Offer to Purchase for Cash
Up to 24,000 Class A Units of Limited Partnership Interest
in
MULTI-BENEFIT REALTY FUND '87-1,
a California limited partnership
for
$50 Net Per Class A Unit
by
MADISON RIVER PROPERTIES, L.L.C.
--------------------------------------------------------------------------------
THE OFFER, WITHDRAWAL RIGHTS AND PRORATION PERIOD WILL
EXPIRE AT 12:00 MIDNIGHT, NEW YORK TIME, ON JANUARY 23,
1998, UNLESS THE OFFER IS EXTENDED.
--------------------------------------------------------------------------------
IMPORTANT
Madison River Properties, L.L.C., a Delaware limited liability
company (the "Purchaser"), is offering to purchase up to 24,000 of the
outstanding Class A units of limited partnership interest ("Class A Units") in
Multi-Benefit Realty Fund '87-1, a California limited partnership (the
"Partnership"), at a purchase price of $50 per Class A Unit (the "Purchase
Price"), net to the seller in cash, without interest, upon the terms and
subject to the conditions set forth in this Offer to Purchase and in the
related Assignment of Partnership Interest (which, together with any
supplements or amendments, collectively constitute the "Offer"). The Purchase
Price is subject to adjustment under certain circumstances, as described
herein. Holders of Class A Units (each, a "Limited Partner") who tender their
Class A Units in response to the Offer will not be obligated to pay any
commissions or partnership transfer fees. The Purchaser is an affiliate of
ConCap Equities, Inc., which is the general partner of the Partnership (the
"General Partner").
Limited Partners are urged to consider the following factors:
o The Purchaser and the General Partner are both affiliates of and
controlled by Insignia Properties Trust ("IPT"), which is controlled
by Insignia Financial Group, Inc. ("Insignia"). IPT, through its
operating partnership Insignia Properties, L.P. ("IPLP"), currently
owns 1,633 Class A Units.
o The net liquidation value per Class A Unit (the "Estimated
Liquidation Value") estimated by the Purchaser (which is an
affiliate of the General Partner) in connection with the Offer is
$74.77. The Purchaser does not believe, however, that the Estimated
Liquidation Value represents a fair estimate of the market value of
a Class A Unit, primarily due to the fact that such estimate does
not take into account timing considerations, market uncertainties
and legal and other expenses that would be incurred in connection
with a liquidation of the Partnership. See Section 13. Accordingly,
the Purchaser does not believe that the Estimated Liquidation Value
should be viewed as representative of the amount a Limited Partner
can realistically expect to obtain on a sale of a Class A Unit in
the near term.
o The Purchaser will have the right to vote all Class A Units acquired
pursuant to the Offer. Accordingly, if the Purchaser (which is an
affiliate of the General Partner) is successful in acquiring a
significant number of Class A Units, it will be able to
significantly influence all voting decisions with respect to the
Partnership, including decisions regarding liquidation, amendments
to the Limited Partnership Agreement, removal and replacement of the
General Partner and mergers, consolidations and other extraordinary
transactions.
o The Purchaser (which is an affiliate of the General Partner) is
making the Offer with a view to making a profit. Accordingly, there
is a conflict between the desire of the Purchaser (which is an
affiliate of the General Partner) to purchase Class A Units at a low
price and the desire of the Limited Partners to sell their Class A
Units at a high price.
THE OFFER IS NOT CONDITIONED ON FINANCING OR UPON ANY MINIMUM
AGGREGATE NUMBER OF CLASS A UNITS BEING TENDERED.
----------------------------------------
Any Limited Partner desiring to tender Class A Units should complete
and sign the Assignment of Partnership Interest in accordance with the
Instructions to the Assignment of Partnership Interest and mail or deliver the
signed Assignment of Partnership Interest to the Depositary. A Limited Partner
may tender any or all of the Class A Units owned by that Limited Partner.
Tenders of fractional Class A Units will not be permitted, except by a Limited
Partner who is tendering all of the Class A Units owned by that Limited
Partner.
Questions and requests for assistance or for additional copies of
this Offer to Purchase and the Assignment of Partnership Interest may be
directed to the Information Agent at the address and telephone numbers set
forth below and on the back cover of this Offer to Purchase. No soliciting
dealer fees or other payments to brokers for tenders are being paid by the
Purchaser (which is an affiliate of the General Partner).
----------------------------------------
For More Information or for Further Assistance Please Call:
Beacon Hill Partners, Inc.
at
(000) 000-0000
December 23, 1997
TABLE OF CONTENTS
PAGE
----
INTRODUCTION.................................................................................................... 1
The Purchaser; Affiliation with the General Partner......................................................... 1
Classes of Units............................................................................................ 1
Some Factors to Be Considered by Limited Partners........................................................... 1
Reasons for and Effects of the Offer........................................................................ 3
Certain Tax Considerations.................................................................................. 3
Originally Anticipated Term of the Partnership; General Policy Regarding Sales
and Refinancings of Partnership Properties; Alternatives................................................ 4
Conditions.................................................................................................. 4
Distributions............................................................................................... 4
Outstanding Class A Units................................................................................... 4
THE OFFER....................................................................................................... 5
Section 1. Terms of the Offer; Expiration Date; Proration.................................................. 5
Section 2. Acceptance for Payment and Payment for Class A Units............................................ 6
Section 3. Procedure for Tendering Class A Units........................................................... 6
Valid Tender............................................................................................ 6
Signature Requirements.................................................................................. 6
Delivery of Assignment of Partnership Interest.......................................................... 7
Appointment as Proxy; Power of Attorney................................................................. 7
Assignment of Interest in Future Distributions.......................................................... 7
Determination of Validity; Rejection of Class A Units; Waiver of Defects; No Obligation
to Give Notice of Defects............................................................................ 8
Backup Federal Income Tax Withholding................................................................... 8
FIRPTA Withholding...................................................................................... 8
Binding Obligation...................................................................................... 8
Section 4. Withdrawal Rights............................................................................... 8
Section 5. Extension of Tender Period; Termination; Amendment.............................................. 9
Section 6. Certain Federal Income Tax Matters.............................................................. 9
General................................................................................................. 9
Gain or Loss Generally.................................................................................. 10
Unrealized Receivables and Certain Inventory............................................................ 10
Passive Activity Loss Limitation........................................................................ 11
Partnership Termination................................................................................. 11
Backup Withholding and FIRPTA Withholding............................................................... 11
Section 7. Effects of the Offer............................................................................ 12
Limitations on Resales.................................................................................. 12
Effect on Trading Market; Registration Under Section 12(g) of the Exchange Act.......................... 12
Control of Limited Partner Voting Decisions by Purchaser; Effect of Relationship
with General Partner................................................................................. 12
Section 8. Future Plans of Insignia, IPT and the Purchaser................................................. 13
Section 9. Certain Information Concerning the Partnership.................................................. 14
General................................................................................................. 14
Class A Units and Class B Units......................................................................... 14
Originally Anticipated Term of Partnership; Alternatives................................................ 14
General Policy Regarding Sales and Refinancings of Partnership Properties............................... 14
Selected Financial and Property-Related Data............................................................ 15
Cash Distributions History.............................................................................. 17
Operating Budgets of the Partnership.................................................................... 17
i
Section 10. Conflicts of Interest and Transactions with Affiliates......................................... 17
Conflicts of Interest with Respect to the Offer......................................................... 17
Voting by the Purchaser................................................................................. 18
Financing Arrangements.................................................................................. 18
Transactions with Affiliates............................................................................ 18
Section 11. Certain Information Concerning the Purchaser, IPLP, IPT and Insignia........................... 19
The Purchaser........................................................................................... 19
IPT and IPLP............................................................................................ 19
Insignia................................................................................................ 21
Section 12. Source of Funds................................................................................ 22
Section 13. Background of the Offer........................................................................ 22
Affiliation with the General Partner.................................................................... 22
Determination of Purchase Price......................................................................... 23
Section 14. Conditions of the Offer........................................................................ 27
Section 15. Certain Legal Matters.......................................................................... 28
General................................................................................................. 28
Antitrust............................................................................................... 29
Margin Requirements..................................................................................... 29
Section 16. Fees and Expenses.............................................................................. 29
Section 17. Miscellaneous.................................................................................. 29
SCHEDULE I - Transactions in the Class A Units Effected by IPLP in the Past 60 Days...............S-1
SCHEDULE II - Information Regarding the Managers of the Purchaser..................................S-2
SCHEDULE III - Information Regarding the Trustees and Executive Officers of IPT.....................S-3
SCHEDULE IV - Information Regarding the Directors and Executive Officers of Insignia...............S-5
SCHEDULE V - IPT Partnerships.....................................................................S-8
ii
TO THE LIMITED PARTNERS HOLDING CLASS A UNITS OF
MULTI-BENEFIT REALTY FUND '87-1
INTRODUCTION
Madison River Properties, L.L.C. (the "Purchaser"), which is a
Delaware limited liability company and an affiliate of the General Partner,
hereby offers to purchase up to 24,000 of the outstanding Class A units of
limited partnership interest ("Class A Units"), representing approximately 25%
of the Class A Units outstanding in Multi-Benefit Realty Fund '87-1, a
California limited partnership (the "Partnership"), at a purchase price of $50
per Class A Unit (the "Purchase Price"), net to the seller in cash, without
interest, upon the terms and subject to the conditions set forth in this Offer
to Purchase and in the related Assignment of Partnership Interest (which,
together with any supplements or amendments, collectively constitute the
"Offer"). The Offer is not conditioned on any aggregate minimum number of
Class A Units being tendered. A Limited Partner may tender any or all of the
Class A Units owned by that Limited Partner. Tenders of fractional Class A
Units will not be permitted, except by a Limited Partner who is tendering all
of the Class A Units owned by that Limited Partner. The Purchaser (which is an
affiliate of the General Partner) will pay all charges and expenses of Beacon
Hill Partners, Inc., who will serve as the Purchaser's information agent for
the Offer (the "Information Agent"), and Xxxxxx Trust Company of New York, who
will act as depositary for the Offer (the "Depositary").
The Purchaser; Affiliation with the General Partner. ConCap Equities,
Inc., which is the general partner of the Partnership (the "General Partner"),
is a wholly-owned subsidiary of Insignia Properties Trust, a Maryland real
estate investment trust ("IPT"). The Purchaser is a newly-formed, wholly-owned
subsidiary of Insignia Properties, L.P., a Delaware limited partnership
("IPLP"), which is the operating partnership of IPT. IPT is the sole general
partner of IPLP (owning approximately 66% of the total equity interests in
IPLP), and Insignia Financial Group, Inc., a Delaware corporation
("Insignia"), is the sole limited partner of IPLP (owning approximately 34% of
the total equity interests in IPLP). Insignia and its affiliates also own
approximately 67% of the outstanding common shares of IPT. Since late December
1994, Insignia Residential Group, L.P. ("IRG"), which is an affiliate of the
Purchaser and the General Partner, has provided property management services
to the Partnership, and Insignia (directly or through affiliates) has
performed asset management, partnership administration and investor relations
services for the Partnership. By reason of these relationships, the General
Partner has conflicts of interest in considering the Offer. The General
Partner has indicated in a Statement on Schedule 14D-9 (the "Schedule 14D-9")
filed with the Securities and Exchange Commission (the "Commission") that it
is remaining neutral and making no recommendation as to whether Limited
Partners should tender their Class A Units in response to the Offer. LIMITED
PARTNERS ARE URGED TO READ THIS OFFER TO PURCHASE AND THE RELATED MATERIALS
AND THE SCHEDULE 14D-9 CAREFULLY AND IN THEIR ENTIRETY BEFORE DECIDING WHETHER
TO TENDER THEIR CLASS A UNITS. See Sections 10 and 13.
Classes of Units. Upon the Partnership's formation, the Partnership's
Limited Partnership Agreement (the "Limited Partnership Agreement")
established two classes of units, the Class A Units and Class B units of
limited partnership interest ("Class B Units," and together with the Class A
Units, the "Units"), each of which is entitled to different rights and
priorities in respect of allocations and distributions by the Partnership to
Limited Partners. The Limited Partnership Agreement entitles holders of Class
A Units to an annual, non-compounded cumulative return (currently 10%) on
their invested capital in the Partnership (the "Priority Return"). See Section
9 for a discussion of the allocations and priorities of cash distributions
between Class A Units and Class B Units.
Some Factors to Be Considered by Limited Partners. In considering the
Offer, Limited Partners may wish to consider the following factors:
Potential Adverse Aspects of the Offer for Limited Partners
o The Purchaser and the General Partner are affiliates of and
controlled by IPT, which is controlled by Insignia. The General
Partner has conflicts of interest in considering the Offer,
including (i)
as a result of the fact that a sale or liquidation of the
Partnership's assets would result in a decrease or elimination of
the fees paid to the General Partner and/or its affiliates and (ii)
the fact that as a consequence of the Purchaser's ownership of Class
A Units, the Purchaser (which is an affiliate of the General
Partner) may have incentives to seek to maximize the value of its
ownership of Class A Units, which in turn may result in a conflict
for the General Partner in attempting to reconcile the interests of
the Purchaser (which is an affiliate of the General Partner) with
the interests of the other Limited Partners. See Section 10.
o The net liquidation value per Class A Unit (the "Estimated
Liquidation Value") estimated by the Purchaser (which is an
affiliate of the General Partner) in connection with the Offer is
$74.77. See Section 13 for a discussion of why the Purchaser (which
is an affiliate of the General Partner) believes that the Estimated
Liquidation Value is not necessarily indicative of the fair market
value of a Class A Unit. THE PURCHASER (WHICH IS AN AFFILIATE OF THE
GENERAL PARTNER) MAKES NO REPRESENTATION AND EXPRESSES NO OPINION AS
TO THE FAIRNESS OR ADEQUACY OF THE PURCHASE PRICE.
o As with any rational investment decision, the Purchaser (which is an
affiliate of the General Partner) is making the Offer with a view to
making a profit. Accordingly, there is a conflict between the desire
of the Purchaser (which is an affiliate of the General Partner) to
purchase Class A Units at a low price and the desire of the Limited
Partners to sell their Class A Units at a high price.
o If the Purchaser is successful in acquiring a significant number of
Class A Units pursuant to the Offer, the Purchaser (which is an
affiliate of the General Partner) will have the right to vote those
Class A Units and thereby significantly influence all voting
decisions with respect to the Partnership, including decisions
concerning liquidation, amendments to the Limited Partnership
Agreement, removal and replacement of the General Partner and
mergers, consolidations and other extraordinary transactions. This
means that (i) non-tendering Limited Partners could be prevented
from taking action they desire but that IPT (which is an affiliate
of the General Partner) opposes and (ii) IPT (which is an affiliate
of the General Partner) may be able to take action desired by IPT
but opposed by the non-tendering Limited Partners.
Potentially Beneficial Aspects of the Offer for Limited Partners
o Although there are some limited resale mechanisms available to
Limited Partners wishing to sell their Class A Units, there is no
formal trading market for Class A Units. Moreover, the Purchaser
understands that the operations of the Chicago Partnership Board,
one of the leading partnership interest "auction" intermediaries,
have been suspended by securities regulators. Accordingly, THE OFFER
AFFORDS LIMITED PARTNERS AN OPPORTUNITY TO DISPOSE OF THEIR CLASS A
UNITS FOR CASH WHICH OTHERWISE MIGHT NOT BE AVAILABLE TO THEM.
o THE OFFER MAY BE ATTRACTIVE TO LIMITED PARTNERS WHO HAVE AN
IMMEDIATE NEED FOR CASH. Although the Purchase Price is
approximately 24% less than the highest reported secondary market
sales price of any Class A Unit during the past six months (based on
published information and information provided by the General
Partner), the Purchaser believes the secondary market incorrectly
attributes a portion of the liquidation value of the Class B Units
to the Class A Units. See Section 9. In addition, the reported
secondary market sales prices do not take into account commissions
and transfer fees typically payable by a Limited Partner in
connection with a secondary market sale. Therefore, the actual
proceeds received by a Limited Partner who sells Class A Units in
the secondary market are typically significantly less than the
reported sales prices.
o LIMITED PARTNERS WHO SELL CLASS A UNITS PURSUANT TO THE OFFER WILL
NOT BE CHARGED ANY SALES COMMISSIONS (WHICH GENERALLY RANGE FROM 3%
TO 10% OF THE SALES PRICE) OR PARTNERSHIP
2
TRANSFER FEES (WHICH ARE TYPICALLY $100 PER TRANSFER). The Purchaser
will pay all transfer fees imposed by the Partnership in connection
with sales of Class A Units pursuant to the Offer.
o Real estate markets in the United States generally have recovered
and experienced an upward trend since the end of the last recession.
That recovery and upward trend might continue. On the other hand,
those markets also may be adversely affected by a variety of
factors, including possible fluctuations in interest rates, economic
slowdowns and overbuilding. Accordingly, ownership of Class A Units
continues to be a speculative investment. THE OFFER MAY PROVIDE
LIMITED PARTNERS WITH THE OPPORTUNITY TO LIQUIDATE THEIR INTERESTS
IN THE PARTNERSHIP AND REPLACE THEM WITH INVESTMENTS THAT ARE LESS
SPECULATIVE.
o The Offer may be attractive to Limited Partners who wish to avoid in
the future the expenses, delays and complications in filing personal
income tax returns which may be caused by ownership of Class A
Units. In addition, A LIMITED PARTNER WHO SELLS 100% OF ITS CLASS A
UNITS PURSUANT TO THE OFFER WILL NO LONGER BE SUBJECT TO THE PASSIVE
ACTIVITY LOSS LIMITATION WITH RESPECT TO "SUSPENDED" LOSSES
ATTRIBUTABLE TO THOSE CLASS A UNITS AND, THEREFORE, WILL BE ABLE TO
UTILIZE FULLY ANY SUCH LOSSES.
o The Offer may be attractive to those Limited Partners who have
become disenchanted with real estate investments generally, and in
particular with the perceived illiquidity of investments made
through limited partnerships, because it may afford an immediate
opportunity for those Limited Partners to liquidate their
investments in the Partnership. On the other hand, Limited Partners
who tender their Class A Units will be giving up the opportunity to
participate in any potential future benefits represented by the
ownership of those Class A Units, including, for example, the right
to participate in any future distributions of cash or property,
whether from operations, the proceeds of a sale or refinancing of
one or more of the Partnership's properties or in connection with
any future liquidation of the Partnership. Instead, any such
distributions of cash or property with respect to Class A Units
tendered in the Offer and purchased by the Purchaser will be paid to
the Purchaser.
The Purchaser (which is an affiliate of the General Partner) makes no
recommendation to any Limited Partner as to whether to tender or refrain from
tendering Class A Units and has been advised by the General Partner that the
General Partner also expects to make no recommendation. Each Limited Partner
must make its own decision, based on the Limited Partner's particular
circumstances, as to whether to tender Class A Units and, if so, how many
Class A Units to tender. Limited Partners should consult with their respective
advisors regarding the financial, tax, legal and other implications of
accepting the Offer. LIMITED PARTNERS ARE URGED TO READ THIS OFFER TO PURCHASE
AND THE RELATED MATERIALS CAREFULLY AND IN THEIR ENTIRETY BEFORE DECIDING
WHETHER TO TENDER THEIR CLASS A UNITS.
Reasons for and Effects of the Offer. The Purchaser's purpose in
making the Offer is to increase IPT's equity interest in the Partnership,
primarily for investment purposes and with a view to making a profit. Although
the number of Class A Units sought in the Offer will not give the Purchaser
(which is an affiliate of the General Partner) absolute control over the
Partnership, if the Purchaser is successful in acquiring all or a substantial
portion of the Class A Units it is tendering for, it will be in a position to
exercise significant influence over the outcome of any vote by Limited
Partners. See Sections 8, 10 and 13.
Certain Tax Considerations. A sale by a Limited Partner pursuant to
the Offer will result in taxable gain (or loss) equal to the excess (deficit)
of the amount realized by the Limited Partner for the Class A Units sold over
such Limited Partner's adjusted tax basis in those Class A Units which may be
taxable as ordinary income, capital gain or gain from real estate depreciation
recapture. If a Limited Partner has suspended "passive losses" from the
Partnership or other passive activity investments, such Limited Partner
generally may deduct these losses up to the amount of any gain from the sale.
A sale pursuant to the Offer of all of a Limited Partner's Class A Units will
terminate his or her investment in the Partnership and, commencing with the
year following the year of sale, the
3
Limited Partner will no longer receive Partnership tax information or have to
report the complicated tax information currently required of Limited Partners.
See Section 6.
Originally Anticipated Term of the Partnership; General Policy
Regarding Sales and Refinancings of Partnership Properties; Alternatives.
According to the Partnership's Prospectus dated December 10, 1986, the then
general partner (predecessor to the current General Partner) anticipated that
the Partnership would sell and/or refinance its properties five to eight years
after their acquisition, depending upon the then current real estate and
capital markets, economic climate and income tax consequences to the Limited
Partners. In general, the General Partner regularly evaluates the
Partnership's properties by considering various factors, such as the
Partnership's financial position and real estate and capital market
conditions. The General Partner monitors each property's specific locale and
sub-market conditions evaluating current trends, competition, new construction
and economic changes. The General Partner oversees each asset's operating
performance and continuously evaluates the physical improvement requirements.
In addition, the financing structure for each property, tax implications and
the investment climate are all considered. Any of these factors, and possibly
others, could potentially contribute to any decision of the General Partner to
sell, refinance, upgrade with capital improvements or hold a particular
Partnership property. The Purchaser (which is an affiliate of the General
Partner) has been advised by the General Partner that the Partnership received
an unsolicited offer by an unaffiliated third party to purchase Shadow Brook
Apartments in West Valley City, Utah, for $16,200,000. Based on the foregoing
considerations, however, the General Partner has determined that it is not in
the best interest of Limited Partners to sell or refinance that or any other
property at the present time. Under the Limited Partnership Agreement the term
of the Partnership will continue until December 31, 2036, unless sooner
terminated as provided in the Limited Partnership Agreement or by law. Limited
Partners could, as an alternative to tendering their Class A Units, take a
variety of possible actions, including voting to liquidate the Partnership or
causing the Partnership to merge with another entity or engage in a "roll-up"
or similar transaction.
Conditions. The Offer is not conditioned on any aggregate minimum
number of Class A Units being tendered. Certain other conditions do apply,
however. See Section 14.
Distributions. The Partnership has made cash distributions to Limited
Partners in respect of Class A Units of $14.16 per Class A Unit in 1997
(through December 23), $4.72 per Class A Unit in 1996 and $9.44 per Class A
Unit in 1995. In total, original investors in the Partnership who purchased
Class A Units have received distributions of only $72.20 in respect of their
original $100 investment made in 1983. The Partnership is currently generating
positive cash flow from operations, and the Purchaser (which is an affiliate
of the General Partner) believes that the Partnership will continue to
generate positive cash flow from operations. The potential for future
distributions was considered by the Purchaser (which is an affiliate of the
General Partner) when establishing the Purchase Price. Limited Partners who
tender their Class A Units in response to the Offer will retain any
distributions made through December 23, 1997, and will be entitled to receive
and retain any subsequent distributions made by the Partnership prior to the
date on which the Purchaser pays for tendered Class A Units pursuant to the
Offer, although any such subsequent distribution will result in a reduction of
the Purchase Price. See Section 1. However, tendering Limited Partners will
not be entitled to receive or retain any distributions in respect of tendered
Class A Units which are made on or after the date on which the Purchaser pays
for such Class A Units pursuant to the Offer, regardless of the fact that the
record date (as opposed to the payment date) for any such distribution may be
a date prior to the date of purchase. See Section 3.
Outstanding Class A Units. According to information supplied by the
Partnership, as of December 1, 1997 there were 96,284 Class A Units issued and
outstanding, which were held of record by 905 Limited Partners. IPLP currently
owns 1,633 Class A Units. See Schedule I to this Offer to Purchase for a list
of transactions in the Class A Units effected by IPLP within the past 60 days.
4
THE OFFER
SECTION 1. TERMS OF THE OFFER; EXPIRATION DATE; PRORATION. Upon the
terms and subject to the conditions of the Offer, the Purchaser (which is an
affiliate of the General Partner) will accept for payment (and thereby
purchase) up to 24,000 Class A Units that are validly tendered on or prior to
the Expiration Date and not withdrawn in accordance with the procedures set
forth in Section 4. For purposes of the Offer, the term "Expiration Date"
shall mean 12:00 midnight, New York City time, on January 23, 1998, unless the
Purchaser (which is an affiliate of the General Partner) in its sole
discretion shall have extended the period of time for which the Offer is open,
in which event the term "Expiration Date" shall mean the latest time and date
on which the Offer, as extended by the Purchaser, shall expire. See Section 5
for a description of the Purchaser's right to extend the period of time during
which the Offer is open and to amend or terminate the Offer.
THE PURCHASE PRICE WILL AUTOMATICALLY BE REDUCED BY THE AGGREGATE
AMOUNT OF DISTRIBUTIONS PER CLASS A UNIT, IF ANY, MADE BY THE PARTNERSHIP TO
LIMITED PARTNERS ON OR AFTER DECEMBER 23, 1997 AND PRIOR TO THE DATE ON WHICH
THE PURCHASER PAYS FOR CLASS A UNITS PURCHASED PURSUANT TO THE OFFER.
If, prior to the Expiration Date, the Purchaser (which is an
affiliate of the General Partner) increases the consideration offered to
Limited Partners pursuant to the Offer, the increased consideration will be
paid for all Class A Units accepted for payment pursuant to the Offer,
regardless of whether the Class A Units were tendered prior to the increase in
the consideration offered.
If more than 24,000 Class A Units are validly tendered prior to the
Expiration Date and not properly withdrawn prior to the Expiration Date in
accordance with the procedures specified in Section 4, the Purchaser (which is
an affiliate of the General Partner) will, upon the terms and subject to the
conditions of the Offer, accept for payment and pay for an aggregate of 24,000
of the Class A Units so tendered, pro rata according to the number of Class A
Units validly tendered by each Limited Partner and not properly withdrawn on
or prior to the Expiration Date, with appropriate adjustments to avoid
purchases of fractional Class A Units. If the number of Class A Units validly
tendered and not properly withdrawn on or prior to the Expiration Date is less
than or equal to 24,000 Class A Units, the Purchaser (which is an affiliate of
the General Partner) will purchase all Class A Units so tendered and not
withdrawn, upon the terms and subject to the conditions of the Offer.
If proration of tendered Class A Units is required, then, subject to
the Purchaser's obligation under Rule 14e-1(c) under the Securities Exchange
Act of 1934 (the "Exchange Act") to pay Limited Partners the Purchase Price in
respect of Class A Units tendered or return those Class A Units promptly after
the termination or withdrawal of the Offer, the Purchaser (which is an
affiliate of the General Partner) does not intend to pay for any Class A Units
accepted for payment pursuant to the Offer until the final proration results
are known. NOTWITHSTANDING ANY SUCH DELAY IN PAYMENT, NO INTEREST WILL BE PAID
ON THE PURCHASE PRICE.
The Offer is conditioned on satisfaction of certain conditions. See
Section 14, which sets forth in full the conditions of the Offer. The
Purchaser (which is an affiliate of the General Partner) reserves the right
(but in no event shall be obligated), in its sole discretion, to waive any or
all of those conditions. If, on or prior to the Expiration Date, any or all of
the conditions have not been satisfied or waived, the Purchaser reserves the
right to (i) decline to purchase any of the Class A Units tendered and
terminate the Offer, (ii) waive all of the unsatisfied conditions and, subject
to complying with applicable rules and regulations of the Commission, purchase
all Class A Units validly tendered, (iii) extend the Offer and, subject to the
right of Limited Partners to withdraw Class A Units until the Expiration Date,
retain the Class A Units that have been tendered during the period or periods
for which the Offer is extended, and/or (iv) amend the Offer.
This Offer to Purchase and the related Assignment of Partnership
Interest are being mailed by the Purchaser (which is an affiliate of the
General Partner) to the persons shown by the Partnership's records to have
been Limited Partners or (in the case of Class A Units owned of record by
Individual Retirement Accounts ("IRAs") and qualified plans) beneficial owners
of Class A Units as of December 1, 1997.
5
SECTION 2. ACCEPTANCE FOR PAYMENT AND PAYMENT FOR CLASS A UNITS. Upon
the terms and subject to the conditions of the Offer, the Purchaser (which is
an affiliate of the General Partner) will accept for payment (and thereby
purchase) and will pay for all Class A Units validly tendered and not
withdrawn in accordance with the procedures specified in Section 4, as
promptly as practicable following the Expiration Date. A tendering beneficial
owner of Class A Units whose Class A Units are owned of record by an IRA or
other qualified plan will not receive direct payment of the Purchase Price;
rather, payment will be made to the custodian of such account or plan. In all
cases, payment for Class A Units purchased pursuant to the Offer will be made
only after timely receipt by the Depositary of a properly completed and duly
executed Assignment of Partnership Interest and any other documents required
by the Assignment of Partnership Interest. See Section 3. UNDER NO
CIRCUMSTANCES WILL INTEREST BE PAID ON THE PURCHASE PRICE BY REASON OF ANY
DELAY IN MAKING SUCH PAYMENT.
For purposes of the Offer, the Purchaser (which is an affiliate of
the General Partner) will be deemed to have accepted for payment pursuant to
the Offer, and thereby purchased, validly tendered Class A Units if, as and
when the Purchaser (which is an affiliate of the General Partner) gives verbal
or written notice to the Depositary of the Purchaser's acceptance of those
Class A Units for payment pursuant to the Offer. Upon the terms and subject to
the conditions of the Offer, payment for Class A Units accepted for payment
pursuant to the Offer will be made by deposit of the Purchase Price with the
Depositary, which will act as agent for tendering Limited Partners for the
purpose of receiving payments from the Purchaser and transmitting those
payments to Limited Partners whose Class A Units have been accepted for
payment.
If any tendered Class A Units are not purchased for any reason, the
Assignment of Partnership Interest with respect to such Class A Units will be
destroyed by the Purchaser (which is an affiliate of the General Partner). If
for any reason acceptance for payment of, or payment for, any Class A Units
tendered pursuant to the Offer is delayed or the Purchaser is unable to accept
for payment, purchase or pay for Class A Units tendered pursuant to the Offer,
then, without prejudice to the Purchaser's rights under Section 14, the
Depositary may, nevertheless, on behalf of the Purchaser (which is an
affiliate of the General Partner) retain tendered Class A Units, and those
Class A Units may not be withdrawn except to the extent that the tendering
Limited Partners are entitled to withdrawal rights as described in Section 4;
subject, however, to the Purchaser's obligation under Rule 14e-1(c) under the
Exchange Act to pay Limited Partners the Purchase Price in respect of Class A
Units tendered or return those Class A Units promptly after termination or
withdrawal of the Offer.
The Purchaser (which is an affiliate of the General Partner) reserves
the right to transfer or assign, in whole or from time to time in part, to one
or more of the Purchaser's affiliates, the right to purchase Class A Units
tendered pursuant to the Offer, but any such transfer or assignment will not
relieve the Purchaser of its obligations under the Offer or prejudice the
rights of tendering Limited Partners to receive payment for Class A Units
validly tendered and accepted for payment pursuant to the Offer.
SECTION 3. PROCEDURE FOR TENDERING CLASS A UNITS.
Valid Tender. In order for a tendering Limited Partner to participate
in the Offer, its Class A Units must be validly tendered and not withdrawn on
or prior to the Expiration Date. To validly tender Class A Units, a properly
completed and duly executed Assignment of Partnership Interest and any other
documents required by the Assignment of Partnership Interest must be received
by the Depositary, at its address set forth on the back cover of this Offer to
Purchase, on or prior to the Expiration Date. A Limited Partner may tender any
or all of the Class A Units owned by that Limited Partner. Tenders of
fractional Class A Units will not be permitted, except by a Limited Partner
who is tendering all of the Class A Units owned by that Limited Partner. No
alternative, conditional or contingent tenders will be accepted.
Signature Requirements. If the Assignment of Partnership Interest is
signed by the registered holder of the Class A Units and payment is to be made
directly to that holder, then no signature guarantee is required on the
Assignment of Partnership Interest. Similarly, if the Class A Units are
tendered for the account of a member firm of a registered national securities
exchange, a member of the National Association of Securities Dealers, Inc. or
a commercial bank, savings bank, credit union, savings and loan association or
trust company having an office,
6
branch or agency in the United States (each an "Eligible Institution"), no
signature guarantee is required on the Assignment of Partnership Interest.
HOWEVER, IN ALL OTHER CASES, ALL SIGNATURES ON THE ASSIGNMENT OF PARTNERSHIP
INTEREST MUST BE GUARANTEED BY AN ELIGIBLE INSTITUTION. Please contact the
Information Agent for assistance in obtaining a signature guarantee.
Delivery of Assignment of Partnership Interest. The method of
delivery of the Assignment of Partnership Interest and all other required
documents is at the option and risk of the tendering Limited Partner, and
delivery will be deemed made only when actually received by the Depositary. In
all cases, sufficient time should be allowed to assure timely delivery.
Appointment as Proxy; Power of Attorney. By executing an Assignment
of Partnership Interest, a tendering Limited Partner irrevocably appoints the
Purchaser (which is an affiliate of the General Partner), and its managers and
designees as the Limited Partner's proxies, in the manner set forth in the
Assignment of Partnership Interest, each with full power of substitution, to
the full extent of the Limited Partner's rights with respect to the Class A
Units tendered by the Limited Partner and accepted for payment by the
Purchaser (which is an affiliate of the General Partner). Each such proxy
shall be considered coupled with an interest in the tendered Class A Units.
Such appointment will be effective when, and only to the extent that, the
Purchaser (which is an affiliate of the General Partner) accepts the tendered
Class A Units for payment. Upon such acceptance for payment, all prior proxies
given by the Limited Partner with respect to the Class A Units will, without
further action, be revoked, and no subsequent proxies may be given (and if
given will not be effective). The Purchaser (which is an affiliate of the
General Partner) and its managers and designees will, as to those Class A
Units, be empowered to exercise all voting and other rights of the Limited
Partner as they in their sole discretion may deem proper at any meeting of
Limited Partners, by written consent or otherwise. The Purchaser (which is an
affiliate of the General Partner) reserves the right to require that, in order
for Class A Units to be deemed validly tendered, immediately upon the
Purchaser's acceptance for payment of the Class A Units, the Purchaser must be
able to exercise full voting rights with respect to the Class A Units,
including voting at any meeting of Limited Partners then scheduled or acting
by written consent without a meeting.
By executing an Assignment of Partnership Interest, a tendering
Limited Partner also irrevocably constitutes and appoints the Purchaser and
its managers and designees as the Limited Partner's attorneys-in-fact, each
with full power of substitution, to the full extent of the Limited Partner's
rights with respect to the Class A Units tendered by the Limited Partner and
accepted for payment by the Purchaser. Such appointment will be effective
when, and only to the extent that, the Purchaser accepts the tendered Class A
Units for payment. The tendering Limited Partner agrees not to exercise any
rights pertaining to the tendered Class A Units without the prior consent of
the Purchaser. Upon such acceptance for payment, all prior powers of attorney
granted by the Limited Partner with respect to such Class A Units will,
without further action, be revoked, and no subsequent powers of attorney may
be granted (and if granted will not be effective). Pursuant to such
appointment as attorneys-in-fact, the Purchaser and its managers and designees
each will have the power, among other things, (i) to transfer ownership of
such Class A Units on the Partnership books maintained by the General Partner
(and execute and deliver any accompanying evidences of transfer and
authenticity any of them may deem necessary or appropriate in connection
therewith), (ii) upon receipt by the Depositary (as the tendering Limited
Partner's agent) of the Purchase Price, to become a substituted Limited
Partner, to receive any and all distributions made by the Partnership on or
after the date on which the Purchaser purchases such Class A Units, and to
receive all benefits and otherwise exercise all rights of beneficial ownership
of such Class A Units in accordance with the terms of the Offer, (iii) to
execute and deliver to the General Partner a change of address form
instructing the General Partner to send any and all future distributions to
which the Purchaser is entitled pursuant to the terms of the Offer in respect
of tendered Class A Units to the address specified in such form, and (iv) to
endorse any check payable to or upon the order of such Limited Partner
representing a distribution to which the Purchaser is entitled pursuant to the
terms of the Offer, in each case in the name and on behalf of the tendering
Limited Partner.
Assignment of Interest in Future Distributions. By executing an
Assignment of Partnership Interest, a tendering Limited Partner irrevocably
assigns to the Purchaser (which is an affiliate of the General Partner) and
its assigns all of the right, title and interest of the Limited Partner in and
to any and all distributions made by the
7
Partnership on or after the date on which the Purchaser purchases such Class A
Units, in respect of the Class A Units tendered by such Limited Partner and
accepted for payment by the Purchaser, regardless of the fact that the record
date for any such distribution may be a date prior to the date of such
purchase. The Purchaser will seek to be admitted to the Partnership as a
substituted Limited Partner upon consummation of the Offer.
Determination of Validity; Rejection of Class A Units; Waiver of
Defects; No Obligation to Give Notice of Defects. All questions as to the
validity, form, eligibility (including time of receipt) and acceptance for
payment of any tender of Class A Units pursuant to the Offer will be
determined by the Purchaser (which is an affiliate of the General Partner), in
its sole discretion, which determination shall be final and binding. The
Purchaser (which is an affiliate of the General Partner) reserves the absolute
right to reject any or all tenders of any particular Class A Units determined
by it not to be in proper form or if the acceptance of or payment for those
Class A Units may, in the opinion of the Purchaser's counsel, be unlawful. The
Purchaser (which is an affiliate of the General Partner) also reserves the
absolute right to waive or amend any of the conditions of the Offer that it is
legally permitted to waive as to the tender of any particular Class A Units
and to waive any defect or irregularity in any tender with respect to any
particular Class A Units of any particular Limited Partner. The Purchaser's
interpretation of the terms and conditions of the Offer (including the
Assignment of Partnership Interest and the Instructions thereto) will be final
and binding. No tender of Class A Units will be deemed to have been validly
made until all defects and irregularities have been cured or waived. None of
the Purchaser (which is an affiliate of the General Partner), the Information
Agent, the Depositary or any other person will be under any duty to give
notification of any defects or irregularities in the tender of any Class A
Units or will incur any liability for failure to give any such notification.
Backup Federal Income Tax Withholding. To prevent the possible
application of backup federal income tax withholding of 31% with respect to
payment of the Purchase Price, each tendering Limited Partner must provide the
Purchaser (which is an affiliate of the General Partner) with the Limited
Partner's correct taxpayer identification number by completing the Substitute
Form W-9 included in the Assignment of Partnership Interest. See the
Instructions to the Assignment of Partnership Interest and Section 6.
FIRPTA Withholding. To prevent the withholding of federal income tax
in an amount equal to 10% of the amount of the Purchase Price plus Partnership
liabilities allocable to each Class A Unit purchased, each tendering Limited
Partner must complete the FIRPTA Affidavit included in the Assignment of
Partnership Interest certifying the Limited Partner's taxpayer identification
number and address and that such Limited Partner is not a foreign person. See
the Instructions to the Assignment of Partnership Interest and Section 6.
Binding Obligation. A tender of Class A Units pursuant to and in
accordance with the procedures described in this Section 3 and the acceptance
for payment of such Class A Units will constitute a binding agreement between
the tendering Limited Partner and the Purchaser (which is an affiliate of the
General Partner) on the terms set forth in this Offer to Purchase and in the
Assignment of Partnership Interest.
SECTION 4. WITHDRAWAL RIGHTS. Tenders of Class A Units pursuant to
the Offer are irrevocable, except that Class A Units tendered pursuant to the
Offer may be withdrawn at any time prior to the Expiration Date and, unless
already accepted for payment as provided in this Offer to Purchase, may also
be withdrawn at any time after February 20, 1998. For withdrawal to be
effective, a written or facsimile transmission notice of withdrawal must be
timely received by the Depositary at its address set forth on the back cover
of this Offer to Purchase. Any such notice of withdrawal must specify the name
of the person who tendered the Class A Units to be withdrawn and must be
signed by the person(s) who signed the Assignment of Partnership Interest in
the same manner as the Assignment of Partnership Interest was signed
(including signature guarantees by an Eligible Institution). Class A Units
properly withdrawn will be deemed not to be validly tendered for purposes of
the Offer. Withdrawn Class A Units may be re-tendered, however, by following
the procedures described in Section 3 at any time prior to the Expiration
Date.
If payment for Class A Units is delayed for any reason or if the
Purchaser (which is an affiliate of the General Partner) is unable to pay for
Class A Units for any reason, then, without prejudice to the Purchaser's
rights under the Offer, tendered Class A Units may be retained by the
Depositary and may not be withdrawn except to the extent that tendering
Limited Partners are entitled to withdrawal rights as set forth in this
Section 4; subject,
8
however, to the Purchaser's obligation, pursuant to Rule 14e-1(c) under the
Exchange Act, to pay Limited Partners the Purchase Price in respect of Class A
Units tendered or return those Class A Units promptly after termination or
withdrawal of the Offer.
All questions as to the validity and form (including time of receipt)
of notices of withdrawal will be determined by the Purchaser (which is an
affiliate of the General Partner), in its sole discretion, which determination
shall be final and binding. None of the Purchaser, the Information Agent, the
Depositary or any other person will be under any duty to give notification of
any defects or irregularities in any notice of withdrawal or incur any
liability for failure to give any such notification.
SECTION 5. EXTENSION OF TENDER PERIOD; TERMINATION; AMENDMENT. The
Purchaser (which is an affiliate of the General Partner) expressly reserves
the right, in its sole discretion, at any time and from time to time, (i) to
extend the period of time during which the Offer is open and thereby delay
acceptance for payment of, and the payment for, validly tendered Class A
Units, (ii) to terminate the Offer and not accept for payment any Class A
Units not already accepted for payment or paid for, (iii) upon the occurrence
of any of the conditions specified in Section 14, to delay the acceptance for
payment of, or payment for, any Class A Units not already accepted for payment
or paid for, and (iv) to amend the Offer in any respect (including, without
limitation, by increasing the consideration offered, increasing or decreasing
the number of Class A Units being sought, or both). Notice of any such
extension, termination or amendment will be disseminated promptly to Limited
Partners in a manner reasonably designed to inform Limited Partners of such
change in compliance with Rule 14d-4(c) under the Exchange Act. In the case of
an extension of the Offer, the extension will be followed by a press release
or public announcement which will be issued no later than 9:00 a.m., New York
City time, on the next business day after the then scheduled Expiration Date,
in accordance with Rule 14e-1(d) under the Exchange Act.
If the Purchaser (which is an affiliate of the General Partner)
extends the Offer, or if the Purchaser (whether before or after its acceptance
for payment of Class A Units) is delayed in its payment for Class A Units or
is unable to pay for Class A Units pursuant to the Offer for any reason, then,
without prejudice to the Purchaser's rights under the Offer, the Depositary
may retain tendered Class A Units and those Class A Units may not be withdrawn
except to the extent tendering Limited Partners are entitled to withdrawal
rights as described in Section 4; subject, however, to the Purchaser's
obligation, pursuant to Rule 14e-1(c) under the Exchange Act, to pay Limited
Partners the Purchase Price in respect of Class A Units tendered or return
those Class A Units promptly after termination or withdrawal of the Offer.
If the Purchaser (which is an affiliate of the General Partner) 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 and disseminate additional tender offer materials to the extent
required by Rules 14d-4(c) and 14d-6(d) under the Exchange Act. The minimum
period during which an offer must remain open following a material change in
the terms of the offer or information concerning the offer will depend upon
the facts and circumstances, including the relative materiality of the change
in the terms or information. In the Commission's view, an offer should remain
open for a minimum of five business days from the date the material change is
first published, sent or given to securityholders, and if material changes are
made with respect to information that approaches the significance of price or
the percentage of securities sought, a minimum of ten business days may be
required to allow for adequate dissemination to securityholders and investor
response. As used in this Offer to Purchase, "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, New York City time.
SECTION 6. CERTAIN FEDERAL INCOME TAX MATTERS.
General. The following summary is a general discussion of certain of
the federal income tax consequences of a sale of Class A Units pursuant to the
Offer. This summary is based on the Internal Revenue Code of 1986, as amended
(the "Code"), applicable Treasury regulations thereunder, administrative
rulings, practice and procedures and judicial authority, all as of the date of
the Offer. All of the foregoing are subject to change, and any such change
could affect the continuing accuracy of this summary. This summary does not
discuss all aspects
9
of federal income taxation that may be relevant to a particular Limited
Partner in light of such Limited Partner's specific circumstances or to
certain types of 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 organizations), nor (except as
otherwise expressly indicated) does it describe any aspect of state, local,
foreign or other tax laws. Sales of Class A Units pursuant to the Offer will
be taxable transactions for federal income tax purposes, and also may be
taxable transactions under applicable state, local, foreign and other tax
laws. EACH LIMITED PARTNER SHOULD CONSULT ITS OWN TAX ADVISOR AS TO THE
PARTICULAR TAX CONSEQUENCES TO SUCH LIMITED PARTNER OF SELLING CLASS A UNITS
PURSUANT TO THE OFFER.
Gain or Loss Generally. In general, a Limited Partner will recognize
gain or loss on a sale of Class A Units pursuant to the Offer equal to the
difference between (i) the Limited Partner's "amount realized" on the sale and
(ii) the Limited Partner's adjusted tax basis in the Class A Units sold.
Generally, a Limited Partner's adjusted tax basis with respect to a Class A
Unit equals its cost, increased by the amount of income and the amount of
Partnership liabilities (as determined under Code Section 752) allocated to
the Class A Unit, and decreased by (i) any distributions made with respect to
such Class A Unit, (ii) the amount of deductions or losses allocated to the
Class A Unit and (iii) any decrease in the amount of Partnership liabilities
(as determined under Code Section 752) allocated to the Class A Unit. Thus,
the amount of a Limited Partner's adjusted tax basis in tendered Class A Units
will vary depending upon the Limited Partner's particular circumstances. The
"amount realized" with respect to a Class A Unit will be a sum equal to the
amount of cash received by the Limited Partner for the Class A Unit pursuant
to the Offer, plus the amount of the Partnership's liabilities allocable to
the Class A Unit (as determined under Code Section 752).
A portion of the gain or loss recognized by a Limited Partner on a
sale of a Class A Unit pursuant to the Offer generally will be treated as a
capital gain or loss, if (as is generally expected to be the case) the Class A
Unit was held by the Limited Partner as a capital asset. Under the Taxpayer
Relief Act of 1997, the capital gains rate for individuals and other
non-corporate taxpayers is reduced to 20% for sales of capital assets after
July 28, 1997 if such assets were held for more than 18 months. However, any
gain from the sale of such assets attributable to the recapture of
depreciation with respect to real property (as defined in Code Section 1250)
is taxed at a maximum rate of 25%. The 28% rate continues to apply to
individual and noncorporate taxpayers who sell a capital asset held for more
than one year but not more than 18 months. Corporate taxpayers are taxed at a
maximum marginal rate of 35% for both capital gains and ordinary income. The
maximum marginal federal income tax rate for ordinary income of individuals
and other noncorporate taxpayers is 39.6%. Capital losses are deductible only
to the extent of capital gains, except that, subject to the passive activity
loss limitations discussed below, 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 carryforward period is five years
and a non-corporate taxpayer can carry forward such losses indefinitely); and
a corporation is permitted to carry back excess capital losses to the three
preceding taxable years, provided the carryback does not increase or produce a
net operating loss for any of those years.
A tendering Limited Partner will be allocated a pro rata share of the
Partnership's taxable income or loss for the year of sale with respect to the
Class A Units sold in accordance with the provisions of the Limited
Partnership Agreement concerning transfers of Class A Units. Such allocation
and any cash distributed by the Partnership to the Limited Partner for that
year will affect the Limited Partner's adjusted tax basis in Class A Units
and, therefore, the amount of such Limited Partner's taxable gain or loss upon
a sale of Class A Units pursuant to the Offer.
Unrealized Receivables and Certain Inventory. If any portion of the
amount of gain realized by a Limited Partner is attributable to "unrealized
receivables" (which includes depreciation recapture) or "substantially
appreciated inventory" as defined in Code Section 751, then a portion of the
Limited Partner's gain or loss may be ordinary rather than capital and, in
addition, a portion of such gain may be taxed at the 25% rate discussed above.
A portion, if not all, of the gain upon the sale of Class A Units is expected
to be attributable to unrealized receivables. A Limited Partner who tenders
Class A Units which are purchased pursuant to the Offer must file an
information statement with such Limited Partner's federal income tax return
for the year of the sale which provides
10
the information specified in Treasury Regulation ss. 1.751-1(a)(3). A selling
Limited Partner also must notify the Partnership of the date of the transfer
and the names, addresses and tax identification numbers of the transferor(s)
and transferee within 30 days of the date of the transfer (or, if earlier, by
January 15 of the following calendar year).
Passive Activity Loss Limitation. Under Code Section 469, a
non-corporate taxpayer or personal service corporation generally can deduct
"passive losses" in any year only to the extent of the person's passive income
for that year. Closely held corporations (other than personal service
corporations) may offset such losses against active income as well as passive
activity income for that year. Substantially all post-1986 losses of Limited
Partners from the Partnership are believed to be passive losses. Thus, Limited
Partners may have "suspended" passive losses from the Partnership (i.e.,
post-1986 net taxable losses in excess of statutorily permitted "phase-in"
amounts which have not been used to offset income from other passive
activities). Substantially all gain or loss from a sale of Class A Units
pursuant to the Offer will be passive income or loss.
If a Limited Partner sells less than all of its Class A Units
pursuant to the Offer, suspended passive losses, if any (including a portion
of any loss recognized on the sale of Class A Units) can be currently deducted
(subject to other applicable limitations) to the extent of the Limited
Partner's passive income from the Partnership for that year (including any
gain recognized on the sale of Class A Units) plus any other passive income
for that year. If, on the other hand, a Limited Partner sells 100% of its
Class A Units pursuant to the Offer, any "suspended" losses and any losses
recognized upon the sale of the Class A Units will be offset first against any
other net passive gain to the Limited Partner from the sale of the Class A
Units and any other net passive activity income from other passive activity
investments, and the balance of any "suspended" net losses from the Class A
Units will no longer be subject to the passive activity loss limitation and,
therefore, will be deductible by such Limited Partner from its other income
(subject to any other applicable limitations), including ordinary income. A
tendering Limited Partner must sell all of its Class A Units to receive these
tax benefits. If more than 24,000 of the outstanding Class A Units are
tendered, some tendering Limited Partners may not be able to sell 100% of
their Class A Units pursuant to the Offer because of proration of the number
of Class A Units to be purchased by the Purchaser. See Section 1.
Partnership Termination. Section 708(b) of the Code provides that a
partnership terminates for income tax purposes if there is a sale or exchange
of 50% or more of the total interest in partnership capital and profits within
a twelve-month period (although successive transfers of the same interest
within a twelve-month period will be treated as a single transfer for this
purpose). In the event of a termination, the Partnership's tax year would
close and the Partnership would be treated for income tax purposes as if it
had contributed all of its assets and liabilities to a "new" partnership in
exchange for an interest in the "new" partnership. The Partnership would then
be treated as making a distribution of the interests in the "new" partnership
to the new partners and the remaining partners, followed by the liquidation of
the Partnership. Because the "new" partnership would be treated as having
acquired its assets on the date of the deemed contribution, a new depreciation
recovery period would begin on such date, the Partnership's annual
depreciation deductions over the next few years would be substantially
reduced, and the Partnership would have greater taxable income (or less tax
loss) than if no tax termination occurred. In addition, depreciation may be
required to be allocated to those Limited Partners that have a higher tax
basis. A tax termination of the Partnership would also terminate any
partnership in which the Partnership holds a majority interest (50% or more).
The Limited Partnership Agreement prohibits transfers of Class A
Units if a transfer, when considered with all other transfers during the same
applicable twelve-month period, would cause a termination of the Partnership
for tax purposes. The Purchaser believes that even if the maximum number of
Class A Units is purchased pursuant to the Offer, those transfers will not
cause a tax termination of the Partnership.
Backup Withholding and FIRPTA Withholding. Limited Partners (other
than tax-exempt persons, corporations and certain foreign individuals) who
tender Class A Units may be subject to 31% backup withholding unless those
Limited Partners provide a taxpayer identification number ("TIN") and certify
that the TIN is correct or properly certify that they are awaiting a TIN. A
Limited Partner may avoid backup withholding by properly completing and
signing the Substitute Form W-9 included as part of the Assignment of
Partnership Interest. If a
11
Limited Partner who is subject to backup withholding does not properly
complete and sign the Substitute Form W-9, the Purchaser will withhold 31%
from payments to such Limited Partner.
Xxxx realized by a foreign Limited Partner on the sale of a Class A
Unit pursuant to the Offer will be subject to federal income tax. Under Code
Section 1445, the transferee of an interest held by a foreign person in a
partnership which owns United States real property generally is required to
deduct and withhold a tax equal to 10% of the amount realized on the
disposition. In order to comply with this requirement, the Purchaser will
withhold 10% of the amount realized by a tendering Limited Partner unless the
Limited Partner properly completes and signs the FIRPTA Affidavit included as
part of the Assignment of Partnership Interest certifying the Limited
Partner's TIN and address, and that such Limited Partner is not a foreign
person. Amounts withheld would be creditable against a foreign Limited
Partner's federal income tax liability and, if in excess thereof, a refund
could be obtained from the Internal Revenue Service by filing a U.S. income
tax return.
SECTION 7. EFFECTS OF THE OFFER.
Limitations on Resales. The Limited Partnership Agreement prohibits
transfers of Class A Units if a transfer, when considered with all other
transfers during the same applicable twelve-month period, would cause a
termination of the Partnership for federal or any applicable state income tax
purposes. This provision may limit sales of Class A Units in the secondary
market and in private transactions for the twelve-month period following
completion of the Offer. The General Partner has advised the Purchaser that
the Partnership will not process any requests for recognition of substitution
of Limited Partners upon a transfer of Class A Units during such twelve-month
period which the General Partner believes may cause a tax termination in
contravention of the Limited Partnership Agreement. In determining the number
of Class A Units for which the Offer is made (representing approximately 25%
of the outstanding Class A Units if 24,000 Class A Units are tendered), the
Purchaser (which is an affiliate of the General Partner) took this restriction
into account so as to permit normal historical levels of transfers to occur
following the transfers of Class A Units pursuant to the Offer without
violating this restriction.
Effect on Trading Market; Registration Under Section 12(g) of the
Exchange Act. If a substantial number of Class A Units are purchased pursuant
to the Offer, the result will be a reduction in the number of Limited
Partners. In the case of certain kinds of equity securities, a reduction in
the number of security-holders might be expected to result in a reduction in
the liquidity and volume of activity in the trading market for the security.
In this case, however, there is no established public trading market for the
Class A Units and, therefore, the Purchaser (which is an affiliate of the
General Partner) does not believe a reduction in the number of Limited
Partners will materially further restrict the Limited Partners' ability to
find purchasers for their Class A Units through secondary market transactions.
See Section 13 for certain limited information regarding recent secondary
market sales of the Class A Units.
The Class A Units are registered under Section 12(g) of the Exchange
Act, which means, among other things, that the Partnership is required to file
periodic reports with the Commission and to comply with the Commission's proxy
rules. The Purchaser (which is an affiliate of the General Partner) does not
expect or intend that consummation of the Offer will cause the Class A Units
to cease to be registered under Section 12(g) of the Exchange Act. If the
Class A Units were to be held by fewer than 300 persons, the Partnership could
apply to de-register the Class A Units under the Exchange Act. Because the
Class A Units are widely held, however, the Purchaser (which is an affiliate
of the General Partner) believes that, even if it purchases the maximum number
of Class A Units in the Offer, after that purchase the Class A Units will be
held of record by more than 300 persons.
Control of Limited Partner Voting Decisions by Purchaser; Effect of
Relationship with General Partner. The Limited Partnership Agreement provides
that the General Partner has absolute discretion as to whether to admit an
assignee of Class A Units to the Partnership as a substituted Limited Partner.
The Purchaser (which is an affiliate of the General Partner) will seek to be
admitted to the Partnership as a substituted Limited Partner upon consummation
of the Offer and, if admitted, will have the right to vote each Class A Unit
purchased pursuant to the Offer. Even if the Purchaser (which is an affiliate
of the General Partner) is not admitted to the Partnership as a substituted
Limited Partner, however, the Purchaser may have the right to vote each Class
A Unit purchased
12
in the Offer pursuant to the irrevocable appointment by tendering Limited
Partners of the Purchaser and its managers and designees as proxies with
respect to the Class A Units tendered by such Limited Partners and accepted
for payment by the Purchaser. See Section 3. As a result, the Purchaser (which
is an affiliate of the General Partner) could be in a position to
significantly influence all voting decisions with respect to the Partnership.
In general, IPLP and the Purchaser (which are affiliates of the General
Partner) will vote the Class A Units owned by them in whatever manner they
deem to be in the best interest of IPT, which, because of their relationship
with the General Partner, also may be in the interest of the General Partner,
but may not be in the interest of other Limited Partners. This could (i)
prevent non-tendering Limited Partners from taking action they desire but that
IPT opposes and (ii) enable IPT to take action desired by IPT but opposed by
non-tendering Limited Partners. Under the Limited Partnership Agreement,
Limited Partners holding a majority of the Units are entitled to take action
with respect to a variety of matters, including: removal of a general partner
and in certain circumstances election of new or successor general partners;
dissolution of the Partnership; the sale of all or substantially all of the
assets of the Partnership; and most types of amendments to the Limited
Partnership Agreement.
The Offer will not result in any change in the compensation payable
to the General Partner or its affiliates. However, as a result of the Offer,
the Purchaser (which is an affiliate of the General Partner) will participate,
in its capacity as a Limited Partner, in any subsequent distributions to
Limited Partners to the extent of the Class A Units purchased pursuant to the
Offer.
SECTION 8. FUTURE PLANS OF INSIGNIA, IPT AND THE PURCHASER. IPT,
through the Purchaser (which is an affiliate of the General Partner), is
seeking to acquire Class A Units pursuant to the Offer in order to increase
its equity interest in the Partnership, primarily for investment purposes and
with a view to making a profit. Following the completion of the Offer, IPT
and/or persons related to or affiliated with it may acquire additional Class A
Units. Any such acquisition may be made through private purchases, through one
or more future tender or exchange offers or by any other means deemed
advisable. Any such acquisition may be at a price higher or lower than the
price to be paid for the Class A Units purchased pursuant to the Offer, and
may be for cash or other consideration. Insignia and IPT (which are affiliates
of the General Partner) also may consider disposing of some or all of the
Class A Units the Purchaser acquires pursuant to the Offer, either directly or
by a sale or other disposition of one or more interests in IPT or IPLP,
depending among other things on the requirements from time to time of
Insignia, IPT and their affiliates in light of liquidity, strategic, tax and
other considerations.
Neither IPT nor the Purchaser (which are affiliates of the General
Partner) has any present plans or intentions with respect to a liquidation of
the Partnership or a sale of assets or refinancing of any of the Partnership's
properties. However, IPT and the Purchaser expect that consistent with the
General Partner's fiduciary obligations, the General Partner will seek and
review opportunities (including opportunities identified by IPT and the
Purchaser) to engage in transactions which could benefit the Partnership, such
as sales or refinancings of assets or a combination of the Partnership with
one or more other entities, with the objective of seeking to maximize returns
to Limited Partners.
IPT and the Purchaser (which are affiliates of the General Partner)
have been advised that the possible future transactions the General Partner
expects to consider on behalf of the Partnership include (i) payment of
extraordinary distributions; (ii) refinancing, reducing or increasing existing
indebtedness of the Partnership; (iii) sales of assets, individually or as
part of a complete liquidation; and (iv) mergers or other consolidation
transactions involving the Partnership. Any such merger or consolidation
transaction could involve other limited partnerships in which the General
Partner or its affiliates serve as general partners, or a combination of the
Partnership with one or more existing, publicly traded entities (including,
possibly, affiliates of IPT (which is an affiliate of the General Partner) or
IPT itself), in any of which Limited Partners might receive cash, common stock
or other securities or consideration. There is no assurance, however, as to
when or whether any of the transactions referred to above might occur. If any
such transaction is effected by the Partnership and financial benefits accrue
to the Limited Partners of the Partnership, the Purchaser (and thus IPT) will
participate in those benefits to the extent of its ownership of Class A Units.
A merger or other consolidation transaction and certain kinds of other
extraordinary transactions would require a vote of the Limited Partners, and
if the Purchaser is successful in acquiring a significant number of Class A
Units pursuant to the Offer (or otherwise), IPT will be able to
13
significantly influence the outcome of any such vote. IPT's primary objective
in seeking to acquire the Class A Units through the Purchaser pursuant to the
Offer is not, however, to influence the vote on any particular transaction,
but rather to generate a profit on the investment represented by those Class A
Units.
SECTION 9. CERTAIN INFORMATION CONCERNING THE PARTNERSHIP. Except as
otherwise indicated, information contained in this Section 9 is based upon
documents and reports publicly filed by the Partnership with the Commission.
Although the Purchaser has no information that any statements contained in
this Section 9 are untrue, the Purchaser cannot take responsibility for the
accuracy or completeness of any information contained in this Section 9 which
is derived from such public documents, or for any failure by the Partnership
to disclose events which may have occurred and may affect the significance or
accuracy of any such information but which are unknown to the Purchaser.
General. The Partnership was organized on September 8, 1986 under the
laws of the State of California. Its principal executive offices are located
at Xxx Xxxxxxxx Xxxxxxxxx Xxxxx, Xxxxxxxxxx, Xxxxx Xxxxxxxx 00000, and its
telephone number at that address is (000) 000-0000.
The Partnership's primary business is real estate ownership and
related operations. The Partnership was formed to invest in low or moderately
leveraged commercial and residential properties in order to generate current
income and capital appreciation.
The Partnership's investment portfolio currently consists of three
residential apartment complexes: a 278- unit complex in Columbus, Ohio; a
200-unit complex in Indianapolis, Indiana; and a 300-unit complex in West
Valley City, Utah.
Class A Units and Class B Units. Upon its formation, the Partnership
issued two classes of units of limited partnership interest, the Class A Units
and Class B Units. The Class A Units and the Class B Units are entitled to
different rights and priorities as to cash distributions and partnership
allocations, as follows. Both distributable cash from operations and cash from
surplus funds (i.e., net sale and refinancing proceeds) are allocated 1% to
the General Partner and 99% to the Limited Partners. Until such time as the
holders of Class A Units have received their Priority Return, all cash
distributions to Limited Partners are made to the holders of Class A Units;
thereafter, the allocation of cash distributions ("Non-Priority Return
Distributions") to Limited Partners depends on whether a distribution is
comprised of distributable cash from operations or cash from surplus funds. A
Non-Priority Return Distribution of distributable cash from operations is
allocated equally among the holders of Class A Units and Class B Units. A
Non-Priority Return Distribution of cash from surplus funds, on the other
hand, is allocated pro rata (based on relative initial capital contributions)
among the holders of Class A Units and Class B Units until such time as each
has received a return of 100% of their initial invested capital, and
thereafter (based on current circumstances) 90% to the holders of Class B
Units, a 9% fee to the General Partner and 1% to the holders of Class A Units.
Originally Anticipated Term of Partnership; Alternatives. According
to the Partnership's Prospectus dated December 10, 1986, the then general
partner (predecessor to the current General Partner) anticipated that the
Partnership would sell and/or refinance its properties five to eight years
after their acquisition, depending upon the then current real estate and money
markets, economic climate and income tax consequences to the Limited Partners.
Under the Limited Partnership Agreement, the term of the Partnership will
continue until December 31, 2036, unless sooner terminated as provided in the
Limited Partnership Agreement or by law. Limited Partners could, as an
alternative to tendering their Class A Units, take a variety of possible
actions including voting to liquidate the Partnership or causing the
Partnership to merge with another entity or engage in a "roll-up" or similar
transaction.
General Policy Regarding Sales and Refinancings of Partnership
Properties. In general, the General Partner regularly evaluates the
Partnership's properties by considering various factors, such as the
Partnership's financial position and real estate and capital market
conditions. The General Partner monitors each property's specific locale and
sub-market conditions evaluating current trends, competition, new construction
and economic changes. The General Partner oversees each asset's operating
performance and continuously evaluates the physical improvement
14
requirements. In addition, the financing structure for each property, tax
implications and the investment climate are all considered. Any of these
factors, and possibly others, could potentially contribute to any decision of
the General Partner to sell, refinance, upgrade with capital improvements or
hold a particular Partnership property. The Purchaser (which is an affiliate
of the General Partner) has been advised by the General Partner that the
Partnership received an unsolicited offer by an unaffiliated third party to
purchase Shadow Brook Apartments in West Valley City, Utah, for $16,200,000.
Based on the foregoing considerations, however, the General Partner has
determined that it is not in the best interest of Limited Partners to sell or
refinance that or any other property at the present time.
Selected Financial and Property-Related Data. Set forth below is a
summary of certain financial and statistical information with respect to the
Partnership and its properties, all of which has been excerpted or derived
from the Partnership's Annual Reports on Form 10-KSB for the years ended
December 31, 1996 and 1995 and on Form 10-K for the years ended December 31,
1994, 1993 and 1992 and the Partnership's Quarterly Reports on Form 10-QSB for
the periods ended September 30, 1997 and 1996. More comprehensive financial
and other information is included in such reports and other documents filed by
the Partnership with the Commission, and the following summary is qualified in
its entirety by reference to such reports and other documents and all the
financial information and related notes contained therein.
MULTI-BENEFIT REALTY FUND '87-1
SELECTED FINANCIAL DATA
(in thousands, except Class A Unit data)
NINE MONTHS ENDED FISCAL YEAR ENDED
SEPTEMBER 30, DECEMBER 31,
----------------------- ------------------------------------------------------------
1997 1996 1996 1995 1994 1993 1992
---------- ------------ ----------- ----------- ----------- ---------- -------
(UNAUDITED)
Statements of Operations Data:
Rental Income................. $ 3,528 $ 3,441 $ 4,595 $ 4,312 $ 4,216 $ 4,185 $ 3,997
Other Income.................. $ 244 $ 198 $ 266 $ 960 $ 132 $ 177 $ 194
Total Revenues............. $ 3,772 $ 3,639 $ 4,861 $ 5,272 $ 4,348 $ 4,362 $ 4,191
Income (Loss) from Operations
(before extraordinary item) $ (12) $ 84 $ 46 $ 383 $ (1,452) $ (350) $ (498)
Net Income (Loss)(1).......... $ (12) $ 84 $ 46 $ 383 $ (1,396) $ (350) $ (498)
Net Income (Loss) per Class A
Unit(1).................... $ (.07) $ .49 $ .27 $ 2.21 $ (8.06) $ (2.01) $ (2.86)
AS OF AS OF
SEPTEMBER 30, DECEMBER 31,
----------------------- -----------------------------------------------------------
1997 1996 1996 1995 1994 1993 1992
---------- ------------ ----------- ----------- ----------- ---------- --------
(UNAUDITED)
Balance Sheets Data:
Total Assets.................. $ 15,202 $ 15,601 $ 16,612 $ 16,334 $ 16,688 $ 18,688 $ 19,986
Total Liabilities............. $ 13,115 $ 12,087 $ 13,136 $ 12,445 $ 12,264 $ 12,363 $ 12,453
Limited Partners' Equity
(Deficit)(1)................ $((1,608) $ (217) $ (238) $ 190 $ 886 $ 2,162 $ 3,206
Class A Units Outstanding..... 96,284 96,284 96,284 96,284 96,284 96,284 97,059
Book Value per Class A Unit... $ (16.70) $ (2.25) $ (2.47) $ 1.97 $ 9.20 $ 22.45 $ 33.03
------------------------
(1) Net income or loss is allocated equally among holders of Class A
Units and Class B Units.
(2) Limited Partners' Equity (Deficit) is calculated only with respect
to Class A Units.
15
Description of Properties. Set forth below is a table showing the
location, the date of purchase, the nature of the Partnership's ownership
interest in and the use of each of the Partnership's properties.
DATE OF
PROPERTY PURCHASE TYPE OF OWNERSHIP USE
----------------------------- -------- ----------------------------- -------------------------
Xxxxxx Xxxxx Apartments 11/87 Fee ownership Residential Apartments
Columbus, Ohio (subject to first mortgage) (278 units)
Xxxx Club Apartments 05/87 Fee ownership Residential Apartments
Indianapolis, Indiana (subject to first mortgage) (200 units)
Shadow Brook Apartments 05/87 Fee ownership Residential Apartments
West Valley City, Utah (subject to first mortgage) (300 units)
Accumulated Depreciation Schedule. Set forth below is a table showing
the gross carrying value, accumulated depreciation and federal tax basis of
each of the Partnership's properties as of December 31, 1996 ($ amounts in
thousands).
GROSS
CARRYING ACCUMULATED FEDERAL
PROPERTY VALUE DEPRECIATION RATE METHOD TAX BASIS
----------------------------------- -------------- ------------- ---------- ----------- -----------
Carlin Manor Apartments $ 6,561 $ 3,307 5-30 yrs. S/L $ 5,471
Xxxx Club Apartments 6,796 3,239 5-30 yrs. S/L 4,309
Shadow Brook Apartments 10,197 3,457 5-30 yrs. S/L 6,692
-------- ---------- ----------
TOTALS $ 23,554 $ 10,003 $ 16,472
======== ========== ==========
Schedule of Mortgages. Set forth below is a table showing certain
information regarding the outstanding mortgages encumbering each of the
Partnership's properties as of December 31, 1996 ($ amounts in thousands).
PRINCIPAL PRINCIPAL
BALANCE AT STATED BALANCE
DECEMBER 31, INTEREST PERIOD MATURITY DUE AT
PROPERTY 1996 RATE AMORTIZED DATE MATURITY
---------------------------------- --------------- ---------- ------------ ------------ -----------
Carlin Manor Apartments $ 2,500 7.33% (a) 11/2003 $ 2,500
Xxxx Club Apartments 3,850 8.30% 20 yrs. 10/2000 3,575
Shadow Brook Apartments 6,000 7.33% (a) 11/2003 6,000
-------- ------------
TOTALS $ 12,350 $ 12,075
======== ============
-----------------
(a) Interest only.
Average Annual Rental Rate and Occupancy. Set forth below is a table
showing the average annual rental rates and occupancy percentages for each of
the Partnership's properties during the past two years.
PROPERTY AVERAGE ANNUAL RENTAL RATE AVERAGE ANNUAL OCCUPANCY
-------- -------------------------- ---------------------------
1996 1995 1996 1995
------------ ------------- ------------ ----------
Carlin Manor Apartments $5,497/unit $5,359/unit 90% 86%
Xxxx Club Apartments $7,074/unit $6,893/unit 94% 91%
Shadow Brook Apartments $6,511/unit $5,763/unit 97% 98%
16
Schedule of Real Estate Taxes and Rates. Set forth below is a table
showing the real estate taxes and rates for 1996 for each of the Partnership's
properties.
1996 1996
PROPERTY BILLING RATE
------------------------------ --------- --------
Carlin Manor Apartments $ 107,000 5.4%
Xxxx Club Apartments $ 149,000 9.2%
Shadow Brook Apartments $ 81,000 1.4%
Other Information. The Partnership is subject to the information
reporting requirements of the Exchange Act and accordingly is required to file
reports and other information with the Commission relating to its business,
financial results and other matters. Such reports and other documents may be
inspected at the Commission's Public Reference Section, Room 1024, 000 Xxxxx
Xxxxxx, X.X., Xxxxxxxxxx, X.X. 00000, where copies may be obtained at
prescribed rates, and at the regional offices of the Commission located in the
Citicorp Center, 000 Xxxx Xxxxxxx Xxxxxx, Xxxxx 0000, Xxxxxxx, Xxxxxxxx 00000,
and 7 World Trade Center, New York, New York 10048. Copies should be available
by mail upon payment of the Commission's customary charges by writing to the
Commission's principal offices at 000 Xxxxx Xxxxxx, X.X., Xxxxxxxxxx, X.X.
00000. The Commission also maintains a web site that contains reports, proxy
and other information filed electronically with the Commission, the address of
which is xxxx://xxx.xxx.xxx.
Cash Distributions History. The Partnership has made cash distributions
to Limited Partners in respect of Class A Units of $14.16 per Class A Unit in
1997 (through December 23), $4.72 per Class A Unit in 1996 and $9.44 per Class
A Unit in 1995. In total, original investors in the Partnership who purchased
Class A Units have received distributions of only $72.20 in respect of their
original $100 investment made in 1983.
Operating Budgets of the Partnership. A summary of the fiscal 1996 and
1997 operating budgets and the audited results of operations for fiscal 1996
of the Partnership are set forth in the table below. The budgeted amounts
provided below are figures that were not computed in accordance with generally
accepted accounting principles ("GAAP"). Historically, budgeted operating
results of operations for a particular fiscal year have differed significantly
in certain respects from the audited operating results for that year. In
particular, items that are categorized as capital expenditures for purposes of
preparing the operating budgets are often re-categorized as expenses when the
financial statements are audited and presented in accordance with GAAP.
Therefore, the summary operating budgets presented for fiscal 1997 should not
necessarily be considered as indicative of what the audited operating results
for fiscal 1997 will be. Furthermore, any estimate of the future performance
of a business, such as the Partnership's business, is forward-looking and
based on numerous assumptions, some of which inevitably will prove to be
incorrect. For this reason, it is probable that the Partnership's future
operating results will differ from those projected in the operating budget,
and those differences may be material. Therefore, such information should not
be relied on by Limited Partners.
FISCAL 1996 FISCAL 1996 FISCAL 1997
BUDGETED AUDITED BUDGETED
-------- ------- --------
Total Revenues from Property Operations................. $ 4,794,403 $ 4,595,000 $ 5,020,380
Total Operating Expenses................................ $ 2,415,319 $ 2,541,000 $ 2,569,016
Net Operating Income.................................... $ 2,379,084 $ 2,054,000 $ 2,451,364
Capital Expenditures.................................... $ 761,746 $ 506,000 $ 605,711
SECTION 10. CONFLICTS OF INTEREST AND TRANSACTIONS WITH AFFILIATES.
The General Partner and its affiliates have conflicts of interest with respect
to the Offer as set forth below.
Conflicts of Interest with Respect to the Offer. The General Partner
has conflicts of interest with respect to the Offer, including conflicts
resulting from its affiliation with IPT and the Purchaser. The General Partner
also would have a conflict of interest (i) as a result of the fact that a sale
or liquidation of the Partnership's assets would result in a decrease or
elimination of the fees paid to the General Partner and/or its affiliates and
(ii) as a consequence of the Purchaser's ownership of Class A Units, because
the Purchaser (which is an affiliate of the
17
General Partner) may have incentives to seek to maximize the value of its
ownership of Class A Units, which in turn may result in a conflict for the
General Partner in attempting to reconcile the interests of the Purchaser
(which is an affiliate of the General Partner) with the interests of the other
Limited Partners. In addition, the Purchaser (which is an affiliate of the
General Partner) is making the Offer with a view to making a profit.
Accordingly, there is a conflict between the desire of the Purchaser (which is
an affiliate of the General Partner) to purchase Class A Units at a low price
and the desire of the Limited Partners to sell their Class A Units at a high
price. The General Partner has indicated in the Schedule 14D-9 that it is
remaining neutral and making no recommendation as to whether Limited Partners
should tender their Class A Units pursuant to the Offer. LIMITED PARTNERS ARE
URGED TO READ THIS OFFER TO PURCHASE AND THE SCHEDULE 14D-9 AND THE RELATED
MATERIALS CAREFULLY AND IN THEIR ENTIRETY BEFORE DECIDING WHETHER TO TENDER
THEIR CLASS A UNITS.
Voting by the Purchaser. The Limited Partnership Agreement provides
that the General Partner has absolute discretion as to whether to admit an
assignee of Class A Units to the Partnership as a substituted Limited Partner.
The Purchaser (which is an affiliate of the General Partner) will seek to be
admitted to the Partnership as a substituted Limited Partner upon consummation
of the Offer and, if admitted, will have the right to vote each Class A Unit
purchased pursuant to the Offer. Even if the Purchaser (which is an affiliate
of the General Partner) is not admitted to the Partnership as a substituted
Limited Partner, however, the Purchaser may have the right to vote each Class
A Unit purchased in the Offer pursuant to the irrevocable appointment by
tendering Limited Partners of the Purchaser (which is an affiliate of the
General Partner) and its managers and designees as proxies with respect to the
Class A Units tendered by such Limited Partners and accepted for payment by
the Purchaser. See Section 3. As a result, if the Purchaser (which is an
affiliate of the General Partner) is successful in acquiring a significant
number of Class A Units pursuant to the Offer, the Purchaser will have the
right to vote those Class A Units and thereby significantly influence all
voting decisions with respect to the Partnership. In general, IPLP and the
Purchaser (which are affiliates of the General Partner) will vote the Class A
Units owned by them in whatever manner they deem to be in IPT's best interest,
which, because of their relationship with the General Partner, also may be in
the interest of the General Partner, but may not be in the interest of other
Limited Partners. This could (i) prevent non-tendering Limited Partners from
taking action they desire but that IPT opposes and (ii) enable IPT to take
action desired by IPT but opposed by non-tendering Limited Partners. Under the
Limited Partnership Agreement, Limited Partners holding a majority of the
Units are entitled to take action with respect to a variety of matters,
including: removal of a general partner and in certain circumstances election
of new or successor general partners; dissolution of the Partnership; the sale
of all or substantially all of the assets of the Partnership; and most types
of amendments to the Limited Partnership Agreement. See Section 7.
Financing Arrangements. The Purchaser (which is an affiliate of the
General Partner) expects to pay for the Class A Units it purchases pursuant to
the Offer with funds provided by IPLP as capital contributions. IPLP in turn
intends to use its cash on hand to make such contributions. See Section 12. It
is possible, however, that in connection with its future financing activities,
IPT or IPLP may cause or request the Purchaser (which is an affiliate of the
General Partner) to pledge the Class A Units as collateral for loans, or
otherwise agree to terms which provide IPT, IPLP and the Purchaser with
incentives to generate substantial near-term cash flow from the Purchaser's
investment in the Class A Units. This could be the case, for example, if a
loan has a "balloon" maturity after a relatively short time or bears a high or
increasing interest rate. In such a situation, the General Partner may
experience a conflict of interest in seeking to reconcile the best interests
of the Partnership with the need of its affiliates for cash flow from the
Partnership's activities.
Transactions with Affiliates. Under the Limited Partnership
Agreement, the General Partner holds an interest in the Partnership and is
entitled to participate in certain cash distributions made by the Partnership
to its partners. The General Partner received from the Partnership in respect
of its interest in the Partnership cash distributions of $14,000 to date in
1997, $5,000 in 1996 and $9,000 in 1995. In late December 1994, IRG (an
affiliate of the Purchaser and the General Partner) assumed day-to-day
property management responsibilities for the Partnership's properties. The
Partnership paid IRG property management fees for property management services
in the amounts of approximately $240,000 and $223,000 for the years ended
December 31, 1996 and 1995, respectively, and has paid IRG property management
fees equal to $185,000 during the first nine months of 1997. The Partnership
reimbursed the General Partner and its affiliates (including Insignia) for
expenses incurred in
18
connection with asset management and partnership administration services
performed by them for the Partnership during 1996 and 1995 in the amounts of
$178,000 and $120,000, respectively, and has reimbursed them in the amount of
$91,000 through September 30, 1997 (including reimbursements paid to an
affiliate of the General Partner in the amounts of $54,000 and $10,500 for the
year ended December 31, 1996 and the nine months ended September 30, 1997,
respectively, for costs incurred in connection with construction oversight
services). Pursuant to the Limited Partnership Agreement, the General Partner
is entitled to receive a fee for executive and administrative management
services equal to 9% of the Partnership's adjusted cash from operations, as
and when cash from operations is distributed to the Limited Partners. The fees
paid to the General Partner pursuant to this provision were approximately
$41,000 and $82,000 for the years ended December 31, 1996 and 1995,
respectively, and approximately $123,000 for the nine months ended September
30, 1997. On July 1, 1995, the Partnership began insuring its properties under
a master policy through an agency and insurer unaffiliated with the General
Partner. An affiliate of the General Partner acquired, in the acquisition of a
business, certain financial obligations from an insurance agency which was
later acquired by the agent who placed the current year's master policy. The
current agent assumed the financial obligations to the affiliate of the
General Partner who receives payments on these obligations from the agent.
Insignia and the General Partner believe that the aggregate financial benefit
derived by Insignia and its affiliates from the arrangement described in the
three preceding sentences has been immaterial.
SECTION 11. CERTAIN INFORMATION CONCERNING THE PURCHASER, IPLP, IPT
AND INSIGNIA.
The Purchaser. The Purchaser (which is an affiliate of the General
Partner) is a newly formed entity controlled by IPT and organized for the
purpose of making the Offer. The Purchaser is a wholly-owned subsidiary of
IPLP. The Purchaser (which is an affiliate of the General Partner) has not
engaged in any business activity other than in connection with the Offer and
certain other tender offers for units of limited partnership interests in
other IPT Partnerships (as defined below) being made contemporaneously with
the Offer, and has no significant assets or liabilities at the present time.
Upon consummation of the Offer and such other offers, the Purchaser's only
significant assets will be the Class A Units it acquires pursuant to the Offer
and the other limited partnership units it acquires pursuant to such other
offers.
The principal executive offices of the Purchaser (which is an
affiliate of the General Partner) are located at One Insignia Financial Plaza,
P.O. Box 19059, Greenville, South Carolina 29602, and its telephone number is
(000) 000-0000. For certain information concerning the managers of the
Purchaser (which is an affiliate of the General Partner), see Schedule II to
this Offer to Purchase.
IPT and IPLP. IPT was formed by Insignia in May 1996 for the purpose
of acquiring and owning interests in multifamily residential properties,
principally through ownership of limited and general partner interests in real
estate limited partnerships (including the Partnership). IPT has been
organized and operates in a manner that will qualify it to be taxed as a real
estate investment trust ("REIT") under the Code. Substantially all of IPT's
investments are held through IPLP, which is the operating partnership of IPT.
IPT is presently the sole general partner and Insignia is presently the sole
limited partner of IPLP.
In forming IPT, Insignia and its affiliates (i) transferred to IPT
equity interests in entities comprising or controlling the general partners of
36 public real estate limited partnerships (including the Partnership) (the
"IPT Partnerships") in exchange for common shares of beneficial interest of
IPT and (ii) transferred to IPLP limited partner interests in the IPT
Partnerships (or equity interests in entities owning limited partner interests
in the IPT Partnerships) in exchange for units of limited partner interest in
IPLP. The IPT Partnerships own, in the aggregate, 184 properties containing
approximately 42,000 residential apartment units and approximately 4.2 million
square feet of commercial space. See Schedule V for a list of the IPT
Partnerships.
IPT does not currently operate as a self-administered and
self-managed REIT, but rather has engaged Insignia to act as advisor to IPT
and IPLP. In such capacity, Insignia and its affiliates provide a broad range
of services to IPT and IPLP, including executive advisory, investment
advisory, acquisition, administrative, financial and accounting services,
including in connection with the Offer.
19
On July 18, 1997, IPT, Insignia, MAE GP Corporation (which is an
affiliate of Insignia) and Angeles Mortgage Investment Trust, an
unincorporated California business trust ("AMIT"), entered into a definitive
merger agreement (the "AMIT Merger Agreement"), pursuant to which AMIT is to
be merged with and into IPT, with IPT being the surviving entity, in a stock
for stock transaction (the "AMIT Merger"). XXXX is a public company whose
Class A shares trade on the American Stock Exchange under the symbol ANM.
Insignia and its affiliates currently own 96,800 (or approximately 3.7%) of
the 2,617,000 outstanding AMIT Class A shares and all of the 1,675,113
outstanding AMIT Class B shares. If the AMIT Merger is consummated, IPT will
become a publicly traded company (IPT presently intends to apply for listing
of its shares on the New York Stock Exchange, which listing would be subject
to completion of the AMIT Merger), and it is anticipated that Insignia and its
affiliates will own approximately 56% of post-merger IPT, the former AMIT
shareholders (other than Insignia and its affiliates) will own approximately
17% of post-merger IPT, and the current unaffiliated shareholders of IPT will
own the remaining 27% of post-merger IPT.
The XXXX Xxxxxx is expected to be completed in the first quarter of
1998. Consummation of the AMIT Merger is subject to several conditions,
including approval of the AMIT Merger Agreement and the AMIT Merger by the
respective shareholders of IPT and XXXX and the receipt by AMIT of a fairness
opinion from its financial advisor to the effect that the AMIT Xxxxxx is fair
to AMIT's shareholders from a financial point of view. Accordingly, there can
be no assurance as to when the AMIT Merger will occur, or that it will occur
at all.
IPT's principal executive offices are located at One Insignia
Financial Plaza, P.O. Box 19059, Greenville, South Carolina 29602, and its
telephone number is (000) 000-0000. For certain information concerning the
trustees and executive officers of IPT, see Schedule III to this Offer to
Purchase. IPLP does not have any officers or employees.
20
Set forth below is certain consolidated financial information with
respect to IPT and IPLP.
INSIGNIA PROPERTIES TRUST
SELECTED CONSOLIDATED FINANCIAL INFORMATION
(in thousands, except share and unit data)
NINE MONTHS
ENDED YEAR ENDED
SEPTEMBER 30, DECEMBER 31,
1997 1996
-------------- ---------------
(unaudited) (audited)
Statements of Operations Data:
Revenues............................... $ 11,144 $ 9,705
Income Before Extraordinary Item....... $ 2,930 $ 3,557
Net Income............................. $ 2,930 $ 2,425
Supplemental Data:
Funds From Operations(1)............... $ 14,324 $ 12,563
IPT Common Shares Outstanding.......... 17,573,151 11,168,036
IPLP Units Outstanding................. 8,399,499 8,399,499
---------- ----------
IPT Common Shares and IPLP Units
Outstanding(2)....................... 25,972,650 19,567,535
========== ==========
Balance Sheets Data:
Cash................................... $ 53,897 $ 4,928
Investments in IPT Partnerships(3)..... $ 126,505 $ 118,741
Long-Term Debt......................... $ 19,300 $ 19,730
Shareholders' Equity(4)................ $ 138,710 $ 121,068
------------------
(1) Funds from Operations represent income or loss from real estate
operations, which is net income or loss in accordance with GAAP, excluding
gains or losses from debt restructuring or sales of property, plus
depreciation and provision for impairment.
(2) Assumes all outstanding IPLP units are exchanged for IPT Common Shares.
(3) Represents IPT's investment in 26 of the 36 IPT Partnerships which IPT
accounts for using the equity method. Of the remaining ten IPT
Partnerships, IPT accounts for nine using the cost method and one using
the consolidation method.
(4) Includes Insignia's investments in predecessor entities.
Insignia. Insignia is a fully integrated real estate services
organization. Insignia is the largest manager of multi-family residential
properties in the United States and is among the largest managers of
commercial properties. Insignia's real estate services include property
management, providing all of the day-to-day services necessary to operate a
property, whether residential or commercial; asset management, including
long-term financial planning, monitoring and implementing capital improvement
plans, and development and execution of refinancings and dispositions; real
estate leasing and brokerage; maintenance and construction services; marketing
and advertising; investor reporting and accounting; and investment banking,
including assistance in workouts and restructurings, mergers and acquisitions,
and debt and equity securitizations.
Insignia provides property and/or asset management services for
approximately 2,600 properties, which include approximately 290,000
residential units (including cooperative and condominium units), and in excess
of 150 million square feet of retail, commercial and industrial space, located
in over 500 cities in 48 states. Insignia currently provides partnership
administration services to approximately 900 limited partnerships having
approximately 330,000 limited partners. Insignia is a public company whose
stock is traded on the New York Stock Exchange under the symbol IFS.
Insignia is subject to the information and reporting requirements of
the Exchange Act and in accordance therewith is required to file periodic
reports, proxy statements and other information with the Commission relating
to its business, financial condition and other matters. Certain information,
as of particular dates, concerning Insignia's business, principal properties,
capital structure, material pending legal proceedings, operating results,
financial condition, directors and officers (including their remuneration and
stock options granted to them), the principal holders of Insignia's
securities, any material interests of such persons in transactions with
Insignia and
21
certain other matters is required to be disclosed in proxy statements and
annual reports distributed to Insignia's shareholders and filed with the
Commission. Such reports, proxy statements and other information may be
inspected and copied at the Commission's public reference facilities and
should also be available for inspection in the same manner as set forth with
respect to the Partnership in Section 9.
Insignia's principal executive offices are located at Xxx Xxxxxxxx
Xxxxxxxxx Xxxxx, Xxxxxxxxxx, Xxxxx Xxxxxxxx 00000, and its telephone number is
(000) 000-0000. For certain information concerning the directors and executive
officers of Insignia, see Schedule IV to this Offer to Purchase.
Set forth below is certain consolidated financial information with
respect to Insignia and its consolidated subsidiaries for its fiscal years
ended December 31, 1996, 1995 and 1994 and the nine-month periods ended
September 30, 1997 and 1996. More comprehensive financial and other
information is included in Insignia's Annual Report on Form 10-K for the year
ended December 31, 1996 (including management's discussion and analysis of
financial condition and results of operations) and in other reports and
documents filed by Insignia with the Commission. The financial information set
forth below is qualified in its entirety by reference to such reports and
documents filed with the Commission and the financial statements and related
notes contained therein. These reports and other documents may be examined and
copies thereof may be obtained in the manner set forth above.
INSIGNIA FINANCIAL GROUP, INC.
SELECTED CONSOLIDATED FINANCIAL INFORMATION
(in thousands, except per share data)
NINE MONTHS ENDED YEAR ENDED
SEPTEMBER 30, DECEMBER 31,
-------------------------- ---------------------------------
1997 1996 1996 1995 1994
------------ ------------ ---------- --------- --------
(unaudited)
Statements of Operations Data:
Total Revenues.................................. $ 254,630 $ 149,204 $ 227,074 $ 123,032 $ 75,453
Income Before Taxes and Extraordinary Item...... $ 7,879 $ 8,097 $ 14,946 $ 10,093 $ 12,101
Net Income...................................... $ 4,727 $ 5,020 $ 8,564 $ 5,806 $ 7,261
Earnings Per Share.............................. $ 0.15 $ 0.15 $ 0.27 $ 0.20 $ 0.35
AS OF AS OF
SEPTEMBER 30, DECEMBER 31,
------------------------ ------------------------------------
1997 1996 1996 1995 1994
---- ---- ---- ---- ----
(unaudited)
Balance Sheets Data:
Cash and Cash Equivalents....................... $ 89,427 $ 60,131 $ 54,614 $ 49,846 $ 36,596
Receivables..................................... $ 73,657 $ 14,292 $ 46,040 $ 26,445 $ 13,572
Total Assets................................ $ 568,768 $ 471,889 $ 492,402 $ 245,409 $ 174,272
Accounts Payable................................ $ 8,767 $ 2,602 $ 1,711 $ 1,497 $ 3,478
Commissions Payable............................. $ 30,841 $ 9,257 $ 18,736 $ 602 --
Accrued and Sundry Liabilities.................. $ 50,893 $ 24,604 $ 40,741 $ 25,619 $ 18,790
Long-Term Debt.................................. $ 58,417 $ 205,590 $ 69,140 $ 42,996 $ 73,198
Total Liabilities........................... $ 148,918 $ 255,714 $ 130,328 $ 70,714 $ 95,466
Redeemable Convertible Preferred Stock.......... -- -- -- $ 15,000 --
Redeemable Convertible Preferred Securities
of Subsidiary Trust........................... $ 143,993 -- $ 144,169 -- --
Minority Interest in Consolidated Subsidiaries.. $ 52,778 $ 2,762 -- $ 2,682 --
Shareholders' Equity........................ $ 223,079 $ 213,413 $ 217,905 $ 157,013 $ 78,806
Except as otherwise set forth herein and in Schedule I, none of the
Purchaser (which is an affiliate of the General Partner), IPLP, IPT, Insignia
or, to the best of the Purchaser's knowledge, any of the persons listed on
Schedules II, III or IV hereto, or any affiliate of the foregoing, (i)
beneficially owns or has a right to acquire any Class A Units, (ii) has
effected any transaction in the Class A Units in the last 60 days, or (iii)
has any contract, arrangement, understanding or relationship with any other
person with respect to any securities of the Partnership,
22
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. Xxxxxx X. Xxxxxx, who is the
Chairman of the Board, Chief Executive Officer and President of Insignia and a
trustee of IPT, beneficially owns approximately 28% of Insignia's outstanding
common stock and, as a result, may be deemed to beneficially own the Class A
Units owned by IPLP.
SECTION 12. SOURCE OF FUNDS. The Purchaser (which is an affiliate of
the General Partner) expects that approximately $1,400,000 will be required to
purchase 24,000 Class A Units, if tendered, and to pay related fees and
expenses. The Purchaser (which is an affiliate of the General Partner) expects
to obtain all of those funds from IPLP, which in turn intends to use its cash
on hand.
SECTION 13. BACKGROUND OF THE OFFER.
Affiliation with the General Partner. Upon the Partnership's
formation in 1986, Consolidated Capital Equities Corporation ("CCEC"), a
Colorado corporation, was the sole general partner and Multi-Benefit '87-1
Depositary Corporation, a wholly-owned subsidiary of CCEC, was the sole
limited partner. As a result of a succession of agreements, CCEC became the
managing general partner. In 1988, through a series of transactions, Southmark
Corporation acquired control of CCEC. In December 1988, CCEC filed for
reorganization under Chapter 11 of the United States Bankruptcy Code. In 1990,
as part of CCEC's reorganization plan, the General Partner acquired CCEC's
interest as managing general partner of the Partnership and its general
partner interests in the Partnership and in 15 other affiliated public limited
partnerships (the "Affiliated Partnerships") and the General Partner replaced
CCEC as the general partner of the Partnership (and as the general partner of
each of the Affiliated Partnerships). The selection of the General Partner as
the general partner of the Partnership (and of each of the Affiliated
Partnerships) was approved by a majority of the Limited Partners in the
Partnership (and by a majority of the limited partners in each of the
Affiliated Partnerships) pursuant to solicitations commenced in August 1990.
Insignia acquired the stock of the General Partner through two transactions in
December 1994 and October 1995, and contributed that stock to IPT in December
1996 in connection with IPT's formation.
Determination of Purchase Price. In establishing the Purchase Price,
the Purchaser (which is an affiliate of the General Partner) reviewed certain
publicly available information and certain information made available to it by
the General Partner and its other affiliates, including among other things:
(i) the Limited Partnership Agreement, as amended to date; (ii) the
Partnership's Annual Report on Form 10-KSB for the year ended December 31,
1996 and the Partnership's Quarterly Report on Form 10-QSB for the period
ended September 30, 1997; (iii) unaudited results of operations of the
Partnership's properties for the period since the beginning of the
Partnership's current fiscal year; (iv) the operating budgets prepared by IRG
with respect to the Partnership's properties for the year ending December 31,
1997; (v) independent appraisals of two of the Partnership's properties; and
(vi) other information obtained by IRG, Insignia and other affiliates in their
capacities as providers of property management, asset management and
partnership administration services to the Partnership. Based on that
information, the Purchaser (which is an affiliate of the General Partner)
considered several factors, as discussed below.
Trading History of Class A Units. Secondary market sales activity for
the Class A Units, including privately negotiated sales, has been limited and
sporadic. According to information obtained from the General Partner, from
October 1, 1995 to September 30, 1997 an aggregate of 3,461 Class A Units
(representing less than 3.6% of the total outstanding Class A Units) was
transferred (excluding the Class A Units transferred to IPLP in December 1996
in connection with the formation of IPT) in sale transactions. Set forth in
the table below are the high and low sales prices of Class A Units for the
quarterly periods from October 1, 1995 to September 30, 1997, as reported by
the General Partner and by The Partnership Spectrum, which is an independent,
third-party source. The gross sales prices reported by The Partnership
Spectrum do not necessarily reflect the net sales proceeds received by sellers
of Class A Units, which typically are reduced by commissions and other
secondary market transaction costs to amounts less than the reported prices;
thus the Purchaser does not know whether the information reported by The
Partnership Spectrum is accurate or complete. The transfer paperwork submitted
to the General
23
Partner often does not include the requested price information or contains
conflicting information as to the actual sales price; accordingly, Limited
Partners should not rely upon this information as being completely accurate.
MULTI-BENEFIT REALTY FUND '87-1
REPORTED SALES PRICES OF PARTNERSHIP CLASS A UNITS
AS REPORTED BY AS REPORTED BY
THE GENERAL PARTNER(1) THE PARTNERSHIP SPECTRUM(2)
---------------------------------- ----------------------------------
LOW SALES HIGH SALES LOW SALES HIGH SALES
PRICE PRICE PRICE PRICE
PER CLASS A UNIT PER CLASS A UNIT PER CLASS A UNIT PER CLASS A UNIT
---------------- ---------------- ---------------- ----------------
Fiscal Year Ended December 31, 1997:
Third Quarter........................... $44 $60 $36 $66
Second Quarter.......................... 29 65 44 65
First Quarter .......................... 40 53 58 71
Fiscal Year Ended December 31, 1996:
Fourth Quarter ......................... 23 40 40 53
Third Quarter........................... 42 52 44 44
Second Quarter.......................... 32 64 40 42
First Quarter........................... 32 75 40 40
Fiscal Year Ended December 31, 1995:
Fourth Quarter.......................... 20 20 32 32
-------------------
(1) Although the General Partner requests and records information on the
prices at which Class A Units are sold, it does not regularly receive or
maintain information regarding the bid or asked quotations of secondary
market makers, if any. The General Partner processes transfers of Class A
Units only 12 times per year - on the first day of each month. The prices
in the table are based solely on information provided to the General
Partner by sellers and buyers of Class A Units transferred in sale
transactions (i.e., excluding transactions believed to result from the
death of a Limited Partner, rollover to an IRA account, establishment of
a trust, trustee to trustee transfers, termination of a benefit plan,
distributions from a qualified or non-qualified plan, uniform gifts,
abandonment of Class A Units or similar non-sale transactions).
(2) The gross sales prices reported by The Partnership Spectrum do not
necessarily reflect the net sales proceeds received by sellers of Class A
Units, which typically are reduced by commissions and other secondary
market transaction costs to amounts less than the reported prices. The
Purchaser (which is an affiliate of the General Partner) does not know
whether the information reported by The Partnership Spectrum is accurate
or complete.
The Purchaser (which is an affiliate of the General Partner) believes
that, although secondary market sales information probably is not a reliable
measure of value because of the limited and inefficient nature of the market
for Class A Units, this information may be relevant to a Limited Partner's
decision as to whether to tender its Class A Units pursuant to the Offer. At
present, privately negotiated sales and sales through intermediaries (e.g.,
through the trading system operated by American Partnership Board, Inc., which
publishes sell offers by holders of Class A Units) are the only means
available to a Limited Partner to liquidate an investment in Class A Units
(other than the Offer) because the Class A Units are not listed or traded on
any exchange or quoted on NASDAQ.
Appraisals. Two of the Partnership's properties were appraised in
1996 by an independent, third party appraiser, Xxxxxxx Tener Real Estate
Services, Inc. ("KTR"), in connection with an initial financing of one
property and a refinancing of the other property. According to the appraisal
reports, the scope of the appraisals included an inspection of each property
and an analysis of the respective surrounding markets. In each case, KTR
relied principally on the income capitalization approach to valuation and
secondarily on the sales comparison approach, and represented that its report
was prepared in accordance with the Code of Professional Ethics and Standards
of Professional Appraisal Practice of the Appraisal Institute and the Uniform
Standards of Professional Appraisal Practice, and in compliance with the
Appraisal Standards set forth in the Financial Institutions Reform, Recovery
and Enforcement Act of 1989 (known as "FIRREA"). The estimated market value of
the fee simple estate of each of the Partnership's properties specified in
those appraisal reports for the two properties which were appraised in 1996
are set forth in the table below, and copies of the summaries of those
appraisals have been filed as exhibits to the Purchaser's Tender Offer
Statement on Schedule 14D-1 filed with the Commission.
24
APPRAISED DATE OF
PROPERTY NAME VALUE APPRAISAL
------------- --------------- ---------
Carlin Manor $ 4,750,000 04/12/96
Shadow Brook $ 11,750,000 04/25/96
Purchaser's Estimate of Gross Real Estate Value. In estimating the
gross real estate value of the Partnership's properties, the Purchaser
utilized the capitalization of income approach. The estimate of the gross real
estate value of the Partnership's properties prepared by the Purchaser does
not purport to be an estimate of the aggregate fair market value of the Class
A Units themselves, nor should it be viewed as such by Limited Partners.
Neither the Purchaser nor any of its affiliates prepared any estimates of the
values of the Partnership's properties based upon any other valuation method.
The following is a description of the methodology employed by the
Purchaser in preparing such estimates (as used below, "net operating income"
is calculated before depreciation, amortization, debt service payments and
certain capital expenditure items):
CARLIN MANOR APARTMENTS. In estimating the value of this property,
the Purchaser reviewed the income ($1,231,480) generated by the property for
the ten months ended October 31, 1997 (comprised of $1,157,876 of gross rental
income and $73,604 of other income), and then deducted from this amount the
total operating expenses of the property for the first ten months of 1997
($660,503), resulting in the Purchaser's estimate of net operating income for
the first ten months of 1997 ($570,977). The Purchaser then annualized this
amount, resulting in estimated annual net operating income of $685,172, and
then reduced that annualized net operating income amount by $400 per apartment
unit, representing the Purchaser's estimate of the adjustment that would be
imputed by a third party purchaser in underwriting the operating expenses,
including normal replacement reserves, of the property for valuation purposes.
Finally, the Purchaser capitalized its estimated adjusted net operating income
amount ($573,972) at an 11.5% capitalization rate, resulting in an estimated
gross property value of $4,991,061.
XXXX CLUB APARTMENTS. In estimating the value of this property, the
Purchaser reviewed the income ($1,156,456) generated by the property for the
ten months ended October 31, 1997 (comprised of $1,103,140 of gross rental
income and $53,316 of other income), and then deducted from this amount the
total operating expenses of the property for the first ten months of 1997
($740,244), resulting in the Purchaser's estimate of net operating income for
the first ten months of 1997 ($416,212). The Purchaser then annualized this
amount, resulting in estimated annual net operating income of $499,454, and
then increased that annualized net operating income amount by $300 per
apartment unit, representing the Purchaser's estimate of the adjustment that
would be imputed by a third party purchaser in underwriting the operating
expenses, including normal replacement reserves, of the property for valuation
purposes. Finally, the Purchaser capitalized its estimated adjusted net
operating income amount ($559,454) at a 10% capitalization rate, resulting in
an estimated gross property value of $5,594,540.
SHADOW BROOK APARTMENTS. In estimating the value of this property,
the Purchaser reviewed the income ($1,748,615) generated by the property for
the ten months ended October 31, 1997 (comprised of $1,653,980 of gross rental
income and $94,635 of other income), and then deducted from this amount the
total operating expenses of the property for the first ten months of 1997
($664,459), resulting in the Purchaser's estimate of net operating income for
the first ten months of 1997 ($1,084,156). The Purchaser then annualized this
amount, resulting in estimated annual net operating income of $1,300,987 and
then reduced that amount by $300 per apartment unit, representing the
Purchaser's estimate of the adjustment that would be imputed by a third party
purchaser in underwriting the operating expenses, including normal replacement
reserves, of the property for valuation purposes. Finally, the Purchaser
capitalized its estimated adjusted net operating income amount ($1,210,987) at
a 9.5% capitalization rate, resulting in an estimated gross property value of
$12,747,232.
Based on the individual estimates of the gross values of the
Partnership's properties described above, the Purchaser estimated that the
current aggregate gross real estate value of the Partnership's properties is
$23,332,833 (the "Gross Real Estate Value Estimate"). The property-specific
capitalization rates used by the Purchaser in the valuation estimates
described above were based upon the Purchaser's, IPT's and Insignia's general
knowledge of
25
the revenues and expenses associated with operating multi-family properties in
the markets in which the Partnership's properties are located, their general
knowledge of property values in those markets and their experience in the real
estate market in general.
Although there are several other methods of estimating the value of
real estate of this type, the Purchaser believes that this approach represents
a reasonable method of estimating the aggregate gross value of the
Partnership's properties (without taking into account the costs of disposing
of the properties), subject to the substantial uncertainties inherent in any
estimate of value. The use of other assumptions, however, particularly as to
the applicable capitalization rate, could produce substantially different
results. None of the Purchaser, IPT or Insignia solicited any offers or
inquiries from prospective buyers of the Partnership's properties in
connection with preparing the Purchaser's estimates of the fair market values
of those properties, and the actual amounts for which the Partnership's
properties might be sold could be significantly higher or significantly lower
than the Purchaser's estimates.
The Gross Real Estate Value Estimate does not take into account (i)
the debt encumbering the Partnership's properties or the other liabilities of
the Partnership, (ii) cash and other assets held by the Partnership, (iii)
real estate transaction costs that would be incurred on a sale of the
Partnership's properties, such as brokerage commissions and other selling and
closing expenses, (iv) timing considerations or (v) costs associated with
winding up the Partnership. For this reason, the Purchaser considers the Gross
Real Estate Value Estimate to be less meaningful in evaluating the Purchase
Price offered by the Purchaser than its pro forma estimate of the net
liquidation value per Class A Unit described below.
Purchaser's Pro Forma Estimate of Net Liquidation Value per Class A
Unit. The Purchaser is offering to purchase Class A Units, which are a
relatively illiquid investment, and is not offering to purchase the
Partnership's underlying assets or assume any of its liabilities.
Consequently, the Purchaser does not believe that the per-Class A Unit amount
which might be distributed to Limited Partners following a future sale of all
the Partnership's properties necessarily reflects the present fair value of a
Class A Unit. Conversely, the realizable value of the Partnership's assets
clearly is a relevant factor in determining the price a prudent purchaser
would offer for Class A Units. In considering this factor, the Purchaser made
a pro forma calculation of the amount each Limited Partner might receive in a
theoretical orderly liquidation of the Partnership (which may not be
realistically possible, particularly in the near term, due to real estate
market conditions, the general difficulty of disposing of real estate in a
short period of time, and other general economic factors), based on the Gross
Real Estate Value Estimate described above and the other considerations
described below. The Purchaser based its pro forma liquidation analysis on the
Gross Real Estate Value Estimate (and thus on the Purchaser's estimates of the
values of the Partnership's properties described above), as opposed to the
appraised values of the Partnership's properties or the values estimated in
connection with the formation of IPT (as described above), because the
Purchaser believes that the Gross Real Estate Value Estimate represents the
best estimate, based on currently available information, of the values of the
Partnership's properties.
In estimating the pro forma net liquidation value per Class A Unit,
the Purchaser adjusted its Gross Real Estate Value Estimate of $23,332,833 to
reflect the Partnership's other assets and liabilities (excluding prepaid and
deferred expenses and security deposits). Specifically, the Purchaser added
the amounts of cash, accounts receivable and escrow deposits shown on the
Partnership's unaudited balance sheet at September 30, 1997 ($1,568,000), and
subtracted the mortgage debt encumbering the Partnership's properties
($12,302,000) and all other liabilities shown on that balance sheet
($690,000). The Purchaser then deducted from that amount $933,313,
representing a reserve equal to 4% of the Gross Real Estate Value Estimate
(which represents the Purchaser's estimate of the probable costs of brokerage
commissions, real estate transfer taxes and other disposition expenses). The
result, $10,975,520, represents the Purchaser's pro forma estimate of the
aggregate net liquidation proceeds (before provision for the costs described
in the following sentence) which could be realized on an orderly liquidation
of the Partnership, based on the assumptions implicit in the calculations
described above. The Purchaser did not, however, deduct any amounts in respect
of the legal and other costs which the Purchaser expects would be incurred in
a liquidation, including costs of negotiating purchase and sale contracts,
possibly conducting a consent solicitation in order to
26
obtain the Limited Partners' approvals for the sales as may be required by the
Limited Partnership Agreement, and winding up the Partnership, because of the
difficulty of estimating those amounts.
To complete its pro forma estimate of the amount of the theoretical
liquidation proceeds that would be distributable per Class A Unit, the
Purchaser then deducted 1%, which is the percentage allocable to the General
Partner in respect of its non-subordinated interest in the Partnership. Of the
remaining $10,865,765, Limited Partners holding the Class A Units are entitled
to $2,532,269 ($26.30 per Class A Unit), which represents the amount of the
unpaid Priority Return as of September 30, 1997. The remaining $8,333,496 is
then allocated pro rata among the holders of Class A Units and Class B Units
based on their relative initial capital contributions (approximately 56% for
the Class A Units and 44% for the Class B Units). Limited Partners holding
Class A Units are entitled to receive $4,666,758 plus the amount representing
their unpaid Priority Return, the total of which represents the estimated
aggregate net liquidation proceeds ($7,199,027), which the Purchaser then
divided by the 96,284 Class A Units reported as outstanding by the General
Partner as of December 1, 1997. The resulting estimated pro forma liquidation
value was $74.77 per Class A Unit (the "Estimated Liquidation Value"), before
provision for the legal and other costs of liquidating the Partnership
described in the last sentence of the preceding paragraph.
The Purchaser's pro forma liquidation analysis described above is
merely theoretical and does not itself reflect the value of the Class A Units
because (i) there is no assurance that any such liquidation in fact will occur
in the foreseeable future and (ii) any liquidation in which the estimated fair
market values described above might be realized would take an extended period
of time (at least a year, and quite possibly significantly longer), during
which time the Partnership and its partners would continue to be exposed to
the risk of fluctuations in asset values because of changing market conditions
and other factors. For any property sales in which the Partnership is required
to indemnify the buyer for matters arising after the closing, a portion of the
sales proceeds could be held by the Partnership until all possible claims were
satisfied, further extending the delay in the receipt by the Limited Partners
of liquidation proceeds. In light of these factors, the Purchaser (which is an
affiliate of the General Partner) believes the actual current value of the
Class A Units is substantially less than its estimate of the Estimated
Liquidation Value. Conversely, there is a substantial possibility that the
per-Class A Unit value realized in an orderly liquidation could be greater
than the Estimated Liquidation Value. A reduction in either operating expenses
or capital expenditures from the levels reflected in the property operating
statements for the ten months ending October 31, 1997 would result in a higher
liquidation value under the method described above. Similarly, a higher
liquidation value would result if a buyer applied lower capitalization rates
(reflecting a willingness to accept a lower rate of return on its investment)
to the applicable net operating income generated by the Partnership's
properties than the capitalization rates applied by the Purchaser. For
example, a 5% increase or decrease in the value of the Partnership's
properties would produce a corresponding increase or decrease in the Estimated
Liquidation Value of approximately $6.50 per Class A Unit. Furthermore, the
analysis described above is based on a series of assumptions, some of which
may not be correct. Accordingly, this analysis should be viewed merely as
indicative of the Purchaser's approach to valuing Class A Units and not as any
way predictive of the likely result of any future transactions.
SECTION 14. CONDITIONS OF THE OFFER. Notwithstanding any other term
of the Offer, the Purchaser (which is an affiliate of the General Partner)
will not be required to accept for payment or to pay for any Class A Units
tendered if all authorizations, consents, orders or approvals of, or
declarations or filings with, or expirations of waiting periods imposed by,
any court, administrative agency or commission or other governmental authority
or instrumentality, domestic or foreign, necessary for the consummation of the
transactions contemplated by the Offer shall not have been filed, occurred or
been obtained prior to the Expiration Date. Furthermore, notwithstanding any
other term of the Offer and in addition to the Purchaser's right to withdraw
the Offer at any time before the Expiration Date, the Purchaser (which is an
affiliate of the General Partner) will not be required to accept for payment
or pay for any Class A Units not theretofore accepted for payment or paid for
and may terminate or amend the Offer as to such Class A Units if, at any time
on or after the date of the Offer and before the Expiration Date, any of the
following conditions exists:
27
(a) a preliminary or permanent injunction or other order of any
federal or state court, government or governmental authority or agency shall
have been issued and shall remain in effect which (i) makes illegal, delays or
otherwise directly or indirectly restrains or prohibits the making of the
Offer or the acceptance for payment, purchase of or payment for any Class A
Units by the Purchaser (which is an affiliate of the General Partner), (ii)
imposes or confirms limitations on the ability of the Purchaser effectively to
exercise full rights of ownership of any Class A Units, including without
limitation the right to vote any Class A Units acquired by the Purchaser
pursuant to the Offer or otherwise on all matters properly presented to the
Partnership's Limited Partners, (iii) requires divestiture by the Purchaser of
any Class A Units, (iv) causes any material diminution of the benefits to be
derived by the Purchaser as a result of the transactions contemplated by the
Offer, or (v) might materially adversely affect the business, properties,
assets, liabilities, financial condition, operations, results of operations or
prospects of the Purchaser or the Partnership;
(b) there shall be any action taken, or any statute, rule, regulation
or order proposed, enacted, enforced, promulgated, issued or deemed applicable
to the Offer by any federal or state court, government or governmental
authority or agency, which might, directly or indirectly, result in any of the
consequences referred to in clauses (i) through (v) of paragraph (a) above;
(c) any change or development shall have occurred or been threatened
since the date of the Offer to Purchase, in the business, properties, assets,
liabilities, financial condition, operations, results of operations or
prospects of the Partnership, which is or may be materially adverse to the
Partnership, or the Purchaser (which is an affiliate of the General Partner)
shall have become aware of any fact that does or may have a material adverse
effect on the value of the Class A Units;
(d) there shall have occurred (i) any general suspension of trading
in, or limitation on prices for, securities on any national securities
exchange or in the over-the-counter market in the United States, (ii) a
declaration of a banking moratorium or any suspension of payments in respect
of banks in the United States, (iii) any limitation by any governmental
authority on, or other event which might affect, the extension of credit by
lending institutions or result in any imposition of currency controls in the
United States, (iv) a commencement of a war or armed hostilities or other
national or international calamity directly or indirectly involving the United
States, (v) a material change in United States or other currency exchange
rates or a suspension of, or imposition of a limitation on, the markets
thereof, or (vi) in the case of any of the foregoing existing at the time of
the commencement of the Offer, a material acceleration or worsening thereof;
or
(e) it shall have been publicly disclosed or the Purchaser (which is
an affiliate of the General Partner) shall have otherwise learned that (i)
more than ten percent of the outstanding Class A Units have been or are
proposed to be acquired by another person (including a "group" within the
meaning of Section 13(d)(3) of the Exchange Act), or (ii) any person or group
that prior to such date had filed a Statement with the Commission pursuant to
Section 13(d) or (g) of the Exchange Act has increased or proposes to increase
the number of Class A Units beneficially owned by such person or group as
disclosed in such Statement by two percent or more of the outstanding Class A
Units.
The foregoing conditions are for the sole benefit of the Purchaser
(which is an affiliate of the General Partner) and may be asserted by the
Purchaser regardless of the circumstances giving rise to such conditions or
may be waived by the Purchaser in whole or in part at any time and from time
to time in its sole discretion. Any determination by the Purchaser (which is
an affiliate of the General Partner) concerning the events described above
will be final and binding upon all parties.
SECTION 15. CERTAIN LEGAL MATTERS.
General. The Purchaser (which is an affiliate of the General Partner)
is not aware of any filings, approvals or other actions by any domestic or
foreign governmental or administrative agency that would be required prior to
the acquisition of Class A Units by the Purchaser (which is an affiliate of
the General Partner) pursuant to the Offer, other than the filing of a Tender
Offer Statement on Schedule 14D-1 with the Commission (which has already been
28
filed) and any required amendments thereto. Should any such approval or other
action be required, it is the Purchaser's present intention that such
additional approval or action would be sought. Although there is no present
intent to delay the purchase of Class A Units tendered pursuant to the Offer
pending receipt of any such additional approval or the taking of any such
action, there can be no assurance that any such additional approval or action,
if needed, would be obtained without substantial conditions or that adverse
consequences might not result to the Partnership's business, or that certain
parts of the Partnership's business might not have to be disposed of or other
substantial conditions complied with in order to obtain such approval or
action, any of which could cause the Purchaser (which is an affiliate of the
General Partner) to elect to terminate the Offer without purchasing Class A
Units thereunder.
Antitrust. The Purchaser (which is an affiliate of the General
Partner) does not believe that the Xxxx-Xxxxx- Xxxxxx Antitrust Improvements
Act of 1976, as amended, is applicable to the acquisition of Class A Units
contemplated by the Offer.
Margin Requirements. The Class A Units are not "margin securities"
under the regulations of the Board of Governors of the Federal Reserve System
and, accordingly, those regulations generally are not applicable to the Offer.
SECTION 16. FEES AND EXPENSES. Except as set forth in this Section
16, the Purchaser (which is an affiliate of the General Partner) will not pay
any fees or commissions to any broker, dealer or other person for soliciting
tenders of Class A Units pursuant to the Offer. The Purchaser (which is an
affiliate of the General Partner) has retained Beacon Hill Partners, Inc. to
act as Information Agent and Xxxxxx Trust Company of New York to act as
Depositary in connection with the Offer. The Purchaser (which is an affiliate
of the General Partner) will pay the Information Agent and the Depositary
reasonable and customary compensation for their respective services in
connection with the Offer, plus reimbursement for out-of-pocket expenses, and
has agreed to indemnify the Information Agent and the Depositary against
certain liabilities and expenses in connection therewith, including
liabilities under the federal securities laws. The Purchaser (which is an
affiliate of the General Partner) will also pay all costs and expenses of
printing and mailing the Offer and its legal fees and expenses.
SECTION 17. MISCELLANEOUS. The Purchaser (which is an affiliate of
the General Partner) is not aware of any jurisdiction in which the making of
the Offer is not in compliance with applicable law. If the Purchaser (which is
an affiliate of the General Partner) becomes aware of any jurisdiction in
which the making of the Offer would not be in compliance with applicable law,
the Purchaser will make a good faith effort to comply with any such law. If,
after such good faith effort, the Purchaser (which is an affiliate of the
General Partner) cannot comply with any such law, the Offer will not be made
to (nor will tenders be accepted from or on behalf of) Limited Partners
residing in such jurisdiction. In those jurisdictions whose securities or blue
sky laws require the Offer to be made by a licensed broker or dealer, the
Offer will be deemed to be made on behalf of the Purchaser (which is an
affiliate of the General Partner) by one or more registered brokers or dealers
licensed under the laws of that jurisdiction.
No person has been authorized to give any information or to make any
representation on behalf of the Purchaser (which is an affiliate of the
General Partner) not contained in this Offer to Purchase or in the Assignment
of Partnership Interest and, if given or made, such information or
representation must not be relied upon as having been authorized.
29
The Purchaser (which is an affiliate of the General Partner), IPLP,
IPT and Insignia have filed with the Commission a Tender Offer Statement on
Schedule 14D-1, pursuant to Rule 14d-3 under the Exchange Act, furnishing
certain additional information with respect to the Offer, and may file
amendments thereto. The Schedule 14D-1 and any amendments thereto, including
exhibits, may be inspected and copies may be obtained at the same places and
in the same manner as set forth in Section 9 (except that they will not be
available at the regional offices of the Commission).
MADISON RIVER PROPERTIES, L.L.C.
DECEMBER 23, 1997
30
SCHEDULE I
TRANSACTIONS IN THE CLASS A UNITS
EFFECTED BY IPLP WITHIN THE PAST 60 DAYS
Number of Price
DATE Class A Units Purchased Per Class A Unit
---- ----------------------- ----------------
11/18/97 437 64.00
S-1
SCHEDULE II
INFORMATION REGARDING THE MANAGERS OF THE PURCHASER
Set forth in the table below are the name and the present principal
occupations or employment and the name, principal business and address of any
corporation or other organization in which such occupation or employment is
conducted, and the five-year employment history of each of the managers of the
Purchaser. Each person identified below is employed by Xxxxxxxx and is a
United States citizen. The principal business address of the Purchaser and,
unless otherwise indicated, the business address of each person identified
below, is One Insignia Financial Plaza, Xxxxxxxxxx, Xxxxx Xxxxxxxx 00000.
PRESENT PRINCIPAL OCCUPATION
OR EMPLOYMENT AND
NAME FIVE-YEAR EMPLOYMENT HISTORY
---- ----------------------------
Xxxxxxx X. Xxxxx Xxxxxxx X. Xxxxx has been a Manager of the Purchaser since its inception in
000 Xxxx Xxxxxx December 1997. For additional information regarding Xx. Xxxxx, see
Suite 3401 Schedule III.
New York, NY 10152
Xxxx X. Xxxxx Xxxx X. Xxxxx has been a Manager of the Purchaser since its inception in
December 1997. For additional information regarding Mr. Xxxxx, see
Schedules III and IV.
Xxxxxx Xxxxxx Xxxxxx Xxxxxx has been a Manager of the Purchaser since its inception in
December 1997. For additional information regarding Xx. Xxxxxx, see
Schedules III and IV.
S-2
SCHEDULE III
INFORMATION REGARDING THE
TRUSTEES AND EXECUTIVE OFFICERS OF IPT
Set forth in the table below are the name and the present principal
occupations or employment and the name, principal business and address of any
corporation or other organization in which such occupation or employment is
conducted, and the five-year employment history of each of the trustees and
executive officers of IPT. Each person identified below is employed by
Xxxxxxxx and is a United States citizen. The principal business address of IPT
and, unless otherwise indicated, the business address of each person
identified below, is One Insignia Financial Plaza, Greenville, South Carolina
29602. Trustees are identified by an asterisk.
PRESENT PRINCIPAL OCCUPATION
OR EMPLOYMENT AND
NAME FIVE-YEAR EMPLOYMENT HISTORY
---- ----------------------------
Xxxxxx X. Xxxxxx* Xxxxxx X. Xxxxxx has served as a Trustee of IPT
since December 1996, and has served as Chairman of the Board
of Trustees and Chief Executive Officer of IPT since January
1997. For additional information regarding Xx. Xxxxxx, see Schedule IV.
Xxxxx X. Xxxxx* Xxxxx X. Xxxxx has served as a Trustee and President of IPT since
its inception in May 1996. For additional information regarding
Xx. Xxxxx, see Schedule IV.
Xxxxx X. Xxxxxxxx* Xxxxx X. Xxxxxxxx has served as a Trustee of IPT since December
102 Woodmont Boulevard 1996. Xx. Xxxxxxxx also served as an Executive Managing
Suite 400 Director of IPT from January 1997 to April 1997. For additional
Nashville, TN 37205 information regarding Xx. Xxxxxxxx, see Schedule IV.
Xxxxxxx X. Xxxxx Xxxxxxx X. Xxxxx has served as a Senior Vice President of IPT
000 Xxxx Xxxxxx since August 1997, and served as a Vice President of IPT from
Suite 3401 June 1997 until August 1997. Since April 1997, Xx. Xxxxx'x
New York, NY 10152 principal occupation has been to serve as a Senior Vice President
-- Investment Banking of Insignia. Prior to April 1997, Xx.
Xxxxx'x principal occupation was as an attorney with the law firm
of Xxxxxx & Xxxxx, New York, New York.
Xxxxxxx X. Xxxxx Xxxxxxx X. Xxxxx has served as the Controller of IPT since August
1997. Since April 1995, Mr. Xxxxx' principal occupation has been
to serve as an accountant with Insignia. Prior to April 1995, Mr.
Xxxxx' principal occupation was as a senior auditor with the
accounting firm of Ernst & Young LLP.
Xxxxxxx X. Xxxxxxx, Xx. Xxxxxxx X. Xxxxxxx, Xx. has served as a Senior Vice President of
IPT since August 1997, and served as Vice President and Director
of Operations of IPT from December 1996 until August 1997.
Xx. Xxxxxxx'x principal employment has been with Insignia for
more than the past five years. From January 1994 to September
1997, Xx. Xxxxxxx served as Managing Director-- Partnership
Administration of Insignia.
S-3
PRESENT PRINCIPAL OCCUPATION
OR EMPLOYMENT AND
NAME FIVE-YEAR EMPLOYMENT HISTORY
---- ----------------------------
Xxxx X. Xxxxx Xxxx X. Xxxxx has served as Secretary of IPT since December
1996, and has served as a Senior Vice President of IPT since
August 1997. Mr. Xxxxx served as a Vice President IPT from May
1996 until August 1997. For additional information regarding Mr.
Xxxxx, see Schedule IV.
Xxxxxx Xxxxxx Xxxxxx Xxxxxx has served as Treasurer of IPT since December
1996, and has served as a Senior Vice President of IPT since
August 1997. Xx. Xxxxxx served as a Vice President of IPT from
December 1996 until August 1997 and as Chief Financial Officer
of IPT from May 1996 until December 1996. For additional
information regarding Xx. Xxxxxx, see Schedule IV.
Xxxxxxx X. Xxxxxx Xxxxxxx X. Xxxxxx has served as Chief Operating Officer of
IPT since May 1997. Since August 1994, Xx. Xxxxxx'x principal
occupation has been to serve as President of the various
corporate general partners of partnerships controlled by
Metropolitan Asset Enhancement, L.P., which is an affiliate
of Insignia.
S-4
SCHEDULE IV
INFORMATION REGARDING THE
DIRECTORS AND EXECUTIVE OFFICERS OF INSIGNIA
Set forth in the table below are the name and the present principal
occupations or employment and the name, principal business and address of any
corporation or other organization in which such occupation or employment is
conducted, and the five-year employment history of each of the directors and
executive officers of Insignia. Unless otherwise indicated, each person
identified below is employed by Insignia and is a United States citizen. The
principal business address of Insignia and, unless otherwise indicated, the
business address of each person identified below, is One Insignia Financial
Plaza, Xxxxxxxxxx, Xxxxx Xxxxxxxx 00000. Directors are identified by an
asterisk.
PRESENT PRINCIPAL OCCUPATION
OR EMPLOYMENT AND
NAME FIVE-YEAR EMPLOYMENT HISTORY
---- ----------------------------
Xxxxxx X. Xxxxxx* Xxxxxx X. Xxxxxx has been a Director and Chairman, President and Chief
Executive Officer of Insignia since its inception in January 1991. Xx. Xxxxxx
has also been President of Metropolitan Asset Group, Ltd. ("MAG"), a real
estate investment banking firm, since 1983.
Xxxxxx X. Xxxxxxx* Xxxxxx X. Xxxxxxx has been a Director of Insignia since May
0000 Xxxxx Xxxxxx Xxxxx 1996. For more than the past five years, Xx. Xxxxxxx'x principal
Santa Fe, NM 87501 occupation has been as a General Partner of First Security Company
II, L.P., an investment advisory firm.
Xxxxx X. Xxxxxx* Xxxxx X. Xxxxxx has been a Director of Insignia since August 1993. Mr.
000 Xxxx Xxxxxx Xxxxxx is the retired Chairman of the Board and Chief Executive Officer of
New York, NY 10021 Xxxxxxxxx'x Inc., a real estate company. He also serves as a director of Refac
Technology Development Corporation, Noodle Kiddoodle, and Containerways
International Ltd.
Xxxxxx X. Xxxxxxx* Xxxxxx X. Xxxxxxx has been a Director of Insignia since August 1993. For
000 Xxxxxxx Xxxxxx more than the past five years, Xx. Xxxxxxx'x principal occupation has been as
New York, NY 10022 Chairman of the Board of Directors and Co-Chief Executive Officer of
Charterhouse Group International, Inc., a privately-owned investment firm which,
among other things, actively engages in making private equity investments in
a broad range of industrial and service companies located primarily in the
United States. Xx. Xxxxxxx is also a director of American Disposal Services,
Inc., Designer Holdings Ltd. and Microwave Power Devices, Inc.
Xxxxxx X. Xxxx* Xxxxxx X. Xxxx has been a Director of Insignia since August 1993. Since
000 Xxxx 00xx Xxxxxx February 1996, Xx. Xxxx has been a partner in the law firm of Akin, Gump,
New York, NY 10019 Xxxxxxx, Xxxxx & Xxxx, which represents Insignia and certain of its affiliates
from time to time. From January 1991 to February 1996, Xx. Xxxx was a
partner in the law firm LeBoeuf, Lamb, Xxxxxx & XxxXxx.
Xxxxxxx X. Xxxxxxxx* Xxxxxxx X. Xxxxxxxx has been a Director of Insignia since August 1993. For
000 Xxxx 00xx Xxxxxx more than the past five years, Xx. Xxxxxxxx'x principal occupation has been as
New York, NY 10022 a self-employed consultant in the real estate business, including ownership,
management and lending.
S-5
PRESENT PRINCIPAL OCCUPATION
OR EMPLOYMENT AND
NAME FIVE-YEAR EMPLOYMENT HISTORY
---- ----------------------------
Xxxx Xxxxxx* Xxxx Xxxxxx has been a Director of Insignia since August 1993. For more
000 X. Xxxx Xxxxxx than the past five years, Xx. Xxxxxx'x principal occupation has been to serve
Greenville, SC 29601 as Chairman of the Board and Chief Executive Officer of RSI Holdings, a
company which distributes outdoor equipment. Xx. Xxxxxx is also a director
of Fluor Corporation, The Liberty Corporation, NationsBank Corporation,
Emergent Group, Inc., Delta Woodside Industries, Inc., Duke Power
Company, and Textile Hall Corporation.
Xxxxx X. Aston Xxxxx X. Aston's principal employment has been with Insignia for more than
the past five years. Xx. Xxxxx currently serves as Chief Financial Officer of
Insignia (since August 1996) and with the Office of the Chairman
(since July 1994).
Xxxxxx X. Xxxxxx Xxxxxx Xxxxxx has been a Senior Vice President -- Human Resources of
Insignia since August 1997. Prior to August 1997, Xx. Xxxxxx'x principal
employment for more than the prior five years was as Director -- Human Resources
of E&Y Xxxxxxx Xxxxxxxxx Real Estate Group, New York, New York.
Xxxxx X. Xxxxxxxx Xxxxx X. Xxxxxxxx'x principal employment has been with Insignia for more
000 Xxxxxxxx Xxxxxxxxx than the past five years. Xx. Xxxxxxxx currently serves as an Executive
Suite 400 Managing Director of Insignia (since July 1994) and as President of Insignia
Nashville, TN 37205 Financial Services, a division of Insignia (since July 1994).
Xxxxxxx X. Xxxxxxxx Xxxxxxx X. Xxxxxxxx'x principal employment has been with Insignia for more
000 Xxxx Xxxxxx than the past five years. Xx. Xxxxxxxx currently serves as a Managing
Suite 3401 Director -- Investment Banking of Insignia (since July 1994).
New York, NY 10152
Xxxxxx X. Xxxxxx Xxxxxx X. Xxxxxx has been with the Office of the Chairman of Insignia since
000 Xxxx Xxxxxx July 1996. Prior to July 1996, Xx. Xxxxxx'x principal employment for more
New York, NY 10166 than the prior five years was as a founder and Chairman of Xxxxxx X. Xxxxxx
Company, Incorporated ("ESG"), a commercial property management and brokerage firm
located in New York, New York that was acquired by Insignia in June 1996.
Xxxxxx X. Xxxxxxx Xxxxxx X. Xxxxxxx'x principal employment has been with Insignia for more than
the past five years. Xx. Xxxxxxx currently serves as a Senior Vice President of
Insignia (since July 1994) and as Chief Information Officer of Insignia (since
January 1991).
Xxxxx Xxxxxxxx Xxxxx Xxxxxxxx'x principal employment has been with Insignia since January 1993.
Xx. Xxxxxxxx currently serves as an Executive Managing Director of Insignia (since
June 1994) and Chief Operating Officer of Insignia Commercial Group (since January
1997). From January 1987 to January 1993, Xx. Xxxxxxxx'x principal employment was
as Chief Executive Officer of First Resource Realty, Inc., a commercial property
management organization located in Oklahoma that Insignia acquired in January 1993.
S-6
PRESENT PRINCIPAL OCCUPATION
OR EMPLOYMENT AND
NAME FIVE-YEAR EMPLOYMENT HISTORY
---- ----------------------------
Xxxx Xxxxxxx Xxxx Xxxxxxx has been an Executive Managing Director of Insignia since
909 Third Avenue September 1995 and President of Insignia Residential Group since September
New York, NY 10022 1997. Prior to September 1995, Xx. Xxxxxxx'x principal occupation was to
serve as President and Chief Executive Officer of Xxxxxxx Company, Inc., a
residential property management firm located in New York, New York which
Insignia acquired in September 1995.
Xxxx X. Xxxxx Xxxx X. Xxxxx has been General Counsel of Insignia since June
1994 and Secretary since July 1994. From May 1993 until June 1994,
Mr. Xxxxx' principal employment was as Assistant General Counsel and
Vice President of Ocwen Financial Corporation, a thrift holding
company located in West Palm Beach, Florida. From October 1991 until
April 1993, Mr. Xxxxx' principal employment was as Senior Attorney
of Banc One Corporation, a bank holding company in Columbus, Ohio.
Xxxxxx Xxxx Xxxxxx Xxxx has been a Senior Vice President -- Finance of Insignia since
January 1997 and Controller of Insignia since June 1994. Prior to June 1994,
Xx. Xxxx was Senior Vice President and Controller of The First Savings Bank
located in Greenville, South Carolina.
Xxxxx Xxxxxx Xxxxxxxxx Xxxxx Xxxxxx Xxxxxxxxx has been Managing Director and Chief Strategic
000 Xxxx Xxxxxx Officer for European Operations of Insignia since June 1997. From November
New York, NY 10152 1993 until June 1997, Xx. Xxxxxxxxx'x principal employment was as Manager
of YPF, a petroleum company located in Buenos Aires, Argentina. From May
1991 until October 1993, Xx. Xxxxxxxxx'x principal employment was as a
partner of MCA, an advisory company in Madrid, Spain.
Xxxxxx X. Xxxxxx Xxxxxx X. Xxxxxx'x principal employment has been with Insignia for more
than the past five years. Xx. Xxxxxx currently serves as Chief Operating
Officer of Insignia Residential Group (since January 1997).
Xxxxxxx X. Xxxxxx Xxxxxxx X. Xxxxxx has been an Executive Managing Director of Insignia since
000 Xxxx Xxxxxx July 1996 and President of Insignia Commercial Group since January 1997.
New York, NY 10166 From February 1992 until July 1996, Xx. Xxxxxx'x principal employment was
as President of ESG.
Xxxxxx Xxxxxx Xxxxxx Xxxxxx'x principal employment has been with Insignia for more than the
past five years. Xx. Xxxxxx currently serves as Chief Operating Officer (since
August 1996) and Treasurer (since January 1992) of Insignia.
Xxxxxx X. Xxxxx Xxxxxx X. Xxxxx'x principal employment has been with Realty One, Inc., a
6000 Rockside Xxxxx wholly-owned subsidiary of Insignia ("Realty One"), for more than the past
Blvd. five years. Xx. Xxxxx currently serves as a Director and Chief Executive
Cleveland, OH 44131 Officer of Realty One (since October 1997).
Xxxxxxx X. Xxxxxxx Xxxxxxx X. Xxxxxxx'x principal employment has been with Realty One for
6000 Rockside Xxxxx more than the past five years. Xx. Xxxxxxx currently serves as Director,
Blvd. President, Chief Operating Officer and Treasurer of Realty One (since October
Cleveland, OH 44131 1997).
S-7
SCHEDULE V
IPT PARTNERSHIPS
Consolidated Capital Growth Fund
Consolidated Capital Institutional Properties
Consolidated Capital Institutional Properties/2
Consolidated Capital Institutional Properties/3
Consolidated Capital Properties III
Consolidated Capital Properties IV
Consolidated Capital Properties V
Consolidated Capital Properties VI
Shelter Properties I Limited Partnership
Shelter Properties II Limited Partnership
Shelter Properties III Limited Partnership
Shelter Properties IV Limited Partnership
Shelter Properties V Limited Partnership
Shelter Properties VI Limited Partnership
Shelter Properties VII Limited Partnership
National Property Investors III
National Property Investors 4
National Property Investors 5
National Property Investors 6
National Property Investors 7
National Property Investors 8
Century Properties Fund XIV
Century Properties Fund XV
Century Properties Fund XVI
Century Properties Fund XVII
Century Properties Fund XVIII
Century Properties Fund XIX
Century Properties Fund XX
Century Properties Growth Fund XXII
Century Pension Income Fund XXIII
Century Pension Income Fund XXIV
Johnstown/Consolidated Income Partners
Davidson Growth Plus, L.P.
Multi-Benefit Realty Fund `87-1
U.S. Realty Partners, X.X.
Xxx Strategic Housing Income Partners
S-8
(THIS PAGE INTENTIONALLY LEFT BLANK)
Manually signed facsimile copies of the Assignment of Partnership
Interest will be accepted. The Assignment of Partnership Interest and any
other required documents should be sent or delivered by each Limited Partner
or such Limited Partner's broker, dealer, bank, trust company or other nominee
to the Depositary as set forth below.
The Depositary for the Offer is:
XXXXXX TRUST COMPANY OF NEW YORK
By Mail: By Facsimile: To Confirm: By Hand/Overnight Delivery:
Wall Street Station (000) 000-0000 (212) 701-0000 Xxxx Xxxxxx Xxxxx
P.O. Box 0000 00 Xxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx Xxx Xxxx, Xxx Xxxx 10005
10268-1023
Questions and requests for assistance or for additional copies of
this Offer to Purchase and the Assignment of Partnership Interest may be
directed to the Information Agent at its telephone number and address listed
below. You may also contact your broker, dealer, bank, trust company or other
nominee for assistance concerning the Offer.
The Information Agent for the Offer is:
BEACON HILL PARTNERS, INC.
00 Xxxxx Xxxxxx
00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
(000) 000-0000
(Toll Free)
(000) 000-0000
(Call Collect)
