OFFER TO PURCHASE FOR CASH
1,500 UNITS
of Limited Partnership Interests in
AMERICAN REPUBLIC REALTY FUND I
by
EVEREST PROPERTIES II, LLC
at a Cash Purchase Price of
$200 per Unit
THE OFFER, WITHDRAWAL RIGHTS AND PRORATION PERIOD WILL EXPIRE AT 5:00 P.M., LOS
ANGELES TIME, ON FRIDAY, JULY 8, 2005, UNLESS THE OFFER IS EXTENDED.
Everest Properties II, LLC ("Everest" or the "Purchaser"), a California
limited liability company, is offering to purchase 1,500 UNITS of AMERICAN
REPUBLIC REALTY FUND I (the "Partnership"), at a cash purchase price of $200 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 the date of
this Offer, 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 or and is not conditioned upon financing. To the knowledge
of the Purchaser, a Unit Holder will not incur any fees, such as selling broker
commissions or depositary fees, to sell Units in response to this Offer; unless
such Unit Holder holds Units in a manner that involves fees particular to such
Unit Holder.
The enclosed Letter of Transmittal may be used to tender Units for the
Offer. Please read all Offer materials completely before completing and
returning the Letter of Transmittal (blue form).
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For More Information or for Further Assistance,
Please Call or Contact the Purchaser at:
Everest Properties II, LLC
199 South Los Robles Avenue
Suite 200
Pasadena, California 91101
(626) 585-5920
(800) 611-4613 (toll free)
June 2, 2005
TABLE OF CONTENTS
Page
INTRODUCTION...................................................................1
SUMMARY OF THE OFFER...........................................................1
DETAILS OF THE OFFER...........................................................2
1. Terms of the Offer; Expiration Date; Proration.................2
2. Acceptance for Payment and Payment of Purchase Price...........3
3. Procedure to Accept the Offer..................................3
4. Determination of Validity; Rejection of Units;
Waiver of Defects; No Obligation to Give Notice of Defects.....4
5. Withdrawal Rights..............................................5
6. Extension of Tender Period; Amendment..........................5
7. Conditions of the Offer........................................6
8. Backup Federal Income Tax Withholding..........................7
9. FIRPTA Withholding.............................................7
CERTAIN INFORMATION CONCERNING THE PARTNERSHIP.................................7
General................................................................8
Outstanding Units......................................................8
Trading History of the Units...........................................8
Selected Financial and Property Related Data...........................8
DETERMINATION OF OFFER PRICE...................................................8
CERTAIN INFORMATION CONCERNING THE PURCHASER...................................9
The Purchaser..........................................................9
General................................................................9
Prior Acquisitions of Units and Prior Contacts.........................9
Source of Funds.......................................................10
FUTURE PLANS OF THE PURCHASER.................................................10
EFFECTS OF THE OFFER..........................................................10
Future Benefits of Unit Ownership.....................................10
Limitations on Resales................................................10
Influence Over Future Voting Decisions................................11
Other Potential Effects...............................................11
FEDERAL INCOME TAX MATTERS....................................................11
CERTAIN LEGAL MATTERS.........................................................13
General...............................................................13
State Takeover Statutes...............................................13
Fees and Expenses.....................................................13
Miscellaneous.........................................................13
SCHEDULE I - EXECUTIVE OFFICERS
APPENDIX A - PARTNERSHIP INFORMATION
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INTRODUCTION
The Purchaser hereby offers to purchase 1,500 Units of limited partnership
interests in the Partnership ("Units") at a cash purchase price of $200 per
Unit, without interest, less the amount of Distributions (defined below) per
Unit, if any, made to Unit Holders by the Partnership after the date of this
Offer, 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). To the knowledge of the Purchaser, a Unit Holder will not
incur any other fees, such as selling broker commissions or depositary fees, to
sell Units in response to this Offer; unless such Unit Holder holds Units in a
manner that involves fees particular to such Unit Holder.
SUMMARY OF THE OFFER.
The purpose of the Offer is for the Purchaser to acquire an equity interest
in the Partnership for investment purposes.
In considering the Offer, Unit Holders are urged to consider the following:
o The price offered for the Units is $200 in CASH, less any
Distributions made after the date of this Offer. See "Details of the
Offer - Acceptance for Payment and Payment of Purchase Price. "
o The Offer is $25 per Unit (14%) more than the highest prior
third-party offer for Units of which Purchaser is aware (made July 2,
2004), based on a review of public SEC filings.
o The Partnership's reported 2004 revenue is down by more than $219,000
compared to 2003 revenue and vacancy at its properties has increased.
o The Units are illiquid - no trades of Partnership interests were
reported during the period from February 2004 through March 2005,
according to Direct Investments Spectrum, an independent industry
publication, in their most recent published report. 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 sales arranged through brokers or other
intermediaries. See "Certain Information Concerning the Partnership -
Trading History of the Units."
o The Partnership will not be required to terminate before December 31,
2012, unless a majority of the limited partners approve an earlier
dissolution or an event occurs that would require a dissolution,
according to the Partnership's limited partnership agreement, and,
according to the Partnership's public reports, the termination date
can be extended if certain events occur.
o The Purchaser is not affiliated with the Partnership or its general
partners. The Partnership's general partner, Mr. Robert J. Werra (the
"General Partner"), may be expected to communicate the Partnership's
position on the Offer in the next two weeks.
o The Purchaser is making the Offer with a view to making a profit for
itself. Accordingly, the desire of the Purchaser to purchase Units at
a low price conflicts with 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, 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
distributions resulting from any future sale of the Partnership's
properties. Unit Holders may have a more immediate need to use the
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cash now tied up in the Units, and may consider the Offer more certain
to achieve a prompt liquidation of their investment in the Units. Unit
Holders who sell all of their Units will also eliminate the need to
file Form K-1 information for the Partnership with their federal tax
returns for years after 2005. See "Details of the Offer - Acceptance
for Payment and Payment of Purchase Price."
o The Offer allows Unit Holders the option to sell "All or None" of
their Units, thereby allowing Unit Holders the option to avoid
proration if more than 1,500 UNITS are tendered. See "Details of the
Offer - Terms of the Offer; Expiration Date; Proration" and "-
Withdrawal Rights - Automatic Withdrawal Option."
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.
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
1,500 validly tendered, and not withdrawn, Units in accordance with the
procedures set forth in this Offer to Purchase ("Properly Tendered"). For
purposes of the Offer, the term "Expiration Date" means 5:00 p.m., Los Angeles
time, on Friday, July 8, 2005, 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 price offered
to the Unit Holders pursuant to the Offer, the increased 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 1,500 Units are Properly Tendered the Purchaser will, upon the
terms and subject to the conditions of the Offer, accept for payment and pay for
an aggregate of 1,500 Units, 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 transfers of Units are limited by the
Partnership Agreement to a number of Units (the "Transfer Limit") less than
1,500 Units, and the number of Units that are Properly Tendered exceeds the
Transfer Limit, the Purchaser will, upon the terms and subject to the other
conditions of the Offer, accept for payment and pay for Units equal to the
Transfer Limit, 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. Subject to its obligation to pay for Units promptly after the
Expiration Date, the Purchaser intends to pay for any Units accepted for payment
pursuant to the Offer after determining the final proration or other
adjustments. The Purchaser does not believe it would take any longer than five
business days to determine the effects of any proration required. If the number
of Units that are Properly Tendered is less than or equal to 1,500 Units (or the
Transfer Limit, if any), the Purchaser will purchase all Units that are Properly
Tendered, upon the terms and subject to the other conditions of the Offer. See
"Effects of the Offer - Limitations on Resales."
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Unit Holders may indicate, by checking a box on the Letter of Transmittal
(the "All or None Box"), that they only wish to sell their Units if they will be
able to sell all of their Units, without any proration. See "Details of the
Offer - Withdrawal Rights." If more than 1,500 Units have been Properly Tendered
without checking the All or None Box, then the above description of proration
will apply only to tenders of such Units that do not have the All or None Box
checked.
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 1,500 Properly Tendered Units, promptly following the Expiration Date.
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; provided,
however, that payment for Properly Tendered Units will be made promptly after
the Expiration Date in all cases. The Purchaser is unable to predict exactly
when the Partnership will provide written confirmations, since that is entirely
under the control of the Partnership's general partner.
Any Distributions made or declared on or after the date of this Offer
would, by the terms of the Offer and as set forth in the Letter of Transmittal,
be assigned by tendering Unit Holders to the Purchaser and deducted from your
proceeds. Also, the transfer fees charged by the Partnership will be deducted
from your proceeds, which the Partnership advises us is $50 per transfer
(regardless of the number of Units transferred). 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 Purchaser may destroy the original Letter of
Transmittal with respect to the Units. 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 Instructions.
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
3
by mail, registered mail with return receipt requested, properly insured, is
recommended. In all cases, sufficient time should be allowed to assure timely
delivery.
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.
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, effective upon 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 accepted for payment pursuant to the Offer will be made
and transmitted directly to Unit Holders whose Units have been accepted for
payment.
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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 1, 2005 (60 days following the Offer Date). 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 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.
Automatic Withdrawal Option. Unit Holders may indicate, by checking a box
on the Letter of Transmittal (the "All or None Box"), that they only wish to
sell their Units if they will be able to sell all of their Units, without any
proration. If at any time during the day of the Expiration Date more than 1,500
Units have been Properly Tendered, unless the Purchaser amends the Offer to
increase the number of Units to be purchased, the Purchaser will deem all Units
from Unit Holders that checked the All or None Box to be withdrawn and not
validly tendered for purposes of the Offer. Neither the Purchaser nor any other
person will be under any duty to give any notice that such automatic withdrawal
will occur. Unit Holders may change their election whether or not to check the
All or None Box at any time on or prior to the Expiration Date by submitting a
new Letter of Transmittal with their preferred election, in the manner described
in Section 3 herein.
6. Extension of Tender Period; 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 delay for a reasonable period the acceptance for payment of, or
payment for, any Units not already accepted for payment or paid for,
if the Purchaser reasonably anticipates the prompt receipt of any
authorization, consent, order of, or filing with, or the expiration of
waiting periods imposed by, any court, government, administrative
agency or other governmental authority, necessary for the consummation
of the transactions contemplated by the Offer;
o to amend the Offer in any respect (including, without limitation, by
increasing or decreasing the price, increasing or decreasing the
number of Units being sought, or both).
5
Notice of any such extension 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(c) 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 waives a condition that constitutes
a material change in the terms of the Offer, the Purchaser will extend the Offer
and disseminate additional tender offer materials to the extent required by
Rules 14d-4(c) and 14d-6(d) under the Exchange Act. If a Distribution occurs
before the Expiration Date and the Purchaser reduces its Offer price as a
result, the Purchaser will provide notice thereof to Unit Holders and extend the
Expiration Date in accordance with Rule 14e-1(b) under the Exchange Act. The
Purchaser will not provide a subsequent offering period pursuant to Rule 14d-11
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, 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 before 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, administrative agency or other governmental authority
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) materially adversely affects the business, properties, assets,
liabilities, financial condition, operations, results of operations or prospects
of the Purchaser, or the Partnership; or (v) 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, administrative agency or
other governmental authority which, directly or indirectly, results in any of
the consequences referred to in paragraph (a) above;
(c) there shall be any authorization, consent, order of, or filing with, or
expiration of waiting periods imposed by, any court, government, administrative
agency or other governmental authority, necessary for the consummation of the
transactions contemplated by the Offer and requested by Purchaser, that shall
not have occurred or been filed or obtained;
(d) any event shall have occurred or been disclosed, or shall have been
threatened, regarding the business, properties, assets, liabilities, financial
condition, operations, results of operations or prospects of the Partnership,
which event is materially adverse, or which threatened event, if fulfilled,
would be materially adverse, to the Partnership or its business or properties,
or there shall be any material lien not disclosed in the Partnership's financial
statements, or the Purchaser shall have become aware of any previously
undisclosed fact that has or with the passage of time would have a material
adverse effect on the value of the Units or the Partnership's properties;
6
(e) the General Partner or the Partnership shall have stated or otherwise
indicated that it intends to refuse to take any action that the Purchaser deems
necessary, in the Purchaser's reasonable judgment, for the Purchaser to be the
registered owner of the Units tendered and accepted for payment hereunder, with
full voting rights, 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, or the Purchaser is unable to
confirm to its reasonable satisfaction that the General Partner or Partnership
will not refuse to take any such action;
(f) 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 reasonable judgment of
the Purchaser, adversely affecting the Purchaser, the Partnership or its
properties or the value of the Units;
(g) 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 the 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, other than listing the Partnership's properties for sale; or,
(h) the 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 prior to the Expiration Date, subject to the requirement to
disseminate to Unit Holders, in a manner reasonably designed to inform them of,
any material change in the information previously provided. Any determination by
the Purchaser, in its reasonable judgment, 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 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
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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 11,000 Units
issued and outstanding, held by approximately 659 Unit holders, as of as of
December 31, 2004.
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. At present, 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 Direct Investments Spectrum, an independent third party
publication, between February 1, 2004 and March 31, 2005 (the most recent
published information), there were no trades of the Partnership's limited
partnership interests. 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.
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 other Quarterly Reports on Form 10-Q or Current Reports on Form 8-K filed
with the Commission after the Form 10-K or after the date of this Offer for more
recent information relating to the business and operations of the Partnership.
DETERMINATION OF OFFER PRICE
In establishing the Offer 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 Offer price pursuant to its
own analysis. The Purchaser did not obtain current independent valuations or
appraisals of the assets.
The Purchaser developed an estimated current liquidation value for the
Partnership's Units using its proprietary valuation methods, based on the
Purchaser's own estimate of the fair market value of the Partnership's property
8
obtained by a review and analysis of the Partnership's publicly filed financial
statements and other publicly available information, the Partnership Agreement
provisions regarding the allocation of distributions, historical distributions
made to Unit Holders, the assets, liabilities and operating results of the
Partnership, the mortgage loans, assumed expenses of selling the properties and
liquidating the Partnership, and other considerations. In so doing, the
Purchaser applied an 8.5% capitalization rate to the estimated 2004 net
operating income for each of the properties and to the Partnership's 2004
reported net operating income as a whole. The Purchaser then reviewed the
Partnership Agreement to determine how net liquidation proceeds from a current
sale of the Partnership's properties would be distributed. Based on the
information described above, the Purchaser estimates the net proceeds to Unit
Holders from a current liquidation of the Partnership would be between $100 and
$216 per Unit. No assurances can be provided that the Purchaser's estimates are
correct, and the actual amount of net proceeds that would be received from a
current liquidation of the Partnership's assets may differ substantially from
the Purchaser's estimate. Unit Holders are advised not to rely on Purchaser's
estimates, but to make their own estimates with the assistance of their own
advisors.
CERTAIN INFORMATION CONCERNING THE PURCHASER
The Purchaser. The Purchaser is a California limited liability company that
was formed in 1996. The principal office of the Purchaser is 199 South Los
Robles Avenue, Suite 200, Pasadena, CA 91101. The Purchaser's manager is Everest
Properties, LLC, a California limited liability company, which has no employees
of its own. Both the Purchaser and its manager have the same executive officers.
For certain information concerning the executive officers of the Purchaser and
its manager, see Schedule I to this Offer to Purchase.
The Purchaser and its affiliates invest in limited partnerships such as the
Partnership, and in other forms of real estate oriented investments, and conduct
activities incident thereto.
General. Except as set forth 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 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 any other person with respect to any securities of the
Partnership, including, but not limited to, the transfer or voting thereof,
joint ventures, loan arrangements, puts or calls, guarantees of loans,
guarantees against loss or the giving or withholding of proxies, consents or
authorizations; (iv) since January 1, 2003, there have been no transactions
which 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 January 1, 2003, 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.
Prior Acquisitions of Units and Prior Contacts. The Purchaser owns 472
Units, or approximately 4% of the Partnership's outstanding Units. Everest
9
Management, LLC, an affiliate of Purchaser, owns 2,300 Units, or approximately
21% of the Partnership's outstanding Units. None of the foregoing Units were
acquired in the last 60 days.
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 Partner concerning the Partnership since January 1, 2002.
Source of Funds. Based on the Offer price of $200 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
$300,000. The Purchaser expects to obtain these funds from current cash and cash
equivalents.
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 purposes.
Following the completion of the Offer, the Purchaser and persons related to or
affiliated with the Purchaser may acquire additional Units, although there is no
current intention to do so. 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. 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.
Other than as set forth above, the Purchaser does not currently intend to
change current management, indebtedness, capitalization, corporate structure or
business operations of the Partnership and does not have current plans for any
extraordinary transaction such as a merger, reorganization, liquidation 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 prohibits a transfer of
Units if the transfer would result in 50% or more of the Units being transferred
in a 12 month period (a "Tax Termination"). This provision may limit sales of
Units on the secondary market and in private transactions following completion
of the Offer. Accordingly, the Partnership may not recognize any requests for
recognition of a transferee Unit Holder upon a transfer of Units if the transfer
would result in a Tax Termination. For the same reasons, it is theoretically
possible that the number of Units tendered for purchase by the Purchaser taken
together with the number of Units that have transferred prior to the Offer could
result in a Tax Termination. In such event, Purchaser will purchase the maximum
number of Units it may purchase without causing a Tax Termination, as informed
by the General Partner. It is not possible for Purchaser to determine how many
Units may be purchased because only the General Partner will know the number of
Units that have been transferred in all other transactions prior to the
expiration of the Offer. See "Details of the Offer - Terms of the Offer;
Expiration Date; Proration."
10
Influence Over Future Voting Decisions. 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 the General Partner,
dissolution and termination of the Partnership, and approval of most types of
amendments to the Partnership Agreement. If all of the Units sought are
acquired, the Purchaser and its affiliate will hold approximately 39% of the
outstanding Units. Accordingly, while the Purchaser and its affiliate will not
control any vote of the Unit holders, the influence of Purchaser and its
affiliate on such actions may be significant.
Other Potential Effects. The Units are registered under the Exchange Act,
which requires, among other things that the Partnership furnish certain
information to its Unit holders and to the Commission and comply with the
Commission's proxy rules in connection with meetings of, and solicitation of
consents from, Unit holders. Registration and reporting requirements could be
terminated by the Partnership if the number of record holders falls below 300,
or below 500 if the Partnership's total assets are below $10 million for three
consecutive preceding fiscal years. The Partnership reported a total of 659
limited partners as of its most recent fiscal year end and in excess of $5
million in total assets. Although it is possible that the purchase of Units
pursuant to the Offer could reduce the number of record Unit holders below 500,
the Purchaser believes the possibility is unlikely and it is not the intention
of the Purchaser to cause such a result. Accordingly, the Purchaser does not
believe that the purchase of Units pursuant to the Offer will result in the
Units becoming eligible for deregistration under the Exchange Act.
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 is 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. 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 15 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
11
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.
If any portion of the amount realized by a Unit Holder is attributable to
such Unit Holder's share of "unrealized receivables" or "substantially
appreciated inventory items" as defined in Code Section 751, a corresponding
portion of such Unit Holder's gain or loss will be treated as ordinary gain or
loss. It is possible that the basis allocation rules of Code Section 751 may
result in a Unit Holder's recognizing ordinary income with respect to the
portion of the Unit Holder's amount realized on the sale of a Unit that is
attributable to such items while recognizing a capital loss with respect to the
remainder of the Unit.
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 (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 interest in the Partnership
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 interest
in the Partnership 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 the number of Units sought in the
Offer 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.
A tendering Unit Holder will be allocated the Unit Holder's pro rata share
of the annual taxable income and losses from the Partnership with respect to the
Units sold for the period through the date of sale, even though such Unit Holder
will assign to the Purchaser its rights to receive certain cash distributions
with respect to such Units. Such allocations and any Partnership distributions
for such period would affect a Unit Holder's adjusted tax basis in the tendered
Units and, therefore, the amount of gain or loss recognized by the Unit Holder
on the sale of the Units.
Unit Holders (other than tax-exempt persons, corporations and certain
foreign individuals) who tender Units may be subject to 28 percent backup
12
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 28 percent from payments to such Unit Holder.
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.
State Takeover Statutes. A number of states have adopted anti-takeover laws
which purport, to varying degrees, to be applicable to attempts to acquire
securities of entities domiciled in such states or which have substantial
assets, security holders, principal executive offices or principal places of
business in such states. These laws are generally directed at the acquisition of
corporations and not partnerships. The Purchaser is not aware of any state
anti-takeover law that would apply to the transaction contemplated by the Offer.
If any person seeks to apply any state takeover statute, the Purchaser will
take such action as then appears desirable, which action may include challenging
the validity or applicability of any such statute in appropriate court
proceedings. If there is a claim that one or more takeover statutes apply to the
Offer, and it is not determined by an appropriate court that such statutes do
not apply or are invalid as applied to the Offer, the Purchaser might be
required to file certain information with, or receive approvals from, the
relevant state authorities. This could prevent the Purchaser from purchasing or
paying for Units tendered pursuant to the Offer, or cause delay in continuing or
consummating the Offer. In such case, the Purchaser may not be obligated to
accept for payment or pay for Units tendered. Furthermore, it is a condition to
the Offer that no state or federal statute impose a material limitation on the
Purchaser's right to vote the Units purchased pursuant to the Offer. If this
condition is not met, Purchaser may terminate or amend the Offer.
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 the Purchaser may solicit tenders of Units without any
additional compensation. The Purchaser will pay all costs and expenses of
printing and mailing the Offer and its legal fees and expenses.
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
13
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
- -- General."
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.
EVEREST PROPERTIES II, LLC
June 2, 2005
14
SCHEDULE I
EXECUTIVE OFFICERS
The Purchaser's manager is Everest Properties, LLC, a California limited
liability company, which has no employees of its own. Both the Purchaser and its
manager have the same executive officers and no directors. The business address
of each executive officer of Everest Properties II, LLC is 199 South Los Robles
Avenue, Suite 200, Pasadena, California 91101. Each executive officer is a
United States citizen. The name and principal occupation or employment of each
executive officer of Everest Properties II, LLC ("EPII"), are set forth below.
Present Principal Occupation or Employment
Name Position and Five-Year Employment History
- ---- ------------------------------------------
W. Robert Kohorst President of EPII from 1996 - present. President and
Director of Everest Properties, Inc. from 1994 - present.
President and Director of KH Financial, Inc. from 1994
- present.
David I. Lesser Executive Vice President and Secretary of EPII from
1996 - present. Executive Vice President of Everest
Properties, Inc. from 1995 - present.
Christopher K. Davis Vice President and the General Counsel of EPII 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 EPII
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, 2004 (the "Form 10-K") and
Quarterly Report on Form 10-Q for the period ended March 31, 2005 (the "Form
10-Q"). 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 the Form 10-K or Form 10-Q 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.
PART I
From the Form 10-K:
Item 1. Business
The Registrant, American Republic Realty Fund I, (the "Partnership"), is a
limited partnership organized under the Wisconsin Uniform Limited Partnership
Act pursuant to a Certificate of Limited Partnership dated December 22, 1982. As
of December 31, 2003, the Partnership consisted of an individual general
partner, Mr. Robert J. Werra, (the "General Partner") and 698 limited partners
owning 11,000 limited partnership interests at $1,000 per interest. The
distribution of limited partnership interests commenced May 2, 1983 and ended
April 17, 1984, pursuant to a Registration Statement on Form S-11 under the
Securities Act of 1933 (Registration #0-11578) as amended.
The Partnership was organized to acquire a diversified portfolio of
income-producing real properties, primarily apartments, as well as office
buildings, industrial buildings, and other similar properties.
During 1983 and 1984, the Partnership acquired four properties: Kenwood
Gardens Apartments, a 104 unit apartment community located in Fort Myers,
Florida (acquired on September 1, 1983, subsequently disposed of by sale during
1988), Jupiter Plaza Office/Showroom, a 131,440 rentable square foot commercial
building located in Garland, Texas (acquired on September 29, 1983, subsequently
disposed of in foreclosure during 1988), Four Winds Apartments, a 154 unit
apartment community located in Orange Park, Florida (Phase I acquired September
12, 1983 and Phase II acquired May 1, 1984) and Forestwood Apartments (formerly
Oak Creek) a 263 unit apartment community located in Bedford, Texas (acquired
December 20, 1983). No additional properties were purchased by the Partnership
and the Partnership will not acquire additional properties in the future. The
properties remaining are described more fully in this report at "Item 2.
Properties".
Univesco, Inc. ("Univesco"), a Texas corporation, eighty three percent
owned by Robert J. Werra ("Univesco") manages the affairs of the Partnership.
Univesco acts as the managing agent with respect to the Partnership's
properties. Univesco may also engage other on-site property managers and other
agents to the extent the management considers appropriate. The General Partner
has ultimate authority regarding property management decisions.
The Partnership competes in the residential rental markets. Univesco
prepared marketing analyses for all property areas and determined that these
A-1
areas contain other like properties which are considered competitive on the
basis of location, amenities and rental rates. It is realistic to assume that
additional properties similar to the foregoing will be constructed within their
various market areas.
No material expenditure has been made or is anticipated for either
Partnership-sponsored or consumer research and development activities relating
to the development or improvement of facilities or services provided by the
Partnership. There neither has been, nor are any anticipated, material
expenditures required to comply with any federal, state, or local environmental
provisions which would materially affect the earnings or competitive position of
the Partnership.
The Partnership is engaged solely in the business of real estate
investments. Its business is believed by management to fall entirely within a
single industry segment. Management does not anticipate that there will be any
material seasonal effects upon the operation of the Partnership.
Competition and Other Factors
The majority of the Properties' leases are six to twelve month terms.
Accordingly, operating income is highly susceptible to changing market
conditions. Occupancy and local market rents are driven by general market
conditions which include job creation, new construction of single and
multi-family projects, and demolition and other reduction in net supply of
apartment units.
Rents have generally been increasing in recent years due to the generally
positive relationship between apartment unit supply and demand in the
Partnership's markets. However, the properties are subject to substantial
competition from similar and often newer properties in the vicinity in which
they are located. In addition, operating expenses and capitalized expenditures
have increased as units are updated and made more competitive in the market
place. (See Item 7 "Management's Discussion and Analysis of Financial Condition
and Results of Operations".)
A-2
PART II
Item 2. Properties
At December 31, 2004 the Partnership owned two properties with
approximately 416,623 net rentable square feet. Both properties are apartment
communities.
Name and Location General Description of the Property
- ----------------- -----------------------------------
Forestwood Apartments A fee simple interest in a 263-unit apartment
community located in Bedford, Texas, purchased
in 1983 containing 244,407 net rentable square
feet on approximately 14 acres of land.
Four Winds Apartments A fee simple interest in a 100-unit community,
Phase I located in Orange Park, Florida, purchased in
1983, containing approximately 110,716 net
rentable square feet on 10 acres of land.
Four Winds Apartments A fee simple interest in a 54-unit apartment
Phase II community located in Orange Park, Florida,
adjacent to Four Winds Apartments I, purchased
in 1984 and containing approximately 61,500 net
rentable square feet on 3.73 acres of land.
Occupancy Rates December 31,
Percent
1999 2000 2001 2002 2003 2004
---- ---- ---- ---- ---- ----
Four Winds I & II 94.0% 95.0% 95.2% 89.6% 94.2% 81.8%
Forestwood 96.9% 94.8% 95.9% 93.2% 84.4% 90.9%
The Properties are encumbered by non-recourse mortgages payable. For information
regarding the encumbrances to which the properties are subject and the status of
the related mortgage loans, see "Management's Discussion and Analysis of
Financial Condition and Results of Operating - Liquidity and Capital Resources"
contained in Item 7 hereof and Note B to the Financial Statements contained in
Item 8.
Selected Financial Data
The following selected financial data, presented in 000's except for Units
outstanding, 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 reports:
A-3
Item 6: Selected Financial Data
The following table sets forth selected financial data regarding the
Partnership's results of operations and financial position as of the dates
indicated. This information should be read in conjunction with Management's
Discussion and Analysis of Financial Condition and Results of Operations"
contained in Item 7 hereof and Financial Statements and notes thereto contained
in Item 8.
2004 2003 2002 2001 2000
---- ---- ---- ---- ----
Limited Partner Units
Outstanding 11,000 11,000 11,000 11,000 11,000
Statement of Operations
Total Revenues $2,490 $2,710 $2,760 $2,896 $2,797
Net Income (Loss) (485) (337) (217) (42) (65)
Limited Partner Net Income (43.73) (30.30) (19.54) (3.45) (5.33)
(Loss) per Unit - Basic
Cash Distributions to
Limited Partners per Unit -
Basic 0 0 25 50 0
Balance Sheet:
Real Estate, net $4,248 $4,825 $5,382 $5,943 $6,499
Total Assets 5,160 5,812 6,305 6,941 7,613
Mortgages Payable 9,919 10,070 10,211 10,341 10,461
Partner's Deficit (5,139) (4,653) (4,316) (3,824) (3,236)
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.
June 2, 2005 EVEREST PROPERTIES II, LLC
Everest Properties II, LLC
199 South Los Robles Avenue
Suite 200
Pasadena, California 91101
(800) 611-4613 or (626) 585-5920
Facsimile: (626) 585-5929