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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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SCHEDULE 14D-9
Solicitation/Recommendation Statement
Pursuant to Section 14(d)(4) of the
Securities Exchange Act of 1934
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KRUPP CASH PLUS LIMITED PARTNERSHIP
(Name of Subject Company)
KRUPP CASH PLUS LIMITED PARTNERSHIP
(Name of Person Filing Statement)
DEPOSITARY RECEIPTS
(Title of Class of Securities)
501112 10 6
(CUSIP Number of Class of Securities)
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Laurence Gerber
The Krupp Corporation
470 Atlantic Avenue
Boston, Massachusetts 02210
(617) 423-2233
(Name, Address and Telephone Number of Person
Authorized to Receive Notice and Communications
on Behalf of the Person(s) filing Statement)
COPY TO:
Scott D. Spelfogel, Esq. James M. Dubin, Esq.
The Berkshire Group Paul, Weiss, Rifkind, Wharton & Garrison
470 Atlantic Avenue 1285 Avenue of the Americas
Boston, Massachusetts 02210 New York, New York 10019-6064
(617) 423-2233 (212) 373-3000
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ITEM 1. SECURITY AND SUBJECT COMPANY
The name of the subject partnership is Krupp Cash Plus Limited
Partnership, a Massachusetts limited partnership (the "Partnership"), and the
address of its principal executive offices is c/o The Krupp Corporation, 470
Atlantic Avenue, Boston, Massachusetts 02210. The title of the class of equity
securities to which this statement relates is Depositary Receipts ("Depositary
Receipts") representing the Partnership's Units of Investor Limited Partnership
Interests ("Units").
ITEM 2. TENDER OFFER OF THE BIDDER
This statement relates to an unsolicited offer by Krescent Partners
L.L.C., a Delaware limited liability company ("Krescent"), and American Holdings
I, L.P., a Delaware limited partnership ("AHI" and, together with Krescent, the
"Purchasers"), disclosed in a Tender Offer Statement on Schedule 14D-1 dated
January 24, 1997 (the "Schedule 14D-1"), to purchase up to 994,182 of the issued
and outstanding Depositary Receipts representing Units at a purchase price of
$6.00 per Unit, net to the seller in cash, without interest thereon, upon the
terms and subject to the conditions set forth in the Offer to Purchase dated
January 24, 1997 and the related Letter of Transmittal, as each may be
supplemented, modified or amended from time to time (which collectively
constitute the "Krescent-AHI Offer" and are contained within the Schedule
14D-1).
The address of Krescent's principal executive offices is 1301 Avenue
of the Americas, 38th Floor, New York, New York 10019. The address of AHI's
principal offices is 100 South Bedford Road, Mount Kisco, New York 10549.
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)(i)The general partners responsible for management of the
Partnership's business are The Krupp Corporation, a Massachusetts corporation
(the "Corporate General Partner"), and The Krupp Company Limited Partnership -
IV, a Massachusetts limited partnership (together with the Corporate General
Partner, the "General Partners"). Except as described below, there are no
material contracts, agreements, arrangements or understandings or any actual or
potential conflicts of interest between the General Partners or their affiliates
and the Partnership, its executive officers, directors or affiliates.
Pursuant to the Amended Agreement of Limited Partnership, dated as
of July 12, 1985 (the "Partnership Agreement"), the General Partners are
entitled to certain cash distributions in respect of their interests in the
Partnership. Aggregate cash distributions paid to the General Partners in
respect of such interests were
$(13,174) [adjustment due to overpayment for prior year], $47,657 and $46,448,
respectively, for the years ended December 31, 1994, 1995 and 1996.
Pursuant to certain management agreements, an affiliate of the
General Partners receives property management fees for its services as
management agent for the Partnership's properties. Such agreements provide for
the payment of monthly management fees payable at the rate of up to 6% of the
gross receipts, net of leasing commissions from commercial properties under
management. In addition, although the General Partners and their affiliates do
not receive any fees from the Partnership for the partnership administration
services they provide, affiliates of the General Partners are reimbursed by the
Partnership for the expenses they incur in connection with providing those
services, which include accounting, computer, insurance, travel, payroll, legal
and the preparation and mailing of reports and other communication to the Unit
holders. Property management fees and reimbursement of expenses paid to such
affiliates aggregated $715,252, $579,298 and $646,980, respectively, for the
three years ended December 31, 1994, 1995 and 1996.
Pursuant to the Partnership Agreement, the General Partners are
entitled to receive fees for managing the affairs of the Partnership equal to 5%
of the Partnership's annual Cash Flow (as defined in the Partnership Agreement),
but the payment thereof is subordinated to the extent necessary for the limited
partners to receive an amount for such year equal to a 7.5% non-cumulative
annual return on their Invested Capital (as defined in the Partnership
Agreement). The General Partners also are entitled to receive an incentive fee
for managing the affairs of the Partnership in an amount equal to 3% of the
Partnership's annual Cash Flow, but payment of such fee is subordinated to the
extent necessary for the limited partners to receive an amount for such year
equal to a 9% non-cumulative annual return on their Invested Capital. No such
fees were paid to the General Partners or their affiliates during the three-year
period ended December 31, 1996.
Pursuant to the Partnership Agreement, in connection with the
disposition of any property owned by the Partnership, the General Partners are
entitled to a disposition fee in an amount equal to 3% of the contract sales
price of such property, subject to certain limitations. No disposition fees were
paid to the General Partners or their affiliates during the three-year period
ended December 31, 1996.
The General Partners are subject to certain conflicts of interests
in connection with the response to the Krescent-AHI Offer contained in this
Schedule 14D-9. The Partnership Agreement provides that, without the concurrence
of the General Partners, a majority in interest of the "Investor Limited
Partners" (a person who has been admitted to the Partnership as, and has the
rights afforded to, an Investor Limited Partner, as provided in the Partnership
Agreement) may vote to remove the General Partners or amend the Partnership
Agreement (including amending certain fees and compensation payable or
authorized to be payable to the
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General Partners or their affiliates), and the ownership of a large block of
Units by any person increases the likelihood that the General Partners may be
removed or that the Partnership Agreement may be amended should that person
become an Investor Limited Partner or otherwise acquire the voting rights of an
Investor Limited Partner. In addition, since the property management agreements
between affiliates of the General Partners and the Partnership are terminable
without penalty on not more than 60 days notice, the removal of the General
Partners or the amendment of the Partnership Agreement could result in a
reduction of management fee income from the Partnership to such affiliates. If a
large number of Units were tendered pursuant to the Krescent-AHI Offer, the
likelihood of such removal or amendment would increase. However, as described in
Items 3(b)(ii) and 8 below, the Purchasers are subject to standstill agreements
pursuant to which they have agreed, among other things, not to acquire more than
25% of the outstanding Units for the period ending 30 months after receipt from
the Partnership and certain other partnerships affiliated with the General
Partners of any list of its unit holders or investors. Accordingly, during such
30 month period the Purchasers will not be in a position to unilaterally remove
the General Partners or amend the Partnership Agreement.
(b)(ii) Except as described below, there are no material contracts,
agreements, arrangements or understandings or any actual or potential conflicts
of interests between the Partnership or its affiliates and the Purchasers, their
respective executive officers, directors or affiliates.
The Corporate General Partner and Liquidity Financial Group, L.P.,
the financial advisor of Krescent ("Liquidity"), are parties to a Settlement
Agreement and Release, dated as of June 27, 1996, as amended as of October 8,
1996 and as of January 6, 1997 (as so amended, the "Liquidity Standstill
Agreement"), pursuant to which Liquidity and any of its affiliates are
restricted from, among other things, acquiring more than 25% of the outstanding
Units for the period ending 30 months after receipt from the Partnership and
certain other partnerships affiliated with the General Partners of any list of
its unit holders or investors. Such a list was last provided to Liquidity on
November 20, 1996 and, pursuant to the Liquidity Standstill Agreement,
additional lists may be requested by Liquidity through June 27, 1997. The
Krescent-AHI Offer states that, pursuant to an Assumption Agreement dated
November 21, 1996 between Krescent and Liquidity, Krescent agreed to be bound by
the restrictions set forth in the Liquidity Standstill Agreement.
On October 24, 1996, a representative of Liquidity contacted a
representative of the Partnership to request, on behalf of Krescent, that the
General Partners agree to admit Krescent as a "Limited Partner" (an assignee of
a Unit holder who, at the discretion of the General Partners, is admitted as a
Unit holder pursuant to the terms of the Partnership Agreement) or as a
recognized or registered owner of Units in the event Krescent made an offer to
purchase Units and Krescent accepted Units for payment pursuant to the terms of
such offer. During that conversation, the Partnership's representative indicated
that in order to agree to such treatment, the
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Partnership had to be satisfied that the consummation of such offer and such
treatment would not cause the Partnership to be classified as a "publicly-traded
partnership" for tax purposes (a "PTP"). Later that day, the Partnership
received a memorandum from counsel to Krescent concluding that such a tender
offer would not cause the Partnership to be classified as a PTP and a letter
agreement was sent to the Corporate General Partner requesting that Krescent be
treated as a Limited Partner or a recognized or registered owner of Units upon
the acceptance of Units for payment pursuant to an offer anticipated to be made
by Krescent. On October 29, 1996, counsel for the Partnership, in a letter to
Liquidity, responded to the memorandum prepared by Krescent's counsel. During
the week of November 4th, counsel for Krescent and counsel for the Partnership
continued to discuss the PTP status issue. On November 11, 1996, counsel for
Krescent and counsel for the Partnership agreed on a form of opinion letter
regarding the PTP issue that would be delivered upon the treatment of Krescent
as a Limited Partner or recognized or registered owner of Units. On November 14,
1996, the Partnership received a request from Liquidity for a current list of
Unit holders and the lists of securityholders of various entities affiliated
with the Partnership, which lists were delivered to Liquidity on November 19,
1996 and November 20, 1996. Also on November 19, 1996, the Corporate General
Partner executed a letter to Krescent indicating its agreement to admit
Krescent, or cause Krescent to be admitted, as a Limited Partner or a recognized
or registered owner of Units (i) upon Krescent's payment for Units pursuant to
the Krescent-AHI Offer, (ii) upon delivery of an opinion of Krescent's counsel
(in the agreed form) that the Krescent-AHI Offer would not cause the Partnership
to be classified as a PTP and (iii) upon delivery, in satisfactory form, of the
Partnership's standard transfer paperwork, payment of standard transfer fee and
satisfaction of any other standard ministerial matter.
By letter dated November 4, 1996, Longacre contacted the Partnership
and requested a list of the Partnership's Unit holders and lists of
securityholders of certain other limited partnerships sponsored by affiliates of
the General Partners. The letter stated that the request was being made to
facilitate a tender offer by an affiliate of Longacre. Counsel to the
Partnership rejected Longacre's request on November 12, 1996 because Longacre
had not given adequate assurance that the list would be used for a proper
partnership business purpose. On or about November 22, 1996, counsel to Longacre
contacted representatives of the Partnership and suggested that, in
consideration for the General Partners agreeing to furnish the requested lists,
Longacre would be prepared to enter into a standstill agreement relating to the
Partnership and certain other limited partnerships containing terms
substantially similar to those contained in the Liquidity Standstill Agreement.
After further discussions, Longacre and the Corporate General Partner signed
such a standstill agreement on November 26, 1996 (the "Longacre Standstill
Agreement"). On November 27, 1996, the Partnership provided Longacre with lists
of the Unit holders of the Partnership and certain other limited partnerships
covered by the Longacre Standstill Agreement.
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On December 10, 1996, counsel for Krescent contacted counsel for the
Partnership and requested that the Liquidity Standstill Agreement be amended in
order to clarify an issue relating to Krescent's ability to participate in a
"group" (within the meaning of Section 13(d)(3) of the Securities Exchange Act
of 1934). During the week of December 16, 1996, such issue was discussed by
counsel for Krescent and counsel for the Partnership. In addition, counsel for
the Partnership was advised by counsel for Krescent of a proposed agreement
between Krescent and AHI pursuant to which Krescent and AHI would make the
Krescent-AHI Offer. On January 6, 1997, an amendment to the Liquidity Standstill
Agreement was executed which permitted Liquidity and its affiliates to
participate or form a "group" if each member of such group agreed to be bound by
the terms of the Liquidity Standstill Agreement.
The Krescent-AHI Offer states that, pursuant to an Assumption Agreement
dated January 8, 1997 between AHI and Liquidity, AHI assumed the obligations of
Liquidity under the Liquidity Standstill Agreement with respect to the
Partnership and certain other limited partnerships sponsored by the General
Partners or their affiliates. Concurrently therewith, on January 8, 1997, the
Longacre Standstill Agreement was amended to delete the Partnership and such
other limited partnerships from the schedule of partnerships covered thereby.
On January 17, 1997, the Partnership was notified by Krescent that
Krescent and AHI planned to commence the Krescent-AHI Offer five business days
after the Partnership's receipt of such notice. Also on January 17, 1997, and
again on January 22, 1997, counsel for the Purchasers contacted counsel for the
Partnership requesting a waiver of the five business day notice provision in the
Liquidity Standstill Agreement. On January 22, 1997, counsel for the Partnership
agreed to reduce the required notice period to one business day upon the
Partnership's receipt of the Krescent-AHI communication to Unit holders.
ITEM 4. THE SOLICITATION OR RECOMMENDATION
(a) Following receipt of the Krescent-AHI Offer, the Corporate
General Partner reviewed and considered the Krescent-AHI Offer. The Corporate
General Partner has determined that the Krescent-AHI Offer is inadequate and not
in the best interests of the Unit holders, and recommends that the holders of
Units reject the Krescent-AHI Offer and not tender their Units pursuant thereto.
(b) In reaching its conclusion described in paragraph (a) above, the
Corporate General Partner considered a number of factors, including the
following:
(i) While the value of the Units is not readily ascertainable,
since there is neither an established public trading market nor a
consistent historical pattern of making annual or periodic
distributions in respect of the Units, the price specified in the
Krescent-AHI Offer of $6.00 per Unit represents a significant
discount from the Corporate
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General Partner's estimate of the inherent value of such Units. The
Corporate General Partner has estimated the net asset value of each
Unit to be $9.02. Such estimate was determined based on independent
third party appraisals, obtained by the Partnership in the ordinary
course of its operations, of the market values of the Partnership's
properties as of January 1, 1996, and taking into account the other
assets and liabilities of the Partnership as reflected on the
Partnership's latest publicly-filed financial statements. (Such
estimate does not necessarily reflect the amount which a Unit holder
would ultimately receive if the Partnership were liquidated. For
example, it does not take into account transaction costs relating to
the sale of the Partnership's properties, which would reduce amounts
available for distribution. In addition, market conditions will
affect the amounts available for distribution.) While the actual
value of a Unit may be either above or below the estimate, the
Corporate General Partner believes its estimate of the net asset
value of a Unit is representative of current value. The Krescent-AHI
Offer is only 66.5% of such estimate. The Corporate General Partner
recognizes that, in exchange for receiving the certainty of a cash
purchase price from the Purchasers in connection with the
Krescent-AHI Offer, Unit holders may prefer to forego the
opportunity to hold their Units and receive proceeds upon the
potential future liquidation of the Partnership's assets in excess
of the amount being offered by the Purchasers. However, the
Corporate General Partner believes that the price specified in the
Krescent-AHI Offer reflects too great a discount to value.
(ii) The Partnership currently is paying a quarterly cash
distribution of $0.1375, or $0.55 annually, per Unit. Holders who
sell their Units to the Purchasers will lose their right to receive
future quarterly distributions from operations that are payable in
respect of Units. Furthermore, Unit holders who sell their Units to
the Purchasers will lose the right to future distributions from
future sales of Partnership properties.
(iii) As stated by the Purchasers in the Krescent-AHI Offer,
the Purchasers are making the Krescent-AHI Offer with a view to
making a profit. Accordingly, there is a conflict of interest
between the Purchasers' desire to purchase the Units at a low price
and a Unit holder's desire to sell its Units at a high price.
(iv) As stated by the Purchasers in the Krescent-AHI Offer, if
the Krescent-AHI Offer is successful, the Purchasers may be in a
position to influence control over the Partnership and to influence
voting decisions, including the removal of the General Partners.
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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 to make solicitations or recommendations to Unit holders on its
behalf concerning the Krescent-AHI Offer.
ITEM 6. RECENT TRANSACTIONS AND INTENT WITH RESPECT TO SECURITIES
(a) Neither the Partnership nor the General Partners have effected
any transactions in the Units during the past 60 days. The General Partners are
not aware of any transactions in the Units during the past 60 days by any of its
executive officers, directors, affiliates or subsidiaries.
(b) Neither the General Partners nor, to the knowledge of the
General Partners, any of their executive officers, directors, affiliates or
subsidiaries intend to tender Units owned by them to the Purchasers pursuant to
the Krescent-AHI Offer.
ITEM 7. CERTAIN NEGOTIATIONS AND TRANSACTIONS BY THE SUBJECT COMPANY
(a) No negotiation is being undertaken or is underway by the
Partnership in response to the Krescent-AHI Offer which relates to or would
result in (i) an extraordinary transaction, such as a merger or reorganization,
involving the Partnership; (ii) a purchase, sale or transfer of a material
amount of assets by the Partnership; (iii) a tender offer for or other
acquisition of securities by or of the Partnership; or (iv) any material change
in the present capitalization or dividend policy of the Partnership.
The General Partners and their affiliates may explore transactions
such as asset sales, a consolidation, a merger, financings of Partnership
properties followed by distributions, or possibly a tender offer for Units at a
price in excess of the Krescent-AHI Offer. However, no plans for, or
negotiations relating to, any of these types of transactions have been made, and
there can be no assurances that any such discussions or plans will be developed
or that any such transactions could be successfully consummated.
(b) There are no transactions, board resolutions, agreements in
principle or signed contracts in response to the Krescent-AHI Offer which relate
to or would result in one or more of the matters referred to in Item 7(a) above.
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ITEM 8. ADDITIONAL INFORMATION TO BE FURNISHED
The General Partners have in the past received numerous requests
from third parties requesting that such parties be provided with a list of the
Partnership's Unit holders. Such a list has only been provided by the General
Partners to parties in cases where the General Partners have been satisfied that
such list has been properly requested by a person entitled by the Partnership
Agreement to receive such a list and/or the party requesting the list has
demonstrated that such party has a proper partnership business purpose in
connection with such request, or the General Partners have been satisfied that
the Partnership and the Unit holders have obtained appropriate protections from
such party with respect to the use of such list. The Corporate General Partner
agreed to provide a list of the Partnership's Unit holders to Liquidity,
Krescent's financial advisor, and to AHI in connection with obtaining the
agreement by such parties, pursuant to the Liquidity Standstill Agreement and
the Longacre Standstill Agreement, that such parties and their affiliates, among
other things, would refrain from acquiring in excess of 25% of the Units for the
period ending 30 months after receipt from the Partnership of any list of its
Unit holders.
ITEM 9. MATERIAL TO BE FILED AS EXHIBITS
(a)(i) Form of letter to Unit holders from the Partnership dated
January 29, 1997.
(ii) Press release of the Partnership dated January 29, 1997.
(c)(i) Amended Agreement of Limited Partnership, dated as of July
12, 1985, by and among The Krupp Corporation and The Krupp
Company Limited Partnership - IV, as general partners, The
Krupp Depository Corporation, as the Corporate Limited
Partner, and those persons who have been admitted to the
Partnership as Investor Limited Partners pursuant to the
terms of the Partnership Agreement.
(ii) Property Management Agreement relating to Luria's Plaza,
dated as of January 1, 1996, between the Partnership and
Berkshire Property Management Company.
(iii) Property Management Agreement relating to High Point
National Furniture Mart, dated as of January 1, 1996,
between the Partnership and Berkshire Property Management
Company.
(iv) Property Management Agreement relating to Tradewinds
Shopping Center, dated as of January 1, 1996, between the
Partnership and Berkshire Property Management Company.
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(v) Settlement Agreement and Release, dated as of June 27, 1996,
between the Corporate General Partner and Liquidity
Financial Group, L.P.
(vi) First Amendment to Settlement Agreement and Release, dated
as of October 8, 1996, between the Corporate General Partner
and Liquidity Financial Group, L.P.
(vii) Second Amendment to Settlement Agreement and Release, dated
as of January 6, 1997, between the Corporate General Partner
and Liquidity Financial Group, L.P.
(viii) Agreement, dated as of November 26, 1996, between the
Corporate General Partner and Longacre Corp.
(xi) First Amendment to Agreement, dated as of January 8, 1997,
between the Corporate General Partner and Longacre Corp.
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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: January 29, 1997
KRUPP CASH PLUS
LIMITED PARTNERSHIP
By: The Krupp Corporation, a
general partner
By: s/Laurence Gerber
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Name: Laurence Gerber
Title:President
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EXHIBIT INDEX
Exhibit Description Page
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1. Form of letter to Unit holders from the
Partnership dated January 29, 1997.
2. Press release of the Partnership dated
January 29, 1997.
3. Amended Agreement of Limited Partnership,
dated as of July 12, 1985, by and among
The Krupp Corporation and The Krupp
Company Limited Partnership - IV, as
general partners, The Krupp Depository
Corporation, as the Corporate Limited
Partner, and those persons who have been
admitted to the Partnership as Investor
Limited Partners pursuant to the terms of the
Partnership Agreement.
4. Property Management Agreement relating to
Luria's Plaza, dated as of January 1, 1996,
between the Partnership and Berkshire
Property Management Company.
5. Property Management Agreement relating to
High Point National Furniture Mart, dated
as of January 1, 1996, between the
Partnership and Berkshire Property
Management Company.
6. Property Management Agreement relating to
Tradewinds Shopping Center, dated as of
January 1, 1996, between the Partnership
and Berkshire Property Management
Company.
7. Settlement Agreement and Release, dated as
of June 27, 1996, between the Corporate
General Partner and Liquidity Financial
Group, L.P.
8. First Amendment to Settlement Agreement
and Release, dated as of October 8, 1996,
between the Corporate General Partner and
Liquidity Financial Group, L.P.
9. Second Amendment to Settlement Agreement
and Release, dated as of January 6, 1997,
between the Corporate General Partner and
Liquidity Financial Group, L.P.
10. Agreement, dated as of November 26, 1996,
between the Corporate General Partner and
Longacre Corp.
11. First Amendment to Agreement, dated as of
January 8, 1997, between the Corporate
General Partner and Longacre Corp.
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