April 10, 2001
OFFER TO PURCHASE
3,000 UNITS OF LIMITED PARTNERSHIP INTERESTS
in
NATIONAL REAL ESTATE LIMITED PARTNERSHIP INCOME PROPERTIES
by
MILLENIUM MANAGEMENT, LLC
for
$210.00 PER UNIT IN CASH
THE OFFER, WITHDRAWAL RIGHTS AND PRORATION PERIOD WILL EXPIRE AT 5:00 P.M., LOS
ANGELES TIME, ON MONDAY, MAY 9, 2001, UNLESS THE OFFER IS EXTENDED.
Millenium Management, LLC ("Millenium" or the "Purchaser") is offering to
purchase your limited partnership interests ("Units") in National Real Estate
Limited Partnership Income Properties. Below are the principal terms and factors
you should consider in deciding whether or not to tender Units:
o Millenium will pay $210 per Unit. Millenium will deduct from that
price the amount of the distributions made to you by the Partnership
after April 9, 2001, and any transfer fees imposed by the
Partnership for each transfer. The Partnership has advised us transfer
fees are $50 per transfer (regardless of the number of Units
transferred). See "Description of the Offer."
o Based on its own analysis, the Purchaser has estimated the range of
values for a Unit to be from $178 to $214 per Unit. See "Determination
of Purchase Price - Value of Partnership's Units."
o There is no established trading market for the Units other than
limited and sporadic trading through matching services or privately
negotiated sales. The most recent trade reported by Partnership
Spectrum was for $100 per Unit. At present, resale to the Partnership
into a repurchase pool provided by the Partnership, privately
negotiated sales, and sales through intermediaries (such as matching
services) are the only means available to a Unit Holder to liquidate
an investment in Units (other than this Offer or other occasional
offers by other partnership investors, if any). See "Determination of
Purchase Price - Trading History of the Units."
o Pursuant to the settlement of a class action lawsuit, the Partnership
is required to sell its properties. According to its most recent
Annual Report on Form 10-K, an Offering Memorandum for marketing the
Property is presently being prepared. It is uncertain if and when any
sale of the Partnership's properties would occur, or what the proceeds
of any such sales would be. See "Certain Information Concerning the
Purchaser - Prior Acquisitions of Units and Prior Contacts" and
Appendix A - Part 1.
o An affiliate of the Purchaser may make an offer to acquire the
self-storage properties owned by the Partnership. The Purchaser is
making this Offer with a view to increasing the likelihood that its
affiliate will be successful in acquiring the Partnership's
properties. Purchaser expects to exercise the voting power of the
Units acquired in order to approve a sale of the properties to
Purchaser's affiliate if it makes an offer and the offer is accepted.
See "Purpose of the Offer," "Future Plans of the Purchaser" and
"Effects of the Offer."
o The Offer allows Unit Holders to dispose of their Units without
incurring the sales commissions (typically up to 8% with a minimum of
$150-$200) associated with transfers of Units arranged through brokers
or other intermediaries. See "Description of the Offer."
o If the Offer is fully subscribed, the Purchaser will own 33% of the
outstanding Units and be in a position to exercise substantial
influence over the Partnership, including over the sale of its
properties. See "Future Plans of the Purchaser" and "Effects of the
Offer."
o Resales of Units by Unit Holders who do not tender their Units in the
Offer are more likely to be limited after the Offer because the
Purchaser is tendering for 33% of the outstanding Units and the
general partners of the Partnership may limit resales of Units if,
among other things, a proposed transfer would result in there being a
sale or exchange of 50% or more of the total interests in the
Partnership's capital and profits within any 12 month period. See
"Effects of the Offer."
o There is a conflict between the desire of the Purchaser to purchase
Units at a low price and the desire of the Unit Holders to sell their
Units at a high price.
o The Offer is an immediate opportunity for Unit Holders to liquidate
their investment in the Partnership, subject to proration, but Unit
Holders who tender their Units will be giving up the opportunity to
participate in any potential future benefits from ownership of Units,
including the opportunity to receive future liquidating distributions
which will occur (if at all) at an unknown future date and will equal
(if anything) an amount that may be greater or less than Purchaser's
offer price. See "Certain Information Concerning the Partnership,"
"Future Plans of the Purchaser," "Effects of the Offer" and Appendix
A.
Each Unit Holder must make his own decision, based on the Unit Holder's
particular circumstances, whether to tender Units. Unit Holders should consult
with their respective advisors about the financial, tax, legal and other
implications of accepting the Offer.
The above statements are intended only as a brief overview of the principal
terms and considerations regarding the Offer. The entire Offer to Purchase,
which follows, provides substantially greater detail about the Offer, and all of
the statements above are qualified by the entire Offer to Purchase. You should
read it completely and carefully before deciding whether or not to tender your
Units. The Offer is subject to certain terms and conditions set forth in this
Offer to Purchase, and in the related Agreement of Transfer and Letter of
Transmittal, that are not summarized above.
__________________
For More Information or for Further Assistance,
Please Call or Contact the Purchaser at:
Millenium Management, LLC
199 South Los Robles Avenue, Suite 440
Pasadena, California 91101
(626) 585-5920
(800) 611-4613 (toll free)
TABLE OF CONTENTS
Page
DESCRIPTION OF THE OFFER.......................................................1
PURPOSE OF THE OFFER...........................................................1
DETAILS OF THE OFFER...........................................................1
1. Terms of the Offer; Expiration Date; Proration........................1
2. Acceptance for Payment and Payment of Purchase Price..................2
3. Procedure to Accept the Offer.........................................2
4. Determination of Validity; Rejection of Units; Waiver of Defects;
No Obligation to Give Notice of Defects...............................3
5. Withdrawal Rights.....................................................4
6. Extension of Tender Period; Termination; Amendment....................4
7. Conditions of the Offer...............................................5
8. Backup Federal Income Tax Withholding.................................6
9. FIRPTA Withholding....................................................6
CERTAIN INFORMATION CONCERNING THE PARTNERSHIP.................................6
General....................................................................6
Outstanding Units..........................................................7
Selected Financial and Property Related Data...............................7
DETERMINATION OF PURCHASE PRICE................................................7
Value of Partnership's Units...............................................7
Trading History of the Units...............................................7
CERTAIN INFORMATION CONCERNING THE PURCHASER...................................8
The Purchaser..............................................................8
Prior Acquisitions of Units and Prior Contacts.............................8
General....................................................................8
Source of Funds............................................................9
FUTURE PLANS OF THE PURCHASER..................................................9
EFFECTS OF THE OFFER...........................................................9
Future Benefits of Unit Ownership..........................................9
Limitations on Resales.....................................................9
Influence on Voting Decisions by the Purchaser............................10
CERTAIN FEDERAL INCOME TAX MATTERS............................................10
CERTAIN LEGAL MATTERS.........................................................11
General...................................................................11
Fees and Expenses.........................................................11
Miscellaneous.............................................................12
i
DESCRIPTION OF THE OFFER
Millenium Management, LLC ("Millenium" or the "Purchaser"), a California
limited liability company, is offering to purchase up to 3,000 units of limited
partnership interests ("Units") of National Real Estate Limited Partnership
Income Properties, a Wisconsin limited partnership (the "Partnership"), at a
cash purchase price ("Purchase Price") of $210 per Unit, without interest, less
the amount of the Distributions (as defined below) per Unit, if any, made to the
Unit Holders by the Partnership after April 9, 2001, and less any transfer fees
imposed by the Partnership for each transfer, which the Partnership advises us
are $50 per transfer (regardless of the number of Units transferred). The Offer
(as defined below) is subject to certain terms and conditions set forth in this
Offer to Purchase, as it may be supplemented from time to time (the "Offer to
Purchase") and in the related Agreement of Transfer and Letter of Transmittal,
as it may be supplemented or amended from time to time (the "Letter of
Transmittal," which together with the Offer to Purchase, constitutes the
"Offer"). This Offer is not subject to brokerage commissions and is not
conditioned upon financing.
PURPOSE OF THE OFFER
The purpose of the Offer is for the Purchaser to acquire a substantial
equity interest in the Partnership in anticipation of an opportunity to acquire
the self-storage properties owned by the Partnership when they are marketed for
sale. The Purchaser expects to exercise the voting power of the Units acquired
in order to approve a sale of the properties to Purchaser's affiliate, if the
Partnership's representative agrees to sell the properties to such affiliate.
DETAILS OF THE OFFER
1. Terms of the Offer; Expiration Date; Proration. On the terms and subject
to the conditions of the Offer, the Purchaser will accept and purchase up to
3,000 Units validly tendered in accordance with the procedures set forth in this
Offer to Purchase, and not withdrawn ("Properly Tendered"). For purposes of the
Offer, the term "Expiration Date" means 5:00 p.m., Los Angeles time, on Monday,
May 9, 2001, unless the Purchaser extends the period of time during which the
Offer is open, in which event the term "Expiration Date" shall mean the latest
time and date to which the Offer is extended by the Purchaser.
If, prior to the Expiration Date, the Purchaser increases the Purchase
Price offered to the Unit Holders pursuant to the Offer, the increased Purchase
Price will be paid for all Units accepted for payment pursuant to the Offer,
whether or not the Units were tendered prior to the increase in consideration.
If more than 3,000 Units are Properly Tendered (or if the number of Units
that are Properly Tendered exceeds the number that can be transferred without
triggering applicable limitations on resales) the Purchaser will, upon the terms
and subject to the conditions of the Offer, accept for payment and pay for an
aggregate of 3,000 Units (or, if less, the maximum number of such Units that can
be transferred without triggering applicable limitations on resales), pro rata,
according to the number of Units that are Properly Tendered by each Unit Holder,
with appropriate adjustments to avoid purchases of fractional Units. If the
number of Units that are Properly Tendered is less than or equal to 3,000 Units
(or, if less, the maximum number of such Units which can be transferred without
triggering applicable limitations on resales), the Purchaser will purchase all
Units that are Properly Tendered, upon the terms and subject to the conditions
of the Offer.
1
If proration of tendered Units is required, the Purchaser may not be able
to announce the final results of the proration until at least seven business
days after the Expiration Date because of the difficulty of determining the
proration results. The Purchaser does not intend to pay for any Units accepted
for payment pursuant to the Offer until the final proration or other adjustment
results are known.
If prior to the Expiration Date any or all of the conditions of the Offer
have not been satisfied or waived by the Purchaser, the Purchaser reserves the
right to: (i) decline to purchase any of the Units tendered, terminate the Offer
and return all tendered Units, (ii) waive the unsatisfied conditions and,
subject to complying with applicable rules and regulations of the Securities and
Exchange Commission (the "Commission"), purchase all Units that are Properly
Tendered, (iii) extend the Offer and, subject to the right of Unit Holders to
withdraw Units until the Expiration Date, retain previously tendered Units for
the period or periods for which the Offer is extended, and (iv) amend the Offer.
2. Acceptance for Payment and Payment of Purchase Price. On the terms and
subject to the conditions of the Offer, the Purchaser will purchase and will pay
for up to 3,000 Properly Tendered Units, as promptly as practicable following
the Expiration Date. In all cases, payment for Units purchased pursuant to the
Offer will be made only after timely receipt by the Purchaser of: (i) a properly
completed and duly executed and acknowledged Letter of Transmittal, (ii) any
other documents required in accordance with the Letter of Transmittal, and (iii)
written confirmation from the Partnership of the transfer of the Units to the
Purchaser. Purchaser has no control over the time it takes the Partnership to
provide written confirmation of the transfer; therefore, receipt of payment may
be delayed depending on how quickly the Partnership provides such confirmation.
The Partnership Agreement requires the Partnership to make an assignment
effective no later than the first day of the second month following the month in
which an acceptable assignment instrument is received. Under no circumstance
will interest on the purchase price be paid, regardless of any extension of the
offer or any delay in making such payment.
If any tendered Units are not purchased for any reason (other than
proration adjustments), the original Letter of Transmittal with respect to the
Units may be destroyed by the Purchaser. If for any reason acceptance for
payment of, or payment for, any Units tendered pursuant to the Offer is delayed
or the Purchaser is unable to accept for payment, purchase or pay for Units
tendered, then, without prejudice to the Purchaser's rights under Section 4
herein, the Purchaser may, nevertheless, retain documents concerning tendered
Units, and those Units may not be withdrawn except to the extent that the
tendering Unit Holders are otherwise entitled to withdrawal rights as described
in Section 5 herein, subject, however, to the Purchaser's obligation under Rule
14e-1(c) under the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), to pay Unit Holders the Purchase Price in respect of Units tendered or
return documents, if any, representing those Units promptly after termination or
withdrawal of the Offer.
3. Procedure to Accept the Offer. For the tender of any Units to be valid,
the Purchaser must receive, at the address listed on the back page of this Offer
to Purchase on or prior to the Expiration Date, a properly completed and duly
executed Letter of Transmittal and all documents required by the Letter of
Transmittal.
The method of delivery of the Letter of Transmittal and all other required
documents is at the option and risk of the tendering Unit Holder, and delivery
will be deemed made only when actually received by the Purchaser. If delivery is
by mail, registered mail with return receipt requested, properly insured, is
recommended. In all cases, sufficient time should be allowed to assure timely
delivery.
2
By executing and delivering a Letter of Transmittal, a tendering Unit
Holder irrevocably appoints the Purchaser and its officers and any other
designee of the Purchaser, and each of them, the attorneys-in-fact and proxies
of the Unit Holder, in the manner set forth in the Letter of Transmittal, each
with full power of substitution, to the full extent of the Unit Holder's rights
with respect to the Units tendered by the Unit Holder and accepted for payment
by the Purchaser (and with respect to any and all distributions, other Units,
rights or other securities issued or issuable in respect thereof (collectively,
"Distributions")), including without limitation the right to direct any IRA
custodian, trustee or other record owner to execute and deliver the Letter of
Transmittal, the right to accomplish a withdrawal of any previous tender of the
Unit Holder's Units and the right to complete the transfer contemplated thereby.
All such proxies will be considered coupled with an interest in the tendered
Units, are irrevocable and are granted in consideration of, and are effective
upon, the acceptance for payment of the Units by the Purchaser in accordance
with the terms of the Offer. Upon acceptance for payment, all prior powers of
attorney and proxies given by the Unit Holder with respect to the Units and
Distributions will, without further action, be revoked, and no subsequent powers
of attorney or proxies may be given (and, if given, will be without force or
effect). The officers and designees of the Purchaser will, with respect to the
Units for which the appointment is effective, be empowered to exercise all
voting and other rights of the Unit Holder as they in their discretion may deem
proper at any meeting of the Partnership or any adjournment or postponement
thereof. In order for Units to be deemed validly tendered, immediately upon the
Purchaser's acceptance for payment of the Units, the Purchaser or its designee
must be able to exercise full voting rights with respect to the Units, including
voting at any meeting of the Partnership's Limited Partners.
By executing and delivering a Letter of Transmittal, a tendering Unit
Holder irrevocably assigns to the Purchaser and its assigns all of the right,
title and interest of the Unit Holder in and to any and all Distributions made
by the Partnership from and after the date of acceptance with respect to Units
accepted for payment and thereby purchased by the Purchaser.
4. Determination of Validity; Rejection of Units; Waiver of Defects; No
Obligation to Give Notice of Defects. All questions about the validity, form,
eligibility (including time of receipt) and acceptance for payment of any tender
of Units pursuant to the Offer will be determined by the Purchaser, which
determination will be final and binding. The Purchaser reserves the right to
reject any or all tenders of any particular Units determined by it not to be in
proper form or if the acceptance of or payment for those Units may, in the
opinion of Purchaser's counsel, be unlawful. The Purchaser also reserves the
right to waive or amend any of the conditions of the Offer that it is legally
permitted to waive and to waive any defect in any tender with respect to any
particular Units. The Purchaser's interpretation of the terms and conditions of
the Offer (including the Letter of Transmittal) will be final and binding. No
tender of Units will be deemed to have been validly made until all defects have
been cured or waived. Neither the Purchaser nor any other person will be under
any duty to give notification of any defects in the tender of any Units or will
incur any liability for failure to give any such notification.
A tender of Units pursuant to the procedure described above and the
acceptance for payment of such Units will constitute a binding agreement between
the tendering Unit Holder and the Purchaser on the terms set forth in the Offer.
For purposes of the Offer, the Purchaser will be deemed to have accepted
for payment pursuant to this Offer, and thereby purchased, Properly Tendered
Units if, as and when the Purchaser gives written notice to the Partnership or
its Transfer Agent of the Purchaser's acceptance of those Units for payment
pursuant to the Offer. Upon the terms and subject to the conditions of the
Offer, payment for Units
3
accepted for payment pursuant to the Offer will be made and transmitted directly
to Unit Holders whose Units have been accepted for payment.
5. Withdrawal Rights. Tenders of Units made pursuant to the Offer are
irrevocable, except that Units tendered pursuant to the Offer may be withdrawn
at any time on or prior to the Expiration Date and, unless already accepted for
payment by the Purchaser pursuant to the Offer, may also be withdrawn at any
time after July 8, 2001. If purchase of, or payment for, Units is delayed for
any reason, including extension by the Purchaser of the Expiration Date, or if
the Purchaser is unable to purchase or pay for Units for any reason (for
example, because of proration adjustments) then, without prejudice to the
Purchaser's rights under the Offer, tendered Units may be retained by the
Purchaser and may not be withdrawn, except to the extent that tendering Unit
Holders are otherwise entitled to withdrawal rights as set forth in this Section
5; subject, however, to the Purchaser's obligation, pursuant to Rule 14e-1(c)
under the Exchange Act, to pay Unit Holders the Purchase Price in respect of
Units tendered promptly after termination or withdrawal of the Offer.
For withdrawal to be effective, a written or facsimile transmission notice
of withdrawal must be timely received by the Purchaser at its address listed on
the back cover of this Offer to Purchase. Any notice of withdrawal must specify
the name of the person(s) who tendered the Units to be withdrawn and must be
signed by the person(s) who signed the Letter of Transmittal in the same manner
as the Letter of Transmittal was signed. Any Units properly withdrawn will be
deemed not validly tendered for purposes of the Offer. Withdrawn Units may be
re-tendered, however, by following the procedures described in Section 3 herein
at any time prior to the Expiration Date.
All questions about the validity and form (including time of receipt) of
notices of withdrawal will be determined by the Purchaser, which determination
shall be final and binding. Neither the Purchaser nor any other person will be
under any duty to give notice of any defects in any notice of withdrawal or
incur any liability for failure to give any such notice.
6. Extension of Tender Period; Termination; Amendment. The Purchaser
expressly reserves the right at any time:
o to extend the period of time during which the Offer is open and
thereby delay acceptance for payment of, and the payment for, any
Units;
o to terminate the Offer and not accept for payment any Units not
already accepted for payment;
o upon the occurrence of any of the conditions specified in Section 7
herein to delay the acceptance for payment of, or payment for, any
Units not already accepted for payment or paid for; and
o to amend the Offer in any respect (including, without limitation, by
increasing or decreasing the Purchase Price, increasing or decreasing
the number of Units being sought, or both).
Notice of any such extension, termination or amendment will promptly be
disseminated to Unit Holders in a manner reasonably designed to inform Unit
Holders of such change in compliance with Rule 14d-4(d)(1) under the Exchange
Act. In the case of an extension of the Offer, the extension will be followed by
a press release or public announcement which will be issued no later than 9:00
a.m., New York City time, on the next business day after the scheduled
Expiration Date, in accordance with Rule 14e-1(d) under the Exchange Act. If the
Purchaser makes a material change in the terms of the Offer or the information
concerning the Offer or waives a material condition of the Offer, the Purchaser
will extend
4
the Offer and disseminate additional tender offer materials to the extent
required by Rules 14d-4(d)(1) and 14d-6(c) under the Exchange Act.
7. Conditions of the Offer. Notwithstanding any other term of the Offer,
the Purchaser will not be required to accept for payment or, subject to any
applicable rules and regulations of the Commission, including Rule 14e-1(c)
under the Exchange Act (relating to a bidder's obligation to pay for or return
tendered securities promptly after the termination or withdrawal of such
bidder's offer), to pay for any Units tendered if all authorizations, consents,
orders of, or filings with, or expirations of waiting periods imposed by, any
court, administrative agency or other governmental authority necessary for the
consummation of the transactions contemplated by the Offer shall not have
occurred or been filed, or obtained. Furthermore, notwithstanding any other term
of the Offer, the Purchaser will not be required to accept for payment or,
subject to the aforesaid, pay for any Units, may delay the acceptance for
payment of the Units tendered, or may withdraw the Offer if, at any time on or
after the date of the Offer and the Expiration Date, any of the following
conditions exists:
(a) a preliminary or permanent injunction or other order of any federal or
state court, government or governmental agency shall have been issued and shall
remain in effect which: (i) makes illegal, delays or otherwise directly or
indirectly restrains or prohibits the making of the Offer or the acceptance for
payment, purchase of or payment for any Units by the Purchaser; (ii) imposes or
confirms limitations on the ability of the Purchaser effectively to exercise
full rights of both legal and beneficial ownership of the Units; (iii) requires
divestiture by the Purchaser of any Units; (iv) causes any material diminution
of the benefits to be derived by the Purchaser as a result of the transactions
contemplated by the Offer; (v) might materially adversely affect the business,
properties, assets, liabilities, financial condition, operations, results of
operations or prospects of the Purchaser, or the Partnership; or (vi) seeks to
impose any material condition to the Offer unacceptable to the Purchaser;
(b) there shall be any action taken, or any statute, rule, regulation or
order proposed, enacted, enforced, promulgated, issued or deemed applicable to
the Offer by any federal or state court, government or governmental authority or
agency which might, directly or indirectly, result in any of the consequences
referred to in paragraph (a) above;
(c) any change or development shall have occurred or been threatened or
disclosed in the business, properties, assets, liabilities, financial condition,
operations, results of operations or prospects of the Partnership, which is or
may be materially adverse to the Partnership, or there shall be any material
lien not disclosed in the Partnership's financial statements, or the Purchaser
shall have become aware of any fact that does or may have a material adverse
effect on the value of the Units or the Partnership's properties;
(d) the general partners of the Partnership shall have failed or refused to
take all other action that the Purchaser deems necessary, in the Purchaser's
judgment, for the Purchaser to be the registered owner of the Units tendered and
accepted for payment hereunder simultaneously with the consummation of the Offer
or as soon thereafter as is permitted under the Partnership Agreement, in
accordance with the Partnership Agreement and applicable law;
(e) there shall have been threatened, instituted or pending any action or
proceeding before any court or governmental agency or other regulatory or
administrative agency or commission or by any other person, challenging the
acquisition of any Units pursuant to the Offer or otherwise directly or
indirectly relating to the Offer, or otherwise, in the judgment of the
Purchaser, adversely affecting the
5
Purchaser, the Partnership or the properties or the value of the Units or the
benefits expected to be derived by the Purchaser as a result of the transactions
contemplated by the Offer;
(f) the Partnership shall have (i) issued, or authorized or proposed the
issuance of, any partnership interests of any class, or any securities
convertible into, or rights, warrants or options to acquire, any such interests
or other convertible securities, (ii) issued or authorized or proposed the
issuance of any other securities, in respect of, in lieu of, or in substitution
for, all or any of the presently outstanding Units, (iii) declared or paid any
Distribution, other than in cash, on any of the Units, or (iv) the Partnership
or any general partner shall have authorized, proposed or announced its
intention to propose any merger, consolidation or business combination
transaction, acquisition of assets, disposition of assets or material change in
its capitalization, or any comparable event not in the ordinary course of
business and not already announced prior to the Offer; or
(g) any general partner shall have modified, or taken any step or steps to
modify, in any way, the procedures or regulations applicable to the registration
of Units or transfers of Units on the books and records of the Partnership or
the admission of transferees of Units as registered owners and as Unit Holders.
The foregoing conditions are for the sole benefit of the Purchaser and may
be (but need not be) asserted by the Purchaser regardless of the circumstances
giving rise to such conditions or may be waived by the Purchaser in whole or in
part at any time. Any determination by the Purchaser concerning the events
described above will be final and binding upon all parties.
8. Backup Federal Income Tax Withholding. To prevent the possible
application of backup federal income tax withholding of 31% with respect to
payment of the Purchase Price, a tendering Unit Holder must provide the
Purchaser with the Unit Holder's correct taxpayer identification number in the
space provided in the Letter of Transmittal.
9. FIRPTA Withholding. To prevent the withholding of federal income tax in
an amount equal to ten percent of the amount of the Purchase Price plus
Partnership liabilities allocable to each Unit purchased, the Letter of
Transmittal includes FIRPTA representations certifying the Unit Holder's
taxpayer identification number and address and that the Unit Holder is not a
foreign person.
CERTAIN INFORMATION CONCERNING THE PARTNERSHIP
The Partnership is subject to the information reporting requirements of the
Exchange Act and is required to file reports and other information with the
Commission relating to its business, financial results and other matters. Such
reports and other documents may be examined and copies may be obtained from the
offices of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549, or
electronically at http://www.sec.gov. Copies should be available by mail upon
payment of the Commission's customary charges by writing to the Commission's
principal offices at 450 Fifth Street, N.W., Washington, D.C. 20549.
General. Attached as Part I of Appendix A to this Offer to Purchase are
excerpts from the last Annual Report on Form 10-K filed by the Partnership with
the Commission (the "Form 10-K"), which excerpts describe the business and
operations of the Partnership.
Outstanding Units. According to the Form 10-K, there were 9,004.15 Units
issued and outstanding, held by approximately 1,109 Unit Holders, as of
December 31, 2000.
6
Selected Financial and Property Related Data. Attached as Part II of
Appendix A is a summary of certain financial and statistical information with
respect to the Partnership and its properties, all of which has been taken from
the Form 10-K. More comprehensive financial and other information is included in
such reports and other documents filed by the Partnership with the Commission.
Part II of Appendix A is qualified in its entirety by reference to such publicly
filed reports and documents, including, without limitation, all the financial
information and related notes contained therein. Unit Holders should also refer
to any Quarterly Reports on Form 10-Q or Current Reports on Form 8-K filed with
the Commission after the date of this Offer for more recent information relating
to the business and operations of the Partnership.
DETERMINATION OF PURCHASE PRICE
In establishing the Purchase Price, the Purchaser reviewed certain publicly
available information including among other things: (i) the Partnership's
limited partnership agreement (the "Partnership Agreement"), (ii) Annual Reports
on Form 10-K, (iii) Quarterly Reports on Form 10-Q, and (iv) other reports filed
with the Commission. The Purchaser determined the Purchase Price pursuant to its
independent analysis of the Partnership and its properties, the interest of its
affiliate in acquiring the Partnership's properties, the illiquidity of the
Units, and the Purchaser's beliefs about its future ability or inability to
influence the disposition of the Partnership's properties. The Purchaser did not
obtain current independent valuations or appraisals of the assets. Based on that
information, the Purchaser considered several factors, some of which are
discussed below.
Value of Partnership's Units. Purchaser developed a range of values for the
Partnership's Units using its proprietary valuation methods, based on the
historical distributions made to Unit Holders, the Partnership Agreement
provisions regarding the allocation of distributions, the assets, liabilities
and operating results of the Partnership, assumed expenses of selling the
properties and liquidating the Partnership, and other considerations. Purchaser
developed a range of values from $178 per Unit to $214.
Trading History of the Units. There is no established trading market for
the Units other than limited and sporadic trading through matching services or
privately negotiated sales. The Form 10-K states that "Management is not aware
of any public trading market for the [Units, however,] the Partnership does
provide a repurchase pool whereby limited partners may offer to sell their
[Units] to the Partnership at a specified price." According to the Form 10-K,
offers to sell to the Partnership are accepted semi-annually if they meet the
established criteria, and as of December 31, 2000, only 29.86 Units had ever
been repurchased by the Partnership. At present, resale to the Partnership,
privately negotiated sales and sales through intermediaries (such as through the
American Partnership Board) are the only means available to a Unit Holder to
liquidate an investment in Units (other than this Offer or other occasional
offers by other partnership investors, if any) because the Units are not listed
or traded on any exchange or quoted on any Nasdaq list or system.
According to Partnership Spectrum, an independent third party publication,
there were two (2) transfers of Units between February 1, 1999 and January 31,
2001: one in April-May 1999, for $355.00 per Unit, and one in August-September
2000, for $100.00 per Unit. Sales may be conducted which are not reported in the
Partnership Spectrum and the prices of sales through other channels may differ
from those reported by the Partnership Spectrum. The reported gross sales prices
may not reflect the net sales proceeds received by sellers of Units, which
typically are reduced by commissions (typically up to 8% with a minimum of
$150-$200) and other secondary market transaction costs. The Purchaser does not
know whether the information provided by the Partnership Spectrum is accurate or
complete.
7
CERTAIN INFORMATION CONCERNING THE PURCHASER
The Purchaser. The Purchaser is a California limited liability company that
was formed on October 23, 1998. Purchaser is managed by Everest Properties II,
LLC, a California limited liability company ("Everest"). The principal office of
Millenium and Everest is 199 South Los Robles Avenue, Suite 440, Pasadena, CA
91101; the telephone number is (626) 585-5920. For certain information
concerning the directors and executive officers of Millenium and Everest, see
Schedule I to this Offer to Purchase.
Millenium and Everest and their affiliates invest in limited partnerships
such as the Partnership, and in other forms of real estate oriented investments,
and conduct activities incident thereto. For certain selected unaudited
financial information available with respect to the Purchaser, see Appendix B to
this Offer to Purchase.
Prior Acquisitions of Units and Prior Contacts. Two affiliates of Millenium
together hold 50 Units, less than one percent (1%) of the outstanding Units of
the Partnership. Such affiliates are Everest Investors 8, LLC, holding 40 Units,
and KM Investments, LLC, holding 10 Units, each of which are at the Purchaser's
address. During 2000 and 2001, Everest has contacted the representative who,
pursuant to the settlement of a class action lawsuit, is responsible for
marketing and selling the Partnership's properties (the "Liquidator"). Everest
has informed the Liquidator that it (or an affiliate) may wish to make an offer
to acquire the Partnership's properties when they become available for sale, and
has requested to receive any marketing materials prepared to offer the
properties for sale. The Liquidator advised Everest in March 2001 that he
expects to provide marketing materials to potential purchasers, including
Everest, within the next several months to start the process of selling the
properties. Except as set forth above, neither the Purchaser nor its affiliates
are party to any past, present or proposed material contracts, arrangements,
understandings, relationships, or negotiations with the Partnership or with the
general partners concerning the Partnership.
General. Except as set forth above or elsewhere in this Offer to Purchase:
(i) the Purchaser does not beneficially own or have a right to acquire, and, to
the best knowledge of the Purchaser, no associate or majority-owned subsidiary
of Purchaser or the persons listed in Schedule I hereto, beneficially owns or
has a right to acquire any Units or any other equity securities of the
Partnership; (ii) the Purchaser has not, and to the best knowledge of the
Purchaser, none of the persons and entities referred to in clause (i) above or
any of their executive officers, directors or subsidiaries has, effected any
transaction in the Units or any other equity securities of the Partnership
during the past 60 days other than as stated in this Offer to Purchase; (iii)
the Purchaser or any of its subsidiaries does not have and, to the best
knowledge of the Purchaser, none of the persons listed in Schedule I hereto has,
any contract, arrangement, understanding or relationship with the Partnership or
any of its affiliates that would require reporting under the rules and
regulations of the Commission; (iv) since December 31, 1998, there have been no
transactions that would require reporting under the rules and regulations of the
Commission between the Partnership or any of its affiliates and the Purchaser or
any of its subsidiaries or, to the best knowledge of the Purchaser, any of its
executive officers, directors or affiliates; and (v) since December 31, 1998,
except as otherwise stated in this Offer to Purchase, there have been no
contacts, negotiations or transactions between the Purchaser, or any of its
subsidiaries or, to the best knowledge of the Purchaser, any of the persons
listed in Schedule I hereto, on the one hand, and the Partnership or its
affiliates, on the other hand, concerning a merger, consolidation or
acquisition, tender offer or other acquisition of securities, an election of
directors, or a sale or other transfer of a material amount of assets of the
Partnership.
8
Source of Funds. Based on the Purchase Price of $210 per Unit, the
Purchaser estimates that the total amount of funds necessary to purchase all
Units sought by this Offer and to pay related fees and expenses, will be
approximately $640,000. The Purchaser expects to obtain these funds by means of
equity capital contributions from its members at the time the Units tendered
pursuant to the Offer are accepted for payment. Such members will fund their
capital contributions through existing cash reserves which in the aggregate are
sufficient to provide the funds required in connection with the Offer without
any borrowings.
FUTURE PLANS OF THE PURCHASER
The Purchaser is seeking to acquire Units pursuant to the Offer to obtain a
substantial equity interest in the Partnership, for investment and also with a
view to increasing the likelihood that its affiliate will be successful in
acquiring the Partnership's properties if they are offered for sale and if such
affiliate makes an offer and the offer is accepted by the Liquidator. In such
event, Purchaser expects to exercise the voting power of the Units acquired in
order to approve a sale of the properties to Purchaser's affiliate. Following
the completion of the Offer, the Purchaser and persons related to or affiliated
with the Purchaser may acquire additional Units. Any such acquisition may be
made through private purchases, through one or more future tender or exchange
offers or by any other means deemed advisable by the Purchaser. Any such
acquisition may be at a price higher or lower than the price to be paid for the
Units purchased pursuant to the Offer, and may be for cash or other
consideration. However, the Purchaser has no present intention of making
additional tender offers for the Units. The Purchaser also may consider selling
some or all of the Units it acquires pursuant to the Offer, either directly or
by a sale of one or more interests in the Purchaser itself, depending upon
liquidity, strategic, tax and other considerations. The Purchaser intends to
encourage the Liquidator generally to pursue the prompt sale of the properties.
There can be no assurances that the sale of any property will be completed,
whether to Purchaser's affiliate or any other person.
Except as described herein, the Purchaser does not currently intend to
change current management or the operation of the Partnership and does not have
current plans for any extraordinary transaction such as a merger,
reorganization, liquidation, reallocation of operations or sale or transfer of
assets involving the Partnership. However, these plans could change at any time
in the future. If any transaction is effected by the Partnership and financial
benefits accrue to the Unit Holders, the Purchaser and its affiliates will
participate in those benefits to the extent of their ownership of the Units.
EFFECTS OF THE OFFER
Future Benefits of Unit Ownership. Tendering Unit Holders shall receive
cash in exchange for their Units purchased by the Purchaser and will forego all
future distributions and income and loss allocations from the Partnership with
respect to such Units.
Limitations on Resales. The Partnership Agreement provides that no
assignment of Units shall be effective if in the opinion of counsel for the
general partners the transfer would, for federal income tax purposes, cause the
Partnership to be terminated or cause the Partnership to be taxed as a
corporation. Accordingly, the Partnership may not recognize any requests for
recognition of a transferee Unit Holder upon a transfer of Units if the general
partners are advised by counsel that the transfer would have such effect. The
general partners may limit the resale of Units, among other things, if a
proposed transfer would result in there being a sale or exchange of 50% or more
of the total interests in the Partnership's capital and profits within any 12
month period. The Purchaser does not believe this limitation will affect the
Offer. However, because the Purchaser is tendering for 33% of the outstanding
Units, limitations on
9
the resales of remaining Units by Unit Holders are more likely after the
consummation of the Offer than before.
Influence on Voting Decisions by the Purchaser. Under the Partnership
Agreement, Unit Holders holding a majority of the Units are entitled to take
action with respect to a variety of matters, including removal of a general
partner, dissolution and termination of the Partnership, and approval of most
types of amendments to the Partnership Agreement. If the Purchaser obtains all
or most of the Units sought, the influence of Purchaser and its affiliates on
such actions may be significant.
CERTAIN FEDERAL INCOME TAX MATTERS
The following summary is a general discussion of certain of the federal
income tax consequences of a sale of Units pursuant to the Offer. The summary is
based on the Internal Revenue Code of 1986, as amended (the "Code"), applicable
Treasury regulations thereunder, administrative rulings, and judicial authority,
all as of the date of the Offer. All of the foregoing are subject to change, and
any such change could affect the continuing accuracy of this summary. This
summary does not discuss all aspects of federal income taxation that may be
relevant to a particular Unit Holder in light of such Unit Holder's specific
circumstances, nor does it describe any aspect of state, local, foreign or other
tax laws. The discussion below assumes that the Partnership does not own any
unrealized receivables or inventory items as such terms are defined in Section
751 of the Code and the regulations promulgated thereunder. Sales of Units
pursuant to the Offer may be taxable transactions under applicable state, local,
foreign and other tax laws. UNIT HOLDERS SHOULD CONSULT THEIR RESPECTIVE TAX
ADVISORS AS TO THE PARTICULAR TAX CONSEQUENCES TO THE UNIT HOLDER OF SELLING
UNITS PURSUANT TO THE OFFER.
In general, a Unit Holder will recognize gain or loss on a sale of Units
pursuant to the Offer equal to the difference between (i) the Unit Holder's
"amount realized" on the sale and (ii) the Unit Holder's adjusted tax basis in
the Units sold. The amount of a Unit Holder's adjusted tax basis in a Unit will
vary depending upon the Unit Holder's particular circumstances, and it will
include the amount of the Partnership's liabilities allocable to the Unit (as
determined under Code Section 752). The "amount realized" with respect to a Unit
will be a sum equal to the amount of cash received by the Unit Holder for the
Unit pursuant to the Offer (that is, the Purchase Price), plus the amount of the
Partnership's liabilities allocable to the Unit (as determined under Code
Section 752).
The gain or loss recognized by a Unit Holder on a sale of a Unit pursuant
to the Offer generally will be treated as a capital gain or loss if the Unit was
held by the Unit Holder as a capital asset. Gain with respect to Units held for
more than one year will be taxed, for federal income tax purposes, at a maximum
long-term capital gain rate of 20 percent. Gain with respect to Units held one
year or less will be taxed at ordinary income rates. It should also be noted
that the Taxpayer Relief Act of 1997 imposed depreciation recapture of
previously deducted straight line depreciation with respect to real property at
a rate of 25 percent (assuming eligibility for long-term capital gain
treatment). A portion of the gain realized by a Unit Holder with respect to a
disposition of the Units may be subjected to this 25 percent rate to the extent
that the gain is attributable to depreciation recapture inherent in the
properties of the Partnership.
Capital losses are deductible only to the extent of capital gains, except
that taxpayers who are natural persons may deduct up to $3,000 per year of
capital losses in excess of the amount of their capital gains against ordinary
income. Excess capital losses generally can be carried forward to succeeding
years
10
(a "C" corporation's carry-forward period is five years and an individual
taxpayer can carry forward such losses indefinitely).
Under Code Section 469, individuals, S corporations and certain
closely-held corporations generally are able to deduct "passive activity losses"
in any year only to the extent of the person's passive activity income for that
year. Substantially all post-1986 losses of Unit Holders from the Partnership
are passive activity losses. Unit Holders may have "suspended" passive activity
losses from the Partnership (i.e., post-1986 net taxable losses in excess of
statutorily permitted "phase-in" amounts and which have not been used to offset
income from other passive activities).
If a Unit Holder sells less than all of its Units pursuant to the Offer, a
passive loss recognized by that Unit Holder can be currently deducted (subject
to the other applicable limitations) to the extent of the Unit Holder's passive
income from the Partnership for that year plus any other net passive activity
income for that year, and any gain recognized by a Unit Holder upon the sale of
Units can be offset by the Unit Holder's current or "suspended" passive activity
losses (if any) from the Partnership and other sources. If, on the other hand, a
Unit Holder sells 100 percent of its Units pursuant to the Offer, any
"suspended" passive activity losses from the Partnership and any passive
activity losses recognized upon the sale of the Units will be offset first
against any net passive activity income from the Unit Holder's other passive
activity investments, and the balance of any net passive activity losses
attributable to the Partnership will no longer be subject to the passive
activity loss limitation and, therefore, will be deductible by such Unit Holder
from its other "ordinary" income (subject to any other applicable limitations).
If more than 3,000 Units are Properly Tendered, some tendering Unit Holders may
not be able to sell 100 percent of their Units pursuant to the Offer because of
proration of the number of Units to be purchased by the Purchaser, unless the
Purchaser amends the Offer to increase the number of Units to be purchased.
Unit Holders (other than tax-exempt persons, corporations and certain
foreign individuals) who tender Units may be subject to 31 percent backup
withholding unless those Unit Holders provide a taxpayer identification number
("TIN") and are certain that the TIN is correct or properly certify that they
are awaiting a TIN. A Unit Holder may avoid backup withholding by properly
completing and signing the Letter of Transmittal. If a Unit Holder who is
subject to backup withholding does not include its TIN, the Purchaser will
withhold 31 percent from payments to such Unit Holder.
A Unit Holder who tenders Units must file an information statement with his
federal income tax return for the year of the sale which provides the
information specified in Treasury Regulation Section 1.751-1(a)(3).
CERTAIN LEGAL MATTERS
General. Except as set forth herein, the Purchaser is not aware of any
filings, approvals or other actions by any domestic or foreign governmental or
administrative agency that would be required prior to the acquisition of Units
by the Purchaser pursuant to the Offer. The Purchaser's obligation to purchase
and pay for Units is subject to certain conditions, including conditions related
to the legal matters discussed herein.
Fees and Expenses. Purchaser will not pay any fees or commissions to any
broker, dealer or other person for soliciting tenders of Units pursuant to the
Offer. Employees of Purchaser may make solicitations or recommendations without
additional compensation. The Purchaser will pay all costs and
11
expenses of printing and mailing the Offer and its legal fees and expenses. The
Purchaser will reduce the purchase price of Units by any transfer fees imposed
by the Partnership.
Miscellaneous. The Offer is not made to (nor will tenders be accepted on
behalf of) Unit Holders residing in any jurisdiction in which the making of the
Offer or the acceptance thereof would not be in compliance with the securities
or other laws of such jurisdiction. However, the Purchaser may take such action
as it deems necessary to make the Offer in any jurisdiction and
extend the Offer to Unit Holders in such jurisdiction.
In any jurisdiction where the securities or other laws require the Offer to
be made by a licensed broker or dealer, the Offer will be deemed to be made on
behalf of the Purchaser by one or more registered brokers or dealers that are
licensed under the laws of such jurisdiction.
The Purchaser has filed with the Commission a Tender Offer Statement on
Schedule TO pursuant to Rule 14d-3 under the Exchange Act, furnishing certain
additional information with respect to the Offer, and may file amendments
thereto. The Schedule TO and any amendments thereto, including exhibits, may be
inspected and copies may be obtained at the same places and in the same manner
as set forth under the caption "Certain Information Concerning The Partnership."
No person has been authorized to give any information or to make any
representation on behalf of the Purchaser not contained herein or in the Letter
of Transmittal and, if given or made, such information or representation must
not be relied upon as having been authorized.
MILLENIUM MANAGEMENT, LLC
April 10, 2001
12
SCHEDULE I
DIRECTORS AND EXECUTIVE OFFICERS
The business address of each executive officer and director of Millenium
Management, LLC ("Millenium") and Everest Properties II, LLC ("Everest") is 199
South Los Robles Avenue, Suite 440, Pasadena, California 91101. The telephone
number is (626) 585-5920. Each executive officer and director is a United States
citizen. The name and principal occupation or employment of each executive
officer and director of Millenium and Everest are set forth below.
Present Principal Occupation or Employment
Name Position and Five-Year Employment History
- -----------------------------------------------------------------------
W. Robert Kohorst President of Millenium since 1998 and Everest
since 1996. President and Director of Everest
Properties, Inc. since 1994. President and
Director of KH Financial, Inc. since 1994.
David I. Lesser Executive Vice President and Secretary of
Millenium since 1998 and Everest since 1996.
Executive Vice President and Director of
Everest Properties, Inc. since 1995. Principal
and member of Feder, Goodman & Schwartz, Inc. from
1994 - 1996.
Christopher K. Davis Vice President and the General Counsel of
Millenium and Everest since 1998. Senior Staff
Counsel and then Director of Corporate Legal of
Pinkerton's, Inc. from 1995 - 1998.
Peter J. Wilkinson Vice President and the Chief Financial Officer
of Millenium since 1998 and Everest since 1996.
Chief Financial Officer and Director of Everest
Properties, Inc. since 1996.
APPENDIX A
The following information has been copied from the Partnership's Annual
Report on Form 10-K for the year ended December 31, 2000 (the "Form 10-K").
Although the Purchaser has no information that any statements contained in this
Appendix A are untrue, the Purchaser has not independently investigated the
accuracy of statements, and takes no responsibility for the accuracy,
inaccuracy, completeness or incompleteness of any of the information contained
in this section or for the failure by the Partnership to disclose events which
may have occurred and may affect the significance or accuracy of any such
information. More comprehensive financial and other information is included in
such reports and other documents filed by the Partnership with the Commission.
Appendix A is qualified in its entirety by reference to such publicly filed
reports and documents, including, without limitation, all the financial
information and related notes contained therein.
PART I
BUSINESS
The Registrant, National Real Estate Limited Partnership Income Properties (the
"Partnership"), is a limited partnership organized under the Wisconsin Uniform
Limited Partnership Act pursuant to a Certificate and an Agreement of Limited
Partnership, each dated December 18, 1984. As of December 31, 2000, the
Partnership consisted of an Individual and two Corporate General Partners and
1,109 Limited Partners owning 9,004.15 limited partnership interests (the
"Interests") acquired at a public offering price of $1,000 per Interest
($9,024,556 net of affiliate discounts). The Individual General Partner is John
Vishnevsky and the Corporate General Partners are National Development and
Investment, Inc. ("NDII"), a Wisconsin corporation and EC Corp., a Wisconsin
corporation. All management decisions are the responsibility of the General
Partners.
The Partnership's primary objective was to acquire existing commercial space,
such as office buildings, shopping centers, and mini-warehouses, though it was
also permitted to acquire existing residential properties from non-affiliated
sellers. Although the Partnership intended to acquire existing properties, it
was permitted to acquire properties which were recently completed. The
Partnership's principal investment objectives are to invest in real estate
properties which will:
1) preserve and protect the Limited Partners' capital investment;
2) provide quarterly distributions of cash from operations, commencing
December 31, 1985; and
3) provide capital appreciation through increases in the value of the
Partnership's real estate assets.
The Partnership owned and operated three investment properties in 2000. During
the fiscal year ended December 31, 1985, the Partnership acquired Lock-It
Lockers Mini-Warehouse, a self storage mini-warehouse rental complex located in
Tucson, Arizona ("Tucson Lock-It Lockers"). Tucson Lock-It Lockers was acquired
in four separate Parcels as follows: Parcel I (21,670 net rentable square feet)
effective May 1, 1985; Parcel II (15,575 net rentable square feet) effective
July 1, 1985; Parcel III (6,845 net rentable square feet) effective August 1,
1985; and Parcel IV (5,795 net rentable square feet) effective September 1,
1985. In 1986, the Partnership continued its investment in properties by
acquiring an additional Lock-It Lockers Mini-Warehouse located in Phoenix,
Arizona ("Phoenix Lock-It Lockers"), in three separate parcels, as follows:
Parcel I (18,600 net rentable square feet) effective January 1, 1986; Parcel II
(17,625 net rentable square feet) effective February 1, 1986; and Parcel III
(22,541 net rentable square feet including 8,000 net rentable square feet for
recreational vehicle storage)
A-1
effective April 1, 1986. The Partnership completed its investment in properties
during the fiscal year ended December 31, 1987, when it purchased the following
two investment properties, a parcel of land containing one building plus part of
a second building out of a total of five buildings of Cave Creek Mini Warehouses
in Phoenix, Arizona and Northridge Commons Shopping Center, a community shopping
center located in Milwaukee, Wisconsin; however, Northridge Commons was sold
December 15, 1999. These properties, with the exception of Northridge Commons,
are described more fully in this report at Properties. Cave Creek was managed by
Enterprise Growth Group ("EGG") from the time the property was purchased through
October, 1991. As of November 1, 1991, National Realty Management, Inc. ("NRMI")
took over management of the property. All other Partnership properties were
managed by NRMI since their purchase.
The real estate investment business is highly competitive. The Partnership's
properties are in competition for tenants with numerous other alternative
sources for storage or shopping center space.
During 2000, the Partnership employed three full-time and five part-time on-site
personnel in the following capacities: 3 managers, 3 rental agents, [and] 2.5
cleaning/maintenance persons. In addition, due to the centralized nature of the
Partnership's accounting and management systems, another 17 employees provided
various accounting and management services to this and other partnerships. All
on-site and partnership employees are supervised by NRMI under its Management
Consulting Delegation of Duties and Property Management Agreements with the
Partnership.
LEGAL PROCEEDINGS
On May 25, 1999, the general partners, the property management company (NRMI),
and other entities and individuals were named as defendants in a lawsuit (the
"Vishnevsky Defendants"). The Partnership (along with other partnerships,
collectively the "Partnerships") was not included in the original lawsuit but
was later added to the action as a nominal defendant. The plaintiffs sought to
have this action certified as a class action lawsuit. In the complaint, the
plaintiffs alleged wrongdoing against Vishnevsky Defendants in connection with
two basic areas. First, allegations involving various vote solicitations alleged
by the plaintiffs to be an effort to perpetuate the Partnerships and avoid
liquidation. Second, allegations involving the taking and use of Partnership
funds and property, including excessive fees and unauthorized expenses. On March
14, 2000, the parties to the litigation with the exception of the defendant Wolf
& Company entered into a Stipulation of Settlement.
Based upon the Stipulation, on April 27, 2000, the Circuit Court of Waukesha
County held a hearing which certified the case as a class action and approved
terms of a settlement. The more significant terms of the Stipulation of
Settlement are as follows:
An independent marketing agent (the "Partnerships' Representative") was
appointed to market and sell the Partnership investment property (the
"Property"). However, no offer to purchase the Property will be accepted
without first obtaining approval from a majority interest of the limited
partners. Final distributions of the net proceeds received from a sale of
the Property will be made in accordance with the terms of the Partnership's
limited partnership agreement and prospectus, and upon providing 20-day
notice to the plaintiff's attorney. Net proceeds will first be applied to
pay plaintiffs' counsel's legal fees, expenses and costs, with interest
thereon. The Partnerships' Representative is presently preparing an
Offering Memorandum for marketing the Property. Interim distributions to
limited partners will continue to be made in accordance with the limited
partnership agreement. However, upon final approval of the Settlement,
distributions were
A-2
increased to the extent that sufficient reserves were established to
support normal partnership operations and the wind-up of Partnership
affairs upon the sale of the Property. Any such additional distributions
were made within 30 days of the final approval of the Settlement.
NRMI and the general partners shall continue to provide management and
consulting services to the Partnership on the same terms and conditions
currently provided under existing contracts until the investment property
is sold and assets liquidated and the Partnership entity dissolved. NRMI
will also be the listing broker for the sale of the Properties.
The plaintiffs' claims made against NRMI, the general partners, and other
related parties for excessive charging of expenses to the Partnerships,
including the Partnership, will be settled through binding arbitration. Any
such expenses disallowed through arbitration shall be reimbursed to the
Partnerships.
At the April 27, 2000 hearing, the lawsuit was certified as a non-opt outclass
action, in which all limited partners of the Partnership other than the
Vishnevsky Defendants are required to be included in the settlement of this
litigation. Furthermore, the Court ruled that plaintiffs' counsel's attorneys
fees would be equal to one-third of the difference between the secondary market
value of the Partnership interests and the total funds available for
distribution to the limited partners after payment of all Partnership
obligations. The Court allowed the Vishnevsky Defendants sixty days thereafter
to present their evidence regarding secondary market value.
On June 20, 2000, the Court entered a judgment based upon its April 27th
decision. Thereafter, on July 21, 2000, the Court held a hearing on the
plaintiffs Motion for Enforcement of the Court Approved Settlement and in
Support of Sanctions. The outcome of the hearing was that the Court granted
sanctions totaling $437,000.00 against the Vishnevsky Defendants and their
counsel for delaying the appointment of the Partnerships' Representative and the
arbitrators. The Court took under advisement the remaining open issue regarding
the secondary market value for computing the plaintiffs' counsel's attorneys
fees until the arbitration proceedings are completed and the Partnerships'
properties are sold. A Motion for Reconsideration of the sanctions was filed
with the Court and was denied on September 25, 2000. The Vishnevsky Defendants
filed a motion with the Court to stay payment of the sanctions pending appeal.
That motion was also denied.
On August 2, 2000, the Vishnevsky Defendants filed an appeal from that portion
of the judgment determining the method for computing the plaintiffs counsels'
attorneys fees. On October 10, 2000 the Vishnevsky Defendants and their counsel
filed a second appeal from the order granting the sanctions. A motion to
consolidate the two appeals has been granted. The appellate court has
temporarily stayed payment of the sanctions pending receipt of briefs on the
issue. The arbitration panel has not been fully selected but discovery is
proceeding. Based on the events to date, it is not possible to determine the
final outcome of the litigation, or the amount of any potential monetary impact
to the Partnership. Therefore, no provision for any such financial impact
arising from the lawsuit has been made in these financial statements.
A-3
PART II
PROPERTIES
The properties in which the Partnership has invested are owned in fee simple,
described more fully at Notes to Financial Statements (Note A) [of the Form
10-K]. The principal factors which the General Partners believe affect rental
rates and occupancy levels include location, ease of access, amenities, and the
quality of property management.
TUCSON LOCK-IT LOCKERS
Tucson Lock-It Lockers is located on 2.057 fully improved acres at 6560 East
Tanque Verde Road, Tucson, Arizona. Tucson Lock-It Lockers consists of seven
single-story buildings containing a total of 598 units which were constructed in
1976. Tucson Lock-It Lockers has an aggregate of 49,865 net rentable square feet
(57,710 gross) with a unit mix that varies. Management has the ability to
subdivide some of the larger units in accordance with market demand. Features of
Tucson Lock-It Lockers include fire walls and exterior passage doors constructed
of solid-core steel hinged in steel frames. Security at Tucson Lock-It Lockers
is provided by a resident manager and a fenced perimeter with single-gate
access. In addition to the seven warehouse buildings, there is an on-site
office/apartment. Limited customer parking spaces are available.
PHOENIX LOCK-IT LOCKERS
Phoenix Lock-It Lockers is located on 3.1 fully improved acres at 10250North 9th
Avenue, Phoenix, Arizona. The complex consists of three single-story buildings
containing a total of 569 units and 30 outside RV spaces which were constructed
in 1976. Phoenix Lock-It Lockers has an aggregate of 62,016 net rentable square
feet (66,200 gross) with a unit mix that varies. Management has the ability to
subdivide some of the larger units according to market demand. Features of the
complex include fire walls and exterior passage doors constructed of solid-core
steel hinged in steel frames. Security in the complex is provided by electronic
surveillance cameras with a motion detector that provides the resident manager
with the ability to monitor the property during the day and night. There is also
a fenced perimeter with a single-gate access to the property which provides
additional security. In addition to the three warehouse buildings, there is an
on-site office/apartment. Customer parking spaces are available.
CAVE CREEK MINI-WAREHOUSE
Cave Creek Mini-Warehouse is located at 1201 East Cinnabar Avenue, Phoenix,
Arizona, on approximately 1.7 acres (the "Complex"). The 728 unit Complex
consists of three individual one story and two individual two-story buildings.
The Partnership's ownership consists of one one-story building and part of one
two-story building of the Complex, of which construction was completed in 1985.
The Partnership has an interest in the remaining portions of the Complex for
access and use of the business office facilities. National Real Estate Limited
Partnerships Income Properties II, another limited partnership of which the
General Partners are general partners, owns the other portion. Security in the
Complex is provided by a resident manager and a fenced perimeter with
single-gate access.
The Complex has an aggregate of approximately 46,283 net rentable square feet.
The Partnership's property contains approximately 8,200 net rentable square
feet, or approximately 18% of the total net rentable square feet of the Complex.
Units can be subdivided, if appropriate, in light of demand;
A-4
therefore, the total unit count may fluctuate. At the time of purchase, the
Partnership's property was divided into 91 units. The Tucson and Phoenix real
estate rental markets are highly competitive. For a further discussion of
occupancy rates, see Management's Discussion and Analysis of Financial Condition
and Results of Operations contained in this report. Additional mini-warehouse
projects may be built within the Tucson and Phoenix areas, which may compete
directly with the Partnership's properties.
A-5
SELECTED FINANCIAL DATA
The following selected financial data has been copied or derived from the Form
10-K and should be read in conjunction with the financial statements and the
related notes set forth in such report:
December 31, December 31,
2000 1999
---- ----
Investment properties, at cost,
less accumulated depreciation. $2,755,973 $2,889,788
Total assets..................... 3,092,624 3,722,204
Total liabilities................ 485,452 411,884
Partners' capital (deficit)
General partners.............. (161,919) (140,824)
Limited partners
(9004.15 units)............... 2,769,091 3,451,144
Year ended Year ended Year ended
December 31, December 31, December 31,
2000 1999 1998
---- ---- ----
Total operating revenues......... $796,475 $979,966 $1,015,632
Total operating expenses......... 758,756 857,786 884,097
Income from operations........... 37,719 122,180 131,535
Total other income (expenses).... (7,538) (347,238) (39,932)
Net income (loss)................ 30,181 (225,058) 91,612
Net income (loss) attributable
general partners (3%)......... 905 (6,752) 2,748
Net income (loss) attributable
limited partners (97%)........ 29,276 (208,306) 88,864
Net income (loss) per limited
partnership interest.......... 3.24 (24.16) 9.87
Distributions
General partners.............. 22,000 12,253
Limited partners.............. 711,329 396,183
A-6
APPENDIX B
MILLENIUM MANAGEMENT, LLC
Balance Sheet
As of March 31, 2001
(unaudited)
ASSETS
Current Assets
Cash and Equivalents........................ $4,780
------
Total Current Assets............................. $4,852
------
TOTAL ASSETS......................................... $4,941
======
LIABILITIES & EQUITY
Equity
Members Capital.............................. $10,000
-------
Retained Earnings................................ $(5,059)
-------
Total Equity..................................... $4,941
------
TOTAL LIABILITIES & EQUITY........................... $4,491
======
B-1
The Letter of Transmittal, and any other required documents should be sent
or delivered by each Unit Holder or his broker, dealer, commercial bank, trust
company or other nominee to the Purchaser at its address set forth below.
Questions and requests for assistance may be directed to the Purchaser at
its address and telephone number listed below. Additional copies of this Offer
to Purchase, the Letter of Transmittal, and other tender offer materials may be
obtained from the Purchaser as set forth below, and will be furnished promptly
at the Purchaser's expense.
For information regarding the Offer contact:
Millenium Management, LLC
199 South Los Robles Avenue
Suite 440
Pasadena, California 91101
(800) 611-4613 or (626) 585-5920
Facsimile: (626) 585-5929