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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [x]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[x] Preliminary Proxy Statement
[ ] CONFIDENTIAL, FOR USE OF THE COMMISSION ONLY
(AS PERMITTED BY RULE 14A-6(E)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to ss.240.14a-12
REAL ESTATE ASSOCIATES LIMITED
(Name of Registrant as Specified In Its Charter)
Payment of Filing Fee (Check the appropriate box):
[x] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
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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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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
1) Amount previously paid:
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2) Form, Schedule or Registration Statement No.:
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4) Date Filed:
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PRELIMINARY COPY -- SUBJECT TO COMPLETION
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON DECEMBER 18, 2003
REAL ESTATE ASSOCIATES LIMITED
CONSENT SOLICITATION STATEMENT
Dear Limited Partner:
We are writing to recommend and seek your consent to amendments to the
agreement of limited partnership (the "PARTNERSHIP AGREEMENT") of Real Estate
Associates Limited (the "PARTNERSHIP"). We believe that these amendments (the
"AMENDMENTS") will facilitate the sale of the Partnership's interests (the
"PROJECT INTERESTS") in the local limited partnerships that own the low income
housing projects (the "PROJECTS") in which the Partnership has invested. We are
seeking your consent to amend the Partnership Agreement in the following ways:
o Eliminate the requirement that the cash proceeds from the sale of
an individual Project or Project Interest must exceed the tax
liability to the limited partners resulting from that sale; and
o Modify the provision in the Partnership Agreement that requires
limited partner approval for a sale of all or substantially all
assets so that sales of Projects or Project Interests in
transactions that are not a series of related transactions do not
require limited partner approval, even if all Projects or Project
Interests are ultimately sold.
We believe that the vast majority of potential benefits from
investment in the Partnership have been realized, and that most limited
partners are not realizing material benefits from continuing to own their
limited partnership interests. Accordingly, the Partnership's current business
strategy is the orderly disposition of the Projects and Project Interests. We
believe that the proposed Amendments will improve our ability to divest the
Projects and Project Interests more quickly and, as a result, may enable us to
make distributions to the limited partners sooner (and, potentially, in greater
amounts) than if the Amendments were not made. However, we cannot assure you
that approval of the Amendments will result in larger or more rapid
distributions to the limited partners.
In many instances, a sale of an individual Project or Project Interest
may be in the best interest of the Partnership and limited partners even if the
cash proceeds from the sale do not exceed the resulting tax liability to the
limited partners. If a property were foreclosed, limited partners could
recognize a tax liability without any corresponding cash distribution. Limited
partners would often be better off if the Partnership sold the property to
avoid foreclosure, even if the cash proceeds would be less than the limited
partners' tax liability resulting from the sale. Such a sale may potentially
generate net cash proceeds that the Partnership may distribute to the limited
partners. Such a distribution would enable the limited partners to partially
offset their tax liability resulting from the sale. In addition, if a property
is operating at a deficit and is likely to continue to do so, it may be in the
limited partners' best interests to sell the property, even if the cash
proceeds from the sale do not exceed the resulting tax liability to the limited
partners. Such a sale could result in an economic loss for the limited
partners, but it could save the Partnership and limited partners from future
losses. The Amendments would allow such sales.
We believe that the Amendments are fair to the limited partners, and
we recommend that you "CONSENT" to the Amendments. You should note, however,
that our recommendation is subject to an inherent conflict of interest as
described more fully in the enclosed Consent Solicitation Statement. If any,
but not all, of the Amendments are approved, the Partnership Agreement will be
amended to reflect the Amendments that are approved.
WE URGE YOU TO READ CAREFULLY THE CONSENT SOLICITATION STATEMENT
BEFORE COMPLETING YOUR CONSENT CARD. YOUR CONSENT IS IMPORTANT. APPROVAL
REQUIRES THE CONSENT OF A MAJORITY OF THE OUTSTANDING LIMITED PARTNER
INTERESTS. FAILURE TO RETURN YOUR CONSENT CARD BY __________ ___, 2004 WILL BE
TREATED AS A CONSENT TO THE AMENDMENTS. TO BE SURE YOUR CONSENT IS REPRESENTED,
PLEASE SIGN, DATE AND RETURN THE ENCLOSED CONSENT CARD AS PROMPTLY AS POSSIBLE.
WE URGE YOU TO CONSULT YOUR TAX ADVISOR REGARDING THE FEDERAL, STATE,
LOCAL AND OTHER TAX CONSEQUENCES TO YOU OF A SALE OR OTHER DISPOSITION OF A
PROJECT OR PROJECT INTERESTS.
If you have any questions about the Consent Solicitation, please do
not hesitate to contact The Altman Group, the Partnership's consent
solicitation agent, at (201) 806-2208.
Very truly yours,
NATIONAL PARTNERSHIP INVESTMENTS CORP.
General Partner
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE
SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED OF THIS CONSENT SOLICITATION
STATEMENT OR DETERMINED IF THIS CONSENT SOLICITATION STATEMENT IS TRUTHFUL OR
COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
This Consent Solicitation Statement and the enclosed form of Consent
Card are first being mailed to limited partners on or about __________ ___,
200__.
BACKGROUND AND REASONS FOR THE AMENDMENTS
GENERAL
The Partnership currently holds limited partnership interests in 8
local limited partnerships. Due to the Partnership's lack of cash, there is
substantial doubt about the ability of the Projects that operate at a deficit
to make payments on their mortgage debt. If a Project were foreclosed, it would
be forfeited to the holder(s) of the mortgage note in satisfaction of the
indebtedness evidenced by such note. Foreclosure of the Projects would
eliminate any potential future returns that the limited partners might receive
from continued ownership or more advantageous dispositions of the Projects or
Project Interests. Additionally, foreclosure would likely create a taxable
event for the limited partners, but would not generate cash for potential
distribution to the limited partners for payment of resulting taxes.
We believe that it is in the best interest of the Partnership and its
limited partners to dispose of the Projects and Project Interests. We believe
that adoption of the Amendments will enhance our prospects for completing this
disposition. The Partnership is not currently realizing enough cash flow to
generate distributions to the limited partners and does not anticipate
realizing sufficient cash flow in the future to enable it to make distributions
to limited partners. The Partnership realized a net decrease in cash and cash
equivalents of approximately $0 and $2,000 for the years ended December 31,
2002 and 2001, respectively. Limited partners realized an aggregate of
approximately $91,502 in current passive activity loss for 2002, comprised of
passive rental real estate loss. In addition, limited partners realized
approximately $59,710 in portfolio income in 2002. The limited partners will be
liable for the taxes related to the Partnership's net passive activity income
and the Partnership's portfolio income without any corresponding cash
distribution. In light of the limited cash flow currently generated by the
Projects and the continuing adverse effect of changes in the laws and policies
applicable to Housing Assistance Payments Contracts under Section 8 of the
United States Housing Act ("HAP CONTRACTS") in the last few years, we believe
that the Partnership should dispose of the Projects and Project Interests as
soon as reasonably practicable.
Prospective purchasers of the Projects or Project Interests may be
able to avail themselves of certain benefits not available to the Partnership.
These potential benefits include (i) earning fee income by performing the
property management functions currently performed by the local general
partners, (ii) acquiring and restructuring the mortgage indebtedness to which
the Projects are subject and (iii) realizing economies of scale in connection
with ownership and management of a large number of properties. These benefits
would not be available to the Partnership because it does not have sufficient
capital to buy out the local general partner interests and to purchase the
mortgage loans encumbering the Projects. Additionally, such activities would be
inconsistent with the Partnership's original investment objectives.
In considering whether the Amendments are in the interests of the
Partnership and the limited partners, we also considered the continuing effects
of changes made in the last few years in the law and policies relating to
government-assisted housing. Under the Multi-family Assisted Housing Reform and
Affordability Act of 1997 ("MAHRAA"), to the extent that rents are above
market, as is the case with many of the Projects, the amount of the HAP
Contract payments will be reduced. While MAHRAA also contemplates a
restructuring of the mortgage loans to reduce the current debt service on the
mortgage loans, it is expected that the reduced HAP Contract payments will more
than offset any benefits from restructuring the mortgage loans and result in a
significant reduction in the cash flow to the local limited partnerships. In
our experience with restructurings that are currently being negotiated or have
recently been concluded by affiliates of ours, the restructurings proposed by
HUD significantly reduced the cash flow from these properties. Furthermore,
since the local general partners control the restructuring negotiations and
most of the local general partners' income results from their management fees,
there can be no assurance that any restructuring negotiated by local general
partners will optimize cash flow to the Partnership or result in any cash
distributions to the limited partners. Moreover, there are a number of
uncertainties as to the restructuring process, including potential for adverse
tax consequences to the limited partners and the local general partners. As a
result, we believe that it is unlikely that the limited partners will benefit
from any restructuring under MAHRAA.
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POTENTIAL BENEFITS OF THE AMENDMENTS
We believe that the Amendments will benefit the Partnership for the
following reasons:
o THE AMENDMENTS WILL HELP REDUCE THE RISK OF FORECLOSURE (AND THE
FORFEITURE OF THE PROJECTS) BY FACILITATING ALTERNATIVE DISPOSITIONS. Due
to the Partnership's lack of cash, there is substantial doubt about the
ability of the Projects that operate at a deficit to make payments on
their mortgage debt. If a Project were foreclosed, it would be forfeited
to the holder(s) of the mortgage note in satisfaction of the indebtedness
evidenced by such note. Foreclosure of the Projects would eliminate any
potential future returns that the limited partners might receive from
continued ownership or more advantageous dispositions of the Projects or
Project Interests. Additionally, foreclosure would likely create a taxable
event for the limited partners, but would not generate cash proceeds for
potential distribution to the limited partners for the payment of any
resulting tax liability.
o WE BELIEVE THAT NOW MAY BE AN OPPORTUNE TIME FOR THE PARTNERSHIP TO
DISPOSE OF THE PROJECTS OR PROJECT INTERESTS, GIVEN CURRENT CONDITIONS IN
THE REAL ESTATE MARKET. We believe that the current interest rate
environment and the availability of capital for real estate investments
may facilitate the disposition of the Projects or Project Interests more
quickly and provide the Partnership with an opportunity to maximize the
value of the Projects or Project Interests. In addition, we have taken
into account the adverse impact of changes in laws and policies relating
to payments under HAP Contracts over the last few years, which have
generally resulted in significant reductions in cash flow from the
Projects.
o THE AMENDMENTS WILL FACILITATE THE DISPOSITIONS OF PROJECTS THAT ARE
CURRENTLY SUBJECT TO EXPIRING HAP CONTRACTS. Each of the Projects is
subject to either a HAP Contract or a rent subsidy provided by the U.S.
Department of Agriculture. We anticipate that, for the foreseeable future,
rental rate increases under such HAP Contracts will either not be
permitted by HUD or will be negligible and unlikely to exceed increases in
operating expenses. Most of these HAP Contracts have expired, and HUD may
not renew them under their current terms. However, the Projects will
continue to be subject to MAHRAA. Under MAHRAA, even if the HAP Contracts
are not renewed, HUD may still reduce Project rents and restructure the
Project mortgages, which is expected to reduce the cash flow from the
Projects and could lead to additional foreclosures of the Projects. As
discussed above, such foreclosures would likely have adverse tax
consequences for the limited partners. Accordingly, we believe it may be
beneficial to the limited partners to reduce such uncertainties by
approving the Amendments in order to enhance the Partnership's ability to
dispose of these assets.
RISKS AND DISADVANTAGES OF THE AMENDMENTS
The following sets forth the risks and disadvantages of the
Amendments. Before deciding whether to consent to the Amendments, you should
carefully consider these factors.
o THE AMENDMENTS WOULD PERMIT THE GENERAL PARTNER TO RECEIVE DISPOSITION
FEES THAT IT WOULD NOT RECEIVE IN A FORECLOSURE. The Partnership Agreement
currently prohibits the sale of a Project or Project Interest if the cash
proceeds do not exceed the resulting tax liability to the limited
partners, even if such a sale would avoid foreclosure. The Amendments
would permit such a sale. Therefore, the Amendments will allow the General
Partner to effect dispositions of Projects for which it may receive
disposition fees. It would not receive these fees in a foreclosure. As a
result, the General Partner has a conflict of interest in recommending the
Amendments.
o EXPENSES, INCLUDING DISPOSITION FEES PAID TO THE GENERAL PARTNER, MAY
CONSUME ALL OR SUBSTANTIALLY ALL OF THE NET PROCEEDS FROM A DISPOSITION.
The Partnership Agreement entitles the General Partner to receive
disposition fees. No such fees may be paid until the limited partners have
received distributions that add up to the greater of (i) their aggregate
capital contributions or (ii) an amount sufficient to satisfy the
cumulative tax liability of the limited partners resulting from all sales.
However, unpaid disposition fees accrue and may be paid on a later
disposition. If such accrued fees are ultimately paid on a later
disposition, they could be great enough to consume all of the net
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proceeds from such disposition. There is no equivalent limitation on
immediate payment of other Partnership expenses. Therefore, such other
expenses could consume all of the net proceeds from any disposition. The
Amendments would permit sales for proceeds that do not exceed the tax
liability to limited partners, which may result in sales in which the
expenses consume a greater portion of the proceeds than would have been
the case without the Amendments.
o THE AMENDMENTS WILL PERMIT THE GENERAL PARTNER TO EFFECT A SALE OF A
PROJECT OR PROJECT INTERESTS IN TRANSACTIONS THAT RESULT IN TAX
LIABILITIES TO LIMITED PARTNERS IN EXCESS OF THE CASH PROCEEDS ARISING
FROM SUCH DISPOSITION. The Partnership Agreement currently prohibits the
sale of a Project or Project Interest if the cash proceeds do not exceed
the tax liability to the limited partners associated with such sale. The
Amendments would eliminate this prohibition. Therefore, the General
Partner could effect a sale of a Project or Project Interests in a taxable
transaction that results in tax liabilities for the limited partners in
excess of any cash proceeds received from the sale or distributed to the
limited partners.
o THE AMENDMENTS WILL PERMIT THE GENERAL PARTNER TO EFFECT A SALE OF ALL OR
SUBSTANTIALLY ALL OF THE PARTNERSHIP'S ASSETS WITHOUT LIMITED PARTNER
APPROVAL IF THE ASSETS ARE TO BE SOLD IN MULTIPLE TRANSACTIONS THAT ARE
NOT A SERIES OF RELATED TRANSACTIONS OR IF THE ASSET TO BE SOLD IS A
SINGLE PROJECT OR PROJECT INTEREST. The Partnership Agreement currently
requires the approval of limited partners holding a majority of the
limited partner interests for a sale of all or substantially all of the
Partnership's assets. As a result, the Amendments would permit the General
Partner to effect transactions that the limited partners might not have
approved.
WE URGE YOU TO CONSULT YOUR TAX ADVISOR REGARDING THE FEDERAL, STATE,
LOCAL AND OTHER TAX CONSEQUENCES TO YOU OF A SALE OR OTHER DISPOSITION OF A
PROJECT OR PROJECT INTERESTS.
THE PROPOSED AMENDMENTS
The full text of the Amendments is attached as Annex A hereto. The
opinion of Skadden, Arps, Slate, Meagher & Flom LLP as to the legality of the
proposed amendments is attached as Annex B hereto. We are seeking your consent
to amend the Partnership Agreement in the following ways:
PERMIT SALES WHERE THE CASH PROCEEDS WOULD BE LESS THAN THE TAX LIABILITY.
The Partnership Agreement currently prohibits the Partnership from
selling any Project or Project Interest if the cash proceeds from such sale
would be less than the taxes at the then maximum state and federal tax rates
(the "TAX REQUIREMENT"). We are seeking your approval to amend to the
Partnership Agreement to eliminate the Tax Requirement. This amendment would
allow the Partnership to sell a Project or Project Interests in situations
where the Tax Requirement would not be satisfied. In many instances, a sale may
be in the best interest of the Partnership and limited partners even if the Tax
Requirement is not satisfied. If a property were foreclosed, limited partners
could recognize a tax liability without any corresponding cash distribution.
Limited partners would often be better off if the Partnership sold the property
to avoid foreclosure, even if the cash proceeds are less than the limited
partners' tax liability associated with the sale. Such a sale may generate net
cash proceeds that the Partnership could distribute to the limited partners.
Such a distribution would enable the limited partners to partially offset their
tax liability resulting from the sale. The Tax Requirement currently prohibits
the Partnership from making such a sale to avoid foreclosure. In addition, if a
property is operating at a deficit and is likely to continue to do so, it may
be in the limited partners' best interests to sell the property, even if the
Tax Requirement would not be satisfied. Such a sale could result in an economic
loss for the limited partners, but it could save the Partnership and limited
partners from future losses. The Amendments would allow such sales.
One of the local limited partnerships, Bernroe, Ltd., has entered into
a contract to sell its Project, Wedgewood Village, a 49-unit housing project
located in Ripley, West Virginia, to Ripley-Wedgewood, L.P., an Ohio limited
partnership. As consideration, the buyer will assume the Project's mortgage,
pay $100 to Bernroe, Ltd., and pay $14,900 toward the closing costs. Closing
costs are estimated to be $25,000. Wedgewood Village is operating at a deficit
and requires substantial capital expenditures to avoid foreclosure. These
required capital expenditures are greater than the Partnership's available cash
reserves. Bernroe, Ltd. has been unable to locate a
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buyer willing to pay consideration sufficient to generate cash proceeds greater
than the tax liability to the limited partners resulting from the sale.
Therefore, the Project can be sold only if the cash proceeds are less than the
tax liability to the limited partners resulting from the sale. If the Project
is not sold, we expect that it will continue to operate at a deficit until the
time of foreclosure. If the Project is sold, the Partnership would avoid the
continuing cost of funding these deficits. The Partnership Agreement currently
prohibits this sale. As a result, the sale is conditioned on our obtaining the
consents of limited partners to the Amendments.
WE URGE YOU TO CONSULT YOUR TAX ADVISOR REGARDING THE FEDERAL, STATE, LOCAL AND
OTHER TAX CONSEQUENCES TO YOU OF A SALE OR OTHER DISPOSITION OF A PROJECT OR
PROJECT INTERESTS.
AMEND THE "SALE OF ALL OR SUBSTANTIALLY ALL ASSETS" PROVISION.
This Amendment would clarify the Partnership Agreement so that sales
of Projects or Project Interests in transactions that are not a series of
related transactions do not require limited partner approval, even if all
Projects or Project Interests are ultimately sold. The Partnership Agreement
prohibits the Partnership from selling all or substantially all of the
Partnership's assets without limited partner consent. The Partnership is not
currently realizing enough cash flow to generate distributions to the limited
partners and does not anticipate realizing sufficient cash flow in the future
to enable it to make distributions to limited partners. The General Partner
believes that the vast majority of potential benefits from investment in the
Partnership have been realized, and that most limited partners are not
realizing material benefits from continuing to own their limited partnership
interests. Accordingly, the Partnership's current business strategy is the
orderly disposition of the Projects and Project Interests. In furtherance of
this strategy, we are seeking your consent to modify the provision in the
Partnership Agreement that requires limited partner approval for a sale of all
or substantially all assets so that sales of Projects or Project Interests in
transactions that are not a series of related transactions do not require
limited partner approval, even if all Projects or Project Interests are
ultimately sold.
The Partnership is not contemplating a specific transaction pursuant
to which all or substantially all of the Partnership's assets will be sold, nor
does the Partnership have any plans to enter into a transaction or a series of
related transactions that would result in the sale of all or substantially all
of the Partnership's assets. Rather, the Partnership intends to liquidate the
Partnership's portfolio through transactions that will be considered on an
individual basis. The proposed amendment will enable the Partnership to enter
into transactions without the delay and expense of soliciting the limited
partners each time a transaction is proposed, even if all the Projects or
Project Interests are ultimately sold, as long as the disposition of all or
substantially all of the Projects of Project Interests is not made in a series
of related transactions. A sale of all or substantially all of the assets in a
series of related transactions would still require limited partner approval.
RECOMMENDATION OF THE GENERAL PARTNER
The General Partner believes that the proposed amendments are
advisable and in the best interest of the Partnership and its limited partners
and recommends that you "CONSENT" to the Amendments. For the reasons that the
General Partner decided to recommend the amendments, see "Background and
Reasons for the Amendments" above.
THE PARTNERSHIP
GENERAL
The Partnership is a limited partnership formed under the laws of the
State of California on September 15, 1977. On October 27, 1978, we offered
16,500 units (the "Units") of limited partnership interests, through an
offering managed by E. F. Hutton Inc. As of December 18, 2003, there were 812
registered holders of our Units and 16,323 Units outstanding.
GENERAL PARTNER
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The Partnership's General Partner is National Partnership Investments
Corp., a California corporation ("NAPICO"). The Partnership has no employees of
its own. On March 11, 2002, Apartment Investment and Management Company, a
Maryland corporation ("AIMCO"), acquired NAPICO from its former owner, Casden
Properties Inc.
OBJECTIVES
Our original objectives were to own and operate real estate assets for
investment so as to obtain:
o tax benefits for the limited partners;
o reasonable protection for the Partnership's capital
investments;
o potential for appreciation, subject to considerations of
capital preservation; and
o potential for future cash distributions from operations (on a
limited basis), refinancings or sales of assets.
OUR RECORD
We have been successful in accomplishing our primary purposes. As of
December 31, 1999, the Partnership had provided its limited partners with tax
benefits (assuming maximum individual federal income tax rates and passive loss
limitations) and cash distributions totaling approximately 94.3% of their
original capital contributions. In 1986, however, the tax laws changed in such
a way as to substantially reduce the ongoing tax benefits to the limited
partners. As a result, we determined that the best course of action was to sell
a significant amount of the Partnership's interests in real property. In 1998,
the Partnership sold its interest in the real estate assets of 8 local limited
partnerships and had its interest in one limited partnership redeemed. In 1999,
we made a cash distribution to the limited partners of $3,861,000. In
September, 2003, the Partnership sold its interest in one of the local limited
partnerships. Since that time, the Managing General Partner has continued to
explore the possibility of disposing or refinancing its remaining interests in
the local limited partnerships.
ASSETS
The Partnership currently holds limited partnership interests in 8
local limited partnerships that own residential low income rental projects
located in 5 different states. The mortgage loans of these projects are payable
to or insured by various governmental agencies.
One of the local limited partnerships, Bernroe, Ltd., has entered into
a contract to sell its Project, Wedgewood Village, a 49-unit housing project
located in Ripley, West Virginia, to Ripley-Wedgewood, L.P., an Ohio limited
partnership. As consideration, the buyer will assume the Project's mortgage,
pay $100 to Bernroe, Ltd., and pay $14,900 toward the closing costs. Closing
costs are estimated to be $25,000. Wedgewood Village is operating at a deficit
and requires substantial capital expenditures to avoid foreclosure. These
required capital expenditures are greater than the Partnership's available cash
reserves. Bernroe, Ltd. has been unable to locate a buyer willing to pay
consideration sufficient to generate cash proceeds greater than the tax
liability to the limited partners resulting from the sale. Therefore, the
Project can be sold only if the cash proceeds are less than the tax liability
to the limited partners resulting from the sale. If the Project is not sold, we
expect that it will continue to operate at a deficit until the time of
foreclosure. If the Project is sold, the Partnership would avoid the continuing
cost of funding these deficits. The Partnership Agreement currently prohibits
this sale. As a result, the sale is conditioned on our obtaining the consents
of limited partners to the Amendments.
The Partnership, as a limited partner, does not exercise control over
the activities and operations, including refinancing or selling decisions, of
the local limited partnerships. However, the Partnership's General Partner owns
the general partners of three of the local limited partnerships.
The local limited partnerships were, in general, organized by private
developers who acquired the sites, or options thereon, and applied for
applicable mortgage insurance and subsidies. The Partnership became the
principal limited partner in these local limited partnerships pursuant to
arm's-length negotiations with these developers, or
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others who act as general partners of the local limited partnerships. As a
limited partner, the Partnership's risk of loss related to any local limited
partnership is limited to the amount of its investment in partnership. The
general partners of each local limited partnerships retain responsibility for
maintaining, operating and managing the properties and, in certain cases, must
consent to the sale of limited partnership assets.
DISTRIBUTIONS
In 1999, the Partnership made a cash distribution to the limited
partners of $3,861,000 after the sale of interests in 8 local limited
partnerships. The Partnership Agreement sets forth a procedure for allocating
distributions among the limited partners and the General Partner. The General
Partner is entitled to receive 1% of the net cash flow from operations to be
distributed, reduced by any amount paid to the General Partner as an annual
management fee. The limited partners as a class are entitled to receive the
balance of the net cash flow from operations to be distributed. There are no
regulatory restrictions on the Partnership's current ability to pay
distributions, although, pursuant to certain state housing finance statutes and
regulations, certain of the local limited partnerships are subject to
limitations on the distributions to the Partnership.
FIDUCIARY RESPONSIBILITY; INDEMNIFICATION
California law requires a general partner to adhere to fiduciary duty
standards under which it owes its limited partners a duty of loyalty and a duty
of care. This generally prohibits a general partner from competing with a
partnership in the conduct of the partnership's business on behalf of a party
having an interest adverse to the partnership and requires the general partner
to exercise any right consistent with the obligation of good faith and fair
dealing and free of gross negligence, reckless conduct, intentional misconduct
or known violations of law. A partnership agreement (a) may not eliminate the
duty of loyalty, but, if not manifestly unreasonable, it may either identify
specific activities that do not violate the duty of loyalty or allow for all of
the partners (or some percentage identified in the partnership agreement) to
authorize or ratify, after full disclosure of all material facts, a specific
act or transaction that otherwise would violate that duty and (b) may contain
provisions releasing a partner from liability for actions taken in good faith
and in the honest belief that the actions are in the best interest of the
partnership, while indemnifying the partner against any good faith belief that
he or she has the power to act. Further, a partner does not violate such duties
because the partner's conduct furthers the partner's own interest.
The General Partner is accountable to the Partnership and the limited
partners as fiduciaries and consequently is obligated, among other things, to
exercise good faith and fair dealing toward other members of the Partnership.
The Partnership Agreement provides that the General Partner and its officers,
directors, employees, agents, affiliates, subsidiaries and assigns are entitled
to be indemnified for any liability, loss or damage resulting from any act or
omission performed or omitted by them in connection with the business of the
Partnership, provided that, if such liability, loss or claim arises out of any
action or inaction of the General Partner, the General Partner must have
determined, in good faith, that such course of conduct was in the best
interests of the Partnership and did not constitute fraud, negligence, breach
of fiduciary duty or willful misconduct by the General Partner.
If a claim is made against the General Partner in connection with its
action on behalf of the Partnership with respect to the Amendments, the General
Partner expects that it will seek to be indemnified by the Partnership with
respect to such claims. Any expenses (including legal fees) incurred by the
General Partner in defending such claim shall be advanced by the Partnership
prior to the final disposition of such claims, subject to the receipt by the
Partnership of an undertaking by the General Partner to repay any amounts
advanced if it is determined that the General Partner's actions constituted
fraud, bad faith, gross negligence, or failure to comply with any
representation, condition or agreement contained in the Partnership Agreement.
A successful claim for indemnification, including the expenses of defending a
claim made, would reduce the Partnership's assets by the amount paid.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The General Partner owns all of the outstanding general partnership
interests of the Partnership, which constitute 1% of the total interests in the
Partnership. The Partnership has no directors or executive officers of its own.
NAPICO is a California corporation owned by LAC Properties Operating
Partnership, L.P., a Delaware limited partnership, the general partner of which
is AIMCO GP LA, L.P., a Delaware limited partnership, the general partner of
which is AIMCO-GP, Inc., a Delaware corporation, which is owned by Apartment
Investment and
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Management Company, a Maryland corporation. None of the directors or executive
officers of NAPICO owns any of the limited partnership interests of the
Partnership. The following table sets forth certain information as of December
18, 2003 with respect to the ownership by any person (including any "group" as
that term is used in Section 13(d)(3) of the Securities Exchange Act of 1934)
known to us to be the beneficial owner of more than 5% of the limited
partnership interests of the Partnership.
NAME AND ADDRESS NUMBER OF UNITS PERCENT OF CLASS
AIMCO Properties, L.P. (1)............. 4,535 27.783%
4582 South Ulster Street Parkway
Suite 1100
Denver, CO 80237
___________________
(1) AIMCO Properties, L.P. is an affiliate of NAPICO.
CONSENT PROCEDURE
LIMITED PARTNER CONSENT
The Partnership Agreement requires the consent of limited partners
holding a majority of the outstanding Units (a "MAJORITY CONSENT") to amend the
Partnership Agreement. Under the terms of the Partnership Agreement, you must
be a limited partner or a substituted limited partner to consent. As permitted
by the Partnership Agreement, the General Partner will treat a failure to
respond as the equivalent of concurrence with its recommendation. Therefore, if
you do not respond by __________ ___, 2004, you will be deemed to have
consented to the Amendments. If any, but not all, of the Amendments are
approved, the Partnership Agreement will be amended to reflect the Amendments
that are approved. Each Amendment is conditioned upon our obtaining a Majority
Consent to such Amendment. Accordingly, if we do not obtain a Majority Consent
to any Amendment, there will be no change in the Partnership Agreement and we
will continue to operate in accordance with the terms of the Partnership
Agreement as it is currently written. In accordance with the terms of the
Partnership Agreement, the Partnership will bear the costs of this consent
solicitation.
CONSENT PROCEDURES
The following is an outline of the procedures to be followed if you
want to consent, or withhold your consent, to the proposed Amendments. A form
of Consent Card is included with this Consent Solicitation Statement. You
should complete this Consent Card in accordance with the instructions contained
in this Consent Solicitation Statement in order to give or withhold your
consent to the proposed Amendments. A failure to respond will be treated as the
equivalent of a consent to the Amendments. These procedures must be strictly
followed in order for the instructions of a limited partner as marked on such
limited partner's consent to be effective:
1. A limited partner may give or withhold his or her consent by
delivering the Consent Card only during the period commencing upon the date of
delivery of this Consent Solicitation Statement and continuing until __________
___, 2004 or such later date as may be determined by the Managing General
Partner (the "SOLICITATION PERIOD").
2. You must return a properly completed, signed and dated Consent Card
in the enclosed postage-paid envelope. If possible, please also fax it to The
Altman Group at fax number (201) 460-0050.
3. You can revoke a previously given consent by signing a subsequently
dated Consent Card that is properly marked to indicate "WITHHOLD CONSENT" and
delivering it to The Altman Group at any time prior to the end of the
Solicitation Period.
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4. A limited partner that fails to return a Consent Card, submits a
signed but unmarked Consent Card, or submits a properly completed, signed and
dated Consent Card marked to indicate "CONSENT" will be deemed to have
consented to the Amendments.
If you have any questions about this consent solicitation, please do
not hesitate to contact The Altman Group, the Partnership's consent
solicitation agent, at (201) 806-2208.
NO DISSENTERS' RIGHTS OF APPRAISAL
Under the Partnership Agreement and California law, limited partners
do not have dissenters' rights of appraisal.
SOLICITATION OF CONSENTS
This Consent Solicitation Statement is being made by the General
Partner. NAPICO and its officers, directors and employees may assist in this
consent solicitation and in providing information to limited partners in
connection with any questions they may have with respect to this Consent
Solicitation Statement and the consent procedures. We have retained The Altman
Group to assist with the solicitation of consents, as well as to assist us with
communicating with our limited partners with respect to this solicitation.
Approximately 5 persons will be utilized by The Altman Group in their efforts.
We expect that The Altman Group will solicit consents by mail, in person, by
telephone, by facsimile and/or by e-mail. In addition to the Partnership's
solicitation by mail, and The Altman Group's efforts, NAPICO may have certain
of its officers, directors and employees solicit, without additional
compensation, consents by mail, in person, by telephone, by facsimile or by
e-mail. Although NAPICO does not currently plan to conduct active solicitation
on the Internet, solicitation materials may be made available on or through
NAPICO's web site or through the Internet.
The cost of the consent solicitation will be borne by the Partnership.
The Altman Group's estimated fee is $2,000, plus reasonable out-of-pocket
expenses.
The Partnership has agreed to indemnify The Altman Group against
certain liabilities and expenses in connection with its engagement, including
certain liabilities under the federal securities laws. The Partnership's plan
to reimburse The Altman Group for any such liabilities or expenses will not be
submitted to the limited partners for a vote.
PARTNER PROPOSALS
In accordance with the terms of our Partnership Agreement, we do not
have annual meetings. Thus, there is no deadline for submitting partner
proposals as set forth in Rule 14a-5 under the Securities Exchange of 1934. The
limited partners may call a special meeting to vote upon matters permitted by
our Partnership Agreement with the prior consent of at least 10% of the limited
partnership interests.
IMPORTANT NOTE
It is important that you return your Consent Card promptly. Limited
partners are urged to complete, sign and date the accompanying form of Consent
Card and mail it in the enclosed envelope, which requires no postage if mailed
in the United States, so that their consent may be recorded.
OTHER MATTERS
Disclosure Regarding Forward-Looking Statements. Certain statements
made herein contain forward-looking statements within the meaning of Section
27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended. Such statements are indicated by
words such as "believes," "intends," "expects," "anticipates" and similar words
or phrases. Such statements are based on current expectations and are subject
to risks, uncertainties and assumptions. Should any of these risks or
uncertainties materialize, or should the underlying assumptions prove
incorrect, actual results may vary materially from those anticipated,
9
estimated or projected. Factors that could cause actual results to differ
materially from those in our forward-looking statements include the ability of
the local general partners to sell the underlying properties on economically
advantageous terms, real estate and general economic conditions in the markets
in which the properties are located and changes in federal and state tax laws
that may create tax disadvantages for certain distributions, some of which may
be beyond our control.
Given these uncertainties, limited partners are cautioned not to place
undue reliance on our forward-looking statements.
Where You Can Find More Information. The Partnership files annual,
quarterly and current reports, proxy statements and other information with the
Securities and Exchange Commission (the "SEC"). You may read and copy any
reports, statements or other information that the Partnership files at the
SEC's public reference room at 450 Fifth Street, N.W., Washington, D.C. 20549.
Please call the SEC at 1-800-SEC-0330 for further information on the operation
of the public reference rooms. The Partnership's public filings are also
available to the public from commercial document retrieval services and at the
website maintained by the SEC at "http://www.sec.gov." Reports, proxy
statements and other information concerning the Partnership also may be
inspected at the offices of the New York Stock Exchange, Inc., 20 Broad Street,
New York, New York 10005.
The SEC allows the Partnership to incorporate by reference information
into this Consent Solicitation Statement, which means that the Partnership can
disclose important information to you by referring you to another document
filed separately with the SEC. The information incorporated by reference is
deemed to be part of this Consent Solicitation Statement, except for any
information modified or superseded by information contained directly in the
Consent Solicitation Statement or in later filed documents incorporated by
reference into this document. Except as otherwise indicated, this document
incorporates by reference the documents set forth below that the Partnership
has previously filed with the SEC. These documents contain important
information about the Partnership and its financial condition.
o Annual Report of the Partnership on Form 10-KSB for the fiscal year ended
December 31, 2002;
o Quarterly Reports of the Partnership on Form 10-QSB for the fiscal
quarters ended March 31, 2003, June 30, 2003 and September 30, 2003; and
o Current Reports of the Partnership on Form 8-K, filed with the SEC on
April 30, 2003, June 2, 2003, August 13, 2003 and November 26, 2003.
The Partnership hereby incorporates by reference into this Consent
Solicitation Statement additional documents that the Partnership may file with
the SEC between the date of this Consent Solicitation Statement and the end of
the Solicitation Period. These include periodic reports, such as Annual Reports
on Form 10-KSB, Quarterly Reports on Form 10-QSB and Current Reports on Form
8-K, as well as proxy statements.
The Partnership may have sent you some of the documents incorporated
by reference, but you can obtain any of them through the Partnership or the
SEC's website described above. Documents incorporated by reference are
available from the Partnership without charge, excluding all exhibits unless
specifically incorporated by reference as exhibits into this Consent
Solicitation Statement.
You may obtain some of the documents about the Partnership at the
Managing General Partner's website, "http://www.napico.com" by selecting
"Partnership Financial Information."
The Partnership is not incorporating the contents of the website of
the SEC, the Partnership or any other person into this Consent Solicitation
Statement.
You may obtain documents incorporated by reference into this Consent
Solicitation Statement by requesting them in writing from the Managing General
Partner at the following address:
10
National Partnership Investments Corp.
9090 Wilshire Boulevard, Suite 201
Beverly Hills, California 90211
Attention: Investor Services
Telephone (800) 666-6274
You should rely only on the information contained in, or incorporated
by reference into, this Consent Solicitation Statement. The Partnership has not
authorized anyone to provide you with information that is different from what
is contained in this Consent Solicitation Statement. This Consent Solicitation
Statement is dated __________ ___, 2004. You should not assume that the
information contained in the Consent Solicitation Statement is accurate as of
any date other than that date.
NATIONAL PARTNERSHIP INVESTMENTS, CORP.
General Partner
__________ ___, 200__
11
ANNEX A
AMENDMENT TO THE THIRD RESTATED CERTIFICATE
AND AGREEMENT OF LIMITED PARTNERSHIP OF
REAL ESTATE ASSOCIATES LIMITED
This Amendment to the Third Restated Certificate and Agreement of
Limited Partnership, as amended to date (the "Partnership Agreement") of Real
Estate Associates Limited, a California limited partnership (the
"Partnership"), is made and entered into as of __________ ___, 200__, by and
among National Partnership Investments Corp., a California corporation
("NAPICO"), as general partner of the Partnership, and NAPICO, as
attorney-in-fact for the limited partners of the Partnership.
WHEREAS, NAPICO and limited partners owning a majority of the
outstanding limited partnership interests of the Partnership have approved this
Amendment.
NOW THEREFORE, the parties hereto hereby agree as follows:
1. Section 9.3(d) of the Partnership Agreement is hereby amended
to read in its entirety as follows:
"(d) upon any sales or refinancing the Partnership
shall not reinvest any proceeds thereof prior to distributing
to the Partners from the proceeds sufficient cash to pay the
state and federal tax at the then maximum rates, and may
distribute to the Partners the balance of the Proceeds;"
2. Except as specifically amended hereby, the terms, covenants,
provisions and conditions of the Partnership Agreement shall remain unmodified
and continue in full force and effect and, except as amended hereby, all of the
terms, covenants, provisions and conditions of the Agreement are hereby
ratified and confirmed in all respects.
[Signature page follows]
A-1
IN WITNESS WHEREOF, the undersigned have executed this
Amendment as of the date first above written.
NATIONAL PARTNERSHIP INVESTMENTS CORP.,
as General Partner
By: ________________________________________
Jeffrey H. Sussman,
Senior Vice President,
General Counsel and Secretary
NATIONAL PARTNERSHIP INVESTMENTS CORP.,
as Attorney-in-Fact for the Limited Partners
By: ________________________________________
Jeffrey H. Sussman,
Senior Vice President,
General Counsel and Secretary
A-2
AMENDMENT TO THE THIRD RESTATED CERTIFICATE
AND AGREEMENT OF LIMITED PARTNERSHIP OF
REAL ESTATE ASSOCIATES LIMITED
This Amendment to the Third Restated Certificate and Agreement of
Limited Partnership, as amended to date (the "Partnership Agreement") of Real
Estate Associates Limited, a California limited partnership (the
"Partnership"), is made and entered into as of __________ ___, 200__, by and
among National Partnership Investments Corp., a California corporation
("NAPICO"), as general partner of the Partnership, and NAPICO, as
attorney-in-fact for the limited partners of the Partnership.
WHEREAS, NAPICO and limited partners owning a majority of the
outstanding limited partnership interests of the Partnership have approved this
Amendment.
NOW THEREFORE, the parties hereto hereby agree as follows:
1. Section 9.3(t) of the Partnership Agreement is hereby amended
to read in its entirety as follows:
"(t) the Partnership shall not sell all or
substantially all of the Partnership's assets in a single
transaction or a series of related transactions without
obtaining the consent of Limited Partners owning a majority
of the Units; provided, however, that the foregoing will not
apply to a sale of a single Project or Project Interest;"
2. Except as specifically amended hereby, the terms, covenants,
provisions and conditions of the Partnership Agreement shall remain unmodified
and continue in full force and effect and, except as amended hereby, all of the
terms, covenants, provisions and conditions of the Agreement are hereby
ratified and confirmed in all respects.
[Signature page follows]
A-3
IN WITNESS WHEREOF, the undersigned have executed this
Amendment as of the date first above written.
NATIONAL PARTNERSHIP INVESTMENTS CORP.,
as General Partner
By: ________________________________________
Jeffrey H. Sussman,
Senior Vice President,
General Counsel and Secretary
NATIONAL PARTNERSHIP INVESTMENTS CORP.,
as Attorney-in-Fact for the Limited Partners
By: ________________________________________
Jeffrey H. Sussman,
Senior Vice President,
General Counsel and Secretary
A-4
ANNEX B
Skadden, Arps, Slate, Meagher & Flom LLP
Four Times Square
New York 10036-6522
__________ ___, 200__
Real Estate Associates Limited
c/o National Partnership Investments Corp.
9090 Wilshire Boulevard, Second Floor
Beverly Hills, California 90211
Re: Proposed Amendments to Agreement of Limited Partnership
Ladies and Gentlemen:
We have acted as special counsel to Real Estate Associates
Limited, a California limited partnership (the "Partnership"), in connection
with proposed amendments (the "Proposed Amendments") to the Third Restated
Certificate and Agreement of Limited Partnership, as amended to date (the
"Partnership Agreement"), of the Partnership. The Proposed Amendments are
attached as Exhibit I hereto. This opinion is being delivered pursuant to
Section 14.1 of the Partnership Agreement.
In our examination we have assumed the genuineness of all
signatures, the legal capacity of natural persons, the authenticity of all
documents submitted to us as originals, the conformity to original documents of
all documents submitted to us as facsimile, electronic, certified or
photostatic copies, and the authenticity of the originals of such copies. As to
any facts material to this opinion that we did not independently establish or
verify, we have relied upon statements and representations of the Partnership
and its general partners, officers of such general partners and other
representatives and of public officials, including the facts and conclusions
set forth therein.
In rendering the opinions set forth herein, we have examined
and relied on originals or copies of the following:
(a) the Proposed Amendments;
(b) the Partnership Agreement, certified by Jeffrey H.
Sussman, the Secretary of National Partnership Investments Corp., a California
corporation ("NAPICO"), general partner of the Partnership;
(c) the certificate of Jeffrey H. Sussman, the Secretary of
NAPICO, dated the date hereof;
(d) resolutions of the Board of Directors of NAPICO, adopted
on __________ ___, 200__, relating to the Proposed Amendments;
(e) the Certificate of Limited Partnership of the
Partnership, as amended to date and certified by the Secretary of State of the
State of California;
(f) a certificate, dated __________ ___, 200__, of the
Secretary of State of the State of California, as to the Partnership's
existence and good standing in the State of California; and
B-1
(g) such other documents as we have deemed necessary or
appropriate as a basis for the opinions set forth below.
We express no opinion as to the laws of any jurisdiction
other than the Uniform Limited Partnership Act, as in effect in the State of
California, and the California Revised Limited Partnership Act.
Based upon the foregoing and subject to the limitations,
qualifications, exceptions and assumptions set forth herein, we are of the
opinion that the Proposed Amendments, if duly approved by the limited partners
of the Partnership in accordance with the terms of the Partnership Agreement,
will not contravene any provision of the Uniform Limited Partnership Act, as in
effect in the State of California, or the California Revised Limited
Partnership Act.
In rendering the foregoing opinion, we have assumed, with
your consent, that:
(a) the Partnership is validly existing and in good standing as a limited
partnership under the laws of the State of California; and
(b) the Proposed Amendments have been duly authorized and approved by the
general partner of the Partnership.
This opinion is being furnished only to you in connection
with the Proposed Amendments and is solely for your benefit and is not to be
used, circulated, quoted or otherwise referred to for any other purpose or
relied upon by, or assigned to, any other person or entity for any purpose
without our prior written consent. Notwithstanding the foregoing, you (and each
of your employees, representatives or other agents) may disclose this opinion
(i) to limited partners of the Partnership and (ii) to any and all persons,
without limitation of any kind, to the extent such disclosure may be relevant
to understanding the tax treatment or tax structure of the Proposed Amendments;
provided that any and all such persons to whom you make such disclosure may not
rely upon this opinion unless otherwise permitted hereby.
Very truly yours,
B-2
CONSENT SOLICITED BY
THE GENERAL PARTNER OF
REAL ESTATE ASSOCIATES LIMITED
THE GENERAL PARTNER OF THE PARTNERSHIP RECOMMENDS THAT YOU CONSENT TO
EACH OF THE PROPOSALS BELOW.
The undersigned, a limited partner of REAL ESTATE ASSOCIATES LIMITED
("REAL" or the "Partnership"), acting with respect to all of the limited
partnership interests held by the undersigned on the date hereof, hereby
consents, withholds consent or abstains, as specified below. All terms used but
not defined herein shall have the meanings ascribed to such terms in the REAL
Consent Solicitation Statement furnished herewith to limited partners of REAL.
A FAILURE TO EXECUTE AND RETURN THIS CONSENT CARD BY __________ ___, 2004 WILL
BE DEEMED A CONSENT TO EACH OF THE PROPOSALS SET FORTH BELOW. A SIGNED BUT
UNMARKED CONSENT CARD WILL BE DEEMED A CONSENT TO EACH OF THE PROPOSALS SET
FORTH BELOW.
______________________________________________________________________________
PROPOSAL 1. Amend Section 9.3(d) of the Partnership Agreement to allow the
Partnership to sell individual Projects or Projects Interests for less than the
amount necessary to cover the resulting tax liability.
[ ] CONSENT [ ] WITHHOLD CONSENT [ ] ABSTAIN
______________________________________________________________________________
PROPOSAL 2. Amend Section 9.3(t) of the Partnership Agreement so that sales of
Projects or Project Interests in transactions that are not a series of related
transactions do not require limited partner approval, even if all Projects or
Project Interests are ultimately sold.
[ ] CONSENT [ ] WITHHOLD CONSENT [ ] ABSTAIN
______________________________________________________________________________
PLEASE SIGN, DATE AND FAX THIS CONSENT CARD TO (201) 460-0050, ATTN: JASON
VINICK, AND MAIL THIS CONSENT CARD TODAY IN THE ENCLOSED POSTAGE PAID ENVELOPE.
IF YOU HAVE ANY QUESTIONS OR NEED ASSISTANCE, PLEASE CALL THE ALTMAN GROUP AT
(201) 806-2208.
PLEASE SIGN YOUR NAME BELOW. IF YOUR PARTNERSHIP INTERESTS ARE HELD JOINTLY,
EACH LIMITED PARTNER SHOULD SIGN. WHEN SIGNING AS ATTORNEY, EXECUTOR,
ADMINISTRATOR, TRUSTEE OR GUARDIAN, PLEASE GIVE FULL TITLE AS SUCH. IF A
CORPORATION, PLEASE SIGN IN FULL CORPORATE NAME BY PRESIDENT OR AUTHORIZED
OFFICER. IF A PARTNERSHIP, PLEASE SIGN IN PARTNERSHIP NAME BY AUTHORIZED
PERSON.
Dated: ________________________, 2004
Signature:______________________ Signature:______________________
Name:_________________________ Name:_________________________
Title:__________________________ Title:__________________________
Telephone Number:_________________