership did not receive any report, opinion or appraisal
with respect to the fairness of this Litigation Settlement Offer or
the offer price being offered to limited partners. However, the
partnership did receive the appraisals prepared by AAA, as described
above.
Although the AIMCO Entities have interests that may be in conflict
with those of the partnership's unaffiliated limited partners, each
of the AIMCO Entities believes that the offer price and the structure
of the transaction are fair to the unaffiliated limited partners
based on the information and factors considered by the general
partner of your partnership. Each of AIMCO Entities expressly adopts
the analysis, and the factors underlying such analysis, of the
general partner of your partnership."
(8) The fourth and fifth paragraphs under "THE LITIGATION SETTLEMENT
OFFER - Section 14. Future Plans of the Purchaser" are amended and restated as
follows:
"We have been advised that the general partner does not
currently expect to consider, on behalf of your partnership any of
the following transactions: (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
34
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. As discussed under "The Litigation
Settlement Offer - Section 15. Certain Information Concerning Your
Partnership - Investment Objectives and Policies; Sale or Financing
of Investments," the general partner regularly evaluates the real
estate and capital markets. The general partner may consider
refinancing the partnership's existing indebtedness to the extent
that the general partner is able to obtain a lower interest rate or
if such indebtedness is approaching maturity. Furthermore, in the
event that the general partner receives an attractive offer for any
of your partnership's properties, the general partner would give due
consideration to such an offer.
If any of the transactions referred to above occur, and
financial benefits accrue to the limited partners, we will
participate in those benefits to the extent of our ownership of
units. The agreement of limited partnership prohibits limited
partners from voting on actions taken by the partnership, unless
otherwise specifically permitted therein. Limited partners may vote
on a liquidation, and we 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."
(9) The chart under "THE LITIGATION SETTLEMENT OFFER - Section 15.
Certain Information Concerning Your Partnership - Financial Data" is amended by
adding the following line items:
<Table>
<Caption>
FOR THE NINE MONTHS
ENDED SEPTEMBER 30, FOR THE YEAR ENDED DECEMBER 31,
---------------------------- --------------------------------------
2003 2002 2002 2001 2000
------------- ------------- ------------- ------------- ---------
(DOLLARS IN THOUSANDS, EXCEPT PER UNIT DATA)
Income (loss) per unit from continuing operations $ 0.17 $ (0.94) $ 0.57 $ 3.48 $ 26.59
Ratio of earnings to fixed charges (deficit)....... 101.3% 93.6% 103.0% 120.8% 297.9%
Book value per limited partnership unit............ (175.11) (158.65) (157.14) (152.58) (69.96)
</Table>
(10) The following chart under Annex I is amended and restated as
follows:
<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
Patti K. Fielding.......... Executive Vice President -- Securities and Debt
Patrick J. Foye............ Executive Vice President
Lance J. Graber............ Executive Vice President -- AIMCO Capital
Paul J. McAuliffe.......... Executive Vice President and Chief Financial Officer
Ronald D. Monson........... Executive Vice President and Head of Property
Operations
David Robertson............ Executive Vice President -- President and Chief Executive Officer
of AIMCO Capital
Jim Purvis................. Executive Vice President -- Human Resources
Randall J. Fein............ Executive Vice President -- Student Housing
James N. Bailey............ Director
Richard S. Ellwood......... Director
J. Landis Martin........... Director
Thomas L. Rhodes........... Director
</Table>
35
SIGNATURE
After due inquiry and to the best of its knowledge and belief, the
undersigned hereby certify that the information set forth in this statement is
true, complete and correct.
Date: December 9, 2003
AIMCO PROPERTIES, L.P.
By: AIMCO-GP, INC.
Its General Partner
By: /s/ Patrick J. Foye
-------------------------------
Patrick J. Foye
Executive Vice President
36
SCHEDULE 13E-3
After due inquiry and to the best of its knowledge and belief, the
undersigned hereby certify that the information set forth in this statement is
true, complete and correct.
Date: December 9, 2003
AIMCO-GP, INC.
By: /s/ Patrick J. Foye
-------------------------------
Patrick J. Foye
Executive Vice President
APARTMENT INVESTMENT AND MANAGEMENT
COMPANY
By: /s/ Patrick J. Foye
-------------------------------
Patrick J. Foye
Executive Vice President
ANGELES REALTY CORPORATION II
By: /s/ Patrick J. Foye
-------------------------------
Patrick J. Foye
Executive Vice President
37
EXHIBIT INDEX
<Table>
<Caption>
Exhibit No. Description
- ----------- -----------
(c)(1) Appraisal of Deer Creek
(c)(2) Appraisal of Georgetown
(c)(3) Appraisal of Landmark
</Table>
38