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 VII
(Name of Registrant as Specified in Its Charter)
Millenium Management, LLC
Everest Properties II, 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
Everest Properties II, LLC
155 N. Lake Avenue, Suite 1000
Pasadena, CA 91101
_________ __, 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 VII, 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 2033).
A review of documents and reports publicly filed by the Partnership
indicates that the remaining assets held by the Partnership include a
significant number of 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"), the
managing general partner 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 when it obtained their approval to sell Partnership
assets to a partnership organized and owned by NAPICO affiliates. The jury
awarded the limited partners of the Partnership compensatory and punitive
damages of approximately $17,000,000. Many of the same officers and employees
who were managing NAPICO when the various wrongdoings occurred continue to
manage NAPICO and 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. 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 VII
by
Millenium Management, LLC and
Everest Properties II, LLC
_________ __, 2003
CONSENT SOLICITATION STATEMENT
Millenium Management, LLC, a California limited liability company
("Millenium") and Everest Properties II, LLC, a California limited liability
company ("Everest") is seeking the approval by written consent (the "Consents")
of the limited partners (the "Limited Partners") of Real Estate Associates
Limited VII, 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").
This Consent Solicitation Statement and the accompanying GREEN Consent of
Limited Partners form are first being mailed to Limited Partners on or about
_________ __, 2003. Limited Partners who are record owners of Limited
Partnership Interests as of _________ __, 2003 shall be sent this Consent
Solicitation Statement. The Record Date shall be the date on which the first
Consent is given (the "Record Date"). Everest Management, LLC, a limited partner
in the Partnership, has indicated that it will give its written Consent on the
same day as the definitive Consent Solicitation is filed with the Securities and
Exchange Commission (the "SEC"), therefore, the date of the Consent Solicitation
Statement is expected to become the Record Date. 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"), the managing
general partner 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 when it obtained
their approval to sell Partnership assets to a partnership organized
and owned by NAPICO affiliates. The jury awarded the limited partners
of the Partnership compensatory and punitive damages of approximately
$17,000,000. Many of the same officers and employees who were managing
NAPICO when the various wrongdoings occurred continue to manage NAPICO
and 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 interests in 17 limited
partnerships as of December 31, 2001 and a general partner interest in
Real Estate Associates Limited IV ("REAL IV"), which, in turn, holds
interests in thirteen more limited partnerships (the "Limited
Partnership Assets") as of December 31, 2001. Based on the fact that
the Partnership has not disclosed that it is exploring a sale of the
Limited Partnership Assets, Millenium 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 2033);
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 NAPICO has received $500,903 and $358,497 in management fees and
$110,039 and $85,823 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, 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 its affiliate holds approximately 4.1% 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. 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 EVEREST 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 ____________ ___, 2003, UNLESS EXTENDED.
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 general partners of the Partnership are National Partnership
Investments Corp. ("NAPICO"), a California Corporation (the "Corporate General
Partner"), and National Partnership Investments Associates II ("NAPIA II").
NAPIA II is a limited partnership formed under the California Limited
Partnership Act and consists of Mr. Charles H. Boxenbaum and two unrelated
individuals 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 Charles 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.
Business
The Partnership held limited partnership interests in 17 local limited
partnerships as of December 31, 2001. The Partnership also holds a general
partner interest in Real Estate Associates IV ("REA IV") which, in turn, held
limited partnership interests in 13 additional local limited partnerships as of
December 31, respectively. Therefore, the Partnership held interests, either
directly or indirectly through REA IV, in 30 local limited partnerships as of
December 31, 2001, respectively. The other general partner of REA IV is NAPICO.
The Partnership surrendered its interest in one limited partnership in July
2001, sold its interest in two limited partnerships in April and December 2001
and the lender foreclosed on three limited partnerships in September 2001. In
December 1998, the Partnership sold its interests in 11 local limited
partnerships to the Operating Partnership. Each of the local partnerships owns a
low income housing project which is subsidized and/or has a mortgage note
payable to or is insured by agencies of the federal or local government.
The partnerships in which the Partnership has invested are principally
existing local limited partnerships. The Partnership became the limited partner
in these local limited partnerships pursuant to arm's-length negotiations witht
the local partnership's general partners who are often the original project
developers. In certain other cases, the Partnership invested in newly formed
local partnerships which, in turn, acquired the projects. As a limited aprtner,
the Partnership's liability for obligations of the local limited partnership is
limited to its investment. The local general partner of the local limited
partnership retains the responsibility of maintaining, operating and managing
the project. Under certain circumstances of default, the Partnership has the
right to replace the general partner of the local limited partnerships, but
otherwise does not have control of sale, refinancing, etc.
Although each of the partnerships in which the Partnership has invested
will generally own a project which must compete in the marketplace for tenants,
interest subsidies and rent supplements from governmental agencies make it
possible to offer these dwelling units to eligible "low income" tenants at a
cost significantly below the market rate for comparable conventionally financed
dwelling units in the area.
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, either directly or indirectly through REAL III, has invested
SCHEDULE OF PROJECTS OWNED BY LOCAL LIMITED PARTNERSHIPS
IN WHICH THE PARTNERSHIP HAS AN INVESTMENT
DECEMBER 31, 2001
For Rental Percentage of
Name and Location No. Of No. Of Units Total Units
Local Partnerships Units Section 8 Occupied Occupied
Aristocrat Manor 101 114/0 83 82%
Hot Springs, AR
Arkansas City Apts. 16 0/12 14 88%
Arkansas City, AR
Bellair Manor Apts. 68 68/7 68 100%
Niles, OH
Birch Manor Apts. I 60 60/0 56 93%
Medina, OH
Birch Manor Apts. II 60 60/0 57 95%
Medina, OH
Bluewater Apts 116 None 108 93%
Port Huron, MI
Clarkwood Apts. I 72 34/0 69 96%
Elyria, OH
Clarkwood Apts. II 120 51/0 113 94%
Elyria, OH
Danbury Park Manor 151 86/0 145 96%
Superior Township, MI
Desoto Apts. 42 42/0 42 100%
Desoto, MO
Dexter Apts. 50 50/0 47 94%
Dexter, MO
Goodlette Arms Apts. 250 250/0 248 99%
Naples, FL
SCHEDULE OF PROJECTS OWNED BY LOCAL LIMITED
PARTNERSHIPS
IN WHICH THE PARTNERSHIP HAS AN INVESTMENT
DECEMBER 31, 2001
(Continued)
Units Authorized
For Rental Percentage of
Name and Location No. Of No. Of Units Total Units
Units Section 8 Occupied Occupied
Hampshire House 150 150/0 145 97%
Warren, OH
Henrico Arms 232 232/0 228 98%
Richmond, VA
Ivywood Apts. 124 124/0 122 98%
Columbus, OH
Jasper County Prop. 24 24/0 17 71%
Heidelberg, MS
Nantucket Apts. 60 59/0 59 98%
Alliance, OH
Newton Apts. 36 None 28 78%
Newton, MS
Oak Hill Apts. 120 82/0 115 96%
Franklin, PA
Oakview Apts. 32 0/7 28 88%
Monticello, AR
Oakwood Park I Apts. 50 50/0 49 98%
Lorain, OH
Oakwood Park II Apts. 78 None 73 94%
Lorain, OH
Rand Grove Village 212 212/0 195 92%
Palatine, IL
Richards Park Apts. 60 24/0 57 95%
Elyria, OH
Shubuta Properties 16 0/16 16 100%
Shubuta, MS
South Glen Apts. 159 14/0 153 96%
Trenton, MI
Tradewinds East 150 30/0 142 95%
Essexville, MI
Warren Heights Apts. II 88 88/0 87 99%
Warren, OH
Yorkview Estates 50 50/0 49 98%
Massillon, OH
TOTAL 2,763 1,954/58 2,628 95%
====== ======== ========= ===
Outstanding Limited Partnership Interests
According to the Partnership, there were 15,505 Limited Partnership
Interests (representing 7,752.5 units) issued and outstanding as of 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, 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 in Real Estate Associates Limited III (a
partnership in which NAPICO is a general partner) and two investors in Real
Estate Associates Limited VI (another partnership in which NAPICO 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 assets to a partnership that was majority-owned by NAPICO
affiliates. 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 $17,000,000.
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 NAPIA II,
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 managing the Partnership, has received
$500,903 and $358,497 in management fees and $110,039 and $85,823 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 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 it has an
affiliate that owns 4.1% 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. 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)
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, (ii) reduce management fees by ten percent (10%)
based on Millenium's indication of its intent to do so, (iii) 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 (iv) 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 2033).
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, however, Millenium reserves the
right to withdraw before admission as the new general partner in the event of a
material adverse change in the Partnership. A material adverse change would
include bankruptcy, foreclosure or other material impairments on the value or
operations of the Partnership's assets.
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.
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 _________ __, 2003. Limited Partners who
are record owners of Limited Partnership Interests as of 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) ________
__, 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 _______ __, 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. All
Consents delivered to Millenium will remain effective until the Expiration Date,
including during any extension thereof, unless validly revoked and not rescinded
by a later dated consent delivered to Millenium prior to the Expiration Date. No
Consent will be considered effective longer than eleven months from the date it
is given. 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, 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. 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.
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, if required.
Effectiveness; Potential Challenges
Millenium believes applicable law provides that actions taken by written
consent, such as the Proposals herein, become effective fifteen (15) days after
the Required Consents are received. The foregoing, as well as other aspects of
the procedure set forth for this solicitation are subject to uncertainty because
such procedures are not defined by the Partnership Agreement or the Uniform
Limited Partnership Act that governs the Partnership. Therefore, such procedures
may be challenged by the current general partners or other limited partners and
may result in a delay or nullification of the effectiveness of the Consents.
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 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 or applicable law 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 and Everest are the only
participants 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 are
currently estimated to be $___________. To date, Everest has incurred fees and
expenses for this solicitation of approximately $_________. 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
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 VII
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
(Form of Consent)
CONSENT OF LIMITED PARTNER
Real Estate Associates Limited VII
a California Limited Partnership (the "Partnership")
SOLICITED BY MILLENIUM MANAGEMENT, LLC AND EVEREST PROPERTIES II, 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 UNTIL DULY
REVOKED, BUT NO LONGER THAN ELEVEN MONTHS.
THIS CONSENT FORM REVOKES ANY PREVIOUSLY EXECUTED CONSENT.
The undersigned has received the Consent Solicitation Statement dated _________
__, 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 National Partnership Investment
Associates II, 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 or applicable law 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