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Offer to Purchase For Cash
AIMCO
AIMCO Properties, L.P.
is offering to purchase any and all units of limited partnership interest in
SHELTER PROPERTIES I LIMITED PARTNERSHIP
FOR $835.00 PER UNIT IN CASH
Upon the terms and subject to the conditions set forth herein, we will accept
any and all units validly tendered in response to our offer. If units are
validly tendered and not properly withdrawn prior to the expiration date and the
purchase of all such units would result in there being less than 320
unitholders, we will purchase only 99% of the total number of units so tendered
by each limited partner.
Our offer and your withdrawal rights will expire at 5:00 p.m., New York City
time, on September 5, 2000, unless we extend the deadline.
You will not pay any partnership transfer fees if you tender your units. You
will pay any other fees and costs, including any transfer taxes.
Our offer is not subject to a minimum number of units being tendered.
Our offer price will be reduced for any distributions subsequently made by your
partnership prior to the expiration of our offer.
SEE "RISK FACTORS" BEGINNING ON PAGE 3 OF THIS OFFER TO PURCHASE FOR A
DESCRIPTION OF RISK FACTORS THAT YOU SHOULD CONSIDER IN CONNECTION WITH OUR
OFFER, INCLUDING THE FOLLOWING:
o We determined the offer price of $ 835.00 per unit without any
arms-length negotiations. Accordingly, our offer price may not reflect
the fair market value of your units.
o In November 1999, an independent investment banking firm estimated that
the net asset value, going concern value and liquidation value of your
partnership were $1,047, $996, and $1,003 per unit, respectively.
o We are making this offer with a view to making a profit and, therefore,
there is a conflict between our desire to purchase your units at a low
price and your desire to sell your units at a high price.
o Although your partnership's agreement of limited partnership provides
for termination in the year 2019, the prospectus pursuant to which the
units were sold in 1980 indicated that the properties owned by your
partnership might be sold within three to eight years of their
acquisition if conditions permitted.
o Your general partner and the property manager of the properties are
subsidiaries of ours and, therefore, the general partner has
substantial conflicts of interest with respect to our offer.
o Continuation of your partnership will result in our affiliates
continuing to receive management fees from your partnership. Such fees
would not be payable if your partnership was liquidated.
o It is possible that we may conduct a future offer at a higher price.
o For any units that we acquire from you, you will not receive any future
distributions from operating cash flow of your partnership or upon a
sale or refinancing of property owned by your partnership.
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If you desire to accept our offer, you should complete and sign the
enclosed letter of transmittal in accordance with the instructions thereto and
mail or deliver the signed letter of transmittal and any other required
documents to River Oaks Partnership Services, Inc., which is acting as
Information Agent in connection with our offer, at one of its addresses set
forth on the back cover of this offer to purchase. QUESTIONS AND REQUESTS FOR
ASSISTANCE OR FOR ADDITIONAL COPIES OF THIS OFFER TO PURCHASE OR THE LETTER OF
TRANSMITTAL MAY ALSO BE DIRECTED TO THE INFORMATION AGENT AT (888) 349-2005.
August 7, 2000
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TABLE OF CONTENTS
<TABLE>
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SUMMARY TERM SHEET................................................................................................1
RISK FACTORS......................................................................................................3
No Third Party Valuation or Appraisal; No Arms-Length Negotiation........................................3
Offer Price May Not Represent Fair Market Value..........................................................3
Offer Price Does Not Reflect Future Prospects............................................................3
Offer Price Based on Our Estimate of Liquidation Proceeds................................................3
Offer Price May Not Represent Liquidation Value..........................................................3
Continuation Of The Partnership; No Time Frame Regarding Sale of Properties..............................3
Holding Units May Result in Greater Future Value.........................................................4
Conflicts of Interest With Respect to the Offer..........................................................4
No General Partner Recommendation........................................................................4
Conflicts of Interest Relating to Management Fees........................................................4
Possible Future Offer at a Higher Price..................................................................4
Recognition of Taxable Gain on a Sale of Your Units......................................................4
Loss of Future Distributions from Your Partnership.......................................................5
Recognition of Gain Resulting from Possible Future Reduction in Your Partnership Liabilities.............5
Possible Termination of Your Partnership for Federal Income Tax Purposes.................................5
Risk of Inability to Transfer Units for 12-Month Period..................................................5
Potential Delay in Payment...............................................................................6
Balloon Payments.........................................................................................6
THE OFFER.........................................................................................................6
Section 1. Terms of the Offer; Expiration Date; Proration.........................................6
Section 2. Acceptance for Payment and Payment for Units...........................................7
Section 3. Procedure for Tendering Units..........................................................8
Section 4. Withdrawal Rights.....................................................................10
Section 5. Extension of Tender Period; Termination; Amendment; Subsequent Offering Period........11
Section 6. Certain Federal Income Tax Matters....................................................11
Section 7. Effects of the Offer..................................................................14
Section 8. Information Concerning Us and Certain of Our Affiliates...............................15
Section 9. Background and Reasons for the Offer..................................................19
Section 10. Position of the General Partner of Your Partnership With Respect to the Offer.........27
Section 11. Conflicts of Interest and Transactions with Affiliates................................28
Section 12. Future Plans of the Purchaser.........................................................28
Section 13. Certain Information Concerning Your Partnership.......................................29
Section 14. Voting Power..........................................................................36
Section 15. Source of Funds.......................................................................37
Section 16. Dissenters' Rights....................................................................37
Section 17. Conditions of the Offer...............................................................37
Section 18. Certain Legal Matters.................................................................38
Section 19. Fees and Expenses.....................................................................39
ANNEX I
Officers and Directors.................................................................................I-1
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SUMMARY TERM SHEET
This summary term sheet highlights the most material information
regarding our offer, but it does not describe all of the details thereof. We
urge you to read this entire offer to purchase which contains the full details
of our offer. We have also included in the summary term sheet references to the
sections of this offer to purchase where a more complete discussion may be
found.
o THE OFFER. We are offering to acquire any and all of the limited
partnership interests (units) in Shelter Properties I Limited
Partnership, your partnership, for $ 835.00 per unit, in cash, less any
distributions made by your partnership prior to the termination of the
offer. See "The Offer--Section 1. Terms of the Offer; Expiration Date;
Proration" and "The Offer--Section 9. Background and Reasons for the
Offer--Determination of Offer Price."
o FACTORS IN DETERMINING THE OFFER PRICE. In determining the offering
price per unit we considered:
o Our belief as to the per unit liquidation value of your
partnership;
o The determination of Robert A. Stanger & Co., Inc., an
independent investment firm, in November 1999, that $863 per
unit was a fair price for your units from a financial point of
view, based on its determination of the net asset value
($1,047), the going concern value ($996) and the liquidation
value ($1,003) of a unit in your partnership; and
o The absence of a trading market for the units.
See "The Offer--Section 9. Background and Reasons for the
Offer--Comparison of Consideration to Alternative Consideration."
o PRORATIONS. If the purchase of all validly tendered units would result
in there being less than 320 unitholders, we will purchase only 99% of
the total number of units so tendered by each limited partner. See "The
Offer--Section 1. Terms of the Offer; Expiration Date; Proration."
o EXPIRATION DATE. Our offer expires on September 5, 2000, unless
extended, and you can tender your units until our offer expires. See
"The Offer--Section 1. Terms of the Offer; Expiration Date; Proration."
o RIGHT TO EXTEND THE EXPIRATION DATE. We can extend the offer in our
sole discretion, and we will send you a notice of any such extension.
See "The Offer--Section 5. Extension of Tender Period; Termination;
Amendment; Subsequent Offering Period."
o HOW TO TENDER. To tender your units, complete the accompanying letter
of transmittal and send it to the Information Agent, River Oaks
Partnership, Inc., at one of the addresses set forth on the back of
this offer to purchase. See "The Offer--Section 3. Procedures for
Tendering."
o WITHDRAWAL RIGHTS. You can withdraw your units at any time prior to the
expiration of the offer, including any extensions. In addition, you can
withdraw your units any time on or after October 9, 2000, if we have
not already accepted units for purchase and payment. See "The
Offer--Section 4. Withdrawal Rights."
o HOW TO WITHDRAW. To withdraw your units, you need to send a notice of
withdrawal to the Information Agent, identifying yourself and the units
to be withdrawn. See "The Offer--Section 4. Withdrawal Rights."
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o TAX CONSEQUENCES. Your sale of units in this offer will be a taxable
transaction for federal income tax purposes, the consequences to each
limited partner may vary and you should consult your tax advisor on the
precise tax consequences to you. See "The Offer--Section 6. Certain
Federal Income Tax Matters."
o AVAILABILITY OF FUNDS. We currently have cash and funds available under
a line of credit that are sufficient to enable us to purchase all of
the units sought in this offer. See "The Offer--Section 15. Source of
Funds."
o CONDITIONS TO THE OFFER. There are a number of conditions to our offer,
including our having adequate cash and available funds under our line
of credit, the absence of competing tender offers, the absence of
certain changes in your partnership, and the absence of certain changes
in the financial markets. See "The Offer--Section 17. Condition to the
Offer."
o REMAINING AS A LIMITED PARTNER. If you do not tender your units, you
will continue to remain a limited partner in your partnership and we
have no plans to alter the operations, business or financial position
of your partnership or to take your partnership private. However, your
partnership is currently offering one property for sale. See "The
Offer--Section 7. Effects of the Offer."
o WHO WE ARE. We are AIMCO Properties, L.P., the main operating
partnership of Apartment Investment and Management Company, a New York
Stock Exchange listed company. As of March 31, 2000, AIMCO owned or
controlled, held an equity interest in, or managed 352,517 apartment
units in 1,834 properties located in 48 states, the District of
Columbia and Puerto Rico. See "The Offer--Section 8. Information
Concerning Us and Certain of Our Affiliates."
o CONFLICTS OF INTEREST. Since our subsidiaries receive fees for managing
your partnership and its properties, a conflict of interest exists
between our continuing the partnership and receiving such fees, and the
liquidation of the partnership and the termination of such fees. See
"The Offer--Section 11. Conflicts of Interests" and "The Offer--
Section 13. Certain Information Concerning Your Partnership."
o NO GENERAL PARTNER RECOMMENDATION. The general partner of your
partnership makes no recommendation as to whether or not you should
tender or refrain from tendering your units , and believes each limited
partner should make his or her own decision whether or not to tender
his or her units. See "The Offer -- Section 10. Position of the General
Partner of Your Partnership with Respect to the Offer."
o SUBSEQUENT OFFERING PERIOD. We do not intend to have a subsequent
offering period after the expiration date of the initial offering
period (including any extensions). See "The Offer--Section 5. Extension
of Tender Offer Period; Termination; Amendment; Subsequent Offering
Period."
o ADDITIONAL INFORMATION. For more assistance in tendering your units,
please contact our Information Agent at one of the addresses or the
telephone number set forth on the back cover page of this offer to
purchase.
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RISK FACTORS
Before deciding whether or not to tender any of your units, you should
consider carefully the following risks and disadvantages of the offer:
NO THIRD PARTY VALUATION OR APPRAISAL; NO ARMS-LENGTH NEGOTIATION
We did not base our valuation of the properties owned by your
partnership on any third-party appraisal or valuation. We established the terms
of our offer without any arms-length negotiation. The terms of the offer could
differ if they were subject to independent third party negotiations. It is
uncertain whether our offer price reflects the value which would be realized
upon a sale of your units to a third party. Your general partner makes no
recommendation to you as to whether or not you should tender your units.
OFFER PRICE MAY NOT REPRESENT FAIR MARKET VALUE
There is no established or regular trading market for your units, nor
is there another reliable standard for determining the fair market value of the
units. Our offer price does not necessarily reflect the price that you would
receive in an open market for your units. Such prices could be higher than our
offer price.
OFFER PRICE DOES NOT REFLECT FUTURE PROSPECTS
Our offer price is based on your partnership's property income. It does
not ascribe any value to potential future improvements in the operating
performance of your partnership's properties.
OFFER PRICE BASED ON OUR ESTIMATE OF LIQUIDATION PROCEEDS
The offer price represents only our estimate of the amount you would
receive if we liquidated the partnership. In determining the liquidation value,
we used the direct capitalization method to estimate the value of your
partnership's properties because we think prospective purchasers of the
properties would value the properties using this method. In doing so, we applied
a capitalization rate to your partnership's estimated property income for the
year ending December 31, 2000, by multiplying the actual property income for the
six months ended June 30, 2000 by two. Actual property income for 2000 could be
higher or lower than such estimate. If property income for a different period,
actual 2000 property income or a different capitalization rate was used, a
higher valuation could result. Other methods of valuing your units could also
result in a higher valuation.
OFFER PRICE MAY NOT REPRESENT LIQUIDATION VALUE
The actual proceeds obtained from a liquidation are highly uncertain
and could be more than our estimate. Accordingly, our offer price could be less
than the net proceeds that you would realize upon an actual liquidation of your
partnership.
CONTINUATION OF THE PARTNERSHIP; NO TIME FRAME REGARDING SALE OF PROPERTIES
Your general partner, which is our subsidiary, is proposing to continue
to operate your partnership and not to attempt to liquidate it at the present
time. However, it is not known when the properties owned by your partnership may
be sold. There may be no way to liquidate your investment in the partnership in
the future until the properties are sold and the partnership is liquidated. The
general partner of your partnership continually considers whether a property
should be sold or otherwise disposed of after consideration of relevant factors,
including prevailing economic conditions, availability of favorable financing
and tax considerations, with a view to achieving maximum capital appreciation
for your partnership. At the current time the general partner of your
partnership believes that a sale of the properties would not be advantageous
given market conditions, the condition of the properties and tax considerations.
In particular, the
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general partner considered the changes in the local rental market, the potential
for appreciation in the value of a property and the tax consequences to you and
your partners on a sale of property. We cannot predict when any property will be
sold or otherwise disposed of, however, your partnership currently is in the
process of selling the Heritage Pointe apartments.
HOLDING UNITS MAY RESULT IN GREATER FUTURE VALUE
Although a liquidation of your partnership is not currently
contemplated in the near future, you might receive more value if you retain your
units until your partnership is liquidated.
CONFLICTS OF INTEREST WITH RESPECT TO THE OFFER
The general partner of your partnership is our subsidiary and,
therefore, has substantial conflicts of interest with respect to our offer. We
are making this offer with a view to making a profit. There is a conflict
between our desire to purchase your units at a low price and your desire to sell
your units at a high price. We determined our offer price without negotiation
with any other party, including any general or limited partner.
NO GENERAL PARTNER RECOMMENDATION
The general partner of your partnership makes no recommendation as to
whether or not you should tender or refrain from tendering your units. Although
the general partner believes the offer is fair, you must make your own decision
whether or not to participate in the offer, based upon a number of factors,
including several factors that may be personal to you, such as your financial
position, your need or desire for liquidity, your preferences regarding the
timing of when you might wish to sell your units, other financial opportunities
available to you, and your tax position and the tax consequences to you of
selling your units.
CONFLICTS OF INTEREST RELATING TO MANAGEMENT FEES
Since our subsidiaries receive fees for managing your partnership and
its properties, a conflict of interest exists between our continuing the
partnership and receiving such fees, and the liquidation of the partnership and
the termination of such fees. Also a decision of the limited partners of your
partnership to remove, for any reason, the general partner of your partnership
or the property manager of any property owned by your partnership would result
in a decrease or elimination of the substantial fees paid to them for services
provided to your partnership.
POSSIBLE FUTURE OFFER AT A HIGHER PRICE
It is possible that we may conduct a future offer at a higher price.
Such a decision will depend on, among other things, the performance of the
partnership, prevailing economic conditions, and our interest in acquiring
additional limited partnership interests.
RECOGNITION OF TAXABLE GAIN ON A SALE OF YOUR UNITS
Your sale of units for cash will be a taxable sale, with the result
that you will recognize taxable gain or loss measured by the difference between
the amount realized on the sale and your adjusted tax basis in the units of
limited partnership interest of your partnership you transfer to us. The "amount
realized" with respect to a unit of limited partnership interest you transfer to
us will be equal to the sum of the amount of cash received by you for the unit
sold pursuant to the offer plus the amount of partnership liabilities allocable
to the unit. The particular tax consequences for you of our offer will depend
upon a number of factors related to your tax situation, including your tax basis
in the units you transfer to us, whether you dispose of all of your units and
whether you have available suspended passive losses, credits or other tax items
to offset any gain recognized as a result of your sale of your units. Therefore,
depending on your basis in the units and your tax position, your taxable gain
and any tax liability resulting from a sale of units to us
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pursuant to the offer could exceed our offer price. Because the income tax
consequences of tendering units will not be the same for everyone, you should
consult your own tax advisor to determine the tax consequences of the offer to
you.
LOSS OF FUTURE DISTRIBUTIONS FROM YOUR PARTNERSHIP
If you tender your units in response to our offer, you will transfer to
us all right, title and interest in and to all of the units we accept, and the
right to receive all distributions in respect of such units on and after the
date on which we accept such units for purchase. Accordingly, for any units that
we acquire from you, you will not receive any future distributions from
operating cash flow of your partnership or upon a sale or refinancing of
properties owned by your partnership.
RECOGNITION OF GAIN RESULTING FROM POSSIBLE FUTURE REDUCTION IN YOUR PARTNERSHIP
LIABILITIES
Generally, a decrease in your share of partnership liabilities is
treated, for federal income tax purposes, as a deemed cash distribution.
Although no general partner of your partnership has any current plan or
intention to reduce the liabilities of your partnership, it is possible that
future economic, market, legal, tax or other considerations may cause a general
partner to reduce the liabilities of your partnership. If you retain all or a
portion of your units and the liabilities of your partnership were to be
reduced, you would be treated as receiving a hypothetical distribution of cash
resulting from a decrease in your share of the liabilities of the partnership.
Any such hypothetical distribution of cash would be treated as a nontaxable
return of capital to the extent of your adjusted tax basis in your units and
thereafter as gain. Gain recognized by you on the disposition of retained units
with a holding period of 12 months or less may be classified as short-term
capital gain and subject to taxation at ordinary income tax rates.
POSSIBLE TERMINATION OF YOUR PARTNERSHIP FOR FEDERAL INCOME TAX PURPOSES
If there is a sale or exchange of 50% or more of the total interest in
capital and profits of your partnership within any 12-month period, including
sales or exchanges resulting from our offer, your partnership will terminate for
federal income tax purposes. Any such termination may, among other things,
subject the assets of your partnership to longer depreciable lives than those
currently applicable to the assets of your partnership. This would generally
decrease the annual average depreciation deductions allocable to you if you do
not tender all of your interests in your partnership, thereby increasing the
taxable income allocable to your interests in your partnership each year, but
would have no effect on the total depreciation deductions available over the
useful lives of the assets of your partnership. Any such termination may also
change (and possibly shorten) your holding period with respect to interests in
your partnership that you choose to retain.
RISK OF INABILITY TO TRANSFER UNITS FOR 12-MONTH PERIOD
Your partnership's agreement of limited partnership prohibits any
transfer of an interest if such transfer, together with all other transfers
during the preceding 12 months, would cause 50% or more of the total interest in
capital and profits of your partnership to be transferred within such 12-month
period. If we acquire a significant percentage of the interest in your
partnership, you may not be able to transfer your units for a 12-month period
following our offer. If more units than can be purchased under the partnership
agreement are validly tendered prior to the expiration date and not properly
withdrawn prior to the expiration date in accordance with the procedures
specified herein, we will, upon the terms and subject to the conditions of the
offer, accept for payment and pay for those units so tendered which do not
violate the terms of the partnership agreement, pro rata according to the number
of 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 units.
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POTENTIAL DELAY IN PAYMENT
We reserve the right to extend the period of time during which our
offer is open and thereby delay acceptance for payment of any tendered units.
The offer may be extended indefinitely, and no payment will be made in respect
of tendered units until the expiration of the offer and acceptance of units for
payment.
BALLOON PAYMENTS
Your partnership has approximately $3,638,000 and $7,250,000 of balloon
payments due on its mortgage debt in November 2002 and November 2003,
respectively. Your partnership will have to refinance such debt, sell assets or
otherwise obtain additional funds prior to the balloon payment dates, or it will
be in default and could lose the properties to foreclosure.
THE OFFER
SECTION 1. TERMS OF THE OFFER; EXPIRATION DATE; PRORATION.
Upon the terms and subject to the conditions of the offer, we will
accept (and thereby purchase) any and all units that are validly tendered on or
prior to the expiration date and not withdrawn in accordance with the procedures
set forth in "The Offer--Section 4. Withdrawal Rights." For purposes of the
offer, the term "expiration date" shall mean 5:00 p.m., New York City time, on
September 5, 2000, unless we in our 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 us,
shall expire. See "The Offer--Section 5. Extension of Tender Period;
Termination; Amendment; Subsequent Offering Period," for a description of our
right to extend the period of time during which the offer is open and to amend
or terminate the offer.
The purchase price per unit will automatically be reduced by the
aggregate amount of distributions per unit, if any, made by your partnership to
you on or after the commencement of our offer and prior to the date on which we
acquire your units pursuant to our offer.
If, prior to the expiration date, we increase the consideration offered
to limited partners pursuant to the offer, the increased consideration will be
paid for all units accepted for payment pursuant to the offer, whether or not
the units were tendered prior to the increase in consideration.
We will pay any transfer fees imposed for the transfer of units by your
partnership. However, you will have to pay any taxes that arise from your sale
of units. You will also have to pay any fees or commissions imposed by your
broker, or by any custodian or other trustee of any Individual Retirement
Account or benefit plan which is the owner of record of your units. Although the
fees charged for transferring units from an Individual Retirement Account vary,
such fees are typically $25-$50 per transaction. Depending on the number of
units that you tender, any fees charged on a per transaction basis could exceed
the aggregate offer price you receive (as a result of proration or otherwise).
If units are validly tendered prior to the expiration date and not
properly withdrawn prior to the expiration date in accordance with the
procedures set forth in "The Offer--Section 4. Withdrawal Rights" and the
purchase of all such units would result in (i) a "Rule 13e-3 transaction" within
the meaning of the Securities Exchange Act of 1934 (the "Exchange Act") , or
(ii) there being less than 320 unitholders, we will purchase only 99% of the
total number of units so tendered by each limited partner (subject to any
necessary adjustment for fractional units). If we are going to purchase only 99%
of the units validly tendered, we will notify you of such fact. In such case,
you would continue to be a limited partner and receive a K-1 for tax reporting
purposes. See "The Offer--Section 7. Effects of the Offer--Effect on Trading
Market; Registration Under 12(g) of the Exchange Act."
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If proration of tendered units is required, then, subject to our
obligation under Rule 14e-1(c) under the Exchange Act to pay limited partners
the purchase price in respect of units tendered or return those units promptly
after termination or withdrawal of the offer, we do not intend to pay for any
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 offer price.
The offer is conditioned on satisfaction of certain conditions. The
offer is not conditioned upon any minimum number of units being tendered. See
"The Offer--Section 17. Conditions to the Offer," which sets forth in full the
conditions of the offer. We reserve the right (but in no event shall we be
obligated), in our reasonable 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, we reserve the right to (i) decline to
purchase any of the units tendered, terminate the offer and return all tendered
units to tendering limited partners, (ii) waive all the unsatisfied conditions
and purchase, subject to the terms of the offer, any and all units validly
tendered, (iii) extend the offer and, subject to the withdrawal rights of
limited partners, retain the units that have been tendered during the period or
periods for which the offer is extended, or (iv) amend the offer. The transfer
of units will be effective May 1, 2000.
This offer is being mailed to the persons shown by your partnership's
records to have been limited partners or, in the case of units owned of record
by Individual Retirement Accounts and qualified plans, beneficial owners of
units, as of July 21, 2000.
SECTION 2. ACCEPTANCE FOR PAYMENT AND PAYMENT FOR UNITS.
Upon the terms and subject to the conditions of the offer, we will
purchase, by accepting for payment, and will pay for, any and all units validly
tendered as promptly as practicable following the expiration date. A tendering
beneficial owner of units whose units are owned of record by an Individual
Retirement Account or other qualified plan will not receive direct payment of
the offer price; rather, payment will be made to the custodian of such account
or plan. In all cases, payment for units purchased pursuant to the offer will be
made only after timely receipt by the Information Agent of a properly completed
and duly executed letter of transmittal and other documents required by the
letter of transmittal. See "The Offer--Section 3. Procedure for Tendering
Units." UNDER NO CIRCUMSTANCES WILL INTEREST BE PAID ON THE OFFER PRICE BY
REASON OF ANY DELAY IN MAKING SUCH PAYMENT.
We will, upon the terms and subject to the conditions of the offer,
accept for payment and pay for any and all units validly tendered, with
appropriate adjustments to avoid purchases that would violate the agreement of
limited partnership of your partnership and any relevant procedures or
regulations promulgated by the general partner. Accordingly, in some
circumstances, we may pay you the full offer price and accept an assignment of
your right to receive distributions and other payments and an irrevocable proxy
in respect of the units and defer, perhaps indefinitely, the transfer of
ownership of the units on the partnership books. In other circumstance we may
only be able to purchase units which, together with units previously transferred
within the preceding twelve months, do not exceed 50% of the outstanding units.
If more units than can be purchased under the partnership agreement are
validly tendered prior to the expiration date and not properly withdrawn prior
to the expiration date in accordance with the procedures specified herein, we
will, upon the terms and subject to the conditions of the offer, accept for
payment and pay for those units so tendered which do not violate the terms of
the partnership agreement, pro rata according to the number of 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
units. If the number of units validly tendered and not properly withdrawn on or
prior to the expiration date is less than or equal to the maximum number we can
purchase under the partnership agreement, we will purchase all units so tendered
and not withdrawn, upon the terms and subject to the conditions of the offer.
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For purposes of the offer, we will be deemed to have accepted for
payment pursuant to the offer, and thereby purchased, validly tendered units,
if, as and when we give verbal or written notice to the Information Agent of our
acceptance of those units for payment pursuant to the offer. Payment for units
accepted for payment pursuant to the offer will be made through the Information
Agent, which will act as agent for tendering limited partners for the purpose of
receiving cash payments from us and transmitting cash payments to tendering
limited partners.
If any tendered units are not accepted for payment by us for any
reason, the letter of transmittal with respect to such units not purchased may
be destroyed by us or the Information Agent or returned to you. You may withdraw
tendered units until the expiration date (including any extensions). In
addition, you may withdraw any tendered units on or after October 9, 2000 if we
have not accepted the validly tendered units for payment. After the expiration
date, the Information Agent may, on our behalf, retain tendered units, and those
units may not be otherwise withdrawn, if, for any reason, acceptance for payment
of, or payment for, any units tendered pursuant to the offer is delayed or we
are unable to accept for payment, purchase or pay for units tendered pursuant to
the offer. Any such action is subject, however, to our obligation under Rule
14e-1(c) under the Exchange Act, to pay you the offer price in respect of units
tendered or return those units promptly after termination or withdrawal of the
offer.
We reserve the right to transfer or assign, in whole or in part, to one
or more of our affiliates, the right to purchase units tendered pursuant to the
offer, but no such transfer or assignment will relieve us of our obligations
under the offer or prejudice your rights to receive payment for units validly
tendered and accepted for payment pursuant to the offer.
SECTION 3. PROCEDURE FOR TENDERING UNITS.
VALID TENDER. To validly tender units pursuant to the offer, a properly
completed and duly executed letter of transmittal and any other documents
required by the letter of transmittal must be received by the Information Agent,
at one of its addresses set forth on the back cover of this offer to purchase,
on or prior to the expiration date. You may tender all or any portion of your
units. No alternative, conditional or contingent tenders will be accepted.
SIGNATURE REQUIREMENTS. If the letter of transmittal is signed by the
registered holder of a unit and payment is to be made directly to that holder,
then no signature guarantee is required on the letter of transmittal. Similarly,
if a unit is 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, branch or agency in the United
States (each an "Eligible Institution"), no signature guarantee is required on
the letter of transmittal. However, in all other cases, all signatures on the
letter of transmittal must be guaranteed by an Eligible Institution.
In order for you to tender in the offer, your units must be validly
tendered and not withdrawn on or prior to the expiration date.
THE METHOD OF DELIVERY OF THE LETTER OF TRANSMITTAL AND ALL OTHER
REQUIRED DOCUMENTS IS AT YOUR OPTION AND RISK AND DELIVERY WILL BE DEEMED MADE
ONLY WHEN ACTUALLY RECEIVED BY THE INFORMATION AGENT. IF DELIVERY IS BY MAIL,
REGISTERED MAIL WITH RETURN RECEIPT REQUESTED IS RECOMMENDED. IN ALL CASES,
SUFFICIENT TIME SHOULD BE ALLOWED TO ASSURE TIMELY DELIVERY.
APPOINTMENT AS PROXY; POWER OF ATTORNEY. By executing the letter of
transmittal, you are irrevocably appointing us and our designees as your proxy,
in the manner set forth in the letter of transmittal each with full power of
substitution, to the fullest extent of the your rights with respect to the units
tendered by you and accepted for payment by us. Each such proxy shall be
considered coupled with an interest in the tendered units. Such appointment will
be effective when, and only to the extent that, we accept the tendered unit for
payment. Upon such acceptance for payment, all prior proxies given by you with
respect to the units will, without further action, be revoked, and no subsequent
proxies may be given (and if given will not be effective). We and our designees
will, as to those units, be empowered
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to exercise all voting and other rights as a limited partner as we, in our sole
discretion, may deem proper at any meeting of limited partners, by written
consent or otherwise. We reserve the right to require that, in order for units
to be deemed validly tendered, immediately upon our acceptance for payment of
the units, we must be able to exercise full voting rights with respect to the
units, including voting at any meeting of limited partners then scheduled or
acting by written consent without a meeting. By executing the letter of
transmittal, you agree to execute all such documents and take such other actions
as shall be reasonably required to enable the units tendered to be voted in
accordance with our directions. The proxy granted by you to us will remain
effective and be irrevocable for a period of ten years following the termination
of our offer.
By executing the letter of transmittal, you also irrevocably constitute
and appoint us and our designees as your attorneys-in-fact, each with full power
of substitution, to the full extent of your rights with respect to the units
tendered by you and accepted for payment by us. Such appointment will be
effective when, and only to the extent that, we pay for your units and will
remain effective and be irrevocable for a period of ten years following the
termination of our offer. You will agree not to exercise any rights pertaining
to the tendered units without our prior consent. Upon such payment, all prior
powers of attorney granted by you with respect to such 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, we and our designees each will have the power, among other
things, (i) to transfer ownership of such units on the partnership books
maintained by your general partner (and execute and deliver any accompanying
evidences of transfer and authenticity it may deem necessary or appropriate in
connection therewith), (ii) upon receipt by the Information Agent of the offer
price, to become a substituted limited partner, to receive any and all
distributions made by your partnership on or after the date on which we acquire
such units, and to receive all benefits and otherwise exercise all rights of
beneficial ownership of such units in accordance with the terms of our offer,
(iii) to execute and deliver to the general partner of your partnership a change
of address form instructing the general partner to send any and all future
distributions to which we are entitled pursuant to the terms of the offer in
respect of tendered units to the address specified in such form, and (iv) to
endorse any check payable to you or upon your order representing a distribution
to which we are entitled pursuant to the terms of our offer, in each case, in
your name and on your behalf.
By executing the letter of transmittal, you will irrevocably constitute
and appoint us and any of our designees as your true and lawful agent and
attorney-in-fact with respect to such units, with full power of substitution
(such power of attorney being deemed to be an irrevocable power coupled with an
interest), to withdraw any or all of such units that have been previously
tendered in response to any other tender or exchange offer, provided that the
price per unit we are offering is equal to or higher than the price per unit
being offered in the other tender or exchange offer. Such appointment is
effective upon the execution and receipt of the letter of transmittal and shall
continue to be effective unless and until you validly withdraw such units from
this offer prior to the expiration date.
ASSIGNMENT OF INTEREST IN FUTURE DISTRIBUTIONS. By executing the letter
of transmittal, you will irrevocably assign to us and our assigns all of your
right, title and interest in and to any and all distributions made by your
partnership from any source and of any nature, including, without limitation,
distributions in the ordinary course, distributions from sales of assets,
distributions upon liquidation, winding-up, or dissolution, payments in
settlement of existing or future litigation, and all other distributions and
payments from and after the expiration date of our offer, in respect of the
units tendered by you and accepted for payment and thereby purchased by us. If,
after the unit is accepted for payment and purchased by us, you receive any
distribution from any source and of any nature, including, without limitation,
distributions in the ordinary course, distributions from sales of assets,
distributions upon liquidation, winding-up or dissolution, payments in
settlement of existing or future litigation and all other distributions and
payments, from your partnership in respect of such unit, you will agree to
forward promptly such distribution to us.
DETERMINATION OF VALIDITY; REJECTION OF 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 units pursuant to our offer will be determined by us, in our reasonable
discretion, which determination shall be final and binding on all parties. We
reserve the absolute right to reject any or all tenders of any particular unit
determined by us not to be in proper form or if the acceptance of or payment for
that unit may, in the opinion of our
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counsel, be unlawful. We also reserve the absolute right to waive or amend any
of the conditions of the offer that we are legally permitted to waive as to the
tender of any particular unit and to waive any defect or irregularity in any
tender with respect to any particular unit of any particular limited partner.
Our interpretation of the terms and conditions of the offer (including the
letter of transmittal ) will be final and binding on all parties. No tender of
units will be deemed to have been validly made unless and until all defects and
irregularities have been cured or waived. Neither us, the Information Agent, nor
any other person will be under any duty to give notification of any defects or
irregularities in the tender of any unit or will incur any liability for failure
to give any such notification.
BACKUP FEDERAL INCOME TAX WITHHOLDING. To prevent the possible
application of back-up federal income tax withholding of 31% with respect to
payment of the offer price, you may have to provide us with your correct
taxpayer identification number. See the instructions to the letter of
transmittal and "The Offer--Section 6. Certain Federal Income Tax Matters."
FIRPTA WITHHOLDING. To prevent the withholding of federal income tax in
an amount equal to 10% of the amount realized on the disposition (the amount
realized is generally the offer price plus the partnership liabilities allocable
to each unit purchased), you must certify that you are not a foreign person if
you tender units. See the instructions to the letter of transmittal and "The
Offer--Section 6. Certain Federal Income Tax Matters."
TRANSFER TAXES. The amount of any transfer taxes (whether imposed on
the registered holder of units or any person) payable on account of the transfer
of units will be deducted from the purchase price unless satisfactory evidence
of the payment of such taxes or exemption therefrom is submitted.
BINDING AGREEMENT. A tender of a unit pursuant to any of the procedures
described above and the acceptance for payment of such unit will constitute a
binding agreement between the tendering unitholder and us on the terms set forth
in this offer to purchase and the related letter of transmittal.
SECTION 4. WITHDRAWAL RIGHTS.
You may withdraw your tendered units at any time prior to the
expiration date, including any extensions thereof, or on or after October 9,
2000, if the units have not been previously accepted for payment.
For a withdrawal to be effective, a written notice of withdrawal must
be timely received by the Information Agent at one of its addresses set forth on
the back cover of the offer to purchase. Any such notice of withdrawal must
specify the name of the person who tendered, the number of units to be withdrawn
and the name of the registered holder of such units, if different from the
person who tendered. In addition, the notice of withdrawal must be signed by the
person who signed the letter of transmittal in the same manner as the letter of
transmittal was signed.
If purchase of, or payment for, a unit is delayed for any reason, or if
we are unable to purchase or pay for a unit for any reason, then, without
prejudice to our rights under the offer, tendered units may be retained by the
Information Agent; subject, however, to our obligation, pursuant to Rule
14e-1(c) under the Exchange Act, to pay the offer price in respect of units
tendered or return those units promptly after termination or withdrawal of our
offer.
Any units properly withdrawn will thereafter be deemed not to have been
validly tendered for purposes of our offer. However, withdrawn units may be
re-tendered at any time prior to the expiration date by following the procedures
described in "The Offer--Section 3. Procedures for Tendering Units."
All questions as to the validity and form (including time of receipt)
of notices of withdrawal will be determined by us in our reasonable discretion,
which determination will be final and binding on all parties. Neither we, the
Information Agent, nor 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.
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SECTION 5. EXTENSION OF TENDER PERIOD; TERMINATION; AMENDMENT; SUBSEQUENT
OFFERING PERIOD.
We expressly reserve the right, in our reasonable discretion, at any
time and from time to time, (i) to extend the period of time during which our
offer is open and thereby delay acceptance for payment of, and the payment for,
any unit, (ii) to terminate the offer and not accept any units not theretofore
accepted for payment or paid for if any of the conditions to the offer are not
satisfied or if any event occurs that might reasonably be expected to result in
a failure to satisfy such conditions, (iii) upon the occurrence of any of the
conditions specified in "The Offer--Section 17. Conditions to the Offer," or any
event that might reasonably be expected to result in such occurrence, to delay
the acceptance for payment of, or payment for, any units not already accepted
for payment or paid for, and (iv) to amend our offer in any respect (including,
without limitation, by increasing or decreasing the consideration offered,
increasing or decreasing the units being sought, or both). Notice of any such
extension, termination or amendment will promptly be disseminated to you in a
manner reasonably designed to inform you of such change. In the case of an
extension of the offer, the extension may 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 scheduled expiration date of our offer,
in accordance with Rule 14e-1(d) under the Exchange Act.
If we extend the offer, or if we delay payment for a unit (whether
before or after its acceptance for payment) or are unable to pay for a unit
pursuant to our offer for any reason, then, without prejudice to our rights
under the offer, the Information Agent may retain tendered units and those units
may not be withdrawn except to the extent tendering unitholders are entitled to
withdrawal rights as described in "The Offer--Section 4. Withdrawal Rights;"
subject, however, to our obligation, pursuant to Rule 14e-l(c) under the
Exchange Act, to pay the offer price in respect of units tendered or return
those units promptly after termination or withdrawal of the offer.
If we make a material change in the terms of our offer, or if we waive
a material condition to our offer, we will extend the offer and disseminate
additional tender offer materials to the extent required by Rules 14d-4 and
14e-1 under the Exchange Act. The minimum period during which the offer must
remain open following any material change in the terms of the offer, other than
a change in price or a change in percentage of securities sought or a change in
any dealer's soliciting fee, if any, will depend upon the facts and
circumstances, including the materiality of the change, but generally will be
five business days. With respect to a change in price or, subject to certain
limitations, a change in the percentage of securities sought or a change in any
dealer's soliciting fee, if any, a minimum of ten business days from the date of
such change is generally required to allow for adequate dissemination to
unitholders. Accordingly, if, prior to the expiration date, we increase (other
than increases of not more than two percent of the outstanding units) or
decrease the number of units being sought, or increase or decrease the offer
price, and if the offer is scheduled to expire at any time earlier than the
tenth business day after the date that notice of such increase or decrease is
first published, sent or given to unitholders, the offer will be extended at
least until the expiration of such ten business days. As used in the 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.
Pursuant to Rule 14d-11 under the Exchange Act, we may provide for a
subsequent offering period in tender offers for any and all outstanding units. A
subsequent offering period is an additional period of from three to twenty
business days following the expiration date of the offer, including any
extensions, in which unitholders may continue to tender units not tendered in
the offer for the offer price. We do no intend to have a subsequent offering
period.
SECTION 6. CERTAIN FEDERAL INCOME TAX MATTERS.
The following summary is a general discussion of certain of the United
States federal income tax consequences of the offer that may be relevant to (i)
unitholders who tender some or all of their units for cash pursuant to our
offer, and (ii) unitholders who do not tender any of their units pursuant to our
offer. This discussion is based on the Internal Revenue Code of 1986, as amended
(the "Internal Revenue Code"), Treasury Regulations, rulings issued by the
Internal Revenue Service (the "IRS"), and judicial decisions, all as of the date
of this offer to purchase. All of the foregoing are subject to change or
alternative construction, possibly with retroactive effect, and any such change
or alternative
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construction could affect the continuing accuracy of this summary. This summary
is based on the assumption that your partnership is operated in accordance with
its organizational documents including its certificate of limited partnership
and agreement of limited partnership. This summary is for general information
only and does not purport to discuss all aspects of federal income taxation
which may be important to a particular person in light of its investment or tax
circumstances, or to certain types of investors subject to special tax rules
(including financial institutions, broker-dealers, insurance companies, and,
except to the extent discussed below, tax-exempt organizations and foreign
investors, as determined for United States federal income tax purposes), nor
(except as otherwise expressly indicated) does it describe any aspect of state,
local, foreign or other tax laws. This summary assumes that the units constitute
capital assets in the hands of the unitholders (generally, property held for
investment). No advance ruling has been or will be sought from the IRS regarding
any matter discussed in this offer to purchase. Further, no opinion of counsel
has been obtained with regard to the offer.
THE UNITED STATES FEDERAL INCOME TAX TREATMENT OF A UNITHOLDER
PARTICIPATING IN THE OFFER DEPENDS IN SOME INSTANCES ON DETERMINATIONS OF FACT
AND INTERPRETATIONS OF COMPLEX PROVISIONS OF UNITED STATES FEDERAL INCOME TAX
LAW FOR WHICH NO CLEAR PRECEDENT OR AUTHORITY MAY BE AVAILABLE. ACCORDINGLY, YOU
SHOULD CONSULT YOUR TAX ADVISOR REGARDING THE UNITED STATES FEDERAL, STATE,
LOCAL AND FOREIGN TAX CONSEQUENCES OF SELLING THE LIMITED PARTNERSHIP INTERESTS
IN YOUR PARTNERSHIP REPRESENTED BY UNITS PURSUANT TO OUR OFFER OR OF A DECISION
NOT TO SELL IN LIGHT OF YOUR SPECIFIC TAX SITUATION.
TAX CONSEQUENCES TO LIMITED PARTNERS TENDERING UNITS FOR CASH. You will
recognize gain or loss on a sale of a unit of limited partnership of your
partnership equal to the difference between (i) your "amount realized" on the
sale and (ii) your adjusted tax basis in the unit sold. The "amount realized"
with respect to a unit of limited partnership of your partnership will be equal
to the sum of the amount of cash received by you for the unit sold pursuant to
the offer plus the amount of partnership liabilities allocable to the unit (as
determined under Section 752 of the Internal Revenue Code). Thus, your taxable
gain and tax liability resulting from a sale of a unit of limited partnership of
your partnership could exceed the cash received upon such sale.
ADJUSTED TAX BASIS. If you acquired your units of limited partnership
of your partnership for cash, your initial tax basis in such units was generally
equal to your cash investment in your partnership increased by your share of
partnership liabilities at the time you acquired such units. Your initial tax
basis generally has been increased by (i) your share of partnership income and
gains, and (ii) any increases in your share of partnership liabilities, and has
been decreased (but not below zero) by (i) your share of partnership cash
distributions, (ii) any decreases in your share of partnership liabilities,
(iii) your share of partnership losses, and (iv) your share of nondeductible
partnership expenditures that are not chargeable to capital. For purposes of
determining your adjusted tax basis in units of limited partnership of your
partnership immediately prior to a disposition of your units, your adjusted tax
basis in your units will include your allocable share of partnership income,
gain or loss for the taxable year of disposition. If your adjusted tax basis is
less than your share of partnership liabilities (e.g., as a result of the effect
of net loss allocations and/or distributions exceeding the cost of your unit),
your gain recognized with respect to a unit of limited partnership of your
partnership pursuant to the offer will exceed the cash proceeds realized upon
the sale of such unit.
CHARACTER OF GAIN OR LOSS RECOGNIZED PURSUANT TO THE OFFER. Except as
described below, the gain or loss recognized by you on a sale of a unit of
limited partnership of your partnership pursuant to the offer generally will be
treated as a long-term capital gain or loss if you held the unit for more than
one year. Long-term capital gains recognized by individuals and certain other
noncorporate taxpayers generally will be subject to a maximum United States
federal income tax rate of 20%. If the amount realized with respect to a unit of
limited partnership of your partnership that is attributable to your share of
"unrealized receivables" of your partnership exceeds the tax basis attributable
to those assets, such excess will be treated as ordinary income. Among other
things, "unrealized receivables" include depreciation recapture for certain
types of property. In addition, the maximum United States federal income tax
rate applicable to persons who are noncorporate taxpayers for net capital gains
attributable to the sale of depreciable real property (which may be determined
to include an interest in a partnership such as your units) held
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for more than one year is currently 25% (rather than 20%) with respect to that
portion of the gain attributable to depreciation deductions previously taken on
the property.
If you tender a unit of limited partnership interest of your
partnership in the offer, you will be allocated a share of partnership taxable
income or loss for the year of tender with respect to any units sold. You will
not receive any future distributions on units of limited partnership interest of
your partnership tendered on or after the date on which such units are accepted
for purchase and, accordingly, you may not receive any distributions with
respect to such accreted income. Such allocation and any partnership cash
distributions to you for that year will affect your adjusted tax basis in your
unit of limited partnership interest of your partnership and, therefore, the
amount of your taxable gain or loss upon a sale of a unit pursuant to the offer.
PASSIVE ACTIVITY LOSSES. The passive activity loss rules of the
Internal Revenue Code limit the use of losses derived from passive activities,
which generally include investments in limited partnership interests such as the
units of limited partnership interest of your partnership. An individual, as
well as certain other types of investors, generally cannot use losses from
passive activities to offset nonpassive activity income received during the
taxable year. Passive losses that are disallowed for a particular tax year are
"suspended" and may be carried forward to offset passive activity income earned
by the investor in future taxable years. In addition, such suspended losses may
be claimed as a deduction, subject to other applicable limitations, upon a
taxable disposition of the investor's interest in such activity.
Accordingly, if your investment in your units is treated as a passive
activity, you may be able to reduce gain from the sale of your units of limited
partnership interest of your partnership pursuant to the offer with passive
losses in the manner described below. If you sell all or a portion of your units
of limited partnership interest of your partnership pursuant to the offer and
recognize a gain on your sale, you will generally be entitled to use your
current and "suspended" passive activity losses (if any) from your partnership
and other passive sources to offset that gain. In general, if you sell all or a
portion of your units of limited partnership interest of your partnership
pursuant to the offer and recognize a loss on such sale, you will be entitled to
deduct that loss currently (subject to other applicable limitations) against the
sum of your passive activity income from your partnership for that year (if any)
plus any passive activity income from other sources for that year. If you sell
all of your units pursuant to the offer, the balance of any "suspended" losses
from your partnership that were not otherwise utilized against passive activity
income as described in the two preceding sentences will generally no longer be
suspended and will generally therefore be deductible (subject to any other
applicable limitations) by you against any other income for that year,
regardless of the character of that income. You are urged to consult your tax
advisor concerning whether, and the extent to which, you have available
"suspended" passive activity losses from your partnership or other investments
that may be used to reduce gain from the sale of units pursuant to the offer.
INFORMATION REPORTING, BACKUP WITHHOLDING AND FIRPTA. If you tender any
units, you must report the transaction by filing a statement with your United
States federal income tax return for the year of the tender which provides
certain required information to the IRS. To prevent the possible application of
back-up United States federal income tax withholding of 31% with respect to the
payment of the offer consideration, you are generally required to provide us
with your correct taxpayer identification number. See the instructions to the
letter of transmittal.
Gain realized by a foreign person on the sale of a unit pursuant to the
offer will be subject to federal income tax under the Foreign Investment in Real
Property Tax Act of 1980. Under these provisions of the Internal Revenue Code,
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
10% of the amount realized on the disposition. Amounts withheld would be
creditable against a foreign person's United States federal income tax liability
and, if in excess thereof, a refund could be claimed from the Internal Revenue
Service by filing a United States income tax return. See the instructions to the
letter of transmittal.
TAX CONSEQUENCES TO NON-TENDERING AND PARTIALLY-TENDERING LIMITED
PARTNERS. Section 708 of the Internal Revenue Code provides that if there is a
sale or exchange of 50% or more of the total interest in capital and
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profits of a partnership within any 12-month period, such partnership terminates
for United States federal income tax purposes. It is possible that our
acquisition of units pursuant to the offer alone or in combination with other
transfers of interests in your partnership could result in such a termination of
your partnership. If your partnership is deemed to terminate for tax purposes,
the following Federal income tax events will be deemed to occur: the terminated
partnership will be deemed to have contributed all of its assets (subject to its
liabilities) to a new partnership in exchange for an interest in the new
partnership and, immediately thereafter, the old partnership will be deemed to
have distributed interests in the new partnership to the remaining limited
partners in proportion to their respective interests in the old partnership in
liquidation of the old partnership.
SECTION 7. EFFECTS OF THE OFFER.
CONTROL BY AIMCO. Because the general partner of your partnership is
our subsidiary, we have control over the management of your partnership. In
addition, we already own over 50% of the units in your partnership and we can
control the vote of the limited partners. In general, we will vote the units
owned by us in whatever manner we deem to be in our best interests, which may
not be in the interest of other limited partners. This could (1) prevent
non-tendering limited partners from taking action they desire but that we oppose
and (2) enable us to take action desired by us but opposed by non-tendering
limited partners. We also own the company that manages the properties owned by
your partnership. In the event that we acquire a substantial number of units
pursuant to the offer, removal of a property manager may become more difficult
or impossible.
DISTRIBUTIONS TO US. If we acquire units in the offer, we will
participate in any subsequent distributions to limited partners to the extent of
the units purchased.
PARTNERSHIP STATUS. We believe our purchase of units should not
adversely affect the issue of whether your partnership is classified as a
partnership for federal income tax purposes.
BUSINESS. Our offer will not affect the operation of the properties
owned by your partnership. We will continue to control the general partner of
your partnership and the property manager, both of which will remain the same.
Consummation of the offer will not affect your agreement of limited partnership,
the operations of your partnership, the business and properties owned by your
partnership, the management compensation payable to your general partner or any
other matter relating to your partnership, except it would result in us
increasing our ownership of units. We have no current intention of changing the
fee structure for your general partner or the manager of your partnership's
properties.
EFFECT ON TRADING MARKET; REGISTRATION UNDER 12(G) OF THE EXCHANGE ACT.
If a substantial number of units are purchased pursuant to the offer, the result
will be a reduction in the number of limited partners in your partnership. In
the case of certain kinds of equity securities, a reduction in the number of
securityholders might be expected to result in a reduction in the liquidity and
volume of activity in the trading market for the security. In the case of your
partnership, however, there is no established public trading market for the
units and, therefore, we do not believe a reduction in the number of limited
partners will materially further restrict your ability to find purchasers for
your units through secondary market transactions.
The units are registered under Section 12(g) of the Exchange Act, which
means, among other things, that your partnership is required to file periodic
reports with the SEC and to comply with the SEC's proxy rules. We do not expect
or intend that consummation of the offer will cause the units to cease to be
registered under Section 12(g) of the Exchange Act. If the units were to be held
by fewer than 300 persons, your partnership could apply to de-register the units
under the Exchange Act. Your partnership currently has 382 unitholders of
record. If units are tendered which would result in less than 320 unitholders,
we will purchase no more than 99% of the units tendered by each unitholder to
assure that there are more than 300 unitholders after the offer. See "The
Offer--Section 1. Terms of the Offer; Expiration Date."
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ACCOUNTING TREATMENT. Upon consummation of the offer, we will account
for our investment in any acquired units under the purchase method of
accounting. There will be no effect on the accounting treatment of your
partnership as a result of the offer.
SECTION 8. INFORMATION CONCERNING US AND CERTAIN OF OUR AFFILIATES.
GENERAL. We are AIMCO Properties, L.P., a Delaware limited partnership.
Together with our subsidiaries, we conduct substantially all of the operations
of Apartment Investment and Management Company, a Maryland corporation
("AIMCO"). AIMCO is a real estate investment trust that owns and manages
multifamily apartment properties throughout the United States. AIMCO's Class A
Common Stock is listed and traded on the New York Stock Exchange under the
symbol "AIV." Based on apartment unit data compiled as of January 1, 1999, by
the National Multi Housing Council, we believe that we are the largest owner and
manager of multi-family apartment properties in the United States. As of March
31, 2000, we:
- owned or controlled 121,449 units in 439 apartment properties;
- held an equity interest in 115,951 units in 671 apartment properties;
and
- managed 115,119 units in 724 apartment properties for third party
owners and affiliates.
Our general partner is AIMCO-GP, Inc., a Delaware corporation, which is
a wholly-owned subsidiary of AIMCO. Our principal executive offices are located
at Colorado Center, Tower Two, 2000 South Colorado Boulevard, Suite 2-1000,
Denver, Colorado 80222, and our telephone number is (303) 757-8101.
The names, positions and business addresses of the directors and
executive officers of AIMCO and your general partner (which is our subsidiary)
as well as a biographical summary of the experience of such persons for the past
five years or more, are set forth on Annex I attached hereto and are
incorporated herein by reference.
We and AIMCO are both subject to the information and reporting
requirements of the Exchange Act and, in accordance therewith, file reports and
other information with the Securities and Exchange Commission relating to our
business, financial condition and other matters, including the complete
financial statements summarized below. Such reports and other information may be
inspected at the public reference facilities maintained by the SEC at Judiciary
Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549; Citicorp Center, 500 West
Madison Street, Chicago, Illinois 60661; and 7 World Trade Center, 13th Floor,
New York, New York 10048. Copies of such material can also be obtained from the
Public Reference Room of the SEC in Washington, D.C. at prescribed rates. The
SEC also maintains a site on the World Wide Web at http://www.sec.gov that
contains reports, proxy and information statements and other information
regarding registrants that file electronically with the SEC. In addition,
information filed by AIMCO with the New York Stock Exchange may be inspected at
the offices of the New York Stock Exchange at 20 Broad Street, New York, New
York 10005.
For more information regarding AIMCO Properties, L.P., please refer to
the Annual Report on Form 10-K for the year ended December 31, 1999, and the
Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2000
(particularly the management's discussion and analysis of financial condition
and results of operations) and other reports and documents filed by us with the
SEC.
Except as described in "The Offer--Section 9. Background and Reasons
for the Offer" and "The Offer--Section 11. Conflicts of Interests and
Transactions with Affiliates," neither we nor, to the best of our knowledge, any
of the persons listed on Annex I attached hereto, (i) beneficially own or have a
right to acquire any units, (ii) has effected any transaction in the units in
the past 60 days, or (iii) have any contract, arrangement, understanding or
relationship with any other person with respect to any securities of your
partnership, including, but not limited to, contracts, arrangements,
understandings or relationships concerning 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. Neither we nor
our affiliates intend to tender any units beneficially owned in this offer.
15
<PAGE> 18
SELECTED FINANCIAL INFORMATION OF AIMCO PROPERTIES, L.P. The historical
financial data set forth below for AIMCO Properties, L.P. for the three months
ended March 31, 2000 and 1999 is unaudited. The historical financial data set
forth below for AIMCO Properties, L.P. for the years ended December 31, 1999 and
1998 is based on audited financial statements. This information should be read
in conjunction with such financial statements, including the notes thereto, and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations of the AIMCO Operating Partnership" included in the AIMCO Properties,
L.P.'s Annual Report on Form 10-K for the year ended December 31, 1999 and its
Form 10-Q for the quarter ended March 31, 2000.
<TABLE>
<CAPTION>
THREE MONTHS ENDED YEAR ENDED
MARCH 31, DECEMBER 31,
------------------------ ------------------------
2000 1999 1999 1998
--------- --------- --------- ---------
(DOLLARS IN THOUSANDS, EXCEPT PER UNIT DATA)
<S> <C> <C> <C> <C>
OPERATING DATA:
RENTAL PROPERTY OPERATIONS:
Rental and other property revenue ................... $ 224,320 $ 110,552 $ 531,883 $ 373,963
Property operating expenses ......................... (90,751) (42,436) (213,959) (145,966)
Owned property management expenses .................. (7,816) (3,395) (15,322) (10,882)
Depreciation ........................................ (64,690) (26,616) (131,257) (83,908)
--------- --------- --------- ---------
Income from property operations ..................... 61,063 38,105 171,345 133,207
SERVICE COMPANY BUSINESS:
Management fees and other income .................... 13,310 7,978 42,877 22,675
Management and other expenses ....................... (4,957) (8,902) (25,470) (16,960)
--------- --------- --------- ---------
Income from service company business ................ 8,353 (924) 17,407 5,715
General and administrative expenses ................. (3,211) (2,594) (12,016) (10,336)
Interest expense .................................... (56,224) (30,360) (139,124) (88,208)
Interest income ..................................... 13,004 9,828 62,183 28,170
Equity in earnings (losses) of unconsolidated
subsidiaries(a) ................................. 2,445 2,695 (2,588) (2,665)
Equity in earnings (losses) of unconsolidated
real estate partnerships(b) ..................... 3,215 2,790 (2,400) 12,009
Loss from IPLP exchange and assumption .............. -- (684) (684) (2,648)
Minority interest ................................... (3,721) (2,065) (5,788) (1,868)
Amortization of goodwill ............................ (1,575) (1,942) (5,860) (8,735)
--------- --------- --------- ---------
Income from operations .............................. 23,349 14,849 82,475 (64,641)
Gain on disposition of properties ................... 5,105 15 (1,785) 4,287
--------- --------- --------- ---------
Income before extraordinary item .................... 28,454 14,864 80,690 68,928
Net income .......................................... $ 28,454 $ 14,864 $ 80,690 $ 68,928
========= ========= ========= =========
</TABLE>
16
<PAGE> 19
<TABLE>
<CAPTION>
THREE MONTHS ENDED YEAR ENDED
MARCH 31, DECEMBER 31,
---------------------------- ----------------------------
2000 1999 1999 1998
----------- ----------- ----------- -----------
(DOLLARS IN THOUSANDS, EXCEPT PER UNIT DATA)
<S> <C> <C> <C> <C>
BALANCE SHEET INFORMATION
(END OF PERIOD:)
Real estate, before accumulated depreciation ... $ 4,995,886 $ 2,852,506 $ 4,508,535 $ 2,743,865
Real estate, net of accumulated depreciation ... 4,507,911 5,917,753 4,092,543 2,515,710
Total assets ................................... 6,017,807 4,291,931 5,684,251 4,186,764
Total mortgages and notes payable .............. 3,007,050 1,608,895 2,584,289 1,601,730
Partnership-obligated mandatory redeemable
convertible preferred securities of a
subsidiary trust ........................... 149,500 149,500 149,500 149,500
Partners' Capital .............................. 2,497,747 2,289,245 2,486,889 2,153,335
OTHER INFORMATION:
Total owned or controlled properties (end of
period) .................................... 439 240 373 234
Total owned or controlled apartment units
(end of period) ............................ 121,449 63,069 106,148 61,672
Total equity apartment units (end of period) ... 115,951 168,817 133,113 171,657
Units under management (end of
period) .................................... 115,119 141,523 124,201 146,034
Basic earnings per Common OP Unit .............. $ 0.17 $ 0.03 $ 0.39 $ 0.80
Diluted earnings per Common OP Unit ............ $ 0.17 $ 0.03 $ 0.38 $ 0.78
Distributions paid per Common OP Unit .......... $ 0.70 $ 0.63 $ 2.50 $ 2.25
Cash flows provided by operating activities .... $ 69,556 $ 65,545 $ 254,380 $ 144,152
Cash flows used in investing activities ........ (108,704) (25,667) (243,078) (342,541)
Cash flows provided by (used in) financing
activities ................................. 74,433 (54,149) 37,470 214,133
Funds from operations(c) ....................... $ 98,120 $ 65,299 $ 320,434 $ 193,830
Weighted average number of Common OP ........... 73,484 64,923 78,531 56,567
Units outstanding
</TABLE>
---------------
(a) Represents AIMCO Properties, L.P. equity in the earnings of
unconsolidated subsidiaries.
(b) Represents AIMCO Properties, L.P.'s share of earnings from partnerships
that own 115,951 apartment units at March 31, 2000 in which
partnerships AIMCO Properties, L.P. owns an equity interest.
(c) AIMCO Properties, L.P.'s management believes that the presentation of
funds from operations or "FFO", when considered with the financial data
determined in accordance with generally accepted accounting principles,
provides a useful measure of performance. However, FFO does not
represent cash flow and is not necessarily indicative of cash flow or
liquidity available to AIMCO Properties, L.P., nor should it be
considered as an alternative to net income or as an indicator of
operating performance. The Board of Governors of the National
Association of Real Estate Investment Trusts ("NAREIT") defines FFO as
net income (loss), computed in
17
<PAGE> 20
accordance with generally accepted accounting principles, excluding
gains and losses from debt restructuring and sales of property, plus
real estate related depreciation and amortization (excluding
amortization of financing costs), and after adjustments for
unconsolidated partnerships and joint ventures. AIMCO Properties, L.P.
calculates FFO based on the NAREIT definition, as adjusted for the
amortization of goodwill, the non-cash deferred portion of the income
tax provision for unconsolidated subsidiaries and less the payments of
distributions on preferred limited partnership interests. AIMCO
Properties, L.P.'s management believes that presentation of FFO
provides investors with industry-accepted measurements which help
facilitate an understanding of its ability to make required dividend
payments, capital expenditures and principal payments on its debt.
There can be no assurance that AIMCO Properties, L.P.'s basis of
computing FFO is comparable with that of other REITs.
The following is a reconciliation of net income to funds from
operations:
<TABLE>
<CAPTION>
THREE MONTHS ENDED YEAR ENDED
MARCH 31, DECEMBER 31,
------------------------ ------------------------
2000 1999 1999 1998
--------- --------- --------- ---------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Net income $ 28,454 $ 14,864 $ 80,690 $ 68,928
Gain (loss) on disposition of property (5,105) (15) 1,785 (4,287)
Real estate depreciation, net of minority
interests 56,976 25,095 121,084 79,869
Real estate depreciation related to unconsol-
idated entities 18,960 21,105 104,754 34,765
Amortization 2,083 12,999 36,731 26,177
Deferred taxes 852 2,456 1,763 9,215
Expenses associated with convertible
preferred securities -- -- 6,892 --
Preferred unit distributions (4,101) (11,205) (33,265) (20,837)
--------- --------- --------- ---------
Funds from operations $ 98,119 $ 65,299 $ 320,434 $ 193,830
--------- --------- --------- ---------
</TABLE>
As of March 31, 2000, AIMCO Properties, L.P. had a net tangible book
value of $61.30 per common unit.
RATIOS OF EARNINGS TO FIXED CHARGES OF AIMCO PROPERTIES, L.P. The
following table shows AIMCO Properties, L.P.'s (i) ratio of income to fixed
charges and (ii) ratio of income to fixed charges and preferred unit
distributions.
<TABLE>
<CAPTION>
FOR THE THREE FOR THE YEAR
MONTHS ENDED ENDED
MARCH 31, DECEMBER 31,
--------------- --------------
2000 1999 1999 1998
----- ----- ---- ----
<S> <C> <C> <C> <C>
Ratio of earnings to fixed charges(1) ............ 1.7:1 1.9:1 2.4:1 1.6:1
Ratio of earnings to combined fixed charges and
preferred unit distributions(2) .................. 1.3:1 1.3:1 1.7:1 1.7:1
</TABLE>
----------
18
<PAGE> 21
(1) Our ratio of earnings to fixed charges was computed by dividing
earnings by fixed charges. For this purpose, "earnings" consists of
income before minority interests (which includes equity in earnings of
unconsolidated subsidiaries and partnerships only to the extent of
dividends received) plus fixed charges (other than any interest which
has been capitalized), and "fixed charges" consists of interest expense
(including amortization of loan costs) and interest which has been
capitalized.
(2) Our ratio of earnings to combined fixed charges and preferred unit
distributions was computed by dividing earnings by the total of fixed
charges and preferred unit distributions. For this purpose, "earnings"
consists of income before minority interests (which includes equity in
earnings of unconsolidated subsidiaries and partnerships only to the
extent of dividends received) plus fixed charges (other than any
interest which has been capitalized), "fixed charges" consists of
interest expense (including amortization of loan costs) and interest
which has been capitalized, and "preferred unit distributions" consists
of the amount of pre-tax earnings that would be required to cover
preferred unit distributions requirements.
SECTION 9. BACKGROUND AND REASONS FOR THE OFFER.
GENERAL. We are in the business of acquiring direct and indirect
interests in apartment properties such as the properties owned by your
partnership. Our offer provides us with an opportunity to increase our ownership
interest in your partnership's properties while providing you and other
investors with an opportunity to liquidate your current investment.
On October 1, 1998, AIMCO merged (the "Insignia Merger") with Insignia
Financial Group, Inc. ("Insignia"). As a result of the Insignia Merger, AIMCO
acquired approximately 51% of the outstanding common shares of beneficial
interest of Insignia Properties Trust ("IPT"). Through the Insignia Merger,
AIMCO also acquired a majority ownership interest in the entity that manages the
properties owned by your partnership. On October 31, 1998, IPT and AIMCO entered
into an agreement and plan of merger, dated as of October 1, 1998, pursuant to
which IPT merged with AIMCO on February 26, 1999. AIMCO then contributed IPT's
interest in Insignia Properties L. P., IPT's operating partnership, to AIMCO's
wholly owned subsidiary, AIMCO/IPT, Inc. AIMCO also replaced IPT as the sole
general partner of Insignia Properties L.P. As a result, the general partner of
your partnership is a wholly-owned subsidiary of AIMCO/IPT and the property
manager is our indirect wholly-owned subsidiary. Together with its subsidiaries,
AIMCO currently owns, in the aggregate, approximately 67.91% of your
partnership's outstanding limited partnership units.
During our negotiations with Insignia in early 1998, we decided that if
the merger with Insignia were consummated, we could also benefit from making
offers for limited partnership interests of some of the limited partnerships
formerly controlled or managed by Insignia (the "Insignia Partnerships"). Such
offers would provide liquidity for the limited partners of the Insignia
Partnerships, and would provide AIMCO Properties, L.P. with a larger asset and
capital base and increased diversification. While some of the Insignia
Partnerships are public partnerships and information is publicly available on
such partnerships for weighing the benefits of making a tender offer, many of
the partnerships are private partnerships and information about such
partnerships comes principally from the general partner. Our control of the
general partner makes it possible for us to obtain access to such information.
Further, such control also means that we control the operations of the
partnerships and their properties. Insignia did not propose that we conduct such
tender offers, rather we initiated the offers on our own. As of the date of this
offering, AIMCO Properties, L.P. has made offers to most of the Insignia
Partnerships, including your partnership.
ALTERNATIVES CONSIDERED BY YOUR GENERAL PARTNER. Before we commenced
this offer, your general partner (which is our subsidiary) considered a number
of alternative transactions. The following is a brief discussion of the
advantages and disadvantages of the alternatives considered by your general
partner.
19
<PAGE> 22
LIQUIDATION
One alternative would be for the partnership to sell its assets,
distribute the net liquidation proceeds to its partners in accordance with the
agreement of limited partnership, and thereafter dissolve. Partners would be at
liberty to use the net liquidation proceeds after taxes for investment,
business, personal or other purposes, at their option. If your partnership were
to sell its assets and liquidate, you and your partners would not need to rely
upon capitalization of income or other valuation methods to estimate the fair
market value of partnership assets. Instead, such assets would be valued through
negotiations with prospective purchasers (in many cases unrelated third
parties).
However, in the opinion of your general partner, which is our
subsidiary, the present time is not be the most desirable time to sell the real
estate assets of your partnership, and the proceeds realized from any such sale
would be uncertain. Your general partner believes it currently is in the best
interest of your partnership to continue holding its real estate assets.
Currently your partnership has received a unsolicited offer to purchase the
Heritage Pointe apartments for $3,000,000 and has decided to sell such property
for such price. See "The Offer -- Section 13. Certain Information Concerning
Your Partnership--Investment Objectives and Policies; Sale or Financing of
Investments."
CONTINUATION OF THE PARTNERSHIP WITHOUT THE OFFER
A second alternative would be for your partnership to continue as a
separate legal entity, with its own assets and liabilities and continue to be
governed by its existing agreement of limited partnership, without our offer. A
number of advantages could result from the continued operation of your
partnership. Given improving rental market conditions or improved operating
performance, the level of distributions might increase over time. It is possible
that the private resale market for properties could improve over time, making a
sale of the partnership's properties at some point in the future a more
attractive option than it is currently. The continuation of your partnership
will allow you to continue to participate in the net income and any increases in
revenue of your partnership and any net proceeds from the sale of any property
owned by your partnership. However, no assurance can be given as to future
operating results or as to the results of any future attempts to sell any
property owned by your partnership.
The primary disadvantage of continuing the operations of your
partnership is that you and your partners would be limited in your ability to
sell your units. Although you could sell your units to a third party, any such
sale would likely be at a discount from your pro rata share of the fair market
value of the properties owned by your partnership.
ALTERNATIVE TRANSACTIONS CONSIDERED BY US. Before we decided to make
our offer, we considered a number of alternative transactions, including
purchasing some or all of your partnership's properties or merging your
partnership with us. However, both of these alternatives would require a vote of
the limited partners. If the transaction was approved, all limited partners,
including those who wish to continue to participate in the ownership of your
partnership's properties, would be forced to participate in the transaction. If
the transaction was not approved, all limited partners, including those who
would like to dispose of their investment in your partnership's properties,
would be forced to retain their investment. We also considered an offer to
exchange units in your partnership for units of AIMCO Properties, L.P. However,
because of the expense and delay associated with making such an exchange offer,
we decided to make an offer for cash only. In addition, our historical
experience has been that most holders of limited partnership units, when given a
choice, prefer cash.
DETERMINATION OF OFFER PRICE. In establishing the offer price, we
reviewed certain publicly available information and certain information made
available to us by the general partner, which is our subsidiary, and our other
affiliates, including among other things: (i) the agreement of limited
partnership, as amended to date; (ii) the partnership's Annual Report on Form
10-KSB for the year ended December 31, 1999 and Quarterly Report on Form 10-QSB
for the quarter ended March 31, 2000; (iii) the operating budgets prepared by
the property manager with respect to the partnership's properties for the year
ending December 31, 2000; and (iv) tender offer statements,
solicitation/recommendation statements and beneficial ownership reports on
Schedules TO, 14D-1, 14D-9 and 13D.
20
<PAGE> 23
Our determination of the offer price was based on our review and analysis of the
foregoing information, the other financial information and the analyses
concerning the partnership summarized below.
VALUATION OF UNITS. We determined our offer price by estimating the
value of each property owned by your partnership using the direct capitalization
method. This method involves applying a capitalization rate to your
partnership's annual property income. A capitalization rate is a percentage
(rate of return), commonly applied by purchasers of residential real estate to
property income to determine the present value of income property. The lower the
capitalization rate utilized, the higher the value produced, and the higher the
capitalization rate utilized, the lower the value produced. We used your
partnership's estimated property income for the year ending December 31, 2000 by
multiplying the actual property income for the six months ended June 30, 2000 by
two. Actual property income for 2000 could be higher or lower than such
estimate. Our method for selecting a capitalization rate begins with each
property being assigned a location and condition rating (e.g., "A" for
excellent, "B" for good, "C" for fair, and "D" for poor). We then adjust the
capitalization rate based on whether the property's mortgage debt bears interest
at a rate above or below 7.5% per annum. Generally, for every 0.5% in excess of
7.5%, the capitalization rate would be increased by 0.25%. The evaluation of a
property's location and condition, and the determination of an appropriate
capitalization rate for a property, which are subjective in nature, and others
evaluating the same property might use a different capitalization rate and
derive a different property value.
Property income is the difference between the revenues from the
property and related costs and expenses, excluding income derived from sources
other than its regular activities and before income deductions. Income
deductions include interest, income taxes, prior-year adjustments, charges to
reserves, write-off of intangibles, adjustments arising from major changes in
accounting methods and other material and nonrecurring items. In this respect,
property income differs from net income disclosed in the partnership's financial
statements, which does not exclude these income sources and deductions. The
following is a reconciliation of your partnership's property's income for March
31, 2000 to your partnership's net operating income for the same period:
<TABLE>
<S> <C>
Net Income (Loss) .......................... $322,000
Other Non-Operating Expense ................ 103
Depreciation ............................... 184,000
Interest ................................... 233,000
--------
Property Income ............................ $739,103
========
</TABLE>
Although the direct capitalization method is a widely accepted way of
valuing real estate, there are a number of other methods available to value real
estate, each of which may result in different valuations of a property. Further,
in applying the direct capitalization method, others may make different
assumptions and obtain different results. The proceeds that you would receive if
you sold your units to someone else or if your partnership were actually
liquidated might be higher than our offer price.
We determined our offer price as follows:
o First, we estimated the value of the property owned by your
partnership. We used the direct capitalization method to value
the properties [that are not currently [being offered for
sale] [under a contract for sale.]]. We selected
capitalization rates based on our experience in valuing
similar properties. The lower the capitalization rate applied
to a property's income, the higher its value. We considered
local market sales information for comparable properties,
estimated actual capitalization rates (property income less
capital reserves divided by sales price) and then evaluated
each property in light of its relative competitive position,
taking into account property location, occupancy rate, overall
property condition and other relevant factors. We believe that
arms-length purchasers would base their purchase offers on
capitalization rates comparable to those used by us, however
there is no single correct capitalization rate and others
might use different rates. We used property income for the six
months ended June 30, 2000, annualized for the full year
ending December 31, 2000, and then
21
<PAGE> 24
divided such amount by the property's capitalization rate to
derive an estimated gross property value as described in the
table below entitled, "Property Valuation.".
The Heritage Pointe residential property is currently under
contract for sale and the table below reflects the current
contract to purchase the property. There can be no assurance,
however, that such properties will be sold or the net proceeds
from any sale. If we have received any offers to purchase a
property, the value we ascribed to such property is the
highest offer price, discounted to reflect the uncertainty of
the actual closing and the possibility of the price changing
prior to the closing.
<TABLE>
<CAPTION>
PROPERTY CONTRACT PRICE
-------- --------------
<S> <C>
Heritage Pointe Apartments $ 3,000,000
</TABLE>
Based on the above, we estimated the gross property value of each
property as follows:
<TABLE>
<CAPTION>
PROPERTY VALUATION
--------------------------------
2000 ESTIMATED
PROPERTY CAPITALIZATION GROSS PROPERTY
PROPERTY INCOME* RATE VALUE
-------- ----------- -------------- --------------
<S> <C> <C> <C>
Quail Hollow Apartments $ 730,000 10.09% $ 7,233,000
Windsor Hills Apartments $ 1,114,000 11.41% $ 9,764,000
Heritage Pointe Apartments $ 335,000 13.08% $ 2,559,000
Stone Mountain West Apartments $ 783,000 12.48% $ 6,270,000
Total ......................... $25,826,000
===========
</TABLE>
----------
* Property income for the six months ended June 30, 2000 has been
annualized by multiplying the six months results by two. Actual 2000
property income could be higher or lower.
o Second, we calculated the value of the equity of your
partnership by adding to the aggregate gross property value of
all properties owned by your partnership, the value of the
non-real estate assets of your partnership, and deducting the
liabilities of your partnership, including mortgage debt and
debt, if any, owed by your partnership to its general partner,
which is our subsidiary. We deducted from this value certain
other costs, including required capital expenditures, deferred
maintenance, and closing costs, to derive a net equity value
for your partnership of $ 13,520,218. Closing costs, which are
estimated to be 5% of the gross property value, include legal
and accounting fees, real property transfer taxes, title and
escrow costs and broker's fees.
o Third, using this net equity value, we determined the proceeds
that would be paid to holders of units in the event of a
liquidation of your partnership, based on the terms of your
partnership's agreement of limited partnership. Accordingly,
93% of the estimated liquidation proceeds are assumed to be
distributed to holders of units. Our offer price represents
the per unit liquidation proceeds determined in this manner.
22
<PAGE> 25
VALUATION OF UNITS
<TABLE>
<CAPTION>
<S> <C>
Gross valuation of partnership properties 25,826,000
Plus: Cash and cash equivalents 470,605
Plus: Other partnership assets, net of security deposits 734,170
Less: Mortgage debt, including accrued interest (11,365,465)
Less: Accounts payable and accrued expenses (87,924)
Less: Other liabilities (319,959)
Less: Distributions to GP's and SLP's (545)
-----------
Partnership valuation before taxes and certain costs 15,256,882
Less: Estimated State Entity Taxes & State Nonresident Withholding (421,744)
Less: Extraordinary capital expenditures and deferred maintenance (669,270)
Less: Closing costs (645,650)
-----------
Estimated net valuation of your partnership 13,520,218
Percentage of estimated net valuation allocated to holders of units 93%
-----------
Estimated net valuation of units 12,527,237
Total number of unit 15,000.00
Estimated valuation per unit 835
===========
Cash consideration per unit 835
-----------
</TABLE>
COMPARISON OF CONSIDERATION TO ALTERNATIVE CONSIDERATION. To assist
holders of units in evaluating the offer, your general partner, which is our
subsidiary, has attempted to compare the offer price against: (a) prices at
which the units have sold in the secondary market; (b) estimates of the value of
the units on a liquidation basis; and (c) Robert A. Stanger & Co., Inc.'s
November 1999 estimate of net asset value, going concern value and liquidation
value. The general partner of your partnership believes that analyzing the
alternatives in terms of estimated value, based upon currently available data
and, where appropriate, reasonable assumptions made in good faith, establishes a
reasonable framework for comparing alternatives. Since the value of the
consideration for alternatives to the offer is dependent upon varying market
conditions, no assurance can be given that the estimated values reflect the
range of possible values.
The results of these comparative analyses are summarized in the chart
below. You should bear in mind that some of the alternative values are based on
a variety of assumptions that have been made by us. These assumptions relate to,
among other things, the operating results, if any, since June 30, 2000 as to
income and expenses of the properties, other projected amounts and the
capitalization rates that may be used by prospective buyers if your partnership
assets were to be liquidated.
23
<PAGE> 26
In addition, these estimates are based upon certain information
available to your general partner, which is our subsidiary, or an affiliate at
the time the estimates were computed, and no assurance can be given that the
same conditions analyzed by it in arriving at the estimates of value would exist
at the time of the offer. The assumptions used have been determined by the
general partner of your partnership or an affiliate in good faith, and, where
appropriate, are based upon current and historical information regarding your
partnership and current real estate markets, and have been highlighted below to
the extent critical to the conclusions of the general partner of your
partnership. Actual results may vary from those set forth below based on
numerous factors, including interest rate fluctuations, tax law changes, supply
and demand for similar apartment properties, the manner in which your
partnership's properties are sold and changes in availability of capital to
finance acquisitions of apartment properties.
Under your partnership's agreement of limited partnership, the term of
the partnership will continue until December 31, 2019, unless sooner terminated
as provided in the agreement or by law.
<TABLE>
<CAPTION>
COMPARISON TABLE PER UNIT
---------------- ----------
<S> <C>
Cash offer price .............................................. $ 835.00
Alternatives
Highest cash tender offer price ............................ $ 914.78(1)
Highest price on secondary market .......................... $ 630.00
Stanger's estimate of liquidation value .................... $ 1,003.00
Stanger's estimate of net asset value ...................... $ 1,047.00
Stanger's estimate of going concern value .................. $ 966.00
Estimated liquidation proceeds ............................. 835.00
</TABLE>
----------
(1) Highest price offered in the 1999 tender offer begun in November 1999.
PRIOR TENDER OFFERS
In November 1999, we commenced a tender offer at the price of $907.01
per unit, which price was determined principally upon our calculation of the
liquidation value of your partnership pursuant to a method set forth in a
proposed settlement of litigation, which proposed settlement has been
terminated. The method of determining the liquidation value was similar to that
used in this offer. We subsequently increased our offer price to $914.78 per
unit. We acquired 2,701 units pursuant to this offer. See "The Offer-Section 13.
Certain Information Concerning Your Partnership-Legal Proceedings."
An unaffiliated third party made a tender offer for 4.9% of the units
in your partnership for $500 per unit, which offer expired on December 17, 1999.
In our June 9, 1999 tender offer, the original offer price of $759 per
unit was determined based upon our calculation of the liquidation value of your
partnership. Such offer price was based on (i) your partnership's property
income for each property for the year ended December 31, 1998, (ii) our estimate
of appropriate capitalization rates (10.25%-11.00%) for your partnership's
properties, (iii) the then current assets of your partnership, (iv) estimated
costs and fees (including applicable state sales taxes) for a sale on the
property, and winding up of your partnership, (v) estimated cost of deferred
maintenance, (vi) the mortgages for the properties, (vii) your partnership's
other liabilities and (viii) the percentage ownership interests of the limited
partners in your partnership. Pursuant to such offer and thereafter, we
purchased 416 units at $759 per unit.
24
<PAGE> 27
Prior to the Insignia Merger, tender offers had been made to acquire
units of your partnership. On July 21, 1998, IPT, then an affiliate of Insignia
and now our affiliate, commenced a tender offer at a cash purchase price of $625
per unit.
We are aware that tender offers may have been made by unaffiliated
third parties to acquire units in your partnership in exchange for cash. We are
unaware of the amounts offered, terms, tendering parties or number of units
involved in these tender offers.
PRICES ON SECONDARY MARKET
Secondary market sales information is not a reliable measure of value
because of the limited amount of any known trades. Except for offers made by use
and unaffiliated third parties, privately negotiated sales and sales through
intermediaries are the only means which may be available to a limited partner to
liquidate an investment in units because the units are not listed or traded on
any exchange or quoted on NASDAQ, on the Electronic Bulletin Board, or in "pink
sheets." Secondary sales activity for the units, including privately negotiated
sales, has been limited and sporadic.
Set forth below are the high and low sale prices of units for the years
ended December 31, 1998 and 1999 and the six months ended June 30, 2000, as
reported 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 units, which
typically are reduced by commissions and other secondary market transaction
costs to amounts less than the reported price. The Partnership Spectrum
represents only one source of secondary sales information, and other services
may contain prices for the units that equal or exceed the sales prices reported
in The Partnership Spectrum. We do not know whether the information compiled by
The Partnership Spectrum is accurate or complete.
SALES PRICES OF PARTNERSHIP UNITS, AS REPORTED BY THE PARTNERSHIP SPECTRUM
<TABLE>
<CAPTION>
HIGH LOW
------- -------
<S> <C> <C>
Six Months Ended June 30, 2000: ........ $500.00 $500.00
Fiscal Year Ended December 31, 1999: ... 525.00 525.00
Fiscal Year Ended December 31, 1998: ... 630.00 405.00
</TABLE>
Set forth in the table below are the high and low sales prices of units
for the years ended December 31, 1998 and 1999 and the six months ended June 30,
2000, as reported by the American Partnership Board, which is an independent,
third-party source. The gross sales prices reported by American Partnership
Board do not necessarily reflect the net sales proceeds received by sellers of
units, which typically are reduced by commissions and other secondary market
transaction costs to amounts less than the reported prices. The American
Partnership Board represents one source of secondary sales information, and
other services may contain prices for units that equal or exceed the sales
prices reported by the American Partnership Board. We do not know whether the
information compiled by the American Partnership Board is accurate or complete.
SALES PRICES OF PARTNERSHIP UNITS, AS REPORTED BY THE AMERICAN PARTNERSHIP BOARD
<TABLE>
<CAPTION>
HIGH LOW
------- -------
<S> <C> <C>
Six Months Ended June 30, 2000: ........ $ -- $ --
Fiscal Year Ended December 31, 1999: ... -- --
Fiscal Year Ended December 31, 1998: ... 630.00 486.16
</TABLE>
25
<PAGE> 28
ESTIMATED LIQUIDATION PROCEEDS
Liquidation value is a measure of the price at which the assets of your
partnership would sell if disposed of by your partnership in an arms-length
transaction to a willing buyer that has access to relevant information regarding
the historical revenues and expenses of the business. Your general partner,
which is our subsidiary, estimated the liquidation value of the units using the
same direct capitalization method and assumptions as we did in valuing the units
for the offer price. The liquidation analysis assumes that your partnership's
properties are sold to an independent third-party at the current property value,
that other balance sheet assets (excluding amortizing assets) and liabilities of
your partnership are sold at their book value, and that the net proceeds of sale
are allocated to your partners in accordance with your partnership's agreement
of limited partnership.
The liquidation analysis assumes that the assets of your partnership
are sold in a single transaction. Should the assets be liquidated over time,
even at prices equal to those projected, distributions to limited partners from
cash flow from operations might be reduced because your partnership's fixed
costs, such as general and administrative expenses, are not proportionately
reduced with the liquidation of assets. However, for simplification purposes,
the sales of the assets are assumed to occur concurrently. The liquidation
analysis assumes that the assets are disposed of in an orderly manner and are
not sold in forced or distressed in which assets might be sold at substantial
discounts to their actual fair market value.
ROBERT A. STANGER & CO., INC.'S ESTIMATE OF NET ASSET VALUE, GOING
CONCERN AND LIQUIDATION VALUE
In connection with our prior offer to purchase units in your
partnership in November 1999, we retained Robert A. Stanger & Co., Inc.
("Stanger"), an independent investment banking firm, to render an opinion as to
the fairness of the consideration originally offered of $863 per unit from a
financial point of view. In rendering its opinion in November 1999, Stanger did
its own estimate of your partnerships' net asset value, going concern value and
liquidation value. Stanger estimated a net asset value of $1,047 per unit, a
going concern value of $996 per unit, and a liquidation value of $1,003 per
unit. Going concern value is a measure of the value of your partnership if it
continued operating as an independent stand-alone entity. The going concern
method relies on a number of assumptions, including among other things, (i)
rental rates for new leases and lease renewals; (ii) improvements needed to
prepare an apartment for a new lease or a renewal lease; (iii) lease periods;
(iv) capital expenditures; (v) broker's commissions; and (vi) discount rates
applied to future cash flows. An estimate of your partnership's net asset value
per unit is based on a hypothetical sale of your partnership's property and the
distribution to the limited partners and the general partner of the gross
proceeds of such sales, net of related indebtedness, together with the cash,
proceeds from temporary investments, and all other known assets that are
believed to have a liquidation value, after provision in full for all of the
liabilities of your partnership. The net asset value does not take into account
(i) timing considerations under "The Offer-Section 9-Background and Reasons for
the Offer--Comparison of Consideration to Alternative Consideration--Estimated
Liquidation Proceeds," and (ii) costs associated with winding up of your
partnership. Therefore, we believe that the estimate of net asset value per
unit does not necessarily represent the fair market value of a unit or the
amount the limited partner reasonably could expect to receive if the
partnership's property was sold and the partnership was liquidated. For this
above reason, we consider net asset value estimates to be less meaningful in
determining the offer consideration than the analysis described above under "The
Offer-Section 9-Background and Reasons for the Offer--Valuation of Units."
For the tender offers commenced in November 1999, Stanger received
total fees for the opinion for your partnership of $21,000 and total fees for
all such partnerships of approximately $1,500,000. In addition, Stanger received
reimbursements for its reasonable legal, travel and out-of-pocket expenses. In
1997, AIMCO retained Stanger to represent it in negotiations to acquire
interests in a real estate limited partnership. Such transaction was never
consummated and no fee was ever paid to Stanger in connection with such proposed
transaction. Stanger was also engaged and did render certain fairness opinions
in 1998 and 1999 for certain exchange offers we made and received fees and
expenses of $317,000.
26
<PAGE> 29
ALLOCATION OF CONSIDERATION. We have allocated to the limited partners
the amount of the estimated net valuation of your partnership based on your
partnership's agreement of limited partnership as if your partnership was being
liquidated at the current time.
SECTION 10. POSITION OF THE GENERAL PARTNER OF YOUR PARTNERSHIP WITH
RESPECT TO THE OFFER.
The partnership and the general partner of your partnership have
provided the following information for inclusion in this Offer to Purchase:
The general partner of your partnership believes the offer price and
the structure of the transaction are fair to the limited partners. In making
such determination, the general partner considered all of the factors and
information set forth below, but did not quantify or otherwise attach particular
weight to any such factors or information:
o the offer gives you an opportunity to make an individual
decision on whether to tender your units or to continue to
hold them;
o the offer price and the method used to determine the offer
price;
o the offer price is based on an estimated value of your
partnership's properties that has been determined using a
method believed to reflect the valuation of such assets by
buyers in the market for similar assets;
o the November 1999 fairness opinion of and valuations by
Stanger;
o prices at which the units have recently sold, to the extent
such information is available;
o the absence of an established trading market for your units;
o an analysis of possible alternative transactions, including
property sales, or a liquidation of the partnership; and
o an evaluation of the financial condition and results of
operations of your partnership.
The general partner of your partnership is remaining neutral and makes
no recommendation as to whether you should tender or refrain from tendering your
units in the offer. Although the general partner believes our offer is fair, the
general partner also believes that you must make your own decision whether or
not to participate in any offer, based upon a number of factors, including
several factors that may be personal to you, such as your financial position,
your need or desire for liquidity, your preferences regarding the timing of when
you might wish to sell your units, other financial opportunities available to
you, and your tax position and the tax consequences to you of selling your
units.
Neither the general partner of your partnership or its affiliates have
any plans or arrangements to tender any units. Except as otherwise provided in
"The Offer -- Section 12. Future Plans of the Purchaser," the general partner
does not have any present plans or proposals which relate to or would result in
an extraordinary transaction, such as a merger, reorganization or liquidation,
involving your partnership; a purchase or sale or transfer of a material amount
of your partnership's assets; or any changes in your partnership's present
capitalization, indebtedness or distribution policies. For information relating
to certain relationships between your partnership and its general partner, on
one hand, and AIMCO and its affiliates, on the other and conflicts of interests
with respect to the tender offer, see "The Offer -- Section 9. Background and
Reasons for the Offer" and "The Offer -- Section 11. Conflicts of Interests and
Transactions with Affiliates." See also "The Offer -- Section 9. Background and
Reasons for the Offer -- Comparison to Alternative Consideration -- Prior Tender
Offers" and "The Offer -- Section 13. Certain Information Concerning Your
27
<PAGE> 30
Partnership -- Beneficial Ownership of Interests in Your Partnership," for
certain information regarding transactions in units of your partnership.
SECTION 11. CONFLICTS OF INTEREST AND TRANSACTIONS WITH AFFILIATES.
CONFLICTS OF INTEREST WITH RESPECT TO THE OFFER. The general partner of
your partnership became a majority-owned subsidiary of AIMCO on October 1,
1998, when AIMCO merged with Insignia. Your general partner became a
wholly-owned subsidiary of AIMCO on February 26, 1999, when IPT merged with
AIMCO. Accordingly, the general partner of your partnership has substantial
conflicts of interest with respect to the offer. The general partner of your
partnership has a fiduciary obligation to you, even as a subsidiary of AIMCO. As
a consequence of our ownership of units, we may have incentives to seek to
maximize the value of our ownership of units, which in turn may result in a
conflict for your general partner in attempting to reconcile our interests with
the interests of the other limited partners. We desire to purchase units at a
low price and you desire to sell units at a high price. Although the general
partner believes our offer is fair, the general partner makes no recommendation
as to whether you should tender or refrain from tendering your units. Such
conflicts of interest in connection with the offer differ from those conflicts
of interest that currently exist for your partnership. LIMITED PARTNERS ARE
URGED TO READ THIS OFFER TO PURCHASE IN ITS ENTIRETY BEFORE DECIDING WHETHER TO
TENDER THEIR UNITS.
CONFLICTS OF INTEREST THAT CURRENTLY EXIST FOR YOUR PARTNERSHIP. We own
both the general partner of your partnership and the property manager of your
partnership's properties. The general partner does not receive an annual
management fee but may receive reimbursements for expenses incurred in its
capacity as general partner. The general partner of your partnership received
total fees and reimbursements of $129,000 in 1997, $138,000 in 1998 and $98,000
in 1999. The property manager for the properties received management fees of
$249,000 in 1997, $262,000 in 1998 and $273,000 in 1999. We have no current
intention of changing the fee structure for your general partner or the manager
of your partnership's properties.
COMPETITION AMONG PROPERTIES. Because AIMCO and your partnership both
invest in apartment properties, these properties may compete with one another
for tenants. Furthermore, you should bear in mind that AIMCO may acquire
properties in general market areas where your partnership properties are
located. It is believed that this concentration of properties in a general
market area will facilitate overall operations through collective advertising
efforts and other operational efficiencies. In managing AIMCO's properties, we
will attempt to reduce conflicts between competing properties by referring
prospective customers to the property considered to be most conveniently located
for the customer's needs.
FUTURE OFFERS. Although we have no current plans to conduct future
tender offers for your units, our plans may change based on future
circumstances, including tender offers made by third parties. Any such future
offers that we might make could be for consideration that is more or less than
the consideration we are currently offering.
SECTION 12. FUTURE PLANS OF THE PURCHASER.
As described above under "The Offer -- Section 9. Background and
Reasons for the Offer," we own the general partner and thereby control the
management of your partnership. In addition, we own the manager of the
properties. We currently intend that, upon consummation of the offer, your
partnership will continue its business and operations as they are currently
being conducted. The offer is not expected to have any effect on partnership
operations.
We are in the business of acquiring direct and indirect interests in
apartment properties such as the properties owned by your partnership. As part
of our business, we have made and, in the future intend to make, tender offers
for partnerships which own apartments, including your partnership. We may
acquire additional units or sell units after completion or termination of the
offer. Any acquisition may be made through private purchases, through one or
more future tender or exchange offers, by merger, consolidation or by any other
means deemed advisable. Any acquisition may be at a price higher or lower than
the price to be paid for the units purchased pursuant to this offer, and may be
for
28
<PAGE> 31
cash, limited partnership interests in AIMCO Properties, L.P. or other
consideration. We also may consider selling some or all of the units we acquire
pursuant to the offer to persons not yet determined, which may include our
affiliates. We may also buy your partnership's properties, although we have no
present intention to do so. There can be no assurance, however, that we will
initiate or complete, or will cause your partnership to initiate or complete,
any subsequent transaction during any specific time period following the
expiration of the offer or at all.
Except as set forth herein, we do not have any present plans or
proposals which relate to or would result in an extraordinary transaction, such
as a merger, reorganization or liquidation, involving your partnership; a
purchase or sale or transfer of a material amount of your partnership's assets;
any changes in composition of your partnership's senior management or personnel
or their compensation; any changes in your partnership's present capitalization,
indebtedness or distribution policy; or any other material changes in your
partnership's structure or business. We or our affiliates may loan funds to your
partnership which may be secured by your partnership's properties. If any such
loans are made, upon default of such loans, we or our affiliates could seek to
foreclose on the loan and related mortgage or security interest. However, we
expect that, consistent with your general partner's fiduciary obligations, the
general partner will seek and review opportunities, including opportunities
identified by us, to engage in transactions which could benefit your
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.
We have been advised that the possible future transactions the general
partner expects to consider on behalf of your 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 your 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 AIMCO), 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 your partnership, we will participate
in those benefits to the extent of our ownership of units. The agreement of
limited partnership prohibits limited partners from voting on actions taken by
the partnership, unless otherwise specifically permitted therein. Limited
partners may vote on a liquidation, and since we currently own a majority of the
outstanding units, we can control any vote of the limited partners. Our primary
objective in seeking to acquire the units 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 units.
SECTION 13. CERTAIN INFORMATION CONCERNING YOUR PARTNERSHIP.
GENERAL. Shelter Properties I Limited Partnership was organized on
April 7, 1980 under the laws of the State of South Carolina. Its primary
business is real estate ownership and related operations. Your partnership was
formed for the purpose of making investments in various types of real properties
which offer potential capital appreciation and cash distributions to its limited
partners.
Your partnership's investment portfolio currently consists of the
following four residential apartment complexes:
o Quail Hollow Apartments, a 215-unit complex in West Columbia, South
Carolina;
o Windsor Hills Apartments, a 300-unit complex in Blacksburg, Virginia;
o Heritage Pointe Apartments, a 149-unit complex in Rome, Georgia; and
o Stone Mountain West Apartments, a 142-unit complex in Stone Mountain,
Georgia.
29
<PAGE> 32
The managing general partner of your partnership is Shelter Realty I
Corporation, which is a wholly-owned subsidiary of AIMCO. A wholly-owned
subsidiary of AIMCO serves as manager of the properties owned by your
partnership. As of June 30, 2000, there were 15,000 units issued and
outstanding, which were held of record by 382 limited partners. Your
partnership's principal executive offices are located at Colorado Center, Tower
Two, 2000 South Colorado Boulevard, Suite 2-1000, Denver, Colorado 80222, and
its telephone number at that address is (303) 757-8101.
For additional information about your partnership, please refer to the
annual report prepared by your partnership which was sent to you prior to this
offer to purchase, particularly Item 2 of Form 10-KSB which contains detailed
information regarding the properties owned, including mortgages, rental rates
and taxes.
INVESTMENT OBJECTIVES AND POLICIES; SALE OR FINANCING OF INVESTMENTS.
In general, your general partner (which is our subsidiary) regularly evaluates
the partnership's properties by considering various factors, such as the
partnership's financial position and real estate and capital markets conditions.
The general partner monitors the properties' specific locale and sub-market
conditions (including stability of the surrounding neighborhood), 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 (including any prepayment penalties), tax implications,
availability of attractive mortgage financing to a purchaser, and the investment
climate are all considered. Any of these factors, and possibly others, could
potentially contribute to any decision by the general partner to sell,
refinance, upgrade with capital improvements or hold a particular partnership
property. If rental market conditions improve, the level of distributions might
increase over time. It is possible that the private resale market for properties
could improve over time, making a sale of the partnership's properties in a
private transaction at some point in the future a more viable option than it is
currently. After taking into account the foregoing considerations, your general
partner [EXCEPT AS SET FORTH BELOW] is not currently seeking a sale of your
partnership's properties primarily because it expects the properties' operating
performance to improve in the near term. In making this assessment, your general
partner noted that occupancy and rental rates at the properties. In particular,
the general partner noted that it has spent and expects to spend approximately
$669,270 for capital improvements at the properties to repair and update the
properties. Although there can be no assurance as to future performance, these
expenditures are expected to improve the desirability of the property to
tenants. The general partner does not believe that a sale of the properties at
the present time would adequately reflect the properties' future prospects.
Another significant factor considered by your general partner is the likely tax
consequences of a sale of the properties for cash. Such a transaction would
likely result in tax liabilities for many limited partners. Except as set forth
below, the general partner has not received any recent indication of interest or
offer to purchase the properties. Recently, your general partner determined that
it was an appropriate time to try to sell Heritage Pointe apartments. As a
result, your partnership has entered into a contract for the sale of such
apartments.
ORIGINALLY ANTICIPATED TERM OF YOUR PARTNERSHIP. Your partnership's
prospectus, dated July 3,1980, pursuant to which units in your partnership were
sold, indicated that your partnership was intended to be self-liquidating and
that it was anticipated that the partnership's properties would be sold within
three to eight years of their acquisition, provided market conditions permit.
The prospectus also indicated that there could be no assurance that the
partnership would be able to so liquidate and that, unless sooner terminated as
provided in the partnership agreement, the existence of the partnership would
continue until the year 2019. The partnership currently owns four apartment
properties. Your general partner (which is our subsidiary) continually considers
whether a property should be sold or otherwise disposed of after consideration
of relevant factors, including prevailing economic conditions, availability of
favorable financing and tax considerations, with a view to achieving maximum
capital appreciation for your partnership. [As noted above, the general partner
[is currently marketing the commercial properties for sale.] [has contracts for
the sale of the commercial properties.] We cannot predict when any of the
properties will be sold or otherwise disposed of. However, there is no current
plan or intention to sell the properties in the near future.]
30
<PAGE> 33
Under your partnership's agreement of limited partnership, the term of
the partnership will continue until December 31, 2019, unless sooner terminated
as provided in the agreement or by law. Limited partners could, as an
alternative to tendering their units, take a variety of possible actions,
including voting to liquidate the partnership or amending the agreement of
limited partnership to authorize limited partners to cause the partnership to
merge with another entity or engage in a "roll-up" or similar transaction.
CAPITAL REPLACEMENTS. Your partnership has an ongoing program of
capital improvements, replacements and renovations, including roof replacements,
kitchen and bath renovations, balcony repairs (where applicable), replacement of
various building systems and other replacements and renovations in the ordinary
course of business. The general partner estimates that $669,270 has been and is
expected to be spent on capital improvements. Such capital improvements are
intended to be paid from operating cash flows, cash reserves, or from short-term
or long-term borrowings.
COMPETITION. There are other residential properties within the market
area of your partnership's properties. The number and quality of competitive
properties in such an area could have a material effect on the rental market for
the apartments at your partnership's properties and the rents that may be
charged for such apartments. While AIMCO is a significant factor in the United
States in the apartment industry, competition for apartments is local. According
to data published by the National Multi-Housing Council, as of January 1, 1999,
our then portfolio of 373,409 owned or managed apartment units represents
approximately 2.2% of the national stock of rental apartments in structures with
at least five apartments.
FINANCIAL DATA. The selected financial information of your partnership
set forth below for the years ended December 31, 1999 and 1998 is based on
audited financial statements. The selected financial information set forth below
for the three months ended March 31, 2000 and 1999 is based on unaudited
financial statements. This information should be read in conjunction with such
financial statements, including notes thereto, and "Management's Discussion and
Analysis of Financial Condition and Results of Operations of Your Partnership"
in the Annual Report on Form 10-KSB of your partnership for the year ended
December 31, 1999, and the Quarterly Report on Form 10-QSB for the quarter ended
March 31, 2000.
SHELTER PROPERTIES I LIMITED PARTNERSHIP
(IN THOUSANDS, EXCEPT PER UNIT DATA)
<TABLE>
<CAPTION>
FOR THE THREE FOR THE YEAR
MONTHS ENDED ENDED
MARCH 31, DECEMBER 31,
------------------------ -----------------------
2000 1999 1999 1998
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
OPERATING DATA:
Total Revenues ..................................... $ 1,389 $ 1,343 $ 5,491 $ 5,289
Net Income (Loss) .................................. 322 322 1,254 1,065
Net Income (Loss) per limited partnership unit ..... 21.27 21.27 82.73 70.27
Distributions per limited partnership unit ......... 33.00 66.00 85.80 105.67
</TABLE>
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
----------------------- -----------------------
2000 1999 1999 1998
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and Cash Equivalents .......................... 1,501 1,145 1,748 1,682
Real Estate, Net of Accumulated Depreciation ....... 6,454 6,065 6,378 6,135
Total Assets ....................................... 8,986 8,523 9,174 9,239
Notes Payable ...................................... 11,227 11,341 11,257 11,368
General Partners' Capital (Deficit) ................ (54) (59) (52) (52)
Limited Partners' Capital (Deficit) ................ (2,865) (3,314) (2,689) (2,643)
Partners' Capital (Deficit) ........................ (2,919) (3,373) (2,741) (2,695)
Total Distributions ................................ (500) (1,000) (1,300) (1,600)
Net Increase (Decrease) in Cash
and Cash Equivalents ............................... (404) (537) 66 (346)
Net Cash Provided by Operating Activities .......... 531 450 2,053 1,675
</TABLE>
31
<PAGE> 34
On June 12, 2000, your partnership made a distribution of $79.00 per
unit.
DESCRIPTION OF PROPERTIES. The following shows the location, the date
of purchase, the nature of your partnership's ownership interest in and the use
of each of your partnership's properties.
<TABLE>
<CAPTION>
DATE OF
PROPERTY PURCHASE TYPE OF OWNERSHIP USE
-------- -------- ----------------- ---
<S> <C> <C> <C>
Quail Hollow Apartments 09/01/80 Fee ownership subject to 215-unit apartments
West Columbia, South Carolina first mortgage
Windsor Hills Apartments 09/01/80 Fee ownership subject to 300-unit apartments
Blacksburg, Virginia first and second mortgages (1)
Heritage Pointe Apartments 09/15/80 Fee ownership subject to 149-unit apartments
Rome, Georgia first mortgage
Stone Mountain West Apartments 12/31/80 Fee ownership subject to 142-unit apartments
Stone Mountain, Georgia first mortgage
</TABLE>
(1) Property is held by a limited partnership which the registrant owns a 99.9%
interest.
ACCUMULATED DEPRECIATION SCHEDULE. The following shows the gross
carrying value, accumulated depreciation and federal tax basis of each of your
partnership's properties as of December 31, 1999.
<TABLE>
<CAPTION>
GROSS
CARRYING ACCUMULATED FEDERAL
PROPERTY VALUE DEPRECIATION RATE METHOD TAX BASIS
-------- -------- ------------ ---- ------ --------------
(IN THOUSANDS) (IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Quail Hollow
Apartments $ 5,672 $ 3,970 5-34 S/L $ 2,069
Windsor Hills
Apartments 7,017 4,801 5-30 S/L 2,452
Heritage Pointe
Apartments 3,694 2,613 5-35 S/L 1,291
Stone Mountain
Apartments 4,914 3,535 5-37 S/L 1,855
------- ------- -------
Total $21,297 $14,919 $ 7,667
======= ======= =======
</TABLE>
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<PAGE> 35
SCHEDULE OF MORTGAGES. The following shows certain information
regarding the outstanding mortgages encumbering each of your partnership's
properties as of December 31, 1999.
<TABLE>
<CAPTION>
PRINCIPAL
PRINCIPAL STATED BALANCE
BALANCE AT INTEREST PERIOD MATURITY DUE AT
PROPERTY DECEMBER 31, 1999 RATE AMORTIZED DATE MATURITY
-------- --------------------- -------- --------- --------- ------------
(IN THOUSANDS) (IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Quail Hollow
Apartments $ 2,850 7.33% none 11/01/03 $ 2,850
Windsor Hills Apartments
1st mortgage 3,975 7.60% (1) 11/15/02 3,489
2nd mortgage 149 7.60% none 11/15/02 149
Heritage Pointe Apartments 1,400 7.33% none 11/01/03 1,400
Stone Mountain West
Apartments 3,000 7.33% none 11/01/03 3,000
---------- ----------
Subtotal: 11,374
Less Unamortized present
value discounts (117)
----------
$ 11,257 $ 10,888
========== ==========
</TABLE>
-----------------
(1) The principal and discount are being amortized over 257 months with a
balloon payment due November 15, 2002.
AVERAGE RENTAL RATES AND OCCUPANCY. The following shows the average
rental rates and occupancy percentages for each of your partnership's properties
during the periods indicated.
<TABLE>
<CAPTION>
AVERAGE RENTAL RATES AVERAGE OCCUPANCY
----------------------- -----------------------
PROPERTY 2000* 1999 2000* 1999
-------- ----- ---- ----- ----
<S> <C> <C> <C> <C>
Quail Hollow Apartments $7,100 $6,793 90% 92%
Windsor Hills Apartments 6,884 6,768 96% 97%
Heritage Pointe Apartments 5,924 5,466 92% 96%
Stone Mountain West Apartments 10,363 9,685 96% 95%
</TABLE>
-----------------
* Actual rates and percentages through March 31, 2000 have been annualized by
multiplying such amount by four. The rates and percentages for 2000 could be
higher or lower.
SCHEDULE OF REAL ESTATE TAXES AND RATES. The following shows the real
estate taxes and rates for 1999 for each of your partnership's properties.
33
<PAGE> 36
<TABLE>
<CAPTION>
PROPERTY 1999 BILLING 1999 RATE
-------- ------------ ---------
(IN THOUSANDS)
<S> <C> <C>
Quail Hollow Apartments $ 74 28.13%
Windsor Hills Apartments 86 0.83%
Heritage Pointe Apartments 40 3.56%
Stone Mountain West 3.52%
Apartments 63
-------
$ 263
=======
</TABLE>
BUDGETS. A summary of the operating budgets per property and for your
partnership for the year ending December 31, 2000, is as follows:
FISCAL 2000 OPERATING BUDGETS
SHELTER PROPERTIES I LIMITED PARTNERSHIP
(IN THOUSANDS)
<TABLE>
<CAPTION>
QUAIL HOLLOW WINDSOR HILLS HERITAGE POINTE STONE MOUNTAIN
APARTMENTS APARTMENTS APARTMENTS WEST APARTMENTS
------------ ------------- --------------- ---------------
<S> <C> <C> <C> <C>
Total Revenues $ 1,463,457 $ 1,933,247 $ 830,207 $ 2,569,313
Operating Expenses (574,295) (734,469) (433,404) (998,971)
Replacement Reserves-Net 0 0 0 0
Debt Service (208,920) (307,886) (102,624) (219,900)
Capital Expenditures 0 0 0 0
----------- ----------- ----------- -----------
Net Cash $ 680,242 $ 890,892 $ 294,179 $ 1,350,442
=========== =========== =========== ===========
</TABLE>
<TABLE>
<CAPTION>
TOTAL
-----------
<S> <C>
Total Revenues $ 6,796,224
Operating Expenses (2,741,139)
Replacement Reserves-Net 0
Debt Service (839,330)
Capital Expenditures 0
-----------
Net Cash $ 3,215,755
===========
</TABLE>
34
<PAGE> 37
The above budgets, at the time they were made, were forward-looking
information developed by the general partner of your partnership. Therefore, the
budgets were dependent upon future events with respect to the ability of your
partnership to meet such budgets. The budgets incorporated various assumptions
including, but not limited to, revenue (including occupancy rates), various
operating expenses, general and administrative expenses, depreciation expenses,
capital expenditures, and working capital levels. While the general partner
deemed such budgets to be reasonable and valid at the date made, there is no
assurance that the assumed facts will be validated or that the budgeted results
will actually occur. Any estimate of the future performance of a business, such
as your partnership's business, is forward-looking and based on assumptions some
of which inevitably will prove to be incorrect.
The budgeted amounts provided above are figures that were not computed
in accordance with GAAP. 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 2000 should not necessarily be considered as indicative of
what the audited operating results for fiscal 2000 will be.
PROPERTY MANAGEMENT. Your partnership's properties are managed by an
entity which is a wholly- owned subsidiary of AIMCO. Pursuant to the management
agreement between the property manager and your partnership, the property
manager operates your partnership's properties, establishes rental policies and
rates and directs marketing activities. The property manager also is responsible
for maintenance, the purchase of equipment and supplies, and the selection and
engagement of all vendors, suppliers and independent contractors.
DISTRIBUTIONS. The following table shows, for each of the years
indicated, the distributions paid per unit for such years.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31 AMOUNT
---------------------- -------
<S> <C>
1995 ................................. $ 9.87
1996 ................................. 0.33
1997 ................................. 83.87
1998 ................................. 105.67
1999 ................................. 85.80
2000 (through July 24) ............... 112.00
-------
Total ................................ $397.54
=======
</TABLE>
BENEFICIAL OWNERSHIP OF INTERESTS IN YOUR PARTNERSHIP. Together with
our subsidiaries, we currently own, in the aggregate, approximately 67.91% your
partnership's limited partnership units. Except as set forth herein, neither we,
nor, to the best of our knowledge, any of our affiliates, (i) beneficially own
or have a right to acquire any units, (ii) has effected any transactions in the
units in the past 60 days, or (iii) have any contract, arrangement,
understanding or relationship with any other person with respect to any
securities of your partnership, including, but not limited to, contracts,
arrangements, understandings or relationships concerning 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.
COMPENSATION PAID TO THE GENERAL PARTNER AND ITS AFFILIATES. The
following table shows, for each of the years indicated, compensation paid to
your general partner and its affiliates on a historical basis.
35
<PAGE> 38
<TABLE>
<CAPTION>
PARTNERSHIP PROPERTY
FEES AND MANAGEMENT
YEAR EXPENSES FEES
---- ----------- ----------
<S> <C> <C>
1995.................................. $63,000 $228,000
1996.................................. 103,000 238,000
1997.................................. 129,000 249,000
1998.................................. 138,000 262,000
1999.................................. 98,000 273,000
2000*................................. 104,000 284,000
</TABLE>
------------
* Actual fees and expenses paid through March 31, 2000 have been annualized by
multiplying such amount four. The actual fees and expenses for 2000 could be
higher or lower.
LEGAL PROCEEDINGS. Your partnership may be a party to a variety of
legal proceedings related to its ownership of the partnership's properties,
arising in the ordinary course of the business, which are not expected to have a
material adverse effect on your partnership.
In March 1998, several putative unit holders of limited
partnership units commenced an action entitled Rosalie Nuanes, et al. v.
Insignia Financial Group, Inc., et al. in the Superior Court of the State of
California for the County of San Mateo. The plaintiffs named as defendants,
among others, your partnership, its general partner and several of their
affiliated partnerships and corporate entities. The action purports to assert
claims on behalf of a class of limited partners and derivatively on behalf of a
number of limited partnerships (including your partnership) which are named as
nominal defendants, challenging the acquisition of interests in certain general
partner entities by Insignia Financial Group, Inc. and entities which were, at
one time, affiliates of Insignia; past tender offers by the Insignia affiliates
to acquire limited partnership units; the management of partnerships by the
Insignia affiliates; and the Insignia Merger. The plaintiffs seek monetary
damages and equitable relief, including judicial dissolution of your
partnership. On June 25, 1998, the general partner filed a motion seeking
dismissal of the action. In lieu of responding to the motion, the plaintiffs
have filed an amended complaint The general partner filed demurrers to the
amended complaint which were heard February 1999.
Pending the ruling on such demurrers, settlement negotiations
commenced. On November 2, 1999, the parties executed and filed a Stipulation of
Settlement, settling claims, subject to final court approval, on behalf of your
partnership and all limited partners who owned units as of November 3, 1999.
Preliminary approval of the settlement was obtained on November 3, 1999 from the
Court, at which time the Court set a final approval hearing for December 10,
1999. Prior to the December 10, 1999 hearing, the Court received various
objections to the settlement, including a challenge to the Court's preliminary
approval based upon the alleged lack of authority of lead counsel at that time
to enter the settlement. On December 14, 1999, the general partner and its
affiliates terminated the proposed settlement. In February 2000, counsel for
some of the named plaintiffs filed a motion to disqualify lead and liaison
counsel who negotiated the settlement. On June 27, 2000, the Court entered an
order disqualifying them from the case. The Court will entertain applications
for lead counsel which must be filed by August 4, 2000. The Court has scheduled
a hearing on August 21, 2000 to address the issue of appointing lead counsel.
The general partner does not anticipate that costs associated with this case
will be material to your partnership's overall operations.
ADDITIONAL INFORMATION CONCERNING YOUR PARTNERSHIP. Your partnership
files annual, quarterly and special reports, proxy statements and other
information with the SEC. You may read and copy any document your partnership
files at the SEC's public reference rooms in Washington, D.C., New York, New
York, and Chicago, Illinois. Please call the SEC at 1-800-SEC-0330 for further
information on the public reference rooms. Your partnership's SEC filings are
also available to the public at the SEC's web site at http://www.sec.gov.
SECTION 14. VOTING POWER.
Decisions with respect to the day-to-day management of your partnership
are the responsibility of the general partner. Because the general partner of
your partnership is our affiliate, we control the management of your
partnership. Under your partnership's agreement of limited partnership, limited
partners holding a majority of the outstanding units
36
<PAGE> 39
must approve certain extraordinary transactions, including the removal of the
general partner, the addition of a new general partner, most amendments to the
partnership agreement and the sale of all or substantially all of your
partnership's assets. We already own a majority of the outstanding units and
have the ability to control any votes of the limited partners.
SECTION 15. SOURCE OF FUNDS.
We expect that approximately $ 3,933,685 will be required to purchase
all of the limited partnership units that we are seeking in this offer
(exclusive of fees and expenses estimated to be $15,000). For more information
regarding fees and expenses, see "The Offer - Section 19. Fees and Expenses."
In addition to this offer, we are concurrently making offers to acquire
interests in approximately 45 other limited partnerships. If all such offers
were fully subscribed for cash, we would be required to pay approximately $ 342
million for all such units. If for some reason we did not have such funds
available we might extend this offer for a period of time sufficient for us to
obtain additional funds, or we might terminate this offer. However, based on our
past experience with similar offers, we do not expect all such offers to be
fully subscribed. As a result, we expect that the funds that will be necessary
to consummate all the offers will be substantially less than $ 342 million. We
believe that we have sufficient cash on hand and available sources of financing
to pay such amounts. As of March, 31, we had $22 million of cash on hand and $90
million available for borrowing under our existing lines of credit. We intend to
repay any amounts borrowed to finance the offer out of future working capital.
Under our secured $350 million revolving credit facility with Bank of
America, BankBoston, N.A. and First Union National Bank, AIMCO Properties, L.P.
is the borrower and all obligations thereunder are guaranteed by AIMCO and
certain of its subsidiaries. The credit facility includes a swing line of up to
$30 million. The obligations under the credit facility are secured by AIMCO
Properties, L.P.'s pledge of its stock ownership in certain subsidiaries of
AIMCO as well as a pledge of its interests in notes issued by it to certain
subsidiaries of AIMCO. The annual interest rate under the credit facility is
based on either LIBOR or a base rate which is the higher of Bank of America's
reference rate or 0.5% over the federal funds rate, plus, in either case, an
applicable margin. The margin ranges between 2.05% and 2.55% in the case of
LIBOR-based loans and between 0.55% and 1.05% in the case of base rate loans,
based upon a fixed charge coverage ratio. The credit facility expires on July
31, 2001 unless extended at the discretion of AIMCO Properties, L.P., at which
time the revolving facility would be converted into a term loan for up to two
successive one-year periods. The financial covenants contained in the credit
facility require us to maintain a ratio of debt to gross asset value of no more
than 0.55 to 1.0, and an interest coverage ratio of 2.25 to 1.0, and a fixed
charge coverage ratio of at least 1.75 to 1.0. In addition, the credit facility
limits us from distributing more than 80% of our Funds From Operations (as
defined) (or such amounts as may be necessary for us to maintain our status as a
REIT), imposes minimum net worth requirements and provides other financial
covenants related to certain of our assets and obligations.
SECTION 16. DISSENTERS' RIGHTS.
Neither the agreement of limited partnership of your partnership nor
applicable law provides any right for you to have your units appraised or
redeemed in connection with, or as a result of, our offer. You have the
opportunity to make an individual decision on whether or not to tender your
units in the offer.
SECTION 17. CONDITIONS OF THE OFFER.
Notwithstanding any other provisions of our offer, we will not be
required to accept for payment and pay for any units tendered pursuant to our
offer, may postpone the purchase of, and payment for, units tendered, and may
terminate or amend our offer if at any time on or after the date of this offer
to purchase and at or before the expiration of our offer (including any
extension thereof), any of the following shall occur or may be reasonably
expected to occur:
37
<PAGE> 40
o any change (or any condition, event or development involving a
prospective change) shall have occurred or been threatened in the
business, properties, assets, liabilities, indebtedness,
capitalization, condition (financial or otherwise), operations,
licenses or franchises, management contract, or results of operations
or prospects of your partnership or local markets in which your
partnership owns property, including any fire, flood, natural disaster,
casualty loss, or act of God that, in our reasonable judgment, are or
may be materially adverse to your partnership or the value of the units
to us, or we shall have become aware of any facts relating to your
partnership, its indebtedness or its operations which, in our
reasonable judgment, has or may have material significance with respect
to the value of your partnership or the value of the units to us; or
o there shall have occurred (i) any general suspension of trading in, or
limitation on prices for, securities on any national securities
exchange or the over-the-counter market in the United States, (ii) a
decline in the closing price of a share of AIMCO's Class A Common Stock
of more than 7.5% from the date hereof, (iii) any extraordinary or
material adverse change in the financial, real estate or money markets
or major equity security indices in the United States such that there
shall have occurred at least a 25 basis point increase in LIBOR, the
price of the 10-year Treasury Bond or the 30-year Treasury Bond, or at
least a 7.5% decrease in the S&P 500 Index or the Morgan Stanley REIT
Index, in each case, from the date hereof, (iii) any material adverse
change in the commercial mortgage financing markets, (iv) a declaration
of a banking moratorium or any suspension of payments in respect of
banks in the United States (not existing on the date hereof), (vi) a
commencement of a war, conflict, armed hostilities or other national or
international calamity directly or indirectly involving the United
States (not existing on the date hereof), (vii) any limitation (whether
or not mandatory) by any governmental authority on, or any other event
which, in our reasonable judgment, might affect the extension of credit
by banks or other lending institutions, or (viii) in the case of any of
the foregoing existing at the time of the commencement of the offer, in
our reasonable judgment, a material acceleration or worsening thereof;
or
o there shall have been threatened, instituted or pending any action,
proceeding, application or counterclaim by any Federal, state, local or
foreign government, governmental authority or governmental agency, or
by any other person, before any governmental authority, court or
regulatory or administrative agency, authority or tribunal, which (i)
challenges or seeks to challenge our purchase of the units, restrains,
prohibits or delays the making or consummation of our offer, prohibits
the performance of any of the contracts or other arrangements entered
into by us (or any affiliates of ours), seeks to obtain any material
amount of damages as a result of the transactions contemplated by our
offer, (ii) seeks to make the purchase of, or payment for, some or all
of the units pursuant to our offer illegal or results in a delay in our
ability to accept for payment or pay for some or all of the units,
(iii) seeks to prohibit or limit the ownership or operation by us or
any of our affiliates of the entity serving as general partner of your
partnership or to remove such entity as general partner of your
partnership, or seeks to impose any material limitation on our ability
or the ability of any affiliate of ours to conduct your partnership's
business or own such assets, (iv) seeks to impose material limitations
on our ability to acquire or hold or to exercise full rights of
ownership of the units including, but not limited to, the right to vote
the units purchased by us on all matters properly presented to the
limited partners, or (v) might result, in our reasonable judgment, in a
diminution in the value of your partnership or a limitation of the
benefits expected to be derived by us as a result of the transactions
contemplated by our offer or the value of the units to us; or
o there shall be any action taken, or any statute, rule, regulation,
order or injunction shall be sought, proposed, enacted, promulgated,
entered, enforced or deemed applicable to our offer, your partnership,
any general partner of your partnership, us or any affiliate of ours or
your partnership, or any other action shall have been taken, proposed
or threatened, by any government, governmental authority or court,
that, in our reasonable judgment, might, directly or indirectly, result
in any of the consequences referred to in clauses (i) through (v) of
the immediately preceding paragraph; or
38
<PAGE> 41
o your partnership shall have (i) changed, or authorized a change of, the
units or your partnership's capitalization, (ii) issued, distributed,
sold or pledged, or authorized, proposed or announced the issuance,
distribution, sale or pledge of (A) any equity interests (including,
without limitation, units), or securities convertible into any such
equity interests or any rights, warrants or options to acquire any such
equity interests or convertible securities, or (B) any other securities
in respect of, in lieu of, or in substitution for units outstanding on
the date hereof, (iii) purchased or otherwise acquired, or proposed or
offered to purchase or otherwise acquire, any outstanding units or
other securities, (iv) declared or paid any dividend or distribution on
any units or issued, authorized, recommended or proposed the issuance
of any other distribution in respect of the units, whether payable in
cash, securities or other property, (v) authorized, recommended,
proposed or announced an agreement, or intention to enter into an
agreement, with respect to any merger, consolidation, liquidation or
business combination, any acquisition or disposition of a material
amount of assets or securities, or any release or relinquishment of any
material contract rights, or any comparable event, not in the ordinary
course of business, (vi) taken any action to implement such a
transaction previously authorized, recommended, proposed or publicly
announced, (vii) issued, or announced its intention to issue, any debt
securities, or securities convertible into, or rights, warrants or
options to acquire, any debt securities, or incurred, or announced its
intention to incur, any debt other than in the ordinary course of
business and consistent with past practice, (viii) authorized,
recommended or proposed, or entered into, any transaction which, in our
reasonable judgment, has or could have an adverse affect on the value
of your partnership or the units, (ix) proposed, adopted or authorized
any amendment of its organizational documents, (x) agreed in writing or
otherwise to take any of the foregoing actions or (xi) been notified
that any debt of your partnership or any of its subsidiaries secured by
any of its or their assets is in default or has been accelerated; or
o a tender or exchange offer for any units shall have been commenced or
publicly proposed to be made by another person or "group" (as defined
in Section 13(d)(3) of the Exchange Act), or it shall have been
publicly disclosed or we shall have otherwise learned that (i) any
person or group shall have acquired or proposed or be attempting to
acquire beneficial ownership of more than five percent of the units, or
shall have been granted any option, warrant or right, conditional or
otherwise, to acquire beneficial ownership of more than five percent of
the units, other than acquisitions for bona fide arbitrage purposes, or
(ii) any person or group shall have entered into a definitive agreement
or an agreement in principle or made a proposal with respect to a
merger, consolidation or other business combination with or involving
your partnership; or
o the offer to purchase may have an adverse effect on AIMCO's status as a
REIT; or
o we shall not have adequate cash or financing commitments available to
pay the for the units validly tendered.
The foregoing conditions are for our sole benefit and may be asserted
by us regardless of the circumstances giving rise to such conditions or may be
waived by us in whole or in part at any time and from time to time in our
reasonable discretion. The failure by us at any time to exercise any of the
foregoing rights shall not be deemed a waiver of any such right, the waiver of
any such right with respect to any particular facts or circumstances shall not
be deemed a waiver with respect to any other facts or circumstances and each
right shall be deemed a continuing right which may be asserted at any time and
from time to time.
SECTION 18. CERTAIN LEGAL MATTERS.
GENERAL. Except as set forth in this Section 18, we are not, based on
information provided by your general partner (which is our subsidiary), aware of
any licenses or regulatory permits that would be material to the business of
your partnership, taken as a whole, and that might be adversely affected by our
acquisition of units as contemplated herein, or any filings, approvals or other
actions by or with any domestic or foreign governmental authority or
administrative or regulatory agency that would be required prior to the
acquisition of units by us pursuant to the offer, other than the filing of a
Tender Offer Statement on Schedule TO with the SEC (which has already been
filed) and any required amendments thereto. While there is no present intent to
delay the purchase of units tendered pursuant to the
39
<PAGE> 42
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 your partnership or its business, or that
certain parts of its 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 us to elect to terminate the offer without purchasing
units thereunder. Our obligation to purchase and pay for units is subject to
certain conditions, including conditions related to the legal matters discussed
in this Section 18.
ANTITRUST. We do not believe that the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended, is applicable to the acquisition of units
contemplated by our offer.
MARGIN REQUIREMENTS. The 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 our offer.
STATE LAWS. We are not aware of any jurisdiction in which the making of
our offer is not in compliance with applicable law. If we become aware of any
jurisdiction in which the making of the offer would not be in compliance with
applicable law, we will make a good faith effort to comply with any such law.
If, after such good faith effort, we cannot comply with any such law, the offer
will not be made to (nor will tenders be accepted from or on behalf of)
unitholders residing in such jurisdiction. In those jurisdictions with
securities or blue sky laws that require the offer to be made by a licensed
broker or dealer, the offer shall be made on behalf of us, if at all, only by
one or more registered brokers or dealers licensed under the laws of that
jurisdiction.
SECTION 19. FEES AND EXPENSES.
Except as set forth herein, we will not pay any fees or commissions to
any broker, dealer or other person for soliciting tenders of units pursuant to
the offer. We have retained River Oaks Partnership Services, Inc. to act as
Information Agent in connection with our offer. The Information Agent may
contact holders of units by mail, e-mail, telephone, telex, telegraph and
personal interview and may request brokers, dealers and other nominee limited
partners to forward materials relating to the offer to beneficial owners of the
units. We will pay the Information Agent reasonable and customary compensation
for its services in connection with the offer, plus reimbursement for
out-of-pocket expenses, and will indemnify it against certain liabilities and
expenses in connection therewith, including liabilities under the Federal
securities laws. We will also pay all costs and expenses of printing and mailing
the offer and any related legal fees and expenses.
----------
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION ON BEHALF OF US NOT CONTAINED HEREIN OR IN THE LETTER OF
TRANSMITTAL AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT
BE RELIED UPON AS HAVING BEEN AUTHORIZED.
We have filed with the SEC a Tender Offer Statement on Schedule TO,
pursuant to Section 14(d)(1) and Rule 14d-3 under the Exchange Act, furnishing
certain additional information with respect to our offer, and may file
amendments thereto. Your partnership has filed with the SEC a
Solicitation/Recommendation Statement on Schedule 14D-9 pursuant to Section
14(d)(4) and Rule 14d-9 under the Exchange Act, furnishing certain additional
information about your partnership's and the general partner's position
concerning our offer, and your partnership may file amendments thereto. The
Schedules TO and 14D-9 and any amendments to either Schedule, including
exhibits, may be inspected and copies may be obtained at the same place and in
the same manner as described in "The Offer--Section 13. Certain Information
Concerning Your Partnership--Additional Information Concerning Your
Partnership."
AIMCO PROPERTIES, L.P.
40
<PAGE> 43
ANNEX I
OFFICERS AND DIRECTORS
The names and positions of the executive officers of Apartment
Investment and Management Company ("AIMCO"), and AIMCO-GP, Inc. ("AIMCO-GP") and
the directors of AIMCO are set forth below. The two directors of AIMCO-GP are
Terry Considine and Peter Kompaniez. The two directors of the general partner of
your partnership are Peter K. Kompaniez and Patrick J. Foye. The sole executive
officer of the general partner of your partnership is Patrick J. Foye, Executive
Vice President. Unless otherwise indicated, the business address of each
executive officer and director is Colorado Center, Tower Two, 2000 South
Colorado Boulevard, Suite 2-1000, Denver, Colorado 80222. Each executive officer
and director is a citizen of the United States of America.
<TABLE>
<CAPTION>
NAME POSITION
---- --------
<S> <C>
Terry Considine................................ Chairman of the Board of Directors and Chief Executive Officer
Peter K. Kompaniez............................. Vice Chairman, President and Director
Thomas W. Toomey............................... Chief Operating Officer
Harry G. Alcock................................ Executive Vice President and Chief Investment Officer
Joel F. Bonder................................. Executive Vice President, General Counsel and Secretary
Patrick J. Foye................................ Executive Vice President
Lance J. Graber................................ Executive Vice President--Acquisitions
Steven D. Ira.................................. Co-Founder and Executive Vice President
Paul J. McAuliffe.............................. Executive Vice President and Chief Financial Officer
James N. Bailey................................ Director
Richard S. Ellwood............................. Director
J. Landis Martin............................... Director
Thomas L. Rhodes............................... Director
</TABLE>
<TABLE>
<CAPTION>
NAME PRINCIPAL OCCUPATIONS FOR THE LAST FIVE YEARS
---- ---------------------------------------------
<S> <C>
Terry Considine................................ Mr. Considine has been Chairman of the Board of Directors and Chief
Executive Officer of AIMCO since July 1994. Mr. Considine serves as
Chairman and director of Asset Investors Corporation ("Asset
Investors") and Commercial Assets, Inc. ("Commercial Assets"), two
other public real estate investment trusts. Mr. Considine has been
and remains involved as a principal in a variety of other business
activities.
Peter K. Kompaniez............................. Mr. Kompaniez has been Vice Chairman of the Board of Directors of
AIMCO since July 1994 and was appointed President in July 1997. Mr.
Kompaniez has also served as Chief Operating Officer of NHP
Incorporated ("NHP"), which was acquired by AIMCO in December 1997.
From 1986 to 1993, he served as President and Chief Executive
Officer of Heron Financial Corporation ("HFC"), a United States
holding company for Heron International, N.V.'s real estate and
related assets. While at HFC, Mr. Kompaniez administered the
acquisition, development and disposition of approximately 8,150
apartment units (including 6,217 units that have been acquired by
AIMCO) and 3.1 million square feet of commercial real estate.
</TABLE>
I-1
<PAGE> 44
<TABLE>
<CAPTION>
NAME PRINCIPAL OCCUPATIONS FOR THE LAST FIVE YEARS
---- ---------------------------------------------
<S> <C>
Thomas W. Toomey............................... Mr. Toomey served as Senior Vice President -- Finance and
Administration of AIMCO from January 1996 to March 1997, when he
was promoted to Executive Vice President -- Finance and
Administration. Mr. Toomey served as Executive Vice President --
Finance and Administration until December 1999, when he was
appointed Chief Operating Officer. From 1990 until 1995, Mr. Toomey
served in a similar capacity with Lincoln Property Company ("LPC")
as Vice President/Senior Controller and Director of Administrative
Services of Lincoln Property Services where he was responsible for
LPC's computer systems, accounting, tax, treasury services and
benefits administration. From 1984 to 1990, he was an audit manager
with Arthur Andersen & Co. where he served real estate and banking
clients. Mr. Toomey received a B.S. in Business
Administration/Finance from Oregon State University.
Harry G. Alcock................................ Mr. Alcock served as a Vice President of AIMCO from July 1996 to
October 1997, when he was promoted to Senior Vice President --
Acquisitions. Mr. Alcock served as Senior Vice President --
Acquisitions until October 1999, when he was promoted to Executive
Vice President and Chief Investment Officer. Mr. Alcock has had
responsibility for acquisition and financing activities of AIMCO
since July 1994. From June 1992 until July 1994, Mr. Alcock served
as Senior Financial Analyst for PDI and HFC. From 1988 to 1992, Mr.
Alcock worked for Larwin Development Corp., a Los Angeles-based
real estate developer, with responsibility for raising debt and
joint venture equity to fund land acquisition and development. From
1987 to 1988, Mr. Alcock worked for Ford Aerospace Corp. He
received his B.S. from San Jose State University.
Joel F. Bonder................................. Mr. Bonder was appointed Executive Vice President, General Counsel
and Secretary of AIMCO effective December 1997. Prior to joining
AIMCO, Mr. Bonder served as Senior Vice President and General
Counsel of NHP from April 1994 until December 1997. Mr. Bonder
served as Vice President and Deputy General Counsel of NHP from
June 1991 to March 1994 and as Associate General Counsel of NHP
Incorporated from 1986 to 1991. From 1983 to 1985, Mr. Bonder
practiced with the Washington, D.C. law firm of Lane & Edson, P.C.
and from 1979 to 1983 practiced with the Chicago law firm of Ross
and Hardies. Mr. Bonder received a B.A. from the University of
Rochester and a J.D. from Washington University School of Law.
</TABLE>
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<TABLE>
<CAPTION>
NAME PRINCIPAL OCCUPATIONS FOR THE LAST FIVE YEARS
---- ---------------------------------------------
<S> <C>
Patrick J. Foye................................ Mr. Foye was appointed Executive Vice President of AIMCO in May
1998. He is responsible for acquisitions of partnership securities,
consolidation of minority interests, and corporate and other
acquisitions. Prior to joining AIMCO, Mr. Foye was a Merger and
Acquisitions Partner in the law firm of Skadden, Arps, Slate,
Meagher & Flom LLP from 1989 to 1998 and was Managing Partner of
the firm's Brussels, Budapest and Moscow offices from 1992 through
1994. Mr. Foye is also Deputy Chairman of the Long Island Power
Authority and serves as a member of the New York State
Privatization Council. He received a B.A. from Fordham College and
a J.D. from Fordham Law School and was Associate Editor of the
Fordham Law Review.
Lance J. Graber................................ Mr. Graber was appointed Executive Vice President -- Acquisitions
of AIMCO in October 1999. His principal business function is
acquisitions. Prior to joining AIMCO, Mr. Graber was an Associate
from 1991 through 1992 and then a Vice President from 1992 through
1994 at Credit Suisse First Boston engaged in real estate financial
advisory services and principal investing. He was a Director there
from 1994 to May 1999, during which time he supervised a staff of
seven in the making of principal investments in hotel, multi-family
and assisted living properties. Mr. Graber received a B.S. and an
M.B.A. from the Wharton School of the University of Pennsylvania.
Steven D. Ira.................................. Mr. Ira is a Co-Founder of AIMCO and has served as Executive Vice
President -- Property Operations of AIMCO since July 1994. From
1987 until July 1994, he served as President of Property Asset
Management ("PAM"). Prior to merging his firm with PAM in 1987, Mr.
Ira acquired extensive experience in property management. Between
1977 and 1981 he supervised the property management of over 3,000
apartment and mobile home units in Colorado, Michigan, Pennsylvania
and Florida, and in 1981 he joined with others to form the property
management firm of McDermott, Stein and Ira. Mr. Ira served for
several years on the National Apartment Manager Accreditation Board
and is a former president of both the National Apartment
Association and the Colorado Apartment Association. Mr. Ira is the
sixth individual elected to the Hall of Fame of the National
Apartment Association in its 54-year history. He holds a Certified
Apartment Property Supervisor (CAPS) and a Certified Apartment
Manager designation from the National Apartment Association, a
Certified Property (CPM) designation from the National Institute of
Real Estate Management (IREM) and he is a member of the Boards of
Directors of the National Multi-Housing Council, the National
Apartment Association and the Apartment Association of Greater
Orlando. Mr. Ira received a B.S. from Metropolitan State College in
1975.
</TABLE>
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<TABLE>
<CAPTION>
NAME PRINCIPAL OCCUPATIONS FOR THE LAST FIVE YEARS
---- ---------------------------------------------
<S> <C>
Paul J. McAuliffe.............................. Mr. McAuliffe has been Executive Vice President of AIMCO since
February 1999 and was appointed Chief Financial Officer in October
1999. Prior to joining AIMCO, Mr. McAuliffe was Senior Managing
Director of Secured Capital Corp and prior to that time had been a
Managing Director of Smith Barney, Inc. from 1993 to 1996, where he
was senior member of the underwriting team that lead AIMCO's
initial public offering in 1994. Mr. McAuliffe was also a Managing
Director and head of the real estate group at CS First Boston from
1990 to 1993 and he was a Principal in the real estate group at
Morgan Stanley & Co., Inc. where he worked from 1983 to 1990. Mr.
McAuliffe received a B.A. from Columbia College and an M.B.A. from
University of Virginia, Darden School.
James N. Bailey................................ Mr. Bailey was appointed a Director of AIMCO. In 1973, Mr. Bailey
co-founded Cambridge Associates, Inc., which is an investment
consulting firm for nonprofit institutions and wealthy family
groups. He is also co-founder, treasurer and director of The
Plymouth Rock Company, Direct Response Corporation and Homeowners's
Direct Corporation, all United States personal lines insurance
company. He received his MBA and JD degrees in 1973 from Harvard
Business School and Harvard Law School.
Richard S. Ellwood............................. Mr. Ellwood was appointed a director of AIMCO in July 1994. Mr.
12 Auldwood Lane Ellwood is currently Chairman of the Audit Committee and a member
Rumson, NJ 07660 of the Compensation Committee. Mr. Ellwood is the founder and
President of R.S. Ellwood & Co., Incorporated, a real estate
investment banking firm. Prior to forming R.S. Ellwood & Co.,
Incorporated in 1987, Mr. Ellwood had 31 years experience on Wall
Street as an investment banker, serving as: Managing Director and
senior banker at Merrill Lynch Capital Markets from 1984 to 1987;
Managing Director at Warburg Paribas Becker from 1978 to 1984;
general partner and then Senior Vice President and a director at
White, Weld & Co. from 1968 to 1978; and in various capacities at
J.P. Morgan & Co. from 1955 to 1968. Mr. Ellwood currently serves
as director of Felcor Lodging Trust, Incorporated and Florida East
Coast Industries, Inc.
</TABLE>
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<PAGE> 47
<TABLE>
<CAPTION>
NAME PRINCIPAL OCCUPATIONS FOR THE LAST FIVE YEARS
---- ---------------------------------------------
<S> <C>
J. Landis Martin............................... Mr. Martin was appointed a director of AIMCO in July 1994 and
199 Broadway became Chairman of the Compensation Committee on March 19, 1998.
Suite 4300 Mr. Martin is a member of the Audit Committee. Mr. Martin has
Denver, CO 80202 served as President and Chief Executive Officer of NL Industries,
Inc., a manufacturer of titanium dioxide since 1987. Mr. Martin has
served as Chairman of Tremont Corporation ("Tremont"), a holding
company operating through its affiliates Titanium Metals
Corporation ("TIMET") and NL Industries, Inc. ("NL"), since 1990
and as Chief Executive Officer and a director of Tremont since
1988. Mr. Martin has served as Chairman of TIMET, an integrated
producer of titanium since 1987 and Chief Executive Officer since
January, 1995. From 1990 until its acquisition by a predecessor of
Halliburton Company ("Halliburton") in 1994, Mr. Martin served as
Chairman of the Board and Chief Executive Officer of Baroid
Corporation, an oilfield services company. In addition to Tremont,
NL and TIMET, Mr. Martin is a director of Halliburton, which is
engaged in the petroleum services, hydrocarbon and engineering
industries, and Crown Castle International Corporation, a
communications company.
Thomas L. Rhodes............................... Mr. Rhodes was appointed a Director of AIMCO in July 1994 and is
215 Lexington Avenue currently a member of the Audit and Compensation Committees. Mr.
4th Floor Rhodes has served as the President and Director of National Review
New York, NY 10016 magazine since November 1992, where he has also served as a
Director since 1988. From 1976 to 1992, he held various positions
at Goldman, Sachs & Co. and was elected a General Partner in 1986
and served as a General Partner from 1987 until November 1992. He
is currently Co-Chairman of the Board, Co-Chief Executive Officer
and a Director of Asset Investors and Commercial Assets. He also
serves as a Director of Delphi Financial Group and its
subsidiaries, Delphi International Ltd., Oracle Reinsurance Company
and The Lynde and Harry Bradley Foundation.
</TABLE>
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<PAGE> 48
The letter of transmittal and any other required documents should be sent or
delivered by each unitholder or such unitholder's broker, dealer, bank, trust
company or other nominee to the Information Agent at one of its addresses set
forth below.
THE INFORMATION AGENT FOR THE OFFER IS:
RIVER OAKS PARTNERSHIP SERVICES, INC.
<TABLE>
<S> <C> <C>
By Mail: By Overnight Courier: By Hand:
P.O. Box 2065 111 Commerce Road 111 Commerce Road
S. Hackensack, N.J. 07606-2065 Carlstadt, N.J. 07072 Carlstadt, N.J. 07072
Attn.: Reorganization Dept. Attn.: Reorganization Dept.
</TABLE>
For information, please call:
TOLL FREE: (888) 349-2005
II-1
