EXHIBIT (a)(1)
OFFER TO PURCHASE FOR CASH
158 Units
of
NANTUCKET ISLAND ASSOCIATES LIMITED PARTNERSHIP
at $7,500 Per Unit by
EQUITY RESOURCE LEXINGTON FUND LIMITED PARTNERSHIP
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THIS OFFER WILL EXPIRE AT 12:00 MIDNIGHT, EASTERN TIME,
ON MARCH 8, 2002 UNLESS THE OFFER IS EXTENDED.
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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 158 Units ("Units") of limited partnership interests
in Nantucket Island Associates Limited Partnership, a Delaware Limited
partnership (the "Partnership"). Lexington Fund is offering to pay a purchase
price of $7,500 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 February 8, 2002 (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"). 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 Three Winthrop Properties, 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
158 Units are validly tendered and not withdrawn, the Purchaser will accept for
purchase up to 158 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:
D.F. King & Co., Inc.
77 Water Street
20th Floor
New York, NY 10005
Please Call Toll-Free: (800) 714-3305
or
Call Collect: (212) 493-6952
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............. 11
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
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
158 Units ("Units") of limited partnership interests in Nantucket Island
Associates Limited Partnership, a Delaware Limited partnership (the
"Partnership") for $7,500 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 February 8, 2002, unless a limited partner was not
entitled to receive that distribution. 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 158 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 158 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 158 Units ("Units") of limited
partnership interests in Nantucket Island Associates Limited Partnership, a
Delaware Limited partnership (the "Partnership"). Lexington Fund is offering
to pay a purchase price of $7,500 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 February 8,
2002 (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"). 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 February
8, 2002, 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 $1,185,000 (exclusive of fees and
expenses) will be required to purchase 158 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 158 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."
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 March 8, 2002,
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 February 8, 2002, 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. 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 you can
withdraw them at any time after the expiration date until we accept Units for
payment. See `THE OFFER--Section 4--Withdrawal Rights.'"
What does the partnership think of the offer?
Three Winthrop Properties, 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 158 Units, we and our affiliates
will own 20.09% 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 December 31, 2001. The
Purchaser and its affiliates have purchased 0 Units in the Partnership in the
past twelve months and know of no other sales of Units in the past twelve
months. See "INTRODUCTION--Market Value of the Units."
Who can I talk to if I have questions about the offer?
You can call D.F. King & Co., who is acting as information agent for the
offer, at 800-714-3305 or 212-493-6952.
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 158 Units ("Units") of limited partnership
interests in Nantucket Island Associates Limited Partnership, a Delaware Limited
partnership (the "Partnership"). Lexington Fund is offering to pay a purchase
price of $7,500 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 February 8, 2002 (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"). 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 February 8, 2002, 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 158 Units are validly
tendered and not withdrawn, the Purchaser will accept for purchase up to 158
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 158 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 October 30, 2001. The
Purchaser and its affiliates have purchased 0 Units in the Partnership in the
past twelve months and know of no other sales of Units in the past twelve
months. The Purchaser calculated a Net Asset Value ("NAV") of $9,644 per Unit
for the Partnership. This NAV is based on figures from the Partnership's 10K for
the year-ended December 31, 2000 ("2000 10K"). Using figures from the 2000 10K's
consolidated statements of operations, the Purchaser calculated the
Partnership's net operating income ("NOI") by subtracting operating expenses
(commercial rental expenses, real estate taxes, insurance and management and
administrative expenses) of $2,049,000 from revenue from commercial rental
operations of $4,470,000. This resulted in an NOI of $2,421,000. Applying a cap
rate of 10.5% to the NOI, the Purchaser fixed the property value of the
Partnership at $23,057,143. Though the Purchaser generally uses a 10% cap rate
in evaluating partnerships, it used a 10.5% cap rate in this case to account for
current market uncertainty. Other Partnership assets from the 2000 10K's
consolidated balance sheets (cash and cash equivalents, accounts receivable,
real estate tax escrow and other current assets) totaled $6,085,000. When added
to the property value, the total Partnership assets were $29,142,143. The
Partnership's liabilities from the 2000 10K's consolidated balance sheets
(accounts payable and other liabilities, current maturity of long-term debt,
long-term debt and related party note payable) totaled $20,880,000. The
Purchaser subtracted those liabilities from the total Partnership assets and
arrived at a value of $8,262,143. The Purchaser then subtracted a 3% selling
commission ($691,714) from the property value to arrive at an NAV of $7,570,429.
Based on a total of 785 Units, this figure translated to a per Unit NAV of
$9,644. The NAV is based on the Purchaser's own calculations and does not
purport to represent the value of the partnership's property if it were sold. In
its calculation of NAV, the Purchaser has made a number of assumptions that if
changed, could significantly alter the NAV of each Unit. For example, a lower
cap rate would result in a materially higher NAV. Likewise, a higher cap rate
would result in a materially lower NAV. The Purchaser's offer price is less than
its estimate of NAV. The Purchaser believes this is appropriate
given that Units in the Partnership represent long-term, illiquid investments
and that the Purchaser is only seeking a minority position in the Partnership.
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 pay the transfer fee for
this transaction.
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 158 Units are tendered and not withdrawn, the
Purchaser will accept up to 158 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. 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.
According to publicly available information, there were 785 Units
issued and outstanding held by approximately 771 limited partners on March 1,
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.
2
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 a taxable gain or
loss 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. Based on the Purchaser's own calculations, an original investor
paying the full investment amount at the time of the first close will recognize
a capital loss of approximately $32,000 per Unit. For investors in the 39.6% tax
bracket, the capital loss associated with a sale may result in a federal income
tax benefit of up to $12,600 per Unit. Depending on your individual tax
situation, the net benefit of a sale could be up to $20,100 per Unit.
3
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.
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 14.25 Unit, representing 0.09%
of the Partnership's outstanding Units. If Lexington Fund purchases an
additional 158 Units, Lexington Fund and its affiliates will own 20.09% 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.
4
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 158 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 March 8, 2002, 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:
o 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 February 8,
2002, and that the Partnership will change the address applicable to the
holder of the Units tendered in the Offer to Purchaser's address;
o 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 158 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 158 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 158 Units so tendered, on a
pro rata basis, with appropriate adjustments to avoid tenders of fractional
Units. 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 the Purchaser increases the Offer Price prior to the Expiration
Date, it will pay the increased Offer Price for all Units accepted for payment
pursuant to the Offer, whether or not the Units were tendered prior to the
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 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.
5
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 identification 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
February 8, 2002, 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:
o 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 ss.2510-3-101 of any "plan"; or
o 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 February 8,
2002, whether those distributions are classified as a return on, or a return of,
capital, unless, with respect to a limited partner, that limited partner was not
entitled to receive that distribution.
Limited Partners will not have appraisal or dissenters' rights with
respect to or in connection with the Offer.
6
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 prior to the end of the extension period. In addition,
limited partners have a right to withdraw tendered shares at any time after the
expiration of the offer until we accept Units for payment.
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:
o to extend the period of time during which the Offer is open;
o 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
o 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 accordance 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.
Section 6. Certain Tax Consequences
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. Based on the Purchaser's own calculations, an original investor
paying the full investment amount at the time of the first close will recognize
a capital loss of approximately $32,000 per Unit. For investors in the 39.6% tax
bracket, the capital loss associated with a sale may result in a federal income
tax benefit of up to $12,600 per Unit. Depending on your individual tax
situation, the net benefit of a sale could be up to $20,100 per Unit.
7
Investors who purchased units on a deferred basis will likely have a different,
though not materially different, tax benefit. The tax consequences of the Offer
to a particular Limited Partner may be different from those of other Limited
Partners and different from the typical investor. We urge you to consult your
own tax advisor in connection with the Offer.
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
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.
8
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:
o any extraordinary transaction, such as a merger, consolidation or
liquidation, involving the Partnership;
o any purchase, sale or transfer of a material amount of assets of the
Partnership;
o any material change in the distribution policy of the Partnership or
in its capitalization or indebtedness;
o any change in the present Board of Directors or management of the
Partnership or the General Partner;
o any material change in the Partnership's structure or business;
o any class of securities of the Partnership to be listed or delisted;
or
o 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. The Purchaser calculated a Net Asset Value ("NAV") of $9,644 per
Unit for the Partnership. This NAV is based on figures from
9
the Partnership's 10K for the year-ended December 31, 2000 ("2000 10K"). Using
figures from the 2000 10K's consolidated statements of operations, the Purchaser
calculated the Partnership's net operating income ("NOI") by subtracting
operating expenses (commercial rental expenses, real estate taxes, insurance and
management and administrative expenses) of $2,049,000 from revenue from
commercial rental operations of $4,470,000. This resulted in an NOI of
$2,421,000. Applying a cap rate of 10.5% to the NOI, the Purchaser fixed the
property value of the Partnership at $23,057,143. Though the Purchaser generally
uses a 10% cap rate in evaluating partnerships, it used a 10.5% cap rate in this
case to account for current market uncertainty. Other Partnership assets from
the 2000 10K's consolidated balance sheets (cash and cash equivalents, accounts
receivable, real estate tax escrow and other current assets) totaled $6,085,000.
When added to the property value, the total Partnership assets were $29,142,143.
The Partnership's liabilities from the 2000 10K's consolidated balance sheets
(accounts payable and other liabilities, current maturity of long-term debt,
long-term debt and related party note payable) totaled $20,880,000. The
Purchaser subtracted those liabilities from the total Partnership assets and
arrived at a value of $8,262,143. The Purchaser then subtracted a 3% selling
commission ($691,714) from the property value to arrive at an NAV of $7,570,429.
Based on a total of 785 Units, this figure translated to a per Unit NAV of
$9,644. The NAV is based on the Purchaser's own calculations and does not
purport to represent the value of the partnership's property if it were sold. In
its calculation of NAV, the Purchaser has made a number of assumptions that if
changed, could significantly alter the NAV of each Unit. For example, a lower
cap rate would result in a materially higher NAV. Likewise, a higher cap rate
would result in a materially lower NAV. The Purchaser's offer price is less than
its estimate of NAV. The Purchaser believes this is appropriate given that Units
in the Partnership represent long-term, illiquid investments and that the
Purchaser is only seeking a minority position in the Partnership. The Purchaser
was unable to determine a liquidation value for the Partnership.
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:
o 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;
o any distributions of net proceeds from the sale of assets by the
Partnership;
o any distributions of net proceeds from the liquidation of the
Partnership;
o any cash from any redemption of the Units by the Partnership, and
o 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 0 Units in the Partnership in the past twelve months
and know of no other sales of Units in 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.
10
The Purchaser's decision to commence this Offer for Units in the
Partnership was based on its belief that some limited partners would be
interested in liquidating their investment in the Partnership. The Purchaser is
in the business of acquiring interests in limited partnerships for long-term
investment purposes. As a result, the Purchaser periodically reviews
partnerships in its portfolio to determine whether an offer is appropriate for a
particular partnership. The Purchaser determines its pricing for offers based
primarily on a partnership's operations at the time of the offer. Though the
previous prices paid for units in a partnership are factors in determining an
offer price, they are not the primary factor.
It is the Purchaser's belief that the primary factor in a limited
partner's decision to sell its Units in this particular Partnership is the
opportunity for liquidity, and decisions to commence future offers will be based
primarily on the Purchaser's belief that the timing of the offer would take
place at a time that would be most favorable to limited partners seeking
liquidity. Though the Purchaser has not considered the timing of any future
offers, it believes that the most advantageous times to conduct offers are in
March and April to coincide with the filing of tax returns and in November and
December to coincide with the end of the fiscal year.
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
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. Last year, as a result of these conversations, an affiliate of
the Purchaser entered into an agreement with the General Partner of the
Partnership. One part of this agreement gives the General Partner the option to
acquire up to 50% of all units which the Purchaser acquires in certain
partnerships, including this Partnership, on the same terms as the Purchaser. In
the past, the general partner has exercised this option with regard to some
offers made by the Purchaser for units in other partnerships and has declined to
exercise this option with regard to other offers made by the Purchaser for units
in other partnerships. The Purchaser does not know if the general partner will
exercise its option with regard to this particular offer and has had no
discussions with the general partner regarding its plans concerning this offer.
In connection with an unregistered offer to purchase units in the
Partnership conducted from October 9, 2000 to November 9, 2000, the general
partner exercised its option to purchase half of the units tendered as a result
of the Purchaser's offer. The general partner reimbursed the Purchaser $47,500
for the 9.5 units acquired as a result of exercising its option and an
additional $2,192.50, which represented one-half of the administrative costs
incurred by the Purchaser as a result of conducting the offer. The effective
date for the transfer of those units from the Purchaser to the general partner
was November 2, 2000.
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 December 17, 1986, under the laws of
the State of Delaware. Its principal executive offices are located at Five
Cambridge Center 9th Floor Cambridge, MA 02142. Its telephone number is
617-570-4600.
11
The Partnership's primary business is real estate ownership and related
operations. The Partnership was organized for the purpose of owning a 99.98%
beneficial interest in Sherburne Associates, a Massachusetts general partnership
that, until June 10, 1998, owned and operated a portfolio of properties located
on Nantucket Island, Massachusetts. Effective January 28, 2000, Sherburne
Associates was converted into Sherburne Associates LLC, a Delaware limited
liability company ("Sherburne"). Sherburne's portfolio included two hotels (the
Harbor House and White Elephant Hotel), 24 rental units located in the Wharf
Cottages, 48 retail buildings, the Nantucket Boat Basin (accommodating 242
yachts) and employee housing for approximately 150 persons. Effective June 10,
1998, Sherburne sold all of its properties other than the 48 retail buildings.
The interest in Sherburne is held through a 99.99% general partnership interest
in NIA Operating Associates Limited Partnership, a Massachusetts limited
partnership ("NIA") which owns a 99.49% of Sherburne and is the sole beneficiary
of Sherburne Business Trust, which owns .5% of Sherburne.
Originally Anticipated Term of Partnership; Alternatives. The Partnership was
formed to invest in real estate by acquiring and holding a 99.98% beneficial
interest in Sherburne Associates, which owns commercial rental property on
Nantucket Island, MA. The Purchaser has no information about when the
Partnership will be dissolved. The Purchaser has no information regarding the
anticipated holding period of the Partnership's assets.
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 June 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.
- --------------------------------------------------------------------------------
NANTUCKET ISLAND ASSOCIATES LIMITED PARTNERSHIP
SELECTED FINANCIAL DATA
AND FROM THE FORM 10-Q FOR THE QUARTER ENDED SEPTEMBER 30, 2001
Consolidated Balance Sheets (Unaudited)
(In thousands, except unit data) September 30, December 31,
2001 2000
---- ----
ASSETS
Cash and cash equivalents $ 5,084 $ 5,541
Accounts receivable 151 129
Real estate tax escrow and other current assets 556 415
-------- --------
Total current assets 5,791 6,085
-------- --------
Property and equipment, net of accumulated depreciation
of $8,096 (2001) and $7,810 (2000) 16,908 17,264
Deferred rent receivable 415 380
Deferred costs, net of accumulated amortization of
$1,392 (2001) and $1,314 (2000) 1,005 1,122
-------- --------
Total assets $ 24,119 $ 24,851
======== ========
LIABILITIES AND PARTNERS' EQUITY
Accounts payable and other liabilities $ 849 $ 884
Current maturity of long-term debt 140 130
Related party note payable 1,300 1,300
-------- --------
Total current liabilities 2,289 2,314
-------- --------
Long-term debt 18,460 18,566
-------- --------
Total liabilities 20,749 20,880
-------- --------
12
Commitments and Contingencies
Partners' equity:
Limited partners equity; 785 units authorized,
issued, and outstanding 14,332 14,943
General partners' deficit (11,962) (10,972)
-------- --------
Total partners' equity 3,370 3,971
-------- --------
Total liabilities and partners' equity $ 24,119 $ 24,851
======== ========
- --------------------------------------------------------------------------------
Consolidated Statements of Operations (Unaudited)
(In thousands, except unit data) For the Nine Months Ended
September 30, 2001 September 30, 2000
------------------ ------------------
Revenue:
Commercial rental operations $3,825 $3,568
------- -------
Total revenue 3,825 3,568
------- -------
Operating expenses:
Commercial rental 256 243
Real estate taxes 375 342
Insurance 209 136
General and administrative 337 282
Bad Debt Expense 41 --
Repairs and maintenance 116 95
Utilities 46 40
Management fees 314 296
Amortization 105 99
Depreciation 428 425
------- -------
Total operating expenses 2,227 1,958
------- -------
Income from operations 1,598 1,610
------- -------
Other income (expense):
Interest income 136 205
Interest expense (1,335) (1,276)
Gain on sale of properties -- 131
------- -------
Total other expense, net (1,199) (940)
------- ------
Net loss before extraordinary loss 399 670
Extraordinary loss on extinguishment of debt -- (92)
------- -------
Net Income $399 $578
======= =======
Net Income allocated to general partners $20 $153
======= =======
Net Income allocated to limited partners $379 $425
======= =======
Net Income per limited partnership unit:
Income before extraordinary item $482.80 $652.74
13
Extraordinary item - loss on extinguishment of debt -- (111.34)
------- -------
Net Income $482.80 $541.40
======= =======
Distributions per unit of Limited Partnership Interest $1,261.15 $6,184.71
========= =========
- --------------------------------------------------------------------------------
Consolidated Statements of Cash Flows (Unaudited)
(In thousands) For the Nine Months Ended
September 30, 2001 September 30, 2000
------------------ ------------------
Cash Flows from Operating Activities:
Net Income $399 $578
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation and amortization 545 536
Gain on sale of properties -- (131)
Extraordinary loss on extinguishment of debt -- 92
Changes in assets and liabilities:
Accounts receivable (22) (6)
Real estate tax escrow and other current assets (141) 256
Deferred rent receivable (35) (18)
Accounts payable and other liabilities (35) 51
-------- --------
Net cash provided by operating activities 711 1,358
-------- --------
Cash Flows from Investing Activities:
Expenditures for property and equipment (72) (57)
Decrease in restricted cash reserves -- 3,077
Net proceeds from sale of properties -- 131
-------- --------
Net cash (used in) provided by investing activities (72) 3,151
-------- --------
Cash Flows from Financing Activities:
Satisfaction of mortgage payable -- (11,624)
Proceeds from mortgage refinancing -- 18,500
Principal payments on long-term debt (96) (90)
Deferred costs paid -- (745)
Distribution to partners (1,000) (4,904)
-------- --------
Net cash (used in) provided by financing activities (1,096) 1,137
-------- --------
Net change in cash and cash equivalents (457) 5,646
Cash and cash equivalents, beginning of period 5,541 100
-------- --------
Cash and cash equivalents, end of period $5,084 $5,746
======== ========
Supplemental Disclosure of Cash Flow Information -
Cash paid for interest $1,495 $1,155
======== ========
- --------------------------------------------------------------------------------
14
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. 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 a cash distribution of $1,261
per Unit on April 23, 2001. The Partnership made a cash distribution of $6,185
per Unit on March 28, 2000 as a result of a refinancing.
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 44 Brattle 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,
o 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;
o 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;
o 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;
o 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
o 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 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.
15
Section 13. Source and Amount of Funds.
The Purchaser expects that approximately $1,185,000 (exclusive of fees
and expenses) will be required to purchase 158 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 158 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 November 1, 2001, the Purchaser had over $1,200,000 in cash on
hand and total assets in excess of $5,000,000. The members of the Partnership
have informed the Partnership that they will contribute any amount required to
purchase the 158 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 158 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 14.25 Unit, representing
0.09% of the Partnership's outstanding Units. If the Purchaser purchases an
additional 158 Units, the Purchaser and its affiliates will own 20.09% 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:
o 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 February 8, 2002, and that the Partnership will
change the address associated with the holder of the Units to
Purchaser's address;
o 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 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
16
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
D.F. King & Company has been retained by the Purchaser to act as the
Information Agent in connection with the Offer. The Information Agent will
receive reasonable and customary compensation for its services and the Purchaser
expects the total fee paid to the Information Agent to be less than $20,000. The
Information Agent 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.
17
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 44 Brattle 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
the following Equity Resources Funds:
Equity Resource Fund XVII
Equity Resource Fund XIX
Equity Resource General Fund
Equity Resource Cambridge Fund
Equity Resource Brattle Fund
Equity Resource Bay Fund
Equity Resource Pilgrim Fund
Equity Resource Bridge Fund
Equity Resource Boston Fund
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 and
syndicators in the areas of financial analysis, negotiation and the structuring
of investment entities.
S-1
SCHEDULE 2
PROPERTIES OWNED BY THE PARTNERSHIP
For a summary of the Properties owned by the Partnership, see Section 10 of the
Offer.
S-2
The Information Agent is:
D.F. King & Co., Inc.
77 Water Street
20th Floor
New York, NY 10005
Please Call Toll-Free: (800) 714-3305
or
Call Collect: (212) 493-6952