<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------------
SCHEDULE 14D-1
TENDER OFFER STATEMENT PURSUANT TO SECTION 14(d)(1)
OF THE SECURITIES EXCHANGE ACT OF 1934
AND
SCHEDULE 13D
UNDER THE SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. 15)
SHELTER PROPERTIES II, LTD. PARTNERSHIP
(Name of Subject Company)
AIMCO PROPERTIES, L.P.
(Bidder)
UNITS OF LIMITED PARTNERSHIP INTEREST
(Title of Class of Securities)
NONE
(CUSIP Number of Class of Securities)
PATRICK J. FOYE
APARTMENT INVESTMENT AND MANAGEMENT COMPANY
1873 SOUTH BELLAIRE STREET, 17TH FLOOR
DENVER, COLORADO 80222
(303) 757-8101
(Name, Address and Telephone Number of Person Authorized
to Receive Notices and Communications on Behalf of Bidder)
COPY TO:
JONATHAN L. FRIEDMAN
SKADDEN, ARPS, SLATE, MEAGHER & FLOM LLP
300 SOUTH GRAND, 34TH FLOOR
LOS ANGELES, CALIFORNIA 90071
(213) 687-5000
----------------------
<PAGE> 2
CALCULATION OF FILING FEE
- --------------------------------------------------------------------------------
Transaction Valuation* $9,148,993.23 Amount of Filing Fee: $1,829.80
- --------------------------------------------------------------------------------
* For purposes of calculating the fee only. This amount assumes the
purchase of 15,713.17 units of limited partnership interest of the
subject partnership for $582.25 per unit. The amount of the filing fee,
calculated in accordance with Section 14(g)(1)(B)(3) and Rule 0-11(d)
under the Securities Exchange Act of 1934, as amended, equals 1/50th of
one percent of the aggregate of the cash offered by the bidder.
[ ] Check box if any part of the fee is offset as provided by Rule
0-11(a)(2) and identify the filing with which the offsetting fee was
previously paid. Identify the previous filing by registration statement
number or the form or schedule and the date of its filing.
Amount Previously Paid: Filing Parties:
Form or Registration No.: Date Filed:
(Continued on following pages)
Page 1 of 10 Pages
<PAGE> 3
CUSIP No. NONE 14D-1 AND 13D/A
1. NAME OF REPORTING PERSONS
S.S. OR I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS
AIMCO PROPERTIES, L.P.
84-1275621
2. CHECK THE APPROPRIATE BOX IF A MEMBER OF GROUP
(a) [ ]
(b) [X]
3. SEC USE ONLY
4. SOURCE OF FUNDS
WC, BK
5. (CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO
ITEMS 2(e) OR 2(f) [ ]
6. CITIZENSHIP OR PLACE OF ORGANIZATION
Delaware
7. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
700.33
8. CHECK IF THE AGGREGATE AMOUNT IN ROW (7) EXCLUDES CERTAIN SHARES
[ ]
9. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (7)
Approximately 2.52%
10. TYPE OF REPORTING PERSON
PN
Page 2 of 10 Pages
<PAGE> 4
CUSIP No. NONE 14D-1 AND 13D/A
1. NAME OF REPORTING PERSONS
S.S. OR I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS
AIMCO-GP, INC.
2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP
(a) [ ]
(b) [X]
3. SEC USE ONLY
4. SOURCES OF FUNDS
Not Applicable
5. CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO
ITEMS 2(e) OR 2(f) [ ]
6. CITIZENSHIP OR PLACE OF ORGANIZATION
Delaware
7. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
700.33
8. CHECK IF THE AGGREGATE AMOUNT IN ROW (7) EXCLUDES CERTAIN SHARES
[ ]
9. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (7)
Approximately 2.52%
10. TYPE OF REPORTING PERSON
CO
Page 3 of 10 Pages
<PAGE> 5
CUSIP No. NONE 14D-1 AND 13D/A
1. NAME OF REPORTING PERSONS
S.S. OR I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS
APARTMENT INVESTMENT AND MANAGEMENT COMPANY
84-129577
2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP
(a) [ ]
(b) [X]
3. SEC USE ONLY
4. SOURCES OF FUNDS
Not Applicable
5. CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO
ITEMS 2(e) OR 2(f)
[ ]
6. CITIZENSHIP OR PLACE OF ORGANIZATION
Maryland
7. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
11,786.83
8. CHECK IF THE AGGREGATE AMOUNT IN ROW (7) EXCLUDES CERTAIN SHARES
[ ]
9. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (7)
Approximately 42.43%
10. TYPE OF REPORTING PERSON
CO
Page 4 of 10 Pages
<PAGE> 6
SCHEDULE 14D-1/AMENDMENT NO. 15 TO SCHEDULE 13D
This Statement (the "Statement") constitutes (a) the initial
Schedule 14D-1 of AIMCO Properties, L.P. (the "AIMCO OP"), relating to AIMCO
OP's Litigation Settlement Offer to purchase units of limited partnership
interest ("Units") of Shelter Properties II (the "Partnership"); and (b)
Amendment No. 15 to the Schedule 13D (the "Schedule 13D") originally filed with
the Securities and Exchange Commission (the "Commission") on May 31, 1995, by
Insignia Financial Group, Inc. ("Insignia") and SP II Acquisition, L.L.C. ("SP
II"), as amended by (i) Amendment No. 1, filed with the Commission on June 14,
1995, by Insignia and SP II, (ii) Amendment No. 2, filed with the Commission on
June 21, 1995, by Insignia and SP II, (iii) Amendment No. 3, filed with the
Commission on July 12, 1995, by Insignia and SP II, (iv) Amendment No. 4, filed
with the Commission on November 22, 1995, by Insignia and SP II, (v) Amendment
No. 5, filed with the Commission on April 24, 1997, by Insignia, Insignia
Properties, L.P. ("IPLP"), SP II, Insignia Properties Trust ("IPT") and Andrew
L. Farkas, (vi) Amendment No. 6, filed with the Commission on June 20, 1997, by
Insignia, IPLP, IPT and Andrew L. Farkas, (vii) Amendment No. 7, filed with the
Commission on July 21, 1998, by Cooper River Properties, L.L.C. ("Cooper
River"), Insignia, IPLP, IPT and Andrew L. Farkas, (viii) Amendment No. 8, filed
with the Commission on August 18, 1998, by Cooper River, Insignia, IPLP, IPT and
Andrew L. Farkas, (ix) Amendment No. 9, filed with the Commission on August 24,
1998, by Cooper River, Insignia, IPLP, IPT and Andrew L. Farkas, (x) Amendment
No. 10, filed with the Commission on September 24, 1998, by Cooper River,
Insignia, IPLP, IPT and Andrew L. Farkas, (xi) Amendment No. 11, filed with the
Commission on October 26, 1998, by Cooper River, IPLP, IPT, AIMCO OP, AIMCO-GP,
Inc. ("AIMCO-GP") and Apartment Investment and Management Company ("AIMCO"),
(xii) Amendment No. 12, filed with the Commission on June 10, 1999, by Cooper
River, AIMCO/IPT, Inc. ("AIMCO/IPT"), IPLP, AIMCO OP, AIMCO-GP and AIMCO, (xiii)
Amendment No. 13, filed with the Commission on July 8, 1999, by Cooper River,
AIMCO/IPT, IPLP, AIMCO OP, AIMCO-GP and AIMCO, and (xiv) Amendment No. 14, filed
with the Commission on July 30, 1999, by Cooper River, AIMCO/IPT, IPLP, AIMCO
OP, AIMCO-GP and AIMCO. The item numbers and responses thereto are set forth
below in accordance with the requirements of Schedule 14D-1.
(1) SECURITY AND SUBJECT COMPANY.
(a) The name of the subject company is Shelter Properties II,
Ltd., a South Carolina limited partnership. The address of the Partnership's
principal executive offices is 1873 South Bellaire Street, 17th Floor, Denver,
Colorado 80222 (on and after November 24, 1999: Colorado Center, Tower Two, 2000
South Colorado Boulevard, Suite 2-1000, Denver, Colorado 80222).
(b) This Statement relates to an offer by AIMCO OP to
purchase, subject to the terms of the Litigation Settlement Offer, all of the
outstanding units of limited partnership interest (the "Units") of the
Partnership at a purchase price per Unit, net to the seller, of $582.25 in cash
(less the amount of any distributions paid by the Partnership on and after
November 15, 1999), upon the terms and subject to the conditions set forth in a
Litigation Settlement Offer, dated November 15, 1999 (as amended or supplemented
from time to time, the "Litigation Settlement Offer"), and the related Letter of
Transmittal and Instructions thereto (as amended or supplemented from time to
time, the "Letter of Transmittal"), copies of which are filed as Exhibits (a)(1)
and (a)(2) hereto, respectively. Approximately 5% of the offer price per Units
represents a payment from a settlement fund that has been established, which
will be paid only if the court approves the proposed settlement in the lawsuit
in the Superior Court of the State of California, County of San Mateo, entitled
Nuanes et al. v. Insignia Financial Group, Inc., et al., and the seller of the
Units does not request exclusion from the settlement class.
Page 5 of 10 Pages
<PAGE> 7
(c) The information set forth in the Litigation Settlement
Offer under "The Offer -- Section 9. Background and Reasons for the Offer --
Prices on Secondary Market" is incorporated herein by reference.
(2) IDENTITY AND BACKGROUND.
(a)-(d), (g) This Statement is being filed by AIMCO
Properties, L.P., a Delaware limited partnership, and, insofar as this Statement
constitutes Amendment No. 15 to the Schedule 13D, by Cooper River Properties,
L.L.C., a Delaware limited liability company, Insignia Properties, L.P., a
Delaware limited partnership, AIMCO/IPT, Inc., a Delaware corporation, AIMCO-GP,
Inc., a Delaware corporation, and Apartment Investment and Management Company, a
Maryland corporation. The sole general partner of AIMCO OP is AIMCO-GP. AIMCO-GP
is a wholly owned subsidiary of AIMCO. On February 26, 1999, IPT was merged into
AIMCO, and AIMCO contributed IPT's interest in IPLP to AIMCO's wholly owned
subsidiary, AIMCO/IPT. AIMCO/IPT also replaced IPT as the sole general partner
of IPLP. The principal business of the Reporting Persons is the ownership,
acquisition, development, expansion and management of multi-family apartment
properties. The principal executive offices of the Reporting Persons are located
at 1873 South Bellaire Street, 17th Floor, Denver, Colorado 80222 (on and after
November 24, 1999: Colorado Center, Tower Two, 2000 South Colorado Boulevard,
Suite 2-1000, Denver, Colorado 80222). The information set forth in the
Litigation Settlement Offer under "The Offer -- Section 8. Information
Concerning Us and Certain of Our Affiliates" is incorporated herein by
reference. The executive officers and directors of AIMCO, AIMCO-GP and AIMCO/IPT
are listed on Annex I to the Litigation Settlement Offer ("Annex I"), which is
incorporated herein by reference.
(e)-(f) During the last five years, none of the Reporting
Persons nor, to the best of their knowledge, any of the persons listed in Annex
I (i) has been convicted in a criminal proceeding (excluding traffic violations
or similar misdemeanors) or (ii) was a party to a civil proceeding of a judicial
or administrative body of competent jurisdiction and as a result of such
proceeding was or is subject to a judgment, decree or final order enjoining
further violations of or prohibiting activities subject to federal or state
securities laws or finding any violation with respect to such laws.
(3) PAST CONTACTS, TRANSACTIONS OR NEGOTIATIONS WITH THE SUBJECT COMPANY.
(a)-(b) The information set forth in Part III of the
Partnership's Form 10-KSB for the year ended December 31, 1998, and the
Partnership's Form 10-QSB for the nine months ended September 30, 1999, and the
financial statements and notes thereto included therein, and the information set
forth in the Litigation Settlement Offer under "The Offer -- Section 9.
Background and Reasons for the Offer -- General," "The Offer -- Section 9.
Background and Reasons for the Offer -- Prior Tender Offers," "The Offer -
Section 11. Conflicts of Interest and Transactions with Affiliates," "The Offer
- -- Section 13. Certain Information Concerning Your Partnership -- Distributions"
and "The Offer -- Section 13. Certain Information Concerning Your Partnership --
Compensation Paid to the General Partner and Its Affiliates" is incorporated
herein by reference.
(4) SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
(a)-(c) The information set forth in the Litigation Settlement
Offer under "The Offer -- Section 15. Source of Funds" is incorporated herein by
reference.
(5) PURPOSE OF THE TENDER OFFER AND PLANS OR PROPOSALS OF THE BIDDER.
Page 6 of 10 Pages
<PAGE> 8
(a)-(g) The information set forth in the Litigation Settlement
Offer under "The Offer -- Section 9. Background and Reasons for the Offer," "The
Offer -- Section 12. Future Plans of the Purchaser" and "The Offer -- Section 7.
Effects of the Offer" is incorporated herein by reference.
(6) INTEREST IN SECURITIES OF THE SUBJECT COMPANY.
(a) Cooper River directly owns 1,958.50 Units, IPLP directly
owns 9,128 Units, and AIMCO OP directly owns 700.33 Units (for an aggregate of
11,786.83 Units), representing Approximately 7.05%, 32.86% and 2.52%,
respectively, or a total of Approximately 42.43% of the outstanding Units based
on the 27,500 Units outstanding at December 31, 1998.
IPLP, AIMCO/IPT and AIMCO may be deemed to beneficially own
the Units directly owned by Cooper River by reason of each of their relationship
with Cooper River. AIMCO/IPT and AIMCO may be deemed to beneficially own the
Units directly owned by IPLP by reason of each of their relationships with IPLP.
Cooper River is a wholly owned subsidiary of IPLP, and AIMCO/IPT is the sole
general partner of IPLP (owning approximately 66.17% of the total equity
interests. AIMCO/IPT is a wholly owned subsidiary of AIMCO.
Accordingly, for purposes of this Statement: (i) Cooper River
is reporting that it shares the power to vote or direct the vote and the power
to dispose or direct the disposition of the 1,958.50 Units directly owned by it;
(ii) IPLP is reporting that it shares the power to vote or direct the vote and
the power to dispose and direct the disposition of the 9,128 Units owned by it
and the 1,958.50 Units directly owned by Cooper River; (iii) AIMCO/IPT is
reporting that it shares the power to vote or direct the vote and the power to
dispose or direct the disposition of the 1,958.50 Units directly owned by Cooper
River and the 9,128 Units directly owned by IPLP; (iv) AIMCO OP is reporting
that it shares the power to vote or direct the power to vote and the power to
dispose or direct the disposition of the 700.33 Units directly owned by it; (v)
AIMCO-GP is reporting that it shares the power to vote or direct the disposition
of the 700.33 Units owned by AIMCO OP; and (vi) AIMCO is reporting that it
shares the power to vote or direct the vote and the power to dispose or direct
the disposition of the 1,958.50 Units directly owned by Cooper River, the 9,128
Units directly owned by IPLP and the 700.33 Units directly owned by AIMCO OP.
(b) The information set forth in the Litigation Settlement
Offer under "The Offer -- Section 9. Background and Reasons for the Offer --
Prior Tender Offers" and "The Offer - Section 9. Background and Reasons for the
Offer -- Our Prior Tender Offer" is incorporated herein by reference.
(7) CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT
TO THE SUBJECT COMPANY'S SECURITIES.
Not applicable.
(8) PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED.
The information set forth in the Litigation Settlement Offer
under "The Offer -- Fees and Expenses" is incorporated herein by reference.
(9) FINANCIAL STATEMENTS OF CERTAIN BIDDERS.
The financial statements included in AIMCO OP's Annual Report
on Form 10-KSB for the year ended December 31, 1998, which are listed on the
Index to Financial Statements on page F-1 of such report, and on Form 10-QSB
dated September 30, 1999, are incorporated herein by reference.
Page 7 of 10 Pages
<PAGE> 9
Such reports may be inspected at the public reference facilities maintained by
the Commission 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 Commission
in Washington, D.C. at prescribed rates and from the Commission's web site at
www.sec.gov.
(10) ADDITIONAL INFORMATION.
(a) Not applicable.
(b)-(d) The information set forth in the Litigation Settlement
Offer under "The Offer -- Section 18. Certain Legal Matters" is incorporated
herein by reference.
(e) The information set forth in the Litigation Settlement
Offer under "The Offer -- Section 9. Background and Reasons for the Offer --
Certain Litigation" is incorporated herein by reference
(f) The Litigation Settlement Offer is hereby incorporated by
reference.
(11) MATERIAL TO BE FILED AS EXHIBITS.
(a)(1) Litigation Settlement Offer, dated November 15, 1999.
(a)(2) Letter of Transmittal and related Instructions.
(a)(3) Letter, dated November 15, 1999, from AIMCO OP to the
Limited Partners of the Partnership.
(b) Credit Agreement (Secured Revolving Credit Facility),
dated as of August 16, 1999, among AIMCO Properties,
L.P., Bank of America, Bank Boston, N.A., and First
Union National Bank. (Exhibit 10.1 to AIMCO's Current
Report on Form 8-K, dated August 16, 1999, is
incorporated herein by this reference.)
(c) Not applicable.
(d) Not applicable.
(e) Not applicable.
(f) Not applicable.
(z)(1) Agreement of Joint Filing, dated November 15, 1999,
among AIMCO, AIMCO-GP, AIMCO OP, AIMCO/IPT, IPLP, and
Cooper River.
Page 8 of 10 Pages
<PAGE> 10
SIGNATURE
After due inquiry and to the best of my knowledge and belief,
I certify that the information set forth in this statement is true, complete and
correct.
Dated: November 15, 1999
COOPER RIVER PROPERTIES, L.L.C.
By: /s/ Patrick J. Foye
-------------------------------
Executive Vice President
AIMCO/IPT, INC.
By: /s/ Patrick J. Foye
-------------------------------
Executive Vice President
INSIGNIA PROPERTIES, L.P.
By: AIMCO/IPT, INC.
(General Partner)
By: /s/ Patrick J. Foye
-------------------------------
Executive Vice President
AIMCO PROPERTIES, L.P.
By: AIMCO-GP, INC.
(General Partner)
By: /s/ Patrick J. Foye
-------------------------------
Executive Vice President
AIMCO-GP, INC.
By: /s/ Patrick J. Foye
-------------------------------
Executive Vice President
APARTMENT INVESTMENT
AND MANAGEMENT COMPANY
By: /s/ Patrick J. Foye
-------------------------------
Executive Vice President
Page 9 of 10 Pages
<PAGE> 11
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ----------- -----------
<S> <C>
(a)(1) Litigation Settlement Offer, dated November 15, 1999.
(a)(2) Letter of Transmittal and related Instructions.
(a)(3) Letter, dated November 15, 1999, from AIMCO OP to the Limited
Partners of the Partnership.
(b) Credit Agreement (Secured Revolving Credit Facility), dated as of
August 16, 1999, among AIMCO Properties, L.P., Bank of America,
Bank Boston, N.A., and First Union National Bank. (Exhibit 10.1
to AIMCO's Current Report on Form 8-K, dated August 16, 1999, is
incorporated herein by this reference.)
(c) Not applicable.
(d) Not applicable.
(e) Not applicable.
(f) Not applicable.
(z)(1) Agreement of Joint Filing, dated November 15, 1999, among AIMCO,
AIMCO-GP, AIMCO OP, AIMCO/IPT, IPLP, and Cooper River.
</TABLE>
Page 10 of 10 Pages
<PAGE> 1
EXHIBIT (a)(1)
AIMCO
LITIGATION SETTLEMENT OFFER
AIMCO PROPERTIES, L.P.
IS OFFERING TO PURCHASE ANY AND ALL UNITS OF LIMITED PARTNERSHIP INTEREST IN
SHELTER PROPERTIES II
LIMITED PARTNERSHIP
FOR $582.25 PER UNIT IN CASH
This Litigation Settlement Offer is being made as part of a proposed
settlement of a class action and derivative lawsuit brought on behalf of limited
partners in your partnership. PRELIMINARY COURT APPROVAL HAS BEEN OBTAINED. The
settlement is subject to final court approval. The method of determining the
offer price and other terms of the offer were negotiated at arm's length with
settlement class counsel and incorporated into the settlement. Approximately 5%
of our offer price represents a payment from a settlement fund that we have
established, which you will be entitled to receive if we receive court approval
and you do not request exclusion from the settlement class. ROBERT A. STANGER
AND CO., INC., AN INDEPENDENT INVESTMENT BANKING FIRM, HAS DELIVERED AN OPINION
THAT OUR CASH OFFER PRICE (EXCLUDING THE SETTLEMENT FUND PAYMENT) IS FAIR TO YOU
FROM A FINANCIAL POINT OF VIEW.
If units tendered for cash in this and other offers made as part of the
settlement exceed $50 million (exclusive of amounts payable out of the
settlement fund), we will accept only $50 million of units on a pro rata basis
according to the value of units tendered by each person.
Our offer and your withdrawal rights will expire at 5:00 p.m., New York
City time, on December 30, 1999, unless we extend the deadline.
--------------------------------
SEE "RISK FACTORS" BEGINNING ON PAGE 2 OF THIS LITIGATION SETTLEMENT OFFER FOR A
DESCRIPTION OF RISK FACTORS THAT YOU SHOULD CONSIDER IN CONNECTION WITH OUR
OFFER, INCLUDING THE FOLLOWING:
o We determined our offer price in accordance with a method
agreed upon by counsel representing the settlement class. The
price per unit reflects an amount to be paid to tendering
unitholders after taking into account amounts for estimated
attorney fees, costs, and expenses which class counsel is
permitted to seek in connection with the settlement. Our offer
price may not reflect the fair market value of your units.
o Stanger, in analyzing our offer, has estimated the net asset
value, liquidation value and going concern value of your
partnership units to be $632.00, $608.00 and $572.00 per unit.
o As of December 31, 1997, your general partner (which is our
subsidiary) estimated the net asset value of your units to be
$697 per unit and an affiliate estimated the net liquidation
value of your units to be $687.02 per unit.
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 Litigation Settlement Offer. 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.
November 15, 1999
(continued on next page)
<PAGE> 2
(continued from cover page)
o In 1997, the properties owned by your partnership were
appraised at $26,150,000. Based on this appraised value, your
units have a liquidation value of $687.02 per unit.
o Although your partnership's agreement of limited partnership
provides for termination in the year 2020, the prospectus
pursuant to which the units were sold in 1981 indicated that
the properties owned by your partnership might be sold within
3 to 8 years of their acquisition if conditions permitted.
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 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 Although our offer price has been determined based on
negotiations with counsel for the settlement class, 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 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.
o Under the settlement, we will be required to make an
additional offer to purchase units within 18 months at a price
which may be higher than this offer.
o If we acquire a substantial number of units, we will increase
our ability to influence voting decisions with respect to your
partnership and may control such voting decisions, including
but, not limited to, the removal of the general partner, most
amendments to the partnership agreement and the sale of all or
substantially all of your partnership's assets.
---------------------
Our offer price will be reduced for any distributions subsequently made
by your partnership prior to the expiration of our offer. We will notify you of
any such reduction.
You will not pay any partnership transfer fees if you tender your
units. However, you may incur transfer taxes, brokerage fees and other costs.
Our offer is not subject to any minimum number of units being tendered.
<PAGE> 3
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
INTRODUCTION.......................................................................................................1
RISK FACTORS.......................................................................................................2
Offer Price Not Based Upon Third Party Valuation or Appraisal...............................................2
Offer Price May Not Represent Fair Market Value.............................................................2
Offer Price Does Not Reflect Future Prospects...............................................................2
Offer Price May Not Represent Liquidation Value.............................................................2
Fairness Opinion of Third Party Relied on Information We Provided...........................................3
Continuation of the Partnership; No Time Frame Regarding Sale of Properties.................................3
Holding Units May Result in Greater Future Value............................................................3
Conflicts of Interest With Respect to the Offer; No General Partner Recommendation..........................3
Conflicts of Interest Relating to Management Fees...........................................................3
Recognition of Taxable Gain on a Sale of Your Units.........................................................4
Tax Consequences of the Settlement Fund Amount..............................................................4
Loss of Future Distributions from Your Partnership..........................................................4
Possible Increase in Control of Your Partnership by Us......................................................4
Recognition of Gain Resulting from Possible Future Reduction in Your Partnership Liabilities................4
Risk of Inability to Transfer Units for 12-Month Period.....................................................4
Potential Delay in Payment..................................................................................5
Balloon Payment.............................................................................................5
THE OFFER..........................................................................................................5
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..................................................................9
Section 4. Withdrawal Rights..............................................................................9
Section 5. Extension of Tender Period; Termination; Amendment............................................10
Section 6. Certain Federal Income Tax Matters............................................................13
Section 7. Effects of the Offer..........................................................................13
Section 8. Information Concerning Us and Certain of Our Affiliates.......................................14
Section 9. Background and Reasons for the Offer..........................................................27
Section 10. Position of the General Partner of Your Partnership With Respect to the Offer.................28
Section 11. Conflicts of Interest and Transactions with Affiliates........................................29
Section 12. Future Plans of the Purchaser.................................................................30
Section 13. Certain Information Concerning Your Partnership...............................................35
Section 14. Voting Power..................................................................................35
Section 15. Source of Funds...............................................................................36
Section 16. Dissenters' Rights............................................................................36
Section 17. Conditions of the Offer.......................................................................37
Section 18. Certain Legal Matters.........................................................................38
Section 19. Fees and Expenses............................................................................I-1
ANNEX I.........................................................................................................II-1
ANNEX II........................................................................................................II-1
</TABLE>
i
<PAGE> 4
INTRODUCTION
This Litigation Settlement Offer is being made as part of a proposed
settlement of a class action and derivative lawsuit in the Superior Court of the
State of California, County of San Mateo, entitled Nuanes et al. v. Insignia
Financial Group, Inc., et al. The terms and conditions of the proposed
settlement are set forth in a stipulation of settlement (the "Stipulation").
Preliminary court approval has been obtained. However, the settlement is subject
to final court approval after a hearing in which all class members may
participate. The method of determining the offer price is the result of
arms-length negotiations between us and counsel representing a group of the
limited partners in your partnership and sixty other partnerships formerly
managed by Insignia Financial Group, Inc. and/or its affiliates. The offer price
per unit reflects an amount to be paid to tendering unitholders after taking
into account amounts for estimated attorney's fees, costs, and expenses which
class counsel is permitted to seek in connection with the settlement.
Approximately 5% of our offer price represents a payment from a settlement fund
that we have established, which you will be entitled to receive if we receive
court approval and you do not request exclusion from the settlement class. If
units tendered for cash in this offer and other tender offers made as part of
the settlement exceed $50 million in value (exclusive of amounts payable out of
the settlement fund), we will accept only $50 million of units on a pro rata
basis, according to the value of units tendered by each person.
Subject to the $50 million limitation and the terms and conditions set
forth herein, we are offering to purchase all outstanding units validly tendered
for the purchase price of $582.25 per unit net to the seller in cash, without
interest, less the amount of distributions, if any, made by your partnership in
respect of any unit from the date hereof until the expiration date; provided,
that approximately 5% of our offer price represents a payment from a settlement
fund that we have established, which you will be entitled to receive if we
receive court approval and you do not request exclusion from the settlement
class. Our offer is made upon the terms and subject to the conditions set forth
in this offer to purchase and in the accompanying letter of transmittal.
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 (subject to any necessary adjustments
for fractional units.) If more units are validly tendered and not withdrawn in
response to our offer than we have indicated we are willing or able to purchase,
we will accept units pro rata according to the value of units validly tendered
and not withdrawn by each limited partner. Any such proration would reduce the
number of units that we purchase from you, with a corresponding reduction in the
amount payable to you.
We will pay any transfer fees imposed for the transfer of units by your
partnership. However, you will be responsible for 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 if some of your units are not accepted by
us (as a result of proration or otherwise).
We have retained River Oaks Partnership Services, Inc. to act as the
Information Agent in connection with our offer. We will pay all charges and
expenses in connection with the services of the Information Agent. The offer is
not conditioned on any minimum number of units being tendered. However, certain
other conditions do apply. See "The Offer--17. Conditions of the Offer" You may
tender all or any portion of the units that you own. Under no circumstances will
we be required to accept any unit if the transfer of that unit to us would be
prohibited by the agreement of limited partnership of your partnership.
Our offer will expire at 5:00 p.m., New York City time, on December 30,
1999, unless extended. If you desire to accept our offer, you must complete and
sign the letter of transmittal in accordance with the instructions contained
therein and forward or hand deliver it, together with any other required
documents, to the Information Agent. You may withdraw your tender of units
pursuant to the offer at any time prior to the expiration date of our offer and,
if we have not accepted such units for payment, on or after January 15, 2000.
We are AIMCO Properties, L.P., a Delaware limited partnership. Together
with our subsidiaries, we conduct
<PAGE> 5
substantially all of the operations of Apartment Investment and Management
Company, or AIMCO. AIMCO is a self-administered and self-managed real estate
investment trust engaged in the ownership, acquisition, development, expansion
and management of multifamily apartment properties. As of June 30, 1999, AIMCO
owned or managed 369,404 apartment units in 2,037 properties located in 49
states, the District of Columbia and Puerto Rico. AIMCO's Class A Common Stock
is listed and traded on the New York Stock Exchange under the symbol "AIV."
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:
OFFER PRICE NOT BASED UPON THIRD PARTY VALUATION OR APPRAISAL
The offer price of $582.25 per unit was determined by using a method
negotiated at arms-length between us and counsel for plaintiffs in a class
action lawsuit brought on behalf of the limited partners in your partnership and
forty-eight other partnerships. Approximately 5% of our offer price represents a
payment from a settlement fund that we have established, which you will be
entitled to receive court approval and you do not request exclusion from the
settlement class. Nevertheless, our offer consideration may not reflect the fair
market value of your units, the liquidation value of your partnership or any
other traditional methods of valuating partnership units. We did not use any
third-party appraisal or valuation to determine the value of your partnership's
properties. It is uncertain whether our offer consideration reflects the value
which would be realized upon a sale of your units or a liquidation of your
partnership's assets. Your general partner makes no recommendation to you as to
whether or not you should tender your units. We have retained Robert A. Stanger
& Co., Inc., an independent investment banking firm, to conduct an analysis of
the offer and to render an opinion as the fairness to you of the offer price
from a financial point of view.
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 historical property income.
It does not ascribe any value to potential future improvements in the operating
performance of your partnership's properties.
OFFER PRICE MAY NOT REPRESENT LIQUIDATION VALUE
The actual proceeds obtained from a liquidation are highly uncertain and
could be more than our offer price. Accordingly, our offer price could be less
than the net proceeds that you would realize upon an actual liquidation of your
partnership.
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FAIRNESS OPINION OF THIRD PARTY RELIED ON INFORMATION WE PROVIDED
Robert A. Stanger & Co., Inc.'s analysis of our offer and opinion as to
the fairness to you of our offer consideration from a financial point of view
relies on information prepared by the general partner of your partnership (which
is our subsidiary). No tests of the underlying data were performed, and no
independent appraisal was conducted. Because the fairness opinion will not be
updated, changes may occur from the date of the fairness opinion that might
affect the conclusions expressed in the opinion.
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.
Thus, our offer does not satisfy any expectation that you would receive the
return of your investment in the partnership through a property sale. 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 general partner considered the changes in the local rental
market, the potential for appreciation in the value of the properties and the
tax consequences to you and your partners on a sale of the properties. We cannot
predict when any property will be sold or otherwise disposed of.
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; NO GENERAL PARTNER
RECOMMENDATION
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 to settle the lawsuit and 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. The general partner of your
partnership makes no recommendation as to whether you should tender or refrain
from tendering your units. Although the general partner believes the offer is
fair, you must make you own decision whether or not to participate in the offer,
based upon a number of factors, including your financial position, your need or
desire for liquidity, 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 subsidiary receives 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. Another conflict is the fact that 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.
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 you transfer to us. The "amount realized" with respect to a
unit of limited partnership interest of your partnership 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
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<PAGE> 7
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 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.
TAX CONSEQUENCES OF THE SETTLEMENT FUND AMOUNT
Approximately 5% of our offer price represents a payment from a settlement
fund that we have established, which you will be entitled to receive if we
receive court approval and you do not request exclusion from the settlement
class. The proper treatment for federal income tax purposes of your receipt of
such amount is uncertain. While we believe that such amount should be treated as
additional consideration for the units pursuant to this offer, no assurance can
be given that the Internal Revenue Service will not assert that such amount
should be treated as a payment in exchange for your release of the defendants
from current and future claims and taxed as ordinary income. You should consult
your own tax advisor regarding the tax consequences to you with respect to your
right to, and your receipt of, such amount, including the possibility of
reporting such a amount under the installment method of reporting.
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
property owned by your partnership.
POSSIBLE INCREASE IN CONTROL OF YOUR PARTNERSHIP BY US
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 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. If we
acquire 2,260.78 additional units, we will own a majority of the outstanding
units and will have the ability to control any vote of the limited partners.
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.
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.
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<PAGE> 8
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 PAYMENT
Your partnership has a balloon payment of approximately $7,370,000 due on
its mortgage debt in November, 2002. Your partnership will have to refinance
such debt or sell the property or properties securing that mortgage debt prior
to the balloon payment due date, or it will become in default on the debt and
could lose the property or properties to foreclosure.
THE OFFER
SECTION 1. TERMS OF THE OFFER; EXPIRATION DATE; PRORATION.
Upon the terms and subject to the conditions of this Litigation Settlement
Offer, we will accept (and thereby purchase) 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 December 30, 1999, 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" 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.
Concurrently with this offer, we are also making similar tender offers to
the limited partners of 48 additional partnerships involved in the lawsuit. The
total amount being offered for the units in all such partnerships (exclusive of
amounts owned by us and our affiliates) is approximately $480 million. However,
pursuant to the Stipulation, we are not required to pay a cash consideration of
more than $50 million (excluding any amounts payable under the settlement fund)
pursuant to all such tender offers. If more than $50 million of units are
validly tendered for cash, we will accept units on a pro rata basis for all such
partnerships according to the value of units validly tendered by each person and
not properly withdrawn on or prior to the expiration date, with appropriate
adjustments to avoid purchases of fractional units. We may increase the $50
million cash limit in our sole and absolute discretion and if we do so, we will
send you a notice.
In addition, 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). 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."
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
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<PAGE> 9
proration results are known. Notwithstanding any such delay in payment, no
interest will be paid on the cash 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 of 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 or are not reasonably expected to be
satisfied, 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 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.
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 October 1, 1999. The transfer of units will be effective October 1,
1999.
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 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
(including the $50 million cash limitation), accept for payment and pay for all
units, 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 in respect of the units
and an irrevocable proxy to vote the units, and defer, perhaps indefinitely, the
transfer of ownership of units on the partnership's books. In other
circumstances 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.
Subject to the other terms and conditions of the 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. 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 or the terms and conditions of this offer, we will
purchase all units so tendered and not withdrawn, upon the terms and subject to
the conditions of the offer.
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. 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
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<PAGE> 10
or pay for units tendered pursuant to the offer, then, without prejudice to our
rights under "The Offer -- Section 17. Conditions of the Offer," the Information
Agent may, nevertheless, on our behalf retain tendered units, and those units
may not be withdrawn except to the extent that the tendering limited partners
are entitled to withdrawal rights as described in "The Offer -- Section 4.
Withdrawal Rights;" 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 such 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 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 and power of
attorney granted by you to us upon your execution of the letter of transmittal
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. 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
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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 will each 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 consideration, 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.
If you tender units through the enclosed 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 receipt of such letter of transmittal and shall continue to
be effective unless and until you 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 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."
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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 to
such person 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 tendered units at any time prior to the expiration date
or on or after January 15, 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. Procedure 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.
SECTION 5. EXTENSION OF TENDER PERIOD; TERMINATION; AMENDMENT.
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 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 of the Offer," 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 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 will be followed by a press release or public
announcement which will be issued no later than 9:00 a.m., New York City time,
on the next business day after the 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-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 the offer.
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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 Rule 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. 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.
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 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 United States 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, 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
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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 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.
Tax Consequences of the Settlement Fund Amount. Approximately 5% of our
offer price represents a payment from a settlement fund (the "Settlement Fund
Amount") that we have established, which you will be entitled to receive if we
receive court approval and you do not request exclusion from the settlement
class. The proper treatment for federal income tax purposes of your receipt of
the Settlement Fund Amount is uncertain. While we believe that the Settlement
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Fund Amount should be treated as additional consideration for the units pursuant
to this offer, no assurance can be given that the IRS will not assert that the
Settlement Fund Amount should be treated as a payment in exchange for your
release of the defendants from current and future claims and taxed as ordinary
income. You should consult your own tax advisor regarding the tax consequences
to you with respect to your right to, and your receipt of, the Settlement Fund
Amount, including the possibility of reporting the Settlement Fund Amount under
the installment method of reporting.
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 United States 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 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 combinations 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 United
States 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.
A remaining limited partner will generally not recognize any gain or loss
upon the deemed distribution or upon the deemed contribution and the capital
accounts of the remaining limited partners in the old partnership will carry
over intact into the new partnership. A termination may change (and possibly
shorten) a remaining partner's holding period with respect to its retained units
in your partnership for United States federal income tax purposes.
The new partnership's adjusted tax basis in its assets will be the same as
the old partnership's basis in such assets immediately before the termination. A
termination may also subject the assets of the new partnership to depreciable
lives in excess of those currently applicable to the old partnership. This would
generally decrease the annual average depreciation deductions allocable to the
remaining limited partners for a number of years following consummation of the
offer (thereby increasing the taxable income allocable to their units in each
such year), but would have no effect on the total depreciation deductions
available over the useful lives of the assets of your partnership.
Elections as to certain tax matters previously made by the old partnership
prior to termination generally will not be applicable to the new partnership
unless the new partnership chooses to make the same elections.
Additionally, upon a termination for tax purposes, the old partnership's
taxable year will close for all limited partners. In the case of a remaining
limited partner or a partially tendering limited partner reporting on a tax year
other than a calendar year, the closing of the partnership's taxable year may
result in more than 12 months' taxable income or loss of the old partnership
being includible in such limited partner's taxable income for the year of
termination.
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SECTION 7. EFFECTS OF THE OFFER.
Future Control by AIMCO. Because the general partner of your partnership
is our subsidiary, we have control over the management of your partnership. If
we are successful in acquiring more than 8.14% of the units pursuant to the
offer, we will own more than 50% of the total outstanding units and, as a
result, will be able to control the outcome of all voting decisions with respect
to your partnership. Even if we acquire a lesser number of units pursuant to the
offer, because we currently own approximately 42.43% of the outstanding units,
we will be able to significantly influence the outcome of all voting decisions
with respect to your partnership. 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 residential 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. Notwithstanding the above, we have agreed in connection with the
settlement to certain limitations in connection with our voting rights. See "The
Offer -- Section 14. Voting Power."
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 that 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
may 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
security holders might be expected to result in a reduction in the liquidity and
volume of activity in the trading market for the security. In 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 Securities and Exchange Commission (the "SEC") and to comply
with the proxy rules of the SEC. 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 1,439 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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SECTION 8. INFORMATION CONCERNING US AND CERTAIN OF OUR AFFILIATES.
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. Based on apartment unit data
compiled by the National Multi-Housing Council, we believe that, as of June 30,
1999, AIMCO was one of the largest owners and managers of multifamily apartment
properties in the United States, with a total portfolio of 369,404 apartment
units in 2,037 properties located in 49 states, the District of Columbia and
Puerto Rico. AIMCO's Class A Common Stock is listed and traded on the New York
Stock Exchange under the symbol "AIV." As of June 30, 1999, AIMCO:
o owned or controlled 64,640 units in 240 apartment properties;
o held an equity interest in 168,817 units in 887 apartment
properties; and
o managed 136,523 units in 940 apartment properties for third
party owners and affiliates.
Our general partner is AIMCO-GP, Inc., which is a wholly owned subsidiary
of AIMCO. Our principal executive offices are located at 1873 South Bellaire
Street, Denver, Colorado 80222, (on and after November 24, 1999: 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 II 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. 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, 1998 and the
Quarterly Reports on Form 10-Q for the quarters ended March 31, 1999, June 30,
1999 and September 30, 1999 (particularly the management's discussion and
analysis of financial condition and results of operations) and other reports and
documents filed by it with the SEC.
Except as set forth in "The Offer -- Section 9. Background and Reasons for
the Offer" and "The Offer -- Section 11. Conflicts of Interests and Transaction
with Affiliates," neither we nor, to the best of our knowledge, any of the
persons listed on Annex II attached hereto, (i) beneficially own or have a right
to acquire any units, (ii) have 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 (except for
previous tender offers we may have conducted for units).
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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"). The general partner of your
partnership is a wholly owned subsidiary of 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. Together with its
subsidiaries, AIMCO currently owns, in the aggregate, approximately 42.43% of
the outstanding limited partnership units of your partnership.
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 approximately 90 of the
Insignia Partnerships, including your partnership.
THE LAWSUIT AND THE PROPOSED SETTLEMENT
The Lawsuit. On March 24, 1998, certain persons claiming to own limited
partner interests in certain of the limited partnerships for which our
subsidiaries act as general partner (including your partnership) filed the
purported class and derivative action against Insignia Financial Group, Inc.,
AIMCO, the general partners of the partnerships, certain persons and entities
who purportedly formerly controlled the general partners, and additional
entities affiliated with and individuals who are officers, directors and/or
principals of several of the defendants. The complaint contains allegations
that, among other things, (i) the defendants breached fiduciary duties owed to
the plaintiffs, or aided and abetted in those purported breaches, by selling or
agreeing to sell their "fiduciary positions" as stockholders, officers and
directors of the general partners for a profit and retaining said profit rather
than distributing it to the plaintiffs; (ii) the defendants breached fiduciary
duties, or aided and abetted in those purported breaches, by mismanaging the
partnerships and misappropriating assets of the partnerships by (a) manipulating
the operations of the partnerships to depress the trading price of limited
partnership units of the partnerships; (b) coercing and fraudulently inducing
unitholders to sell units to certain of the defendants at depressed prices; and
(c) using the voting control obtained by purchasing units at depressed prices to
entrench certain of the defendants' positions of control over the partnerships;
and (iii) the defendants breached their fiduciary duties to the plaintiffs by
(a) selling assets of the partnerships such as mailing lists of unitholders and
(b) causing the general partners to enter into exclusive arrangements with their
affiliates to sell goods and services to the general partners, the unitholders
and tenants of properties owned by the partnerships. The complaint also alleges
that the foregoing allegations constitute violations of various California
securities, corporate and partnership statutes, as well as conversion and common
law fraud. The complaint seeks unspecified compensatory and punitive damages, an
injunction blocking the sale of control of the general partners and a court
order directing the defendants to discharge their fiduciary duties to the
plaintiffs. On June 25, 1998, the defendants filed motions seeking dismissal of
the action. In lieu of responding to the motion, plaintiffs filed an amended
complaint. On October 14, 1998, the AIMCO and Insignia defendants filed
demurrers to the amended complaint. The demurrers (which are requests to dismiss
the action as a matter of law) were heard on February 8, 1999, but no decision
has been reached by the Court.
Pending decision on defendants' motions, the parties began arm's length
negotiations relating to a potential
15
<PAGE> 19
settlement of the lawsuit. The parties reached agreement upon the principal
terms of the settlement by executing Memorandum of Understanding on October 22,
1999. On November 1, 1999, the parties executed a Stipulation of Settlement
setting forth the terms of the settlement.
The settlement was reached only after conducting substantial discovery in
the lawsuit. The discovery included settlement class counsel inspecting various
documents produced by the defendants, including copies of the operative
partnership agreements for each of the partnerships. Settlement class counsel
also reviewed and analyzed publicly-available information and performed other
factual investigations. In addition, settlement class counsel also investigated
and researched the law applicable to their claims and to the defenses raised by
the defendants.
Based on their investigation of the facts and the applicable law, the
plaintiffs, settlement class counsel, and their clients have concluded that it
is in the best interests of the members of the settlement class and the
partnerships that the action be settled on the terms and conditions set forth in
the Stipulation. The plaintiffs and settlement class counsel have reached their
conclusion concerning the fairness of the settlement after considering the
factual and legal issues in the lawsuit, the risks and uncertainties of
continued litigation, the expense, difficulties and delays inherent in
prosecuting the lawsuit through trial and through any appeals that might be
taken, and the likelihood of success at trial, including the fact that even if
the plaintiffs ultimately prevailed on their claims, there can be no assurance
that the settlement class members or the partnerships would receive any greater
recovery than they will receive from the settlement embodied in the Stipulation.
The defendants have concluded that it is in their best interests that the
lawsuit be settled on the terms and conditions set forth in the Stipulation. The
defendants have reached this conclusion after considering the legal and factual
issues in the lawsuit, the substantial benefits in final resolution of the
lawsuit, the risks and uncertainties of continued litigation, and the expenses
associated with, and difficulties and delays inherent in, defending such
litigation through trial and any appeals that might be taken.
The proposed settlement of the lawsuit is the product of good faith, arm's
length negotiations between settlement class counsel and counsel for the
defendants. These negotiations resulted in the settlement set forth in the
Stipulation.
Terms of the Settlement. Pursuant to the Stipulation, not later than 30
days after final approval of the settlement, we are obligated to commence offers
to purchase the outstanding units of substantially all of the partnerships
subject to the lawsuit. This offer is being made to satisfy the requirements of
the Stipulation.
The price offered for your units in the partnership is a key provision of
the settlement. Approximately 5% of our offer price represents a payment from a
settlement fund that we have established, which you will be entitled to receive
if we receive court approval and you do not request exclusion from the
settlement class. The offer price per unit reflects an amount to be paid to
tendering unitholders after taking into account amounts for estimated attorney's
fees, costs, and expenses which class counsel is permitted to seek in connection
with the settlement.
The Stipulation provides that the price per unit to be paid in the offer
for each partnership (without taking into account the amount paid from the
settlement fund) will be based upon an estimate of the liquidation value of the
limited partners' interest in the equity of such partnership, divided by the
number of units in such partnership. The estimated liquidation value of each
partnership is equal to the estimated fair market value of the partnership's
properties and other assets, plus any cash or cash equivalents owned by the
partnership and any receivables payable to the partnership, less (i) all
mortgage debt and other debt, payables and obligations of the partnership,
together with accrued interest and any applicable pre-payment or similar
penalties, (ii) all fees or other liabilities that would be payable by the
partnership in the event of a sale of its assets and liquidation of the
partnership, including, but not limited to, any disposition or similar fees,
(iii) accounts payable, accrued expenses and other existing liabilities, (iv) an
estimate of the applicable "transaction costs" that would be paid in a
hypothetical liquidation in an amount equal to a percentage of the estimated
gross fair market valuation of the partnership's properties that is equal to, or
less than, five (5%) percent of such estimated value, (v) extraordinary capital
expenditures and deferred maintenance expenditures that have been budgeted to be
or actually are paid by the partnership in the fiscal year in which the tender
offer is commenced, (vi) the amount of the partnership's cash reserves that are
distributed to unitholders after determination of the tender offer prices, but
prior to the closing of any particular tender offer, and (vii) the amount of the
hypothetical liquidation proceeds that would be required to be allocated to the
general partner, if any. The Stipulation provides that the estimated fair market
value of each partnership's
16
<PAGE> 20
properties is to be determined, in good faith, by the general partner of the
partnership, calculating for each residential property net operating income for
each property, less a per-apartment unit reserve in an amount, if any, that is
deemed appropriate and acceptable to an independent appraiser and taking into
account all income and expenses of such property, including without limitation,
general and administrative expenses, where deemed appropriate, and thereafter
applying a capitalization rate. The general partner is to consider and take into
account the valuations of the properties contained in any appraisals of the
properties that have been prepared since January 1996 by persons other than the
general partner and the prices contained in any offers to purchase properties
that were received by the general partner since January 1997. For commercial
properties, the fair market value will be determined by the general partner, in
good faith after considering any current offers to purchase or contracts for
sale of the property received for such properties, or by using the discounted
cash flow method of evaluating commercial properties if no such offers have been
received or contracts have been entered into.
The Stipulation provides that the general partner of your partnership
retain Robert A. Stanger & Co., Inc. as an independent valuation firm to render
an opinion that our offer price (without taking into account the amount paid
from the settlement fund) is fair from a financial point of view to the holders
of the units. The Stipulation also provides that in determining whether each of
the tender offer prices is fair from a financial point of view, Stanger is
expressly directed to consider the following factors: (i) any and all appraisals
of the value of the partnership, its properties or any of its other assets that
have been prepared since January 1996, (ii) any offers to purchase properties
that have been received by the general partner since January 1997, and (iii) all
other factors that the independent appraiser deems relevant. The reasonable fees
of, and reimbursement of expenses incurred by, the independent appraiser in
connection with the settlement will be paid by the partnerships. See"-Stanger
Analysis."
In accordance with the Stipulation, we have established a settlement fund
equal to 6% of the aggregate purchase price of all units sought in this offer.
If the Court finally approves the settlement and you tender units in this offer
and do not opt out of the settlement, we will make a payment to you from the
settlement fund. The payment from the settlement fund represents approximately
5% of our offer price. We will also pay settlement class counsel an amount equal
to less than 1% of the price of the units we purchase from you in this offer.
We are not required to pay more than $50 million in cash (exclusive of
amounts payable out of the settlement fund), in the aggregate, to purchase units
in this offer and the other offers made as part of the settlement. We may waive
or increase this $50 million cash limitation in our sole and absolute
discretion, in which case we will so notify you.
Under the Stipulation, AIMCO or the AIMCO operating partnership is to
conduct an additional tender offer for the same partnerships no later than
eighteen months after the effective date of the settlement upon the same terms
and conditions set forth above. In these tender offers, we will not be required
to pay more than $50 million in cash (exclusive of amounts payable out of the
settlement fund), but we may increase such amount in our sole and absolute
discretion. The $50 million cash limit for these latter tender offers is in
addition to the $50 million cash limit applicable to this tender offer and the
other tender offers being made concurrently under the Stipulation. Further, if
you tender units in the offer contemplated by this paragraph and if you did not
opt out of the settlement class, the Stipulation provides that, subject to court
approval, we will pay you an additional amount estimated at 5.7% of the offer
price per unit in this offer (less the amount paid from the settlement fund)
times the number of units we purchased from you in the additional offer and we
will pay settlement class counsel an amount estimated at 0.3% of the offer price
of the units in this offer (less the amount paid from the settlement fund) times
the number of units we purchase from you in the additional offer.
Subject to court approval, under the Stipulation, settlement class counsel
will seek an order awarding appropriate attorneys' fees and the reimbursement of
all reasonable expenses incurred in the lawsuit of up to $2 million, plus the
amounts payable to settlement class counsel provided for in the previous two
paragraphs. Any such amounts allowed by the Court to the settlement class
counsel will be paid by 49 partnerships on a pro rata basis based upon the
estimated liquidation value of the partnerships, except for the amounts payable
to settlement class counsel provided for in the previous two paragraphs.
Under the Stipulation, the partnerships and the members of the settlement
class will release the defendants from claims related to the lawsuit and the
Stipulation.
In addition, under the Stipulation, AIMCO and its affiliates will agree to
certain other restrictions on the operation
17
<PAGE> 21
of your partnership, as described in "The Offer -- Section 14. Voting Power."
Court Approval of the Settlement. While preliminary court approval has
been obtained, the terms and conditions of the settlement are subject to final
court approval. However, we are making this offer prior to obtaining such court
approval because obtaining court approval may take several months. If more than
$50 million of units are tendered in this and the other offers, and we do not
purchase all of such units, our parent corporation, Apartment Investment and
Management Company, a New York Stock Exchange-listed company, will seek an
exemption from the registration requirements of the Securities Act of 1933 under
Section 3(a)(10) of such Act in order to offer shares of its stock in exchange
for your units tendered that exceed the $50 million cash limit. Section 3(a)(10)
provides such an exemption for the exchange of securities where the terms and
conditions of the issuance and exchange are approved by a court after a hearing
upon the fairness of such terms and conditions at which all persons to whom it
is proposed to issue such securities in the exchange have an opportunity to
appear. If the Section 3(a)(10) exemption is not available, AIMCO may register
the shares.
DETERMINATION OF OFFER PRICE
Valuation of Units. In accordance with the Stipulation, we determined our
offer price by estimating the estimated liquidation value of your partnership.
First, we estimated the value of each property owned by your partnership. For
the residential properties, we used 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 annualized your partnership's
property income for the nine months ended September 30, 1999. 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 8%, 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, is
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 annualized property income to your
partnership's annualized net income based upon the nine month period ended
September 30, 1999:
<TABLE>
<CAPTION>
<S> <C>
Net Income (Loss) 1,037,333
Other Non-Operating Expenses (89,667)
Depreciation 933,333
Interest 756,000
----------
Property income 2,637,000
==========
</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 each property owned by your
partnership. We valued properties using the direct capitalization
method. We selected capitalization rates based on our experience in
valuing similar
18
<PAGE> 22
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 annualized the property
income for the first nine months of 1999 and then divided such
amount by the property's capitalization rate to derive an estimated
gross property value.
<TABLE>
<CAPTION>
PROPERTY 1999 CAPITALIZATION RATE ESTIMATED GROSS
- -------- PROPERTY ------------------- PROPERTY VALUE
INCOME* ---------------
--------
<S> <C> <C> <C>
Parktown Townhouses .................. $ 1,128,000 10.19% $ 11,067,000
Raintree ............................. $ 375,000 10.50% 3,568,000
Signal Pointe (Squire One) ........... $ 1,134,000 10.78% 10,527,000
Total ................................ $ 2,637,000 $ 25,162,000
============
</TABLE>
* Property income for the nine months ended September 30, 1999 has been
annualized by multiplying by 1.33. Actual 1999 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 owed by your partnership to its general partner (which is
our subsidiary) or its affiliates. Pursuant to the
Stipulation, we deducted from this value certain other costs,
including required capital expenditures, deferred maintenance,
closing costs, the cost of the Stanger opinion for your
partnership and your partnership's share of the estimated
legal fees payable to settlement class counsel, to derive a
net equity value for your partnership of $15,246,903. Closing
costs include, but are not limited to, 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,
100% 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
<TABLE>
<S> <C>
Gross valuation of partnership properties 25,162,000
Plus: Cash and cash equivalents 1,016,722
Plus: Other partnership assets, net of security deposits 741,889
Less: Mortgage debt, including accrued interest (8,460,318)
Less: Accounts payable and accrued expenses (441,869)
Less: Other liabilities (45,495)
Partnership valuation before taxes and certain costs 17,972,930
Less: Disposition fees 0
Less: Extraordinary capital expenditures and deferred maintenance (1,182,163)
Less: Closing costs (1,543,864)
------------
Estimated net valuation of your partnership 15,246,903
Percentage of estimated net valuation allocated to holders of units 100.00%
------------
Estimated net valuation of units 15,246,903
Total number of units 27,500
------------
Estimated valuation per unit 554.00
============
Settlement Fund (5.1%)* 28.25
------------
Cash consideration per unit 582.25
------------
</TABLE>
19
<PAGE> 23
* Payable only upon court approval of the settlement and if you do not opt out
of the settlement class.
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; (c) your general
partner's estimate of net asset value; (d) an affiliate's estimate of net
liquidation value; and (e) the recent appraisals of your partnership's
properties. 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 the estimated values assigned to the
alternative consideration (except historic market and tender offer prices) 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 September
30, 1999, as to income and expenses of each property, other projected amounts
and the capitalization rates that may be used by prospective buyers if your
partnership assets were to be liquidated.
In addition, these estimates are based upon certain information
available to your general partner (which is our subsidiary), and no assurance
can be given that the same conditions analyzed by us in arriving at the
estimates of value will not change. The assumptions used have been determined by
the general partner of your partnership 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, 2020, 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.
COMPARISON TABLE
<TABLE>
<CAPTION>
PER UNIT
--------
<S> <C>
Cash offer price................................................................... $582.25(1)
Alternatives:
Prior tender offer................................................................. $200,$450,$460,
................................................................................... $470,$480
Stanger's estimate of liquidation value ........................................... $608.00
Stanger's estimate of net asset value ............................................. $632.00
Stanger's estimate of going concern value.......................................... $572.00
Prices on secondary market......................................................... $275.00-502.65
Estimated liquidation proceeds..................................................... $554.00
General partner's estimate of net asset value...................................... $697.00
Affiliate's estimate of net liquidation value...................................... $687.02
</TABLE>
- ----------------------
(1) Approximately 5% of our offer price represents a payment from a
settlement fund that we have established, which you will be entitled to
receive if we receive court approval and you do not request exclusion
from the settlement class.
20
<PAGE> 24
Prior Tender Offers. In our June 9, 1999 tender offer, the offer price
of $480 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 an 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 486.33 units at $480 per unit.
On March 29, 1999, Madison Liquidity Investors 104, L.L.C., which was
unaffiliated with Insignia and is not affiliated with AIMCO, commenced a tender
offer for $200 per unit.
On March 30, 1999, Everest Investors 12, L.L.C., which was unaffiliated
with Insignia and is not affiliated with AIMCO, commenced a tender offer for
$470 per unit.
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 of $450 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. In connection with tender offers made by
Insignia affiliates with respect to partnerships for which we are making offers,
some limited partners filed a lawsuit as described in "-The Lawsuit and the
Proposed Settlement." We are not aware of any merger, consolidation or other
combination involving any of the Insignia Partnerships, or any acquisitions of
any of such partnerships or a material amount of the assets of such
partnerships.
Prices on Secondary Market. Secondary market sales information is not a
reliable measure of value because of the lack of any known trades. At present,
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
(other than our offer) 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, 1996, 1997 and 1998 and for the seven months ended July 31,
1999, 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 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>
Seven Months Ended July 31, 1999:................................. $485.00 $360.00
Fiscal Year Ended December 31, 1998:.............................. 441.00 285.00
Fiscal Year Ended December 31, 1997:.............................. 365.00 275.00
Fiscal Year Ended December 31, 1996:.............................. -- --
</TABLE>
Set forth in the table below are the high and low sales prices of units
for the year ended December 31, 1998 and for the nine months ended September 30,
1999, 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 the
other services may contain prices for units that equal or exceed sales prices
reported
21
<PAGE> 25
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>
Nine Months Ended September 30, 1999:............................. $502.65 $411.26
Fiscal Year Ended December 31, 1998:.............................. 441.00 366.00
</TABLE>
Appraisals. Your partnership's properties were appraised in 1997 by an
independent third party appraiser, Koeppel Tener Real Estate Services, Inc. (the
"Appraiser"), in connection with a requirement in your partnership's agreement
of limited partnership and not in connection with this offer. According to the
appraisal reports, the scope of the appraisals included an inspection of the
properties and an analysis of the surrounding market. The Appraiser relied
principally on the income capitalization approach to valuation and secondarily
on the sales comparison approach, and represented that its report was prepared
in accordance with the Code of Professional Ethics and Standards of Professional
Appraisal Practice of the Appraisal Institute and the Uniform Standards of
Professional Appraisal Practice, and in compliance with the Appraisal Standards
set forth in the Financial Institutions Reform, Recovery and Enforcement Act of
1989 (known as "FIRREA"). The estimated market value of the fee simple estate of
each property is as follows:
<TABLE>
<CAPTION>
PROPERTY APPRAISED VALUE
-------- ---------------
<S> <C>
Parktown Townhouses.............................. $10,650,000
Raintree Apartments.............................. $ 4,500,000
Signal Pointe Apartments......................... $11,000,000
</TABLE>
Estimated Liquidation Proceeds. Liquidation value is a measure of the
price at which the assets of your partnership would sell if disposed of in an
arms-length transaction between a willing buyer and your partnership, each
having 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 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 buyer at the current property value and 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 sales where sellers might be expected to
dispose of their interests at substantial discounts to their actual fair market
value.
General Partner's Annual Estimates of Net Asset Value. Your general
partner (which is our subsidiary) prepared an estimate of your partnership's net
asset value per unit in connection with a requirement in the partnership
agreement. That estimate of your partnership's net asset value per unit as of
December 31, 1997 was $697. This estimated net asset value is based on a
hypothetical sale of the partnership's properties 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 assets that are believed to have liquidation value,
after provision in full for all of the other known liabilities of your
partnership. This net asset value does not take into account (i) timing
considerations, (ii) costs associated with winding up the partnership, (iii) the
distribution paid by your partnership of $105.67 per unit for the fiscal year
ended December 31, 1998, or (iv) $1,182,163 in deferred maintenance costs.
Therefore, we believe that this estimate of net asset value per unit does not
necessarily represent either the fair market value of a unit or the amount a
limited partner reasonably could expect to receive if the partnership's
properties were sold and the partnership was liquidated. For this reason, we
considered this net asset value estimate to be less meaningful in determining
the offer price than our valuation analysis described above.
22
<PAGE> 26
Affiliate's Estimate of Net Liquidation Value. An affiliate of your
general partner which is now an affiliate of ours, prepared an estimate of your
partnership's net liquidation value per unit in connection with a tender offer
to purchase units for $450 each which closed in August 1998. That estimate of
your partnership's net liquidation value per unit as of December 31, 1997 was
$687.02. This estimated net liquidation value is based on the an income
capitalization approached similar to the one we used, adjusted for your
partnership's other assets and liabilities (excluding prepaid and deferred
expenses and security deposits). Four percent was then deducted from the
resulting amount to cover the estimated costs of selling the properties. This
final amount was then divided by the number of units outstanding to obtain the
$687.02 per unit. While this value is higher than our offer price per unit,
because different income and capitalization rates were used and we believe that
the income capitalization amounts used overstate the value of the properties.
Stanger's Estimate of Net Asset Value, Going Concern Value and
Liquidation Value. In rendering its opinion set forth as Annex I hereto, Stanger
independently estimated your partnership's net asset value to be $632 per unit,
its going concern value to be $572 per unit and its liquidation value to be $608
per unit. For an explanation of how Stanger determined such values see
"--Stanger Analysis -- Summary of Reviews -- Comparison of Offer Price."
ALLOCATION OF CONSIDERATION
Pursuant to the Stipulation, we have deducted from the estimated net
valuation of your partnership an amount allocated to the general partner
pursuant to your partnership's agreement of limited partnership as if your
partnership was being liquidated at the current time.
STANGER ANALYSIS
Pursuant to the Stipulation, we engaged Robert A. Stanger & Co., Inc.,
an independent investment banking firm, to conduct an analysis and to render an
opinion (the "Fairness Opinion") as to whether the offer price (excluding the
settlement fund payment) for the units is fair, from a financial point of view,
to the unitholders. We selected Stanger because of its experience in providing
similar services to other parties in connection with real estate merger and sale
transactions and Stanger's experience and reputation in connection with real
estate partnerships and real estate assets. No other investment banking firm was
engaged to provide any report, analysis or opinion relating to the fairness of
our offer.
Stanger has advised us that, subject to the assumptions, limitations
and qualifications contained in its Fairness Opinion, the offer price (excluding
the settlement fund payment) for the units is fair, from a financial point of
view, to the unitholders. We determined the offer price (excluding the
settlement fund payment), and Stanger did not, and was not requested to, make
any recommendations as to the form or amount of consideration to be paid in
connection with the offer.
The full text of the Fairness Opinion, which contains a description of
the matters considered and the assumptions, limitations and qualifications made,
is set forth as Annex I hereto and should be read in its entirety. Stanger has
advised us that the description of Stanger's analysis contained herein describes
the material portions of Stanger's review. The summary set forth herein does not
purport to be a complete description of the review performed by Stanger in
rendering the Fairness Opinion. Arriving at a fairness opinion is a complex
process not necessarily susceptible to partial analysis or amenable to summary
description.
We imposed no conditions or limitations on the scope of Stanger's
investigation or with respect to the methods and procedures to be followed in
arriving at the fairness opinion. See "-Assumptions, Limitations and
Qualifications." We have agreed to indemnify Stanger against any losses, claims,
damages, liabilities or expenses to which Stanger may be subject, under any
applicable federal or state law, including federal and state securities laws,
arising out of Stanger's engagement to prepare and deliver the Fairness Opinion.
Experience of Stanger. Since its founding in 1978, Stanger and its
affiliates have provided information, research, investment banking and
consulting services to clients located throughout the United States, including
major NYSE member firms, insurance companies and over seventy companies engaged
in the management and operation of
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<PAGE> 27
partnerships and real estate investment trusts. The investment banking
activities of Stanger include financial advisory and fairness opinion services,
asset and securities valuations, industry and company research and analysis,
litigation support and expert witness services, and due diligence investigations
in connection with both publicly registered and privately placed securities
transactions.
Stanger, as part of its investment banking business, is regularly
engaged in the valuation of businesses and their securities in connection with
mergers, acquisitions, reorganizations and for estate, tax, corporate and other
purposes. Stanger's valuation practice principally involves partnerships,
partnership securities and the assets typically held through partnerships, such
as real estate, oil and gas reserves, cable television systems and equipment
leasing assets. Stanger was selected because of its experience and reputation in
connection with real estate partnerships, real estate assets and mergers and
acquisitions.
Summary of Materials Considered. In the course of Stanger's analysis to
render its opinion, Stanger: (i) reviewed a draft of the Offer to Purchase
related to the offer in substantially the form which will be distributed; (ii)
reviewed your partnership's audited financial statements for the years ended
December 31, 1997 and 1998, and its unaudited financial statements for the
period ended September 30, 1999, which your partnership's management has
indicated to be the most current available financial statements at the time for
your partnership; (iii) reviewed descriptive information concerning your
partnership's real estate assets (the "property") provided by management,
including location, number of units and unit mix or square footage, age, and
amenities; (iv) reviewed summary historical operating statements for your
partnership's property for 1997, 1998 and 1999; (v) reviewed operating budgets
for your partnership's property for 1999, as prepared by management; (vi)
reviewed information prepared by management relating to any debt encumbering
your partnership's property; (vii) reviewed information regarding market rental
rates and conditions for similar properties in the general market area of your
partnership's property and other information relating to acquisition criteria
for similar properties; (viii) reviewed internal financial and forecast analyses
prepared by your partnership of the estimated current net liquidation value of
your partnership; and (ix) conducted other studies, analysis and inquiries as
Stanger deemed appropriate.
A summary of the operating budgets per property for the year ended
December 31, 1999, which was supplied by your partnership to Stanger, is as
follows:
FISCAL 1999 OPERATING BUDGET
SHELTER PROPERTIES II
<TABLE>
<CAPTION>
PARKTOWN
TOWNHOUSES RAINTREE SIGNAL POINT
---------- ---------- ------------
<S> <C> <C> <C>
Total Revenues 2,473,320 985,530 2,518,495
Operating Expenses (1,214,851) (492,734) (1,246,676)
---------- ---------- ----------
Net Operating Income Before
Replacement Reserves 1,258,469 492,796 1,271,819
</TABLE>
The above budget, at the time it was made, was forward-looking information
developed by the general partner of your partnership. Therefore, the budget was
dependent upon future events with respect to the ability of your partnership to
meet such budget. The budget incorporated various assumptions including, but not
limited to, revenue (including occupancy rates), various operating expenses,
general and administrative expenses, capital expenditures, and working capital
levels. While the general partner deemed such budget 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 budget 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 budget are often
re-categorized as expenses when the financial statements are audited and
presented in accordance with GAAP. Therefore, the summary
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<PAGE> 28
operating budget presented for fiscal 1999 should not necessarily be considered
as indicative of what the audited operating results for fiscal 1999 will be.
In addition, Stanger discussed with management of your partnership and
AIMCO the market conditions for the property, conditions in the market for
sales/acquisitions of properties similar to that owned by your partnership,
historical, current and projected operations and performance of your
partnership's property and your partnership, the physical condition of your
partnership's property including any deferred maintenance, and other factors
influencing value of your partnership's property and your partnership. Stanger
also performed site inspections of your partnership's property, reviewed local
real estate market conditions, and discussed with property management personnel
conditions in local apartment rental markets and market conditions for sales and
acquisitions of properties similar to your partnership's property.
Summary of Reviews. The following is a summary of the material reviews
conducted by Stanger in connection with and in support of its Fairness Opinion.
The summary of the opinion and reviews of Stanger set forth in herein is
qualified in its entirety by reference to the full text of such opinion.
Property Evaluation. In preparing its Fairness Opinion, Stanger
performed a site inspection of your partnership's property during the fourth
quarter of 1999. In the course of the site visit, the physical facilities of
your partnership's property were observed, current rental and occupancy
information was obtained, current local market conditions were reviewed, similar
competing properties were identified, and local property management personnel
were interviewed concerning your partnership's property and local market
conditions. Stanger also reviewed and relied upon information provided by your
partnership and AIMCO, including, but not limited to, financial schedules of
historical and current rental rates, occupancies, income, expenses, reserve
requirements, cash flow and related financial information; property descriptive
information, including unit mix or square footage; and information relating to
the condition of the property, including any deferred maintenance, capital
budgets, status of ongoing or newly planned property additions,
reconfigurations, improvements and other factors affecting the physical
condition of the property improvements.
Stanger also reviewed historical operating statements for your
partnership's property for 1997, 1998 and for the nine month period ending
September 30, 1999, the operating budget for 1999, as prepared management of
your partnership, and discussed with management the current and anticipated
operating results of your partnership's property.
In addition, Stanger interviewed management personnel of your
partnership and AIMCO. Such interviews included discussions of conditions in the
local market, economic and development trends affecting your partnership's
property, historical and budgeted operating revenues and expenses and
occupancies and the physical condition of your partnership's property (including
any deferred maintenance and other factors affecting the physical condition of
the improvements), projected capital expenditures and building improvements, the
terms of existing debt encumbering your partnership's property, and expectations
of management regarding operating results of your partnership's property.
Stanger also reviewed the acquisition criteria used by owners and
investors in the type of real estate owned by your partnership, utilizing
available published information and information derived from interviews
conducted by Stanger with various real estate owners and investors.
Comparison of Offer Price. Stanger observed that the offer price
(excluding the settlement fund payment) of $554 per unit is equal to
management's estimate of liquidation value.
In addition to the above analysis, Stanger prepared an independent
estimate of net asset value, going concern value and liquidation value per unit.
Stanger has advised AIMCO that Stanger's estimates of net asset value, going
concern value and liquidation value are based upon Stanger's independent
estimate of property income, a direct capitalization rate range of 10.0% to
10.25%, transaction costs of 3% to 5%, growth rates of 3% and a terminal
capitalization rate range of 10.5% to 10.75%. Stanger has advised us that the
direct capitalization rate represents Stanger's estimate of the capitalization
rate applicable to its estimate of property income and is based upon Stanger's
independent estimate of the direct capitalization rate for such property based
upon such property's age, condition and location. Stanger further advised us
that the terminal capitalization rate is the capitalization rate utilized in
Stanger's going concern value estimate which is applied to Stanger's estimate of
property income in the eleventh year to establish the value of the property at
the end of the tenth year. Stanger has advised us that Stanger estimated the
terminal capitalization rate at a 50 basis point
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<PAGE> 29
premium to the direct capitalization rate estimate for each property. Stanger
utilized deferred maintenance estimates derived from the Adjusters
International, Inc. reports in the calculation of net asset value, going concern
value and liquidation value. Stanger advised us that Stanger adjusted its
estimate of net asset value and liquidation value for the cost of above market
debt using an 8% interest rate. With respect to the going concern value estimate
prepared by Stanger, Stanger advised AIMCO that a ten-year projection period and
a discount rate of 15.5% was utilized. Such discount rate reflects the risk
associated with real estate, leverage and a limited partnership investment. The
15.5% discount rate was based upon the property's estimated internal rate of
return derived from the discounted cash flow analysis, (12.6% as described
above), plus a premium reflecting the additional risk associated with mortgage
debt equal to more than 30% of property value. Stanger's estimates were based in
part upon information provided by us. Stanger relied upon the deferred
maintenance estimates, property descriptions, unit configurations, allocation
among partners, and other data provided by us. Stanger's analyses were based on
balance sheet data as of September 30, 1999. Stanger's estimate of net asset
value, going concern value and liquidation value per unit were $632, $572 and
$608 representing premiums to the offer price (excluding the settlement fund
payment) of 14 %, 3 % and 10%. See "-Comparison of Consideration to Alternative
Consideration."
Stanger observed that we are tendering for units of limited partnership
interest in the Partnership and that such units represent a minority interest in
the Partnership. Additionally, Stanger observed that the Partnership is not
listed on any established securities exchange but does trade infrequently in an
informal secondary market. Stanger has advised the Partnership that during the
past 5 years, Stanger has reviewed the secondary market trading activity of more
than 500 partnerships involving more than 31,500 transactions and has compared
the price derived in such transactions to the reported net asset value of such
Partnerships where such data was reported. Stanger observed average discounts
for each of the five year periods ranging from 23.6% to 28.1% for actively
traded partnerships. Stanger observed that the offer price (excluding the
settlement fund reserve) represents a 12% discount to Stanger's estimate of net
asset value.
Conclusions. Stanger concluded, based upon its analysis of the
foregoing and the assumptions, qualifications and limitations stated below, as
of the date of the Fairness Opinion, that the offer price (excluding the
settlement fund payment) to be paid for the units in connection with the offer
is fair to the unitholders from a financial point of view. Stanger has rendered
similar fairness opinions with regard to certain other tender offers being made
by us. Stanger rendered the opinions only as to the individual fairness of the
offer price (excluding the settlement fund payment) in each in such tender
offer. The Fairness Opinion does not address the fairness of all possible
acquisitions of interests in your partnership. In addition, the Fairness Opinion
will not be revised to reflect the actual participation in the offer.
Assumptions, Limitations and Qualifications. In rendering the Fairness
Opinion, Stanger relied upon and assumed, without independent verification, the
accuracy and completeness of all financial information and data, and all other
reports and information contained herein or that were provided, made available,
or otherwise communicated to Stanger by your partnership, AIMCO, or the
management of the partnership's property. Stanger has not performed an
independent appraisal, engineering study or environmental study of the assets
and liabilities of your partnership. Stanger relied upon the representations of
your partnership and AIMCO concerning, among other things, any environmental
liabilities, deferred maintenance and estimated capital expenditure and
replacement reserve requirements, the determination and valuation of non-real
estate assets and liabilities of your partnership, the allocation of your
partnership's net values between your general partner (which is our subsidiary)
and limited partners of your partnership, the terms and conditions of any debt
encumbering the partnership's property, and the transaction costs and fees
associated with a sale of the property. Stanger also relied upon the assurance
of your partnership, AIMCO, and the management of the partnership's property
that any financial statements, budgets, pro forma statements, projections,
capital expenditure estimates, debt, value estimates and other information
contained herein or provided or communicated to Stanger were reasonably prepared
and adjusted on bases consistent with actual historical experience, are
consistent with the terms of your partnership's agreement of limited
partnership, and reflect the best currently available estimates and good faith
judgments; that no material changes have occurred in the value of the
partnership's property or other balance sheet assets and liabilities or other
information reviewed between the date of such information provided and the date
of the Fairness Opinion; that your partnership, AIMCO, and the management of the
partnership's property are not aware of any information or facts that would
cause the information supplied to Stanger to be incomplete or misleading; that
the highest and best use of the partnership's property is as improved; and that
all calculations were made in accordance with the terms of your partnership's
agreement of limited partnership.
Stanger was not requested to, and therefore did not: (i) select the
offer price or the offer price (excluding the
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<PAGE> 30
settlement fund payment); (ii) make any recommendation to your partnership or
its partners with respect to whether to accept or reject the proposed offer;
(iii) solicit any third party indications of interest in acquiring the assets of
your partnership or all or any part of your partnership; or (iv) express any
opinion as to (a) the tax consequences of the offer to unitholders, (b) the
terms of your partnership's agreement of limited partnership or the terms of any
agreements or contracts between your partnership and AIMCO; (c) AIMCO's or the
general partner's business decision to effect the offer, or alternatives to the
offer, (d) the amount or allocation of expenses relating to the offer between
AIMCO and your partnership or tendering unitholders; (e) the amount or
derivation of liquidation values per unit of limited partnership interests in
your partnership by us: and (f) any adjustments made to determine the offer
price or the offer price (excluding the settlement fund payment) and the net
amounts distributable to the unitholders, including but not limited to, balance
sheet adjustments to reflect your partnership's estimate of the value of current
net working capital balances, reserve accounts, and liabilities, and adjustments
to the offer consideration for distributions made by your partnership subsequent
to the date of the offer.
Stanger is not expressing any opinions as to the fairness of any terms
of the offer other than the offer price (excluding the settlement fund payment)
for the units, nor did Stanger address the fairness of all possible acquisitions
of interests in the partnership. The opinion will not be revised to reflect the
actual results of the offer. Stanger's opinion is based on business, economic,
real estate and capital market, and other conditions as of the date of its
analysis and addresses the offer in the context of information available as of
the date of its analysis. Events occurring after such date and before the
closing of the proposed offer could affect value of the partnership's property
or the assumptions used in preparing the Fairness Opinion. Stanger has no
obligation to update the Fairness Opinion on the basis of subsequent events.
In connection with preparing the Fairness Opinion, Stanger was not
engaged to, and consequently did not, prepare any written or oral report or
compendium of its analysis for internal or external use beyond the report set
forth in Annex I.
Compensation and Material Relationships. Stanger has been retained by
AIMCO to provide fairness opinions with respect to your partnership and other
partnerships which are or will be the subject of similar offers under the
settlement. Pursuant to the Stipulation, Stanger's fee of $17,000 with respect
to its Fairness Opinion for your partnership will be paid by your partnership.
The estimated aggregate fee payable to Stanger in connection with all affiliated
partnerships is estimated at 1,500,000. In addition, Stanger is entitled to
reimbursement for reasonable legal, travel and out-of-pocket expenses incurred
in making the site visits and preparing the Fairness Opinion, and is entitled to
indemnification against certain liabilities, including certain liabilities under
Federal securities laws. No portion of Stanger's fee is contingent upon
consummation of the offer or the content of Stanger's opinion. Stanger was
engaged by AIMCO during 1997 to represent AIMCO 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 in and did render certain fairness
opinions in 1998 and 1999 for certain exchange offers we made and received fees
and expenses of approximately $317,000. AIMCO and its affiliates may retain the
services of Stanger in the future. Any such future services could relate to this
offer, some or all of the concurrent offers, or a completely separate
transaction.
SECTION 10. POSITION OF THE GENERAL PARTNER OF YOUR PARTNERSHIP WITH RESPECT TO
THE OFFER.
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 Our offer price, the method we used to determine our offer
price and the fact that such method was determined by
arms-length negotiations in connection with the settlement of
the lawsuit.
o The Fairness Opinion of Robert A. Stanger & Co., Inc.
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<PAGE> 31
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 evaluation of the financial condition and results of
operations of your partnership including the increase in
property income of your partnership from $2,350,000 for the
year ended 1998 (based on annualizing the net income for the
nine months ended September 30, 1998) compared to an estimated
$2,637,000 for the year ending 1999 (based on annualizing net
income for the nine months ended September 30, 1999) Actual
1999 taxes could be higher or lower.
The general partner of your partnership makes no recommendation as to
whether 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 your financial position, your need or desire for liquidity, other
financial opportunities available to you, and your tax position and the tax
consequences to you of selling your units.
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 obtain a fair offer price for 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.
Additionally, we desire to purchase units at a low price and you desire to sell
units at a high price. The general partner of your partnership makes no
recommendation as to whether you should tender or refrain from tendering your
units. Such conflicts of interest in connection with the offer and the operation
of AIMCO differ from those conflicts of interest that currently exist for your
partnership. See "Risk Factors -- Conflicts of Interest With Respect to the
Offer." Your general partner has filed a Solicitation/Recommendation Statement
on Schedule 14D-9 with the SEC, which indicates that it is remaining neutral and
making no recommendation as to whether limited partners should tender their
units pursuant to the offer. LIMITED PARTNERS ARE URGED TO READ THIS OFFER TO
PURCHASE AND THE SCHEDULE 14D-9 AND THE RELATED MATERIALS CAREFULLY AND IN THEIR
ENTIRETY BEFORE DECIDING WHETHER TO TENDER THEIR 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 $123,000 in 1996, $137,000 in 1997 and $120,000
in 1998. The property manager received management fees of $269,000 in 1996,
$278,000 in 1997 and $290,000 in 1998. 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. Except as contemplated by the Stipulation, we have no
current plans to conduct future tender offers for your units. However, our plans
may change based on future circumstances, including third party tender offers.
Any such future offers that we might make could be for consideration that is
more or less than the consideration we are currently offering.
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<PAGE> 32
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 your
partnership's properties. We currently intend that, upon consummation of the
offer, your partnership will continue its business and operations substantially
as they are currently being conducted. The offer is not expected to have any
effect on partnership operations.
Although we have no present intention to do so (except as provided in
the Stipulation), 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 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 or any of
your partnership's subsidiaries; a sale or transfer of a material amount of your
partnership's assets (or assets of the partnership's subsidiaries); any changes
in composition of your partnership's senior management or personnel or their
compensation; any changes in your partnership's present capitalization 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 property. If any such loans are made,
upon default of such loans, the lender 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 refinances
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: (1) payment
of extraordinary distributions; (2) refinancing, reducing or increasing existing
indebtedness of the partnership; (3) sales of assets, individually or as part of
a complete liquidation; and (4) 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 if we are successful in acquiring a substantial number of units
pursuant to the offer, we will be able to control the outcome of any such vote.
Even if we acquire a lesser number of units pursuant to the offer, however,
because we currently own approximately 42.43% of the outstanding units we will
be able to significantly influence the outcome of any such vote. 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 II was organized on October 10, 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.
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<PAGE> 33
Your partnership's investment portfolio currently consists of the
following three residential apartment complexes: Parktown Townhouses, a 309-unit
complex in Deer Park, Texas; Raintree Apartments, a 176-unit complex in
Anderson, South Carolina; and, Signal Pointe Apartments, a 368-unit complex in
Winter Park, Florida.
The general partner of your partnership is Shelter Realty II
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 October 26, 1999, there were 27,500 units issued and
outstanding, which were held of record by 1,439 limited partners. Your
partnership's principal executive offices are located at 1873 South Bellaire
Street, 17th Floor, 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 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. The general partner noted that it expects to spend approximately
$1,182,163 for capital improvements at the properties in 1999 to repair and
update the properties. Although there can be no assurance as to future
performance, however, 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. The general partner has not received any recent indication of interest
or offer to purchase the properties.
Originally Anticipated Term of Partnership. Your partnership's
prospectus, dated February 2, 1981, 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 3 to 8 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 2020. The partnership currently owns three 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. 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.
Under your partnership's agreement of limited partnership, the term of
the partnership will continue until December 31, 2020, 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.
30
<PAGE> 34
Capital Replacement. 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. All capital improvement and renovation costs are expected to be
paid from operating cash flows, cash reserves, or from short-term or long-term
borrowings.
Competition. There are other 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 we are 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
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 and Property-Related Data. The selected financial information
for your partnership set forth below for the years ended December 31, 1998 and
1997, is based on audited financial statements. The selected financial
information for your partnership set forth below for the six months ended June
30, 1999 and 1998, 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, 1998 and the Quarterly
Report on Form 10-QSB for the quarter ended June 30, 1999.
SHELTER PROPERTIES II
<TABLE>
<CAPTION>
FOR THE SIX MONTHS ENDED FOR THE YEAR ENDED
JUNE 30, DECEMBER 31,
---------------------------- -----------------------------
1999 1998 1998 1997
---------- ---------- ---------- ----------
(in thousands, except per unit data)
OPERATING DATA:
<S> <C> <C> <C> <C>
Total Revenues ..................................... $ 2,971.00 $ 2,905.00 $ 5,858.00 $ 5,642.00
Net income (Loss) .................................. 619.00 388.00 838.00 428.00
Net Income per limited partnership unit ............ 22.29 13.96 30.18 15.41
Distributions per limited partnership unit ......... -- 27.02 96.69 36.18
</TABLE>
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
----------------------------- -----------------------------
1999 1998 1998 1997
---------- ---------- ---------- ----------
BALANCE SHEET DATA:
<S> <C> <C> <C> <C>
Cash and Cash Equivalents .......................... $ 1,204 $ 1,804 $ 576 $ 1,993
Real Estate, Net of Accumulated Depreciation ....... 8,424 8,551 8,312 8,810
Total Assets ....................................... 10,852 11,913 10,377 12,331
Notes Payable ...................................... 8,228 8,447 8,341 8,549
General Partners' Capital (Deficit) ................ (129) (119) (135) (116)
Limited Partners' Capital (Deficit) ................ 2,091 2,948 1,478 3,307
Partners' Capital (Deficit) ........................ 1,962 2,829 1,343 3,191
Total Distributions ................................ -- 750 2,686 1,005
Net increase (decrease) in cash and cash 628 (189) (1,417) (229)
equivalents ........................................
Net cash provided by operating activities .......... 1,047 958 2,102 1,557
</TABLE>
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<PAGE> 35
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>
PROPERTY DATE OF PURCHASE TYPE OF OWNERSHIP USE
-------- ---------------- ----------------- ---
<S> <C> <C> <C>
Parktown Townhouses 03/01/81 Fee ownership, subject to Apartment
Deer Park, Texas first and second mortgages 309 units
Raintree Apartments 04/30/81 Fee ownership, subject to Apartment
Anderson, South Carolina first and second mortgages 176 units
Signal Pointe Apartments 06/30/81 Fee ownership, subject to Apartment
Winter Park, Florida first and second mortgages 368 units
</TABLE>
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, 1998.
<TABLE>
<CAPTION>
PROPERTY GROSS ACCUMULATED RATE METHOD FEDERAL
-------- CARRYING DEPRECIATION ---- ------ TAX BASIS
VALUE ------------ ---------
--------
(in thousands)
<S> <C> <C> <C> <C> <C>
Parktown Townhouses............ $ 9,682 $ 6,533 5-35 S/L $2,928
Raintree Apartments............ 4,129 2,812 5-38 S/L 559
Signal Pointe Apartments....... 11,507 7,661 5-37 S/L 1,900
------- ------- ------
Totals................. $25,318 $17,006 $5,387
======= ======= ======
</TABLE>
Schedule of Mortgages. The following shows certain information
regarding the outstanding mortgages encumbering each of your partnership's
properties as of December 31, 1998.
<TABLE>
<CAPTION>
PROPERTY PRINCIPAL STATED PERIOD MATURITY PRINCIPAL
-------- BALANCE AT INTEREST AMORTIZED DATE BALANCE DUE AT
DECEMBER 31, RATE --------- -------- MATURITY
1998 -------- --------------
------------
(in thousands) (in thousands)
<S> <C> <C> <C> <C> <C>
Parktown Townhouses
1st mortgage ................ $ 3,016 7.60% (1) 11/15/02 $ 2,552
2nd mortgage ................ 109 7.60% (1) 11/15/02 109
Raintree Apartments
1st mortgage ................ 1,338 7.60% (1) 11/15/02 1,133
2nd mortgage ................ 48 7.60% (1) 11/15/02 48
Signal Pointe Apartments
1st mortgage ................ 3,998 7.60% (1) 11/15/02 3,383
2nd mortgage ................ 145 7.60% (1) 11/15/02 145
--------
8,654 7,370
Less unamortized mortgage discounts (313) --------
Total $ 8,341
========
</TABLE>
- -------------------
(1) The principal balance is being amortized over 257 months with a balloon
payment due November 15, 2002.
Average Annual Rent and Occupancy Rates. The following shows the
average annual rent amounts and occupancy rates for each of your partnership's
properties during the year ended December 31, 1998 and the nine months ended
September 30, 1999.
32
<PAGE> 36
<TABLE>
<CAPTION>
AVERAGE ANNUAL RENT AVERAGE ANNUAL OCCUPANCY RATE
---------------------- -------------------------------
PROPERTY 1999* 1998 1999* 1998
-------- ---- ---- ---- ----
$ $
<S> <C> <C> <C> <C>
Parktown Townhouses $7,732/unit $8,163/unit 94% 95%
Raintree Apartments 5,384/unit 5,751/unit 95% 94%
Signal Pointe Apartments 6,404/unit 6,518/unit 95% 96%
</TABLE>
- -------------------------
* Based on annualizing the average annual rent and occupancy rate for the nine
months ended September 30, 1999, by multiplying such averages by 1.33. Actual
1999 average annual rent and occupancy rate 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.
<TABLE>
<CAPTION>
PROPERTY 1999 TAXES* 1999 TAX RATE
-------- ---------- -------------
<S> <C> <C>
Parktown Townhouses $140,146 2.38%
Raintree Apartments 61,002 35.67%
Signal Pointe Apartments 121,890 1.79%
</TABLE>
- -------------------
* Based on annualizing the taxes for the nine months ended September 30, 1999 by
multiplying such taxes by 1.33. Actual 1999 taxes could be higher or lower.
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 in such years.
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31 AMOUNT
----------- ---------
<S> <C>
1995....................................................... $ 21.60
1996....................................................... 18.18
1997....................................................... 36.18
1998....................................................... 96.69
1999 (through September 30, 1999).......................... 10.80
---------
Total............................................ $ 183.45
=========
</TABLE>
Beneficial Ownership of Interests in Your Partnership. Together with
its subsidiaries, we currently beneficially own, in the aggregate, approximately
42.43% of the interests in your partnership. Except as set forth above, 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) have 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:
33
<PAGE> 37
<TABLE>
<CAPTION>
PARTNERSHIP FEES PROPERTY
YEAR AND EXPENSES MANAGEMENT FEES
---- ---------------- ---------------
<S> <C> <C>
1995 ................................. $ 98,000 $263,000
1996 ................................. 123,000 269,000
1997 ................................. 137,000 278,000
1998 ................................. 120,000 290,000
1999* ................................ 172,000 301,333
</TABLE>
- -------------------
* Based on annualizing the fees and expenses for the nine months ended September
30, 1999 by multiplying such fees and expenses by 1.33. Actual 1999 fees and
expenses could be higher or lower.
Legal Proceedings. Your partnership may be party to a variety of legal
proceedings arising in the ordinary course of the business related to its
ownership of the partnership's properties, which are not expected to have a
material adverse effect on your partnership.
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 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. If we
acquire 2,260.78 additional units that we are offering to purchase, we will own
a majority of the outstanding units and will have the ability to control any
vote of the limited partners.
If we acquire a substantial number of additional units pursuant to our
offer, we may be in a position to influence or control voting decisions with
respect to the limited partners of your partnership. See "The Offer -- Section
7. Effect of the Offer."
However, in connection with the settlement, we have agreed that:
o We will not propose, or cause to have proposed, for a period
of at least five years after the effective date of the
settlement, any amendments to your partnership agreement of
limited partnership which relate to an increase in the various
fees that are payable to the general partner and/or its
affiliates under the terms of such partnership agreement or
existing management contracts.
o We will vote any units that we own in your partnership in the
same manner (and percentages) as do unaffiliated limited
partners with respect to any proposal to increase the various
fees that are payable to the general partner or its affiliates
under the terms of such partnership agreement or existing
management contracts.
o We will obtain a fairness opinion from an independent
appraiser with respect to the consideration offered
unaffiliated limited partners in the event of a sale or merger
of your partnership to or with us or our affiliates.
34
<PAGE> 38
SECTION 15. SOURCE OF FUNDS.
We expect that approximately $9,149,000 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 $40,000). 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 48 other limited partnerships pursuant to the
Stipulation. If all such offers were fully subscribed for cash, we would be
required to pay approximately $480 million for all such units (except that with
respect to all of such offers we are not obligated to pay more than $50
million). 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
of June 30, 1999, we had $51,658,000 of cash on hand and $300 million available
for borrowing under our existing lines of credit.
Under our $300 million secured 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 1.7 to 1.0 through September 30, 1999 and 1.75
to 1.0 thereafter. 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:
(a) 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
35
<PAGE> 39
(b) 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
30-day LIBOR or 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, 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, (vi) a commencement of a war, conflict, armed hostilities or other
national or international calamity directly or indirectly involving the United
States, (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
(c) 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 the 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
(d) 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 (vi) of paragraph (c) above; or
36
<PAGE> 40
(e) your partnership shall have (i) changed, or authorized a change of,
its 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
(f) 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 Securities Exchange Act of 1934), 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, 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 debt refinancing, merger, consolidation, purchase or
lease of assets or other business combination with or involving your
partnership; or
(g) the offer to purchase may have an adverse effect on AIMCO's status as
a REIT; or
(h) we shall not have adequate cash or financing commitments available to
pay the offer price; or
(i) the Court shall fail to approve the settlement contemplated by the
Stipulation by December 31, 1999, the parties terminate the settlement or such
settlement shall otherwise terminate.
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 14D-1 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 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.
37
<PAGE> 41
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 10. FEES AND EXPENSES.
Except as set forth in this Section 19, 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, 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 its 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 Commission a Tender Offer Statement on Schedule
14D-1, 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. The Schedule 14D-1 and any amendments thereto,
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.
38
<PAGE> 42
ANNEX I
- --------------------------------------------------------------------------------
1129 Broad Street
Shrewsbury, NJ 07702-4314
ROBERT A. STANGER & CO., INC. (732) 389-3600
INVESTMENT BANKING FAX: (732) 389-1751
(732) 544-0779
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
AIMCO Properties, L.P.
1873 South Bellaire -- Suite 1700
Denver, Colorado 80222
Re: Shelter Properties II
Gentlemen:
You have advised us that AIMCO Properties, L.P. (the "Purchaser"), a
subsidiary of Apartment Investment and Management Company ("AIMCO"), which
directly or indirectly owns the general partner (the "General Partner") of
Shelter Properties II (the "Partnership") (the Purchaser, AIMCO, the General
Partner and other affiliates and subsidiaries of AIMCO are referred to herein
collectively as the "Company"), is contemplating a transaction (the "Offer") in
which limited partnership interests in the Partnership (the "Units") will be
acquired by the Purchaser in exchange for an offer price per Unit of $582.25 in
cash (the "Offer Price"). Approximately 5% of the Offer Price represents a
payment from a settlement fund established by AIMCO which will be paid to
limited partners under certain circumstances. The limited partners of the
Partnership (the "Limited Partners") will have the choice to maintain their
current interest in the Partnership or exchange their Units for cash.
You have requested that Robert A. Stanger & Co., Inc. ("Stanger")
provide its opinion as to whether the Offer Price (excluding the settlement fund
payment) (the "Offer Price Excluding the Settlement Fund Payment") per Unit of
$554 is fair to the Limited Partners of the Partnership from a financial point
of view.
Since its founding in 1978, Stanger and its affiliates have provided
information, research, investment banking and consulting services to clients
located throughout the United States, including major New York Stock Exchange
member firms, insurance companies and over seventy companies engaged in the
management and operation of partnerships and real estate investment trusts. The
investment banking activities of Stanger include financial advisory and fairness
opinion services, asset and securities valuations, industry and company research
and analysis, litigation support and expert witness services, and due diligence
investigations in connection with both publicly registered and privately placed
securities transactions.
Stanger, as part of its investment banking business, is regularly
engaged in the valuation of businesses and their securities in connection with
mergers, acquisitions, reorganizations and for estate, tax, corporation and
other purposes. Stanger's valuation practice principally involves partnerships,
partnership securities and the assets typically held through partnerships, such
as real estate, oil and gas reserves, cable television systems and equipment
leasing assets.
In the course of our analysis for rendering this opinion, we have,
among other things:
1. Reviewed a draft of the Offer to Purchase related to the Offer
in a form management has represented to be substantially the same as will be
distributed to the Limited Partners;
2. Reviewed the Partnership's financial statements for the years
ended December 31, 1997 and 1998, and the quarterly reports for the period
ending September 30, 1999, which the Partnership's management has indicted to be
the most current available financial statements;
I-1
<PAGE> 43
3. Reviewed descriptive information concerning the real property
owned by the Partnership (the "Property"), including location, number of units
and unit mix, age, amenities and land acreage.
4. Reviewed summary historical operating statements for the
Property, for the years ended December 31, 1997 and 1998, and the nine months
ending September 30, 1999;
5. Reviewed the 1999 operating budget for the Property prepared by
the Partnership's management. Such budgets are summarized in the Offer to
Purchase in "The Offer-Item 9. Background and Reasons for the Offer-Stanger
Analysis-Summary of Materials Considered."
6. Reviewed the estimate of liquidation provided by the general
partner to Stanger. Such estimates are described in the Offer to Purchase in
"The Offer-Item 9. Background and Reasons for the Offer-Comparison of
Consideration to Alternative Consideration."
7. Discussed with management the market conditions for the
Property; conditions in the market for sales/acquisitions of properties similar
to that owned by the Partnership; historical, current and expected operations
and performance of the Property and the Partnership; the physical condition of
the Property including any deferred maintenance; and other factors influencing
value of the Property and the Partnership;
8. Performed a site inspection of the Property;
9. Reviewed data and discussed with local sources real estate
rental market conditions in the market of the Property, and reviewed available
information relating to acquisition criteria for income-producing properties
similar to the Property;
10. Reviewed information provided by the Company relating to debt
encumbering the Property; and
11. Conducted such other studies, analyses, inquiries and
investigations as we deemed appropriate.
In rendering this opinion, we have relied upon and assumed, without
independent verification, the accuracy and completeness of all financial
information and management reports and data, and all other reports and
information contained in the Offer to Purchase or that were provided, made
available or otherwise communicated to us by the Partnership and the Company. We
have not performed an independent appraisal, engineering study or environmental
study of the assets and liabilities of the Partnership. We have relied upon the
representations of the Partnership and the Company concerning, among other
things, any environmental liabilities, deferred maintenance and estimated
capital expenditures and replacement reserve requirements, the determination and
valuation of non-real estate assets and liabilities of the Partnership, the
terms and conditions of any debt encumbering the Property, the allocation of net
Partnership values between the General Partner and Limited Partners, and the
transaction costs and fees associated with a sale of the Property. We have also
relied upon the assurance of the Partnership and the Company that any financial
statements, projections, capital expenditure estimates, debt summaries, value
estimates and other information contained in the Offer to Purchase or otherwise
provided or communicated to us were reasonably prepared and adjusted on bases
consistent with actual historical experience, are consistent with the terms of
the Partnership Agreement, and reflect the best currently available estimates
and good faith judgments; that no material changes have occurred in the value of
the Property or other information reviewed between the date such information was
provided and date of this letter; that the Partnership and the Company are not
aware of any information or facts that would cause the information supplied to
us to be incomplete or misleading; that the highest and best use of the Property
is as improved; and that all calculations were made in accordance with the terms
of the Partnership Agreement.
In addition, you have advised us that upon consummation of the Offer,
the Partnership will continue its business and operations substantially as they
are currently being conducted and that the Partnership and the Company do not
have any present plans, proposals or intentions which relate to or would result
in an extraordinary transaction, such as a merger, reorganization or liquidation
involving the Partnership; a sale of the Partnership's Properties or the sale or
transfer of a material amount of the Partnership's other assets; any changes to
the Partnership's senior management or personnel or their compensation; any
changes in the Partnership's present capitalization or distribution policy; or
any
I-2
<PAGE> 44
other material changes in the Partnership's structure or business.
We have not been requested to, and therefore did not: (i) select the
Offer Price or the Offer Price Excluding the Settlement Fund Payment or the
method of determining the Offer Price or the Offer Price Excluding the
Settlement Fund Payment in connection with the Offer; (ii) make any
recommendation to the Partnership or its partners with respect to whether to
accept or reject the Offer; (iii) solicit any third party indications of
interest in acquiring the assets of the Partnership or all or any part of the
Partnership; or (iv) express any opinion as to (a) the tax consequences of the
proposed Offer to the Limited Partners, (b) the terms of the Partnership
Agreement or of any agreements or contracts between the Partnership and the
Company, (c) the Company's business decision to affect the Offer or alternatives
to the Offer, (d) the amount of expenses relating to the Offer or their
allocation between the Company and the Partnership or tendering Limited
Partners; (e) the amount or derivation of liquidation values per Unit of limited
partnership interests in the Partnership by the Purchaser: and (f) any
adjustments made to determine the Offer Price or the Offer Price Excluding the
Settlement Fund Payment and the net amounts distributable to the Limited
Partners, including, but not limited to, balance sheet adjustments to reflect
the Partnership's estimate of the value of current net working capital balances,
reserve accounts and liabilities, and adjustments to the Offer Price and the
Offer Price Excluding the Settlement Fund Payment for distributions made by the
Partnership subsequent to the date of the initial Offer. We are not expressing
any opinion as to the fairness of any terms of the Offer other than the Offer
Price Excluding the Settlement Fund Payment for the Units.
Our opinion is based on business, economic, real estate and capital
market, and other conditions as they existed and could be evaluated as of the
date of our analyses and addresses the Offer in the context of information
available as of the date of our analysis. Events occurring after that date could
affect the assumptions used in preparing the opinion.
The summary of the opinion set forth in the Offer to Purchase does not
purport to be a complete description of the analyses performed, or the matters
considered, in rendering our opinion. The analyses and the summary set forth
must be considered as a whole, and selecting portions of such summary or
analyses, without considering all factors and analyses, would create an
incomplete view of the processes underlying this opinion. In rendering this
opinion, judgment was applied to a variety of complex analyses and assumptions.
The assumptions made, and the judgments applied, in rendering the opinion are
not readily susceptible to partial analysis or summary description. The fact
that any specific analysis is referred to in the Offer to Purchase is not meant
to indicate that such analysis was given greater weight than any other analysis.
Based upon and subject to the foregoing, it is our opinion that as of
the date of this letter the Offer Price Excluding the Settlement Fund Payment is
fair to the Limited Partners of the Partnership from a financial point of view.
Yours truly,
Robert A. Stanger & Co., Inc.
Shrewsbury, New Jersey
November 11, 1999
I-3
<PAGE> 45
ANNEX II
OFFICERS AND DIRECTORS
The names and positions of the executive officers of Apartment
Investment and Management Company ("AIMCO"), 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 two executive
officers of the general partner of your partnership are Patrick J. Foye,
Executive Vice President, and Carla Stoner, Senior Vice President - Real Estate
Accounting. Unless otherwise indicated, the business address of each executive
officer and director is 1873 South Bellaire Street, 17th Floor, 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.......................Executive Vice President -- Finance and Administration
Joel F. Bonder.........................Executive Vice President, General Counsel and Secretary
Patrick J. Foye........................Executive Vice President
Paul J. McAuliffe......................Executive Vice President--Capital Markets and Chief Financial Officer
Steven D. Ira..........................Executive Vice President and Co-Founder
Harry G. Alcock........................Executive Vice President and Chief Investment Officer
Lance J. Graber........................Executive Vice President--Acquisitions
Richard S. Ellwood.....................Director
J. Landis Martin.......................Director
Thomas L. Rhodes.......................Director
John D. Smith..........................Director
</TABLE>
<TABLE>
<CAPTION>
NAME PRINCIPAL OCCUPATIONS FOR THE LAST FIVE YEARS
---- ---------------------------------------------
<S> <C>
Terry Considine.............. Chief Executive Officer of AIMCO
and AIMCO-GP since July 1994. He is
the sole owner of Considine
Investment Co. and prior to July
1994 was owner of approximately 75%
of Property Asset Management,
L.L.C., Limited Liability Company,
a Colorado limited liability
company, and its related entities
(collectively, "PAM"), one of
AIMCO's predecessors. On October 1,
1996, Mr. Considine was appointed
Co-Chairman and director of Asset
Investors Corp. and Commercial
Asset Investors, Inc., two other
public real estate investment
trusts, and appointed as a director
of Financial Assets Management,
LLC, a real estate investment trust
manager. Mr. Considine has been
involved as a principal in a
variety of real estate activities,
including the acquisition,
renovation, development and
disposition of properties. Mr.
Considine has also controlled
entities engaged in other
businesses such as television
broadcasting, gasoline distribution
and environmental laboratories. Mr.
Considine received a B.A. from
Harvard College, a J.D. from
Harvard Law School and was formerly
admitted as a member of the
Massachusetts Bar (inactive).
</TABLE>
II-1
<PAGE> 46
<TABLE>
<CAPTION>
NAME PRINCIPAL OCCUPATIONS FOR THE LAST FIVE YEARS
---- ---------------------------------------------
<S> <C>
Peter K. Kompaniez........... Mr. Kompaniez has been Vice
Chairman and a director of AIMCO
since July 1994 and was appointed
President of AIMCO in July 1997.
Mr. Kompaniez has served as Vice
President of AIMCO-GP from July
1994 through July 1998 and was
appointed President in July 1998.
Mr. Kompaniez has been a director
of AIMCO-GP since July 1994. Since
September 1993, Mr. Kompaniez has
owned 75% of PDI Realty
Enterprises, Inc., a Delaware
corporation ("PDI"), one of AIMCO's
predecessors, and serves as its
President and Chief Executive
Officer. 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
the AIMCO) and 3.1 million square
feet of commercial real estate.
Prior to joining HFC, Mr. Kompaniez
was a senior partner with the law
firm of Loeb and Loeb where he had
extensive real estate and REIT
experience. Mr. Kompaniez received
a B.A. from Yale College and a J.D.
from the University of California
(Boalt Hall).
Thomas W. Toomey............. Mr. Toomey has served as Senior
Vice President - Finance and
Administration of AIMCO since
January 1996 and was promoted to
Executive Vice-President-Finance
and Administration in March 1997.
Mr. Toomey has been Executive Vice
President - Finance and
Administration of AIMCO-GP similar
capacity with Lincoln Property
Company ("LPC") as well 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. From
1981 to 1983, Mr. Toomey was on the
audit staff of Kenneth Leventhal &
Company. Mr. Toomey received a B.S.
in Business Administration/Finance
from Oregon State University and is
a Certified Public Accountant.
Joel F. Bonder............... Mr. Bonder has served as Executive
Vice President and General Counsel
of AIMCO since December 8, 1997.
Mr. Bonder has been Executive Vice
President and General Counsel of
AIMCO-GP since July 1998. Prior to
joining AIMCO, Mr. Bonder served as
Senior Vice President and General
Counsel of NHP Incorporated from
April 1994 until December 1997. Mr.
Bonder served as Vice President and
Deputy General Counsel of NHP
Incorporated from June 1991 to
March 1994 and as Associate General
Counsel of NHP from 1986 to 1991.
From 1983 to 1985, Mr. Bonder was
with the Washington, D.C. law firm
of Lane & Edson, P.C. From 1979 to
1983, Mr. Bonder practiced with the
Chicago law firm of Ross and
Hardies. Mr. Bonder received an
A.B. from the University of
Rochester and a J.D. from
Washington University School of
Law.
Patrick J. Foye.............. Mr. Foye has served as Executive
Vice President of AIMCO and
AIMCO-GP since May 1998. Prior to
joining AIMCO, Mr. Foye was a
partner in the law firm of Skadden,
Arps, Slate, Meagher &
</TABLE>
II-2
<PAGE> 47
<TABLE>
<CAPTION>
NAME PRINCIPAL OCCUPATIONS FOR THE LAST FIVE YEARS
---- ---------------------------------------------
<S> <C>
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
University Law School.
Paul J. McAuliffe............ Mr. McAuliffe was appointed
Executive Vice President-- Capital
Markets in February 1999 and Chief
Financial Officer in October 1999.
Prior to joining AIMCO, Mr.
McAuliffe was Senior Managing
Director of Secured Capital
Corporation and prior to that time
had been a Managing Director of
Smith Barney, Inc. from 1993 to
1996, where he was a key member of
the underwriting team that led
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.
from 1983 to 1990. Mr. McAuliffe
received a B.A. from Columbia
College and an MBA from University
of Virginia, Darden School.
Steven D. Ira................ Mr. Ira is a Co-Founder of AIMCO
and has served as Executive Vice
President of AIMCO since July 1994.
Mr. Ira has been Executive Vice
President of AIMCO-GP since July
1998. From 1987 until July 1994, he
served as President of 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 Manager (CPM)
designation from the National
Institute of Real Estate Management
(IREM) and he is a member of the
Board of Directors of the National
Multi-Housing Council, the National
Apartment Association and the
Apartment Association of Metro
Denver. Mr. Ira received a B.S.
from Metropolitan State College in
1975.
Harry G. Alcock.............. Mr. Alcock was appointed Vice
President of AIMCO and AIMCO-GP in
July 1996, and was promoted to
Senior Vice President
--Acquisitions in October 1997 and
then Executive Vice President and
Chief Investment Officer in October
1999, with responsibility for
acquisition and financing
activities 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
</TABLE>
II-3
<PAGE> 48
<TABLE>
<CAPTION>
NAME PRINCIPAL OCCUPATIONS FOR THE LAST FIVE YEARS
---- ---------------------------------------------
<S> <C>
based real estate developer, with
responsibility for raising debt and
joint venture equity to fund land
acquisitions and development. From
1987 to 1988, Mr. Alcock worked for
Ford Aerospace Corp. He received
his B.S. from San Jose State
University.
Lance J. Graber.............. Mr. Graber was appointed Vice
President-Acquisitions in October
1999. He was a Director in the Real
Estate Principal Transactions Group
of Credit Suisse First Boston.
Before joining Credit Suisse First
Boston in 1991, Mr. Graber was a
Vice President with Sonnenblick
Goldman Company, a New York based
real estate investment bank. He has
a B.S. in Economics and a M.B.A.
from The Wharton School of the
University of Pennsylvania.
Richard S. Ellwood........... Mr. Ellwood was appointed a
12 Auldwood Lane Director of AIMCO in July 1994 and
Rumson, NJ 07660 is currently Chairman of the Audit
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 a director of
FelCor Suite Hotels, Inc. and
Florida East Coast Industries, Inc.
J. Landis Martin............. Mr. Martin was appointed a Director
199 Broadway of AIMCO in July 1994 and became
Suite 4300 Chairman of the Compensation
Denver, CO 80202 Committee in March 1998. Mr. Martin
has served as President and Chief
Executive Officer and a Director of
NL Industries, Inc., a manufacturer
of titanium dioxide, since 1987.
Mr. Martin has served as Chairman
of Tremont Corporation, a holding
company operating through its
affiliates Titanium Metals
Corporation ("TIMET") and NL
Industries, Inc., since 1990 and as
Chief Executive Officer and a
director of Tremont since 1998. 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 Dresser Industries,
Inc. ("Dresser") 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 Dresser, which is
engaged in the petroleum services,
hydrocarbon and engineering
industries.
Carla R. Stoner.............. Ms. Stoner joined AIMCO in July
1997 as Vice President of Finance
and Administration and became
Senior Vice President - Real Estate
Accounting in November 1998. Prior
to joining AIMCO, Ms. Stoner was
with National Housing Partners
since 1989. While at National
Housing Partners, Ms. Stoner served
as a real estate controller from
1989 to 1992, as Vice President of
Accounting from 1992 to 1995 and as
Interim Chief Information Officer
from 1995 to July 1997. Prior to
joining National Housing Partners,
Ms. Stoner was a Senior Auditor
with Deloitte & Touche from 1984 to
1989. Ms. Stoner received a B.A. in
accounting from Virginia Tech.
</TABLE>
II-4
<PAGE> 49
<TABLE>
<CAPTION>
NAME PRINCIPAL OCCUPATIONS FOR THE LAST FIVE YEARS
---- ---------------------------------------------
<S> <C>
Thomas L. Rhodes............. Mr. Rhodes was appointed a Director
215 Lexington Avenue of AIMCO in July 1994. Mr. Rhodes
4th Floor has served as the President and a
New York, NY 10016 Director of National Review
magazine since November 30, 1992,
where he has also served as a
Director since 1998. 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 27, 1992.
He is currently Co-Chairman of the
Board, Co-Chief Executive Officer
and a Director of Commercial Assets
Inc. and Asset Investors
Corporation. He also serves as a
Director of Delphi Financial Group,
Inc. and its subsidiaries, Delphi
International Ltd., Oracle
Reinsurance Company, and the Lynde
and Harry Bradley Foundation. Mr.
Rhodes is Chairman of the Empire
Foundation for Policy Research, a
Founder and Trustee of Change NY, a
Trustee of The Heritage Foundation,
and a Trustee of the Manhattan
Institute.
John D. Smith................ Mr. Smith was appointed a Director
3400 Peachtree Road of AIMCO in November 1994. Mr.
Suite 8311994 Smith is Principal and President of
Atlanta, GA 30326 John D. Smith Developments. Mr.
Smith has been a shopping center
developer, owner and consultant for
over 8.6 million square feet of
shopping center projects including
Lenox Square in Atlanta, Georgia.
Mr. Smith is a Trustee and former
President of the International
Council of Shop ping Centers and
was selected to be a member of the
American Society of Real Estate
Counselors. Mr. Smith served as a
Director for Pan-American
Properties, Inc. (National Coal
Board of Great Britain) formerly
known as Continental Illinois
Properties. He also serves as a
director of American Fidelity
Assurance Companies and is retained
as an advisor by Shop System Study
Society, Tokyo, Japan.
</TABLE>
II-5
<PAGE> 50
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.
</TABLE>
For information, please call:
TOLL FREE (888) 349-2005
<PAGE> 1
EXHIBIT (a)(2)
LETTER OF TRANSMITTAL
TO TENDER UNITS OF LIMITED PARTNERSHIP IN
SHELTER PROPERTIES II LIMITED PARTNERSHIP (THE "PARTNERSHIP")
PURSUANT TO A LITIGATION SETTLEMENT OFFER (THE "OFFER")
DATED NOVEMBER 15, 1999 (THE "OFFER DATE")
BY
AIMCO PROPERTIES, L.P.
- --------------------------------------------------------------------------------
THE OFFER AND WITHDRAWAL RIGHTS WILL
EXPIRE AT 5:00 P.M., NEW YORK TIME,
ON DECEMBER 30, 1999, UNLESS EXTENDED (THE "EXPIRATION DATE")
- --------------------------------------------------------------------------------
WE ARE OFFERING TO PURCHASE UNITS IN YOUR PARTNERSHIP FOR $582.25 PER UNIT.
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>
By Telephone:
TOLL FREE (888) 349-2005
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
DESCRIPTION OF UNITS TENDERED
- -------------------------------------------------------------------------------------------------------------------------
Name(s) and Address(es) of Registered Holder(s) (Please indicate Units in Shelter Properties II Limited Partnership
changes or corrections to the name, address and tax
identification number printed below.)
- -------------------------------------------------------------------------------------------------------------------------
1. Total Number of Units 2. Total Number of Units
Owned Tendered
(#) (#)
--------------------------------------------------------
<S> <C> <C>
- -------------------------------------------------------------------------------------------------------------------------
[ ] Check box if the units have been tendered in another tender offer.
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 2
To participate in the offer, you must send a duly completed and executed copy of
this Letter of Transmittal and any other documents required by this Letter of
Transmittal so that such documents are received by River Oaks Partnership
Services, Inc., the Information Agent, on or prior to the Expiration Date,
unless extended. THE METHOD OF DELIVERY OF THIS 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. DELIVERY OF
THIS LETTER OF TRANSMITTAL OR ANY OTHER REQUIRED DOCUMENTS TO AN ADDRESS OTHER
THAN AS SET FORTH ABOVE DOES NOT CONSTITUTE VALID DELIVERY.
--------------------------
IF YOU HAVE THE CERTIFICATE ORIGINALLY ISSUED TO REPRESENT YOUR
INTEREST IN THE PARTNERSHIP PLEASE SEND IT TO THE INFORMATION
AGENT WITH THIS LETTER OF TRANSMITTAL.
---------------------------
FOR INFORMATION OR ASSISTANCE IN CONNECTION WITH THE OFFER OR THE
COMPLETION OF THIS LETTER OF TRANSMITTAL, PLEASE CONTACT THE INFORMATION AGENT
AT (888) 349-2005 (TOLL FREE).
THE INSTRUCTIONS ACCOMPANYING THIS LETTER OF TRANSMITTAL SHOULD BE READ
CAREFULLY BEFORE THIS LETTER OF TRANSMITTAL IS COMPLETED.
- -------------------------------------------------------------------------------
SPECIAL PAYMENT INSTRUCTIONS
(SEE INSTRUCTIONS 2, 4 AND 9)
To be completed ONLY if the consideration for the purchase price of
Units accepted for payment is to be issued in the name of someone other than
the undersigned.
[ ] Issue consideration to:
Name
--------------------------------------------------------------------------
(Please Type or Print)
Address
--------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
(Include Zip Code)
- -------------------------------------------------------------------------------
(Tax Identification or Social Security No.)
(See Substitute Form W-9)
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTIONS 2, 4 AND 9)
To be completed ONLY if the consideration for the purchase price of
Units accepted for payment is to be sent to someone other than the undersigned
or to the undersigned at a address other than that shown above.
[ ] Mail consideration to:
Name
--------------------------------------------------------------------------
(Please Type or Print)
Address
--------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
(Include Zip Code)
- -------------------------------------------------------------------------------
NOTE: SIGNATURES MUST BE PROVIDED BELOW
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
2
<PAGE> 3
Ladies and Gentlemen:
The undersigned hereby acknowledges that he or she has received and
reviewed (i) the Purchaser's Offer to Purchase relating to the offer by AIMCO
Properties, L.P. (the "Purchaser") to purchase Limited Partnership Interests
(the "Units") in the Partnership and (ii) this Letter of Transmittal and the
Instructions hereto, as each may be supplemented or amended from time to time
(collectively, the "Offer").
Upon the terms and subject to the conditions set forth in the Offer to
Purchase, and this Letter of Transmittal, the undersigned hereby tenders to the
Purchaser the Units set forth in the box above entitled "Description of Units
Tendered," including all interests in any limited partnership represented by
such units (collectively, the "Units"), at the price indicated on the Offer to
Purchase, less the amount of distributions, if any, made by the Partnership from
the Offer Date until the Expiration Date (the "Offer Price"), net to the
undersigned in cash, without interest.
Subject to and effective upon acceptance for payment of any of the Units
tendered hereby in accordance with the terms of the Offer, the undersigned
hereby irrevocably sells, assigns, transfers, conveys and delivers to, or upon
the order of, the Purchaser all right, title and interest in and to such Units
tendered hereby that are accepted for payment pursuant to the Offer, including,
without limitation, (i) all of the undersigned's interest in the capital of the
Partnership, and the undersigned's interest in all profits, losses and
distributions of any kind to which the undersigned shall at any time be entitled
in respect of the Units, 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 the Offer, in respect of the Units tendered by the
undersigned and accepted for payment and thereby purchased by the Purchaser;
(ii) all other payments, if any, due or to become due to the undersigned in
respect of the Units, under or arising out of the agreement of limited
partnership of the Partnership (the "Partnership Agreement"), or any agreement
pursuant to which the Units were sold (the "Purchase Agreement"), whether as
contractual obligations, damages, insurance proceeds, condemnation awards or
otherwise; (iii) all of the undersigned's claims, rights, powers, privileges,
authority, options, security interests, liens and remedies, if any, under or
arising out of the Partnership Agreement or Purchase Agreement or the
undersigned's ownership of the Units, including, without limitation, all voting
rights, rights of first offer, first refusal or similar rights, and rights to be
substituted as a limited partner of the Partnership; and (iv) all present and
future claims, if any, of the undersigned against the Partnership, the other
partners of the Partnership, or the general partner and its affiliates,
including the Purchaser, under or arising out of the Partnership Agreement, the
Purchase Agreement, the undersigned's status as a limited partner, or the terms
or conditions of the Offer, for monies loaned or advanced, for services
rendered, for the management of the Partnership or otherwise.
The undersigned hereby irrevocably constitutes and appoints the Purchaser
and any designees of the Purchaser as the true and lawful agent and
attorney-in-fact of the undersigned 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 vote or act in such manner as any such attorney
and proxy or substitute shall, in its sole discretion, deem proper with respect
to such Units, to do all such acts and things necessary or expedient to deliver
such Units and transfer ownership of such Units on the partnership books
maintained by the general partner of the Partnership, together with all
accompanying evidence of transfer and authenticity to, or upon the order of, the
Purchaser, to sign any and all documents necessary to authorize the transfer of
the Units to the Purchaser including, without limitation, the "Transferor's
(Seller's) Application for Transfer" created by the National Association of
Securities Dealers, Inc., if required, and upon receipt by the Information Agent
(as the undersigned's agent) of the Offer Price, to become a substitute limited
partner, to receive any and all distributions made by the Partnership from and
after the Expiration Date of the Offer (regardless of the record date for any
such distribution), and to receive all benefits and otherwise exercise all
rights of beneficial ownership of such Units, all in accordance with the terms
of the Offer. This appointment is effective upon the purchase of the Units by
the Purchaser as provided in the Offer and shall be irrevocable for a period of
ten years following the termination of the Offer. Upon the purchase of Units
pursuant to the Offer, all prior proxies and consents given by the undersigned
with respect to such Units will be revoked and no subsequent proxies or consents
may be given (and if given will not be deemed effective).
3
<PAGE> 4
In addition to and without limiting the generality of the foregoing, the
undersigned hereby irrevocably (i) requests and authorizes (subject to and
effective upon acceptance for payment of any Unit tendered hereby) the
Partnership and its general partners to take any and all actions as may be
required to effect the transfer of the undersigned's Units to the Purchaser (or
its designee) and to admit the Purchaser as a substitute limited partner in the
Partnership under the terms of the Partnership Agreement; (ii) empowers the
Purchaser and its agent to execute and deliver to each general partner a change
of address form instructing the general partner to send any and all future
distributions to the address specified in the form, and to endorse any check
payable to or upon the order of such unitholder representing a distribution to
which the Purchaser is entitled pursuant to the terms of the offer, in each
case, in the name and on behalf of the tendering unitholder; (iii) agrees not to
exercise any rights pertaining to the Units without the prior consent of the
Purchaser; and (iv) requests and consents to the transfer of the Units, to be
effective on the books and records of the Partnership as of the Offer Date.
The undersigned irrevocably constitutes and appoints the Purchaser and any
designees of the Purchaser as the true and lawful agent and attorney-in-fact of
the undersigned 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 tender or exchange offer provided that the price per
unit being offered by the Purchaser is equal to or higher than the price per
unit being offered in the other tender or exchange offer. This appointment is
effective immediately and shall continue to be effective unless and until such
Units are withdrawn from the Offer by the undersigned prior to the Expiration
Date.
NOTWITHSTANDING ANY PROVISION IN A PARTNERSHIP AGREEMENT OR ANY PURCHASE
AGREEMENT TO THE CONTRARY, THE UNDERSIGNED HEREBY DIRECTS EACH GENERAL PARTNER
OF THE PARTNERSHIP TO MAKE ALL DISTRIBUTIONS AFTER THE PURCHASER ACCEPTS THE
TENDERED UNITS FOR PAYMENT TO THE PURCHASER OR ITS DESIGNEE. Subject to and
effective upon acceptance for payment of any Unit tendered hereby, the
undersigned hereby requests that the Purchaser be admitted to the Partnership as
a substitute limited partner under the terms of the Partnership Agreement. Upon
request, the undersigned will execute and deliver additional documents deemed by
the Information Agent or the Purchaser to be necessary or desirable to complete
the assignment, transfer and purchase of Units tendered hereby and will hold any
distributions received from the Partnership after the Expiration Date in trust
for the benefit of the Purchaser and, if necessary, will promptly forward to the
Purchaser any such distributions immediately upon receipt. The Purchaser
reserves the right to transfer or assign, in whole or in part, from time to
time, to one or more of its affiliates, the right to purchase Units tendered
pursuant to the Offer, but any such transfer or assignment will not relieve the
Purchaser of its obligations under the Offer or prejudice the rights of
tendering unitholders to receive payment for Units validly tendered and accepted
for payment pursuant to the Offer.
By executing this Letter of Transmittal, the undersigned represents that
either (i) the undersigned is not a plan subject to Title I of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"), or Section 4975 of
the Internal Revenue Code of 1986, as amended (the "Code"), or an entity deemed
to hold "plan assets" within the meaning of 29 C.F.R. Section 2510.3-101 of any
such plan, or (ii) the tender and acceptance of Units pursuant to the Offer will
not result in a nonexempt prohibited transaction under Section 406 of ERISA or
Section 4975 of the Code.
The undersigned understands that a tender of Units to the Purchaser will
constitute a binding agreement between the undersigned and the Purchaser upon
the terms and subject to the conditions of the Offer. The undersigned recognizes
that under certain circumstances set forth in the Offer, the Purchaser may not
be required to accept for payment any of the Units tendered hereby. In such
event, the undersigned understands that any Letter of Transmittal for Units not
accepted for payment may be destroyed by the Purchaser (or its agent). EXCEPT AS
STATED IN THE OFFER, THIS TENDER IS IRREVOCABLE, PROVIDED THAT UNITS TENDERED
PURSUANT TO THE OFFER MAY BE WITHDRAWN AT ANY TIME PRIOR TO THE EXPIRATION DATE,
OR UNLESS ALREADY ACCEPTED FOR PAYMENT, ANY TIME AFTER 60 DAYS FROM THE OFFER
DATE.
THE UNDERSIGNED HAS BEEN ADVISED THAT THE PURCHASER IS AN AFFILIATE OF THE
GENERAL PARTNER OF THE PARTNERSHIP AND NO SUCH GENERAL PARTNER MAKES ANY
RECOMMENDATION AS TO WHETHER TO TENDER OR REFRAIN FROM TENDERING UNITS IN THE
OFFER. THE UNDERSIGNED HAS MADE HIS OR HER OWN DECISION TO TENDER UNITS.
4
<PAGE> 5
The undersigned hereby represents and warrants for the benefit of the
Partnership and the Purchaser that the undersigned owns the Units tendered
hereby and has full power and authority and has taken all necessary action to
validly tender, sell, assign, transfer, convey and deliver the Units tendered
hereby and that when the same are accepted for payment by the Purchaser, the
Purchaser will acquire good, marketable and unencumbered title thereto, free and
clear of all liens, restrictions, charges, encumbrances, conditional sales
agreements or other obligations relating to the sale or transfer thereof, and
such Units will not be subject to any adverse claims and that the transfer and
assignment contemplated herein are in compliance with all applicable laws and
regulations.
All authority herein conferred or agreed to be conferred shall survive the
death or incapacity of the undersigned, and any obligations of the undersigned
shall be binding upon the heirs, personal representatives, trustees in
bankruptcy, legal representatives, and successors and assigns of the
undersigned.
The undersigned further represents and warrants that, to the extent a
certificate evidencing the Units tendered hereby (the "original certificate") is
not delivered by the undersigned together with this Letter of Transmittal, (i)
the undersigned represents and warrants to the Purchaser that the undersigned
has not sold, transferred, conveyed, assigned, pledged, deposited or otherwise
disposed of any portion of the Units, (ii) the undersigned has caused a diligent
search of its records to be taken and has been unable to locate the original
certificate, (iii) if the undersigned shall find or recover the original
certificate evidencing the Units, the undersigned will immediately and without
consideration surrender it to the Purchaser; and (iv) the undersigned shall at
all times indemnify, defend, and save harmless the Purchaser and the
Partnership, its successors, and its assigns from and against any and all
claims, actions, and suits whether groundless or otherwise, and from and against
any and all liabilities, losses, damages, judgments, costs, charges, counsel
fees, and other expenses of every nature and character by reason of honoring or
refusing to honor the original certificate when presented by or on behalf of a
holder in due course of a holder appearing to or believed by the partnership to
be such, or by issuance or delivery of a replacement certificate, or the making
of any payment, delivery, or credit in respect of the original certificate
without surrender thereof, or in respect of the replacement certificate.
5
<PAGE> 6
===============================================================================
SIGNATURE BOX
(SEE INSTRUCTION 2)
- -------------------------------------------------------------------------------
Please sign exactly as your name is printed on the front of this Letter of
Transmittal. For joint owners, each joint owner must sign. (See Instruction 2).
TRUSTEES, EXECUTORS, ADMINISTRATORS, GUARDIANS, ATTORNEYS-IN-FACT, OFFICERS
OF A CORPORATION OR OTHER PERSONS ACTING IN A FIDUCIARY OR REPRESENTATIVE
CAPACITY, PLEASE COMPLETE THIS BOX AND SEE INSTRUCTION 2.
The signatory hereto hereby tenders the Units indicated in this Letter of
Transmittal to the Purchaser pursuant to the terms of the Offer, and certifies
under penalties of perjury that the statements in Box A, Box B and, if
applicable, Box C and Box D are true.
X
------------------------------------------------------------------------------
(Signature of Owner)
X
------------------------------------------------------------------------------
(Signature of Joint Owner)
Name and Capacity (if other than individuals).
---------------------------------
Title:
-------------------------------------------------------------------------
Address:
-----------------------------------------------------------------------
- -------------------------------------------------------------------------------
(City) (State) (Zip)
Area Code and Telephone No. (Day):
---------------------------------------------
(Evening):
-----------------------------------------
SIGNATURE GUARANTEE (IF REQUIRED)
(SEE INSTRUCTION 2)
Name and Address of Eligible Institution:
--------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Authorized Signature: X
--------------------------------------------------------
Name:
--------------------------------------------------------------------------
Title: Date:
------------------------------------- ------------------------------
===============================================================================
6
<PAGE> 7
TAX CERTIFICATIONS
(SEE INSTRUCTION 4)
BY SIGNING THE LETTER OF TRANSMITTAL IN THE SIGNATURE BOX, THE UNITHOLDER
CERTIFIES AS TRUE UNDER PENALTY OF PERJURY, THE REPRESENTATIONS IN BOXES A, B
AND C BELOW. PLEASE REFER TO THE ATTACHED INSTRUCTIONS FOR COMPLETING THIS
LETTER OF TRANSMITTAL AND BOXES A, B AND C BELOW.
================================================================================
BOX A
SUBSTITUTE FORM W-9
(SEE INSTRUCTION 4 - BOX A)
- --------------------------------------------------------------------------------
THE UNITHOLDER HEREBY CERTIFIES THE FOLLOWING TO THE PURCHASER UNDER
PENALTIES OF PERJURY:
(i) THE TAXPAYER IDENTIFICATION NO. ("TIN") PRINTED (OR CORRECTED) ON THE
FRONT OF THIS LETTER OF TRANSMITTAL IS THE CORRECT TIN OF THE UNITHOLDER, UNLESS
THE UNITS ARE HELD IN AN INDIVIDUAL RETIREMENT ACCOUNT ("IRA"); OR IF THIS
BOX [ ] IS CHECKED, THE UNITHOLDER HAS APPLIED FOR A TIN. IF THE UNITHOLDER HAS
APPLIED FOR A TIN, A TIN HAS NOT BEEN ISSUED TO THE UNITHOLDER, AND EITHER (a)
THE UNITHOLDER HAS MAILED OR DELIVERED AN APPLICATION TO RECEIVE A TIN TO THE
APPROPRIATE IRS CENTER OR SOCIAL SECURITY ADMINISTRATION OFFICE, OR (b) THE
UNITHOLDER INTENDS TO MAIL OR DELIVER AN APPLICATION IN THE NEAR FUTURE (IT
BEING UNDERSTOOD THAT IF THE UNITHOLDER DOES NOT PROVIDE A TIN TO THE PURCHASER,
31% OF ALL REPORTABLE PAYMENTS MADE TO THE UNITHOLDER WILL BE WITHHELD); AND
(ii) UNLESS THIS BOX [ ] IS CHECKED, THE UNITHOLDER IS NOT SUBJECT TO
BACKUP WITHHOLDING EITHER BECAUSE THE UNITHOLDER: (a) IS EXEMPT FROM BACKUP
WITHHOLDING; (b) HAS NOT BEEN NOTIFIED BY THE IRS THAT THE UNITHOLDER IS SUBJECT
TO BACKUP WITHHOLDING AS A RESULT OF A FAILURE TO REPORT ALL INTEREST OR
DIVIDENDS; OR (c) HAS BEEN NOTIFIED BY THE IRS THAT SUCH UNITHOLDER IS NO LONGER
SUBJECT TO BACKUP WITHHOLDING.
NOTE: PLACE AN "X" IN THE BOX IN (ii) ABOVE, ONLY IF YOU ARE UNABLE TO
CERTIFY THAT THE UNITHOLDER IS NOT SUBJECT TO BACKUP WITHHOLDING.
================================================================================
================================================================================
BOX B
FIRPTA AFFIDAVIT
(SEE INSTRUCTION 4 - BOX B)
- --------------------------------------------------------------------------------
UNDER SECTION 1445(e)(5) OF THE INTERNAL REVENUE CODE AND TREAS. REG.
1.1445-11T(d), A TRANSFEREE MUST WITHHOLD TAX EQUAL TO 10% OF THE AMOUNT
REALIZED WITH RESPECT TO CERTAIN TRANSFERS OF AN INTEREST IN A PARTNERSHIP IF
50% OR MORE OF THE VALUE OF ITS GROSS ASSETS CONSISTS OF U.S. REAL PROPERTY
INTERESTS AND 90% OR MORE OF THE VALUE OF ITS GROSS ASSETS CONSISTS OF U.S. REAL
PROPERTY INTERESTS PLUS CASH EQUIVALENTS, AND THE HOLDER OF THE PARTNERSHIP
INTEREST IS A FOREIGN PERSON. TO INFORM THE PURCHASER THAT NO WITHHOLDING IS
REQUIRED WITH RESPECT TO THE UNITHOLDER'S UNITS IN THE PARTNERSHIP, THE PERSON
SIGNING THIS LETTER OF TRANSMITTAL HEREBY CERTIFIES THE FOLLOWING UNDER
PENALTIES OF PERJURY:
(i) UNLESS THIS BOX [ ] IS CHECKED, THE UNITHOLDER, IF AN INDIVIDUAL,
IS A U.S. CITIZEN OR A RESIDENT ALIEN FOR PURPOSES OF U.S. INCOME TAXATION, AND
IF OTHER THAN AN INDIVIDUAL, IS NOT A FOREIGN CORPORATION, FOREIGN PARTNERSHIP,
FOREIGN ESTATE OR FOREIGN TRUST (AS THOSE TERMS ARE DEFINED IN THE INTERNAL
REVENUE CODE AND INCOME TAX REGULATIONS);
(ii) THE UNITHOLDER'S U.S. SOCIAL SECURITY NUMBER (FOR INDIVIDUALS) OR
EMPLOYER IDENTIFICATION NUMBER (FOR NON-INDIVIDUALS) IS CORRECT AS FURNISHED IN
THE BLANK PROVIDED FOR THAT PURPOSE ON THE FRONT OF THE LETTER OF TRANSMITTAL;
(iii) THE UNITHOLDER'S HOME ADDRESS (FOR INDIVIDUALS), OR OFFICE
ADDRESS (FOR NON-INDIVIDUALS), IS CORRECTLY PRINTED (OR CORRECTED) ON THE FRONT
OF THIS LETTER OF TRANSMITTAL.
THE PERSON SIGNING THIS LETTER OF TRANSMITTAL UNDERSTANDS THAT THIS
CERTIFICATION MAY BE DISCLOSED TO THE IRS BY THE PURCHASER AND THAT ANY FALSE
STATEMENTS CONTAINED HEREIN COULD BE PUNISHED BY FINE, IMPRISONMENT, OR BOTH.
================================================================================
7
<PAGE> 8
================================================================================
BOX C
SUBSTITUTE FORM W-8
(SEE INSTRUCTION 4 - BOX C)
- --------------------------------------------------------------------------------
BY CHECKING THIS BOX [ ], THE PERSON SIGNING THIS LETTER OF TRANSMITTAL
HEREBY CERTIFIES UNDER PENALTIES OF PERJURY THAT THE UNITHOLDER IS AN "EXEMPT
FOREIGN PERSON" FOR PURPOSES OF THE BACKUP WITHHOLDING RULES UNDER THE U.S.
FEDERAL INCOME TAX LAWS, BECAUSE THE UNITHOLDER HAS THE FOLLOWING
CHARACTERISTICS:
(i) IS A NONRESIDENT ALIEN INDIVIDUAL OR A FOREIGN CORPORATION,
PARTNERSHIP, ESTATE OR TRUST;
(ii) IF AN INDIVIDUAL, HAS NOT BEEN AND PLANS NOT TO BE PRESENT IN THE
U.S. FOR A TOTAL OF 183 DAYS OR MORE DURING THE CALENDAR YEAR; AND
(iii) NEITHER ENGAGES, NOR PLANS TO ENGAGE, IN A U.S. TRADE OR BUSINESS
THAT HAS EFFECTIVELY CONNECTED GAINS FROM TRANSACTIONS WITH A
BROKER OR BARTER EXCHANGE.
================================================================================
8
<PAGE> 9
INSTRUCTIONS
FOR COMPLETING LETTER OF TRANSMITTAL
1. REQUIREMENTS OF TENDER. To be effective, a duly completed and signed Letter
of Transmittal (or facsimile thereof) and any other required documents must
be received by the Information Agent at one of its addresses (or its
facsimile number) set forth herein before 5:00 p.m., New York Time, on the
Expiration Date, unless extended. To ensure receipt of the Letter of
Transmittal and any other required documents, it is suggested that you use
overnight courier delivery or, if the Letter of Transmittal and any other
required documents are to be delivered by United States mail, that you use
certified or registered mail, return receipt requested.
Our records indicate that the undersigned owns the number of Units set
forth in the box above entitled "Description of Units Tendered" under the
column entitled "Total Number of Units Owned." If you would like to tender
only a portion of your Units, please so indicate in the space provided in
the box above entitled "Description of Units Tendered."
WHEN TENDERING, YOU MUST SEND ALL PAGES OF THE LETTER OF TRANSMITTAL,
INCLUDING TAX CERTIFICATIONS (BOXES A, B, AND C).
THE METHOD OF DELIVERY OF THE LETTER OF TRANSMITTAL AND ALL OTHER REQUIRED
DOCUMENTS IS AT THE OPTION AND RISK OF THE TENDERING UNITHOLDER AND DELIVERY
WILL BE DEEMED MADE ONLY WHEN ACTUALLY RECEIVED BY THE INFORMATION AGENT. IN
ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ASSURE TIMELY DELIVERY.
2. SIGNATURE REQUIREMENTS.
INDIVIDUAL AND JOINT OWNERS -- After carefully reading and completing the
Letter of Transmittal, to tender Units, unitholders must sign at the "X" in
the Signature Box of the Letter of Transmittal. The signature(s) must
correspond exactly with the names printed (or corrected) on the front of the
Letter of Transmittal. If the Letter of Transmittal is signed by the
unitholder (or beneficial owner in the case of an IRA), no signature guarantee
on the Letter of Transmittal is required. If any tendered Units are registered
in the names of two or more joint owners, all such owners must sign this
Letter of Transmittal.
IRAS/ELIGIBLE INSTITUTIONS -- For Units held in an IRA account, the
beneficial owner should sign in the Signature Box and no signature guarantee
is required. Similarly, if Units are tendered for the account of a member firm
of a registered national security exchange, a member firm 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.
TRUSTEES, CORPORATIONS, PARTNERSHIP AND FIDUCIARIES -- Trustees, executors,
administrators, guardians, attorneys-in-fact, officers of a corporation,
authorized partners of a partnership or other persons acting in a fiduciary or
representative capacity must sign at the "X" in the Signature Box and have
their signatures guaranteed by an Eligible Institution by completing the
signature guarantee set forth in the Signature Box of the Letter of
Transmittal. If the Letter of Transmittal is signed by trustees,
administrators, guardians, attorneys-in-fact, officers of a corporation,
authorized partners of a partnership or others acting in a fiduciary or
representative capacity, such persons should, in addition to having their
signatures guaranteed, indicate their title in the Signature Box and must
submit proper evidence satisfactory to the Purchaser of their authority to so
act (see Instruction 3 below).
3. DOCUMENTATION REQUIREMENTS. In addition to the information required to be
completed on the Letter of Transmittal, additional documentation may be
required by the Purchaser under certain circumstances including, but not
limited to, those listed below. Questions on documentation should be
directed to the Information Agent at its telephone number set forth herein.
9
<PAGE> 10
DECEASED OWNER (JOINT TENANT) -- Copy of death certificate.
DECEASED OWNER (OTHERS) -- Copy of death certificate (see
also Executor/Administrator/
Guardian below).
EXECUTOR/ADMINISTRATOR/GUARDIAN -- Copy of court appointment
documents for executor or
administrator; and
(a) a copy of applicable
provisions of the will (title
page, executor(s)' powers, asset
distribution); or
(b) estate distribution
documents.
ATTORNEY-IN-FACT -- Current power of attorney.
CORPORATION/PARTNERSHIP -- Corporate resolution(s) or other
evidence of authority to act.
Partnership should furnish a
copy of the partnership
agreement.
TRUST/PENSION PLANS -- Unless the trustee(s) are named
in the registration, a copy of
the cover page of the trust or
pension plan, along with a copy
of the section(s) setting forth
names and powers of trustee(s)
and any amendments to such
sections or appointment of
successor trustee(s).
4. SPECIAL PAYMENT AND DELIVERY INSTRUCTIONS. If consideration is to be issued
in the name of a person other than the person signing the Signature Box of
the Letter of Transmittal or if consideration is to be sent to someone
other than such signer or to an address other than that set forth on the
Letter of Transmittal in the box entitled "Description of Units Tendered,"
the appropriate boxes on the Letter of Transmittal should be completed.
5. TAX CERTIFICATIONS. The unitholder(s) tendering Units to the Purchaser
pursuant to the Offer must furnish the Purchaser with the unitholder(s)'
taxpayer identification number ("TIN") and certify as true, under penalties
of perjury, the representations in Box A, Box B and, if applicable, Box C.
By signing the Signature Box, the unitholder(s) certifies that the TIN as
printed (or corrected) on this Letter of Transmittal in the box entitled
"Description of Units Tendered" and the representations made in Box A, Box
B and, if applicable, Box C, are correct. See attached Guidelines for
Certification of Taxpayer Identification Number on Substitute Form W-9 for
guidance in determining the proper TIN to give the Purchaser.
U.S. PERSONS. A unitholder that is a U.S. citizen or a resident alien
individual, a domestic corporation, a domestic partnership, a domestic trust
or a domestic estate (collectively, "U.S. Persons"), as those terms are
defined in the Code, should follow the instructions below with respect to
certifying Box A and Box B.
BOX A - SUBSTITUTE FORM W-9.
Part (i), Taxpayer Identification Number -- Tendering unitholders must
certify to the Purchaser that the TIN as printed (or corrected) on this Letter
of Transmittal in the box entitled "Description of Units Tendered" is correct.
If a correct TIN is not provided, penalties may be imposed by the Internal
Revenue Service (the "IRS"), in addition to the unitholder being subject to
backup withholding.
Part (ii), Backup Withholding -- In order to avoid 31% Federal income tax
backup withholding, the tendering unitholder must certify, under penalty of
perjury, that such unitholder is not subject to backup withholding. Certain
unitholders (including, among others, all corporations and certain exempt
non-profit organizations) are not subject to backup withholding. Backup
withholding is not an additional tax. If withholding results in an overpayment
of taxes, a refund may be obtained from the IRS. DO NOT CHECK THE BOX IN BOX
A, PART (ii), UNLESS YOU HAVE BEEN NOTIFIED BY THE IRS THAT YOU ARE SUBJECT TO
BACKUP WITHHOLDING.
10
<PAGE> 11
When determining the TIN to be furnished, please refer to the following as
a guide:
Individual accounts - should reflect owner's TIN.
Joint accounts - should reflect the TIN of the owner whose name appears
first.
Trust accounts - should reflect the TIN assigned to the trust.
IRA custodial accounts - should reflect the TIN of the custodian (not
necessary to provide).
Custodial accounts for the benefit of minors - should reflect the TIN of
the minor.
Corporations, partnership or other business entities - should reflect the
TIN assigned to that entity.
By signing the Signature Box, the unitholder(s) certifies that the TIN as
printed (or corrected) on the front of the Letter of Transmittal is correct.
BOX B - FIRPTA AFFIDAVIT -- Section 1445 of the Code requires that each
unitholder transferring interests in a partnership with real estate assets
meeting certain criteria certify under penalty of perjury the representations
made in Box B, or be subject to withholding of tax equal to 10% of the
purchase price for interests purchased. Tax withheld under Section 1445 of the
Code is not an additional tax. If withholding results in an overpayment of
tax, a refund may be obtained from the IRS. PART (i) SHOULD BE CHECKED ONLY IF
THE TENDERING UNITHOLDER IS NOT A U.S. PERSON, AS DESCRIBED THEREIN.
BOX C - FOREIGN PERSONS -- In order for a tendering unitholder who is a
Foreign Person (i.e., not a U.S. Person, as defined above) to qualify as
exempt from 31% backup withholding, such foreign Unitholder must certify,
under penalties of perjury, the statement in Box C of this Letter of
Transmittal, attesting to that Foreign Person's status by checking the box
preceding such statement. UNLESS THE BOX IS CHECKED, SUCH UNITHOLDER WILL BE
SUBJECT TO 31% WITHHOLDING OF TAX.
6. VALIDITY OF LETTER OF TRANSMITTAL. All questions as to the validity, form,
eligibility (including time of receipt) and acceptance of a Letter of
Transmittal and other required documents will be determined by the
Purchaser and such determination will be final and binding. The Purchaser's
interpretation of the terms and conditions of the Offer (including these
Instructions for this Letter of Transmittal) will be final and binding. The
Purchaser will have the right to waive any irregularities or conditions as
to the manner of tendering. Any irregularities in connection with tenders,
unless waived, must be cured within such time as the Purchaser shall
determine. This Letter of Transmittal will not be valid until any
irregularities have been cured or waived. Neither the Purchaser nor the
Information Agent are under any duty to give notification of defects in a
Letter of Transmittal and will incur no liability for failure to give such
notification.
7. ASSIGNEE STATUS. Assignees must provide documentation to the Information
Agent which demonstrates, to the satisfaction of the Purchaser, such
person's status as an assignee.
8. TRANSFER TAXES. The amount of any transfer taxes (whether imposed on the
registered holder or such person) payable on account of the transfer to
such person will be deducted from the purchase price unless satisfactory
evidence of the payment of such taxes or exemption therefrom is submitted.
11
<PAGE> 12
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
GUIDELINES FOR DETERMINING THE PROPER IDENTIFICATION NUMBER TO GIVE THE
PAYER -- Social Security numbers have nine digits separated by two hyphens:
i.e., 000-00-0000. Employer identification numbers have nine digits separated by
only one hyphen: i.e., 00-0000000. The table below will help determine the
number to give the payer.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------
GIVE THE
TAXPAYER
IDENTIFICATION
FOR THIS TYPE OF ACCOUNT: NUMBER OF --
- --------------------------------------------------------------------------------------------------------
<S> <C>
1. An individual account The individual
2. Two or more individuals (joint The actual owner of the account or, if
account) combined funds, the first individual on
the account
3. Husband and wife (joint account) The actual owner of the account or, if
joint funds, either person
4. Custodian account of a minor The minor (2)
(Uniform Gift to Minors Act)
5. Adult and minor (joint account) The adult or, if the minor is the only
contributor, the minor (1)
6. Account in the name of guardian or The ward, minor or incompetent person (3)
committee for a designated ward,
minor or incompetent person (3)
7. a. The usual revocable savings trust The grantor trustee (1)
account (grantor is also trustee)
b. So-called trust account that is The actual owner (1)
not a legal or valid trust under
state law
8. Sole proprietorship account The owner (4)
9. A valid trust, estate or pension The legal entity (Do not furnish the
trust identifying number of the personal
representative or trustee unless the
legal entity itself is not designated in
the account title.) (5)
10. Corporate account The corporation
11. Religious, charitable, or The organization
educational organization account
12. Partnership account held in the name The partnership
of the business
13. Association, club, or other The organization
tax-exempt organization
14. A broker or registered nominee The broker or nominee
15. Account with the Department of The public entity
Agriculture in the name of a public
entity (such as a State or local
government, school district, or
prison) that receives agricultural
program payments
- --------------------------------------------------------------------------------------------------------
</TABLE>
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<PAGE> 13
(1) List first and circle the name of the person whose number you furnish.
(2) Circle the minor's name and furnish the minor's social security number.
(3) Circle the ward's or incompetent person's name and furnish such person's
social security number or employer identification number.
(4) Show your individual name. You may also enter your business name. You may
use your social security number or employer identification number.
(5) List first and circle the name of the legal trust, estate, or pension
trust.
NOTE: If no name is circled when there is more than one name, the number will be
considered to be that of the first name listed.
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
OBTAINING A NUMBER
If you do not have a taxpayer identification number or you do not know your
number, obtain Form SS-5, Application for a Social Security Number Card (for
individuals), or Form SS-4, Application for Employer Identification Number (for
businesses and all other entities), at the local office of the Social Security
Administration or the Internal Revenue Service and apply for a number.
PAYEES EXEMPT FROM BACKUP WITHHOLDING
Payees specifically exempted from backup withholding on ALL payments
include the following:
- A corporation.
- A financial institution.
- An organization exempt from tax under section 501(a) of the Internal
Revenue Code of 1986, as amended (the "Code"), or an individual
retirement plan.
- The United States or any agency or instrumentality thereof.
- A State, the District of Columbia, a possession of the United States, or
any subdivision or instrumentality thereof.
- A foreign government, a political subdivision of a foreign government,
or any agency or instrumentality thereof.
- An international organization or any agency or instrumentality thereof.
- A registered dealer in securities or commodities registered in the U.S.
or a possession of the U.S.
- A real estate investment trust.
- A common trust fund operated by a bank under section 584(a) of the Code.
- An exempt charitable remainder trust, or a non-exempt trust described in
section 4947(a)(1).
- An entity registered at all times under the Investment Company Act of
1940.
- A foreign central bank of issue.
- A futures commission merchant registered with the Commodity Futures
Trading Commission.
Payments of dividends and patronage dividends not generally subject to
backup withholding include the following:
- Payments to nonresident aliens subject to withholding under section 1441
of the Code.
- Payments to Partnerships not engaged in a trade or business in the U.S.
and which have at least one nonresident partner.
- Payments of patronage dividends where the amount received is not paid in
money.
13
<PAGE> 14
- Payments made by certain foreign organizations.
- Payments made to an appropriate nominee.
- Section 404(k) payments made by an ESOP.
Payments of interest not generally subject to backup withholding include
the following:
- Payments of interest on obligations issued by individuals. NOTE: You may
be subject to backup withholding if this interest is $600 or more and is
paid in the course of the payer's trade or business and you have not
provided your correct taxpayer identification number to the payer.
Payments of tax exempt interest (including exempt interest dividends
under section 852 of the Code).
- Payments described in section 6049(b)(5) of the Code to nonresident
aliens.
- Payments on tax-free covenant bonds under section 1451 of the Code.
- Payments made by certain foreign organizations.
- Payments of mortgage interest to you.
- Payments made to an appropriate nominee.
Exempt payees described above should file a substitute Form W-9 to avoid
possible erroneous backup withholding. FILE THIS FORM WITH THE PAYER. FURNISH
YOUR TAXPAYER IDENTIFICATION NUMBER, WRITE "EXEMPT" ON THE FACE OF THE FORM, AND
RETURN IT TO THE PAYER. IF THE PAYMENTS ARE INTEREST, DIVIDENDS, OR PATRONAGE
DIVIDENDS, ALSO SIGN AND DATE THE FORM. IF YOU ARE A NONRESIDENT ALIEN OR A
FOREIGN ENTITY NOT SUBJECT TO BACKUP WITHHOLDING, FILE WITH PAYER A COMPLETED
INTERNAL REVENUE FORM W-8 (CERTIFICATE OF FOREIGN STATUS).
Certain payments other than interest, dividends, and patronage dividends,
that are not subject to information reporting are also not subject to backup
withholding. For details, see the regulations under sections 6041, 6041A(A),
6045, and 6050A of the Code.
PRIVACY ACT NOTICE -- Section 6109 of the Code requires most recipients of
dividend, interest, or other payments to give correct taxpayer identification
numbers to payers who must report the payments to the IRS. The IRS uses the
numbers for identification purposes. Payers must be given the numbers whether or
not recipients are required to file a tax return. Payers must generally withhold
31% of taxable interest, dividend, and certain other payments to a payee who
does not furnish a correct taxpayer identification number to a payer. Certain
penalties may also apply.
PENALTIES
(1) PENALTY FOR FAILURE TO FURNISH TAXPAYER IDENTIFICATION NUMBER -- If
you fail to furnish your correct taxpayer identification number to a payer, you
are subject to a penalty of $50 for each such failure unless your failure is due
to reasonable cause and not to willful neglect.
(2) CIVIL PENALTY FOR FALSE INFORMATION WITH RESPECT TO WITHHOLDING -- If
you make a false statement with no reasonable basis that results in no
imposition of backup withholding, you are subject to a penalty of $500.
(3) CRIMINAL PENALTY FOR FALSIFYING INFORMATION -- Willfully falsifying
certifications or affirmations may subject you to criminal penalties including
fines and/or imprisonment.
FOR ADDITIONAL INFORMATION CONTACT YOUR TAX CONSULTANT OR THE INTERNAL
REVENUE SERVICE.
14
<PAGE> 15
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>
BY TELEPHONE:
TOLL FREE (888) 349-2005
15
<PAGE> 1
EXHIBIT (a)(3)
IMPORTANT-PROPOSED LITIGATION
SETTLEMENT AND TENDER OFFER
AIMCO
AIMCO PROPERTIES, L.P.
c/o River Oaks Partnership Services, Inc.
P.O. Box 2065
S. Hackensack, N.J., 07606-2065
(888) 349-2005
November 15, 1999
Dear Limited Partner:
We are pleased to announce that we have reached a settlement, subject to
final court approval, of the class action litigation entitled Rosalie Nuanes, et
al. v. Insignia Financial Group, et al., which was brought on behalf of limited
partners in partnerships formerly managed by Insignia Financial Group, Inc.,
including yours. Pursuant to the settlement, we are offering to acquire your
units of limited partnership interest in Shelter Properties II Limited
Partnership at $582.25 per unit. We determined the offer price based upon a
method negotiated at arm's length with plaintiffs' class action counsel. This
price includes a payment of $28.25 from a settlement fund which we will pay you
if we receive court approval of the settlement and you do not request exclusion
from the settlement class. IN ACCORDANCE WITH THE TERMS OF THE SETTLEMENT,
ROBERT A. STANGER & CO., INC., AN INDEPENDENT INVESTMENT BANKING FIRM, HAS
DELIVERED ITS OPINION THAT THE OFFER PRICE IS FAIR TO LIMITED PARTNERS FROM A
FINANCIAL POINT OF VIEW. (A copy of that opinion is attached as Annex I to the
enclosed Litigation Settlement Offer.)
The Court has preliminarily approved the settlement and will soon consider
whether to give its final approval. The offer price of $582.25 was calculated
after taking into account amounts for estimated attorneys' fees, costs, and
expenses which plaintiffs' counsel is permitted to seek in connection with the
settlement. These and other terms of the settlement are more fully described in
the accompanying Notice of Settlement, as well as in the Stipulation of
Settlement on file with the San Mateo Superior Court.
<PAGE> 2
Our offer is not subject to any minimum number of units being tendered.
However, under the settlement, we are not required to pay more than $50,000,000
in cash in the aggregate for all units tendered by limited partners in all of
the 49 partnerships to which we are making offers as part of the settlement. If
units tendered for cash in all of these offers exceed $50,000,000 in value, we
will accept units on a pro rata basis, according to the value of units tendered
by each person. However, in connection with the settlement, our parent
corporation, Apartment Investment and Management Company ("AIMCO'"), a New York
Stock Exchange-listed company, intends to seek Court approval to offer freely
tradeable shares of AIMCO stock in exchange for units tendered in excess of
$50,000,000. However, before we offer any such shares of AIMCO stock, the Court
must first determine that the terms are fair after holding a hearing in which
you and all other limited partners in your partnership can participate. If we do
offer AIMCO stock, we will provide you with additional information describing
the shares and how many you will receive for your units. In any event, we will
not be obligated to pay more than $50,000,000 in cash pursuant to all of the
offers, although we reserve the right to do so. If you wish to sell your units
for cash you may wish to sell pursuant to this offer.
You will not be required to pay any partnership transfer fees in connection
with any disposition of your units pursuant to our offer. However, you may have
to pay any taxes and any other fees and expenses. Our offer price will be
reduced for any distributions subsequently made by your partnership prior to the
expiration of our offer.
There are advantages and disadvantages to you of accepting or declining our
offer. The terms of the offer are more fully described in the enclosed
materials, which you should read carefully. These documents describe the
material risks and opportunities associated with the offer, including certain
tax considerations. The general partner of your partnership, which is our
affiliate, makes no recommendation as to whether you should tender or refrain
from tendering your units. You must make your own decision whether or not to
participate in the offer, based upon a number of factors, including your
financial position, your need or desire for liquidity, other financial
opportunities available to you, and your tax position and the tax consequences
to you of selling your units.
If you desire to tender any of your units in response to our offer, you
should complete and sign the enclosed letter of transmittal in accordance with
the enclosed instructions and mail or deliver the signed letter of transmittal
and any other required documents to River Oaks Partnership Services, Inc., which
is acting as the Information Agent in connection with our offer, at the address
set forth on the back cover of the enclosed Offer to Purchase. The offer will
expire at 5:00 p.m. New York City time on
2
<PAGE> 3
December 30, 1999, unless extended. If you have any questions or require further
information, please call the Information Agent, toll free, at (888) 349-2005.
Very truly yours,
AIMCO PROPERTIES, L.P.
3
<PAGE> 1
Exhibit (z)(1)
AGREEMENT OF JOINT FILING
Cooper River Properties, L.L.C., AIMCO/IPT, Inc., Insignia Properties,
L.P., AIMCO Properties, L.P., AIMCO-GP, Inc. and Apartment Investment and
Management Company agree that the Amendment No. 15 to Schedule 13D to which this
agreement is attached as an exhibit, and all further amendments thereto, and all
filings under Schedule 14D-1 to which this agreement is attached as an exhibit,
and all amendments thereto, shall be filed on behalf of each of them. This
agreement is intended to satisfy the requirements of Rule 13d-1(f)(1)(iii) under
the Securities Exchange Act of 1934, as amended.
Dated: November 15, 1999
COOPER RIVER PROPERTIES, L.L.C.
By: /s/ Patrick J. Foye
-------------------------------
Executive Vice President
AIMCO/IPT, INC.
By: /s/ Patrick J. Foye
-------------------------------
Executive Vice President
INSIGNIA PROPERTIES, L.P.
By: AIMCO/IPT, INC.
(General Partner)
By: /s/ Patrick J. Foye
-------------------------------
Executive Vice President
AIMCO PROPERTIES, L.P.
By: AIMCO-GP, INC.
(General Partner)
By: /s/ Patrick J. Foye
-------------------------------
Executive Vice President
AIMCO-GP, INC.
By: /s/ Patrick J. Foye
-------------------------------
Executive Vice President
APARTMENT INVESTMENT
AND MANAGEMENT COMPANY
By: /s/ Patrick J. Foye
-------------------------------
Executive Vice President
