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:
[ ] Preliminary Proxy Statement
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Rule 14a-6(e)(2))
[x ] 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)
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computed pursuant to Exchange Act Rule 0-11 (set forth the
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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 January 22, 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 January 2, 2004.
BACKGROUND AND REASONS FOR THE AMENDMENTS
General
The Partnership currently holds limited partnership interests in
eight 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 could 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 could 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 previous 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
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
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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. During 2002 and 2003, Wedgewood
Village operated at a deficit. In the absence of substantial capital
expenditures, we expect that it will continue to operate at a deficit for the
foreseeable future. These required capital expenditures are greater than the
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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. If the Project is sold, the Partnership would avoid 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
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
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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 eight
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
eight local limited partnerships that own residential low income rental
projects located in five 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. During 2002 and 2003, Wedgewood
Village operated at a deficit. In the absence of substantial capital
expenditures, we expect that it will continue to operate at a deficit for the
foreseeable future. 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. If the Project is sold, the Partnership would avoid 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 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.
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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 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.
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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 January 22, 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 January 22,
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.
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.
8
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 five 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, 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.
9
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:
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
10
January 2, 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
January 2, 2004
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 __________ ___, 2004, 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 sale 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 __________ ___, 2004, 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
January 2, 2004
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
January 2, 2004, 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 December 20, 2003, 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,
Skadden, Arps, Slate, Meagher & Flom LLP
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 January 22, 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:______________________