SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE TO/A
Tender Offer Statement Pursuant to Section 14(d)(1)
of the Securities Exchange Act of 1934
Amendment No. 1 (Name of Subject Company)
CAPITAL REALTY INVESTORS II LIMITED PARTNERSHIP
A Maryland limited partnership
at $175 Net Per Unit
by
EQUITY RESOURCE FUND XXII LIMITED PARTNERSHIP,
a Massachusetts limited partnership
Equity Resource Investments LLC
Eggert Dagbjartsson
Limited Partnership Units
Eggert Dagbjartsson, Executive Vice President
Equity Resource Investments LLC
44 Brattle Street
Cambridge, MA 02138
(617) 876-4800
Calculation of Filing Fee
Transaction Valuation* Amount of Filing Fee
$875,000 $175.00
- --------------------------------------------------------------------------------
* For purposes of calculating the filing fee only. This calculation assumes
the purchase of 5,000 Units at a purchase price of $175 per Unit in the
Partnership.
[X] Check box if any part of the fee is offset as provided by Rule
0-11(a)(2) and identify the filing with which the offsetting fee was
previously paid. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
- --------------------------------------------------------------------------------
Amount Previously Paid: $175 Filing Party: Equity Resource
Fund XXII Limited
Partnership
Form of Registration No.: Schedule TO/T Date Filed: January 23, 2004
AMENDMENT NO. 1
This Amendment No. 1 amends and supplements the Tender Offer Statement on
Schedule TO (the "Schedule TO") by Equity Resource Fund XXII, Limited
Partnership, a Massachusetts limited partnership, Eggert Dagbjartsson, its
general partner and Equity Resource Investments LLC, its manager (collectively
the "Purchaser") to purchase 5,000 units (the "Units") of limited partnership
interests in Capital Realty Investors II Limited Partnership, a Maryland limited
partnership (the "Partnership"), at $175 for each Unit, net to the seller in
cash, without interest, less the amount of any distributions declared or paid
from any source by the Partnership with respect to the Units after January 23,
2004 (without regard to the record date), upon the terms and subject to the
conditions set forth in the Offer to Purchase (the "Offer to Purchase") and in
the related Agreement of Sale, copies of which are attached hereto as Exhibits
(a)(l) and (a)(3) (which are herein collectively referred to as the "Offer").
The information in the Offer to Purchase, including all schedules and annexes
thereto, is hereby expressly incorporated herein by reference in response to all
the items of this Statement, except as otherwise set forth below.
ITEMS 1, 2 and 4
ITEM 1--SUMMARY TERM SHEET
The fourth question of the Summary Term Sheet is amended in its entirety
to read as follows:
"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?
Fund XXII is offering to purchase 5,000 Units ("Units") of limited
partnership interests in Capital Realty Investors II Limited
Partnership, a Maryland limited partnership (the "Partnership"). Fund
XXII is offering to pay a purchase price of $175 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 January 23, 2004 (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"). The Purchaser will pay all transfer fees
charged by the general partner of the Partnership. 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 January 23, 2004, the amount paid to you in the Offer will
not be reduced by the amount of any distribution you were not entitled
to receive. Limited partners who hold their units in a brokerage account
or in trust may be required to pay commissions or similar payments if
they tender their Units. Limited partners should consult their advisors
concerning such brokerage fees, commissions or similar expenses
associated with the tender their Units."
The seventh question of the Summary Term Sheet is amended in its
entirety to read as follows:
"Can the offer be extended or amended and under what circumstances?
Yes, we may elect to extend the offer in order to extend the period of
time during which the offer is open and/or to amend the offer in any
respect (including, without limitation, by increasing or decreasing the
offer price). If the Offer is amended with less than 10 business days
remaining in the initial offering period, the Offer will be extended to
give limited partners at least 10 business days following the filing of
the amendment to consider the amended offer. 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.'"
The Summary Term Sheet is amended to include the following:
"Are there any pending distributions or transactions relating
Partnership Units?
On January 12, 2004, the general partner of the Partnership filed a
preliminary proxy statement on Schedule 14A seeking approval of the
limited partners of the liquidation of the Partnership. If the
liquidation is approved, the general partner estimates that limited
partners will receive between $333 and $433 per unit. The general
partner estimates that a liquidation would take up to (and possibly
longer than) 36 months to complete. The Purchaser does not anticipate
any distributions from cash flow or capital events that would reduce the
purchase price for Limited Partners who tender their units. If any such
distributions are made, the Purchaser will extend the Offer so that 10
business days remain in the Offer prior to expiration. See `THE
OFFER--Section 7--Purpose and Effects of the Offer.'"
ITEM 2--SUBJECT COMPANY INFORMATION
The fourth paragraph of Risk Factors is amended in its entirety to read
as follows:
"The Offer Price may not represent the value that a Limited Partner
might receive upon a liquidation of the Partnership.
The general partner of the Partnership recently filed a preliminary
proxy statement on Schedule 14A seeking approval of the limited partners
of the liquidation of the Partnership. The Offer Price is based in part
on the range of value presented by the general partner in the proxy
($344 to $433 per Unit) with discounts applied to account for the risks
associated with a liquidation."
ITEM 4--TERMS OF THE TRANSACTION
The second paragraph of "The Offer-Section 2- Proration; Acceptance for
Payment and Payment for Units" is amended to read as follows:
"If more than 5,000 Units are validly tendered and not properly
withdrawn on or prior to the Expiration Date, the Purchaser, upon the
terms and subject to the conditions of the Offer, will accept for
payment 5,000 Units so tendered, on a pro rata basis, with appropriate
adjustments to avoid tenders of fractional Units.
As a result, if Units are purchased on a prorated basis, the total
number of Units accepted for payment will be based on the highest number
up to 5,000 Units under which Units can be accepted without the tender
of fractional Units."
"The Offer-Section 4-Withdrawal Rights" is amended in its entirety to
read as follows:
"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. Tendering limited partners will additionally have withdrawal
rights as provided under Exchange Act 14(d)(5). According to the act,
"securities deposited pursuant to a tender offer or request or
invitation for tenders may be withdrawn by or on behalf of the depositor
at any time until the expiration of seven days after the time definitive
copies of the offer or request or invitation are first published or sent
or given to security holders, and at any time after sixty days from the
date of the original tender offer or request or invitation, except as
the Commission may otherwise prescribe by rules, regulations, or order
as necessary or appropriate in the public interest or for the protection
of investors."
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."
The heading and first paragraph of "The Offer-Section 6-Tax
Consequences" is amended to read as follows:
"Section 6. Tax Consequences
The following is a summary of the 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"). "Publicly traded
partnerships", as defined in Section 7704, are partnerships that are
traded on an established securities market or readily tradable on a
secondary market. Publicly traded partnerships are taxed as
corporations. 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."
"The Offer-Section 7-Purpose and Effects of the Offer" is amended in its
entirety to read as follows:
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. On January 12, 2004, the General Partner of the
Partnership filed a preliminary proxy statement (the "Proxy Statement")
asking limited partners to approve a liquidation of the Partnership. If
the liquidation is approved, the General Partner expects the liquidation
to take 36 months to complete. In determining its Offer Price, the
Purchaser relied in part on the valuations presented in the Proxy
Statement. A complete copy of the Proxy Statement 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. A
summary of the valuation presented by the General Partner in the Proxy
Statement is presented below.
The Partnership is currently a limited partner in twelve separate
limited partnerships (the "Local Limited Partnerships"). Each Local
Limited Partnership owns a single apartment complex (the "Properties").
In estimating a value for Units, the General Partner first estimated the
potential sales values of the Properties owned by the Local Limited
Partnerships. These values were based on either the direct
capitalization method or an assumed sale in a Low Income Housing Tax
Credit ("LIHTC") transaction, depending upon certain federal and/or
state restrictions associated with the particular property.
Five of the twelve Properties are conventionally financed and not
subject to federal and/or state restrictions that could have a material
impact on their valuation. For these Properties, the General Partner
used the direct capitalization method. This method involves applying a
capitalization rate to the net operating income (NOI) generated by the
property being valued. A capitalization rate is a
percentage (rate of return) commonly applied by purchasers of commercial
real estate to property NOI to determine the present value of income
producing property. A lower capitalization rate will result in a higher
property value; conversely, a higher capitalization rate will result in
a lower property value.
The first step in the direct capitalization method is determining the
appropriate NOI to use in the valuation. The NOI is defined as the
actual or anticipated net income that remains after all operating
expenses are deducted from effective gross income, but before mortgage
debt service, book depreciation and capital expenditures are deducted.
For the five conventionally financed properties, the General Partner
applied cap rates of 8.5% and 9.5% to its estimated 2004 NOI for the
Properties. Using this approach, the General Partner came up with the
following values:
PROPERTY 9.5% CAP RATE 8.5% CAP RATE
---------------- --------------- ---------------
Arrowhead $ 7,896,000 $ 8,825,000
Country Place I 13,900,000 15,535,000
Country Place II 8,739,000 9,767,000
Moorings 16,389,000 18,210,000
Posada Vallarta 15,135,000 16,915,000
The remaining seven Properties have mortgage notes payable to or insured
by agencies of the federal government or by local housing agencies.
These Properties are subject to various federal and/or state agreements
that restrict their use, regulate their operations, and in certain cases
limit dividends payable to the Local Partnerships. Due to the terms of
the federal and/or state agreements governing the operations of these
Properties, the General Partner valued them assuming a sale in a LIHTC
transaction. Using its best judgment based upon its experience in the
marketing and sale of similar properties, the General Partner estimated
the value of the seven government-assisted properties as follows:
PROPERTY LOWER VALUATION UPPER VALUATION
------------------ --------------- ---------------
Chevy Chase $ 9,396,000 $ 10,440,000
Four Winds West 992,000 1,102,000
Golden Acres 1,041,000 1,156,000
Mercy Terrace 8,422,000 9,400,000
Orangewood Plaza 1,643,000 1,826,000
Troy Manor 739,000 822,000
Westgate 5,073,000 5,637,000
Below are the estimated payoff amounts for the liabilities of all twelve
Properties projected by the General Partner as of December 31, 2003.
MORTGAGE ADDITIONAL TOTAL
PROPERTY BALANCE INDEBTEDNESS INDEBTEDNESS
------------------- --------------- --------------- ---------------
Arrowhead $ 6,587,810 $ 0 $ 6,587,810
Chevy Chase 2,850,241 0 2,850,241
Country Place I 6,847,370 0 6,847,370
Country Place II 4,149,921 0 4,149,921
Four Winds West 831,370 0 831,370
Golden Acres 1,130,726 44,992 1,975,718
Mercy Terrace 8,220,915 11,349,512 19,570,427
Moorings 7,811,889 0 7,811,889
Orangewood Plaza 1,826,500 0 1,826,500
Posada Vallarta 14,304,236 4,006,514 18,310,750
Troy Manor 815,819 6,252 822,071
Westgate 1,700,123 0 1,700,123
Total 57,076,920 16,207,270 73,284,190
Based on the figures presented above and after adjustments for the
priority of distributions as required under the terms of the Local
Limited Partnership agreements, the General Partner estimated that the
aggregate gross distribution of proceeds to the Partnership would be
between $18,500,000 and $24,000,000. The General Partner also estimated
that $2,900,000 in operating reserves would be released on the sale of
the Local Limited Partnerships for distribution to limited partners.
Below is the General Partner's schedule of distributions to limited
partners based on these estimates:
SOURCES OF FUNDS LOW HIGH
-------------------------------------------- ------------- -------------
DISTRIBUTIONS FROM LOCAL PARTNERSHIPS $ 18,500,000 $ 24,000,000
------------- -------------
CASH AND CASH EQUIVALENTS (2) $ 2,900,000 $ 2,900,000
------------- -------------
TOTAL SOURCE OF FUNDS $ 21,400,000 $ 26,900,000
USES OF FUNDS
Solicitation/Communication Expenses $ 51,900 $ 51,900
Final Audit and Tax Return Preparation Fees $ 92,000 $ 92,000
Dissolution Filing Fees $ 1,000 $ 1,000
Estimated Disposition Fees (3) $ 3,600,000 $ 3,950,000
Partnership Liquidation Fee (4) $ 500,000 $ 500,000
------------- -------------
TOTAL USE OF FUNDS $ 4,244,900 $ 4,594,900
LIQUIDATION PROCEEDS BEFORE TAXES $ 17,155,100 $ 22,305,100
PER UNIT $ 333 $ 433
The General Partner discloses in the Proxy Statement that these
liquidation values are highly uncertain and that actual liquidation
proceeds may be higher or lower than the values presented. Additionally,
there is no guarantee that a
liquidation of the Partnership will occur. As a part of the vote to
approve the liquidation outlined in the Proxy Statement, the General
Partner is asking limited partner to vote for a modification of the
terms of the partnership agreement so that the General Partner can earn
certain fees associated with the liquidation. The Purchaser cannot
predict whether limited partners will approve the liquidation. If a
majority of the Partnership's limited partners do not vote in favor of
both the amendment and the liquidation, the liquidation will not
proceed. If the amendment and liquidation are approved, the General
Partner estimates that the liquidation will take up to 36 months (and
possibly longer) to complete. The difference between the low value of
$344 per Unit presented by the General Partner in its Proxy Statement
and the Purchaser's Offer Price of $175 per Unit is based on discounts
applied by the Purchaser to account for the potential risks associated
with the liquidation. In determining the Offer Price, the Purchaser also
considered past prices paid for Units and the illiquid nature of Units.
Other measures of value may be relevant to a Limited Partner, and all
Limited Partners are urged to carefully consider all of the information
contained in the Offer to Purchase and Agreement of Sale and to consult
with their own advisors (tax, financial, or otherwise) in evaluating the
terms of the Offer before deciding whether to tender Units. The Offer is
being made as a speculative investment by the Purchaser based on its
belief that there is inherent underlying value in the assets of the
Partnership. The purpose of the Offer is to allow the Purchaser to
benefit to the greatest extent possible from any one or a combination of
the following:
. any cash distributions, whether those distributions are
classified as a return on, or a return of, capital, from the operations
in the ordinary course of the Partnership;
. any distributions of net proceeds from the sale of assets by the
Partnership;
. any distributions of net proceeds from the liquidation of the
Partnership;
. any cash from any redemption of the Units by the Partnership,
and
. any proceeds that may be received from any lawsuit brought by
the Limited Partners, which lawsuit relates to the Partnership or its
General Partner (the Purchaser is not aware of any lawsuit at this time
and is not planning that action in the future).
Price Range of Units; Lack of Public Market. At present, privately
negotiated sales and sales through intermediaries (e.g., through the
trading system operated by the American Partnership Board, which
publishes sell offers by holders of Units) are the only means available
to a Limited Partner to liquidate an investment in Units (other than by
accepting the Offer) because the Units are not listed or traded on any
national securities exchange or quoted on NASDAQ. The Purchaser and its
affiliates have purchased 1,258 Units in the Partnership in the past
twelve months.
The first three paragraphs of "The Offer-Section 10-Certain Information
Concerning the Partnership" are amended to read as follows:
"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.
The Purchaser has no means of verifying the accuracy or completeness of
any of the information contained in this Section 10 which is derived
from those filings, or any failure by the Partnership to disclose events
which may have occurred and may affect the significance or accuracy of
any information but which are unknown to the Purchaser.
General. The Partnership was organized on March 23, 1983, under the laws
of the State of Maryland. Its principal executive offices are located at
11200 Rockville Pike, Rockville, MD 20852. Its telephone number is
301-468-9200.
The Partnership's primary business is real estate ownership and related
operations. The Partnership was formed for the benefit of its Limited
Partners, to make equity investments in other limited partnerships which
own and operate multi-family residential properties which are assisted
by federal, state or local government agencies. The Partnership's
investment portfolio currently consists of the following limited
partnerships:
Name and Location of Complex 2002 Occupancy 2002 Rent/Apartment
----------------------------------------------------------------------
Arrowhead Apts. 98% $ 10,244
Palatine, IL
Chevy Chase Park 98% $ 6,411
Centerville, OH
Country Place I 97% $ 11,406
Burtonsville, MD
Country Place II 98% $ 11,738
Burtonsville, MD
Four Winds West 98% $ 5,433
Birmingham, AL
Golden Acres 96% $ 6,364
Chowchilla, CA
Mercy Terrace 99% $ 14,717
San Francisco, CA
The Moorings 98% $ 10,365
Roselle, IL
Orangewood Plaza 100% $ 2,559
Orange Cove, CA
Posada Vallarta 90% $ 6,861
Phoenix, AZ
Princeton Community Village 92% $ 8,544
Princeton, NJ
Troy Manor Apts. 100% $ 4,881
Troy, AL
Westgate Tower Apts. 93% $ 4,136
Westland, MI"
"The Offer-Section 15-Conditions of the Offer" is amended in its
entirety to read as follows:
"Section 15. Conditions of the Offer.
The Purchaser will not be required to accept for payment or to pay for
any Units tendered, and may amend or terminate the Offer if the general
partner of the Partnership or its transfer agent are unable to confirm
after being contacted by the Purchaser that the Agreement of Sale is
properly completed and duly executed. The Purchaser will contact the
general partner or transfer agent to verify the satisfaction of this
condition upon receipt of executed documents and will notify Limited
Partners promptly if this condition is not satisfied.
Purchaser will not be required to accept for payment or to pay for any
Units unless the Purchaser has received assurances from the Partnership
that the tendering Limited Partner's address will be changed to the
Purchaser's address pursuant to the terms and conditions of the Offer.
The Purchaser will contact the general partner or transfer agent to
verify the satisfaction of this condition upon receipt of executed
documents and will notify Limited Partners promptly if this condition is
not satisfied.
Limited partners may independently confirm the satisfaction of these
conditions by contacting the general partner of the Partnership at the
telephone number located in Section 10 of the Offer. The conditions set
forth in this Section 15 are for the sole benefit of the Purchaser and
its affiliates and may be asserted by the Purchaser regardless of the
circumstances giving rise to that condition. The conditions set forth in
this Section 15 may be waived by the Purchaser, in whole or in part,
from time to time in its sole discretion prior to the expiration of the
offer. The conditions set forth in this Section 15 will be waived by the
Purchaser upon 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 has
disclosed all conditions of the
Offer and that all conditions of the Offer must be satisfied prior to
the expiration of the Offer. If any material conditions of the Offer are
waived, the Purchaser will amend the Offer to disclose its waiver. If
the amendment is filed with less than ten (10) business days remaining
in the Offer, the Purchaser will extend the offer giving limited
partners at least ten (10) business days following the amendment to
consider the amended offer."
SIGNATURE
After due inquiry and to the best of my knowledge and belief, I certify
that the information set forth in this statement is true, complete and correct.
Dated: February 9, 2004 Equity Resource Fund XXII Limited Partnership,
a Massachusetts limited partnership
By: /s/ Eggert Dagbjartsson
-----------------------
Eggert Dagbjartsson
General Partner
Equity Resource Investments LLC
A Massachusetts limited liability company
By: /s/ Eggert Dagbjartsson
-----------------------
Eggert Dagbjartsson
Managing Director
Eggert Dagbjartsson
By: /s/ Eggert Dagbjartsson
-----------------------
Eggert Dagbjartsson
EXHIBIT INDEX
Sequential
Exhibit No. Description Page Number
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(a)(1) - Offer to Purchase, dated January 23, 2004.* 4-28
(a)(2) - Transmittal letter, dated January 23, 2004. 29
(a)(3) - Agreement of Sale and Assignment* 30-33
(a)(4) Summary Advertisement* 34
(a)(4) Press Release dated February 9, 2004.
(b) - Not applicable.
(c) - Not applicable.
(d) - Not applicable.
(e) - Not applicable.
(f) - Not applicable.
(g) Not applicable
(h) Not applicable.
* Previously Filed