SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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SCHEDULE 14D-9
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SOLICITATION/RECOMMENDATION STATEMENT PURSUANT TO SECTION 14(d)(4)
OF THE SECURITIES EXCHANGE ACT OF 1934
HCW PENSION REAL ESTATE FUND LIMITED PARTNERSHIP,
A MASSACHUSETTS LIMITED PARTNERSHIP
(Name of Subject Company)
HCW PENSION REAL ESTATE FUND LIMITED PARTNERSHIP,
A MASSACHUSETTS LIMITED PARTNERSHIP
(Name of Person(s) Filing Statement)
UNITS OF LIMITED PARTNERSHIP INTEREST
(Title of Class of Securities)
N/A
(Cusip Number of Class of Securities)
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CARROLL D. VINSON
PRESIDENT
IH, INC.
ONE INSIGNIA FINANCIAL PLAZA
GREENVILLE, SOUTH CAROLINA 29602
(864) 239-2747
(Name, Address and Telephone Number of Person
Authorized to Receive Notice and Communications on Behalf of
the person(s) filing statement)
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ITEM 1. SECURITY AND SUBJECT COMPANY.
The name of the subject company is HCW Pension Real Estate Fund
Limited Partnership, a Massachusetts limited partnership (the "Partnership"),
and the address of the principal executive offices of the Partnership is One
Insignia Financial Plaza, Greenville, South Carolina 29602. The title of the
class of equity securities to which this statement relates is the units of
limited partnership interest ("Units") of the Partnership.
ITEM 2. TENDER OFFER OF THE BIDDER.
This statement relates to an offer by Cooper River Properties,
L.L.C., a Delaware limited liability company (the "Purchaser"), to purchase up
to 4,000 of the outstanding Units at a purchase price of $475 per Unit, net to
the seller in cash, without interest, upon the terms and subject to the
conditions set forth in an Offer to Purchase dated September 23, 1998 (the
"Offer to Purchase") and related Assignment of Partnership Interest (which
collectively constitute the "Offer"). A Tender Offer Statement on Schedule
14D-1 with respect to the Offer has been filed by the Purchaser, Insignia
Properties, L.P., a Delaware limited partnership ("IPLP"), Insignia Properties
Trust, a Maryland real estate investment trust ("IPT") and Insignia Financial
Group, Inc., a Delaware corporation ("Insignia") (collectively, the "Bidders").
The address of the Purchaser's principal executive offices is One
Insignia Financial Plaza, Greenville, South Carolina 29602.
ITEM 3. IDENTITY AND BACKGROUND.
(a) The name and business address of the Partnership, which is the
person filing this statement, are set forth in Item 1 above.
(b)(1) HCW General Partner, Ltd., a Texas limited partnership, is
the general partner of the Partnership (the "General Partner"), and its sole
general partner is IH, Inc., a Delaware corporation ("IH"). IH is a direct,
wholly-owned subsidiary of IPT. The Purchaser is a recently formed,
wholly-owned subsidiary of IPLP, which is the operating partnership of IPT. IPT
is the sole general partner of IPLP (owning approximately 70% of the total
equity interests in IPLP), and Insignia is the sole limited partner of IPLP
(owning approximately 30% of the total equity interests in IPLP). Insignia and
its affiliates also own approximately 57% of the outstanding common shares of
IPT.
For more than the past three years, Insignia Residential Group, L.P.
("IRG") and Insignia/ESG, Inc. (formerly known as Insignia Commercial Group,
Inc.) ("I/ESG"), which are affiliates of IPT and the Purchaser, have provided
property management services to the Partnership, and Insignia (directly or
through affiliates) has performed asset management, partnership administration
and investor relations services for the Partnership.
By reason of these relationships, the General Partner has conflicts
of interest in considering the Offer.
Under the Limited Partnership Agreement, the General Partner holds
an interest in the Partnership and is entitled to participate in certain cash
distributions made by the Partnership to its partners. The General Partner
received from the Partnership in respect of its interest in the Partnership
cash distributions of $6,000 in 1997, $6,000 in 1996 and $9,000 in 1995. The
Partnership paid IRG and I/ESG fees for property management services in the
amounts of approximately $160,000, $171,000 and $165,000 for the years ended
December 31, 1997, 1996
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and 1995, respectively, and has paid IRG and I/ESG property management fees
equal to $79,000 during the first six months of 1998. The Partnership
reimbursed the General Partner and its affiliates (including Insignia) for
expenses incurred in connection with asset management and partnership
administration services performed by them for the Partnership for the years
ended December 31, 1997, 1996 and 1995 in the amounts of $144,000, $120,000 and
$116,000, respectively, and has reimbursed them for such services in the amount
of $44,000 through June 30, 1998 (including reimbursements paid to an affiliate
of the General Partner in the amounts of $30,000, $8,000 and $3,000 for the
years ended December 31, 1997 and 1996, and for the six months ended June 30,
1998, respectively, for costs incurred in connection with construction
oversight services). The Limited Partnership Agreement provides that the
Partnership pays asset management fees to the General Partner and its
affiliates based on the "tangible asset value," as defined in the Limited
Partnership Agreement. The asset management fees paid to the General Partner
pursuant to this provision were approximately $136,000, $136,000 and $155,000
for the years ended December 31, 1997, 1996 and 1995, respectively, and
approximately $67,000 for the six months ended June 30, 1998. For the period
January 1, 1996 through December 31, 1996, the Partnership insured its
properties under a master policy through an agency and insurer unaffiliated
with the General Partner, and through an agency affiliated with the General
Partner for the period January 1, 1997 through August 31, 1997. An affiliate of
the General Partner acquired, in the acquisition of a business, certain
financial obligations from an insurance agency which was later acquired by the
agent who placed the current year's master policy. That agent assumed the
financial obligations to the affiliate of the General Partner who received
payments on these obligations from the agent. Insignia and the General Partner
believe that the aggregate financial benefit derived by Insignia and its
affiliates from such arrangement was immaterial.
As described above, the Purchaser and the General Partner are
affiliates of and controlled by IPT, which is controlled by Insignia. The
General Partner has conflicts of interest in considering the Offer, including
(i) as a result of the fact that a sale or liquidation of the Partnership's
assets would result in a decrease or elimination of the fees paid to the
General Partner and/or its affiliates and (ii) the fact that as a consequence
of the Purchaser's ownership of Units, the Purchaser (which is an affiliate of
the General Partner) may have incentives to seek to maximize the value of its
ownership of Units, which in turn may result in a conflict for the General
Partner in attempting to reconcile the interests of the Purchaser (which is an
affiliate of the General Partner) with the interests of the other Limited
Partners. As with any rational investment decision, the Purchaser (which is an
affiliate of the General Partner) is making the Offer with a view to making a
profit. Accordingly, there is a conflict between the desire of the Purchaser
(which is an affiliate of the General Partner) to purchase Units at a low price
and the desire of the Limited Partners to sell their Units at a high price.
As described in the Offer to Purchase, the Purchaser (which is an
affiliate of the General Partner) expects to pay for the Units it purchases
pursuant to the Offer with funds provided by IPLP as capital contributions.
IPLP in turn intends to use its cash on hand and, if necessary, funds available
to it under its credit facility to make such contributions. It is possible,
however, that in connection with its future financing activities, IPT or IPLP
may cause or request the Purchaser (which is an affiliate of the General
Partner) to pledge the Units as collateral for loans, or otherwise agree to
terms which provide IPT, IPLP and the Purchaser with incentives to generate
substantial near-term cash flow from the Purchaser's investment in the Units.
This could be the case, for example, if a loan has a "balloon" maturity after a
relatively short time or bears a high or increasing interest rate. In such a
situation, the General Partner may experience a conflict of interest in seeking
to reconcile the best interests of the Partnership with the need of its
affiliates for cash flow from the Partnership's activities.
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If the Purchaser is successful in acquiring a significant number of
Units pursuant to the Offer, the Purchaser (which is an affiliate of the
General Partner) will have the right to vote those Units and thereby
significantly influence all voting decisions with respect to the Partnership,
including decisions concerning liquidation, amendments to the Limited
Partnership Agreement, removal and replacement of the General Partner and
mergers, consolidations and other extraordinary transactions. This means that
(i) non-tendering Limited Partners could be prevented from taking action they
desire but that IPT (which is an affiliate of the General Partner) opposes and
(ii) IPT (which is an affiliate of the General Partner) may be able to take
action desired by IPT but opposed by the non-tendering Limited Partners.
The Limited Partnership Agreement provides that the General Partner
has absolute discretion as to whether to admit an assignee of Units to the
Partnership as a substituted Limited Partner. The Purchaser (which is an
affiliate of the General Partner) will seek to be admitted to the Partnership
as a substituted Limited Partner upon consummation of the Offer and, when
admitted, will have the right to vote each Unit purchased pursuant to the
Offer. Even if the Purchaser (which is an affiliate of the General Partner) is
not admitted to the Partnership as a substituted Limited Partner, however, the
Purchaser nonetheless will have the right to vote each Unit purchased in the
Offer pursuant to the irrevocable appointment by tendering Limited Partners of
the Purchaser (which is an affiliate of the General Partner) and its managers
and designees as proxies with respect to the Units tendered by such Limited
Partners and accepted for payment by the Purchaser. As a result, if the
Purchaser (which is an affiliate of the General Partner) is successful in
acquiring a significant number of Units pursuant to the Offer, the Purchaser
will have the right to vote those Units and thereby significantly influence all
voting decisions with respect to the Partnership. In general, IPLP and the
Purchaser (which are affiliates of the General Partner) will vote the Units
owned by them in whatever manner they deem to be in IPT's best interests,
which, because of their relationship with the General Partner, also may be in
the interest of the General Partner, but may not be in the interest of other
Limited Partners. This could (i) prevent non-tendering Limited Partners from
taking action they desire but that IPT opposes and (ii) enable IPT to take
action desired by IPT but opposed by non-tendering Limited Partners. Under the
Limited Partnership Agreement, Limited Partners holding a majority of the Units
are entitled to take action with respect to a variety of matters including:
removal of the General Partner and in certain circumstances election of a new
or successor general partner; dissolution of the Partnership; sale of all or
substantially all of the assets of the Partnership; and most types of
amendments to the Limited Partnership Agreement.
To the best knowledge of the General Partner, except as described in
this Schedule 14D- 9, there are no other material agreements, arrangements,
understandings or any actual or potential conflicts of interest between the
Partnership, the General Partner and their affiliates and the Bidders, their
executive officers, directors or affiliates.
ITEM 4. THE SOLICITATION OR RECOMMENDATION.
Because of the existing and potential future conflicts of interest
described in Item 3 above, the Partnership and the General Partner are
remaining neutral and making no recommendation as to whether Limited Partners
should tender their Units in response to the Offer.
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ITEM 5. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED.
Neither the Partnership nor any person acting on its behalf has
employed, retained or compensated, or intends to employ, retain or compensate,
any person or class of person to make solicitations or recommendation to
Limited Partners on its behalf concerning the Offer.
ITEM 6. RECENT TRANSACTIONS AND INTEREST WITH RESPECT TO SECURITIES.
None.
ITEM 7. CERTAIN NEGOTIATIONS AND TRANSACTIONS BY THE SUBJECT COMPANY.
None.
ITEM 8. ADDITIONAL INFORMATION TO BE FURNISHED.
Litigation. On July 30, 1998, certain entities claiming to own
limited partnership interests in certain limited partnerships (including the
Partnership) whose general partners are affiliates of Insignia, IPT and the
Purchaser (the "Affiliated General Partners") filed a complaint in the Superior
Court of the State of California, County of Los Angeles (the "Los Angeles
Complaint") against Insignia, the Subject Partnerships (defined below), the
Affiliated General Partners and additional entities affiliated with several of
the defendants. The action involved 44 real estate limited partnerships (each
named as a defendant) in which the plaintiffs allegedly own interests and which
Insignia affiliates allegedly manage or control (the "Subject Partnerships").
Plaintiffs allege that they have requested from, but have been denied by each
of the Subject Partnerships, lists of their respective limited partners for the
purpose of making tender offers to purchase up to 4.9% of the units of limited
partnership interest in each of the Subject Partnerships. The Los Angeles
Complaint also alleges that certain of the defendants made tender offers to
purchase units of limited partnership interest in many of the Subject
Partnerships, with the alleged result that plaintiffs have been deprived of the
benefits they would have realized from ownership of the additional units. The
plaintiffs assert eleven causes of action, including breach of contract, unfair
business practices, and violations of the partnership statutes of the states in
which the Subject Partnerships are organized. Plaintiffs seeks compensatory,
punitive and treble damages. Insignia was only recently served with the Los
Angeles Complaint and has not yet responded to it. Insignia believes the claims
to be without merit and intends to defend the action vigorously.
ITEM 9. MATERIAL TO BE FILED AS EXHIBITS.
(a) Form of cover letter to Limited Partners of the
Partnership dated September 23, 1998.
(b) None.
(c) None.
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SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief,
I certify that the information set forth in this statement is true, complete
and correct.
Dated: September 23, 1998
HCW Pension Real Estate Fund Limited Partnership,
a Massachusetts limited partnership
By: HCW General Partner, Ltd.,
its General Partner
By: IH, Inc.
its General Partner
By: /s/ Carroll D. Vinson
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Carroll D. Vinson
President
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EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION
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(a) Form of cover letter to Limited Partners from the Partnership
dated September 23, 1998.
(b) None.
(c) None.
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