SCHEDULE 14C
(Rule 14c-101)
INFORMATION REQUIRED IN INFORMATION STATEMENT
SCHEDULE 14C INFORMATION
Information Statement Pursuant to Section 14(c) of the Securities
Exchange Act of 1934
Check the appropriate box:
[X] Preliminary Information Statement [ ] Confidential, for Use of the
Commission Only (as permitted by
Rule 14c-5(d)(2))
[ ] Definitive Information Statement
NATIONAL PROPERTY INVESTORS III
(Name of Registrant as Specified in Its Charter)
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(3) Per unit price or other underlying value of transaction computed pursuant
to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is
calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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previously. Identify the previous filing by registration statement number,
or the form or schedule and the date of its filing.
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PRELIMINARY COPY
NATIONAL PROPERTY INVESTORS III
C/O THE ALTMAN GROUP, INC.
1200 WALL STREET
3RD FLOOR
LYNDHURST, NJ 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 Amended and Restated Limited Partnership Agreement (as amended, the
"Partnership Agreement") of National Property Investors III, a California
limited partnership (your "Partnership"), to extend the term of your Partnership
from December 31, 2005 to December 31, 2022.
On December 14, 2001, your Partnership refinanced its mortgage indebtedness
secured by Lakeside Apartments, a 568-unit apartment complex located in Lisle,
Illinois 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 January 1,
2022. 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. Although the general partner of the Partnership is
not currently attempting to have the Partnership sell Lakeside Apartments, the
Partnership has a contract for the sale of one of its properties, Pinetree
Apartments. Because the Partnership does not want to sell Lakeside Apartments 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 "General Partner"), has conflicts of interest with respect to
the Amendment. Continuation of the Partnership beyond 2005 will result in the
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, 48,049 Units were issued and outstanding. As of __________,
2005, AIMCO Properties, L.P. ("AIMCO Properties") and its affiliates own 37,253,
or approximately 77.53%, 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 21,380 Units owned by it in proportion
to the votes cast with respect to Units not subject to this voting restriction.
AIMCO Properties and its affiliates have indicated that they will vote their
other 15,873 Units, or approximately 33.03%, 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 28,594.1 Units, or
approximately 59.51% 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 General Partner executes the
Amendment. The 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 (201) 460-0050 TOLL FREE (800) 217-9608
3rd Floor
Lyndhurst, NJ 07071
PRELIMINARY COPY
NATIONAL PROPERTY INVESTORS III
C/O THE ALTMAN GROUP, INC.
1200 WALL STREET
3RD FLOOR
LYNDHURST, NJ 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 III, a California limited
partnership (the "Partnership"), in connection with an amendment (the
"Amendment") to the Partnership's Amended and Restated Limited 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 December 14, 2001, your Partnership refinanced its mortgage indebtedness
secured by Lakeside Apartments, a 568-unit apartment complex located in Lisle,
Illinois 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 January 1,
2022. 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 if the Partnership's term is not
extended.
Although the general partner of the Partnership is not currently attempting
to have the Partnership sell Lakeside Apartments, the Partnership has a contract
for the sale of one of its properties, Pinetree Apartments. However, if the
Partnership does not adopt the Amendment, the Partnership will liquidate on
December 31, 2005 and will attempt to sell its properties in connection with
such liquidation. The Amendment will provide the Partnership with additional
time to market its properties for sale. The Partnership's term currently expires
on December 31, 2005, and the general partner of the Partnership 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
properties could be increased, if the Partnership has greater flexibility with
respect to the timing of the sale of the properties. 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 properties will be
increased, by an extension of the Partnership's term. Because the Partnership
does not want to sell Lakeside Apartments 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 "General Partner"), has conflicts of interest with respect to
the Amendment. Continuation of the Partnership beyond 2005 will result in the
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, 48,049 Units were issued and outstanding. As of
____________, 2005, AIMCO
Properties, L.P. ("AIMCO Properties") and its affiliates owned 37,253, or
approximately 77.53%, of the outstanding Units. As more fully described herein,
AIMCO IPLP, L.P. ("AIMCO IPLP"), an affiliate of AIMCO Properties, must vote
21,380 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 15,873 Units, or approximately 33.03%, 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 28,594.1 Units, or
approximately 59.51% 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 General Partner executes the
Amendment. The 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 1275 Valley Brook Avenue, Lyndhurst, New Jersey 07071, telephone (800)
217-9608.
RISK FACTORS
There are risks associated with the Amendment. In addition, the 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
PROPERTIES. The 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 Properties are
sold in the near future in connection with the Partnership's liquidation, it is
possible that the sale price received for the Properties could be higher than
the sale price received at some future time. The Partnership's prospectus, dated
October 24, 1979, 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 properties 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 properties 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 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
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. Although the Partnership has a contract for the sale of
Pinetree Apartments, the General Partner does not know when any sale or other
disposition of your partnership's properties 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.
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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 General Partner. The General Partner
is controlled by AIMCO. In addition, affiliates of the General Partner hold
37,253, or approximately 77.53%, 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 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, including amendments to the
Partnership Agreement that could be inconsistent with the desires of other
Limited Partners.
A number of the Units held by affiliates of the 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, 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.
AFFILIATES OF THE GENERAL PARTNER WILL CONTINUE TO RECEIVE FEES. Affiliates
of the General Partner are entitled to receive 5% of gross receipts from both of
the Partnership's properties as compensation for providing property management
services. The Partnership paid approximately $162,000 for the six months ended
June 30, 2005 and $325,000 and $436,000 for the years ended December 31, 2004
and 2003, respectively, to affiliates of the General Partner.
Affiliates of the General Partner received reimbursement of accountable
administrative expenses of approximately $78,000 for the six months ended June
30, 2005 and $175,000 and $245,000 for the years ended December 31, 2004 and
2003, respectively. The amounts include approximately $7,000, $10,000, and
$43,000 of fees related to construction management services provided by an
affiliate of the 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 properties. At
June 30, 2005, approximately $11,000 was owed to an affiliate of the General
Partner for unpaid reimbursements.
Upon the sale of the properties owned by the Partnership, the General
Partner will be entitled to an Incentive Compensation Fee equal to a declining
percentage of the difference between the total amount distributed to limited
partners and the appraised value of their investment at February 1, 1992. The
percentage amount to be realized by the General Partner, if any, will be
dependent upon the year in which the property is sold. Payment of the Incentive
Compensation Fee is subordinated to the receipt by the limited partners of: (a)
distributions from capital transaction proceeds of an amount equal to their
appraised investment in the Partnership at February 1, 1992, and (b)
distributions from all sources (capital transactions as well as cash flow) of an
amount equal to six percent (6%) per annum cumulative, non-compounded, on their
appraised investment in the Partnership at February 1, 1992. For the year ended
December 31, 2004, and in connection with the January 2004 sale of Summerwalk
Apartments, an Incentive Compensation Fee of approximately $222,000 was earned
and was paid to the Managing General Partner. No Incentive Compensation Fees
were paid in the year ended December 31, 2003 and none have been earned to date
in 2005. Pursuant to the sale of Pinetree Apartment in accordance with the
purchase contract, we estimate an Incentive Compensation Fee of approximately
$44,000 to $75,000 will be earned and is expected to be paid from future cash
flow or operations.
For services relating to the administration of the Partnership and
operation of the Partnership's properties, the General Partner is entitled to
receive payment for non-accountable expenses up to a maximum of $100,000 per
year based upon the number of Partnership units sold, subject to certain
limitations. There was no such fee for the six months ended June 30, 2005, as no
operating distribution was made. The Managing General Partner received
approximately $31,000 and $14,000 during the years ended December 31, 2004 and
2003, respectively, in connection with the operating distributions paid to the
partners.
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 $418,000
and $200,000. During the year ended December 31, 2004, the Partnership repaid
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approximately $108,000 representing the outstanding principal balance which had
been previously borrowed under the Partnership revolver and approximately $2,000
of accrued interest. Interest expense during each of the six months ended June
30, 2005 and years ended December 31, 2004 and 2003 amounted to approximately
$10,000, $5,000 and $2,000, 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 $632,000.
The Partnership insures its properties up to certain limits through
coverage provided by AIMCO, an affiliate of the General Partner, which is
generally self-insured for a portion of losses and liabilities related to
workers' compensation, property casualty and vehicle liability. The Partnership
insures its properties above the AIMCO limits through insurance policies
obtained by AIMCO from insurers unaffiliated with the General Partner. During
the six months ended June 30, 2005 and the years ended December 31, 2004 and
2003, the Partnership was charged by AIMCO and its affiliates approximately
$82,000, $91,000 and $104,000, respectively, 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 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 Partnership.
Although the Partnership has a contract for the sale of Pinetree Apartments, the
General Partner cannot predict when any sale or other disposition of the
Partnership's properties 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 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. Although the Partnership has a
contract for the sale of Pinetree Apartments, the General Partner does not know
when any of your Partnership's properties will be sold or otherwise disposed of.
Therefore, there may not be any way to liquidate your investment in the
Partnership until the properties are sold and your Partnership is liquidated.
THE VALUE OF THE PROPERTIES MAY DECLINE, AND YOUR INVESTMENT WILL CONTINUE
TO BE AT RISK. Until its properties are sold, the Partnership will continue to
bear the investment risk associated with the continued ownership of the
properties. The Partnership's future success will depend upon many factors
beyond the 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 properties 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 properties 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 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 General Partner
regularly evaluates whether your Partnership's properties should be sold and has
recently sold one property, if the term of the Partnership is extended, the
General Partner may not be required to sell the properties until the end of the
extended term, depending on, among other things, the Partnership's financial
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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 agreements between the Partnership and
the lender require the extension of the Partnership's term beyond the maturity
date of the mortgage indebtedness. The Partnership's mortgage indebtedness
matures on January 1, 2022. 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 properties. The 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 properties could be increased, if the Partnership has greater flexibility
with respect to the timing of the sale of the properties. 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 properties will be
increased, by an extension of the Partnership's term.
YOU ARE LIKELY TO RECOGNIZE GAIN ON A DISPOSITION OF THE PROPERTIES,
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 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 properties, 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.
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THE AMENDMENT
The Amendment amends and restates Article 4 of the Partnership Agreement in its
entirety as follows:
"The Partnership will have a term commencing on the date of filing of the
certificate of limited partnership 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 General Partner executes the
Amendment. The 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 December 14, 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 January 1, 2022. 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. Although
the general partner of the Partnership is not currently attempting to have the
Partnership sell Lakeside Apartments, the Partnership has a contract for the
sale of one of its properties, Pinetree Apartments. Because the Partnership does
not want to sell Lakeside Apartments 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.
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 General Partner discussed with the lender the terms
of the financing agreement, including the requirement to extend the
Partnership's term. Alternatively, the 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 General Partner was
of the opinion that refinancing with such a loan term could have resulted in
more frequent
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refinancings, resulting in repeated unnecessary refinancing costs and
potentially higher interest costs to the Partnership.
CONFLICTS OF INTEREST
The General Partner is an affiliate of AIMCO. AIMCO and its affiliates,
including the General Partner, may have interests that conflict with the
interests of the Limited Partners.
Affiliates of the General Partner Will Continue to Receive Fees. Affiliates
of the General Partner are entitled to receive 5% of gross receipts from both of
the Partnership's properties as compensation for providing property management
services. The Partnership paid approximately $162,000 for the six months ended
June 30, 2005 and $325,000 and $436,000 for the years ended December 31, 2004
and 2003, respectively, to affiliates of the General Partner.
Affiliates of the General Partner received reimbursement of accountable
administrative expenses of approximately $78,000 for the six months ended June
30, 2005 and $175,000 and $245,000 for the years ended December 31, 2004 and
2003, respectively. The amounts include approximately $7,000, $10,000, and
$43,000 of fees related to construction management services provided by an
affiliate of the 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 properties. At
June 30, 2005, approximately $11,000 was owed to an affiliate of the General
Partner for unpaid reimbursements.
Upon the sale of the properties owned by the Partnership, the General
Partner will be entitled to an Incentive Compensation Fee equal to a declining
percentage of the difference between the total amount distributed to limited
partners and the appraised value of their investment at February 1, 1992. The
percentage amount to be realized by the General Partner, if any, will be
dependent upon the year in which the property is sold. Payment of the Incentive
Compensation Fee is subordinated to the receipt by the limited partners of: (a)
distributions from capital transaction proceeds of an amount equal to their
appraised investment in the Partnership at February 1, 1992, and (b)
distributions from all sources (capital transactions as well as cash flow) of an
amount equal to six percent (6%) per annum cumulative, non-compounded, on their
appraised investment in the Partnership at February 1, 1992. For the year ended
December 31, 2004, and in connection with the January 2004 sale of Summerwalk
Apartments, an Incentive Compensation Fee of approximately $222,000 was earned
and was paid to the Managing General Partner. No Incentive Compensation Fees
were paid in the year ended December 31, 2003 and none have been earned to date
in 2005. Pursuant to the sale of Pinetree Apartment in accordance with the
purchase contract, we estimate an Incentive Compensation Fee of approximately
$44,000 to $75,000 will be earned and is expected to be paid from future cash
flow or operations.
For services relating to the administration of the Partnership and
operation of the Partnership's properties, the General Partner is entitled to
receive payment for non-accountable expenses up to a maximum of $100,000 per
year based upon the number of Partnership units sold, subject to certain
limitations. There was no such fee for the six months ended June 30, 2005, as no
operating distribution was made. The Managing General Partner received
approximately $31,000 and $14,000 during the years ended December 31, 2004 and
2003, respectively, in connection with the operating distributions paid to the
partners.
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 $418,000
and $200,000. During the year ended December 31, 2004, the Partnership repaid
approximately $108,000 representing the outstanding principal balance which had
been previously borrowed under the Partnership revolver and approximately $2,000
of accrued interest. Interest expense during each of the six months ended June
30, 2005 and years ended December 31, 2004 and 2003 amounted to approximately
$10,000, $5,000 and $2,000, 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 $632,000
The Partnership insures its properties up to certain limits through
coverage provided by AIMCO, an affiliate of the General Partner, which is
generally self-insured for a portion of losses and liabilities related to
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workers' compensation, property casualty and vehicle liability. The Partnership
insures its properties above the AIMCO limits through insurance policies
obtained by AIMCO from insurers unaffiliated with the General Partner. During
the six months ended June 30, 2005 and the years ended December 31, 2004 and
2003, the Partnership was charged by AIMCO and its affiliates approximately
$82,000, $91,000 and $104,000, respectively, 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 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 37,253, or approximately 77.53%, 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 February 1, 1979 for the purpose of acquiring, managing, and
ultimately selling income-producing real properties. 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 General
Partner and its affiliates for the management and administration of all
Partnership activities.
APPRAISALS. 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 Properties were 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 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 properties and an analysis of the surrounding market. In
addition, the appraiser reviewed the historical operating statements for the
Properties 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 Properties.
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 Properties. The appraiser concluded that the total appraised
value of the Partnership's Properties is $47,900,000. The appraised value of
Pine Tree Apartments is $5,100,000 and the appraised value of Lakeside
Apartments is $42,800,000.
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Under the sales comparison approach, the appraiser utilized the following
methods to derive a value for your partnership's Properties: (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 total value of the Partnership's Properties is
$47,900,000. The appraised value of Pine Tree Apartments is $5,200,000 and the
appraised value of Lakeside Apartments is $42,700,000.
Under the income capitalization approach, the appraiser performed a direct
capitalization analysis and a discounted cash flow analysis to derive a value
for the Properties. 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 total
value of the Partnership's Properties is $47,800,000. The appraised value of
Pine Tree Apartments is $5,000,000 and the appraised value of Lakeside
Apartments is $42,800,000.
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 100 F
Street, N.E., Room 1580, 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.
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
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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.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Except as noted below, no person or entity was known by the 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 Properties, L.P.) 21,566 44.88%
AIMCO Properties, L.P. 15,687 32.65%
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AIMCO IPLP, L.P. is indirectly owned by AIMCO. Its 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, 48,049 Units were issued and
outstanding. As of __________, 2005, AIMCO Properties and its affiliates own
37,253, or approximately 77.53%, of the outstanding Units. With respect to
21,380 Units, or approximately 44.49%, of the outstanding Units, AIMCO IPLP,
L.P. must vote such Units (i) against any increase in compensation payable to
the General Partner and any of its affiliates and (ii) with respect to any
proposal made by the 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 15,873 Units, or approximately 33.03%%, 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 28,594.10
Units, or approximately 59.51% 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 III
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 (201) 460-0050 TOLL FREE (800) 217-9608
3rd Floor
Lyndhurst, NJ 07071
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