SCHEDULE 14C
(Rule 14c-101)
INFORMATION REQUIRED IN INFORMATION STATEMENT
SCHEDULE 14C INFORMATION
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Exchange Act of 1934
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[ ] Definitive Information Statement
NATIONAL PROPERTY INVESTORS 4
(Name of Registrant as Specified in Its Charter)
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PRELIMINARY COPY
NATIONAL PROPERTY INVESTORS 4
C/O THE ALTMAN GROUP, INC.
1200 WALL STREET, 3RD FLOOR
LYNDHURST, NEW JERSEY 07071
(800) 217-9608
[___________ __], 2005
WE ARE NOT ASKING YOU FOR A PROXY AND
YOU ARE REQUESTED NOT TO SEND US A PROXY
Dear Limited Partner:
The attached Information Statement describes an amendment (the "Amendment")
to the Partnership Agreement (as amended, the "Partnership Agreement") of
National Property Investors 4, a California limited partnership (your
"Partnership"), to extend the term of your Partnership from December 31, 2005 to
December 31, 2022.
On August 31, 2001, your Partnership refinanced its mortgage indebtedness
secured by Village of Pennbrook Apartments, a 722-unit apartment complex located
in Falls Township, Virginia, which your Partnership owns (the "Property"). The
mortgage was refinanced to take advantage of more favorable financing rates and
terms. The financing agreement between the Partnership and the lender requires
the extension of the Partnership's term beyond the maturity date of the mortgage
indebtedness. The Partnership's mortgage indebtedness matures on September 1,
2021. The lender can exercise remedies, which include accelerating the maturity
of the mortgage indebtedness and foreclosing on the Property, if the
Partnership's term is not extended. If the Partnership does not adopt the
Amendment, the Partnership will terminate and dissolve on December 31, 2005, and
the managing general partner of the Partnership will promptly liquidate the
assets of the Partnership. Because the Partnership does not want to sell the
Property at this time and because the financing agreement between the
Partnership and its lender requires that the term of the Partnership extend
beyond the maturity date of the mortgage indebtedness, the Partnership desires
to amend the Partnership Agreement to extend the term until December 31, 2022.
NPI Equity Investments, Inc., the managing general partner of the
Partnership (the "Managing General Partner"), has conflicts of interest with
respect to the Amendment. Continuation of the Partnership beyond 2005 will
result in the Managing General Partner and its affiliates continuing to receive
management fees from the Partnership. These fees would not continue to be
payable beyond 2005 if the Amendment is not adopted.
Pursuant to the Partnership Agreement, the consent of the limited partners
who own more than 50% of all outstanding units of limited partnership interest
in the Partnership ("Units") is required to approve the Amendment. As of
_________, 2005, 60,005 Units were issued and outstanding. As of _________,
2005, AIMCO Properties, L.P. ("AIMCO Properties") and its affiliates owned
47,658, or approximately 79.42%, of the outstanding Units. As more fully
described in the accompanying Information Statement, AIMCO IPLP, L.P. ("AIMCO
IPLP"), an affiliate of AIMCO Properties, must vote 26,466 Units owned by it in
proportion to the votes cast by other unitholders. AIMCO Properties and its
affiliates have indicated that they will vote their other 21,192 Units, or
approximately 35.32%, of the outstanding Units, that are not subject to the
voting restriction in favor of the Amendment. As a result, AIMCO Properties and
its affiliates will vote a total of 37,918.51 Units, or approximately 63.19% of
the outstanding Units in favor of the Amendment. Accordingly, approval of the
Amendment is assured. We are providing the attached Information Statement in
order to notify you of the background and terms of the Amendment.
The Amendment will become effective when the Managing General Partner
executes the Amendment. The Managing General Partner expects that the Amendment
will become effective on or about [______], 2005. There can be no assurance,
however, that the Amendment will not become effective sooner or later than such
date.
Questions may be directed to the Information Agent, The Altman Group, Inc.,
at its address set forth below.
Very truly yours,
NPI EQUITY INVESTMENTS, INC.
THE INFORMATION AGENT IS:
THE ALTMAN GROUP, INC.
By Mail, Overnight Courier or Hand: By Facsimile: For Information please call:
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1200 Wall Street, 3rd Floor (201) 460-0050 TOLL FREE (800) 217-9608
Lyndhurst, New Jersey 07071
PRELIMINARY COPY
NATIONAL PROPERTY INVESTORS 4
C/O THE ALTMAN GROUP, INC.
1200 WALL STREET, 3RD FLOOR
LYNDHURST, NEW JERSEY 07071
(800) 217-9608
INFORMATION STATEMENT
[______], 2005
WE ARE NOT ASKING YOU FOR A PROXY AND
YOU ARE REQUESTED NOT TO SEND US A PROXY
This Information Statement is being furnished to the limited partners (the
"Limited Partners") of record as of the close of business on _________, 2005
(the "Record Date"), of National Property Investors 4, a California limited
partnership (the "Partnership"), in connection with an amendment (the
"Amendment") to the Partnership's Partnership Agreement (the "Partnership
Agreement") to extend the term of the Partnership from December 31, 2005 to
December 31, 2022.
This Information Statement is first being mailed to Limited Partners on or
about [__________________], 2005.
On August 31, 2001, your Partnership refinanced its mortgage indebtedness
secured by Village of Pennbrook Apartments, a 722-unit apartment complex located
in Falls Township, Virginia, which your Partnership owns (the "Property"). The
mortgage was refinanced to take advantage of more favorable financing rates and
terms. The financing agreement between the Partnership and the lender requires
the extension of the Partnership's term beyond the maturity date of the mortgage
indebtedness. The Partnership's mortgage indebtedness matures on September 1,
2021. If the Partnership does not adopt the Amendment, the Partnership will
terminate and dissolve on December 31, 2005 and the managing general partner of
the Partnership will promptly liquidate the assets of the Partnership. In
addition, the lender can exercise remedies, which include accelerating the
maturity of the mortgage indebtedness and foreclosing on the Property, if the
Partnership's term is not extended. Because the Partnership does not want to
sell the Property at this time and because the financing agreement between the
Partnership and its lender requires that the term of the Partnership extend
beyond the maturity date of the mortgage indebtedness, the Partnership desires
to amend the Partnership Agreement to extend the term until December 31, 2022.
NPI Equity Investments, Inc., the managing general partner of the
Partnership (the "Managing General Partner"), has conflicts of interest with
respect to the Amendment. Continuation of the Partnership beyond 2005 will
result in the Managing General Partner and its affiliates continuing to receive
management fees from the Partnership. These fees would not continue to be
payable beyond 2005 if the Amendment is not adopted.
Pursuant to the Partnership Agreement, the consent of the limited partners
who own more than 50% of all outstanding units of limited partnership interest
in the Partnership ("Units") is required to approve the Amendment. As of
_________, 2005, 60,005 Units were issued and outstanding. As of _________,
2005, AIMCO Properties, L.P. ("AIMCO Properties") and its affiliates owned
47,658, or approximately 79.42%, of the outstanding Units. As more fully
described herein, AIMCO IPLP, L.P. ("AIMCO IPLP"), an affiliate of AIMCO
Properties, must vote 26,466 Units owned by it in proportion to the votes cast
by other unitholders. AIMCO Properties and its affiliates have indicated that
they will vote their other 21,192 Units, or approximately 35.32%, of the
outstanding Units, that are not subject to the voting restriction in favor of
the Amendment. As a result, AIMCO Properties and its affiliates will vote a
total of 37,918.51 Units, or approximately 63.19% of the outstanding Units in
favor of the Amendment. Accordingly, approval of the Amendment is assured. We
are providing this Information Statement in order to notify you of the
background and terms of the Amendment.
The Amendment will become effective when the Managing General Partner
executes the Amendment. The Managing General Partner expects that the Amendment
will become effective on or about [______], 2005. There can be no assurance,
however, that the Amendment will not become effective sooner or later than such
date.
Questions may be directed to the Information Agent, The Altman Group, Inc.,
at 1200 Wall Street, 3rd Floor, Lyndhurst, New Jersey 07071, telephone (800)
217-9608.
RISK FACTORS
There are risks associated with the Amendment. In addition, the Managing
General Partner is an affiliate of Apartment Investment and Management Company,
a publicly traded real estate investment trust ("AIMCO"), which, together with
its other affiliates, may have interests that conflict with the interests of the
Limited Partners. You should consider the following risks carefully:
RISKS OF THE AMENDMENT
CONTINUATION OF THE PARTNERSHIP; NO DEFINITE TIME FRAME REGARDING SALE OF
PROPERTY. The Managing General Partner is proposing to continue to operate the
Partnership until December 31, 2022 and not to attempt to liquidate it at the
present time. If the Partnership's term is not extended and the Property is sold
in the near future in connection with the Partnership's liquidation, it is
possible that the sale price received for the Property could be higher than the
sale price received at some future time. The Partnership's prospectus, dated
January 5, 1981, pursuant to which the Units in your Partnership were sold,
indicates that the Partnership was intended to be self-liquidating and that it
was anticipated that the Partnership's property would be sold within five to ten
years of acquisition, subject to market conditions. The prospectus also
indicated that there could be no assurance that the Partnership would be able to
so liquidate and that, unless sooner terminated as provided in the Partnership
Agreement, the existence of the Partnership would continue until the year 2005.
We do not know when the property owned by your Partnership may be sold. The
market for Units is illiquid, and it may be difficult or impossible to sell your
investment in the Partnership in the future. The Managing General Partner
continually considers whether a property should be sold or otherwise disposed of
after consideration of relevant factors, including prevailing economic
conditions, availability of favorable financing and tax considerations, with a
view to achieving maximum capital appreciation for the Partnership. In
particular, the Managing General Partner considers changes in the local rental
market, the potential for appreciation in the value of a property and the tax
consequences to you on a sale of property. The Managing General Partner does not
know when any sale or other disposition of your partnership's property will
occur.
If the Amendment is approved, you may not be able to exit from the
Partnership until a termination of the Partnership in December 31, 2022, or if
the termination date is further extended, until that extended date.
AIMCO PROPERTIES AND ITS AFFILIATES CONTROL YOUR PARTNERSHIP AND THEIR
CONTROL MAY INCREASE. Decisions with respect to the day-to-day management of
your Partnership, including a refinancing of the Partnership's mortgage
indebtedness, are the responsibility of the Managing General Partner. The
Managing General Partner is controlled by AIMCO. In addition, affiliates of the
Managing General Partner hold 47,658, or approximately 79.42%, of the
outstanding Units. Pursuant to the Partnership Agreement, Limited Partners
holding a majority of the outstanding Units must approve certain transactions,
including certain amendments to the Partnership Agreement and certain sales of
all or substantially all of the Partnership's assets. The Managing General
Partner and its affiliates can significantly influence, and may have the ability
to control under certain circumstances, many voting decisions with respect to
the Partnership.
A number of the Units held by affiliates of the Managing General Partner
were acquired pursuant to tender offers made by AIMCO or its affiliates. It is
possible that AIMCO or its affiliates will acquire additional units of limited
partnership interest in the Partnership in exchange for cash or a combination of
cash and units in AIMCO Properties, L.P., the operating partnership of AIMCO,
either through private purchases or tender offers. The Amendment provides
additional time to AIMCO Properties and its affiliates to purchase additional
Units in the future, thereby increasing the influence AIMCO Properties and its
affiliates have over the voting decisions of the Partnership. Accordingly, the
Amendment may result in increased control of the Partnership by AIMCO Properties
and its affiliates.
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AFFILIATES OF THE MANAGING GENERAL PARTNER WILL CONTINUE TO RECEIVE FEES.
Affiliates of the Managing General Partner are entitled to receive 5% of gross
receipts from the Partnership's property as compensation for providing property
management services. The Partnership paid approximately $191,000 for the six
months ended June 30, 2005 and $390,000 and $370,000 for the years ended
December 31, 2004 and 2003, respectively, to affiliates of the Managing General
Partner.
Affiliates of the Managing General Partner received reimbursement of
accountable administrative expenses of approximately $78,000 for the six months
ended June 30, 2005 and $162,000 and $180,000 for the years ended December 31,
2004 and 2003, respectively. The amounts include approximately $10,000, $26,000,
and $20,000 of fees related to construction management services provided by an
affiliate of the Managing General Partner for the six months ended June 30, 2005
and the years ended December 31, 2004 and 2003, respectively. The fees were
calculated based upon a percentage of current year additions to investment
property. At June 30, 2005, approximately $81,000 was owed to an affiliate of
the Managing General Partner for unpaid reimbursements.
For services relating to the administration of the Partnership and
operation of the Partnership's property, the Managing General Partner is
entitled to receive payment for non-accountable expenses up to a maximum of
$100,000 per year based on the number of Partnership units sold, subject to
certain limitations. There were no such fees paid for the six months ended June
30, 2005. The Managing General Partner received approximately $78,000 and
$34,000 for the years ended December 31, 2004 and 2003, respectively.
In addition, the Managing General Partner, as compensation for services
rendered in managing the Partnership, is entitled to receive a Partnership
management fee in conjunction with distributions of cash from operations,
subject to certain limitations. There were no such fees for the six months ended
June 30, 2005. During the years ended December 31, 2004 and 2003, approximately
$25,000 and $11,000, respectively, was paid in conjunction with the operating
distributions.
An affiliate of the General Partner made a credit line of up to $300,000
available to the Partnership. During the six months ended June 30, 2005 and the
year ended December 31, 2004, the Partnership borrowed approximately $355,000
and $320,000. Interest expense during each of the six months ended June 30, 2005
and year ended December 31, 2004 amounted to approximately $15,000 and $3,000
respectively. These advances bear interest at the prime rate plus 2% (8.25% at
June 30, 2005). At June 30, 2005, the total outstanding loans and accrued
interest due to an affiliate of the General Partner was approximately $693,000.
During the year ended December 31, 2003, the Partnership did not have any
borrowings or amounts outstanding. Subsequent to June 30, 2005, the Partnership
borrowed approximately $1,144,000. All amounts borrowed thus far relate to
redevelopment work at the property.
The Partnership insures its property up to certain limits through coverage
provided by AIMCO which is generally self-insured for a portion of losses and
liabilities related to workers compensation, property casualty and vehicle
liability. The Partnership insures its property above the AIMCO limits through
insurance policies obtained by AIMCO from insurers unaffiliated with the
Managing General Partner. During the six months ended June 30, 2005, the
Partnership was charged by AIMCO and its affiliates approximately $81,000 for
insurance coverage and fees associated with policy claims administration. During
both of the years ended December 31, 2004 and 2003, the Partnership was charged
by AIMCO and its affiliates approximately $78,000 for insurance coverage and
fees associated with policy claims administration.
The adoption of the Amendment and extension of the Partnership's term will
result in similar fees continuing to be paid for a longer period than would be
the case if the term of the Partnership expired in 2005. Therefore, the
interests of the Managing General Partner and its affiliates in continuing the
Partnership may be different than those of any Limited Partners who desire to
have the Partnership earlier dissolved and liquidated. See "Security Ownership
of Certain Beneficial Owners and Management."
THERE IS NO ACTIVE TRADING MARKET FOR YOUR UNITS. Although the Units are
registered with the Securities and Exchange Commission (the "SEC"), there is no
active trading market for the Units. There may be a limited number of
prospective buyers for your Units in the future, and you may find it difficult
or impossible to liquidate your investment at a price that exceeds the amounts
you might receive on the liquidation and dissolution of the
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Partnership. The Managing General Partner cannot predict when any sale or other
disposition of the Partnership's property will occur. If the Amendment is not
approved, your Partnership will terminate on December 31, 2005; if the Amendment
is approved, you may not be able to exit from the Partnership until December 31,
2022, or if this termination date is further extended, until such extended date.
YOU MAY BE REQUIRED TO HOLD YOUR UNITS INDEFINITELY. The Managing General
Partner is proposing to continue to operate the Partnership until December 31,
2022 and not to attempt to liquidate it at the present time. The Managing
General Partner does not know when your Partnership's property will be sold or
otherwise disposed of. Therefore, there may not be any way to liquidate your
investment in the Partnership until the property is sold and your Partnership is
liquidated.
THE VALUE OF THE PROPERTY MAY DECLINE, AND YOUR INVESTMENT WILL CONTINUE TO
BE AT RISK. Until its property is sold, the Partnership will continue to bear
the investment risk associated with the continued ownership of the property. The
Partnership's future success will depend upon many factors beyond the Managing
General Partner's control, including competitive activity, the need for capital
expenditures, prevailing economic and market conditions and financial, business
and other factors. These factors, and others, may cause the value of the
property and the Partnership to decline.
YOUR CUMULATIVE RETURNS ACCRUE AT A SIMPLE INTEREST RATE. Pursuant to the
Partnership Agreement, each Limited Partner is entitled to certain cumulative
returns with respect to distributions resulting from sales, refinancings, and
other dispositions of property and working capital reserves to the extent cash
is available for this purpose. Those cumulative returns are not compounded and
are computed on a simple interest basis. After the Limited Partners receive
their cumulative returns, the Managing General Partner is entitled to special
distributions if available. If the Partnership does not adopt the Amendment and
liquidates in 2005, Limited Partners may be able to invest the liquidating
distributions, if any, in other investments that provide a compounded return on
their investment as opposed to the simple interest returns to which they are
entitled pursuant to the Partnership Agreement. Although your Managing General
Partner regularly evaluates whether your Partnership's property should be sold,
if the term of the Partnership is extended, the Managing General Partner may not
be required to sell the property until the end of the extended term, depending
on, among other things, the Partnership's financial condition, prevailing
conditions in the real estate and capital markets, availability of favorable
financing, and tax considerations.
RISKS IF THE AMENDMENT IS NOT ADOPTED
THE LENDER MAY BE ABLE TO EXERCISE REMEDIES AGAINST THE PARTNERSHIP IF THE
AMENDMENT IS NOT ADOPTED. The financing agreement between the Partnership and
the lender requires the extension of the Partnership's term beyond the maturity
date of the mortgage indebtedness. The Partnership's mortgage indebtedness
matures on September 1, 2021. The lender can exercise remedies, which include
accelerating the maturity of the mortgage indebtedness and foreclosing on
Partnership property, if the Partnership's term is not extended.
THE PARTNERSHIP MAY BE REQUIRED TO WIND UP. If the Amendment is not
adopted, the Partnership's term will expire on December 31, 2005. If the
Partnership's term expires on December 31, 2005, the Partnership generally will
be required to wind up and to dispose of its property. The Managing General
Partner is of the opinion that the Partnership's negotiating leverage will be
enhanced, and the net proceeds to the Partnership and the Limited Partners from
the sale of the property could be increased, if the Partnership has greater
flexibility with respect to the timing of the sale of the property. There can be
no assurance, however, that the Partnership's negotiating leverage will in fact
be enhanced, or that the net sales proceeds from the sale of the property will
be increased, by an extension of the Partnership's term.
YOU ARE LIKELY TO RECOGNIZE GAIN ON A DISPOSITION OF THE PROPERTY,
INCLUDING BY FORECLOSURE. Any sale, exchange or other disposition of any
property by the Partnership, including by foreclosure, would likely result in
the recognition of gain or loss by the Partnership equal to the difference
between (i) the amount realized for the property and (ii) the Partnership's tax
basis (which has been reduced because of prior years' depreciation deductions)
in the property. The amount realized for each property would be the selling
price for that property, less any expenses of sale, plus any liabilities assumed
by the purchaser of the property or liabilities that the purchaser takes the
property
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subject to. Any taxable gain or loss will pass through to the partners of the
Partnership. A partner also will recognize gain or loss on the liquidation of
its interest in the Partnership to the extent of the difference between: (i) the
sum of the amount of cash (including a deemed distribution of cash equal to the
partner's share, under applicable tax principles, of the liabilities of the
Partnership) and other property distributed to the partner by the Partnership;
and (ii) the partner's adjusted basis in his or her Partnership interest after
adjustment for such partner's share of any gain or loss from the Partnership.
See "Material U.S. Federal Income Tax Consequences" below. Even if the Amendment
is adopted, the tax consequences described in this paragraph would likely result
on a disposition of any property, including by foreclosure. However, if the
Amendment is adopted, the disposition of property, and therefore the taxable
events, may take place in a later taxable year than if the Amendment is not
adopted. However, there is no guarantee that the tax consequences will be
deferred if the Amendment is adopted.
DISTRIBUTIONS FROM YOUR PARTNERSHIP MAY NOT BE SUFFICIENT TO COVER CURRENT
TAX LIABILITIES OF THE PARTNERS. As noted above, if a property is sold or lost
through the exercise of remedies by the lender, the Partnership will recognize
taxable income from the disposition of the property equal to the difference
between the proceeds, if any, and the Partnership's basis in the property.
Depending on the purchase price and related sales costs, a partner's tax
liability could be greater than the funds, if any, it receives from the
Partnership. Because the amount realized includes liabilities assumed by the
purchaser of the property, or liabilities that the purchaser takes the property
subject to, there may be a significant tax liability in excess of the funds
available on a sale. Similarly, on a foreclosure, the amount realized would
generally include the full amount of the debt. In addition, the Partnership may
also recognize taxable income due to cancellation of indebtedness, which also
may create a significant risk of a tax liability in excess of the funds
available. Any taxable income would be allocated to partners. A partner also
will recognize gain or loss on the liquidation of its interest in the
Partnership to the extent of the difference between: (i) the sum of the amount
of cash (including a deemed distribution of cash equal to the partner's share,
under applicable tax principles, of the liabilities of the Partnership) and
other property distributed to the partner by the Partnership; and (ii) the
partner's adjusted basis in his or her Partnership interest after adjustment for
such partner's share of any gain or loss from the Partnership. As noted above,
the tax consequences of disposing of property would likely result at some time
regardless of whether the Amendment is adopted, but may result earlier if the
Amendment is not adopted.
THE AMENDMENT
The Amendment amends and restates Section 4.1 of the Partnership Agreement in
its entirety as follows:
"The Partnership will have a term commencing on July 1, 1980, and
continuing until December 31, 2022, unless previously terminated in
accordance with the provisions of the Partnership Agreement."
EFFECTIVENESS
The Amendment will become effective when the Managing General Partner
executes the Amendment. The Managing General Partner expects that the Amendment
will become effective on or about [_______], 2005. There can be no assurance,
however, that the Amendment will not become effective sooner or later than such
date.
REASONS FOR THE AMENDMENT
On August 31, 2001, your Partnership refinanced its mortgage indebtedness
secured by the Property. The mortgage was refinanced to take advantage of more
favorable financing rates and terms. The financing agreement between the
Partnership and the lender requires the extension of the Partnership's term
beyond the maturity date of the mortgage indebtedness. The Partnership's
mortgage indebtedness matures on September 1, 2021. If the Partnership does not
adopt the Amendment, the Partnership will terminate and dissolve on December 31,
2005 and the Managing General Partner of the Partnership will promptly liquidate
the assets of the Partnership. In addition, the lender can exercise remedies,
which include accelerating the maturity of the mortgage indebtedness and
foreclosing on the Property, if the Partnership's term is not extended. Because
the Partnership does not want to sell the Property at this time and because the
financing agreement between the Partnership and its lender requires that the
term of the Partnership extend beyond the maturity date of the mortgage
indebtedness, the Partnership desires to amend the Partnership Agreement to
extend the term until December 31, 2022.
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ALTERNATIVES TO THE AMENDMENT
At the current time, an alternative to extending the Partnership's term as
required by the financing agreement is to allow the Partnership to default on
the existing mortgage and to allow the holder of such debt to foreclose on the
Property. However, such a disposition of the Property by the Partnership would
likely result in 1) lesser net proceeds than might be received following an
orderly sale of the Property in a more advantageous climate for the disposition
of real estate such as the Property and 2) the recognition of gain or loss by
the Partnership equal to the difference between (i) the amount realized for the
Property and (ii) the Partnership's tax basis (which has been reduced because of
prior years' depreciation deductions) in the Property. The amount realized for
the Property would be the amount of the outstanding indebtedness secured by the
Property, less any expenses of sale, plus any liabilities assumed by the
purchaser of the Property or liabilities that the purchaser takes the Property
subject to. Any taxable gain or loss would pass through to the partners of the
Partnership.
ALTERNATIVES TO THE REFINANCING
At the time of the refinancing of the Property in 2001, the Partnership's
then-existing mortgage indebtedness was scheduled to mature in 2003. At the time
the refinancing was considered, the Partnership's then-existing mortgage
indebtedness could be refinanced at a lower rate than such existing
indebtedness, but only on terms and conditions that included extending the
Partnership's term beyond the maturity date of the new mortgage indebtedness.
The mortgage was refinanced to take advantage of more favorable financing rates
and terms. At that time, the Managing General Partner discussed with the lender
the terms of the financing agreement, including the requirement to extend the
Partnership's term. Alternatively, the Managing General Partner could have
negotiated a shorter loan term such that the maturity of the mortgage
indebtedness would occur prior to the expiration of the Partnership's term. The
Managing General Partner was of the opinion that refinancing with such a loan
term could have resulted in more frequent refinancings, resulting in repeated
unnecessary refinancing costs and potentially higher interest costs to the
Partnership.
CONFLICTS OF INTEREST
The Managing General Partner is an affiliate of AIMCO. AIMCO and its
affiliates, including the Managing General Partner, may have interests that
conflict with the interests of the Limited Partners.
Affiliates of the Managing General Partner Will Continue to Receive Fees.
Affiliates of the Managing General Partner are entitled to receive 5% of gross
receipts from the Partnership's property as compensation for providing property
management services. The Partnership paid approximately $191,000 for the six
months ended June 30, 2005 and $390,000 and $370,000 for the years ended
December 31, 2004 and 2003, respectively, to affiliates of the Managing General
Partner.
Affiliates of the Managing General Partner received reimbursement of
accountable administrative expenses of approximately $78,000 for the six months
ended June 30, 2005 and $162,000 and $180,000 for the years ended December 31,
2004 and 2003, respectively. The amounts include approximately $10,000, $26,000,
and $20,000 of fees related to construction management services provided by an
affiliate of the Managing General Partner for the six months ended June 30, 2005
and the years ended December 31, 2004 and 2003, respectively. The fees were
calculated based upon a percentage of current year additions to investment
property. At June 30, 2005, approximately $81,000 was owed to an affiliate of
the Managing General Partner for unpaid reimbursements.
For services relating to the administration of the Partnership and
operation of the Partnership's property, the Managing General Partner is
entitled to receive payment for non-accountable expenses up to a maximum of
$100,000 per year based on the number of Partnership units sold, subject to
certain limitations. There were no such fees paid for the six months ended June
30, 2005. The Managing General Partner received approximately $78,000 and
$34,000 for the years ended December 31, 2004 and 2003, respectively.
In addition, the Managing General Partner, as compensation for services
rendered in managing the Partnership, is entitled to receive a Partnership
management fee in conjunction with distributions of cash from
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operations, subject to certain limitations. There were no such fees for the six
months ended June 30, 2005. During the years ended December 31, 2004 and 2003,
approximately $25,000 and $11,000, respectively, was paid in conjunction with
the operating distributions.
An affiliate of the General Partner made a credit line of up to $300,000
available to the Partnership. During the six months ended June 30, 2005 and the
year ended December 31, 2004, the Partnership borrowed approximately $355,000
and $320,000. Interest expense during each of the six months ended June 30, 2005
and year ended December 31, 2004 amounted to approximately $15,000 and $3,000
respectively. These advances bear interest at the prime rate plus 2% (8.25% at
June 30, 2005). At June 30, 2005, the total outstanding loans and accrued
interest due to an affiliate of the General Partner was approximately $693,000.
During the year ended December 31, 2003, the Partnership did not have any
borrowings or amounts outstanding. Subsequent to June 30, 2005, the Partnership
borrowed approximately $1,144,000. All amounts borrowed thus far relate to
redevelopment work at the property.
The Partnership insures its property up to certain limits through coverage
provided by AIMCO which is generally self-insured for a portion of losses and
liabilities related to workers compensation, property casualty and vehicle
liability. The Partnership insures its property above the AIMCO limits through
insurance policies obtained by AIMCO from insurers unaffiliated with the
Managing General Partner. During the six months ended June 30, 2005, the
Partnership was charged by AIMCO and its affiliates approximately $81,000 for
insurance coverage and fees associated with policy claims administration. During
both of the years ended December 31, 2004 and 2003, the Partnership was charged
by AIMCO and its affiliates approximately $78,000 for insurance coverage and
fees associated with policy claims administration.
The adoption of the Amendment and extension of the Partnership's term will
result in similar fees continuing to be paid for a longer period than would be
the case if the term of the Partnership expired in 2005. Therefore, the
interests of the Managing General Partner and its affiliates in continuing the
Partnership may be different than those of any Limited Partners who desire to
have the Partnership earlier dissolved and liquidated. See "Security Ownership
of Certain Beneficial Owners and Management."
AIMCO Properties May Buy Units in Future Tender Offers. AIMCO Properties
and its affiliates hold 47,658, or approximately 79.42%, of the outstanding
Units. A number of these Units were acquired pursuant to tender offers made by
AIMCO or its affiliates. The Amendment provides additional time to AIMCO
Properties and its affiliates to purchase additional Units in the future,
thereby increasing the influence AIMCO Properties and its affiliates have over
the voting decisions of the Partnership. Accordingly, the Amendment may result
in increased control of the Partnership by AIMCO Properties and its affiliates.
NO APPRAISAL RIGHTS
Limited Partners are not entitled to dissenters' appraisal rights under
California law or the Partnership Agreement in connection with the Amendment.
INFORMATION ABOUT YOUR PARTNERSHIP
GENERAL. Your Partnership was organized under the laws of the State of
California on July 1, 1980 for the purpose of acquiring, managing, and
ultimately selling income-producing real property. The managing general partner
of your Partnership is NPI Equity Investments, Inc., a Florida corporation and a
wholly owned subsidiary of AIMCO, a publicly traded real estate investment
trust. The Partnership's principal executive offices are located at 55 Beattie
Place, P.O. Box 1089, Greenville, South Carolina 29602, and its telephone number
is (864) 239-1000.
The Partnership does not have any employees and depends on the Managing
General Partner and its affiliates for the management and administration of all
Partnership activities.
APPRAISAL. As part of the settlement of a class and derivative litigation
entitled Nuanes et al. v. Insignia Financial Group, Inc. et al. and Heller v.
Insignia Financial Group, Inc., et al. filed by limited partners in your
partnership and others, the Partnership's property was appraised in 2003 by
American Appraisal Associates, Inc. ("AAA"), an independent appraiser appointed
by the court. AAA has represented that its report was prepared in
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conformity with the Uniform Standards of Professional Appraisal Practice and the
Code of Professional Ethics and Standards of Professional Practice of the
Appraisal Institute. AAA was furnished with all of the necessary information
requested by AAA in connection with the appraisal.
According to the appraiser's report, the scope of the appraisal included an
inspection of the property and an analysis of the surrounding market. In
addition, the appraiser reviewed the historical operating statements for the
Property and the operating budget for 2003, as prepared by the Partnership. 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 the Partnership's Property.
Based on the values determined under the valuation approaches described
below, the appraiser determined the estimated market value of the fee simple
estate for the Property. The appraiser concluded that the appraised value of the
Property is $54,000,000.
Under the sales comparison approach, the appraiser utilized the following
methods to derive a value for your partnership's property: (1) price per unit
analysis; (2) net operating income analysis; and (3) effective gross income
analysis. Based on these valuation methods under the sales comparison approach,
the appraiser estimated the value of the Property at $52,500,000.
Under the income capitalization approach, the appraiser performed a direct
capitalization analysis and a discounted cash flow analysis to derive a value
for the Property. 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 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. Based on these analyses
under the income capitalization approach, the appraiser estimated the value of
the Property at $54,500,000.
ADDITIONAL INFORMATION. Your Partnership, AIMCO and AIMCO Properties are
subject to the information and reporting requirements of the Securities Exchange
Act of 1934, as amended, and, in accordance therewith, file reports and other
information with the SEC relating to the business, financial condition and other
matters of each of the foregoing entities. Such reports and other information
may be inspected at the public reference facility maintained by the SEC at
Judiciary Plaza, 450 Fifth Street, N.W., Room 1200, 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.
MATERIAL U.S. FEDERAL INCOME TAX CONSEQUENCES
The following summary of the material U.S. Federal income tax consequences
is based upon current U.S. Federal tax law which is subject to change, possibly
with retroactive effect. This summary is for general information only and does
not address all aspects of U.S. Federal income taxation that may be relevant in
the particular circumstances of each Limited Partner or to Limited Partners
subject to special treatment under the Internal Revenue Code (the "Code"). In
addition, this summary does not address any state, local or foreign tax
consequences.
There will be no Federal or state income tax consequences resulting solely
from the approval of the Amendment. If the Partnership is required to sell the
Property, or the lender forecloses on the Property, the Partnership likely would
recognize gain or loss, which would pass through to the partners of the
Partnership.
TAX CONSEQUENCES OF SALE OF PARTNERSHIP PROPERTY OR FORECLOSURE. The
description set forth below is a general description of the tax consequences
that a partner of the Partnership may incur as a result of a sale of any of the
property or a foreclosure by the lender in the future, assuming that the
applicable tax rates and tax laws remain unchanged from those in existence for
the 2005 tax year. Each partner should consult with his or her own tax advisor
to determine his or her particular tax consequences.
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A sale, exchange or other disposition of any property by the Partnership
would likely result in the recognition of gain or loss by the Partnership equal
to the difference between (i) the amount realized for the property and (ii) the
Partnership's tax basis (which has been reduced because of prior years'
depreciation deductions) in the property. The amount realized for the property
would be the selling price for the property, less any expenses of sale, plus any
liabilities assumed by the purchaser of the property or liabilities that the
purchaser takes the property subject to. In addition, the Partnership may
recognize cancellation of indebtedness income to the extent it is unable to
satisfy other Partnership indebtedness that is not assumed by the purchaser of
the property. Any taxable gain or loss and cancellation of indebtedness income
will pass through to the partners of the Partnership.
Any gain or loss recognized as a result of the transfer of any property may
be characterized for taxation purposes as ordinary or capital, or a combination
of both. To the extent that any part of a property being sold consists of
depreciable personal property under Code Section 1245 or depreciable real
property under Code Section 1250, some or all gain on a transfer of such
property may be treated as ordinary income. Some portion of any capital gain
recognized on the property may be considered "unrecaptured section 1250 gain"
that is taxable at a maximum Federal individual rate of 25%. Generally, the
unrecaptured section 1250 gain tax rate applies only to individuals and certain
other noncorporate taxpayers. Gain in excess of Code Section 1245 and Code
Section 1250 gain and unrecaptured section 1250 gain generally will be taxed as
Code Section 1231 gain, which may be taxed at capital gain rates (currently, the
maximum capital gains tax rate applicable to individuals and certain other
noncorporate taxpayers is 15%) depending upon your individual tax circumstances.
Any loss from a disposition of the property may be characterized as ordinary
loss, subject to certain rules that may require a partner to re-characterize the
loss as capital loss. Any cancellation of indebtedness income would be taxable
as ordinary income at a maximum Federal individual rate of 35.0%. The rates set
forth above are the Federal tax rates that currently are in effect for 2005.
The proceeds available for distribution to the partners of the Partnership
in the event of a sale of the property or a foreclosure by the lender may be
less than any tax liabilities resulting from such sale or foreclosure. Any
taxable income would be allocated to partners. Accordingly, a Limited Partner
may need to use funds from other sources to satisfy any such tax liabilities.
Because the amount realized on a sale includes liabilities assumed by the
purchaser of the Property, or liabilities that the purchaser takes the Property
subject to, there may be a significant tax liability in excess of the funds
available. Similarly, on a foreclosure the amount realized would generally
include the full amount of the debt. In addition, the Partnership may also
recognize taxable income due to cancellation of indebtedness, which also may
create a significant risk of a tax liability in excess of the funds available.
Any taxable income would be allocated to partners. As noted above, the tax
consequences of disposing of property would likely result at some time
regardless of whether the Amendment is adopted, but may result earlier if the
Amendment is not adopted.
A partner also will recognize gain or loss on the liquidation of its
interest in the Partnership to the extent of the difference between: (i) the sum
of the amount of cash (including a deemed distribution of cash equal to the
partner's share, under applicable tax principles, of the liabilities of the
Partnership) and other property distributed to the partner by the Partnership;
and (ii) the partner's adjusted basis in his or her Partnership interest after
adjustment for such partner's share of any gain or loss from the Partnership.
If a partner possesses suspended tax losses, tax credits, or other items of
tax benefit, a partner may be able to use such items to reduce any tax liability
that arises with respect to the sale of the property or a foreclosure by the
lenders, and the liquidation of the partner's interest in the Partnership.
THE TAX CONSEQUENCES TO A PARTICULAR PARTNER ARE DEPENDENT IN PART ON FACTS THAT
ARE UNIQUE TO EACH PARTNER, EACH PARTNER IS URGED TO CONSULT HIS OR HER TAX
ADVISORS AS TO THE EXACT CONSEQUENCES TO HIM OR HER OF SUCH ACTIONS, INCLUDING
THE APPLICATION OF FEDERAL, STATE, LOCAL, FOREIGN AND OTHER TAX LAWS.
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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Except as noted below, no person or entity was known by the Managing
General Partner to be the beneficial owner of more than 5% of the Units of the
Partnership as of _________, 2005.
ENTITY NUMBER OF UNITS PERCENT OF CLASS
- ------ --------------- ----------------
AIMCO IPLP, L.P. (formerly known as Insignia 32,525 54.20%
Properties, L.P.)
IPLP Acquisition I, LLC 4,452 7.42%
AIMCO Properties, L.P. 10,681 17.80%
AIMCO IPLP, L.P. and IPLP Acquisition I, LLC are indirectly owned by AIMCO.
Their business address is 55 Beattie Place, Greenville, South Carolina 29602.
AIMCO Properties, L.P. is controlled by AIMCO through AIMCO's direct
subsidiaries. Its principal executive offices are located at 4582 South Ulster
Street Parkway, Suite 1100, Denver, Colorado 80237, and its telephone number is
(303) 757-8101.
NO CONSENTS REQUIRED
The Partnership has fixed _________, 2005 as the Record Date for
determining Limited Partners entitled to notice of the Amendment.
Pursuant to the Partnership Agreement, approval of the Amendment requires
the consent of Limited Partners who own more than 50% of the Partnership's
outstanding Units. As of the Record Date, 60,005 Units were issued and
outstanding. As of _________, 2005, AIMCO Properties and its affiliates own
47,658, or approximately 79.42%, of the outstanding Units. With respect to
26,466 Units, or approximately 44.11%, of the outstanding Units, AIMCO IPLP,
L.P. must vote such Units (i) against any increase in compensation payable to
the Managing General Partner and any of its affiliates and (ii) with respect to
any proposal made by the Managing General Partner or any of its affiliates, in
proportion to votes cast by other unitholders, and such affiliate will vote
those Units accordingly. AIMCO Properties and its affiliates have indicated that
they will vote their other 21,192 Units, or approximately 35.32%, of the
outstanding Units, that are not subject to the voting restriction in favor of
the Amendment. As a result, AIMCO Properties and its affiliates will vote a
total of 37,918.51 Units, or approximately 63.19% of the outstanding Units in
favor of the Amendment. Accordingly, approval of the Amendment is assured. We
are providing this Information Statement in order to notify you of the
background and terms of the Amendment.
The date on which such votes will be counted will be [________], 2005.
EXPENSES
The cost of preparing, assembling, printing and mailing this Information
Statement will be borne by the Partnership. The fees and expenses of the
Information Agent are expected to be $5,000 and will be borne by the
Partnership.
NATIONAL PROPERTY INVESTORS 4
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THE INFORMATION AGENT IS:
THE ALTMAN GROUP, INC.
By Mail, Overnight Courier or Hand: By Facsimile: For Information please call:
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1200 Wall Street, 3rd Floor (201) 460-0050 TOLL FREE (800) 217-9608
Lyndhurst, New Jersey 07071
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