SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) Securities
Exchange Act of 1934
Filed by the Registrant ]
Filed by a party other than the Registrant [X]
Check the appropriate box:
[X] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only
(as permitted by Rule 14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
REAL ESTATE ASSOCIATES LIMITED III
(Name of Registrant as Specified in Its Charter)
Millenium Management, LLC
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of filing fee (Check the appropriate box):
[X] No fee required
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transactions applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined.)
(4) Proposed maximum aggregate value of transaction:
(5) Total Fee paid:
[ ] Fee paid previously with preliminary materials
[ ] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting
fee was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
(1) Amount previously paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing party:
(4) Date filed:
Millenium Management, LLC
155 N. Lake Avenue, Suite 1000
Pasadena, CA 91101
January 10, 2003
Dear Limited Partner:
Enclosed is a Solicitation of Consents seeking the approval by written
consent (the Consents") of the limited partners (the "Limited Partners") of Real
Estate Associates Limited III, a California limited partnership (the
"Partnership"), to remove the current general partners and to continue the
Partnership and elect Millenium Management, LLC, a California limited liability
company ("Millenium") as the new general partner of the Partnership.
The goal of Millenium in soliciting the Consents is to elect Millenium as
the new general partner of the Partnership so that Millenium can (i) distribute
cash on hand, (ii) investigate claims against the Partnership's current general
partners, (iii) reduce management fees by ten percent (10%), (iv) review the
Partnership's books and records to analyze alternatives, including the possible
liquidation of the limited and general partner interests that the Partnership
holds and (v) make a subsequent proposal to obtain the Limited Partners' consent
to amend the Partnership Agreement to provide that the Partnership be liquidated
on or before January 1, 2005 (the Partnership Agreement currently provides that
the Partnership does not have to be liquidated until the year 2030).
A review of documents and reports publicly filed by the Partnership
indicates that the remaining assets held by the Partnership include a
significant amount of cash on hand ($1,983,073 as of September 31, 2002) and
potentially valuable real estate and other assets. Millenium believes the
Partnership should be exploring opportunities to sell the Partnership's assets
(limited and general partner interests in other partnership(s)) to third parties
now to maximize the potential cash returns to the Limited Partners on their
original investment
Most importantly, on November 15, 2002, a jury in the class action case
brought against National Partnership Investment Corporation ("NAPICO"), one of
the general partners of the Partnership, and other defendants found that NAPICO
had knowingly violated various sections of the Securities Exchange Act and had
acted with malice, oppression or fraud in breaching its fiduciary duty to the
limited partners. The jury awarded the limited partners of the Partnership
compensatory and punitive damages of approximately $32,000,000. Many of the same
officers and employees who were managing the affairs of the general partners
when the various wrongdoings occurred continue to manage the Partnership. Do you
want general partners who have been found liable for securities fraud to
continue to manage the Partnership?
We urge you to carefully read the enclosed Consent Solicitation Statement
in order to vote your interests. Please note that we can give no assurance that
limited partner value will be increased by the election of Millenium as the new
general partner. YOUR VOTE IS IMPORTANT. FAILURE TO VOTE, ABSTENTIONS AND BROKER
NON-VOTES WILL HAVE THE SAME EFFECT AS A VOTE AGAINST THE PROPOSALS. To be sure
your vote is represented, please
sign, date and return the enclosed GREEN Consent of Limited Partner form as
promptly as possible in the enclosed, prepaid envelope. If you have any
questions, please do not hesitate to contact Mr. Vahan Saroians at 626-585-5920.
Very Truly Yours,
Millenium Management, LLC
SOLICITATION OF CONSENTS
of
LIMITED PARTNERS
of
Real Estate Associates Limited III
by
Millenium Management, LLC
a California limited liability company
January __, 2003
CONSENT SOLICITATION STATEMENT
Millenium Management, LLC, a California limited liability company
("Millenium"), is seeking the approval by written consent (the "Consents") of
the limited partners (the "Limited Partners") of Real Estate Associates Limited
III, a California limited partnership (the "Partnership"), to remove the current
general partners and to continue the Partnership with Millenium as the new
general partner of the Partnership. The election of Millenium as a general
partner is conditioned upon the approval of the removal of the current general
partners.
In the event that the current general partners are removed and the Limited
Partners do not approve continuing the Partnership with Millenium as the new
general partner, Millenium will initiate an additional consent solicitation to
continue the Partnership with a different, new general partner. In the event
that the Limited Partners do not elect to continue the Partnership with a new
general partner within sixty (60) days after the removal of the current general
partners, the Partnership will be dissolved and the assets of the Partnership
will be liquidated pursuant to the Partnership's Restated Certificate and
Agreement of Limited Partnership (the "Partnership Agreement").
If such a situation shall arise the general partners or other party
appointed for such purpose shall wind up the affairs of the Partnership, shall
sell all of the Partnership's assets as promptly as is consistent with obtaining
the fair value thereof, and pay all liabilities and all costs of dissolution,
Upon the dissolution of the Partnership, a final statement shall be
prepared by the Partnership's certified public accountants as soon as
practicable setting forth the assets and liabilities of the Partnership. A copy
of such statement shall be furnished to each Partner within 90 days after such
dissolution. Thereupon all assets of the Partnership shall be liquidated as
promptly as possible and the proceeds therefrom shall be distributed in the
following order of priority: (a) to the payment of the debts and liabilities of
the Partnership and the expenses of liquidation; (b) to the setting up of such
reserves as the current general partners may deem reasonably necessary for any
contingent or unforeseen liabilities or obligations of the Partnership arising
out of or in connection with the Partnership, provided that any such reserves
shall be paid over by the current general partners to an escrow agent, to be
held by such escrow agent for the purpose of disbursing such reserves in payment
of any of the aforementioned contingencies and, at the expiration of such period
as the current general partners shall deem advisable, to distribute the balance
thereafter remaining in the manner hereinafter provided; (c) to the limited and
general partners in accordance with the Partnership Agreement.
Upon dissolution and termination each Limited Partner shall look solely to
the assets of the Partnership for the return of his cash contribution, and if
the Partnership property remaining after the payment or discharge of the debts
and liabilities of the Partnership is insufficient to return the cash
contribution of each Limited Partner, such Limited Partner shall have no
recourse against the current general partners.
This Consent Solicitation Statement and the accompanying GREEN Consent of
Limited Partners form are first being mailed to Limited Partners on or about
January 31, 2003. Limited Partners who are record owners of Limited Partnership
Interests as of January 31, 2003 (the "Record Date") may execute and deliver a
Consent. The Record Date shall be the date on which the first written consent is
given. Everest Management LLC, a limited partner in the Partnership, has
indicated that it will give its written Consent on the same day as a definitive
Consent Solicitation that is filed with the Securities and Exchange Commission
(the "SEC") A beneficial owner of Limited Partnership Interests who is not the
record owner of such Limited Partnership Interests must arrange for the record
owner of such Limited Partnership Interests to execute and deliver to Millenium
a Consent form that reflects the vote of the beneficial owner.
In reviewing this Consent Solicitation Statement please consider the
following:
o On November 15, 2002, a jury in the class action case brought against
National Partnership Investment Corporation ("NAPICO"), one of the
general partners of the Partnership, and other defendants found that
NAPICO had knowingly violated various sections of the Securities
Exchange Act and had acted with malice, oppression or fraud in
breaching its fiduciary duty to the limited partners. The jury awarded
the limited partners of the Partnership compensatory and punitive
damages of approximately $32,000,000. Many of the same officers and
employees who were managing the affairs of the general partners when
the various wrongdoings occurred continue to manage the Partnership.
Do you want general partners who have been found liable for securities
fraud to continue to manage the Partnership?
o The remaining assets of the Partnership are eleven limited partners
interests and one remaining general partner interest in real estate
limited partnership (the "Limited Partnership Assets"). Based on the
fact that the Partnership has not disclosed that it is exploring the
alternative of selling the Limited Partnership Assets, Bond Purchase
believes that the current general partners are not actively seeking
opportunities to sell the Limited Partnership Assets.
o If Millenium is successful in replacing the current general partners
Millenium plans to consider opportunities to sell the Limited
Partnership Assets. While considering such opportunities, Millenium
will provide detailed financial information about Partnership assets
to the limited partners which the current General Partners have
continuously withheld.
o If Millenium is appointed as the general partner, Millenium plans to
solicit consents of the Limited Partners to amend the Partnership
Agreement to provide that the Partnership be liquidated on or before
January 1, 2005 (the Partnership Agreement currently provides that the
Partnership does not have to be liquidated until the year 2030);
although Millenium's not contractually bound to do so.
o If Millenium is appointed as the new general partner, it or its
affiliates would generally be entitled to the same fees as previously
paid to the current general partners. Although Millenium will not be
contractually bound to do so, Millenium intends, upon its election as
the new general partner, to reduce the annual management fees set
forth in Section 9.5 of the Partnership Agreement and any other fees
payable to the general partner or its affiliates by at least 10%.
o If Millenium is appointed as the new general partner, it will be
entitled to at least a 1% interest in all profits and losses and
distributions, as well as liquidation proceeds of the Partnerships to
the same extent as the former general partners pursuant to Sections
7.1 and 8.1 of the Partnership Agreement.
o General Partners have received $129,292 and $96,941 in management fees
and $189,569 and $72,347 as reimbursement for general and
administrative costs for the year ended December 31, 2001 and the nine
months ended September 30, 2002 respectively. The current general
partners and its affiliates will continue to collect management fees
until they sell the Limited Partnership Assets, and therefore have a
financial incentive not to sell the Limited Partnership Assets. Based
on publicly available information, except for the initial limited
partner Bruce Nelson, who is an officer of NAPICO, none of the
officers or directors of NAPICO own directly or beneficially any
Limited Partnership Interests. Because the Partnership has recently
sold a significant number of its assets in 1998, Millenium believes
that the management fee should be reduced below 4% of the
Partnership's invested assets. Although Millenium may have a financial
incentive not to sell the Limited Partnership Assets because it also
will receive management fees, Millenium's incentive not to sell the
Limited Partnership Assets is significantly less because (i) it will
be collecting management fees which are 10% less for managing the
Limited Partnership Assets if Millenium decreases management fees as
it intends to do and (ii) its affiliate holds approximately 4.2% of
the Limited Partnership Interests. Therefore, Millenium has a stronger
incentive to ensure the prompt sale of the Limited Partnership Assets
at a favorable price.
Considerations other than those identified, such as investment and tax
considerations, exist which should be weighed in replacing the current general
partners with Millenium. Limited Partners are advised to read this entire
Consent Solicitation Statement carefully and to consult with their investment
and tax advisors before making a decision whether or not to consent. Please note
that Millenium can give no assurance that limited partner value will be
increased by the election of Millenium as the new general partner. YOUR VOTE IS
IMPORTANT. FAILURE TO VOTE WILL HAVE THE SAME EFFECT AS A VOTE AGAINST THE
PROPOSALS.
The Consents are solicited upon the terms and subject to the conditions of
this Consent Solicitation Statement and the accompanying form of Consent.
Removal of the current general partners and the election to continue the
Partnership with Millenium as the new general partner requires the consent of
the record holders of a majority of the outstanding limited partnership
interests ("Limited Partnership Interests") of the Limited Partners (the
"Required Consents"). If Millenium receives the Required Consents, it will
become the new general partner, as provided in the Partnership Agreement.
Section 9.9(d) of the Partnership Agreement provides that the vote of
Limited Partners owning a majority of the Limited Partnership Interests may
remove a general partner. Section 13.4 provides that the Limited Partners owning
a majority of the Limited Partnership Interests may elect to continue the
Partnership and elect a new general partner if an event of dissolution occurs by
the removal of a general partner.
Under the Partnership Agreement and California law, Limited Partners do not
have dissenters' rights of appraisal in connection with these Proposals.
THIS SOLICITATION IS BEING MADE BY MILLENIUM AND NOT ON BEHALF OF THE
PARTNERSHIP. CONSENTS SHOULD BE DELIVERED TO MILLENIUM.
THE SECURITIES AND EXCHANGE COMMISSION HAS NOT PASSED UPON THE ACCURACY OR
ADEQUACY OF THE INFORMATION CONTAINED IN THIS DOCUMENT. ANY REPRESENTATION TO
THE CONTRARY IS UNLAWFUL.
THIS SOLICITATION OF CONSENTS EXPIRES NO LATER THAN 11:59 P.M. PACIFIC TIME
ON FEBRUARY 28, 2003, UNLESS EXTENDED. THE CONSENTS RECEIVED ON THE ACTIONS
PROPOSED HEREIN SHALL REMAIN VALID UNTIL THE DATE SUCH ACTIONS HAVE BEEN ADOPTED
BY THE PARTNERSHIP OR ELEVEN MONTHS, WHICHEVER IS LATER.
AVAILABLE INFORMATION
The Partnership is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith files reports, consent solicitation statements and other
information with the Securities and Exchange Commission (the "Commission"). Such
reports, consent solicitation statements and other information filed with the
Commission can be inspected and copied at the public reference facilities
maintained by the Commission at Room 1024, 450 Fifth Street, N.W., Washington,
D.C. 20549, and at the Commission's Regional Offices, 233 Broadway, New York,
New York 10279 and 175 W. Jackson Boulevard, Suite 900, Chicago, Illinois 60604.
In addition, the Commission maintains a site on the World Wide Web portion of
the Internet that contains reports, proxy and information statements and other
information regarding registrants that file electronically with the Commission.
The address of such site is http://www.sec.gov.
INFORMATION CONCERNING MILLENIUM AND EVEREST
Millenium is a California limited liability company that was formed in 1999
for the purpose of seeking to become the general partner of other real estate
limited partnerships. The sole Manager of Millenium is Everest Properties II,
LLC ("Everest"), who manages all of the business affairs of Millenium
Everest is a California limited liability company that was formed in 1996
as a diversified real estate-oriented investment firm that specializes in
investing in and managing limited partnerships. The principal office of
Millenium and Everest is 155 N. Lake Avenue, Suite 1000, Pasadena, CA 91101;
telephone (626) 585-5920.
The following are the resumes of Everest officers. The business address of
each of the officers is 155 N. Lake Avenue, Suite 1000, Pasadena, CA 91101.
Millenium and Everest do not own any Limited Partnership Interests.
W. Robert Kohorst. Mr. Kohorst has been the President of Everest and its
predecessor since 1995. He is a lawyer by profession. From 1984 through 1990,
Mr. Kohorst was the President of the Private Placement Group for Public Storage,
Inc., a national U.S. real estate syndicator. Mr. Kohorst's responsibilities
included all structuring, marketing, investor services and accounting services
for private placement syndications for Public Storage, Inc., and its affiliates.
Upon leaving Public Storage, Inc. in 1990, Mr. Kohorst was the Chief Executive
Officer and principal of two businesses, Tiger Shark Golf, Inc., a golf
equipment manufacturer, and Masquerade International, Inc., a manufacturer of
costumes. In 1991 Mr. Kohorst co-founded KH Financial, Inc., which has been
engaged in the acquisition of general partner interests, real estate companies
and related assets. Mr. Kohorst has been the President of KH Financial, Inc.
from its inception to the present. Mr. Kohorst holds a Juris Doctor from the
University of Michigan and a Bachelor of Science degree in accounting from the
University of Dayton.
David I. Lesser. Mr. Lesser has been the Executive Vice President of
Everest and its predecessor since 1995. He is a lawyer by profession. From 1979
through 1986, Mr. Lesser practiced corporate and real estate law with Kadison,
Pfaelzer, Woodard, Quinn & Rossi and Johnsen, Manfredi & Thorpe, two prominent
Los Angeles law firms. From 1986 through 1995, Mr. Lesser was a principal and
member of Feder, Goodman & Schwartz and its predecessor firm, co-managing the
firm's corporate and real estate practice. Between 1990 and 1992, Mr. Lesser was
counsel to Howard, Rice, Nemerovski, Robertson, Canady & Falk. Mr. Lesser is
also a Vice President of KH Financial, Inc. Mr. Lesser holds a Juris Doctor from
Columbia University and a Bachelor of Arts degree from the University of
Rochester.
Christopher K. Davis. Mr. Davis is a Vice President and the General Counsel
of Everest, which he joined in 1998. He is a lawyer by profession. From 1991 to
1995, he practiced securities and corporate law with Gibson, Dunn & Crutcher, a
prominent national law firm headquartered in Los Angeles. From 1995 through
1997, he served as Senior Staff Counsel and then Director of Corporate Legal of
Pinkerton's, Inc., a worldwide provider of security, investigation and related
services. At Pinkerton, Mr. Davis was responsible for directing the corporate
section of the legal department. Mr. Davis holds a Juris Doctor from Harvard Law
School and a Bachelor of Science degree in Business Administration from the
University of California, Berkeley.
Peter J. Wilkinson. Mr. Wilkinson is a Vice President and the Chief
Financial Officer of Everest, which he joined in 1996. He is an accountant by
profession. From 1981 through 1987, he worked for Deloitte Haskins and Sells and
Coopers and Lybrand in London and Sydney in their audit divisions, gaining
significant experience in a variety of industry segments. From 1987 to 1990, he
was the company secretary and controller of Gresham Partners, an Australian
investment bank where, in addition to being responsible for all financial, tax
and administrative matters, he was involved with analyzing leveraged buyout,
property finance and business acquisitions. Mr. Wilkinson joined BankAmerica in
the United States and from 1991 to 1996 held a number of positions, culminating
in being the Division Finance Officer for the Corporate Trust and Mortgage and
Asset Backed divisions. In this capacity, he was responsible for presentation of
all financial information and financial due diligence during their divestiture.
Mr. Wilkinson holds a Bachelor of Science degree from Nottingham University and
is an English chartered accountant.
INFORMATION CONCERNING THE PARTNERSHIP
Information contained in this section is based upon documents and reports
publicly filed by the Partnership, including the Annual Report on Form 10-K for
the fiscal year ended December 31, 2001 (the "Form 10-K") and the Form 10-Q for
the period ended September 31, 2002 ("Form 10-Q"). Although Millenium has no
information that any statements contained in this section are untrue, Millenium
has not independently investigated the accuracy 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. Millenium disclaims responsibility for the following information
except to the extent prohibited by law.
Current General Partners
The Partnership is a limited partnership formed under the laws of the State
of California on July 25, 1980. The original objectives of the Partnership were
to own and operate its Limited Partnership Assets for investments so as to
obtain (i) tax benefits for the Limited Partners; (ii) reasonable protection for
the Partnership's capital investments; (iii) potential for appreciation, subject
to considerations of capital preservation; and (iv) potential for future cash
distributions from operations (on a limited basis), refinancings or sales of
assets.
The general partners of the Partnership are National Partnership
Investments Corp. ("NAPICO"), a California corporation, and Coast Housing
Investments Associates ("CHIA"), a limited partnership formed under the
California Limited Partnership Act and consisting of Messrs. Nicholas G.
Ciriello, an unrelated individual, as general partner, and Charles H. Boxenbaum
as limited partners. The business of the Partnership is conducted primarily by
NAPICO.
Prior to December 30, 1998, NAPICO was a wholly owned subsidiary of Casden
Investment Corporation ("CIC"), which is wholly owned by Alan I. Casden. On
December 30, 1998, Casden Limited Partnership Assets Operating Partnership, L.P.
(the "Operating Partnership"), a majority owned subsidiary of Casden Limited
Partnership Assets Inc., a real estate investment trust organized by Alan I.
Casden, purchased a 95.25% economic interest in NAPICO. The current members of
NAPICO's Board of Directors are Chares H. Boxenbaum, Bruce E. Nelson and Alan I.
Casden.
On December 3, 2001, Casden Properties Inc., entered into a merger
agreement and certain other transaction documents with Apartment Investment and
Management Company, a Maryland corporation ("AIMCO") and certain of its
subsidiaries, pursuant to which AIMCO, on March 11, 2002, acquired Casden
Properties Inc. and its subsidiaries, including NAPICO.
The Partnership holds limited partnership interests in 11 local limited
partnerships as of December 31, 2001, and a general partner interest in Real
Estate Associates ("REA"), which in turn holds limited partnership interests in
an additional partnership; therefore, the Partnership holds directly or
indirectly through REA, investments in 12 local limited partnerships. The
general partners of REA are the Partnership and NAPICO. In December 1998, the
Partnership sold its interest in 20 local limited partnerships to the Operating
Partnership. Each of the limited partnerships owns a low income housing project
which is subsidized and/or has a mortgage note payable to or insured by agencies
of the federal or local government.
The local partnerships in which the Partnership has invested were, in
general, organized by private developers who acquired the sites, or options
thereon, and applied for applicable mortgage insurance and subsidies. The
Partnership became the principal limited partner in these real estate holding
limited partnerships pursuant to arm's-length negotiations with these
developers, or others, who act as general partners. As a limited partner, the
Partnership's liability for obligations of the real estate holding limited
partnerships is limited to its investment. The general partners of such local
limited partnerships retain responsibility for maintaining, operating and
managing the Limited Partnership Assets.
During 2001, the projects in which the Partnership had invested were
substantially rented. The following is a schedule of the status as of December
31, 2001, of the projects owned by local limited partnerships in which the
Partnership is a limited partner.
SCHEDULE OF PROJECTS OWNED BY LOCAL LIMITED PARTNERSHIPS
IN WHICH THE PARTNERSHIP HAS AN INVESTMENT
DECEMBER 31, 2001
Units Authorized
For Rental
Assistance Under
Section 8 Percentage of
No. Of or Other Rent Units Total Units
Units Supplement Occupied Occupied
Program
Name and Location
Charlotte Lakeview, 553 0/0 517 93%
Riverview Residential
Project, Rochester, NY
Hidden Pines Apts 40 40/0 38 95%
Greenville, MI
Jenks School Apts 83 83/0 83 100%
Pawtucket, RI
Lakeside Apts 32 0/21 31 97%
Stuart, FL
Ramblewood Apts 64 0/13 62 97%
Fort Payne, AL
Santa Maria Apts 86 86/0 86 100%
San German, Puerto Rico
Sunset Grove Apts 22 22/0 22 100%
Carson City, MI
Sunshine Canyon 26 26/0 23 88%
Stanton, MI
Village Apts 50 50/0 50 100%
La Follette TN
Vincente Geigel 80 80/0 80 100%
Polanco Apts
Isabela, Puerto Rico
Vista De Jagueyes 73 73/0 73 100%
Aguas Buenas, PR
Westgate Apts 72 0/16 66 92%
Albertville, AL
Outstanding Limited Partnership Interests
According to the Partnership, there were 11,456 Limited Partnership
Interests (representing 5,728 units) issued and outstanding at December 31,
2002. A Limited Partner is entitled to one vote for each Limited Partnership
Interest owned by such Limited Partner. Millenium owns no Limited Partnership
Interest in the Partnership. According to the Form 10-K, except for the initial
limited partner Bruce Nelson, who is an officer of NAPICO, none of the officers
or directors of NAPICO own directly or beneficially any Limited Partnership
Interests. No person is known to own beneficially in excess of 5% of the
outstanding Limited Partnership Interests.
LITIGATION
On August 27, 1998, two investors holding an aggregate of eight units of
limited partnership interests in Real Estate Associates Limited III (a
partnership in which NAPICO is a general partner) and two investors holding an
aggregate of five units of limited partnership interest in Real Estate
Associates Limited III (another partnership in which Company is a general
partner) commenced an action in the United States District Court for the Central
District of California on behalf of themselves and all other similarly situated,
against the Partnership, NAPICO and certain other affiliated entities. The
complaint alleges that the defendants breached their fiduciary duty to the
limited partners of such Funds and made materially false and misleading
statements in the consent solicitation statements that were disseminated to the
limited partners of such Funds relating to approval of the transfer of
partnership interests in limited partnerships to the Operating Partnership. The
plaintiffs sought preliminary and permanent injunctive relief and other
equitable relief, as well as compensatory and punitive damages.
On November 15, 2002, a jury in the above described case found that NAPICO
had knowingly violated various sections of the Securities Exchange Act and had
acted with malice, oppression or fraud in breaching its fiduciary duty to the
limited partners. The jury awarded the limited partners of the Partnership
compensatory and punitive damages of approximately $32,000,000. Many of the same
officers and employees who were managing the affairs of the general partners
when the various wrongdoings occurred continue to manage the Partnership. Do you
want general partners who have been found liable for securities fraud to
continue to manage the Partnership?
PROPOSALS AND SUPPORTING STATEMENT
The Limited Partners are being asked to approve by written consent the
following actions (the "Proposals") pursuant to the Partnership Agreement:
(1) the removal of the current general partners, NAPICO and CHIA, as the
general partners of the Partnership; and
(2) the continuation of the Partnership with Millenium as the new general
partner of the Partnership (which is conditioned upon the approval of Proposal 1
above).
Removing the General Partner
A review of documents and reports publicly filed by the Partnership and
books and records available to partners indicates that the remaining assets held
by the Partnership are potentially valuable real estate assets. These assets are
interests in low-income housing projects which are subsidized and/or have a
mortgage note payable to or insured by agencies of the federal or local
government. The Form 10K notes the economic impact of the combination of the
reduced payments under the Housing Assistance Payment contracts and the
restructuring of the existing FHA-insured mortgage loans under MAHRAA is
uncertain. Millenium believes the Partnership should be exploring opportunities
to sell the Limited Partnership Assets to third parties now to maximize the
potential cash returns to the Limited Partners on their original investment. The
Partnership has not indicated that it is exploring this alternative.
NAPICO, the current general partner primarily responsible for managing the
Partnership, has received $129,292 and $96,941 in management fees and $186,569
and $72,342 as reimbursement for general and administrative costs for the twelve
months ended December 31, 2001 and the nine months ended September 30, 2002
respectively Millenium has committed to reduce annual management fees pursuant
to Section 9.5 of the Partnership Agreement and any other fees payable to the
general partner or its affiliates by at least 10%.
The current managing general partner will continue to collect management
fees until it sells the Limited Partnership Assets, and therefore has a
financial incentive not to sell the Limited Partnership Assets. Although
Millenium may have a financial incentive not to sell the Limited Partnership
Assets because it also will receive management fees, Millenium's incentive to
sell the Limited Partnership Assets is significantly greater because (i) it will
receive management fees which are 10% less than the current fees for managing
the Limited Partnership Assets if Millenium decreases management fees as it has
indicated it intends to do and (ii) it has an affiliate that owns a significant
number of Limited Partnership Interests. Therefore, Millenium has a stronger
incentive to ensure the prompt sale of the Limited Partnership Assets at a
favorable price. The current general partners and its affiliates own
significantly fewer Limited Partnership Interests in the Partnership and
therefore do not have the same financial incentive to sell the Limited
Partnership Assets as do the Limited Partners.
Millenium believes that removing the current general partners and electing
Millenium as the new general partner will provide the Limited Partners with the
best potential to maximize the potential cash returns to the Limited Partners in
the near future. The goal of Millenium in soliciting the Consents is to elect
itself as the new general partner of the Partnership so that it can (i)
distribute cash and cash equivalents on hand ($1,983,073 as of December 31, 2001
to the extent not required for the continued operation of the Partnership, (ii)
investigate claims against the Partnership's current general partners including
without limitation reviewing the books and records to examine why the costs
associated with the transaction in 1998 involving the sale of assets to an
affiliate of the general partner were so exorbitant and potentially making a
claim against the general partners if in fact the costs were not legitimate
expenses of the transaction, (iii) reduce management fees by ten percent (10%)
based on Millenium's indication of its intent to do so, (iv) review the
Partnership's books and records to analyze alternatives, including the possible
liquidation of the limited and general partner interests that the Partnership
holds and (v) obtain the Limited Partners' consent to amend the Partnership
Agreement to provide that the Partnership be liquidated on or before January 1,
2006 (the Partnership Agreement currently provides that the Partnership does not
have to be liquidated until the year 2032). Millenium believes that the cash (to
the extent not required for the continued operation of the Partnership) should
be distributed to the Limited Partners. As indicated above, the Partnership,
however, still holds a significant amount of cash and cash equivalents that
Millenium believes is not necessary for the continued operation of the
Partnership and should be distributed to the Limited Partners.
Admission of New General Partner
If the Required Consents are obtained to remove the current general
partners and elect Millenium as the new general partner, the current general
partners will not retain any of the rights, powers or authority accruing to the
general partner following their removal as general partners; provided, however,
that the Partnership must purchase the current general partners' interest in the
Partnership at its fair value on the date of such removal as provided in Section
9.9 of the Partnership Agreement, with the fair value determined, if necessary,
in accordance with the arbitration procedure of the American Arbitration
Association. If Millenium is appointed as the new general partner, it will be
entitled to a 1% interest in all profits and losses, and cash distributions made
by the Partnership prior to dissolution or liquidation (the same as which the
current general partners are entitled to).
Millenium does not anticipate any circumstance under which Millenium would
not desire to become the new general partner. A material adverse change would
include bankruptcy, foreclosure or other material impairments on the value or
operations of the Partnership's assets. Millenium reserves the right to withdraw
before admission as the new general partner in the event of a material adverse
change in the Partnership in nature of circumstances described in this
paragraph.
Millenium, as the new general partner, will be entitled to a 1% interest in
all profits, losses and distributions of the Partnership pursuant to the
Partnership Agreement. Upon total or partial liquidation of the Partnership or
the disposition or partial disposition of a Limited Partnership Asset and
distribution of the proceeds, pursuant to the Partnership Agreement, Millenium
would be entitled to a liquidation fee equal to the lesser of (i) 10% of the net
proceeds to the Partnership from the sale of a Limited Partnership Asset or (ii)
1% of the sales price (including the mortgage) plus 3% of the net proceeds after
deducting an amount sufficient to pay federal and state taxes, if any,
calculated at the maximum rate then applicable. No part of such liquidation fee
shall be paid, unless the Limited Partners shall have first received an amount
equal to (i) the greater of (A) their aggregate capital contributions, or (B) an
amount sufficient to satisfy the cumulative state and federal income tax
liability, if any, arising from the disposition of all Limited Partnership
Assets disposed of to date, calculated at the maximum tax rate then applicable,
less, (ii) all amounts previously distributed to Limited Partners under the
Partnership Agreement. Prior to the receipt by the Limited Partners of an amount
equal to the greater of (i) their aggregate capital contributions, or (ii) an
amount sufficient to satisfy the cumulative tax liability arising from the
disposition of all Limited Partnership Assets disposed of to date, the unpaid
liquidation fee shall accrue for later payment to the General Partners.
VOTING PROCEDURE FOR LIMITED PARTNER
Distribution and Expiration Date of Solicitation
This Consent Solicitation Statement and the related Consent are first being
mailed to Limited Partners on or about January 31, 2003. Limited Partners who
are record owners of Limited Partnership Interests as of January 31, 2003 (the
"Record Date") may execute and deliver a Consent. A beneficial owner of Limited
Partnership Interests who is not the record owner of such Limited Partnership
Interests must arrange for the record owner of such Limited Partnership
Interests to execute and deliver to Millenium a Consent form that reflects the
vote of the beneficial owner.
This solicitation of Consents will expire at 11:59 p.m. Pacific Time on the
earlier to occur of the following dates (the "Expiration Date"): (i) February
28, 2003 or such later date to which Millenium determines to extend the
solicitation, and (ii) the date the Required Consents are received. Millenium
reserves the right to extend this solicitation of Consents for such period or
periods as it may determine in its sole discretion from time to time; provided,
however that it will not extend this solicitation past April 25, 2003. Any such
extension will be followed as promptly as practicable by notice thereof by
written notice to the Limited Partners, as well as filing with the SEC. During
any extension of this solicitation of Consents, all Consents delivered to
Millenium will remain effective, unless validly revoked and not rescinded by a
later dated consent delivered to Millenium prior to the Expiration Date.
Millenium reserves the right for any reason to terminate the solicitation of
Consents at any time prior to the Expiration Date by filing an amendment to this
Consent Solicitation Statement with the SEC.
Voting Procedures and Required Consents
The consent of Limited Partner form included with this Consent Solicitation
Statement is the ballot to be used by Limited Partners to cast their votes. For
each Proposal, Limited Partners should mark a box adjacent to the Proposal
indicating that the Limited Partner votes "For" or "Against" the Proposal, or
wishes to "Abstain." All Consents that are properly completed, signed and
delivered to Millenium, and not validly revoked prior to the Expiration Date,
will be given effect in accordance with the specifications thereof. If none of
the boxes on the Consent is marked, but the Consent is otherwise properly
completed and signed, the Limited Partner delivering such Consent will be deemed
to have voted "For" the Proposals.
Each Proposal requires the consent of the record holders of a majority of
the Limited Partnership Interests of the Limited Partners (the "Required
Consents"). Accordingly, adoption of each Proposal requires the receipt without
revocation of the Required Consents indicating a vote "For" the Proposal.
Millenium is seeking approval of each of the Proposals. The continuation of the
Partnership with Millenium as the new general partner is conditioned on the
approval of the removal of the current general partners. Otherwise, the
Proposals are not conditioned on the approval of the other Proposals. The
failure of a Limited Partner to deliver a Consent or a vote to "Abstain" will
have the same effect as if such Limited Partner had voted "Against" the
Proposals. Limited Partnership Interests not voted on Consents returned by
brokers, banks or nominees will have the same effect as Limited Partnership
Interests voted against the Proposals.
If Limited Partnership Interests to which a Consent relates are held of
record by two or more joint holders or tenants in common, in which case all such
holders must sign the contract. If a Consent is signed by a trustee, partner,
executor, administrator, guardian, attorney-in- fact, officer of a corporation
or other person acting in a fiduciary or representative capacity, such person
must so indicate when signing and must submit with the Consent form appropriate
evidence of authority to execute the Consent. In addition, if a Consent relates
to less than the total number of Limited Partnership Interests held in the name
of such Limited Partner, the Limited Partner must state the number of Limited
Partnership Interests recorded in the name of such Limited Partner to which the
Consent relates. If a Consent is executed by a person other than the record
owner, then it must be accompanied by a valid proxy duly executed by the record
owner.
All questions as to the validity, form, eligibility (including time of
receipt), acceptance, and revocation of Consents, and the interpretation of the
terms and conditions of this solicitation of Consents, will be determined by
Millenium, subject to the provisions of the Partnership Agreement, as well as
state and federal law. Neither Millenium, nor any of its affiliates, shall be
under any duty to give any notification of any such defects, irregularities or
waiver, nor shall any of them incur any liability for failure to give such
notification. Deliveries of Consents will not be deemed to have been made until
any irregularities or defects therein have been cured or waived.
In the event Millenium determines to extend this solicitation of Consents
in its sole discretion or this solicitation of Consents expires, Millenium will
notify the Limited Partners as promptly as practicable thereafter by notice of
such extension or the results of this solicitation of Consents by written notice
to the Limited Partners, as well as filing an amendment to this Consent
Solicitation Statement with the SEC.
Completion Instructions
Limited Partners are requested to complete, sign and date the GREEN Consent
of Limited Partner form included with this Consent Solicitation Statement and
mail, fax, hand deliver, send by overnight courier the original signed Consent
to Millenium Management, LLC, 155 N. Lake Avenue, Suite 1000, Pasadena, CA
91101, Fax No.: 626-585-5929.
Consents should be sent or delivered to Millenium at the address set forth
on the back cover of this Consent Solicitation Statement. A prepaid, return
envelope is included for your convenience.
Power of Attorney
Upon approval of a Proposal, Millenium will be expressly authorized to
prepare any and all documentation and take any further actions necessary to
implement the actions contemplated under this Consent Solicitation Statement
with respect to the approved Proposal. Furthermore, each Limited Partner who
votes for a Proposal described in this Consent Solicitation Statement, by
signing the attached Consent, constitutes and appoints Millenium, acting through
its officers and employees, as his or her attorney-in-fact for the purposes of
executing any and all documents and taking any and all actions required under
the Partnership Agreement in connection with this Consent Solicitation Statement
or in order to implement the approved Proposal, including the execution of an
amendment to the Partnership Agreement to reflect Millenium as the new general
partner of the Partnership or to reflect the dissolution of the Partnership in
accordance with the applicable Proposal, and including the selection of an
appraiser to appraise the Partnership's assets as may be required by the
Partnership Agreement.
Revocation of Consents
Consents may be revoked at any time prior to the Expiration Date, or a
Limited Partner may change his vote on one or both Proposals, in accordance with
the following procedures. For a revocation or change of vote to be effective,
Millenium must receive prior to the Expiration Date a written notice of
revocation or change of vote (which may be in the form of a subsequent, properly
executed Consent) at the address set forth on the Consent. The notice must
specify the name of the record holder of the Limited Partnership Interests and
the name of the person having executed the Consent to be revoked or changed (if
different), and must be executed in the same manner as the Consent to which the
revocation or change relates or by a duly authorized person that so indicates
and that submits with the notice appropriate evidence of such authority as
determined by Millenium. A revocation or change of a Consent shall be effective
only as to the Limited Partnership Interests listed on such notice and only if
such notice complies with the provisions of this Consent Solicitation Statement.
Millenium reserves the right to contest the validity of any revocation or
change of vote and all questions as to validity (including time of receipt) will
be determined by Millenium, subject to the provisions of the Partnership
Agreement, as well as state and federal law.
No Dissenters' Rights of Appraisal
Under the Partnership Agreement and California law, Limited Partners do not
have dissenters' rights of appraisal in connection with these Proposals.
Solicitation of Consents
Neither the Partnership nor the current general partners are participants
in this solicitation of Consents. Millenium is the only participant in the
solicitation. Millenium will initially bear all costs of this solicitation of
Consents, including fees for attorneys and the cost of preparing, printing and
mailing this Consent Solicitation Statement which is currently estimate to be
___________. Millenium shall seek reimbursement for such costs from the
Partnership to the extent allowed under the Partnership Agreement and applicable
law. In addition to the use of mails, certain officers or regular employees of
Millenium and Everest may solicit Consents via telephone, for which no
additional compensation will be paid to those persons engaged in such
solicitation.
Limited Partners are encouraged to contact Mr. Vahan Saroians of Millenium
at the telephone number set forth on the back cover of this Consent Solicitation
Statement with any questions regarding this solicitation of Consents and with
requests for additional copies of this Consent Solicitation Statement and form
of Consent.
SOLICITATION OF CONSENTS
of
LIMITED PARTNERS
of
Real Estate Associates Limited III
a California Limited Partnership
Deliveries of Consents, properly completed and duly executed, should be
made to Millenium Management, LLC at:
155 N. Lake Avenue, Suite 1000
Pasadena, CA 91101
Fax No.: 626-585-5929
Questions and requests for assistance about procedures for consenting or
other matters relating to this solicitation may be directed to Mr. Vahan
Saroians at the address and telephone number listed below. Additional copies of
this Consent Solicitation Statement and form of Consent may be obtained from
Millenium as set forth below.
No person is authorized to give any information or to make any
representation not contained in this Consent Solicitation Statement regarding
the solicitation of Consents made hereby, and, if given or made, any such
information or representation should not be relied upon as having been
authorized by Millenium or any other person. The delivery of this Consent
Solicitation Statement shall not, under any circumstances, create any
implication that there has been no change in the information set forth herein or
in the affairs of Millenium or the Partnership since the date hereof.
Millenium Management, LLC
155 N. Lake Avenue, Suite 1000
Pasadena, CA 91101
(626) 585-5920
APPENDIX A
(Definitive Copy of Consent)
Real Estate Associates Limited III
a California Limited Partnership (the "Partnership")
CONSENT OF LIMITED PARTNER
THIS CONSENT IS SOLICITED ON BEHALF OF MILLENIUM MANAGEMENT, LLC
LIMITED PARTNERS WHO RETURN A SIGNED CONSENT BUT FAIL TO INDICATE THEIR
APPROVAL OR DISAPPROVAL AS TO ANY MATTER WILL BE DEEMED TO HAVE VOTED TO APPROVE
SUCH MATTER. THIS CONSENT IS VALID FROM THE DATE OF ITS EXECUTION UNLESS DULY
REVOKED.
THIS CONSENT CARD WILL REVOKE ANY PREVIOUSLY EXECUTED
REVOCATION OF CONSENT.
The undersigned has received the Consent Solicitation Statement dated January
31, 2003 ("Consent Solicitation Statement") by Millenium Management, LLC, a
California limited liability company ("Millenium"), seeking the approval by
written consent of the following proposals:
(1) the removal of the current general partners, National Partnership
Investments Corp., a California corporation and Coast Housing Investments
Associates, a California limited partnership; and
(2) the continuation of the Partnership with Millenium as the new general
partner of the Partnership (which is conditioned on the approval of proposal (1)
above).
Each of the undersigned, by signing and returning this Consent, hereby
constitutes and appoints Millenium,, acting through its officers and employees
as his or her attorney-in-fact for the purposes of executing any and all
documents and taking any and all actions required under the Partnership
Agreement in connection with this Consent and the Consent Solicitation Statement
or in order to implement an approved proposal; and hereby votes all limited
partnership interests of the Partnership held of record by the undersigned as
follows for the proposals set forth above, subject to the Consent Solicitation
Statement.
Proposal FOR AGAINST ABSTAIN
1. Removal of General Partners [ ] [ ] [ ]
2. Continuation of the Partnership [ ] [ ] [ ]
with a new general partner,
Millenium
(Please sign exactly as your name appears on the Partnership's records. Joint
owners should each sign. Attorneys-in-fact, executors, administrators, trustees,
guardians, corporation officers or others acting in representative capacity
should indicate the capacity in which they sign and should give FULL title, and
submit appropriate evidence of authority to execute the Consent)
Dated: _______________________, 2003
(Important-please fill in)
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Signature / Title
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Signature / Title
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Telephone Number