EXHIBIT (a)(1)
OFFER TO PURCHASE FOR CASH
1,040 Units
of
Urban Improvement Fund Limited-1974
at $210 Per Unit by
Equity Resource Lexington Fund LIMITED PARTNERSHIP
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THIS OFFER WILL EXPIRE AT 12:00 MIDNIGHT, EASTERN TIME,
ON May 30, 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 1,040 Units ("Units") of limited partnership interests
in Urban Improvement Fund Limited-1974, a California Limited partnership (the
"Partnership"). Lexington Fund is offering to pay a purchase price of $210 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 April 30, 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 Interfinancial Real Estate Management Company 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 10% 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--Certain Conditions of the Offer." The Offer is not
conditioned upon the valid tender of any minimum number of Units. If more than
1,040 Units are validly tendered and not withdrawn, the Purchaser will accept
for purchase up to 1,040 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) 207-3158
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.............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
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
1,040 Units ("Units") of limited partnership interests in Urban Improvement Fund
Limited-1974, a California Limited partnership (the "Partnership") for $210 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 April
30, 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 1,040 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 1,040 Units of limited partnership
interests in the Partnership. This represents 10% 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 1,040 Units ("Units") of limited
partnership interests in Urban Improvement Fund Limited-1974, a California
Limited partnership (the "Partnership"). Lexington Fund is offering to pay a
purchase price of $210 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 April 30, 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 April 30,
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 $218,400 (exclusive of fees and
expenses) will be required to purchase 1,040 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 1,040 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 May 30, 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 April 30, 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?
"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?
Interfinancial Real Estate Management Company, 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 1,040 Units, we and our affiliates
will own 22.44% 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 February 28, 2002. The
Purchaser and its affiliates have purchased 726 Units in the Partnership at a
price of $210 per Unit in the past twelve months and have purchased 0 Units
in the past 60 days. The Purchaser 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 & Company, the information agent for this offer,
toll-free at (800) 207-3158 or call them collect at (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 1,040 Units ("Units") of limited
partnership interests in Urban Improvement Fund Limited-1974, a California
Limited partnership (the "Partnership"). Lexington Fund is offering to pay a
purchase price of $210 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 April 30, 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 April 30, 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 10% 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 1,040 Units are
validly tendered and not withdrawn, the Purchaser will accept for purchase up to
1,040 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 1,040 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 February 28, 2002. The
Purchaser and its affiliates have purchased 726 Units in the Partnership at a
price of $210 per Unit in the past twelve months and have purchased 0 Units in
the past 60 days. The Purchasers knows of no other sales of Units in the past
twelve months. The Partnership currently holds limited partnership interests in
nine limited partnerships (the "Local Partnerships"). The Local Partnerships
primarily 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 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 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:
o 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;
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 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 1,040 Units are tendered and not withdrawn,
the Purchaser will accept up to 1,040 of the tendered Units on a pro rata basis,
subject to the terms and conditions described in this Offer to Purchase. 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 11,404 Units
issued and outstanding on September 30, 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 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.
3
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 affiliated funds controlled by Equity Resources Group
currently own 1,419 Units, representing 12.44% of the Partnership's outstanding
Units. If Lexington Fund purchases an additional 1,040 Units, Lexington Fund and
its affiliates will own 22.44% 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 1,040 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 May 30, 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 April 30, 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 fewer than 1,040 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 1,040 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 1,040 Units so
tendered, on a pro rata basis, with appropriate adjustments to avoid tenders of
fractional 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. A letter announcing the final results of
proration will be mailed to all tendering limited partners and a press release
announcing the final results of proration will be released. The 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 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. Any Limited Partner wishing to tender Units under the Offer
who is subject to backup withholding, including nonresident aliens and foreign
corporations, should contact the Purchaser's information agent for information
regarding the tender procedure for limited partners subject to backup
withholding.
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
April 30, 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 April 30,
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.
6
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 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. Tendering limited
partners will additionally have withdrawal rights as provided under Exchange Act
14(d)(5).
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. Any extension or amendment will be
announced by press release on the date of the amendment or extension in
accordance with Rule 14e-1(d). Any mailing or press release announcing an
amendment or extension will include the approximate number of Units tendered at
the time of the extension or amendment.
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
7
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. The difference between the Limited Partner's
8
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.
9
The Purchaser established the Offer Price based on its own review of
the Partnership, taking into account primarily the price paid by the Purchaser
in its most recent purchase of Units. Based on the fact that Partnership
operations have not materially changed since the date of its last offer, the
Purchaser determined to offer to purchase Units at the same price the Purchaser
has 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 nine limited partnerships (the "Local Partnerships").
The Local Partnerships primarily 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-KSB for the year ended
December 31, 2000 ("2000 10-K") and the Partnership's Quarterly Report for the
quarter 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:
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.
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.
10
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.
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 January 13, 1974, under the laws of
the State of California. Its principal executive offices are located at 1201
Third Avenue, Suite 5400, Seattle, WA 98101. Its telephone number is
206-622-9900.
The Partnership's primary business is real estate ownership and related
operations. The Partnership was formed for the purpose of investing in other
limited partnerships which own federal and state-assisted housing projects.
The Partnership's investment portfolio currently consists of investments in the
following limited partnerships:
o 51st & King Drive, Chicago, IL
o Capitol Hill, Denver, CO
o Community Apartments, Cleveland, OH
o Met Paca II Associates, Manhattan, NY
o Norway Housing Associates, Boston, MA
o Notre Dame Apartments, San Francisco, CA
o Southern Blvd. II, The Brox, NY
o Weyerbacher Terrace, Indianapolis, IN
o Monatiquot Village Associates, Santa Maria, CA
Originally Anticipated Term of Partnership; Alternatives. The Partnership was
formed to invest in real estate. The Purchaser has no information regarding the
anticipated holding period of the Partnership's assets or the termination date
of the Partnership.
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.
11
BALANCE SHEETS
URBAN IMPROVEMENT FUND LIMITED - 1974
(A Limited Partnership)
ASSETS
Sept. 30, Dec. 31,
2001 2000
Cash and cash equivalents $ 10,481 $ 12,591
Investments in and advances to
Local Limited Partnerships accounted for on the equity method 9,988,306 10,121,042
--------- ----------
Total Assets $9,998,787 $10,133,633
========== ===========
LIABILITIES AND PARTNERS' CAPITAL
Accounts payable $ 13,500 $ 5,500
Management fee payable 98,032 b 55,265
Distribution payable 2,096 2,096
Advance from General Partner 11,080 -0-
------ ---
124,708 62,861
------- ------
Partners' Capital:
General Partner
115 Partnership units authorized, issued and outstanding 98,740 100,708
Limited Partners
11,404 Partnership units authorized, issued and outstanding 9,775,339 9,970,064
9,874,079 10,070,772
Total Liabilities and Partners' Capital $9,998,787 $10,133,633
========== ===========
- ----------------------------------------------------------------------------------------------------------
12
STATEMENTS OF INCOME
URBAN IMPROVEMENT FUND LIMITED - 1974
(A Limited Partnership)
For the Three-Month For the Nine-Month
Period Ended Period Ended
September 30, September 30,
2001 2000 2001 2000
Revenues $ 80 $ 268 $ 564 $ 17,366
Cost and expenses:
Professional fees 5,000 10,000 15,050 20,000
Management fee 14,255 14,255 42,765 42,765
Other expenses 2,245 1,085 16,869 18,218
Amortization 1,050 833 3,150 2,500
----- --- ----- -----
22,550 26,173 77,834 83,483
------ ------ ------ ------
Income (Loss) before equity of
Local Limited Partnerships (22,470) (25,905) (77,270) (66,117)
Equity in net income (loss) of
Local Limited Partnerships (90,000) 71,039 (119,423) 2,646,039
------- ------ -------- ---------
Net income (loss) $ (112,470) $ 45,134 $ (196,693) $2,579,922
---------- ---------- ---------- ----------
Allocation of net income (loss):
Net income (loss) allocated
To General Partner $ (1,116) $ 4,513 $ (1,966) $ 25,799
Net income (loss) allocated
To Limited Partners (111,354) 40,621 (194,727) 2,554,123
-------- ------ -------- ---------
$ (112,470) $ 45,134 $ (196,693) $2,579,922
---------- ---------- ---------- ----------
Net income allocated to
Limited Partners per
Limited Partnerships
Unit (11,404 units out-
standing at September 30,
2001 and 2000) $ 10 $ 4 $ (17) $ 223
========== ========== ========== ==========
- ----------------------------------------------------------------------------------------
13
STATEMENTS OF CASH FLOWS
URBAN IMPROVEMENT FUND LIMITED - 1974
(A Limited Partnership)
For the Three-Month For the Nine-month
Period Ended Period Ended
September 30, September 30,
2001 2000 2001 2000
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ (112,470) $ 45,134 $ (196,693) $ 2,579,922
Adjustments to reconcile net income to net cash used by operating activities:
Amortization of initial and rent-up fees 1,050 833 3,150 2,500
Equity in net income of local limited partnerships 90,000 119,423 (2,646,039)
(Increase) decrease in receivable from affiliate,
distribution and deposit -0- (7,838) -0- 606,934
Increase (decrease) in trade accounts payable
and accrued management fees 17,755 (4,750) 61,847 46,262
------ ------ ------ ------
Total adjustments 108,805 (82,794) 184,420 (1,990,343)
------- ------- ------- ----------
Net cash used by operating activities (3,665) (37,660) (12,273) 589,579
------ ------- ------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Distribution received -0- 36,511 7,077 36,511
Contributions for investment -0- -0- -0- (2,347,154)
Net advances repaid by limited partnerships 3,086 26,459 3,086 23,956
----- ------ ----- ------
Net cash provided by investing activities 3,086 62,970 10,163 (2,286,687)
----- ------ ------ ----------
NET DECREASE IN CASH AND EQUIVALENTS (579) 25,310 (2,110) (1,697,108)
CASH BALANCE AT BEGINNING OF PERIOD 11,060 695 12,591 1,723,113
CASH BALANCE AT END OF PERIOD $ 10,481 $ 26,005 $ 10,481 $ 26,005
=========== =========== =========== ===========
- ---------------------------------------------------------------------------------------------------------------------------
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 no cash distributions to
Limited Partners in 2001. The last distribution made by the Partnership was on
August 17, 1999 (approximately $130 per Unit).
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 $218,400 (exclusive of fees
and expenses) will be required to purchase 1,040 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 1,040 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 April 22, 2002, the Purchaser had over $700,000 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 1,040 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 1,040 Units which the Purchaser has offered to purchase in this
Offer to Purchase. No alternative financing plan exists.
Section 14. Voting Power.
Lexington Fund and affiliated funds controlled by Equity Resources
Group currently own 1,419 Units, representing 12.44% of the Partnership's
outstanding Units. If the Purchaser purchases an additional 1,040 Units, the
Purchaser and its affiliates will own 22.44% 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 April 30, 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.
The Purchaser confirms that it had disclosed all conditions of the
Offer and that all conditions of the Offer must be satisfied prior to the
expiration of the Offer
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
16
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
D.F. King and Co., Inc. 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 in an amount not
in excess of $15,000 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.
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) 207-3158
or
Call Collect: (212) 493-6952