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)
Everest Properties II, LLC
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
April __, 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:
o Distribute Cash On Hand: 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). Your current general partners
will tell you that they are holding these funds as reserves for
potential contingencies and property repairs. What potential
contingencies and what repairs? Without any specific items, they
should not hold you money indefinitely.
o Sell Partnership Assets: Millenium believes the Partnership should be
exploring opportunities to sell the Partnership's assets (including
limited and general partner interests in other Partnerships) to third
parties now to maximize the potential cash returns to the Limited
Partners on their original investment. Your current general partners
will claim that they are marketing the Partnership's assets. However,
we have not seen any evidence of such an effort. Millenium believes
that if they have made such efforts, they have been ineffective.
o Collect and Distribute Judgement: 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 has knowingly
violated various sections of the Securities Exchange Act and has 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 $32,000,000. This
represents $5,587 per unit to the Limited Partners. The current
managing general partner will have a great conflict of interest in
collecting this judgment, since it is one of the defendants in the
case. Millenium, as an affiliate of Everest Management, LLC, one of
your Limited Partners, and as an independent general partner will do
its best to cooperate with class counsel in collecting the judgment
awarded to you.
o Investigate Claims: Although Millenium is currently not aware of any
existing claims against the general partners, upon becoming your new
general partner Millenium will investigate to determine whether or not
there are additional claims against the Partnership's current general
partners for actions similar to those for which they have already been
found liable.
o NAPICO may claim that because NAPICO was sold to an affiliate of
Apartment Investment and Management Company ("AIMCO"), you should not
be concerned that NAPICO and its prior owners were found to have
committed securities fraud. However, many high-level officers and
employees of NAPICO are still managing NAPICO. Peter Kompaniez, the
President of AIMCO, was recently elected President of NAPICO and
oversees these officers and employees. Millenium believes that NAPICO
cannot be trusted to manage the Partnership in the best interests of
the Limited Partners.Do you want a managing general partner who has
been found liable for securities fraud to continue to manage the
Partnership?
o Reduce Management Fees By Fifty Percent (50%): Millenium will take all
measures necessary to reduce the Management fees and expenses
currently charged by the general partners by fifty percent (50%).
o Liquidate The Partnership: after analyzing all the variables involved,
if Millenium deems it to be in the best interest of the Limited
Partners, it will 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).
You may have the following questions:
Q: What is Millenium Asking Me to Vote Upon?
A: Millenium is asking for your consent (1) to remove Coast Housing Investments
Associates ("CHIA") and NAPICO as general partners; NAPICO was found liable for
securities fraud and to have acted with malice, oppression or fraud in violating
its fiduciary duty to you; and (2) to continue the Partnership and elect
Millenium Management, LLC, an affiliate of your limited partner, Everest
Management, LLC, as the general partner of the Partnership.
Q: Who is Millenium?
A: Millenium is an affiliate of Everest Management, LLC, a limited partner in
the Partnership. Millenium's management has substantial experience in investing
in and managing limited partnerships.
Q: Why Should I Vote to Remove the Current General Partners?
A: In our opinion, the current general partners are not selling the assets of
the partnership so that they can continue to collect high management fees at
your expense. Additionally, On November 15, 2002, a jury in the class action
case brought against NAPICO and other defendants found that NAPICO has 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. This represents $5,587 per
unit to the Limited Partners. We believe that the current managing general
partner will have a great conflict of interest in collecting this judgment,
since it is one of the defendants in the case. Millenium, as an affiliate of
Everest Management, LLC, one of your Limited Partners, and as an independent
general partner will do its best to cooperate with class counsel in collecting
the judgment awarded to you.
Q: What Do I Need to Do Now?
A: After carefully reading and considering the information contained in this
document, we are asking that you please complete, sign and date the enclosed
WHITE consent form by marking FOR each proposals herein and mailing it to us in
the self-addressed envelope provided. Hopefully, after Millenium is elected as
the general partner of the Partnership, we can work together to protect and
insure the value of your interest.
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. Again, to be sure your vote is represented, please sign,
date and return the enclosed WHITE 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
April __, 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. The current managing general partner has been found liable for
securities fraud and acting with malice, oppression or fraud against the Limited
Partners. Millenium is also seeking your approval 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 WHITE Consent of
Limited Partners form are first being mailed to Limited Partners on or about
April __, 2003. Limited Partners who are record owners of Limited Partnership
Interests as of April 21, 2003 (the "Record Date") shall be sent this Consent
Solicitation Statement. Neither the Partnership Agreement nor the law governing
the Partnership specify how a Record Date is determined for the Consents;
however, the Partnership's general partners have established a procedure that
Millenium has followed to set the Record Date.
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 has knowingly violated various sections of the Securities
Exchange Act and has 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
$32,000,000. Although they were not personally found liable for
various wrongdoings, many of the same officers and employees who were
employed by NAPICO when the various wrongdoings occurred continue to
manage NAPICO and the Partnership. Do you want a managing general
partner who has been found liable for securities fraud to continue to
manage the Partnership?
o 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 "Limited Partnership Assets").
Based on the fact that the Partnership has not disclosed that it is
exploring a sale of the Limited Partnership Assets and the fact that
no Limited Partnership assets have been sold in over three years,
despite a strong real estate market, 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 2030);
although Millenium's not contractually bound to do so.
o Millenium commits, intending to be legally bound, as a binding
obligation to reduce the annual management fees set forth in Section
9.5 of the Partnership Agreement and any other fees that are currently
being paid to the general partners or their affiliates by fifty
percent (50%).
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, 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, persons controlling
Millenium beneficially own, indirectly through an affiliate,
approximately 4.1% of the Limited Partnership Interests. Therefore,
Millenium's management has a stronger incentive to ensure the prompt
sale of the Limited Partnership Assets at a favorable price,
consistent with the best interest of the limited partners.
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
and Millenium are affiliates of Everest Management, LLC. Everest Management owns
4.1% limited partnership interests in the Partners. Everest and Millenium's
other affiliates have substantial experience in investing in and managing
limited partnerships.
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.
Business
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 or Percentage of
No. Of Other Rent Units Total Units
Name and Location Units Supplement Program Occupied Occupied
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 in Real Estate Associates Limited III (a
partnership in which NAPICO is a general partner) and two investors in Real
Estate Associates Limited III (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 $32,000,000.
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 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 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.
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, persons controlling
Millenium beneficially own, indirectly through an affiliate, approximately 4.1%
of the Limited Partnership Interests. Therefore, Millenium's management 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 to determine whether or not there are additional 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, 2005 (the Partnership
Agreement currently provides that the Partnership does not have to be liquidated
until the year 2030).
Millenium believes that all cash held by the Partnership (to the extent not
required for operations) 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. Millenium is unable to estimate the fair value of the current
general partners' interest in the Partnership based on the information available
to Millenium. Therefore, Millenium is unable to determine if the Partnership's
obligation to purchase such interest would be material or would have a material
effect on the Partnership's financial condition or operations. 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 the current general partners are
removed, Millenium withdraws, and no replacement general partner is elected,
than a 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.
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 April __, 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) May __,
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 July __, 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, no Proposal
is conditioned on the approval of another Proposal. 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
Certain 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. In particular, neither the Partnership
Agreement nor applicable law conclusively establishes: the manner for getting
the Record Date; who can receive and verify consents and revocations; and whom
does an action taken by written consent become effective. 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. Millenium believes that its procedures for collection of consents
and revocations, as well as determining the validity of the same, may be subject
to challenge by the current general partners or other limited partners due to
ambiguity in the Partnership Agreement and the applicable law.
Completion Instructions
Limited Partners are requested to complete, sign and date the WHITE 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 in accordance
with the applicable Proposal.
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.
See "Voting Procedure for Limited Partner - Effectiveness; Potential
Challenges."
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 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
(Preliminary Form of Consent)
CONSENT OF LIMITED PARTNER
Real Estate Associates Limited III
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 April __,
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 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