SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE TO
TENDER OFFER STATEMENT PURSUANT TO SECTION 14(D)(1)
OF THE SECURITIES EXCHANGE ACT OF 1934
(NAME OF SUBJECT COMPANY)
CAPITAL REALTY INVESTORS II LTD PARTNERSHIP
A MARYLAND LIMITED PARTNERSHIP
AT $100.00 NET PER UNIT
BY
EQUITY RESOURCE LEXINGTON FUND LIMITED PARTNERSHIP,
A MASSACHUSETTS LIMITED PARTNERSHIP
EQUITY RESOURCES GROUP, INC.
EGGERT DAGBJARTSSON
LIMITED PARTNERSHIP UNITS
Eggert Dagbjartsson, Executive Vice President
Equity Resources Group, Inc.
14 Story Street
Cambridge, MA 02138
(617) 876-4800
Calculation of Filing Fee
- --------------------------------------------------------------------------------
Transaction Valuation* Amount of Filing Fee
$1,000,000 $200.00
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* For purposes of calculating the filing fee only. This calculation assumes
the purchase of 10,000 Units at a purchase price of $100.00 per Unit in the
Partnership.
[ ] Check box if any part of the fee is offset as provided by Rule 0-11(a)(2)
and identify the filing with which the offsetting fee was previously paid.
Identify the previous filing by registration statement number, or the Form or
Schedule and the date of its filing.
- --------------------------------------------------------------------------------
Amount Previously Paid: Not Applicable Filing Party: Not Applicable
Form of Registration No.: Not Applicable Date Filed: Not Applicable
- --------------------------------------------------------------------------------
1
TENDER OFFER
This Tender Offer Statement on Schedule TO (the "Schedule TO") relates to
an offer by Equity Resource Lexington Fund, Limited Partnership, a Massachusetts
limited partnership, Eggert Dagbjartsson, its general partner and Equity
Resources Group, Inc., its manager (collectively the "Purchaser") to purchase
10,000 units (the "Units") of limited partnership interests in Capital Realty
Investors II Ltd Partnership, a Maryland limited partnership (the
"Partnership"), at $100.00 for each Unit, net to the seller in cash, without
interest, less the amount of any distributions declared or paid from any source
by the Partnership with respect to the Units after November 19, 2001 (without
regard to the record date), upon the terms and subject to the conditions set
forth in the Offer to Purchase (the "Offer to Purchase") and in the related
Agreement of Sale, copies of which are attached hereto as Exhibits (a)(l) and
(a)(3) (which are herein collectively referred to as the "Offer") and less the
$100 transfer fee charged by the general partner of the PartnershipThe
information in the Offer to Purchase, including all schedules and annexes
thereto, is hereby expressly incorporated herein by reference in response to all
the items of this Statement, except as otherwise set forth below.
ITEM 12. EXHIBITS
(a)(1) Offer to Purchase, dated November 19, 2001
(a)(2) Transmittal letter, dated November 19, 2001
(a)(3) Agreement of Sale
(a)(4) Summary Advertisement
(b) Not applicable
(c) Not applicable
(d) Not applicable
(e) Not applicable
(f) Not applicable
(g) Not applicable
(h) Not applicable
2
SIGNATURE
After due inquiry and to the best of my knowledge and belief, I certify
that the information set forth in this statement is true, complete and correct.
Dated: November 19, 2001 Equity Resource Lexington Fund
Limited Partnership,
a Massachusetts limited partnership
By: /s/ Eggert Dagbjartsson
Eggert Dagbjartsson
General Partner
Equity Resources Group, Inc.
A Massachusetts Corporation
By: /s/ Eggert Dagbjartsson
Eggert Dagbjartsson
Executive Vice President
Eggert Dagbjartsson
By: /s/ Eggert Dagbjartsson
Eggert Dagbjartsson
3
EXHIBIT INDEX
Exhibit No. Description Sequential
Page Number
- -----------------------------------------------------------------------------
(a)(1) - Offer to Purchase, dated November 19, 2001.. 4-28
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(a)(2) - Transmittal letter, dated November 19, 2001. 29
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(a)(3) - Agreement of Sale. . . . . . . . . . . . . . 30-33
- -----------------------------------------------------------------------------
(a)(4) Summary Advertisement. . . . . . . . . . . . 34
- -----------------------------------------------------------------------------
(b) - Not applicable.
- -----------------------------------------------------------------------------
(c) - Not applicable.
- -----------------------------------------------------------------------------
(d) - Not applicable.
- -----------------------------------------------------------------------------
(e) - Not applicable.
- -----------------------------------------------------------------------------
(f) - Not applicable.
- -----------------------------------------------------------------------------
(g). . . Not applicable
- -----------------------------------------------------------------------------
(h). . . Not applicable.
- -----------------------------------------------------------------------------
4
OFFER TO PURCHASE FOR CASH
10,000 UNITS
OF
CAPITAL REALTY INVESTORS II LIMITED PARTNERSHIP
AT $100 PER UNIT BY
EQUITY RESOURCE LEXINGTON FUND LIMITED PARTNERSHIP
---------------------------------------------------------
|THIS OFFER WILL EXPIRE AT 12:00 MIDNIGHT, EASTERN TIME,|
| ON DECEMBER 19, 2001, UNLESS THE OFFER IS EXTENDED. |
---------------------------------------------------------
Equity Resource Lexington Fund, Limited Partnership, a Massachusetts limited
partnership, Eggert Dagbjartsson, its general partner and Equity Resources
Group, Inc., its manager (collectively "Lexington Fund" or the "Purchaser"),
hereby offers to purchase 10,000 Units ("Units") of limited partnership
interests in Capital Realty Investors II Limited Partnership, a Maryland limited
partnership (the "Partnership"). Lexington Fund is offering to pay a purchase
price of $100 for each Unit, to the seller in cash, without interest, less the
amount of any distributions declared or paid from any source by the Partnership
with respect to the Units after November 19, 2001 (without regard to the record
date), upon the terms and subject to the conditions set forth in this Offer to
Purchase (the "Offer to Purchase") and in the Agreement of Sale, as each may be
supplemented or amended from time to time (which together constitute the
"Offer"), and less the $100 transfer fee charged by the general partner of the
Partnership. The transfer fee is $100 per transaction, not per unit. For
example, a limited partner who sells five (5) Units will receives $400 ($500
less the $100 transfer fee). A limited partner who sells ten (10) Units will
receives $900. Neither Lexington Fund, Equity Resources Group, Inc., Lexington
Fund's manager nor Eggert Dagbjartsson, Lexington Fund's general partner is an
affiliate of the Partnership or CRI, Inc. the general partner of the
Partnership. The Units sought to be purchased pursuant to the Offer represent,
to the best knowledge of the Purchaser, approximately 20% of all Units
outstanding as of the date of the Offer.
The Offer is subject to certain conditions described in this Offer to Purchase.
See "THE OFFER-Section 15-Conditions of the Offer." The Offer is not
conditioned upon the valid tender of any minimum number of Units. If more than
10,000 Units are validly tendered and not withdrawn, the Purchaser will accept
for purchase up to 10,000 Units, on a pro rata basis, subject to the terms and
conditions described in the Offer to Purchase, see "THE OFFER-Section 15-Certain
Conditions of the Offer." A limited partner of the Partnership (a "Limited
Partner") may tender any or all Units owned by that Limited Partner.
The Offer is subject to certain risks described in this Offer to Purchase. See
"THE OFFER-Introduction-Risk Factors."
IMPORTANT
Any Limited Partner desiring to tender any or all of the Units held by that
Limited Partner should complete and sign the Agreement of Sale accompanying this
Offer to Purchase, in accordance with the instructions set forth in the
Agreement of Sale, and mail or deliver the Agreement of Sale and any other
required documents to Equity Resources Group, Inc., the manager of the
Purchaser, at the address set forth on the back cover of this Offer to Purchase,
or request his or her broker, dealer, commercial bank, credit union, trust
company or other nominee to effect the transaction for him or her.
No person has been authorized to make any recommendation or any
representation on behalf of the Purchaser or to provide any information other
than as contained in this Offer to Purchase or in the Agreement of Sale. No
recommendation, information, or representation may be relied upon as having been
authorized.
Direct questions or requests for assistance or additional copies of this Offer
to Purchase or the Agreement of Sale to:
EQUITY RESOURCES GROUP, INC.
14 STORY STREET
CAMBRIDGE, MA 02138
(617) 876-4800
INFO@EQUITYRESOURCES.COM
5
Table of Contents
-----------------
SUMMARY TERM SHEET
INTRODUCTION 1
RISK FACTORS 3
TENDER OFFER 5
Section 1. Terms of the Offer. 5
Section 2. Acceptance for Payment and Payment for Units 5
Section 3. Procedures for Tendering Units. 5
Section 4. Withdrawal Rights 7
Section 5. Extension of Tender Period; Termination; Amendment 7
Section 6. Certain Tax Consequences 7
Section 7. Purpose and Effects of the Offer. 9
Section 8. Future Plans 10
Section 9. Past Contacts and Negotiations With General Partner 10
Section 10. Certain Information Concerning the Partnership 11
Section 11. Background and Reasons for the Offer 15
Section 12. Certain Information Concerning the Purchaser 15
Section 13. Source and Amount of Funds 16
Section 14. Voting Power 16
Section 15. Certain Conditions of the Offer 16
Section 16. Certain Legal Matters and Required Regulatory Approvals. 16
Section 17. Fees and Expenses 17
Section 18. Miscellaneous 17
SCHEDULE 1
Information with respect to the Managers of Equity Resources Group, Inc.
the Manager of Purchaser (Equity Resources Lexington Fund) S-1
SCHEDULE 2
Properties Owned by the Partnership S-2
6
SUMMARY TERM SHEET
Equity Resource Lexington Fund, Limited Partnership, a Massachusetts limited
partnership, Eggert Dagbjartsson, its general partner and Equity Resources
Group, Inc., its manager (collectively "Lexington Fund") is offering to purchase
10,000 Units ("Units") of limited partnership interests in Capital Realty
Investors II Limited Partnership, a Maryland limited partnership (the
"Partnership") for $100 per Unit, to the seller in cash, less the amount of any
distributions declared or paid from any source by the Partnership with respect
to the Units after November 19, 2001, unless a limited partner was not entitled
to receive that distribution, and less the $100 transfer fee charged by the
general partner of the Partnership. The following are some questions you, as a
Limited Partner, may have, and the answers to those questions. We urge you to
read carefully the remainder of this Offer to Purchase and the accompanying
documents because the information in this summary is not complete, and
additional information is contained in the remainder of this Offer to Purchase.
HOW DO I TENDER MY UNITS?
In order to tender your Units properly, you must properly complete and execute
an Agreement of Sale and deliver it to our address set forth on the enclosed
business reply envelope and on the back cover of the offer to purchase not later
than the time the offer expires. See "THE OFFER-Section 3-Procedures for
Tendering Units."
WHO IS OFFERING TO BUY MY UNITS?
Lexington Fund is offering to purchase 10,000 Units. Lexington Fund is a
Massachusetts limited partnership whose general partner is Eggert Dagbjartsson
and whose manager is Equity Resources Group, Inc., a Massachusetts corporation
which is engaged in real estate investment and consulting. See "THE
OFFER-Section 12-Certain Information Concerning the Purchaser."
WHAT ARE THE CLASSES AND AMOUNTS OF SECURITIES SOUGHT IN THE OFFER?
Lexington Fund is seeking to purchase 10,000 Units of limited partnership
interests in the Partnership. This represents 20% of the Partnership's
outstanding Units. See "INTRODUCTION."
HOW MUCH ARE YOU OFFERING TO PAY FOR MY SECURITIES AND WHAT IS THE FORM OF
PAYMENT? WILL I HAVE TO PAY FEES OR COMMISSIONS?
Lexington Fund is offering to purchase 10,000 Units ("Units") of limited
partnership interests in Capital Realty Investors II Limited Partnership, a
Maryland limited partnership (the "Partnership"). Lexington Fund is offering to
pay a purchase price of $100 for each Unit, to the seller in cash, without
interest, less the amount of any distributions declared or paid from any source
by the Partnership with respect to the Units after November 19, 2001 (without
regard to the record date), upon the terms and subject to the conditions set
forth in this Offer to Purchase (the "Offer to Purchase") and in the Agreement
of Sale, as each may be supplemented or amended from time to time (which
together constitute the "Offer"), and less the $100 transfer fee charged by the
general partner of the Partnership. The transfer fee is $100 per transaction,
not per unit. For example, a limited partner who sells five (5) Units will
receives $400 ($500 less the $100 transfer fee). A limited partner who sells
ten (10) Units will receives $900. If you tender your Units in the Offer and
you were not entitled to receive any distribution declared or paid from any
source by the Partnership with respect to your Units after November 19, 2001,
the amount paid to you in the Offer will not be reduced by the amount of any
distribution you were not entitled to receive. If you tender your Units in the
offer, you will not have to pay any brokerage fees, commissions or similar
expenses.
DO YOU HAVE THE FINANCIAL RESOURCES TO MAKE PAYMENT AND IS YOUR FINANCIAL
CONDITION RELEVANT TO MY DECISION TO TENDER IN THE OFFER??
The Purchaser expects that approximately $1,000,000 (exclusive of fees and
expenses) will be required to purchase 10,000 Units, if tendered. The Purchaser
will obtain those funds from capital contributions from its members, which have
an aggregate net worth substantially in excess of the amount required to
purchase the 10,000 Units. The Purchaser is not a public company and has not
prepared audited financial statements. We do not think our financial condition
is relevant to your decision whether to tender in the offer because the form of
payment is cash, and we currently have sufficient cash and cash equivalents
relative to the consideration to be paid in the offer. Additionally, the offer
is not subject to any financing condition. See "THE OFFER-Section 13-Source and
Amount of Funds."
7
HOW LONG DO I HAVE TO DECIDE WHETHER TO TENDER IN THE OFFER?
You will have at least until 12:00 midnight, Eastern Time, on December 19, 2001,
to decide whether to tender your Units in the offer. In addition, if we decide
to extend the offering period as described below, you will have an additional
opportunity to tender your Units. See "THE OFFER-Section 3-Procedures for
Tendering Units."
CAN THE OFFER BE EXTENDED OR AMENDED AND UNDER WHAT CIRCUMSTANCES?
Yes, we may elect to extend the offer: to extend the period of time during which
the offer is open; upon the failure of a Limited Partner to satisfy any of the
conditions specified in Section 15, to delay the acceptance for payment of, or
payment for, any Units; and to amend the offer in any respect (including,
without limitation, by increasing or decreasing the offer price). If you do not
tender your Units during the initial offering period, you will not have the
opportunity to accept the offer. See "THE OFFER-Section 5-Extension of Tender
Period; Termination; Amendment."
HOW WILL I BE NOTIFIED IF THE OFFER IS EXTENDED?
If we decide to extend the offer, we will send each Limited Partner notification
of the extension, not later than 9:00 a.m., Eastern Time, on the business day
after the day on which the offer was scheduled to expire. See "THE
OFFER-Section 5-Extension of Tender Period; Termination; Amendment."
WHAT ARE THE MOST SIGNIFICANT CONDITIONS TO THE OFFER?
We are not obligated to purchase any Units in the offer if we have not confirmed
to our reasonable satisfaction that, upon purchase of the units, we will be
entitled to receive all distributions, from any source, from the Partnership
after November 19, 2001, and that the Partnership will change the address
associated with the holder of the Units to our address. See "THE OFFER-Section
15-Certain Conditions of the Offer."
HOW DO I WITHDRAW PREVIOUSLY TENDERED UNITS?
To withdraw your Units after you have tendered them, you must deliver a properly
executed written notice of withdrawal with the required information to us while
you still have the right to withdraw the Units. In addition, limited partners
have a right to withdraw tendered shares after sixty days from the commencement
of the tender offer if not yet accepted for payment. See "THE OFFER-Section
4-Withdrawal Rights."
UNTIL WHAT TIME CAN I WITHDRAW PREVIOUSLY TENDERED UNITS?
You can withdraw Units at any time until the offer has expired, and, if we have
not accepted your Units for payment by 10 days after the expiration date, you
can withdraw them at any time after the date until we accept Units for payment.
See "THE OFFER-Section 4-Withdrawal Rights."
WHAT DOES THE PARTNERSHIP THINK OF THE OFFER?
CRI, Inc., the general partner of the Partnership, is required to respond to
this offer. The Purchaser does not currently know what the general partner will
recommend to limited partners as to whether or not to tender units pursuant to
the offer.
WILL THERE BE ANY CHANGE TO THE PARTNERSHIP OR MY UNITS IF I DECIDE NOT TO
TENDER MY UNITS?
It is expected that following the offer, the business and operations of the
Partnership will be continued substantially as they are currently being
conducted today. We are acquiring the Units for investment purposes only, not
with a view toward affecting management of the Partnership. You should note,
however, that if we purchase an additional 10,000 Units, we and our affiliates
will own 29.98% of the outstanding Units. Although this would not represent a
majority interest, this increase in ownership would give us and our affiliates
increased control over any vote of the limited partners. See "THE OFFER-Section
8-Future Plans" and "-Section 14-Voting Power."
WHAT IS THE MARKET VALUE OF MY SHARES AS OF A RECENT DATE?
Partnership Spectrum, a national reporting service covering limited
partnerships, reported no sales of Units in the Partnership on the INFORMAL
MARKET "MATCHING SERVICE" between January 1, 2001 and August 30, 2001. On March
13, 2001, an unaffiliated third party initiated an unregistered tender offer to
purchase approximately 2,475 of the outstanding Units in the Partnership at a
8
price of $53 per Unit. On June 22, 2001, the Purchaser initiated a registered
tender offer to purchase Units in the Partnership at a price of $100 per Unit
The Purchaser and its affiliates purchased 1,243 Units as a result of that
offer. The Purchaser and its affiliates have purchased 0 Units in the
Partnership since the close of that offer. See "INTRODUCTION-Market Value of
the Units" for more information.
WHO CAN I TALK TO IF I HAVE QUESTIONS ABOUT THE OFFER?
You can call Equity Resources Group, Inc., who is acting as information agent
for the offer, at (617) 876-4800.
9
INTRODUCTION
Equity Resource Lexington Fund, Limited Partnership, a Massachusetts
limited partnership, Eggert Dagbjartsson, its general partner and Equity
Resources Group, Inc., its manager (collectively "Lexington Fund" or the
"Purchaser"), is offering to purchase 10,000 Units ("Units") of limited
partnership interests in Capital Realty Investors II Limited Partnership, a
Maryland limited partnership (the "Partnership"). Lexington Fund is offering to
pay a purchase price of $100 for each Unit, to the seller in cash, without
interest, less the amount of any distributions declared or paid from any source
by the Partnership with respect to the Units after November 19, 2001 (without
regard to the record date), upon the terms and subject to the conditions set
forth in this Offer to Purchase (the "Offer to Purchase") and in the Agreement
of Sale, as each may be supplemented or amended from time to time (which
together constitute the "Offer"), and less the $100 transfer fee charged by the
general partner of the Partnership. The transfer fee is $100 per transaction,
not per unit. For example, a limited partner who sells five (5) Units will
receives $400 ($500 less the $100 transfer fee). A limited partner who sells
ten (10) Units will receives $900. If you tender your Units in the Offer and
you were not entitled to receive any distribution declared or paid from any
source by the Partnership with respect to your Units after November 19, 2001,
the amount paid to you in the Offer will not be reduced by the amount of any
distribution you were not entitled to receive.
The Units sought to be purchased pursuant to the Offer represent, to the
best knowledge of the Purchaser, approximately 20% of the Units outstanding as
of the date of the Offer. Neither Lexington Fund, its manager, Equity Resources
Group, Inc., nor its general partner, Eggert Dagbjartsson is an affiliate of the
Partnership. The Offer to Purchase is not conditioned upon the valid tender of
any minimum number of Units. If more than 10,000 Units are validly tendered and
not withdrawn, the Purchaser will accept for purchase up to 10,000 Units, on a
pro rata basis, subject to the terms and conditions described in this Offer to
Purchase, see "OFFER-Section 15-Certain Conditions of the Offer." A limited
partner of the Partnership (a "Limited Partner") may tender any or all Units
owned by that Limited Partner.
PAYMENT OF THE OFFER PRICE
For those Limited Partners who accept the Offer, a cash payment for Units
will be made to those Limited Partners within ten (10) business days following
the expiration date of the Offer, as long as Lexington Fund has received from
those Limited Partners a properly completed and duly executed Agreement of Sale
and assurances from the general partner of the Partnership that the address
applicable to the holder of those Units will be changed to the Purchaser's
address. The Purchasers may accept only a portion of the Units tendered by a
Limited Partner in the event a total of more than 10,000 Units are tendered.
MARKET VALUE OF THE UNITS
Partnership Spectrum, a national reporting service covering limited
partnerships, reported no sales of Units in the Partnership on the INFORMAL
MARKET "MATCHING SERVICE" between January 1, 2001 and August 30, 2001. On March
13, 2001, an unaffiliated third party initiated an unregistered tender offer to
purchase approximately 2,475 of the outstanding Units in the Partnership at a
price of $53 per Unit. On June 22, 2001, the Purchaser initiated a registered
tender offer to purchase Units in the Partnership at a price of $100 per Unit
The Purchaser and its affiliates purchased 1,243 Units as a result of that
offer. The Purchaser and its affiliates have purchased 0 Units in the
Partnership since the close of that offer. The Partnership currently holds
limited partnership interests in fourteen limited partnerships (the "Local
Partnerships"). The majority of the Local Partnerships own low-income housing
projects that are subject to government regulations limiting the amount of money
that the Local Partnerships can distribute to the Partnership. Government
regulations also limit the properties' rent levels and may limit the Local
Partnerships' ability to refinance or sell these properties. As a result of the
Partnership's two-tiered structure, government regulated income restrictions and
the potential inability to sell or refinance a portion of the Partnership's
10
assets, the Purchaser's previous and current offer price's may be viewed as
speculative in nature.
NO SELLING COMMISSIONS
Units sold in the informal market "matching service" usually require
payment of a selling commission of the greater of $200 or 8.75%. If you accept
the Offer, however, you will NOT pay any selling commission.
TRANSFER FEES
If you accept the Offer, the Purchaser will deduct a $100 transfer fee
required by the general partner of the Partnership. The transfer fee is $100
per transaction, not per unit. For example, a limited partner who sells five
(5) Units will receives $400 ($500 less the $100 transfer fee). A limited
partner who sells ten (10) Units will receives $900.
PURPOSE OF THE OFFER
The purpose of the Offer is to allow the Purchaser to benefit from any one or a
combination of the following:
- - any cash distributions, whether these distributions are classified as a
return on, or a return of, capital, from the operations in the ordinary course
of the Partnership;
- - any distributions of net proceeds from the sale of assets by the
Partnership;
- - any distributions of net proceeds from the liquidation of the Partnership;
- - any cash from any redemption of the Units by the Partnership, and
- - any proceeds that may be received by the Limited Partners or by the
Partnership as a result of any litigation. The Purchaser is not aware of any
current or pending litigation involving the Partnership.
The Offer is not conditioned upon the valid tender of any minimum number of
the Units. If more than 10,000 Units are tendered and not withdrawn, the
Purchaser will accept up to 10,000 of the tendered Units on a pro rata basis,
subject to the terms and conditions described in this Offer to Purchase.
Regardless of the number of Units tendered in the Offer, any Limited Partner
tendering 5 or fewer Units will be exempt from proration, as long as that
Limited Partner tenders all of that Limited Partner's Units. See "THE
OFFER-Section 15-Certain Conditions of the Offer. The Purchaser expressly
reserves the right, in its sole discretion and for any reason, to waive any or
all of the conditions of the Offer, although the Purchaser does not presently
intend to do so.
CERTAIN INFORMATION ABOUT THE PARTNERSHIP
The Partnership is subject to the information and reporting requirements of
the Securities Exchange Act of 1934, as amended ("Exchange Act"), and, in
accordance with that act, is required to file reports and other information with
the Securities and Exchange Commission (the "SEC") relating to its business,
financial condition and other matters. These reports and other information may
be inspected at the public reference facilities maintained by the SEC at room
1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, and is
available for inspection and copying at the regional offices of the SEC located
in Northwestern Atrium Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661, and at 7 World Trade Center, 13th Floor, New York, New York
10048. Copies of these materials can also be obtained from the Public Reference
Room of the SEC in Washington, D.C. at prescribed rates or from the SEC's
Website at http://www.sec.gov.
The Purchaser has filed with the SEC a Tender Offer Statement on Schedule
TO (including exhibits) pursuant to Rule 14d-3 of the General Rules and
Regulations under the Exchange Act, which provides certain additional
information with respect to the Offer. The Schedule TO and any amendments to
the Schedule TO, including exhibits, may be inspected and copies may be obtained
from the SEC in the manner specified above.
11
According to publicly available information, there were 50,000 Units issued
and outstanding held by approximately 3,640 limited partners on March 20, 2001.
Information contained in this Offer to Purchase which relates to, or
represents statements made by, the Partnership, has been derived from
information provided in reports and other information filed with the SEC by the
Partnership.
Limited Partners are urged to read this Offer to Purchase and the
accompanying Agreement of Sale carefully before deciding whether to tender their
Units in the Offer.
12
RISK FACTORS
Before making a decision whether or not to accept the Offer, you should consider
the following Risk Factors:
IN MAKING THE OFFER, THERE HAS BEEN NO THIRD PARTY VALUATION OR APPRAISAL.
No independent party has been retained by Lexington Fund or any other person to
evaluate or render any opinion to Limited Partners with respect to the fairness
of the Offer Price, and no representation is made as to any fairness or other
measures of value that may be relevant to Limited Partners. In making the
Offer, Lexington Fund has not based its valuation of the properties owned by the
Partnership on any third-party appraisal or valuation and it is uncertain
whether the Offer Price reflects the value that would be realized upon the sale
of Units by a Limited Partner to a third party. We urge Limited Partners to
consult their own financial and tax advisors in connection with the Offer.
THE OFFER PRICE MAY NOT REPRESENT FAIR MARKET VALUE OF UNITS.
There is no established or regular trading market for Units, nor is there
another reliable standard for determining the fair market value of the Units.
The Offer Price does not necessarily reflect the price that Limited Partners
might receive in an open market sale of Units. Those prices could be higher
than the Offer Price.
THE OFFER PRICE DOES NOT TAKE INTO ACCOUNT ANY FUTURE PROSPECTS OF THE
PARTNERSHIP.
The Offer Price is speculative in nature and does not ascribe any value to
potential future improvements in the operating performance of the Partnership's
properties.
THE OFFER PRICE MAY NOT REPRESENT THE VALUE THAT A LIMITED PARTNER MIGHT RECEIVE
UPON A LIQUIDATION OF THE PARTNERSHIP.
Although a liquidation of the Partnership is not anticipated in the near future,
you might receive more value if you retain Units until the Partnership is
liquidated. The actual proceeds which might be obtained upon liquidation of the
Partnership are highly uncertain and could be more than the Offer Price.
Limited Partners are not required to accept the Offer and tender their Units.
THERE MAY BE CONFLICTS OF INTEREST WITH RESPECT TO THE OFFER.
Lexington Fund is making the Offer with a view toward making a profit.
Accordingly, there is a conflict between Lexington Fund's desire to acquire your
Units at a low price and your desire to sell your Units at a high price.
Lexington Fund's intent is to acquire the Units at a discount to the value
Lexington Fund might ultimately realize from owning the Units. Although
Lexington Fund cannot predict the future value of the Partnership assets on a
per Unit basis, the Offer Price could differ significantly from the net proceeds
that could be realized from a current sale of the properties owned by the
Partnership or that may be realized upon future liquidation of the Partnership.
WE MAY CONDUCT FUTURE OFFERS AT A HIGHER PRICE.
It is possible that we may conduct a future offer at a higher price than the
Offer Price. That decision will depend on, among other things, the performance
of the Partnership, prevailing economic conditions and our interest in acquiring
additional Units.
IF YOU ACCEPT THE OFFER AND SELL YOUR UNITS, YOU MAY RECOGNIZE TAXABLE GAIN ON
YOUR SALE.
A sale of Units in the Offer will be a taxable sale, with the result that you
will recognize taxable gain or loss measured by the difference between the
amount realized on the sale and your adjusted tax basis in the Units you
transfer to us. The tax consequences of the Offer to a particular Limited
Partner may be different from those of other Limited Partners and we urge you to
consult your own tax advisor in connection with the Offer.
13
IF YOU ACCEPT THE OFFER AND SELL YOUR UNITS, YOU WILL LOSE THE RIGHT TO SHARE IN
THE FUTURE PROFITS OF THE PARTNERSHIP.
Limited Partners who sell their Units will be giving up the opportunity to
participate in any future potential benefits associated with ownership of Units,
including the right to participate in any future distribution of cash or
property.
THE OFFER WILL INCREASE OUR STAKE IN THE PARTNERSHIP.
Lexington Fund and its affiliates currently own 4,993.83 Units, representing
9.98% of the Partnership's outstanding Units. If Lexington Fund purchases an
additional 10,000 Units, Lexington Fund and its affiliates will own 29.98% of
the Partnership's outstanding Units. Although this would not represent a
majority interest, this increase in ownership would give Lexington Fund and its
affiliates increased control over any vote of the Limited Partners.
14
THE OFFER
SECTION 1. TERMS OF THE OFFER.
Upon the terms and subject to the conditions of the Offer, the Purchaser
will accept for payment and pay for up to 10,000 Units that are validly tendered
on or prior to the Expiration Date (as defined below). The term "Expiration
Date" means 12:00 midnight, Eastern Time, on December 19, 2001, unless the
Purchaser extends the period of time for which the Offer is open, in which event
the term "Expiration Date" shall mean the latest date on which the Offer, as so
extended by the Purchaser, shall expire.
The Offer is conditioned on satisfaction of certain conditions. See
"Offer-Section 15-Certain Conditions of the Offer," which sets forth in full the
conditions of the Offer. The Purchaser will not be required to accept for
payment or to pay for any Units tendered, and may amend or terminate the Offer
if:
- - the Purchaser shall not have confirmed to its reasonable satisfaction
that, upon purchase of the Units, the Purchaser will be entitled to receive all
distributions, from any source, from the Partnership after November 19, 2001,
and that the Partnership will change the address applicable to the holder of the
Units tendered in the Offer to Purchaser's address;
- - the Agreement of Sale is not properly completed and duly executed.
Purchaser reserves the right (but shall not be obligated) to waive any or
all of these conditions. If any or all of those conditions have not been
satisfied or waived by the Expiration Date, Purchaser reserves the right (but
shall not be obligated) to (i) decline to purchase any of the Units tendered,
(ii) terminate the Offer and return all tendered Units to tendering Limited
Partners, (iii) waive all of the unsatisfied conditions and, subject to
complying with applicable rules and regulations of the SEC, purchase all Units
validly tendered, (iv) extend the Offer and, subject to the right of Limited
Partners to withdraw Units until the Expiration Date, retain the Units that have
been tendered during the period or periods for which the Offer is extended or
(v) otherwise amend the Offer.
SECTION 2. PRORATION; ACCEPTANCE FOR PAYMENT AND PAYMENT FOR UNITS.
If not less than 10,000 Units are validly tendered and not properly
withdrawn prior to the Expiration Date, the Purchaser, upon the terms and
subject to the conditions of the Offer, will accept for payment all of those
Units so tendered.
If more than 10,000 Units are validly tendered and not properly withdrawn
on or prior to the Expiration Date, the Purchaser, upon the terms and subject to
the conditions of the Offer, will accept for payment 10,000 Units so tendered,
on a pro rata basis, with appropriate adjustments to avoid tenders of fractional
Units and purchases that would violate the Partnership's Agreement of Limited
Partnership. Regardless of the number of Units tendered in the Offer, any
Limited Partner tendering 5 or fewer Units will be exempt from proration, as
long as that Limited Partner tenders all of that Limited Partner's Units.
In the event that proration is required, the Purchaser will determine the
precise number of Units to be accepted and will announce the final results of
proration as soon as practicable, but in no event, later than five (5) business
days following the Expiration Date. Purchaser will not pay for any Units
tendered until after the final results of proration have been determined.
If, prior to the Expiration Date, the Purchaser increases the Offer Price,
the increased Offer Price will be paid for all Units accepted for payment
pursuant to the Offer, whether or not those Units were tendered prior to such
increase.
SECTION 3. PROCEDURES FOR TENDERING UNITS.
VALID TENDER. For Units to be validly tendered pursuant to the Offer, a
properly completed and duly executed Agreement of Sale must be received by
15
Lexington Fund at its address set forth on the back cover of this Offer to
Purchase, on or prior to the Expiration Date and not withdrawn prior to the
Expiration Date. A Limited Partner may tender any or all Units owned by that
Limited Partner. At least ten (10) business days will remain in the offer in
the event the offer price is reduced by any distributions with respect to the
Units.
The delivery of the Agreement of Sale will be deemed made only when
actually received by Lexington Fund. Sufficient time should be allowed by a
Limited Partner electing to tender Units in the Offer to ensure timely delivery.
BACKUP FEDERAL INCOME TAX WITHHOLDING. A tendering Limited Partner must verify
that Limited Partner's correct taxpayer identifi-cation number or social
security number, as applicable, and make certain warranties and representations
that it is not subject to backup federal income tax withholding as set forth in
the Agreement of Sale.
TENDERS BY BENEFICIAL HOLDERS. A tender of Units can only be made by the
Registered Owner of those Units, and the party whose name appears as Registered
Owner must tender those Units on behalf of any beneficial holder, as set forth
in the "Instructions" to the Agreement of Sale.
DETERMINATION OF VALIDITY; REJECTION OF UNITS; WAIVER OF DEFECTS; NO OBLIGATION
TO GIVE NOTICE OF DEFECTS. All questions as to the form of documents and
validity, eligibility (including time of receipt), and acceptance for payment of
any tender of Units will be determined by the Purchaser, in its sole discretion,
which determination will be final and binding on all parties.
OTHER REQUIREMENTS. By executing and delivering the Agreement of Sale, a
tendering Limited Partner (who does not properly withdraw acceptance of the
Offer prior to the Expiration Date) irrevocably appoints the Purchaser as that
Limited Partner's proxy, with full power of substitution. All proxies are
irrevocable and coupled with an interest in the tendered Units and empower the
Purchaser to exercise all voting and other rights of such Limited Partner as it
in its sole discretion may deem proper at any meeting of Limited Partners. The
complete terms and conditions of the proxy are set forth in the Agreement of
Sale.
By executing and delivering the Agreement of Sale, a tendering Limited
Partner also irrevocably constitutes and appoints the Purchaser and its
designees as the Limited Partner's attorneys-in-fact. This appointment will be
effective upon Purchaser's payment for the Units. The complete terms and
conditions of the Power of Attorney are set forth in the Agreement of Sale.
By executing and delivering the Agreement of Sale, a tendering Limited
Partner will irrevocably assign to the Purchaser and its assignees all right,
title, and interest that the Limited Partner has to the Units-, including,
without limitation, any and all distributions made by the Partnership after
November 19, 2001, regardless of the fact that the record date for any such
distribution may be a date prior to the Expiration Date and whether those
distributions are classified as a return on, or a return of, capital. The
complete terms and conditions of the assignment of the Units are set forth in
the Agreement of Sale.
By executing the Agreement of Sale, a tendering Limited Partner represents
that either:
- - the Limited Partner is not a "plan" subject to Title 1 of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA") or Section 4975 of
the Internal Revenue Code of 1986, as amended (the "Code"), or an entity deemed
to hold "plan assets" within the meaning of 29 C.F.R 2510-3-101 of any "plan";
or
- - the tender and acceptance of Units pursuant to the applicable Offer will
not result in a nonexempt prohibited transaction under Section 406 of ERISA or
Section 4975 of the Code.
By executing the Agreement of Sale, a tendering Limited Partner also agrees
that regardless of any provision in the Partnership's Agreement of Limited
Partnership which provides that a transfer is not effective until a date
subsequent to the date of any transfer of Units under the Offer, the Offer Price
will be reduced by any distributions with respect to the Units after November
19, 2001, whether those distributions are classified as a return on, or a return
16
of, capital, unless, with respect to a limited partner, that limited partner was
not entitled to receive that distribution.
Limited Partners will not have any appraisal or dissenters' rights with
respect to or in connection with the Offer.
SECTION 4. WITHDRAWAL RIGHTS.
Except as otherwise provided in this Section 4, tenders of Units made
pursuant to the Offer are irrevocable. Units tendered pursuant to the Offer may
be withdrawn at any time prior to the Expiration Date. In the event that the
Offer is extended beyond the Expiration Date, the Units tendered may be
withdrawn at any time.
In order for a withdrawal to be effective, a signed, written transmission
notice of withdrawal must be timely received by the Purchaser at its address set
forth on the last page of this Offer to Purchase. Any notice of withdrawal must
specify the name of the person who tendered the Units to be withdrawn, and the
number of Units to be withdrawn. Any Units properly withdrawn will be deemed
not validly tendered for purposes of the Offer, but may be re-tendered at any
subsequent time prior to the Expiration Date by following the procedures
described in Section 3.
All questions as to the form and validity (including time of receipt) of
notices of withdrawal will be determined by the Purchaser, in its sole
discretion, whose determination will be final and binding.
SECTION 5. EXTENSION OF TENDER PERIOD; TERMINATION; AMENDMENT.
The Purchaser expressly reserves the right, in its sole discretion, at any
time:
- - to extend the period of time during which the Offer is open;
- - upon the failure of a Limited Partner to satisfy any of the conditions
specified in Section 15, to delay the acceptance for payment of, or payment for,
any Units; and
- - to amend the Offer in any respect (including, without limitation, by
increasing or decreasing the Offer Price).
Any extension, or amendment will be followed as promptly as practicable by
a mailing notifying each Limited Partner, the mailing in the case of an
extension to be issued no later than 9:00 a.m., Eastern Time, on the next
business day after the previously scheduled Expiration Date, in accor-dance with
Rule 14e-1(d) under the Exchange Act.
If the Purchaser makes a material change in the terms of the Offer or the
information concerning the Offer or waives a material condition of the Offer,
the Purchaser will extend the Offer to the extent required by the rules and
regulations of the SEC. The minimum period during which an Offer must remain
open following a material change in the terms of the Offer or of information
concerning the Offer, other than a change in price or a change in percentage of
securities sought, will depend upon the facts and circumstances, including the
relative materiality of the change in the terms or information. With respect to
a change in price or a change in percentage of securities sought, however, a
minimum ten-business-day period is generally required to allow for adequate
dissemination to security holders and for investor response. As used in this
Offer, "business day" means any day other than a Saturday, Sunday, or a federal
holiday and consists of the time period from 12:01 a.m. through 12:00 midnight,
Eastern Time.
Because Purchaser is offering to purchase less than 100% of the Units,
there will be no "subsequent offering period" as defined in Rule 14d-11 of the
Exchange Act.
17
SECTION 6. CERTAIN TAX CONSEQUENCES
.
The following is a summary of certain federal income tax consequences of a
sale of Units pursuant to the Offer assuming that the Partnership is a
partnership for federal income tax purposes and that it is not a "publicly
traded partnership" as defined in Section 7704 of the Internal Revenue Code of
1986, as amended (the "Code"). This summary is based on the Code, applicable
Treasury Regulations thereunder, administrative rulings, practice and procedures
and judicial authorities as of the date of the Offer. All of the foregoing are
subject to change, and any change could affect the continuing accuracy of this
summary. This summary does not address all aspects of federal income taxation
that may be relevant to a particular Limited Partner in light of that Limited
Partner's specific circumstances, or that may be relevant to Limited Partners
subject to special treatment under the federal income tax laws (for example,
foreign persons, dealers in securities, banks, insurance companies and
tax-exempt entities), nor does it address any aspect of state, local, foreign or
other tax laws. Sales of Units pursuant to the Offer will be taxable
transactions for federal income tax purposes, and may also be taxable
transactions under applicable state, local, foreign and other tax laws. EACH
LIMITED PARTNER SHOULD CONSULT HIS OR HER TAX ADVISOR AS TO THE PARTICULAR TAX
CONSEQUENCES TO THAT LIMITED PARTNER OF SELLING UNITS PURSUANT TO THE OFFER,
INCLUDING, WITHOUT LIMITATION, FEDERAL, STATE AND LOCAL TAX CONSEQUENCES.
CONSEQUENCES TO TENDERING LIMITED PARTNERS. A Limited Partner will
recognize gain or loss on a sale of Units pursuant to the Offer equal to the
difference between (i) the Limited Partner's "amount realized" on the sale and
(ii) that Limited Partner's adjusted tax basis in the Units sold. The "amount
realized" with respect to a Unit sold pursuant to the Offer will be a sum equal
to the amount of cash received by the Limited Partner for the Unit plus the
amount of Partnership liabilities allocable to the Unit (as determined under
Code Section 752). The amount of a Limited Partner's adjusted tax basis in
Units sold pursuant to the Offer will vary depending upon that Limited Partner's
particular circumstances and will be affected by allocations of Partnership
taxable income or loss to a Limited Partner with respect to those Units, and
distributions to a Limited Partner. In this regard, tendering Limited Partners
will be allocated a pro rata share of the Partnership's taxable income or loss
with respect to Units sold pursuant to the Offer through the last day of the
month preceding the effective date of the sale.
Subject to Code Section 751 (discussed below), the gain or loss recognized
by a Limited Partner on a sale of a Unit pursuant to the Offer generally will be
treated as a capital gain or loss if the Unit was held by the Limited Partner as
a capital asset. Changes to the federal income tax laws in recent years
modified applicable capital gain rates and holding periods. Gain with respect
to Units held for more than one year will be taxed at long-term capital gain
rates not exceeding 20 percent. Gain with respect to Units held one year or
less will be taxed at ordinary income rates, up to a maximum rate of 39.6
percent. To the extent of depreciation recapture of previously deducted
straight-line depreciation with respect to real property, a maximum rate of 25
percent is imposed (assuming eligibility for long-term capital gain treatment).
A portion of the gain realized by a Limited Partner with respect to the
disposition of the Units may be subject to this maximum 25 percent rate to the
extent that the gain is attributable to depreciation recapture inherent in the
properties of the Partnership.
Capital losses are deductible only to the extent of capital gains, except
that non-corporate taxpayers may deduct up to $3,000 of capital losses in excess
of the amount of their capital gains against ordinary income. Excess capital
losses generally can be carried forward to succeeding years (a corporation's
carry forward period is five years and non-corporate taxpayer can carry forward
such capital losses indefinitely). In addition, corporations (but not
non-corporate taxpayers) are allowed to carry back excess capital losses to the
three preceding taxable years.
A portion of Limited Partner's gain or loss on a sale of a Unit pursuant to
the Offer may be treated as ordinary income or loss. That portion will be
determined by allocating a Limited Partner's amount realized for a Unit between
amounts received in exchange for all or a part of the Limited Partner's interest
in the Partnership attributable to "Section 751 items" and non-Section 751
items. Section 751 items include "inventory items" and "unrealized receivables"
(including depreciation recapture) as defined in Code Section 751. The
18
difference between the portion of the Limited Partners amount realized that is
allocable to Section 751 items and the portion of the Limited Partner's adjusted
tax basis in the Units sold that is so allocable will be treated as ordinary
income or loss. The difference between the Limited Partner's remaining amount
realized and adjusted tax basis will be treated as capital gain or loss assuming
the Units were held by the Limited Partner as a capital asset.
Under Code Section 469, a non-corporate taxpayer or personal service
corporation can deduct passive activity losses in any taxable year only to the
extent of that person's passive activity income for such year. Closely held
corporations may offset passive activity losses against passive activity income
and active income, but may not offset such losses against portfolio income. If
a Limited Partner is subject to these restrictions and has unused passive losses
from prior years, those losses will generally become available upon a sale of
Units, provided the Limited Partner sells all of his or her Units. If a Limited
Partner does not sell all of his or her Units, the deductibility of those losses
would continue to be subject to the passive activity loss limitation until the
Limited Partner sells his or her remaining Units.
Gain realized by a foreign Limited Partner on a sale of a Unit pursuant to
the Offer will be subject to federal income tax. Under Code Section 1445 of the
Code, the transferee of a partnership interest held by a foreign person is
generally required to deduct and withhold a tax equal to 10% of the amount
realized on the disposition. Purchaser will withhold 10% of the amount realized
by a tendering Limited Partner from the Purchase Price payable to that Limited
Partner unless the Limited Partner properly completes and signs the Agreement of
Sale certifying the accuracy of the Limited Partner's TIN and address, and that
the Limited Partner is not a foreign person. Amounts withheld are creditable
against a foreign Limited Partner's federal income tax liability. If amounts
withheld are in excess of such liability, a refund can be obtained.
A Limited Partner who tenders Units must file an information statement with
his or her federal income tax return for the year of the sale which provides the
information specified in Treasury Regulation Section 1.751-1(a)(3). The selling
Limited Partner must also notify the Partnership of the date of the transfer and
the names, addresses and tax identification numbers of the transferors and
transferees within 30 days of the date of the transfer (or, if earlier, January
15 of the following calendar year).
CONSEQUENCES TO A NON-TENDERING LIMITED PARTNER. Purchaser anticipates
that a Limited Partner who does not tender his or her Units will not realize any
material federal income tax consequences as a result of the decision not to
tender.
SECTION 7. PURPOSE AND EFFECTS OF THE OFFER.
The Purchaser is making the Offer for investment purposes with a view
towards making a profit. The Purchaser's intent is to acquire the Units at a
discount to the value that the Purchaser might ultimately realize from owning
the Units. No independent party has been retained by the Purchaser to evaluate
or render any opinion with respect to the fairness of the Offer Price and no
representation is made as to the fairness of the Offer Price. The Purchaser may
in the future seek to acquire additional Units through private purchases, one or
more future tender offers, or by any other means deemed advisable. However, the
Purchaser has no plans that relate to or would result in:
- - any extraordinary transaction, such as a merger, consolidation or
liquidation, involving the Partnership;
- - any purchase, sale or transfer of a material amount of assets of the
Partnership;
- - any material change in the distribution policy of the Partnership or in
its capitalization or indebtedness;
- - any change in the present Board of Directors or management of the
Partnership or the General Partner;
- - any material change in the Partnership's structure or business;
- - any class of securities of the Partnership to be listed or delisted; or
19
- - any class of securities of the Partnership to become eligible for
termination of registration under the Exchange Act.
The Purchaser established the Offer Price based on its own review of the
Partnership, taking into account primarily the prices paid by the Purchaser and
by other parties in their most recent purchases of Units. Based on the
foregoing, the Purchaser determined to offer to purchase Units at a price which
reflected a premium over the prices the Purchaser and other parties have most
recently paid for Units. The Purchaser was unable to determine a net asset
value (NAV) or liquidation value for the Partnership because of the
Partnership's two-tiered structure. The Partnership currently holds limited
partnership interests in sixteen limited partnerships (the "Local
Partnerships"). The majority of the Local Partnerships own low-income housing
projects that are subject to government regulations limiting the amount of money
that the Local Partnerships can distribute to the Partnership. Government
regulations also limit the properties' rent levels and may limit the Local
Partnerships' ability to refinance or sell these properties. As a result of the
Partnership's two-tiered structure, government regulated income restrictions and
the potential inability to sell or refinance a portion of the Partnership's
assets, the Purchaser's offer price may be viewed as speculative in nature. The
Purchaser reviewed the Partnership's Annual Report on Form 10-K for the year
ended December 31, 2000 ("2000 10 K) and its quarterly report on Form 10-Q for
the period ended September 30, 2001.
Other measures of value may be relevant to a Limited Partner, and all
Limited Partners are urged to carefully consider all of the information
contained in the Offer to Purchase and Agreement of Sale and to consult with
their own advisors (tax, financial, or otherwise) in evaluating the terms of the
Offer before deciding whether to tender Units. The Offer is being made as a
speculative investment by the Purchaser based on its belief that there is
inherent underlying value in the assets of the Partnership. The purpose of the
Offer is to allow the Purchaser to benefit to the greatest extent possible from
any one or a combination of the following:
- - any cash distributions, whether those distributions are classified as a
return on, or a return of, capital, from the operations in the ordinary course
of the Partnership;
- - any distributions of net proceeds from the sale of assets by the
Partnership;
- - any distributions of net proceeds from the liquidation of the Partnership;
- - any cash from any redemption of the Units by the Partnership, and
- - any proceeds that may be received by the Limited Partners or by the
Partnership as a result of litigation (the Purchaser is not aware of any current
or pending litigation involving the Partnership).
PRICE RANGE OF UNITS; DISTRIBUTIONS.
LACK OF PUBLIC MARKET. At present, privately negotiated sales and sales through
intermediaries (e.g., through the trading system operated by the American
Partnership Board, which publishes sell offers by holders of Units) are the only
means available to a Limited Partner to liquidate an investment in Units (other
than by accepting the Offer) because the Units are not listed or traded on any
national securities exchange or quoted on NASDAQ. The Purchaser and its
affiliates have purchased 1,243 Units in the Partnership for $100 per unit
during the past twelve months.
SECTION 8. FUTURE PLANS.
FUTURE PLANS OF THE PURCHASER. The Purchaser is acquiring the Units pursuant to
the Offer for investment purposes. However, the Purchaser and its affiliates
may acquire additional Units through private purchases, one or more future
tender offers, or by any other means deemed advisable. Those future purchases
may be at prices higher or lower than the Offer Price.
FUTURE PLANS OF THE PARTNERSHIP. Except as otherwise set forth in this Offer to
Purchase, it is expected that following the Offer, the business and operations
20
will be continued substantially as they are currently being conducted. For a
description of the Partnership's business, Limited Partners are urged to review
the Partnership's 2000 10-K and its 10-Q for the period ended September 30,
2001.
SECTION 9. PAST CONTACT AND NEGOTIATIONS WITH GENERAL PARTNER.
Since 1983, and continuing until the date of this Offer, various affiliates
of the Purchaser have engaged in ongoing conversations and exchanges of
correspondence with various affiliates of the Partnership and affiliates of the
general partner of the Partnership with regard to these affiliates' ownership of
Units and other partnership interests in which the general partner of the
Partnership is affiliated. These conversations have principally involved
requests to obtain the list of Limited Partners and other information concerning
the Partnership. NO DISCUSSIONS HAVE TAKEN PLACE BETWEEN THE PURCHASER AND ITS
AFFILIATES AND THE PARTNERSHIP AND ITS AFFILIATES WITH REGARD TO THIS OFFER.
Neither the Partnership, the General Partner or any of their affiliates have
disclosed to the Purchaser or disclosed in any filings made by the Partnership
with the SEC, any plans or intentions to liquidate the Partnership.
SECTION 10. CERTAIN INFORMATION CONCERNING THE PARTNERSHIP.
Except as otherwise indicated, information contained in this Section 10 is
based upon filings made by the Partnership with the SEC. Although the Purchaser
has no information that any statements contained in this Section 10 are untrue,
the Purchaser is not assuming any responsibility for the accuracy or
completeness of any information contained in this Section 10 which is derived
from those filings, or for any failure by the Partnership to disclose events
which may have occurred and may affect the significance or accuracy of any
information but which are unknown to the Purchaser.
GENERAL. The Partnership was organized on March 23, 1983, under the laws of the
State of Maryland. Its principal executive offices are located at 11200
Rockville Pike, Rockville, MD 20852. Its telephone number is 301-468-9200.
THE PARTNERSHIP'S PRIMARY BUSINESS IS REAL ESTATE OWNERSHIP AND RELATED
OPERATIONS. The Partnership was formed for the benefit of its Limited Partners,
to make equity investments in other limited partnerships which own and operate
multi-family residential properties which are assisted by federal, state or
local government agencies. The Partnership's investment portfolio currently
consists of the following limited partnerships:
- - Arrowhead Apts., Palatine, IL
- - Chevy Chase Park, Centerville, OH
- - Country Place I, Burtonsville, MD
- - Country Place II, Burtonsville, MD
- - Four Winds West, Birmingham, AL
- - Golden Acres, Chowchilla, CA
- - Mercy Terrace, San Francisco, CA
- - The Moorings, Roselle, IL
- - Orangewood Plaza, Orange Cove, CA
- - Posada Vallarta, Phoenix, AZ
- - Princeton Village, Princeton, NJ
- - Rock Glen, Baltimore, MD
- - Troy Manor, Troy, AL
- - Westgate Tower, Westland, MI
ORIGINALLY ANTICIPATED TERM OF PARTNERSHIP; ALTERNATIVES. The Partnership was
formed to invest in real estate by acquiring and holding a limited partnership
interest in limited partnerships that own and operate federal or state
government-assisted or conventionally financed apartment properties located
throughout the United States. The Partnership shall continue until December 31,
2037 unless sooner dissolved in accordance with the Partnership Agreement.
21
SELECTED FINANCIAL AND PROPERTY-RELATED DATA. Set forth on the following pages
is a summary of certain financial and statistical information with respect to
the Partnership, all of which has been excerpted or derived from the
Partnership's most recent Form 10Q for the quarter ended September 30, 2001.
More comprehensive financial and other information is included in those reports
and other documents filed by the Partnership with the SEC, and the following
summary is qualified in its entirety by reference to those reports and other
documents and all the financial information and related notes contained in those
reports.
22
CAPITAL REALTY INVESTORS II LIMITED PARTNERSHIP
SELECTED FINANCIAL DATA
AND FROM THE FORM 10-Q FOR THE QUARTER ENDED SEPTEMBER 30, 2001
BALANCE SHEETS
ASSETS September 30, December 31,
2001 2000
- --------------------------------------------------------------------------------
(Unaudited)
Investments in and advances to partnerships $ 1,129,109 $ 729,191
Investment in partnerships held for sale or transfer 15,154 79,579
Cash and cash equivalents 3,384,709 6,292,654
Acquisition fees, principally paid to related parties,
net of accumulated amortization of $256,375 and
$245,626, respectively 173,612 184,362
Property purchase costs, net of accumulated
amortization of $239,743 and $229,486, respectively 170,543 180,800
Other assets 727 2,538
----------------------------
Total assets $ 4,873,854 $ 7,469,124
============================
LIABILITIES AND PARTNERS' DEFICIT
Due on investments in partnerships $ 1,900,000 $ 5,050,000
Accrued interest payable 2,982,853 9,156,205
Accounts payable and accrued expenses 93,603 176,350
-----------------------------
Total liabilities 4,976,456 14,382,555
-----------------------------
Commitments and contingencies
Partners' capital (deficit):
Capital paid in:
General Partners 2,000 2,000
Limited Partners 50,015,000 50,015,000
-----------------------------
50,017,000 50,017,000
Less:
Accumulated distributions to partners (10,814,009) (7,569,859)
Offering costs (5,278,980) (5,278,980)
Accumulated losses (34,026,613) (44,081,592)
------------------------------
Total partners' deficit (102,602) (6,913,431)
------------------------------
Total liabilities and partners' deficit $ 4,873,854 $ 7,469,124
==============================
23
STATEMENTS OF OPERATIONS AND ACCUMULATED LOSSES (Unaudited)
For the three months ended For the nine months ended
September 30, September 30,
2001 2000 2001 2000
- --------------------------------------------------------------------------------------------------------------
Share of income from partnerships $ 341,357 $ 125,867 $ 1,085,183 $ 795,528
-----------------------------------------------------------------
Other revenue and expenses:
Revenue:
Interest 25,804 119,598 149,833 343,444
-----------------------------------------------------------------
Expenses:
Interest 70,044 134,166 350,147 640,881
Management fee 62,499 62,499 187,497 187,497
General and administrative 52,446 53,617 167,171 165,193
Professional fees 21,512 22,381 63,287 75,844
Amortization of deferred costs 7,002 7,832 21,007 26,414
-----------------------------------------------------------------
213,503 280,495 789,109 1,095,829
-----------------------------------------------------------------
Total other revenue and expenses (187,699) (160,897) (639,276) (752,385)
-----------------------------------------------------------------
Income (loss) before gain on disposition
of investments in partnerships 153,658 (35,030) 445,907 43,143
(Loss) gain on disposition
of investments in partnerships -- -- (56,217) 5,879,778
-----------------------------------------------------------------
Income (loss) before extraordinary (loss) gain
from extinguishment of debt 153,658 (35,030) 389,690 5,922,921
Extraordinary (loss) gain
from extinguishment of debt -- (56,201) 9,665,289 10,018,558
-----------------------------------------------------------------
Net income (loss) 153,658 (91,231) 10,054,979 15,941,479
Accumulated losses, beginning of period (34,180,271) (43,602,478) (44,081,592) (59,635,188)
-----------------------------------------------------------------
Accumulated losses, end of period $(34,026,613) $ (43,693,709) $ (34,026,613) $ (43,693,709)
=================================================================
Net income (loss) allocated
to General Partners (1.51%) $ 2,320 $ (1,378) $ 151,830 $ 240,716
=================================================================
Net income (loss) allocated to Initial
and Special Limited Partners (1.49%) $ 2,290 $ (1,359) $ 149,819 $ 237,528
=================================================================
Net income (loss) allocated
to Additional Limited Partners (97%) $ 149,048 $ (88,494) $ 9,753,330 $ 15,463,235
=================================================================
Net income (loss) per unit of
Additional Limited Partner Interest
based on 50,000 units outstanding $ 2.98 $ (1.77) $ 195.07 $ 309.26
=================================================================
24
STATEMENTS OF CASH FLOWS (Unaudited)
For the nine months ended
September 30,
2001 2000
- --------------------------------------------------------------------------------
Cash flows from operating activities:
Net income $ 10,054,979 $ 15,941,479
Adjustments to reconcile net income to net
cash used in operating activities:
Share of income from partnerships (1,085,183) (795,528)
Amortization of deferred costs 21,007 26,414
Loss (gain) on disposition
of investments in partnerships 56,217 (5,879,778)
Extraordinary gain from extinguishment of debt (9,665,289) (10,018,558)
Changes in assets and liabilities:
Decrease (increase) in other assets 1,811 (2,547)
Increase in accrued interest payable 350,147 640,880
Payment of purchase money note interest -- (231,201)
Decrease in accounts payable and accrued expenses (82,747) (27,870)
----------------------------------
Net cash used in operating activities (349,058) (346,709)
----------------------------------
Cash flows from investing activities:
Receipt of distributions from partnerships 883,504 864,027
Proceeds from disposition of investments
in partnerships -- 5,993,661
Additional investment in partnership (198,241) --
----------------------------------
Net cash provided by investing activities 685,263 6,857,688
----------------------------------
Cash flows from financing activities:
Payoff of purchase money notes and related interest -- (5,993,661)
----------------------------------
Payment of purchase money note principal -- (50,000)
Distribution to Additional Limited Partners (3,244,150) (1,622,237)
----------------------------------
Net cash used in financing activities (3,244,150) (7,665,898)
----------------------------------
Net decrease in cash and cash equivalents (2,907,945) (1,154,919)
Cash and cash equivalents, beginning of period 6,292,654 8,936,520
----------------------------------
Cash and cash equivalents, end of period $ 3,384,709 $ 7,781,601
==================================
Supplemental disclosure of cash flow information:
Cash paid during the period for interest $ -- $ 3,976,115
==================================
25
OTHER INFORMATION. The Partnership is subject to the reporting requirements of
the Exchange Act and accordingly is required to file reports and other
information with the SEC relating to its business, financial results and other
matters. These reports and other documents may be inspected at the SEC's Public
Reference Section, Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549,
where copies may be obtained at prescribed rates, and at the regional offices of
the SEC located in the Citicorp Center, 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661, and 7 World Trade Center, New York, New York 10048.
Copies should be available by mail upon payment of the SEC's customary charges
by writing to the SEC's principal offices at 450 Fifth Street, N.W., Washington,
D.C. 20549. The SEC also maintains a web site that contains reports, proxy and
other information filed electronically with the SEC, the address of which is
http://www.sec.gov.
CASH DISTRIBUTIONS HISTORY. The Partnership made cash distributions to Limited
Partners of $65 per Unit on May 2, 2001, of $30 per Unit on October 30, 2000, of
$32.50 per Unit on January 28, 2000, and of $34 per Unit on October 29, 1999.
SECTION 11. BACKGROUND AND REASONS FOR THE OFFER.
The Purchaser is in the business of acquiring fractional investment
interests for long-term retention and seeks to purchase the Units in furtherance
of that strategy. The Purchaser and its affiliates have been in this business
since 1981. The Units acquired as a result of the Offer will be held as
long-term investments and not with a view to a resale. The Purchaser does not
acquire general partner interests nor is it engaged in property management. The
Purchaser does not currently intend to establish control of the Partnership in
the future through subsequent tender offers or other purchasers of Units.
SECTION 12. CERTAIN INFORMATION CONCERNING THE PURCHASER.
The Purchaser is a Massachusetts limited partnership which holds limited
partnership interests in real estate with other limited partnerships. The
Manager of the Purchaser is Equity Resources Group, Inc., a Massachusetts
corporation ("Manager"), which is controlled by Eggert Dagbjartsson ("ED"), who
is also the general partner of the Purchaser. ERG is engaged in real estate
investment and consulting. The Purchaser's, ERG's and Mr. Dagbjartsson's
offices are located at 14 Story Street Cambridge, MA 02138. For certain
information concerning the members of the Manager, see Schedule 1 to this Offer
to Purchase.
Except as otherwise set forth in this Offer to Purchase,
- - neither the Purchaser, Manager, or ED, or, to the best knowledge of the
Purchaser, any of the persons listed on Schedule 1, or any affiliate of the
Purchaser beneficially owns or has a right to acquire any Units;
- - neither the Purchaser, Manager, or ED, or, to the best knowledge of the
Purchaser, any of the persons listed on Schedule 1, or any affiliate of the
Purchaser or any member, director, executive officer, or subsidiary of any of
the foregoing has effected any transaction in the Units;
- - neither the Purchaser, Manager, or ED, or, to the best knowledge of the
Purchaser, any of the persons listed on Schedule 1 or any affiliate of the
Purchaser has any contract, arrangement, understanding, or relationship with any
other person with respect to any securities of the Partnership, including but
not limited to, contracts, arrangements, understandings, or relationships
concerning the transfer or voting thereof, joint ventures, loan or option
arrangements, puts or calls, guarantees of loans, guarantees against loss, or
the giving or withholding of proxies, consents, or authorizations;
- - there have been no transactions or business relationships which would be
required to be disclosed under the rules and regulations of the SEC between the
Purchaser, Manager, or ED,, or, to the best knowledge of the Purchaser, any of
the persons listed on Schedule 1 or any affiliate of the Purchaser, on the one
hand, and the Partnership or affiliates, on the other hand; and
- - there have been no contracts, negotiations, or transactions between the
Purchaser, Manager, or ED, or to the best knowledge of the Purchaser, any of
the persons listed on Schedule 1 or any affiliate of the Purchaser, on the one
26
hand, and the Partnership or its affiliates, on the other hand, concerning a
merger, consolidation or acquisition, tender offer (other than as described in
Section 8 of this Offer) or other acquisition of securities, an election or
removal of the General Partner, or a sale or other transfer of a material amount
of assets.
SECTION 13. SOURCE AND AMOUNT OF FUNDS.
The Purchaser expects that approximately $1,000,000 (exclusive of fees and
expenses) will be required to purchase 10,000 Units, if tendered. The Purchaser
will either use cash on hand or will obtain those funds from capital
contributions from its members, each of whom have an aggregate net worth
substantially in excess of the amount required to be contributed to the
Purchaser to purchase the 10,000 Units. The Purchaser is not a public company
and has not prepared audited financial statements. The Purchaser and its
members have adequate cash and cash equivalents to fund payment to selling
limited partners. As of June 11, 2001, the Purchaser had over $1,200,000 in
cash on hand and total assets in excess of $2,000,000. The members of the
Partnership have informed the Partnership that they will contribute any amount
required to purchase the 10,000 Units. No third-party financing is required in
connection with the Offer. The Purchaser represents to all tendering Limited
Partners that the Purchaser has the financial wherewithal to accept for payment
and thereby purchase all 10,000 Units which the Purchaser has offered to
purchase in this Offer to Purchase. No alternative financing plan exists.
SECTION 14. VOTING POWER.
The Purchaser and its affiliates currently own 4,993.83 Units, representing
9.98% of the Partnership's outstanding Units. If the Purchaser purchases an
additional 10,000 Units, the Purchaser and its affiliates will own 29.98% of the
Partnership's outstanding Units. Although this would not represent a majority
interest, this increase in ownership would give the Purchaser and its affiliates
increased control over any vote of the Limited Partners.
SECTION 15. CERTAIN CONDITIONS OF THE OFFER.
Purchaser will not be required to accept for payment or to pay for any
Units tendered, and may amend or terminate the Offer if:
- - the Purchaser shall not have confirmed to its reasonable satisfaction
that, upon purchase of the Units, the Purchaser will be entitled to receive all
distributions, from any source, from the Partnership after November 19, 2001,
and that the Partnership will change the address associated with the holder of
the Units to Purchaser's address;
- - the Agreement of Sale is not properly completed and duly executed.
The foregoing conditions are for the sole benefit of the Purchaser and its
affiliates and may be asserted by the Purchaser regardless of the circumstances
(including, without limitation, any action or inaction by the Purchaser or any
of its affiliates) giving rise to that condition, or may be waived by the
Purchaser, in whole or in part, from time to time in its sole discretion on or
prior to the expiration of the offer. The failure by the Purchaser at any time
on or prior to the expiration of the offer to exercise these rights will not be
deemed a waiver of those rights, which rights will be deemed to be ongoing and
may be asserted at any time and from time to time on or prior to the expiration
of the offer. Any determination by the Purchaser concerning the events
described in this Section 15 will be final and binding upon all parties.
SECTION 16. CERTAIN LEGAL MATTERS AND REQUIRED REGULATORY APPROVALS.
Except as set forth in this Offer to Purchase, based on its review of
filings made by the Partnership with the SEC and other publicly available
information regarding the Partnership, the Purchaser is not aware of any
licenses or regulatory permits that would be material to the business of the
Partnership, taken as a whole, and that might be adversely affected by the
Purchaser's acquisition of Units in the Offer. In addition, the Purchaser is
27
not aware of any filings, approvals, or other actions by or with any domestic,
foreign, or governmental authority or administrative or regulatory agency that
would be required prior to the acquisition of Units by the Purchaser pursuant to
the Offer. Should any approval or other action be required, there can be no
assurance that any additional approval or action, if needed, would be obtained
without substantial conditions or that adverse consequences might not result to
the Partnership's business, or that certain parts of the Partnership's or the
Purchaser's business might not have to be disposed of or held separate or other
substantial conditions complied with in order to obtain that approval. The
Purchaser's obligation to purchase and pay for Units is subject to certain
conditions. See "THE OFFER-Section 15-Certain Conditions of the Offer."
ANTITRUST. Under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended (the "HSR Act"), and the rules and regulations that have been
promulgated under the HSR Act by the Federal Trade Commission (the "FTC"),
certain acquisition transactions may not be consummated until information and
documentary material has been furnished for review by the Antitrust Division of
the Department of Justice (the "Antitrust Division") and the FTC and certain
waiting period requirements have been satisfied. The Purchaser does not
currently believe that any filing is required under the HSR Act with respect to
its acquisition of Units contemplated by the Offer.
STATE TAKEOVER LAWS. The Purchaser has not attempted to comply with any state
takeover statutes in connection with the Offer. The Purchaser reserves the right
to challenge the validity or applicability of any state law allegedly applicable
to the Offer, and nothing in the Offer, nor any action taken in connection with
the Offer, is intended as a waiver of that right. In the event that any state
takeover statute is found applicable to the Offer, the Purchaser might be unable
to accept for payment or purchase Units tendered pursuant to the Offer or be
delayed in continuing or consummating the Offer. In that case, the Purchaser
may not be obligated to accept for purchase, or pay for, any Units tendered.
SECTION 17. FEES AND EXPENSES.
Equity Resources Group, Inc. has been retained by the Pur-chaser to act as
the Information Agent in connection with the Offer. The Information Agent will
receive reasonable and customary compensation for its services in an amount not
in excess of $5,000 in connection with the Offer and will be indemnified against
certain liabilities and expenses in connection with its service as the
Information Agent.
Except as set forth in this Section 17, the Purchaser will not pay any fees or
commissions to any broker, dealer or other person for soliciting tenders of
Units pursuant to the Offer. Brokers, dealers, commercial banks, trust
companies, and other nominees, if any, will, upon request, be reimbursed by the
Purchaser for customary clerical and mailing expenses incurred by them in
forwarding materials to their customers.
SECTION 18. MISCELLANEOUS.
THE OFFER IS NOT BEING MADE TO (NOR WILL TENDERS BE ACCEPTED FROM OR ON
BEHALF OF) LIMITED PARTNERS IN ANY JURISDICTION IN WHICH THE MAKING OF THE OFFER
OR THE ACCEPTANCE OF UNITS TENDERED IN THE OFFER WOULD NOT BE IN COMPLIANCE WITH
THE LAWS OF THAT JURISDICTION. THE PURCHASER IS NOT AWARE OF ANY JURISDICTION
WITHIN THE UNITED STATES IN WHICH THE MAKING OF THE OFFER OF THE ACCEPTANCE OF
UNITS TENDERED IN THE OFFER WOULD BE ILLEGAL.
In any jurisdiction where the securities, blue sky, or other laws require
the Offer to be made by a licensed broker or dealer, the Purchaser will withdraw
the Offer. The Purchaser has filed with the SEC, the Schedule TO, together with
exhibits, pursuant to Rule 14d-1 of the General Rules and Regulations under the
Exchange Act, furnishing information with respect to the Offer, and may file
amendments to that Schedule TO. The Schedule TO and any amendments to that
Schedule TO, including exhibits, may be examined and copies may be obtained from
the SEC as set forth above in "Introduction."
No person has been authorized to give any information or to make any
representation on behalf of the Purchaser not contained in this Offer to
Purchase or in the Agreement of Sale and, if given or made, any information or
representation must not be relied upon as having been authorized. Neither the
delivery of the Offer to Purchase nor any purchase pursuant to the Offer shall,
under any circumstances, create any implication that there has been no change in
the affairs of the Purchaser or the Partnership since the date as of which
information is furnished or the date of this Offer to Purchase.
28
SCHEDULE 1
INFORMATION REGARDING THE MANAGERS
OF EQUITY RESOURCES GROUP, INC.
Set forth below are the names of the members of Equity Resources Group,
Inc., the Manager of the Purchaser and their present principal occupations and
five (5) year employment histories. Each individual is a citizen of the United
States and the business address of each person is 14 Story Street, Cambridge, MA
02138.
Eggert Dagbjartsson Executive Vice President and Principal, Equity Resources
Group Inc., 1992-Present
General Partner, Equity Resource Lexington Fund Limited Partnership,
1999-Present
Mr. Dagbjartsson began working at Equity Resources Group, Inc. (ERG) in
1985. In 1989, Mr. Dagbjartsson became ERG's Chief Investment Officer, with
primary responsibility for the valuation and negotiation of investment
acquisitions for various Equity Resource Funds. In 1992, Mr. Dagbjartsson became
Executive Vice President and Principal of ERG. In addition to being the General
Partner of Equity Resource Lexington Fund, Mr. Dagbjartsson is a Co-General
Partner of various Equity Resources Funds.
During the past five years, Mr. Dagbjartsson has not been convicted in a
criminal proceeding or been a party to any procedural or administrative
proceeding that resulted in a judgment, decree or final order enjoining Mr.
Dagbjartsson from future violations of, or prohibiting activities subject to,
federal or state securities law, or a finding of any violation of federal or
state securities law.
Equity Resources Lexington Fund Limited Partnership was formed under
Massachusetts law in August 2000 for the purpose of providing a secondary market
for real estate limited partnership interests. Its predecessor entity, Equity
Resource Group, Inc., was formed under Massachusetts law in March 1981 for the
purpose of providing financial consulting services in the field of real estate
limited partnerships syndicated through private placement offerings. The
corporation's functions include advising real estate developers, Investors II
and syndicators in the areas of financial analysis, negotiation and the
structuring of investment entities.
29
SCHEDULE 2
Properties Owned by the Partnership
For a summary of the Properties owned by the Partnership, see Section 10 of
the Offer.
EQUITY RESOURCES GROUP, INC.
14 STORY STREET
CAMBRIDGE, MA 02138
(617) 876-4800
INFO@EQUITYRESOURCES.COM
30
EQUITY RESOURCE LEXINGTON FUND
14 Story Street
Cambridge, MA 02138
November 19, 2001
OFFER TO PURCHASE UNITS IN
CAPITAL REALTY INVESTORS II LTD. PARTNERSHIP
FOR $100 PER UNIT
Dear Limited Partner:
Enclosed with this letter is an offer to purchase limited partnership units in
Capital Realty Investors II Ltd. Partnership (the "Partnership") for $100 per
unit [See "THE OFFER-Introduction"]. This offer expires on December 19, 2001.
If you are interested in selling your units, please read the enclosed offer
carefully.
The Partnership currently holds limited partnership interests in fourteen
limited partnerships (the "Local Partnerships"). The majority of these Local
Partnerships own low-income housing projects that are subject to government
regulations limiting the amount of money that the Local Partnerships can
distribute to the Partnership. Government regulations also limit the
properties' rent levels and may limit the Local Partnerships' ability to
refinance or sell these properties. [See "THE OFFER-Section 10-Certain
Information Concerning the Partnership "].
BENEFITS OF A SALE
- - HIGHEST OFFER PRICE: Equity Resource Lexington Fund (the "Lexington Fund"
or "Purchaser") is currently offering to purchase your interest in the
Partnership for $100 per unit. To our knowledge, the Lexington Fund's offer
price is equal to or higher than any previous offer for units in the
Partnership.
- - THE SALE WILL OCCUR BEFORE YEAR-END: Limited partners who sell their
units pursuant to this offer will terminate their investment before year-end,
eliminating tax reporting and tax liability beyond this year. This may be
beneficial to limited partners. The Partnership's taxable income for the
year-ended December 31, 2000 was $301.74 per unit, resulting in substantial tax
liability for limited partners. While the Purchaser has no information
regarding the Partnership's future year-end income and distribution levels, it
is possible that future years will be similar to the year-ended December 31,
2000. Please see "THE OFFER-Section 6-Certain Tax Consequences" for further
information regarding the tax consequences of a sale of your units.
- - OPPORTUNITY FOR LIQUIDITY: The Lexington Fund's offer provides liquidity
to limited partners and will give them an opportunity to liquidate this
investment. The Partnership has been in existence for over 15 years and the
Purchaser anticipates that it will continue to operate for the foreseeable
future. By selling your limited partnership units, you give yourself the
opportunity to place the proceeds from a sale into other, potentially better
performing, investments. You may also simplify your tax returns by eliminating
future K-1 reporting for these Partnerships.
Limited partnership units are illiquid investments. When you consider the
illiquid secondary market (which is essentially nothing more than a "matching
service" that attempts to bring buyers and sellers together), the cost of
selling commissions, your annual cost of tax reporting, and the cost of a
trustee if units are held in an IRA or pension plan, the sale of your units for
cash may be a good choice for you.
31
RISKS OF A SALE
- - No independent party has been retained by Lexington Fund or any other
person to evaluate or render any opinion to limited partners with respect to the
fairness of the Offer Price, and no representation is made as to any fairness or
other measures of value that may be relevant to limited partners. In making the
Offer, Lexington Fund has not based its valuation of the properties owned by the
Partnership on any third-party appraisal or valuation and it is uncertain
whether the Offer Price reflects the value that would be realized upon the sale
of units by a limited partner to a third party. We urge limited partners to
consult their own financial and tax advisors in connection with the Offer.
- - Lexington Fund is making the Offer with a view toward making a profit.
Accordingly, there is a conflict between Lexington Fund's desire to acquire your
units at a low price and your desire to sell your units at a high price.
Lexington Fund's intent is to acquire the units at a discount to the value
Lexington Fund might ultimately realize from owning the units.
- - limited partners who sell their units will be giving up the opportunity to
participate in any future potential benefits associated with ownership of units,
including the right to participate in any future distribution of cash or
property. A sale of units in the Offer will be a taxable sale. The tax
consequences of the Offer to a particular limited partner may be different from
those of other limited partners and we urge you to consult your own tax advisor
in connection with the Offer.
THE PURCHASER
The Lexington Fund is in the business of acquiring fractional investment
interests for long-term retention and seeks to purchase units in the Partnership
in advancement of that strategy. The units acquired as a result of this offer
will be held as long-term investments and not with a view to a resale. The
Lexington Fund does not acquire general partner positions and is not engaged in
property management.
Please read the enclosed offer carefully. It contains important information
concerning this offer, the Partnership and the Purchaser. If you wish to sell
your units, complete the enclosed Agreement of Sale according to the directions
on the back of the agreement, sign where indicated and return it in the
pre-addressed return envelope.
If you have any questions regarding this offer, please call Equity Resources
Group, Inc., the information agent for this offer, at (617) 876-4800, or e-mail
them at info@equityresources.com.
Sincerely,
Equity Resource Lexington Fund LP
32
AGREEMENT OF SALE AND ASSIGNMENT
The undersigned Limited Partner (the "Seller") does hereby sell, assign,
transfer, convey and deliver to Equity Resource Lexington Fund LP, a
Massachusetts limited partnership ("Lexington Fund" or the "Purchaser"), all of
the Seller's right, title and interest in the units (the "Units") of limited
partnership interests in Capital Realty Investors II Ltd Partnership, a Maryland
limited partnership (the "Partnership") being sold pursuant to this Agreement of
Sale and Assignment ("Agreement") and indicated on the signature pages to this
Agreement, for a purchase price of $100 per Unit less the $100 transfer fee (per
transaction, not per unit) charged by the general partner of the Partnership and
less the amount of any distributions declared or paid from any source by the
Partnership with respect to the Units after November 19, 2001 without regard to
the record date or whether such distributions are classified as a return on, or
a return of, capital.
PAYMENT FOR UNITS BEING SOLD PURSUANT TO THIS AGREEMENT WILL BE MADE WITHIN TEN
(10) BUSINESS DAYS FOLLOWING THE "EXPIRATION DATE" SET FORTH IN THE OFFER TO
PURCHASE ACCOMPANYING THIS AGREEMENT, PROVIDED LEXINGTON FUND HAS RECEIVED AND
ACCEPTED THIS AGREEMENT, PROPERLY COMPLETED AND DULY EXECUTED AND HAS RECEIVED
ASSURANCES FROM THE PARTNERSHIP THAT THE SELLER'S ADDRESS WILL BE CHANGED TO THE
PURCHASER'S ADDRESS PURSUANT TO THE TERMS AND CONDITIONS OF THE OFFER.
The Seller hereby represents and warrants to the Purchaser that the Seller owns
all of the Units being sold hereunder and has full power and authority to
validly sell, assign, transfer, convey, and deliver to the Purchaser such Units,
and that when any such Units are accepted for payment by the Purchaser, the
Purchaser will acquire good, marketable and unencumbered title thereto, free and
clear of all options, liens, restrictions, charges, encumbrances, conditional
sales agreements, or other obligations relating to the sale or transfer thereof,
and such Units will not be subject to any adverse claim. The Seller represents
and warrants that the Seller is a "United States person" as defined in Section
7701(a)(30) of the Internal Revenue Code of 1986, as amended, or if the Seller
is not a United States person, the Seller does not own beneficially or of record
more than 5 percent of the outstanding Units. The Seller also represents and
warrants that in deciding to sell the Units to the Purchaser, the Seller has not
relied upon any representation or warranty made by the Purchaser or any agent of
the Purchaser with respect to the value of the Units or the income tax
consequences of the sale of the Units.
The sale of Units pursuant to this Agreement shall include, without limitation,
all rights in, and claims to, any Partnership profits and losses, cash
distributions, voting rights and other benefits of any nature whatsoever,
distributable or allocable to such Units under the Partnership's Agreement of
Limited Partnership. Upon the execution of this Agreement by the Seller,
Purchaser shall have the right to receive all benefits and cash distributions
and otherwise exercise all rights of beneficial ownership of such Units. By
executing this Agreement, Seller assigns to Purchaser (i) the Seller's right to
pursue any legal or other action of recovery against any person or entity which
might be liable in any way to the Seller as a result of his purchase or
ownership of the Units (or any interest therein) being sold hereby and (ii) any
existing or future rights arising from the refusal of the Partnership or its
General Partner to recognize the substitution of Purchaser as a limited partner,
the assignment of Seller's beneficial ownership of the Units to Purchaser, or
the assignment of claims effected by clause (i) of this sentence. Any damages
or recoveries resulting from such actions, whether initiated by the Purchaser or
by other parties will be due and payable to the Purchaser.
Seller, upon execution of this Agreement, hereby irrevocably constitutes and
appoints Purchaser as its true and lawful agent and attorney-in-fact with
respect to the Units being sold hereby with full power of substitution. This
power of attorney is an irrevocable power, coupled with an interest of the
Seller to Purchaser, to (i) execute, swear to, acknowledge, and file any
document relating to the assignment of the Units being sold hereby on the books
of the Partnership that are maintained with respect to the Units and on the
Partnership's books maintained by the General Partner of the Partnership, or
amend the books and records of the Partnership as necessary or appropriate for
the assignment of the Units, (ii) vote or act in such manner as any such
attorney-in-fact shall, in its sole discretion, deem proper with respect to the
Units being sold hereby, (iii) deliver the Units being sold hereby and transfer
ownership of such Units on the books of the Partnership that are maintained with
respect to the Units and on the Partnership's books, maintained by the
Partnership's General Partner, (iv) endorse on the Seller's behalf any and all
payments received by Purchaser from the Partnership for any period on or after
November 19, 2001 which are made payable to the Seller, in favor of Purchaser,
(v) execute on the Seller's behalf, any applications for transfer and any
distribution agreements required by the National Association of Securities
Dealers, Inc.'s Notice to Members 96-14 to give effect to the transaction
contemplated by this Agreement, (vi) receive all distributions and inspect and
amend the books and records of the Partnership, including Seller's address and
records, to direct all distributions to Purchaser as of the effective date of
this Agreement, (vii) request an accounting of the affairs of the Partnership.
Purchaser shall not be required to post bond of any nature in connection with
this power of attorney, and (viii) in the event that the General Partner of the
Partnership refuses to either transfer the Seller's Units to the Purchaser or to
admit the Purchaser as a substitute limited partner, take legal action, as the
Seller's true and lawful agent and attorney-in-fact, on behalf of the Seller, to
enforce this Agreement of Sale.
SELLER DOES HEREBY DIRECT AND INSTRUCT THE PARTNERSHIP AND THE GENERAL PARTNER
IMMEDIATELY UPON THEIR RECEIPT OF THIS AGREEMENT OF SALE , WHICH INCLUDES A
POWER OF ATTORNEY APPOINTING THE PURCHASER AS THE SELLER'S TRUE AND LAWFUL AGENT
AND ATTORNEY-IN-FACT, (I) TO AMEND THE BOOKS AND RECORDS OF THE PARTNERSHIP TO
CHANGE THE SELLER'S ADDRESS OF RECORD FOR PURPOSES OF MAILING DISTRIBUTIONS WITH
RESPECT TO THE UNITS BEING SOLD HEREBY TO EQUITY RESOURCE LEXINGTON FUND, LP
C/O EQUITY RESOURCES GROUP, INC., 14 STORY STREET CAMBRIDGE, MA 02138 AND (II)
TO FORWARD ALL DISTRIBUTIONS AND ALL OTHER INFORMATION RELATING THEREIN TO BE
RECEIVED BY SELLER TO EQUITY RESOURCE LEXINGTON FUND, LP TO THE ADDRESS SET
FORTH IN (I) ABOVE.
Seller does hereby release and discharge the General Partner and their officers,
shareholders, employees and agents from all actions, causes of actions, claims
or demands Seller has, or may have, against the General Partner that result from
the General Partner's reliance on this Agreement or any of the terms and
conditions contained herein. Seller agrees to indemnify and hold the Purchaser
33
and the Partnership harmless from and against, and to reimburse the Purchaser
and/or the Partnership on demand, for any damage, loss, cost or expense
(including attorneys' fees and costs of investigation incurred in defending
against and/or settling such damage, loss, cost or expense) reasonably incurred
by the Purchaser and/or the Partnership arising out of or in connection with any
misrepresentation, breach of warranty, or failure to perform or violation of any
agreement or covenant on the part of the Seller under this Agreement.
All authority herein conferred or agreed to be conferred shall survive the death
or incapacity of the Seller and any obligations of the Seller shall be binding
upon the heirs, personal representatives, successors and assigns of the
undersigned. This agreement is irrevocable and may not be withdrawn following.
Upon request, the Seller will execute and deliver any additional documents
deemed by the Purchaser or the Partnership to be necessary or desirable to
complete the assignment, transfer and purchase of such Units.
If the Seller is more than one person, then and in such event, the obligations
of the Seller under this Agreement shall be joint and several and the
representations, warranties and covenants herein contained shall be deemed to be
made by and binding upon each such person and his heirs, executors,
administrators, successors and assigns. The representations, warranties,
covenants and agreements contained in this Agreement shall survive the transfer
of the Units made by this Agreement and the payment of the consideration
therefor.
The Seller hereby certifies, under penalties of perjury, that (i) the tax
identification number shown on this form is the Seller's correct Taxpayer
Identification Number; and (ii) Seller is not subject to backup withholding
either because Seller has not been notified by the Internal Revenue Service (the
"IRS") that Seller is subject to backup withholding as a result of failure to
report all interest or dividends, or the IRS has notified Seller that Seller is
no longer subject to backup withholding.
The Seller hereby also certifies, under penalties of perjury, that the Seller,
if an individual, is not a nonresident alien for purposes of U.S. income
taxation, and if not an individual, is not a foreign corporation, foreign
partnership, foreign trust, or foreign estate (as those terms are defined in the
Internal Revenue Code and Income Tax Regulations). The Seller understands that
this certification may be disclosed to the IRS by the Purchaser and that any
false statements contained herein could be punished by fine, imprisonment, or
both.
The undersigned recognizes that, if proration is required pursuant to the terms
of the Offer, the Purchaser will accept for payment from among those Units
validly tendered on or prior to the Expiration Date and not properly withdrawn,
the maximum number of Units permitted pursuant to the Offer on a pro rata basis.
The undersigned understands that a tender of Units to the Purchaser will
constitute a binding agreement between the undersigned and the Purchaser upon
the terms and subject to the conditions of the Offer. The undersigned
recognizes that under certain circumstances set forth in the Offer to Purchase,
the Purchaser may not be required to accept for payment any of the Units
tendered hereby. In such event, the undersigned understands that any Agreement
for Units not accepted for payment will be destroyed by the Purchaser.
This Agreement shall be governed by and construed in accordance with the laws of
the Commonwealth of Massachusetts. Seller waives any claim that any court in
Massachusetts is an inconvenient forum, and waives any right to trial by jury.
The undersigned Seller (including any joint owner(s)) owns and wishes to assign
the number of Units set forth below. By its own or its Authorized Signatory's
signature below, the Seller hereby assigns its entire right, title and interest
in the Units set forth below to the Purchaser.
By executing this Agreement, the Seller hereby acknowledges to the General
Partner that the Seller desires to assign the Units referenced herein and hereby
directs the General Partner to take all such actions as are necessary to
accomplish such assignment, and appoints the General Partner the agent and
attorney-in-fact of the Limited Partner, to execute, swear to, acknowledge and
file any document or amend the books and records of the Partnership as necessary
or appropriate for the assignment of the withdrawal of the Limited Partner.
Each of the Parties hereto agrees to promptly execute and deliver any and all
further agreements, documents or instruments necessary to effectuate this
Agreement and the transaction referred to herein or reasonably requested by the
other party to perfect or evidence its or his rights hereunder.
Should either party hereto commence any proceeding to enforce the provisions of
this Agreement, then and in such event, the prevailing party in any such
proceeding or action shall be entitled to reimbursement of its or his costs,
including attorney's fees, incurred in the investigation and prosecution of such
proceeding or action. The parties agree that the proper venue for any such
action shall be in the County of Middlesex, Commonwealth of Massachusetts, and
the Seller hereby consents to the jurisdiction over the Seller by the state and
Federal courts of or in the Commonwealth of Massachusetts, County of Middlesex
in connection with any proceeding or action brought under this Assignment.
Any provision of this Agreement that is invalid or unenforceable in any
jurisdiction shall, as to that jurisdiction, be ineffective to the extent of
such invalidity or unenforceability without rendering invalid or unenforceable
the remaining provisions of this Agreement or affecting the validity or
enforceability of any provisions of this Agreement in any other jurisdiction.
34
SIGNATURE PAGE
- --------------------------------------------------------------------------------
IN WITNESS WHEREOF, ERG and the Limited Partners have executed this Assignment
as of November 19, 2001.
(A) NUMBER OF UNITS OWNED: _________________ NUMBER OF UNITS TO BE TRANSFERRED
-ALL-
(B)___________________________________________________________________
Limited Partner (s)/Assignor(s) (Full Registered Name of Limited
Partner(s)/Assignor(s))
(C) Mailing Address :
________________________________________ (F)____________________________
Street Social Security/Taxpayer
No. of Limited Partner
________________________________________ ____________________________
City State Zip Security/Taxpayer No. of
Joint Limited Partner
(D)_____________________________________
Telephone Number (And Fax Number if Available)
(E) _____________________________ ____________________________
Signature of Limited Partner Signature of Joint Limited Partner or
Custodian /Trustee
Date ____________________, 200______ Date______________________, 200______
Limited Partner's Signature Guarantee Jnt Limited Partner's or
Custodian/Trustee Signature Guarantee
(G) CUSTODIAN(S) OR TRUSTEE(S) INFORMATION
________________________________________
Name of Custodian(s) or Trustee(s)
________________________________________
Address
________________________________________
City, State, Zip
________________________________ _____________________________________
ACCOUNT NUMBER FOR EQUITY RESOURCE LEXINGTON FUND
- --------------------------------------------------------------------------------
INSTRUCTIONS TO COMPLETE AGREEMENT OF SALE
- --------------------------------------------------------------------------------
LINE HOW TO FILL IN
(A) number of Units you wish to sell
(B) print full registered name of Limited Partner (for example: "Mary
Smith" or "Anne & Bob Smith, JTWROS"). If Units are held in
partnerships, trusts, retirement accounts or other entities,
please indicate (for example: "ABC Corp. Pension Plan, Jane Smith,
Custodian" or "John Smith, Trustee UGMA FBO Sarah Smith Trust")
(C) Limited Partner's current mailing address
(D) telephone number
(E) signature of person listed on Line B or authorized representative
(F) social security or tax ID number of person/entity listed on Line B
(G) name and address of custodian (for example, IRA custodian)
SIGNATURE GUARANTEE: NECESSARY ONLY IF SELLING MORE THAN 110 UNITS. May be
obtained by the officer of a national bank or trust company, or a member firm of
a stock exchange.
- --------------------------------------------------------------------------------
EQUITY RESOURCES GROUP, INC.
14 STORY STREET
CAMBRIDGE, MA 02138
35
SCHEDULE TO
Equity Resource Lexington Fund LP, Eggert Dagbjartsson, its general partner
and Equity Resources Group, Inc., its manager (collectively the "Purchaser") is
offering (the "Offer") to purchase 10,000 units ("Units") of limited partnership
interests in Capital Realty Investors II Ltd Partnership (the "Subject Company")
for a purchase price of $100 per Unit in cash. THE OFFER AND WITHDRAWAL RIGHTS
WILL EXPIRE ON DECEMBER 19, 2001 (the "Expiration Date").
Offer materials will be mailed to record holders, beneficial holders, brokers,
banks and similar persons whose name appears on the list of limited partners of
the Subject Company ("Limited Partners"). You may obtain a copy of the tender
offer materials with respect to the Offer by calling Equity Resources Group,
Inc., the manager of the Offer, at (617) 876-4800. The Purchaser does not
currently intend to establish control of the Subject Company. The general
partner of the Subject Company has not approved or disapproved of the Offer.
If more than 10,000 Units are validly tendered and not withdrawn, Purchaser will
accept up to 10,000 Units, on a pro rata basis. If Purchaser decides to extend
the Offer, Purchaser will promptly send each Limited Partner notification of
that fact. For Units to be validly tendered pursuant to the Offer, a properly
completed and duly executed Agreement of Sale must be received by Purchaser. A
cash payment for Units will be made within 10 business days following the
expiration date of the Offer, as long the Purchaser has received a properly
completed and duly executed Agreement of Sale and assurances from the general
partner of the Subject Company that the address applicable to the holder of
those Units will be changed to Purchaser's address. Units tendered pursuant to
the Offer may be withdrawn at any time prior to the Expiration Date. In the
event that the Offer is extended beyond the Expiration Date, the Units tendered
may be withdrawn at any time up to the date that the Offer, as extended,
expires. For a withdrawal to be effective, a signed, written or facsimile
transmission notice of withdrawal must be timely received by Purchaser.
The information required by Exchange Act Rule 14d-6(d)(1) is contained in the
Offer to Purchase with respect to the Offer and is incorporated by reference
into this summary advertisement. The complete terms and conditions of this
Offer are set forth in the Offer to Purchase and related agreement of sale,
which are being filed today with the Securities and Exchange Commission and
mailed to Limited Partners.
36