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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
--------------------
CENTURY PROPERTIES FUND XVI
(Name of Subject Company)
DEFOREST VENTURES I L.P.
(Bidder)
UNITS OF LIMITED PARTNERSHIP INTEREST
(Title of Class
of Securities)
NONE
(CUSIP Number of Class
of Securities)
--------------------
Michael L. Ashner Copy to:
DeForest Capital I Corporation Mark I. Fisher
100 Jericho Quadrangle Rosenman & Colin
Suite 214 575 Madison Avenue
Jericho, New York 11735-2717 New York, New York 10022-2585
(516) 822-0022 (212) 940-8877
(Name, Address and Telephone Number of
Person Authorized to Receive Notices and
Communications on Behalf of Bidder)
Calculation of Filing Fee
Transaction Amount of
Valuation* Filing Fee
----------- ----------
$390,984.37 $78.20
*For purposes of calculating the filing fee only. This amount assumes
the purchase of 24,031 units of limited partnership interest ("Units")
of the subject company for $16.27 per Unit in cash.
/ / 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 date of its filing.
CUSIP No. None
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1. Name of Reporting Person
S.S. or I.R.S. Identification No. of Above Person
DeForest Ventures I L.P.
I.R.S. I.D. No. 11-3230287
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2. Check the Appropriate Box if a Member of a Group
(See Instructions)
(a) / /
(b) / /
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3. SEC Use Only
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4. Sources of Funds (See Instructions)
WC; OO
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5. Check Box if Disclosure of Legal Proceedings is
Required Pursuant to Items 2(e) of 2(f)
/ /
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6. Citizenship or Place of Organization
Delaware
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7. Aggregate Amount Beneficially Owned by Each Reporting
Person
40,691.67 Units
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8. Check Box if the Aggregate Amount in Row (7) Excludes
Certain Shares (See Instructions)
/ /
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9. Percent of Class Represented by Amount in Row (7)
31.3%
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10. Type of Reporting Person (See Instructions)
PN
2
Item 1. Security and Subject Company.
(a) The name of the subject company is Century
Properties Fund XVI, a California limited partnership (the
"Partnership"), which has its principal executive offices at 5665
Northside Drive, N.W., Suite 370, Atlanta, Georgia 30328.
(b) This Schedule relates to the offer by DeForest
Ventures I L.P., a Delaware limited partnership (the "Purchaser"),
to purchase up to 24,031 outstanding units of limited partnership
interest ("Units") of the Partnership at $16.27 per Unit, net to
the seller in cash, upon the terms and subject to the conditions
set forth in the Offer to Purchase dated June 2, 1995 (the "Offer
to Purchase") and the related Letter of Transmittal, copies of
which are attached hereto as Exhibits (a)(1) and (a)(2),
respectively. The number of Units outstanding is set forth under
"INTRODUCTION" in the Offer to Purchase and is incorporated herein
by reference.
(c) The information set forth under "THE TENDER OFFER --
Section 13. Background of the Offer" of the Offer to Purchase is
incorporated herein by reference.
Item 2. Identity and Background.
(a)-(d) The information set forth under "INTRODUCTION",
"THE TENDER OFFER -- Section 11. Certain Information Concerning
the Purchaser" and Schedule 1 of the Offer to Purchase is
incorporated herein by reference.
3
(e)-(f) During the last five years, neither the
Purchaser, the General Partner nor, to the best of its knowledge,
any of the persons listed in Schedule 1 of the Offer to Purchase
(i) has been convicted in a criminal proceeding (excluding traffic
violations or similar misdemeanors) or (ii) were a party to a civil
proceeding of a judicial or administrative body of competent
jurisdiction and as a result of such proceeding were or are subject
to a judgment, decree or final order enjoining future violations
of, or prohibiting activities subject to, Federal or state
securities laws or finding any violation of such laws.
(g) The information set forth in Schedule 1 of the Offer
to Purchase is incorporated herein by reference.
Item 3. Past Contracts, Transactions or Negotiations with the
Subject Company.
(a) The information set forth in "THE TENDER OFFER --
Section 10. Conflicts of Interest and Transactions with
Affiliates" and "THE TENDER OFFER -- Section 13. Background of the
Offer" of the Offer to Purchase is incorporated herein by
reference. In addition, the information set forth in Note 2 to the
financial statements of the Partnership included in the Form 10-K
of the Partnership for the fiscal year ended December 31, 1994
(such Note being referred to as the "Form 10-K Note"), a copy of
which is attached hereto as Exhibit (g)(i), Note 2 to the financial
statements of the Partnership included in the Form 10-Q of the
Partnership for the three months ended March 31, 1995 (such Note
being referred to as the "Form 10-Q Note"), a copy of which is
attached hereto as Exhibit (g)(ii), and the seventh, eighth and
4
ninth paragraphs of Item 1. "Business" of Form 10-K of the
Partnership for the fiscal year ended December 31, 1994 (the "1994
Form 10-K"), a copy of which is attached hereto as Exhibit
(g)(iii), is incorporated herein by reference.
(b) The information set forth in "THE TENDER OFFER --
Section 13. Background of the Offer" of the Offer to Purchase is
incorporated herein by reference. In addition, the information set
forth in the Form 10-K Note, the Form 10-Q Note and Item 1 of the
1994 Form 10-K is incorporated herein by reference.
Item 4. Source and Amount of Funds or Other Consideration.
(a)-(b) The information set forth in "THE TENDER OFFER
- -- Section 10. Conflicts of Interest and Transactions with
Affiliates" and "THE TENDER OFFER -- Section 12. Source of Funds"
of the Offer to Purchase is incorporated herein by reference.
(c) Not applicable.
Item 5. Purpose of the Tender Offer and Plans or Proposals of the
Bidder.
(a)-(b) The information set forth in "THE TENDER OFFER
- -- Section 8. Future Plans" and "THE TENDER OFFER -- Section 13.
Background of the Offer" of the Offer to Purchase is incorporated
herein by reference.
(c) Not applicable.
5
(d) The information set forth in "THE TENDER OFFER --
Section 8. Future Plans" of the Offer to Purchase is incorporated
herein by reference.
(e)-(g) Not applicable.
Item 6. Interest in Securities of the Subject Company.
(a) The information set forth in "INTRODUCTION" and "THE
TENDER OFFER -- Section 11. Certain Information Concerning the
Purchaser" of the Offer to Purchase is incorporated herein by
reference.
(b) None.
Item 7. Contracts, Arrangements, Understandings or Relationships
with Respect to the Subject Company's Securities.
The information set forth in "THE TENDER OFFER -- Section
11. Certain Information Concerning The Purchaser" and "The TENDER
OFFER -- Section 12. Source of Funds" of the Offer to Purchase is
incorporated herein by reference.
Item 8. Persons Retained, Employed or to be Compensated.
None.
Item 9. Financial Statements of Certain Bidders.
The information set forth in "THE TENDER OFFER -- Section
11. Certain Information Concerning the Purchaser" and Schedule 2
of the Offer to Purchase is incorporated herein by reference.
Item 10. Additional Information.
6
(a) None.
(b)-(d) The information set forth in "THE TENDER OFFER
- -- Section 15. Certain Legal Matters" of the Offer to Purchase is
incorporated herein by reference.
(e) None.
(f) Reference is hereby made to the Offer to Purchase
and the related Letter of Transmittal, copies of which are attached
hereto as Exhibits (a)(1) and (a)(2), respectively, and which are
incorporated herein in their entirety by reference.
Item 11. Material to be Filed as Exhibits.
(a)(1) Offer to Purchase dated June 2, 1995.
(a)(2) Letter of Transmittal.
(a)(3) Form of Cover Letter, dated June 2, 1995, from
DeForest Ventures I L.P. to Unitholders.
(b)(1) Master Agreement, dated as of November 21,
1994, among DeForest Capital II Corporation,
DeForest Ventures II L.P., NPI-AP Management,
L.P., National Property Investors, Inc. and
Kidder Peabody Mortgage Capital Corporation.
(b)(2) Letter Agreement supplementing the Master
Agreement, dated November 30, 1994, among
DeForest Capital II Corporation, DeForest
Ventures II L.P., NPI-AP Management, L.P.,
National Property Investors, Inc., DeForest
Capital I Corporation, DeForest Ventures I
L.P. and Kidder Peabody Mortgage Capital
Corporation.
(b)(3) Amendment No. 2 to the Master Agreement, dated
as of May 5, 1995, among DeForest Capital I
Corporation, DeForest Ventures I L.P.,
DeForest Capital II Corporation, DeForest
Ventures II L.P., NPI-AP Management, L.P.,
National Property Investors, Inc. and
PaineWebber Real Estate Securities Inc.
7
(b)(4) Loan Agreement, dated as of November 30, 1994,
between DeForest Capital I Corporation,
DeForest Ventures I L.P. and Kidder Peabody
Mortgage Capital Corporation.
(b)(5) Amendment No. 1 to the Loan Agreement, dated
as of May 5, 1995, among DeForest Ventures I
L.P. and PaineWebber Real Estate Securities
Inc.
(c)(1) Agreement, dated December 1, 1994, by and
between Lisle W. Payne and Ventures I relating
to certain distributions which may be received
by Ventures I.
(c)(2) Agreement, dated December 1, 1994, by and
between Janet E. Larson, individually and as
Trustee of the Larson Family Revocable Trust
and Ventures I relating to certain
distributions which may be received by
Ventures I.
(d) None.
(e)-(f) Not applicable.
(g)(i) Note 2 to the financial statements of Century
Properties Fund XVI included in the Form 10-K
of Century Properties Fund XVI for the fiscal
year ended December 31, 1994.
(g)(ii) Note 2 to the financial statements of Century
Properties Fund XVI included in the Form 10-Q
of Century Properties Fund XVI for the three
months ended March 31, 1995.
(g)(iii) The seventh, eighth and ninth paragraphs of
Item 1. "Business" of the Form 10-K of Century
Properties Fund XVI for the fiscal year ended
December 31, 1994 (the "1994 Form 10-K").
8
Signatures
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: June 2, 1995
DEFOREST VENTURES I L.P.
By: DeForest Capital I Corporation,
its General Partner
By: /s/ Michael L. Ashner
-------------------------
Name: Michael L. Ashner
Title: President
9
Exhibit Index
Sequentially
Exhibit No. Description Numbered Page
- ----------- ----------- -------------
(a)(1) Offer to Purchase dated June 2, 1995 . . . . . . . . .
(a)(2) Letter of Transmittal. . . . . . . . . . . . . . . . .
(a)(3) Form of Cover Letter, dated June 2, 1995,
from DeForest Ventures I L.P. to
Unitholders. . . . . . . . . . . . . . . . . . . . . .
(b)(1) Master Agreement, dated as of November
21, 1994, among DeForest Capital II
Corporation, DeForest Ventures II L.P.,
NPI-AP Management, L.P., National Property
Investors, Inc. and Kidder Peabody Mortgage
Capital Corporation. . . . . . . . . . . . . . . . . .*
(b)(2) Letter Agreement supplementing the Master
Agreement, dated November 30, 1994, among
DeForest Capital II Corporation, DeForest
Ventures II L.P., NPI-AP Management, L.P.,
National Property Investors, Inc., DeForest
Capital I Corporation DeForest Ventures I
L.P. and Kidder Peabody Mortgage Capital
Corporation. . . . . . . . . . . . . . . . . . . . . .*
(b)(3) Amendment No. 2 to the Master Agreement,
dated as of May 5, 1995, among DeForest
Capital I Corporation, DeForest Ventures I
L.P., DeForest Capital II Corporation,
DeForest Ventures II L.P., NPI-AP
Management, L.P., National Property
Investors, Inc. and PaineWebber Real
Estate Securities Inc. . . . . . . . . . . . . . . . **
(b)(4) Loan Agreement, dated as of November 30,
1994, between DeForest Capital I Corporation,
DeForest Ventures I L.P. and Kidder Peabody
Mortgage Capital Corporation . . . . . . . . . . . . .*
(b)(5) Amendment No. 1 to the Loan Agreement, dated
as of May 5, 1995, among DeForest Ventures I
L.P. and PaineWebber Real Estate Securities
Inc. . . . . . . . . . . . . . . . . . . . . . . . .**
(c)(1) Agreement, dated December 1, 1994, by and
between Lisle W. Payne and Ventures I
relating to certain distributions which
may be received by Ventures I. . . . . . . . . . . . **
(c)(2) Agreement, dated December 1, 1994, by
and between Janet E. Larson, individually
10
and as Trustee of the Larson Family
Revocable Trust and Ventures I relating
to certain distributions which may be
received by Ventures I . . . . . . . . . . . . . . . **
(d) None.
(e)-(f) Not applicable.
(g)(i) Note 2 to the financial statements of the
Form 10-K of Century Properties Fund XVI
included in Fund XVI for the fiscal year
ended December 31, 1994. . . . . . . . . . . . . . . .
(g)(ii) Note 2 to the financial statements of Century
Properties Fund XVI included in the Form 10-Q
of Century Properties Fund XVI for the three
months ended March 31, 1995. . . . . . . . . . . . . .
(g)(iii) The seventh, eighth and ninth paragraphs of Item 1.
"Business" of the Form 10-K of Century
Properties Fund XVI for the fiscal year
ended December 31, 1994. . . . . . . . . . . . . . . .
* Incorporated by reference to the Purchaser's Amendment No. 2
to Schedule 14D-1 (Final Amendment) filed November 30, 1994 in
respect of the Purchaser's offer to purchase Units of Limited
Partnership Interest of Century Properties Fund XII.
** Incorporated by reference to the Purchaser's Schedule 14D-1
filed on June 2, 1995 in respect of the Purchaser's offer to
purchase Units of Limited Partnership Interest of Century
Properties Fund XII.
11
Exhibit (a)(1)
Offer to Purchase
Up to 24,031 Units of Limited Partnership Interest
of
CENTURY PROPERTIES FUND XVI
for
$16.27 Per Unit
by
DEFOREST VENTURES I L.P.
THE OFFER, WITHDRAWAL RIGHTS AND THE PRORATION PERIOD WILL EXPIRE AT 12:00
MIDNIGHT, NEW YORK CITY TIME, ON JUNE 30, 1995, UNLESS EXTENDED.
This offer is being made pursuant to the terms of the settlement of a
class action litigation described below. DeForest Ventures I L.P., a
Delaware limited partnership (the "Purchaser"), hereby offers to
purchase up to 24,031 of the outstanding Units of Limited Partnership
Interest (the "Units") of Century Properties Fund XVI, a California
limited partnership (the "Partnership"), for $16.27 per Unit, upon the
terms and subject to the conditions set forth in this Offer to Purchase
(the "Offer to Purchase") and in the related Letter of Transmittal as
each may be supplemented or amended from time to time (which together
constitute the "Offer"). The 24,031 Units sought pursuant to the Offer
represent approximately 18% of the total Units outstanding as of June 2,
1995.
In order to avoid a termination of the Partnership for federal
income tax purposes, the Purchaser will not purchase Units pursuant to
the Offer if, after giving effect to such purchase, 50% or more of the
outstanding interests in the Partnership would have been transferred in
the 12-month period preceding the consummation of the Offer. In order
to avoid such a tax termination while at the same time providing to each
tendering Unitholder upon consummation of the Offer $16.27 (the "Cash
Consideration") for each Unit tendered, the Purchaser has structured the
Offer to include a non-recourse loan in the event that more than 21,579
of the outstanding Units (the "Transfer Limitation") are tendered.
Accordingly, if more than 21,579 of the outstanding Units are tendered,
the aggregate Cash Consideration paid to each tendering Unitholder will
represent (i) the Cash Consideration per Unit payable to purchase the
number of Units tendered by such Unitholder which under the Transfer
Limitation the Purchaser is permitted to purchase ("Purchase Proceeds"),
and (ii) the proceeds of a non-recourse loan ("Loan Proceeds") to such
Unitholder (a "Loan") equal to the Cash Consideration per Unit payable
in respect of the Units tendered by such Unitholder which under the
Transfer Limitation the Purchaser is not permitted to purchase (the
"Retained Units"). The Loan will be secured only by the Retained Units.
The acceptance of a Loan will not impose any personal liability on a
tendering Unitholder for the payment of any principal or interest in
respect of such Loan.
The Offer is being made pursuant to the terms of a court approved
Settlement Agreement (the "Settlement Agreement") which governs the
terms and conditions of a settlement (the "Settlement") of the class
action litigation (the "Action") entitled In Re DeForest Tender Offer
Securities Litigation (Civil Action No. 1:94-CV-2983-JEC) filed in the
United States District Court for the Northern District of Georgia,
Atlanta Division, (the "Court").
The Offer is not conditioned upon any minimum number of Units being
tendered. If more than 24,031 Units are validly tendered and not
withdrawn, subject to the Transfer Limitation and the delivery of Loan
Proceeds (as hereinafter defined), the Purchaser will accept for
purchase on a pro rata basis 24,031 Units, subject to the terms and
conditions herein.
A Unitholder must tender all Units owned by such Unitholder in
order for the tender to be valid.
If necessary to effect the terms of the Settlement, and subject to
obtaining the approval of the Court and/or counsel for the settling
plaintiffs in the Action, the Purchaser may amend the Offer or extend
the period of time during which the Offer is open and thereby delay
acceptance for payment of, and the payment for, any Units. Any such
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, in accordance
with Rule 14e-1(d) under the Securities Exchange Act of 1934 (the
"Exchange Act").
--------------------
If you have any questions or need additional information, you may
contact the Purchaser at:
DeForest Ventures I L.P.
(404) 916-9055 or (404) 850-9640
June 2, 1995
TABLE OF CONTENTS
Page
----
INTRODUCTION. . . . . . . . . . . . . . . . . . . . . 1
THE TENDER OFFER. . . . . . . . . . . . . . . . . . . 3
Section 1. Terms of the Offer . . . . . . . . . 3
Section 2. Proration; Acceptance for
Payment and Payment for Units. . . 4
Section 3. Procedures for Tendering Units . . . 4
Section 4. Withdrawal Rights. . . . . . . . . . 6
Section 5. Extension of Tender Period;
Termination; Amendment . . . . . . 6
Section 6. Certain Federal Income Tax
Consequences. . . . . . . . . . . . 7
Section 7. Effects of the Offer. . . . . . . . . 10
Section 8. Future Plans . . . . . . . . . . . . 11
Section 9. Certain Information Concerning the
Partnership . . . . . . . . . . . . 11
Section 10. Conflicts of Interest and
Transactions With Affiliates. . . . 11
Section 11. Certain Information Concerning the
Purchaser . . . . . . . . . . . . . 13
Section 12. Source of Funds . . . . . . . . . . . 13
Section 13. Background of the Offer . . . . . . . 16
Section 14. Conditions of the Offer . . . . . . . 21
Section 15. Certain Legal Matters . . . . . . . . 22
Section 16. Fees and Expenses . . . . . . . . . . 22
Section 17. Miscellaneous . . . . . . . . . . . . 22
Exhibit A Form of Note and Security Agreement
Schedule 1 Information with respect to Directors and Executive
Officers of DeForest Capital
Schedule 2 Financial Statements of the Purchaser and
DeForest Capital
Schedule 3 Subject Partnerships
To the Holders of Units of
Limited Partnership Interest
of Century Properties Fund XVI
INTRODUCTION
This offer is being made pursuant to the terms of the settlement of a
class action litigation described below. DeForest Ventures I L.P., a
Delaware limited partnership (the "Purchaser"), hereby offers to
purchase up to 24,031 of the outstanding Units of Limited Partnership
Interest (the "Units") of Century Properties Fund XVI, a California
limited partnership (the "Partnership"), for $16.27 per Unit, upon the
terms and subject to the conditions set forth in this Offer to Purchase
(the "Offer to Purchase") and in the related Letter of Transmittal as
each may be supplemented or amended from time to time (which together
constitute the "Offer"). Holders of Units ("Unitholders") who tender
their Units will not be obligated to pay any commissions or partnership
transfer fees, which commissions and fees will be borne by the
Purchaser. A Unitholder must tender all Units owned by such Unitholder
in order for the tender to be valid.
In order to avoid a termination of the Partnership for federal
income tax purposes (see "THE TENDER OFFER - Section 6. Certain Federal
Income Tax Consequences" for a discussion of the effects of such a
termination), the Purchaser will not purchase Units pursuant to the
Offer if, after giving effect to such purchase, 50% or more of the
outstanding interests in the Partnership would have been transferred in
the 12-month period preceding the consummation of the Offer. In order
to avoid such a tax termination while at the same time providing to each
tendering Unitholder upon consummation of the Offer $16.27 for each Unit
tendered (the "Cash Consideration"), the Purchaser has structured the
Offer to include a non-recourse loan in the event that more than 21,579
of the outstanding Units (the "Transfer Limitation") are tendered.
Accordingly, if more than 21,579 of the outstanding Units are tendered,
the aggregate Cash Consideration paid to each tendering Unitholder will
represent (i) the Cash Consideration per Unit payable to purchase the
number of Units tendered by such Unitholder which under the Transfer
Limitation the Purchaser is permitted to purchase ("Purchase Proceeds"),
and (ii) the proceeds of a non-recourse loan ("Loan Proceeds") to such
Unitholder (a "Loan") equal to the Cash Consideration per Unit payable
in respect of the Units tendered by such Unitholder which under the
Transfer Limitation the Purchaser is not permitted to purchase (the
"Retained Units"). The Loan will be secured only by the Retained Units.
(See "THE TENDER OFFER - SECTION 1. Terms of the Offer" for further
information relating to the Loans.) The acceptance of a Loan will not
impose any personal liability on a tendering Unitholder for the payment
of any principal or interest in respect of its Loan. Each Loan may be
satisfied, at its maturity, by surrendering to the Purchaser the
Retained Units or, at the sole option of the tendering Unitholder, by a
payment in cash equal to the then outstanding balance of principal and
accrued interest in respect of such Loan. In establishing the number of
Units constituting the Transfer Limitation, the Purchaser took into
account the historical transfer volume for Units, as well as the number
of Units acquired by the Purchaser in the Original Tender Offer (as
defined below) for Units, in order to continue to permit the historical
level of transfers after the consummation of the Offer.
The Offer is being made pursuant to the terms of a court approved
Settlement Agreement (the "Settlement Agreement") which governs the
terms and conditions of a settlement (the "Settlement") of the class
action litigation (the "Action") entitled In Re DeForest Tender Offer
Securities Litigation (Civil Action No. 1:94-CV-2983-JEC) filed in the
United States District Court for the Northern District of Georgia,
Atlanta Division, (the "Court"). Pursuant to the Settlement Agreement,
Unitholders who tender their Units may also be entitled to an additional
cash payment (the "Residual Settlement Premium"). The per Unit amount
of the Residual Settlement Premium, which is not expected to be
material, is dependent on the amount of attorney's fees awarded by the
Court following expiration of the Offer and will be determined in
accordance with the terms of the Settlement Agreement. (See "THE TENDER
OFFER - Section 13. Background of the Offer".)
The subject matter of the Action relates to tender offers for units
of limited partnership interests in the Partnership and 18 other limited
partnerships (collectively, the "Subject Partnerships") commenced by the
Purchaser and an affiliated purchaser in October 1994 (the "Original
Tender Offers"). (See "THE TENDER OFFER - Section 13. Background of the
Offer"). Schedule 3 to this Offer to Purchase sets forth the names of
the Subject Partnerships. As described in the Notice of Class Action
and Hearing of Proposed Settlement previously delivered to Unitholders
in connection with the Action (the "Settlement Notice"), the Settlement,
among other things, provides (i) Unitholders who did not tender their
Units in the Original Tender Offer for Units with the opportunity to
sell their Units pursuant to the Offer at a price equal to the price
offered in the Original Tender Offer for Units plus $1.27 (the
"Settlement Premium") and (ii) for payment of the Settlement Premium to
each person who tendered Units in the Original Tender Offer for Units.
Like the Original Tender Offer, the Offer will provide Unitholders with
an opportunity to liquidate their investment without the usual
transaction costs associated with market sales.
The Offer is not conditioned upon any minimum number of Units being
tendered. If more than 24,031 Units are validly tendered and not
withdrawn, subject to the Transfer Limitation and the delivery of Loan
Proceeds, the Purchaser will accept for purchase on a pro rata basis
24,031 Units, subject to the terms and conditions herein.
As discussed herein, the Purchaser is affiliated with the general
partners of the Partnership and, accordingly, the general partners of
the Partnership have certain conflicts of interest with respect to the
Offer. The Partnership has indicated in its statement on Schedule 14D-9
filed with the Securities and Exchange Commission (the "Commission")
that, because of such conflicts, it makes no recommendation and is
remaining neutral as to whether a Unitholder should accept the Offer.
(See "THE TENDER OFFER - Section 13. Background of the Offer"; and
"Section 10. Conflicts of Interest and Transactions with Affiliates".)
The general partner of the Purchaser is DeForest Capital I
Corporation, a Delaware corporation ("DeForest Capital") which is
affiliated with NPI Equity Investments II, Inc. ("NPI Equity"), the
entity which, on December 6, 1993, assumed management and obtained
control of Fox Capital Management Corporation ("FCMC") and Fox Realty
Investors ("FRI"), the general partners of the Partnership (together,
the "General Partner"). (See "THE TENDER OFFER - Section 13. Background
of the Offer".)
Unitholders who desire liquidity may wish to consider the Offer.
However, each Unitholder must make his or her own decision based upon
such Unitholder's particular circumstances, including the Unitholder's
own financial needs, other investment opportunities and tax position.
Each Unitholder should consult with his or her own advisors, tax,
financial or otherwise, in evaluating the terms of and whether to tender
Units pursuant to the Offer.
The $15 purchase price in the Original Tender Offer for Units (the
"Original Purchase Price") was determined as a result of the Purchaser's
own independent analysis. The Settlement Premium was determined and
agreed to as part of the Settlement. No independent person has been
retained to evaluate or render any opinion with respect to the fairness
of the Cash Consideration. Unitholders are urged to consider carefully
all of the information contained herein before accepting the Offer.
(See "THE TENDER OFFER - Section 13. Background of the Offer".)
According to information supplied by the Partnership, of the
130,000 Units issued and outstanding, 89,308 of such Units are held by
5,974 Unitholders who are not affiliated with the Purchaser. The
Purchaser and its affiliates own 40,692 Units, constituting
approximately 31% of the Units outstanding.
Certain information contained in this Offer to Purchase which
relates to the Partnership, or represents statements made by the General
Partner, has been derived from information provided to the Purchaser by
the General Partner.
Unitholders are urged to read this Offer to Purchase, the
accompanying Letter of Transmittal and the Note and Security Agreement
annexed hereto as Exhibit A carefully before deciding whether to tender
their Units.
2
THE TENDER OFFER
Section 1. Terms of the Offer. Upon the terms of the Offer, and
subject to the Transfer Limitation, the Purchaser will pay for Units
validly tendered on or prior to the Expiration Date and not withdrawn in
accordance with Section 4 of this Offer to Purchase. The term
"Expiration Date" shall mean 12:00 Midnight, New York City time, on June
30, 1995, unless, in order to effect the Settlement, and subject to
obtaining the approval of the Court and/or counsel for the settling
plaintiffs in the Action, the Purchaser extends the period of time
during which the Offer is open. In the event the Offer is so extended,
the term "Expiration Date" shall mean the latest time and date on which
the Offer, as extended by the Purchaser, shall expire.
If, prior to the Expiration Date, the Purchaser shall increase the
consideration offered to Unitholders pursuant to the Offer, such
increased consideration shall be paid for all Units accepted for payment
pursuant to the Offer, whether or not such Units were tendered prior to
such increase.
The Offer is conditioned on satisfaction of certain conditions.
See Section 14, which sets forth in full the conditions of the Offer.
The Purchaser reserves the right (but shall not be obligated), in its
sole discretion, to waive any or all of such conditions. If, on or
prior to the Expiration Date, any or all of such conditions have not
been satisfied or waived, the Purchaser may (i) decline to purchase any
of the Units tendered, terminate the Offer and return all tendered Units
to tendering Unitholders, (ii) waive all the unsatisfied conditions and,
subject to complying with applicable rules and regulations of the
Commission, purchase, or make a Loan with respect to, all Units validly
tendered, or (iii) subject to obtaining the approval of the Court and/or
counsel for the settling plaintiffs in the Action, extend the Offer and,
subject to the right of Unitholders to withdraw Units until the
Expiration Date, retain the Units that have been tendered during the
period or periods for which the Offer is extended.
If up to 21,579 Units are validly tendered and not withdrawn, upon
consummation of the Offer, all Units tendered will be purchased for
$16.27 per Unit. Subject to the proration requirements of Section 2,
if more than 21,579 Units are validly tendered and not withdrawn, each
tendering Unitholder will receive $16.27 for each Unit tendered in a
combination of Purchase Proceeds and Loan Proceeds. The number of Units
with respect to which a Unitholder will receive Purchase Proceeds will
be determined by multiplying the number of Units tendered by such
Unitholder by a fraction the numerator of which is 21,579 and the
denominator of which is the total number of Units tendered pursuant to
the Offer and not withdrawn. The balance payable to such Unitholder
will be paid as Loan Proceeds.
Each Loan will bear interest at the rate of 9% per annum. Interest
and principal will not be due and payable prior to the scheduled
maturity date of the Loan, except that the Loan shall become due upon
certain bankruptcy events of the Unitholder and, in certain
circumstances, on the demand of the Purchaser. Any distributions in
respect of the Retained Units are required to be applied to pay
outstanding amounts of interest and principal. Each Loan will mature by
its terms on January 2, 1996, and will be payable by payment of cash in
the principal amount of the Loan plus accrued interest thereon. If the
Purchaser does not receive a cash payment in repayment of a Loan within
15 days from the date the Loan is due, the Purchaser will apply the
Retained Units held in respect of such Loan against the amount due in
full satisfaction of the Loan. EXCEPT THROUGH THE APPLICATION OF ANY
DISTRIBUTIONS IN RESPECT OF RETAINED UNITS (AS DISCUSSED BELOW), THE
LOANS WILL NOT BE PREPAYABLE. THE ACCEPTANCE OF A LOAN WILL NOT IMPOSE
ANY PERSONAL LIABILITY ON A TENDERING UNITHOLDER FOR THE PAYMENT OF ANY
PRINCIPAL OR INTEREST IN RESPECT OF ITS LOAN. EACH LOAN MAY BE
SATISFIED, AT ITS MATURITY, BY SURRENDERING TO THE PURCHASER THE
RETAINED UNITS OR, AT THE SOLE OPTION OF THE TENDERING UNITHOLDER, BY A
PAYMENT IN CASH EQUAL TO THE THEN OUTSTANDING BALANCE OF PRINCIPAL AND
ACCRUED INTEREST IN RESPECT OF SUCH LOAN.
Any distribution payable to a Unitholder in respect of the Retained
Units will be applied at the time such distribution is made first to
accrued interest on the Loan and then to the principal amount of the
Loan and
3
any amounts remaining after such application will be remitted
to the Unitholder. Each Unitholder will agree not to exercise its
voting rights with respect to the Retained Units in favor of a
dissolution of the Partnership or in any manner inconsistent with the
terms of the Loan. Each Unitholder who tenders Units in accordance with
the Offer, and does not withdraw such tender in accordance with the
terms of Section 4, shall have irrevocably elected to receive the
proceeds of the Loan if more than 21,579 Units are validly tendered and
not withdrawn, and to be bound by the terms of the Loan, including the
repayment thereof, the pledge of the Unitholder's Retained Units to
secure such repayment, the application of distributions made in respect
of the Retained Units and the limitation on voting rights as described
above.
The terms and conditions of the Loan are set forth in the form of
Note and Security Agreement attached hereto as Exhibit A, which Exhibit
is incorporated by reference herein in its entirety.
Section 2. Proration; Acceptance for Payment and Payment for
Units. If the number of Units validly tendered on or prior to the
Expiration Date and not withdrawn is 24,031 or less, subject to the
Transfer Limitation and the delivery of Loan Proceeds, the Purchaser
will accept for payment, subject to the terms and conditions of the
Offer, all Units so tendered.
If the number of Units validly tendered on or prior to the
Expiration Date and not withdrawn exceeds 24,031, subject to the
Transfer Limitation and the delivery of Loan Proceeds, the Purchaser
will accept for payment, subject to the terms and conditions of the
Offer, Units so tendered on a pro rata basis (with such adjustments to
avoid purchase of fractional Units).
The Purchaser will deliver the Cash Consideration for Units validly
tendered and not withdrawn in accordance with Section 4 as promptly as
practicable following the Expiration Date. In all cases, Cash
Consideration will be delivered only after timely receipt by Purchaser
of a properly completed and duly executed Letter of Transmittal (or
facsimile thereof), duly executed signature page for the Note and
Security Agreement and any other documents required by the Letter of
Transmittal. (See "Section 3. Procedures for Tendering Units".) Under
no circumstances will interest be paid on the Cash Consideration by
reason of any delay in making such payment.
If any tendered Units are not purchased for any reason, the Letter
of Transmittal with respect to such Units will be destroyed by the
Purchaser. However, Retained Units will be held by the Purchaser
subject to the terms of a Unitholder's Loan. If for any reason
acceptance for payment of, or payment for, any Units tendered pursuant
to the Offer is delayed or the Purchaser is unable to accept for
payment, purchase or pay for Units tendered pursuant to the Offer, then,
without prejudice to the Purchaser's rights under Section 14, the
Purchaser may retain tendered Units and such Units may not be withdrawn
except to the extent that the tendering Unitholders are entitled to
withdrawal rights as described in Section 4; provided, however, that the
Purchaser is required, pursuant to Rule 14e-1(c) under the Exchange Act,
to pay Unitholders the Cash Consideration in respect of Units tendered
or return such Units promptly after termination or withdrawal of the
Offer.
Section 3. Procedures for Tendering Units.
Valid Tender. To validly tender Units, a properly completed and
duly executed Letter of Transmittal (or facsimile thereof), duly
executed signature page for the Note and Security Agreement and any
other documents required by the Letter of Transmittal, must be received
by the Purchaser on or prior to the Expiration Date. A Unitholder must
tender all Units owned by such Unitholder in order for the tender to be
valid.
Signature Requirements. If the Letter of Transmittal and signature
page for the Note and Security Agreement is signed by the registered
holder of the Units and payment is to be made directly to that holder,
then no notarization or signature guarantee is required on the Letter of
Transmittal. Similarly, if the Units are tendered for the account of a
member firm of a registered national securities exchange, a member of
the National Association of Securities Dealers, Inc. or a commercial
bank, savings bank, credit union, savings and loan association or trust
company having an office, branch or agency in the United States (each an
"Eligible
4
Institution"), no notarization or signature guarantee is required on the Letter
of Transmittal. However, in all other cases, all signatures on the Letter of
Transmittal and signature page for the Note and Security Agreement must either
be notarized or guaranteed by an Eligible Institution.
In order for a tendering Unitholder to participate in the Offer,
Units must be validly tendered and not withdrawn on or prior to the
Expiration Date, which is 12:00 Midnight, New York City time, on June
30, 1995.
The method of delivery of the Letter of Transmittal, signature page
for the Note and Security Agreement 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 Purchaser.
A tendering Unitholder will be notified after the Expiration Date
as to the number of such Unitholder's Units, if any, which were not
purchased but which are being held by the Purchaser as Retained Units
for a Loan to such Unitholder. Such notice will also provide the
principal amount of any such Loan.
Backup Federal Income Tax Withholding. To prevent the possible
application of backup federal income tax withholding with respect to
payment of the Cash Consideration and the Residual Settlement Premium, a
tendering Unitholder must provide the Purchaser with such Unitholder's
correct taxpayer identification number by completing the Substitute Form
W-9 included in the Letter of Transmittal. (See the Instructions to the
Letter of Transmittal and "Section 6. Certain Federal Income Tax
Consequences".)
FIRPTA Withholding. To prevent the withholding of federal income
tax in an amount equal to 10% of the sum of the Cash Consideration plus
the Residual Settlement Premium plus the amount of Partnership
liabilities allocable to each Unit tendered, each Unitholder must
complete the FIRPTA Affidavit included in the Letter of Transmittal
certifying such Unitholder's taxpayer identification number and address
and that the Unitholder is not a foreign person. (See the Instructions
to the Letter of Transmittal and "Section 6. Certain Federal Income Tax
Consequences".)
Other Requirements. By executing a Letter of Transmittal, a
tendering Unitholder irrevocably appoints the designees of the Purchaser
as such Unitholder's proxies, in the manner set forth in the Letter of
Transmittal, each with full power of substitution, to the full extent of
such Unitholder's rights with respect to the Units tendered by such
Unitholder and accepted for payment by the Purchaser. Such appointment
will be effective when, and only to the extent that, the Purchaser
accepts such Units for payment. Upon such acceptance for payment, all
prior proxies given by such Unitholder with respect to such Units will,
without further action, be revoked, and no subsequent proxies may be
given (and if given will not be effective). The designees of the
Purchaser will, as to such Units, be empowered to exercise all voting
and other rights of such Unitholder as they in their sole discretion may
deem proper at any meeting of Unitholders, by written consent or
otherwise. The Purchaser reserves the right to require that, in order
for Units to be deemed validly tendered, immediately upon the
Purchaser's acceptance for payment of such Units, the Purchaser must be
able to exercise full voting rights with respect to such Units,
including voting at any meeting of Unitholders then scheduled. In
addition, by executing a Letter of Transmittal, a Unitholder also
assigns to the Purchaser all of the Unitholder's rights to receive
distributions from the Partnership with respect to Units which are
purchased pursuant to the Offer. (See "Section 6. Certain Federal Income
Tax Consequences" and "Section 9. Certain Information Concerning the
Partnership".)
By executing a Letter of Transmittal, a Unitholder irrevocably
agrees to accept the proceeds of a Loan in respect of its Retained Units
on the terms and conditions set forth in the Note and Security
Agreement. Such Unitholder also directs the Partnership to deliver any
and all distributions payable on the Retained Units to the Purchaser for
credit against amounts outstanding in respect of the Loan, and the
Purchaser may, in the name and behalf of such Unitholder, execute and
deliver to the Partnership a written confirmation of such direction. In
addition, by executing a Letter of Transmittal, a Unitholder appoints
the designees of the Purchaser as its attorney-in-fact (such appointment
being coupled with an interest, and irrevocable) to execute and cause to
be
5
filed and recorded any and all documents on behalf of the Unitholder
and to take any and all other actions reasonably deemed necessary by the
Purchaser to perfect or continue the perfection of the security interest
in the Retained Units that secures any Loan made to such Unitholder.
FURTHERMORE, BY EXECUTING A LETTER OF TRANSMITTAL, A UNITHOLDER WHO HAS
PREVIOUSLY REQUESTED EXCLUSION FROM THE SETTLEMENT WILL BE DEEMED TO
HAVE REVOKED SUCH REQUEST AND THEREUPON BE BOUND BY THE SETTLEMENT AND
ALL ORDERS AND FINAL JUDGMENTS RENDERED IN THE ACTION.
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 the procedures described
above will be determined by the Purchaser, in its sole discretion, which
determination shall be final and binding. The Purchaser reserves the
absolute right to reject any or all tenders if not in proper form
(including, without limitation, the proper execution of the Note and
Security Agreement) or if the acceptance of, or payment for, the Units
tendered may, in the opinion of the Purchaser's counsel, be unlawful.
The Purchaser also reserves the right to waive any defect or
irregularity in any tender with respect to any particular Units of any
particular Unitholder, and the Purchaser's interpretation of the terms
and conditions of the Offer (including the Letter of Transmittal and the
Instructions thereto) will be final and binding. Neither the Purchaser
nor any other person will be under any duty to give notification of any
defects or irregularities in the tender of any Units or will incur any
liability for failure to give any such notification.
A tender of Units pursuant to any of the procedures described above
will constitute a binding agreement between the tendering Unitholder and
the Purchaser on the terms set forth in the Offer.
Section 4. Withdrawal Rights. Except as otherwise provided in
this Section 4, all tenders of Units pursuant to the Offer are
irrevocable, provided that Units tendered pursuant to the Offer may be
withdrawn at any time prior to the Expiration Date and, unless already
accepted for payment as provided in this Offer to Purchase, may also be
withdrawn at any time after June 30, 1995.
For withdrawal to be effective, a written or facsimile transmission
notice of withdrawal must be timely received by the Purchaser at the
address set forth on the back cover of this Offer to Purchase. Any such
notice of withdrawal must specify the name of the person who tendered
the Units to be withdrawn and must be signed by the person(s) who signed
the Letter of Transmittal in the same manner as the Letter of
Transmittal was signed.
If purchase of, or payment for, Units is delayed for any reason or
if the Purchaser is unable to purchase or pay for Units for any reason,
then, without prejudice to the Purchaser's rights under the Offer,
tendered Units may be retained by the Purchaser and may not be withdrawn
except to the extent that tendering Unitholders are entitled to
withdrawal rights as set forth in this Section 4; provided, however,
that the Purchaser is required, pursuant to Rule 14e-1(c) under the
Exchange Act, to pay Unitholders the Cash Consideration in respect of
Units tendered or return such Units promptly after termination or
withdrawal of the Offer.
Any Units properly withdrawn will be deemed not to be validly
tendered for purposes of the Offer. Withdrawn Units may be re-tendered,
however, by following any of the procedures described in Section 3 at
any time prior to the Expiration Date.
Section 5. Extension of Tender Period; Termination; Amendment. If
necessary to effect the terms of the Settlement, and subject to
obtaining the approval of the Court and/or counsel for the settling
plaintiffs in the Action, the Purchaser may amend the Offer or extend
the period of time during which the Offer is open and thereby delay
acceptance for payment of, and the payment for, any Units. Any such
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, in accordance
with Rule 14e-1(d) under the Exchange Act.
6
If the Purchaser extends the Offer, or if the Purchaser (whether
before or after its acceptance for payment of Units) is delayed in its
payment for Units or is unable to pay for Units pursuant to the Offer
for any reason, then, without prejudice to the Purchaser's rights under
the Offer, the Purchaser may retain tendered Units and such Units may
not be withdrawn except to the extent tendering Unitholders are entitled
to withdrawal rights as described in Section 4; provided, however, that
the Purchaser is required, pursuant to Rule 14e-1(c) under the Exchange
Act, to pay Unitholders the Cash Consideration in respect of Units
tendered or return such Units promptly after termination or withdrawal
of the Offer.
If the Purchaser makes a material change in the terms of the Offer
(which change may only be made with approval of the Court and/or counsel
for the settling plaintiffs in the Action) or if there is a material
change in the information concerning the Offer, the Purchaser will
extend the Offer and disseminate additional tender offer materials to
the extent required by Rules 14d-4(c) and 14d-6(d) under the Exchange
Act. The minimum period during which an offer must remain open
following a material change in the terms of the offer or information
concerning the offer will depend upon the facts and circumstances,
including the relative materiality of the change in the terms or
information. In the Commission's view, an offer should remain open for
a minimum of five business days from the date the material change is
first published, sent or given to securityholders, and if material
changes are made with respect to information that approaches the
significance of price or the percentage of securities sought, a minimum
of ten business days may be required to allow for adequate dissemination
to securityholders and for investor response. As used in this Offer to
Purchase, "business day" means any day other than a Saturday, Sunday or
a federal holiday, and consists of the time period from 12:01 a.m.
through 12:00 Midnight, New York City time.
Section 6. Certain Federal Income Tax Consequences. The following
summary is a general discussion of certain federal income tax
consequences of a sale of Units pursuant to the Offer. This summary is
based on the Internal Revenue Code of 1986, as amended (the "Code"),
applicable Treasury regulations thereunder, administrative rulings,
practice and procedures and judicial authority as of the date of the
Offer. All of the foregoing are subject to change, and any such change
could affect the continuing accuracy of this summary. This summary does
not discuss all aspects of federal income taxation that may be relevant
to a particular Unitholder in light of such Unitholder's specific
circumstances or to certain types of Unitholders subject to special
treatment under the federal income tax laws (for example, foreign
persons, dealers in securities, banks, insurance companies and
tax-exempt organizations), nor does it discuss any aspect of state,
local, foreign or other tax laws. Sales of Units pursuant to the Offer
will be taxable transactions for federal income tax purposes, and may
also be taxable transactions under applicable state, local, foreign and
other tax laws. EACH UNITHOLDER SHOULD CONSULT HIS OR ITS TAX ADVISOR
AS TO THE PARTICULAR TAX CONSEQUENCES TO SUCH UNITHOLDER OF SELLING
UNITS AND RECEIVING A LOAN PURSUANT TO THE OFFER.
A taxable Unitholder will recognize gain or loss on a sale of Units
pursuant to the Offer equal to the difference between (i) the
Unitholder's "amount realized" on the sale and (ii) the Unitholder's
adjusted tax basis in the Units sold. The amount of a Unitholder's
adjusted tax basis in Units sold pursuant to the Offer will vary
depending upon the Unitholder's particular circumstances, and will be
affected by both allocations of Partnership income, gain or loss and any
cash distributions made to a Unitholder for 1995 with respect to such
Units. The "amount realized" with respect to a Unit sold pursuant to
the Offer will be a sum equal to the amount of cash received by the
Unitholder for the Unit plus the amount of Partnership liabilities
allocable to the Unit (as determined under Code Section 752). If a
Unitholder receives a Loan pursuant to the Offer and later transfers
ownership of the Retained Units to the Purchaser in satisfaction of the
Loan, the unpaid balance (including accrued and unpaid interest) of such
Loan would be includible in the Unitholder's amount realized on such
subsequent sale, but interest accrued on the Loan may be non-deductible
as personal interest. (See the discussion of certain tax aspects of the
Loan below.) However, assuming no principal payments are made on a Loan
prior to maturity, the amount of interest is anticipated to be only
approximately $53 per $1,000 loaned.
7
Based on the results of Partnership operations through December 31,
1994, and without giving effect to Partnership operations or
transactions since that time, it is estimated that, depending on the
Unitholder's date of entry into the Partnership, a taxable Unitholder
who or which sells Units pursuant to the Offer that were acquired by
such Unitholder at the time of the Partnership's original offering of
Units will recognize a loss for federal income tax purposes of between
$8.33 per Unit for those admitted in September 1981 and $67.63 per Unit
for those admitted in April 1982 less, in each case, the amount of the
Residual Settlement Premium. It also is estimated that such Unitholder
has "suspended" passive activity losses (i.e., post-1986 net taxable
losses in excess of statutorily provided "phase-in" amounts) from the
Partnership of $32 per Unit (subject to reduction to the extent such
Unitholder utilized any of such losses to offset passive activity income
from other investments). Once the Unitholder sells all his Units, such
losses should no longer be subject to the passive activity loss
limitation, and therefore should be deductible by such Unitholder from
his other income subject to any other applicable limitations. However,
if a Unitholder is unable to sell all of his Units pursuant to the
Offer, such losses will not be deductible (except to the extent of the
Unitholder's passive activity income from other sources) until the
Retained Units are transferred to the Purchaser upon maturity of the
Unitholder's Loan in 1996 or are otherwise sold. (See the discussion of
the passive activity loss limitation below and "Section 7. Effects of
the Offer".) Tendering Unitholders will be allocated a pro rata share
of the Partnership's taxable income or loss with respect to Units sold
pursuant to the Offer through the effective date of the sale, even
though such Unitholders will assign to the Purchaser their right to
receive cash distributions with respect to such Units.
The gain or loss recognized by a Unitholder on a sale of a Unit
pursuant to the Offer generally will be treated as a capital gain or
loss if the Unit was held by the Unitholder as a capital asset. Such
capital gain or loss will be treated as long-term capital gain or loss
if the tendering Unitholder's holding period for the Unit exceeds one
year. Under current law, long-term capital gains of individuals and
other non-corporate taxpayers are taxed at a maximum marginal federal
income tax rate of 28%, whereas the maximum marginal federal income tax
rate for other income of such persons is 39.6%. Capital losses are
deductible only to the extent of capital gains, except that
non-corporate taxpayers may deduct up to $3,000 of capital losses in
excess of the amount of their capital gains against ordinary income.
Excess capital losses generally can be carried forward to succeeding
years (a corporation's carryforward period is five years and a
non-corporate taxpayer can carry forward such losses indefinitely); in
addition, corporations, but not non-corporate taxpayers, are allowed to
carry back excess capital losses to the three preceding taxable years.
If any portion of the amount realized by a Unitholder is
attributable to "unrealized receivables" (which includes depreciation
recapture) or "substantially appreciated inventory" as defined in Code
Section 751, then a portion of the Unitholder's gain or loss may be
ordinary rather than capital. It is possible that the basis allocation
rules of Code Section 751 may result in a Unitholder's recognizing
ordinary income with respect to such items while recognizing a larger
capital loss with respect to the remainder of the Unit, even though such
Unitholder has an overall loss on the sale.
The portion of the Residual Settlement Premium that is received by
a Unitholder with respect to the Retained Units, if any, will be taxable
to a Unitholder as ordinary income even if the Unitholder later
transfers the Retained Units in satisfaction of the Loan and even if
such transfer results in the Unitholder's recognition of a capital loss.
If tendering Unitholders receive Loans, they will be allocated a
pro rata share of the Partnership's taxable income or loss for all of
1995 with respect to the Retained Units even though any cash
distributions with respect to such Units will be applied against the
Loans. Amounts so applied might not be deductible, and, if the Retained
Units are transferred to Purchaser in 1996 at a loss, such loss would
not offset the taxable income (if any) allocated to a Unitholder in 1995
on account of the Retained Units. (See the discussion of certain tax
aspects of the Loans below.)
Under Code Section 469, a non-corporate taxpayer or personal
service corporation can deduct passive activity losses in any year only
to the extent of such person's passive activity income for such year,
and closely held corporations may not offset such losses against
so-called "portfolio" income. A loss recognized by a
8
Unitholder upon a sale of a Unit pursuant to the Offer can be currently
deducted (subject to other applicable limitations) to the extent of such
Unitholder's taxable income from the Partnership for that year, and gain
recognized by a Unitholder upon such sale can be offset by such
Unitholder's passive activity losses (if any) from the Partnership. If
a Unitholder disposes of all his Units pursuant to the Offer, such
Unitholder generally will be able to deduct his remaining passive
activity losses (if any) from the Partnership that could not previously
be deducted by such Unitholder due to the foregoing limitation.
However, if more than 21,579 Units are tendered pursuant to the Offer,
a tendering Unitholder will be unable to sell all of his Units in 1995
upon consummation of the Offer. In that event, a tendering Unitholder
with "suspended" passive activity losses from the Partnership will be
unable to deduct such losses until the Retained Units are transferred to
the Purchaser in satisfaction of the Unitholder's Loan in 1996, or are
otherwise sold.
A taxable Unitholder (other than corporations and certain foreign
individuals) who tenders Units may be subject to 31% backup withholding
unless the Unitholder provides a taxpayer identification number ("TIN")
and certifies that the TIN is correct or properly certifies that he is
awaiting a TIN. A Unitholder may avoid backup withholding by properly
completing and signing the Substitute Form W-9 included as part of the
Letter of Transmittal. If a Unitholder who is subject to backup
withholding does not properly complete and sign the Substitute Form W-9,
the Purchaser will withhold 31% from payments to such Unitholder.
Gain realized by a foreign Unitholder on a sale of a Unit pursuant
to the Offer will be subject to federal income tax. Under Section 1445
of the Code, the transferee of a partnership interest held by a foreign
person is generally required to deduct and withhold a tax equal to 10%
of the amount realized on the disposition. The Purchaser will withhold
10% of the amount realized by a tendering Unitholder unless the
Unitholder properly completes and signs the FIRPTA Affidavit included as
part of the Letter of Transmittal certifying the Unitholder's TIN, that
such Unitholder is not a foreign person and the Unitholder's address.
Amounts withheld would be creditable against a foreign Unitholder's
federal income tax liability and, if in excess thereof, a refund could
be obtained from the Internal Revenue Service by filing a U.S. income
tax return.
If Loans are made to Unitholders, amounts withheld by the Purchaser
from payments to a Unitholder with respect to the Retained Units will be
applied against the principal balance of the Unitholder's Loan, and, if
such Loan is later satisfied by the Unitholder's transfer of the
Retained Units, will be paid by the Purchaser to the Internal Revenue
Service at that time.
If more than 21,579 Units are validly tendered and not withdrawn,
only a pro rata portion of the tendered Units will be treated by the
Purchaser as purchased pursuant to the Offer. The excess of the Cash
Consideration paid to each tendering Limited Partner over the amounts
attributable to the purchased Units will be received as the proceeds of
nonrecourse Loans secured by a pledge of the Retained Units. The
Purchaser intends to treat the Loans as debt instruments for federal
income tax purposes. Nevertheless, a taxing authority may assert that
100% of the tendered Units must be treated as sold pursuant to the
Offer. If such an assertion were to prevail, all Units tendered would
be treated for income tax purposes as having been sold in 1995, and the
Partnership would be treated as having terminated for income tax
purposes when the Loans were made. The effect of a tax termination on
the Partnership and, therefore, on non-tendering Unitholders and
tendering Unitholders as to the Retained Units, would include a
reduction in the Partnership's depreciable tax basis in its properties
and a lengthening of the period of time over which the Partnership
recognizes depreciation deductions for tax purposes. A termination of
the Partnership for income tax purposes also could have the adverse
effect on Unitholders whose tax year differs from the calendar year of
the inclusion of more than one year of the Partnership's tax items in
one tax return of such Unitholders. In addition, a tax termination
could have the adverse effect on Unitholders who subsequently dispose of
their Units at a gain of requiring them to treat a greater portion of
such gain as ordinary income (due to the application of Code Section
735) than would be required under Code Section 751 (discussed above).
Assuming that the Loans are respected as debt for tax purposes, it
is unclear whether a Unitholder will be entitled to deduct interest
accruing thereon before such interest is paid, which would be at
maturity of the Loan or in the event cash distributions are made with
respect to the Retained Units. The deductibility of interest
9
paid by a Unitholder will depend on how the Unitholder uses the Loan proceeds
(i.e., whether the Unitholder uses the Loan proceeds to pay personal
expenses or make additional investments, and, if the latter, whether
such investments are "passive activity" or "portfolio" investments).
Personal interest is generally nondeductible, and there are limitations
on the deductibility of investment interest and interest allocable to
passive activities. Unitholders should consult their tax advisors
concerning the application of these rules and limitations to their
particular circumstances.
If a Loan is treated as indebtedness incurred by a tax-exempt
Limited Partner to acquire or improve property, income from such
property will be taxable to the tax-exempt Unitholder as unrelated
debt-financed income within the meaning of Code Section 514. Tax-exempt
Unitholders should consult their tax advisors with respect to the tax
consequences of tendering Units pursuant to the Offer.
A taxable Unitholder who satisfies a Loan by transferring the
Retained Units to the Purchaser will recognize gain or loss upon such
transfer under the rules discussed above, with the then outstanding Loan
balance (including any accrued and unpaid interest) being treated as an
amount realized by the Unitholder on the transfer of the Retained Units.
Section 7. Effects of the Offer.
Limitations on Resales. Pursuant to authority contained in the
Partnership Agreement, the General Partner restricts transfers of Units
if a transfer, when considered with all other transfers during the same
applicable twelve-month period, would cause a termination of the
Partnership for federal or applicable state income tax purposes (which
termination may occur when 50% or more of the Units are transferred in a
twelve-month period). If the secondary market in private transactions
were to become more active, sales of Units on the secondary market for
the twelve-month period following completion of the Offer may be
limited. The Partnership will not process any requests for recognition
of substitution of Unitholders upon a transfer of Units during such
twelve-month period which the General Partner believes may cause a tax
termination. In determining the Transfer Limitation, the Purchaser took
this restriction into account so as to permit transfers of up to 1,299
of the outstanding Units to occur prior to January 1996 without
violating this restriction.
Effect on Trading Market. There is no established public trading
market for the Units and, therefore, a reduction in the number of
Unitholders should not materially further restrict the Unitholders'
ability to find purchasers for their Units.
Control of all Unitholder Voting Decisions by Purchaser; Effect of
Affiliation with General Partner. Like Units acquired in the Original
Tender Offer for Units, the Purchaser will have the right to vote each
Unit purchased pursuant to the Offer. As a result of the Original
Tender Offer for Units, the Purchaser is in a position to significantly
influence all voting decisions with respect to the Partnership.
Consummation of the Offer may further enhance such voting influence.
Accordingly, the Purchaser could (i) prevent non-tendering Unitholders
from taking action they desire but that the Purchaser opposes and (ii)
take action desired by the Purchaser but opposed by non-tendering
Unitholders. Under the Partnership Agreement, Unitholders holding a
majority of the Units are entitled to take action with respect to a
variety of matters. When voting on such matters, the Purchaser will
vote Units owned and acquired by it in its interest, which, because of
its affiliation with the General Partner, will also likely be in the
interest of the General Partner. However, in connection with the
Original Tender Offers, the Purchaser has agreed for the benefit of
non-tendering Unitholders, and the Purchaser hereby reaffirms such
agreement, that (i) it will vote its Units against any proposal
(including a proposal by the Purchaser, the General Partner and any
affiliates thereof) to increase the existing fees and other compensation
presently received by the General Partner and any of its affiliates from
the Partnership, and (ii) with respect to any other matter proposed by
the Purchaser, the General Partner or any of their affiliates, the
Purchaser will vote its Units in proportion to the votes cast by other
Unitholders. Except for the foregoing, no other limitations are imposed
on the Purchaser's right to vote each Unit purchased, including any vote
on the removal of the General Partner.
10
The Units are registered under the Exchange Act, which requires,
among other things, that the Partnership furnish certain information to
its Unitholders and to the Commission and comply with the Commission's
proxy rules in connection with meetings of, and solicitation of consents
from, Unitholders. Purchase of Units pursuant to the Offer will not
result in the Units becoming eligible for deregistration under the
Exchange Act.
Section 8. Future Plans. The Purchaser is acquiring the Units
pursuant to the Offer in connection with the Settlement and otherwise
for investment purposes. Subject to the limitation on resales discussed
in Section 7, following the completion of the Offer, the Purchaser may
acquire additional Units. Any such acquisition may be made through
private purchases or by any other means deemed advisable; provided,
however, as part of the Settlement, the Purchaser has agreed not to
initiate or participate (as a member of any group or as an investor or
creditor of the tender offer(s)) in any tender offer for Units for a
period of 24 months following the Expiration Date, except in response to
a tender offer by a party who is not an affiliate of the Purchaser. Any
such acquisition may be at a price higher or lower than the price to be
paid for the Units purchased pursuant to the Offer. Neither the
Purchaser nor the General Partner has any present plans or intentions
with respect to a liquidation, sale of assets or refinancing of any of
the Partnership's properties. However, the Purchaser believes that
consistent with its fiduciary obligations the General Partner will
continue to review any opportunities such as sales or refinancings and
will seek to maximize returns to investors in the Units. The General
Partner's stated intentions are to manage the Partnership's assets to
maximize capital appreciation, improve property operations and reduce
Partnership debt. See "Section 10. Conflicts of Interest and
Transactions with Affiliates" for certain information concerning the
General Partner's potential conflict of interest with respect to sales
or refinancings.
Section 9. Certain Information Concerning the Partnership. The
Partnership was organized on December 30, 1980, under the laws of the
State of California. Its principal executive offices are located at
5665 Northside Drive, N.W., Suite 370, Atlanta, Georgia 30328. Its
telephone number is (404) 916-9050.
The Partnership's primary business is real estate related
operations.
Unitholders are referred to the financial and other information
included in the Partnership's Annual Report on Form 10-K for the fiscal
year ended December 31, 1994, and the Partnership's Quarterly Report on
Form 10-Q for the three months ended March 31, 1995. Such reports and
other documents may be examined and copies may be obtained from the
offices of the Commission at 450 Fifth Street, N.W., Washington, D.C
20549, and at the regional offices of the Commission located in the
Northwestern Atrium Center, 500 Madison Street, Suite 1400, Chicago,
Illinois 60661, and 7 World Trade Center, New York, New York 10048.
Copies should be available by mail upon payment of the Commission's
customary charges by writing to the Commission's principal offices at
450 Fifth Street, N.W., Washington, D.C. 20549.
Section 10. Conflicts of Interest and Transactions with
Affiliates. The General Partner, the Purchaser and their affiliates
have conflicts of interest with respect to the Offer as set forth below.
Conflicts of Interest With Respect to the Offer. The General
Partner has a conflict of interest with respect to the Offer, including
as a result of its affiliation with the Purchaser. (See "Section 13.
Background of the Offer".)
Voting by the Purchaser. As a result of the Original Tender
Offers, the Purchaser is in a position to significantly influence all
Partnership decisions on which Unitholders may vote. Consummation of
the Offer may further enhance such voting influence. However, the
Purchaser has agreed, for the benefit of non-tendering Unitholders that
(i) it will vote its Units against any proposal (including a proposal by
the Purchaser, the General Partner and any affiliates thereof) to
increase the existing fees and other compensation presently received by
the General Partner and any of its affiliates from the Partnership, and
(ii) with respect to any other matter proposed by the Purchaser, the
General Partner or any of their affiliates, the Purchaser will vote its
Units in proportion to the votes cast by other Unitholders. Except for
the foregoing, no other limitations are imposed on the
11
Purchaser's right to vote each Unit purchased, including any vote on the
removal of the General Partner. (See "Section 7. Effects of the
Offer".)
Repayment of Tender Offer Loan. A loan (the "Original DeForest
Loan") was obtained by the Purchaser in connection with the Original
Tender Offers. (See "Section 13. Background of the Offer".) On May 8,
1995, following the expiration of the draw down period for the Original
Deforest Loan, the agreement governing the Original DeForest Loan (the
"Original Loan Agreement") was amended (as amended, the "Amended Loan
Agreement") to provide for additional debt financing (such additional
debt financing together with the Original DeForest Loan being referred
to herein as, the "Amended DeForest Loan") for the purchase of units by
the Purchaser in the Settlement Tender Offers (as defined in Section
13). The Purchaser services the Amended DeForest Loan with Purchaser
Cash Flow and Tender Cash Flow (as defined in Section 12). One of
several possible sources of Tender Cash Flow is the Purchaser's
distributable portion of the proceeds of any sales or refinancings of
Partnership properties attributable to Units owned by the Purchaser.
Consequently, a conflict of interest may exist for the General Partner
in determining whether and when to sell and/or refinance the
Partnership's properties. Any such conflict, however, may be mitigated
by the fact that (i) proceeds from the sale or refinancing of properties
owned by other Subject Partnerships may be available to the Purchaser
(see "Section 12. Source of Funds."), (ii) there exist other repayment
sources, including capital contributions from the Purchaser's partners,
(iii) certain of the Purchaser's partners have agreed to advance funds
to the Purchaser in order to enable the Purchaser to make timely
interest payments, and (iv) the Purchaser may be able to refinance all
or a portion of the Amended DeForest Loan.
Distributions upon Sales or Refinancings. As mentioned above, one
source of Tender Cash Flow is the Purchaser's distributable portion of
the proceeds of any sales or refinancings of Partnership properties
attributable to Units owned by the Purchaser. The Amended Loan
Agreement provides that the Purchaser is required to make a prepayment
on the Amended DeForest Loan of an amount equal to 75% (100% in the case
of a refinancing) of the Purchaser's distributable portion of the
proceeds of such sale or refinancing, whether or not distributed by the
Partnership. Consequently, unless the Purchaser otherwise has funds
available to make such a required prepayment, a conflict of interest may
exist for the General Partner in determining whether and when to cause
the Partnership to distribute the proceeds of any such sale or
refinancing to the Partnership's partners.
Transactions with Affiliates. The General Partner of the
Partnership, an affiliate of the Purchaser, owns a 2% interest in the
Partnership and thus receives, as a continuing interest in the
Partnership, an amount equal to a 2% allocation of the Partnership's
profits and losses, and 2% of distributions. The General Partner and
its affiliates are also entitled to be reimbursed for certain expenses
and to receive certain fees pursuant to the terms of the Partnership
Agreement; however, as a result of the Settlement, the General Partners
and their affiliates will no longer be entitled to receive a portion of
such expense reimbursements to the extent such expenses exceed the
amount reimbursed during the 1994 fiscal year, subject to increases for
inflation. (See "Section 13. Background of the Offer" for a discussion
of the material terms of the Settlement.)
For information as to the amounts paid to the General Partner and
its affiliates during the last three fiscal years and the three months
ended March 31, 1995, see Note 2 to the Financial Statements of the
Partnership in the Form 10-K of the Partnership for the fiscal year
ended December 31, 1994 and Note 2 to the Financial Statements of the
Partnership in the Form 10-Q of the Partnership for the three months
ended March 31, 1995.
In connection with NPI Equity's acquisition of management and
control of the Partnership, NPI Equity and certain principals of
National Property Investors, Inc. ("NPI"), an affiliate of NPI Equity,
agreed to indemnify FRI, FCMC and certain of the former individual
general partners of FRI for 25% of the out-of-pocket costs, expenses and
liabilities, if any, that may be incurred by them in connection with the
restoration of any deficit balance in the General Partner's capital
account upon the dissolution of the Partnership subsequent to the sale
of all of the Partnership's properties. (See "Section 13. Background of
the Offer" for a description of the transaction pursuant to which NPI
Equity acquired control of the Partnership.)
12
As part of the Settlement, the General Partners have agreed to
provide the Partnership with a $300,000 credit line. (See "Section 13.
Background of the Offer" for a discussion of the material terms of the
Settlement.)
Section 11. Certain Information Concerning the Purchaser. The
Purchaser was organized for the purpose of acquiring the Units in the
Original Tender Offers. The principal executive office of the Purchaser
and DeForest Capital is at 5665 Northside Drive, N.W., Suite 370,
Atlanta, Georgia 30328. DeForest Capital was organized for the purpose
of acting as the general partner of the Purchaser.
For certain information concerning the directors and executive
officers of DeForest Capital, the general partner of the Purchaser, see
Schedule 1 to this Offer to Purchase.
For certain financial information concerning the Purchaser and
DeForest Capital, see Schedule 2 to this Offer to Purchase.
The Purchaser has entered into agreements with Lisle Payne and
Janet Larson, two former affiliates of FRI (the "Former Affiliates"),
pursuant to which the Purchaser has agreed to pay to the Former
Affiliates the portion of any distribution received by the Purchaser or
its affiliates on account of the Units owned by the Purchaser or its
affiliates which are attributable to capital contributions by such
Former Affiliates to restore the deficit in a general partner's capital
account. (See "Section 13. Background of the Offer" for a discussion
of the General Partner's capital account restoration obligations.)
Pursuant to each such agreement, the Purchaser will receive
approximately $60,000 per year from each Former Affiliate until
February 1998.
Except as otherwise set forth herein, (i) neither the Purchaser,
DeForest Capital, to the best of Purchaser's knowledge, the persons
listed on Schedule 1 nor any affiliate of the foregoing beneficially
owns or has a right to acquire any Units, (ii) neither the Purchaser,
DeForest Capital, to the best of Purchaser's knowledge, the persons
listed on Schedule 1, nor any affiliate thereof or director, executive
officer or subsidiary of DeForest Capital has effected any transaction
in the Units within the past 60 days, (iii) neither the Purchaser,
DeForest Capital, to the best of Purchaser's knowledge, any of the
persons listed on Schedule 1, nor any director or executive officer of
DeForest Capital has any contract, arrangement, understanding or
relationship with any other person with respect to any securities of the
Partnership, including, but not limited to, contracts, arrangements,
understandings or relationships concerning the transfer or voting
thereof, joint ventures, loan or option arrangements, puts or calls,
guarantees of loans, guarantees against loss or the giving or
withholding of proxies, (iv) there have been no transactions or business
relationships which would be required to be disclosed under the rules
and regulations of the Commission between any of the Purchaser, DeForest
Capital or, to the best of Purchaser's knowledge, the persons listed on
Schedule 1, on the one hand, and the Partnership or its affiliates, on
the other hand, and (v) there have been no contracts, negotiations or
transactions between the Purchaser, DeForest Capital or, to the best of
Purchaser's knowledge, the persons listed on Schedule 1, on the one
hand, and the Partnership or its affiliates, on the other hand,
concerning a merger, consolidation or acquisition, tender offer or other
acquisition of securities, an election of directors or a sale or other
transfer of a material amount of assets.
QAL Associates and QALA II Associates, each an affiliate of the
Purchaser with an address at 100 Jericho Quadrangle, Suite 214, Jericho,
New York 11753, own 486 and 44 Units, respectively.
Section 12. Source of Funds. As described in Section 13, in
connection with the Original Tender Offers, the Purchaser obtained the
Original DeForest Loan in the original principal amount of $21,223,858,
and DeForest II (as defined in Section 13) obtained a loan (the
"Original NPI Loan", and together with the Original DeForest Loan, the
"Original Loans") in the original principal amount of $13,250,690, in
each case from Kidder Peabody Mortgage Capital Corporation ("Kidder").
Kidder subsequently assigned the Original Loans to PaineWebber Real
Estate Securities Inc. (the "Lender"), the successor in interest to
Kidder. On May 8, 1995, following the expiration of the draw down
period for the Original Loans, the Original Loans were amended to
provide for additional debt financing to be used in connection with
consummation of the Settlement, including consummation of the Settlement
Tender Offers. The aggregate principal amount of the Amended DeForest
13
Loan and the "Amended NPI Loan" (defined as the Original NPI Loan as
increased by the additional debt financing allocated to DeForest II) may
not exceed $55 million. Subject to such limitation and to reduction by
the amount of additional debt financing allocated to DeForest II in
connection with consummation of the Settlement by DeForest II, the
maximum increase in the principal amount of the Original DeForest Loan
will be approximately $19,019,000, of which approximately $14,655,000
is available for the Settlement Tender Offers.
Approximately $390,984 in the aggregate would be required by the
Purchaser to purchase or make a Loan with respect to the 24,031 Units
sought pursuant to the Offer, if tendered. The Purchaser may obtain up
to approximately $351,090 of such aggregate amount from the additional
debt financing subject to reduction dependent upon the amount of the
additional debt financing allocated to DeForest II to consummate the
other Settlement Tender Offers and the success of the Purchaser in the
other Settlement Tender Offers. Any funds required by the Purchaser to
consummate the Offer and the other Settlement Tender Offers in excess of
the amount available to it from the additional debt financing will be
obtained from the Purchaser's partners.
The Amended DeForest Loan and the Amended NPI Loan (together, the
"Amended Loans") are governed by the terms of the Amended Loan
Agreement. Except as indicated below, the terms of the Amended Loans,
including the covenants of the respective borrowers and the terms
relating to interest and maturity, are not materially different from the
terms which governed the Original Loans prior to execution of the
Amended Loan Agreement. Any changes in such terms are generally
reflective of the increased principal amount of the Amended Loans as
well as the additional collateral for the Amended Loans to be acquired
by the respective borrowers in the Settlement Tender Offers and to be
pledged to the Lender.
The Amended DeForest Loan and the Amended NPI Loan are
cross-defaulted and cross-collateralized. The Amended DeForest Loan and
the Amended NPI Loan are each due and payable on November 21, 1995.
However, the respective borrowers have the right to extend the Amended
Loans for two consecutive one-year periods provided that the Amended
Loans are not in default. Interest on each Amended Loan accrues monthly
and is payable in arrears at a rate per annum equal to 250 basis points
over LIBOR through November 21, 1995, 350 basis points over LIBOR
through November 21, 1996 (if extended through such date) and 450 basis
points over LIBOR through November 21, 1997 (if extended through such
date). As of May 16, 1995 the LIBOR rate was 6.0625% per annum.
The Lender is also entitled to additional interest on the Amended
Loans in the form of a residual fee. Payment of the Lender's additional
interest, however, is subordinate to the prior return of the aggregate
capital contributions received by the Purchaser and DeForest II,
together with a 15% per annum return thereon. The residual fee consists
of the greater of 20% or a specified percentage of Tender Cash Flow
until the Lender has received a 17% per annum rate of return. The
specified percentage to be received by the Lender will be based upon the
actual monthly outstanding balance of the Amended Loans and the period
of time during which the Amended Loans were outstanding, and will
continue to be paid to the Lender after its receipt of a 17% per annum
rate of return. "Tender Cash Flow" is the amount to be received by the
Purchaser with respect to the units of limited partnership interest
acquired in the Original Fox Tender Offers and acquired or held by the
Purchaser in connection with the Settlement Tender Offers (together with
the units of limited partnership interest acquired by DeForest II in the
Original NPI Tender Offers and the Settlement Tender Offers, the
"Tendered Units"), whether in the form of distributions from the NPI
Partnerships or as proceeds from the sale or other disposition of such
Tendered Units.
Although the Amended Loans are prepayable at any time without
premium or penalty, a prepayment is required upon the occurrence of
certain events. The Purchaser is required to prepay the outstanding
principal amount of the Amended DeForest Loan utilizing Purchaser Cash
Flow (as defined herein), if any, remaining after its application to the
payment of interest on the Amended Loans. Further, whether or not
distributed to the Purchaser, 75% (increased from 60% in connection with
entering into the Amended Loan Agreement) of the Purchaser's
distributable portion of the net proceeds of a sale (and 100% of the net
proceeds of a refinancing) of a property owned by a Fox Partnership is
required to be applied in prepayment of the Amended
14
DeForest Loan. (See "Section 10. Conflicts of Interest and
Transactions With Affiliates" for a discussion of certain potential
conflicts of interest resulting from the Purchaser's obligation to
prepay the Amended DeForest Loan with the proceeds of sales or
refinancings of Partnership properties.) "Purchaser Cash Flow" means
the cash revenues, with certain exceptions, to be received by NPI-AP
Management, L.P. ("NPI-AP Management"), an affiliate of the Purchaser,
and by certain other entities affiliated with NPI less allowable
operating expenses. Each of NPI-AP and NPI have guaranteed the Amended
Loans.
As collateral security for the Amended Loans, among other things,
the Purchaser and DeForest II have pledged and collaterally assigned the
Tendered Units (or upon acquisition thereof pursuant to the Settlement
Tender Offers will pledge and collaterally assign Tendered Units) to the
Lender, and their respective partners have pledged all partnership
interests in the borrowers. As additional collateral security, all
outstanding shares of the common stock of NPI Equity (and its parent
NPI) and all partnership interests in NPI-AP Management have been
pledged to the Lender by the holders thereof.
The Amended Loan Agreement contains customary affirmative and
negative reporting and operational covenants. The Amended Loan
Agreement also provides that certain actions (i.e., bankruptcy or
insolvency and default under mortgage indebtedness) by Subject
Partnerships having in the aggregate an Attributed Net Value (as defined
below) of more than 20% of the Attributed Net Value of all Subject
Partnerships constitute a default under the Amended Loans. "Attributed
Net Value" of any Subject Partnership represents the purchase price
actually paid by the Purchaser or DeForest II for Tendered Units of a
Subject Partnership multiplied by the number of Tendered Units actually
acquired at such price.
The Purchaser and DeForest II have timely made all required
payments of principal and interest on the Original Loans. The Purchaser
anticipates that, over the remaining course of the Amended Loans or any
refinancing thereof, the allocable share of sale or refinancing proceeds
to be received by it or by DeForest II on account of Tendered Units,
together with the Purchaser Cash Flow available to service the Amended
Loans, will continue to be sufficient to retire the principal balance of
the Amended Loans or any replacement loans. However, it is the
Purchaser's belief that unless properties owned by one or more of the
Subject Partnerships are sold or refinanced, repayment of the Amended
Loans will be dependent upon the ability of the Purchaser or DeForest II
to obtain replacement financing. (See "Section 10. Conflicts of
Interest and Transactions with Affiliates" for a discussion of certain
potential conflicts of interest resulting from consummation of the
Original DeForest Loan.) There are 84 individual properties owned by
the Subject Partnerships. Neither the General Partner nor the Purchaser
is aware of any property owned by a Subject Partnership which is
contemplated for current sale other than the following:
(i) Century Properties Fund XIV has entered into contracts for
the sale of its Greenbriar Plaza and Duck Creek properties for purchase
prices of $1,060,000 and $2,240,000 respectively. The anticipated net
proceeds to the partnership from these sales is expected to be
approximately $925,000 from the Greenbriar Plaza sale and 1,950,000
from the Duck Creek sale. The sales are subject to customary closing
conditions, including title, survey and environmental review;
(ii) Century Properties Growth Fund XXII has entered into a
contract for the sale of its Monterey Village property for a purchase
price of $10,500,000 with anticipated net proceeds to the partnership
of approximately $3,200,000. The sale is contingent upon the buyer's
satisfactory completion of its due diligence review;
(iii) MRI Business Properties Fund, Ltd. II ("MRI II") has
entered into a contract for the sale of its Marriott Riverwalk property
for a purchase price of $49,600,000 with anticipated net proceeds to
the partnership of approximately $30,000,000, and has entered into a
non-binding letter of intent for the sale of its Marriott Somerset
property for $25,000,000 with anticipated net proceeds to the
partnership of approximately $2,500,000. The sale of the Marriott
Riverwalk is subject to customary closing conditions, and the sale of
the Marriott Somerset will be contingent upon the buyer's satisfactory
15
completion of its due diligence review. MRI II is also currently
marketing its interests in both its Holiday Inn Crowne Plaza property
and its Radisson South property; and
(iv) MRI Business Properties Fund, Ltd. III ("MRI III") has
entered into a contract for the sale of its Embassy Suites property for
a purchase price of $19,600,000 with anticipated net proceeds to the
partnership of approximately $19,500,000. The sale is contingent upon
the buyer's satisfactory completion of its due diligence review. MRI
III is also currently marketing its interest in its Holiday Inn Crowne
Plaza property.
In addition, neither the Purchaser nor Deforest II has made any
plans or arrangements to refinance the Amended Loans. Assuming all of
the foregoing properties which are under contract or subject to letters
of intent are sold for the purchase prices indicated and the proceeds of
such sales are distributed by the respective partnerships, the
Purchaser's share of such proceeds on account of units currently owned
in such partnerships, together with the Purchaser's share of the
proceeds from the April 1995 sale of Plumtree Apartments by Century
Properties Fund XV, would aggregate approximately $17,950,000.
Section 13. Background of the Offer.
Acquisition of Control. On December 6, 1993, NPI Equity, a
wholly-owned subsidiary of NPI, an affiliate of the Purchaser, assumed
management and obtained control of the General Partner of the
Partnership, the respective general partners of the other Subject
Partnerships set forth on Schedule 3 under the heading "Fox
Partnerships" (together with the Partnership, the "Fox Partnerships"),
and certain other affiliated partnerships, by being appointed as
substitute managing partner of FRI, a general partner of the Partnership
and the direct or indirect general partner of certain of the other Fox
Partnerships and such other affiliated partnerships, and by entering
into a voting trust agreement with the beneficial owners of the
outstanding shares of stock of FCMC, another general partner of the
Partnership and the direct or indirect general partner of certain of the
other Fox Partnerships and such other affiliated partnerships. Three of
the eleven former individual general partners of FRI are limited
partners of the Purchaser.
In connection with the acquisition by NPI Equity of management and
control of the Fox Partnerships and such other affiliated partnerships,
NPI Realty Advisors, Inc. ("NPI Realty"), an affiliate of NPI Equity,
acquired for cash and notes an aggregate of approximately $10,800,000
of loans made by FRI and/or FCMC to the Fox Partnerships and such other
affiliated partnerships (the "Partnership Advances") for the outstanding
balance of such loans. All of the Partnership Advances have since been
repaid by the borrower thereof from, among other sources, the proceeds
of the sales of certain properties of the Fox Partnerships and such
other affiliated partnerships.
On October 12, 1994, NPI sold one-third of its stock to an
affiliate of Apollo Real Estate Advisors, L.P. ("Apollo"). (See the
seventh, eighth and ninth paragraphs of Item 1. of the Partnership's
Form 10-K for the fiscal year ended December 31, 1994 for additional
information with respect to this transaction.) Certain individual
beneficial owners of NPI and an entity affiliated with Apollo formed
both the Purchaser and DeForest Capital on September 30, 1994 for the
purpose of making the Original Tender Offers.
The Original Tender Offers. On October 17, 1994, the Purchaser
commenced the Original Tender Offers for units of limited partnership
interest in the Fox Partnerships (the "Original Fox Tender Offers"), and
the Purchaser's affiliate, DeForest Ventures II L.P. ("DeForest II"),
commenced the Original Tender Offers (the "Original NPI Tender Offers")
for units of limited partnership interest in the Subject Partnerships
set forth on Schedule 3 under the heading "NPI Partnerships" (the "NPI
Partnerships"). The Original NPI Tender Offers and the Original Fox
Tender Offers were consummated on November 18, 1994 and November 29,
1994, respectively.
Original Tender Offer Financing. The Purchaser purchased the Units
tendered in the Original Tender Offer for Units as well as the units of
limited partnership interest tendered in the other Original Fox Tender
Offers, in part, with the proceeds of the $21,223,858 Original
DeForest Loan. The balance of the purchase
16
price for such units was obtained through capital contributions from the
Purchaser's partners. The Lender also provided the $13,250,690 Original NPI
Loan to DeForest II in connection with DeForest II's purchase of units in the
Original NPI Tender Offers. As of May 8, 1995, the outstanding principal
balance of the Original DeForest Loan and the Original NPI Loan, was
$21,223,858 and $12,403,079, respectively. As discussed in Section 12,
prior to execution of the Amended Loan Agreement, the Original Loans were
governed by terms not materially different from the terms governing the Amended
Loans (see "Section 12. Source of Funds" for a discussion of the terms of the
Amended Loans.)
The Action. The Action consolidates two of the litigations filed
in response to the Original Tender Offers. The following sets forth
certain background information relating to such litigations:
The Ruben Action. On November 7, 1994, Plaintiffs Bonnie L.
Ruben and Sidney Finkel (the "Original Ruben Plaintiffs") filed their
original complaint (the "Ruben Action") with the Court entitled Bonnie
L. Ruben, et. al. v. DeForest Ventures I L.P., et. al. (Civil Action No
1:94CV-2983-JEC), alleging claims relating to the Original Fox Tender
Offers on behalf of the limited partners in the Fox Partnerships. The
complaint included claims for violation of Section 14(e) of the
Securities Exchange Act of 1934 against the tender offerors, for breach
of fiduciary duties by the General Partners of the Fox Partnerships, for
breach of the Partnership Agreements of the Fox Partnerships, and for
aiding and abetting such breaches. The Original Ruben Plaintiffs moved
for a temporary restraining order and a preliminary injunction to enjoin
the Original Fox Tender Offers. On November 18, 1994, following a
hearing, the Court denied the Original Ruben Plaintiffs' motion for a
temporary restraining order enjoining the Original Fox Tender Offers and
other matters, and scheduled a hearing on the Original Ruben Plaintiffs'
preliminary injunction motion for November 28, 1994. On November 22,
1994, the Original Ruben Plaintiffs withdrew their motion for a
preliminary injunction. On December 29, 1994, the Original Ruben
Plaintiffs, joined by Plaintiff Robert Lewis (collectively, the "Ruben
Plaintiffs"), filed their First Amended Complaint, alleging claims
related both to the Original Fox Tender Offers and the Original NPI
Tender Offers, on behalf of limited partners in the Fox Partnerships and
the NPI Partnerships, respectively.
The Andrews Action. On December 16, 1994, a complaint (the
"Andrews Action") was filed in the Court by Plaintiff James Andrews and
others (the "Andrew Plaintiffs") with the Court entitled James Andrews,
et. al. v. Fox Capital Management Corp., et al., (Civil Action No
1:94CV-3351-JEC), alleging similar claims to those alleged in the Ruben
Action.
By order of the Court, dated February 23, 1995, the Ruben Action
and the Andrews Action were consolidated.
The Settlement also settles the two other class actions which were
filed in response to the Original Tender Offers. The following sets
forth certain background information relating to such litigations:
The Whiteside Action. On November 3, 1994, a complaint (the
"Whiteside Action") was filed in the Superior Court of the State of
California in and for the County of San Mateo entitled Whiteside, et al.
v. Fox Capital Management Corp. (Case No. 390018), alleging claims under
California state law in connection with the Original Fox Tender Offers
on behalf of certain limited partners in the Fox Partnerships, and an
amended complaint was filed in that action on December 28, 1994,
alleging claims related both to the Original Fox Tender Offers and to
the Original NPI Tender Offers, on behalf of certain limited partners of
the Fox Partnerships and the NPI Partnerships, respectively. The court
in the Whiteside Action denied plaintiff's motions for a temporary
restraining order and a preliminary injunction to enjoin the Original
Fox Tender Offers.
The Vernon Action. On November 22, 1994, a complaint (the
"Vernon Action") was filed in the Illinois Circuit Court entitled Vernon
v. DeForest Ventures I L.P., et. al. (No. 94 CH 0150592) containing
allegations similar to those contained in the Action.
Each defendant in the Action has at all times denied the
allegations of wrongdoing and the merits of any and all claims asserted
in the Action and in the Whiteside and Vernon Actions.
17
The Settlement. After extensive arm's-length negotiations between
counsel for the Plaintiffs in the various litigations and counsel for
the Defendants, the parties to the litigations entered into an Amended
Stipulation of Settlement dated as of March 14, 1995. As described in
the Settlement Notice, the Settlement provides that in full and final
disposition of all claims with respect to any transaction or occurrence
constituting the subject matter of the Action, the following
consideration was provided with respect to the Fox Partnerships:
Monetary Payment to Class Members who tendered in the Original
Tender Offers. Each unitholder who tendered units of limited
partnership interest in the Original Fox Tender Offers will receive a
payment equal to the sum of the Settlement Premium plus the Residual
Settlement Premium in the Settlement Tender Offer applicable to such
unitholder's Fox Partnership. Accordingly, unitholders who tendered
units in the Original Fox Tender Offers, and unitholders who tender
units in the Settlement Tender Offers relating to the same Fox
Partnership, will have received the same consideration with respect to
tendered units which are purchased pursuant to such Offers.
Settlement Tender Offers. The Purchaser was required to make the
Offer, and similar tender offers (together with the Offer, the
"Settlement Tender Offers") were required to be made with respect to the
other Subject Partnerships.
Establishment of Credit Line. The respective general partners of
the Fox Partnerships, or their affiliates, will provide a credit line to
each Fox Partnership in an amount determined by multiplying $150,000 by
the number of properties owned directly or indirectly by such Fox
Partnership, with interest at the lesser of the prime rate plus 1% or
the interest rate permitted under the respective partnership agreement
of the Fox Partnerships for short term loans to such Fox Partnership by
its general partners. The principal amount of such loans will be
payable on the earliest to occur of either the sale or refinancing of
any property owned by the applicable Fox Partnership or upon liquidation
of such Fox Partnership. Interest on such loans will be payable out of
first available cash flow or upon sale or refinancing of any property
owned by the applicable Fox Partnership.
Limitation on Expense Reimbursement. The annual amount of general
and administrative expenses (other than that portion attributable to
outside legal and accounting fees) which is reimbursable to the
respective general partners of each Fox Partnership from such Fox
Partnership may not exceed the amount reimbursed to such general
partners during the 1994 fiscal year, subject to increases for
inflation.
Prohibition on Roll-up Transactions. The respective general
partners of the Fox Partnerships will adopt a policy of prohibiting the
Fox Partnerships from entering into a Roll-up Transaction in which such
general partners or their affiliates are a party prior to December 31,
1999, unless such transaction is approved by a majority of the limited
partnership interests held by non-affiliates of such general partners.
A Roll-up Transaction is defined to mean (i) any merger or consolidation
of a Fox Partnership with any other entity if as a result thereof
limited partners of such partnership will be issued securities in any
other entity in exchange for, or as a distribution with respect to, the
units of such partnership; or (ii) any sale of all or substantially all
of the assets of a Fox Partnership to another entity if as a result
thereof limited partners of such partnership will be issued securities
in any other entity in exchange for, or as a distribution with respect
to, the units of such partnership; or (iii) any transaction involving an
exchange of units of a Fox Partnership for securities in any other
entity whether through a voluntary exchange or otherwise; or (iv) any
other similar transaction or series of transactions, if, as a result of
a transaction or any series of related transactions, any of the limited
partners of such partnership will be issued securities in any other
entity in exchange for, or as a distribution with respect to, the units
in such partnership; or (v) any sale of all or substantially all of the
assets of a Fox Partnership or termination and dissolution of a Fox
Partnership, if in either case, the general partner of such partnership
or any of its affiliates has a material financial interest in such
transaction (other than in its capacity as a general or limited partner
in such partnership).
Elimination of Fees. The respective general partners of the Fox
Partnerships and their affiliates will not be entitled to any
subordinated incentive fees otherwise payable pursuant to the respective
partnership agreements of the Fox Partnerships.
18
No Additional Tender Offers. Neither the Purchaser nor any of its
affiliates will initiate or participate in (as a member of any group or
as an investor in or creditor of the tender offeror(s)) any tender offer
for the outstanding units of one or more of the Subject Partnerships
after completion of the Settlement Tender Offers for a period of 24
months following the completion of the Settlement Tender Offers, except
in response to a tender offer by a party who is not an affiliate of the
Purchaser.
At a May 19, 1995 hearing on the Settlement, the Court approved the
Settlement and entered an order (the "Order") determining that the terms
of the Settlement were fair, reasonable and adequate and dismissing the
Action with prejudice. Unless an appeal is filed, the Court's order
will become final, binding and non-appealable on June 19, 1995.
Payment of Settlement Expenses. Depending on the number of units
tendered in the Settlement Tender Offers, the Subject Partnerships will
be obligated to pay a portion of Class Members' counsel's fees. In the
case of the Partnership, such payment will not exceed $33,200.
Establishment of Cash Consideration. The Purchaser has set the
Cash Consideration at $16.27 net per Unit as compared to the Original
Purchase Price of $15 per Unit in the Original Tender Offer for Units.
As discussed above, the Cash Consideration was determined in connection
with the Settlement and represents the price offered in the Original
Tender Offer increased by the Settlement Premium. (See "Section 13.
Background of the Offer".)
As discussed in the Offer to Purchase relating to the Original
Tender Offer for Units, the Original Purchase Price was established by
analyzing a number of both quantitative and qualitative factors which
existed at the time of the Original Tender Offers, including: (i)
secondary market activity with respect to the Units; (ii) the lack of
liquidity of, and lack of current income derived from, an investment in
the Partnership; (iii) an estimate of the underlying value of the
Partnership's assets; (iv) the costs to the Purchaser associated with
acquiring the Units in the Original Tender Offer; and (v) the
administrative costs of continuing to own the Partnership's assets
through a publicly registered limited partnership.
Secondary sales activity has been very limited and sporadic. Since
the Original Tender Offers, according to information obtained from trade
publications that report on public real estate limited partnerships,
Units that were transferred in the secondary market were sold at prices
approximating the Original Purchase Price.
Set forth below is updated information with respect to the
underlying value of the Partnership's assets.
The Purchaser is offering to purchase Units which are a relatively
illiquid investment and which do not presently generate current income
and is not offering to purchase the Partnership's underlying assets.
Consequently, the Purchaser does not believe that the underlying asset
value of the Partnership is determinative in arriving at the Cash
Consideration. Nevertheless, the Purchaser derived an estimated net
value (the "Derived Value") for the Partnership's assets. In
determining the Derived Value, the Purchaser first calculated the
"Adjusted Value" of each of the Partnership's properties. The Adjusted
Value was determined by subtracting a replacement reserve (the
"Replacement Reserve") from a property's earnings before interest,
depreciation and amortization ("EBIDA") for the twelve month period
commencing on April 1, 1994 and ending March 31, 1995, which earnings
were based upon the Partnership's actual operating results. This amount
was then divided by a capitalization rate (the "Cap Rate") to determine
the property's Adjusted Value. The Replacement Reserve and Cap Rate
used in calculating the Adjusted Value for the Partnership's properties
was $400.00 per apartment unit and the 9.75%, respectively.
The Purchaser believes that the Replacement Reserve and Cap Rates
utilized by it are within a range of reserves and capitalization rates
currently employed in the marketplace. The utilization of different
replacement reserves and capitalization rates could also be appropriate.
Unitholders should be aware that the use of lower replacement reserves
and/or capitalization rates would result in higher Adjusted Values for
the Partnership's properties.
19
The following table applies the method used by the Purchaser to
determine the Adjusted Value.
Replacement Adjusted
Property Year Built EBIDA Reserve Cap Rate Value
-------- ---------- ----- ----------- -------- --------
Woods of 1981 $530,000 $108,800 9.75% $4,320,000
Inverness
The 1979 $193,000 $ 80,000 9.75% $1,158,974
Landings
To determine the Derived Value of the Partnership's assets, the
Purchaser then added to the aggregate Adjusted Value the net amount of
all cash and cash equivalents of the Partnership at March 31, 1995,
which net amount equaled $917,000. Finally, the Adjusted Value of each
property was reduced by subtracting to the extent of such property's
Adjusted Value its long-term debt as of March 31, 1995, which reduction
amounted to approximately $5,158,974 in the aggregate. The resulting
Derived Value of the Partnership's assets was approximately $1,237,000
or $9 per Unit (based upon the percentage of capital distributions to
which Unitholders are entitled). The disparity between the Derived
Value per Unit determined herein and the Derived Value of $15 per Unit
set forth in the Offer to Purchase for the Original Tender Offer for
Units results from changes occurring in the EBIDA between June 30, 1994
and March 31, 1995. In view of the financial impact of leverage from
the Partnership's mortgage debt, a small difference in EBIDA results in
a significantly larger difference in Adjusted Value due to the effect of
dividing EBIDA by the applicable Cap Rate and then subtracting therefrom
the Partnership s mortgage debt.
The Purchaser believes that realization by the Partnership of the
Derived Value may be impacted by several factors affecting real estate
assets generally, including the continued sale of properties acquired by
financial institutions and government agencies. In addition, no
deduction was made in calculating the Derived Value on account of
closing costs which would be incurred upon the sale by the Partnership
of its properties, including brokerage commissions, title costs, legal
fees and transfer taxes. No Partnership properties or assets have been
identified for sale, and neither the General Partner nor the Purchaser
has any present plans or intentions with respect to liquidation of the
Partnership.
Unitholders should also be aware that, in connection with Apollo's
decision to make an investment in the Purchaser and its affiliates,
Apollo retained an independent third party to conduct an equity analysis
of, among other entities, the Partnership as of June 30, 1994. The
foregoing analysis estimated the equity value of the Partnership at an
amount equivalent to $15 per Unit. However, Unitholders are advised
that this valuation was not prepared with a view toward public
disclosure (including disclosure in this Offer) and that Apollo does not
as a matter of course make public its internal valuations. The fact
that Apollo commissioned this evaluation of the Partnership in
connection with its decision to make an investment in the Purchaser and
its affiliates should not be considered as an indication that either
Apollo or the Purchaser considers this valuation as an accurate
indicator of the net amount the Partnership could realize for its
assets.
The Partnership Agreement provides, among other things, that upon
dissolution of the Partnership subsequent to the sale of all of the
Partnership's properties, the General Partner is required to contribute
capital to the Partnership in an amount equal to any deficit then
existing in its capital account. Through ownership of Units by the
Purchaser, an affiliate of the General Partner, the potential liability
of the General Partner and its affiliates is effectively reduced.
Although there was a deficit in the capital account of the General
Partner of $3,569,007 as of the end of the Partnership's last fiscal
year (equal to $27.45 per Unit), such amount is subject to future
reduction through allocation of a portion of the taxable gain, if any,
that results from the sale by the
20
Partnership of its properties under the Partnership Agreement.
Consequently, the ultimate amount, if any, of the deficit and the date
on which it would be paid are indeterminable. Accordingly, the
Purchaser has attributed no value to this obligation in establishing the
Cash Consideration.
Pursuant to the Settlement Agreement, it was agreed that the Cash
Consideration would be $16.27 reflecting the price offered in the
Original Tender Offer increased by the Settlement Premium. The Cash
Consideration represents the price at which the Purchaser is willing to
purchase Units. No independent person has been retained to evaluate or
render any opinion with respect to the fairness of the Cash
Consideration and no representation is made by the Purchaser or any
affiliate of the Purchaser as to such fairness. The Purchaser did not
attempt to obtain current independent valuations or appraisals of the
underlying properties and other assets owned by the Partnership;
however, the Purchaser is aware of the equity analysis referred to
above. As indicated above, the Purchaser does not believe that such
valuations or appraisals should be determinative as to the Purchaser's
establishment of the Cash Consideration. Other measures of the value of
the Units may be relevant to Unitholders. Unitholders are urged to
consider carefully all of the information contained herein and consult
with their own advisors, tax, financial or otherwise, in evaluating the
terms of the Offer before deciding whether to tender Units.
Partnership Makes No Recommendation. The Partnership has indicated
in its Statement on Schedule 14D-9 filed with the Commission that it
makes no recommendation and is remaining neutral as to whether
Unitholders should tender their Units pursuant to the Offer because the
General Partner of the Partnership is subject to an inherent conflict of
interest resulting from the General Partner's affiliation with the
Purchaser.
Section 14. Conditions of the Offer. Notwithstanding any other
term of the Offer, the Purchaser shall not be required to accept for
payment or to pay for any Units tendered if all authorizations,
consents, orders or approvals of, or declarations or filings with, or
expirations of waiting periods imposed by, any court, administrative
agency or commission or other governmental authority or instrumentality,
domestic or foreign, necessary for the consummation of the transactions
contemplated by the Offer shall not have been filed, occurred or been
obtained. Furthermore, notwithstanding any other term of the Offer, the
Purchaser shall not be required to accept for payment or pay for any
Units not theretofore accepted for payment or paid for and may terminate
or amend the Offer as to such Units if, at any time on or after the date
of the Offer and before the acceptance of such Units for payment or the
payment therefor, any of the following conditions exists:
(a) a preliminary or permanent injunction or other order of any
federal or state court, government or governmental authority or agency
shall have been issued and shall remain in effect which (i) makes
illegal, delays or otherwise directly or indirectly restrains or
prohibits the making of the Offer or the acceptance for payment of or
payment for any Units by the Purchaser, (ii) imposes or confirms
limitations on the ability of the Purchaser effectively to exercise full
rights of ownership of any Units, including, without limitation, the
right to vote any Units acquired by the Purchaser pursuant to the Offer
or otherwise on all matters properly presented to the Partnership's
Unitholders, or (iii) requires divestiture by the Purchaser of any
Units;
(b) there shall be any action taken, or any statute, rule,
regulation or order proposed, enacted, enforced, promulgated, issued or
deemed applicable to the Offer by any federal or state court, government
or governmental authority or agency, which might, directly or
indirectly, result in any of the consequences referred to in clauses (i)
through (iii) of paragraph (a) above; or
(c) the Order shall not have become final, binding and
non-appealable.
The foregoing conditions are for the sole benefit of the Purchaser
and may be asserted by the Purchaser regardless of the circumstances
giving rise to such conditions or may be waived by the Purchaser in
whole or in part at any time and from time to time in its sole
discretion. Any determination by the Purchaser concerning the events
described above will be final and binding upon all parties.
21
Section 15. Certain Legal Matters.
General. Except as set forth in this Section 15, the Purchaser is
not aware of any filings, approvals or other actions by any domestic or
foreign governmental or administrative agency that would be required
prior to the acquisition of Units by the Purchaser pursuant to the
Offer. Should any such approval or other action be required, it is the
Purchaser's present intention that such additional approval or action
would be sought. 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 the Partnership's business, or that
certain parts of the Partnership's business might not have to be
disposed of or held separate or other substantial conditions complied
with in order to obtain such approval or action, any of which could
cause the Purchaser to elect to terminate the Offer without purchasing
Units thereunder. The Purchaser's obligation to purchase and pay for
Units is subject to certain conditions, including conditions related to
the legal matters discussed in this Section 15.
Antitrust. The Purchaser does not believe that the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, is
applicable to the acquisition of Units contemplated by the Offer.
Margin Requirements. The Units are not "margin securities" under
the regulations of the Board of Governors of the Federal Reserve System
and, accordingly, such regulations are not applicable to the Offer.
State Takeover Laws. A number of states have adopted anti-takeover
laws which purport, to varying degrees, to be applicable to attempts to
acquire securities of corporations which are incorporated in such states
or which have substantial assets, securityholders, principal executive
offices or principal places of business therein. Although the Purchaser
has not attempted to comply with any state anti-takeover statutes in
connection with the Offer, the Purchaser reserves the right to challenge
the validity or applicability of any state law allegedly applicable to
the Offer and nothing in this Offer to Purchase nor any action taken in
connection herewith is intended as a waiver of such right. If any state
anti-takeover statute is applicable to the Offer, the Purchaser might be
unable to accept for payment or purchase Units tendered pursuant to the
Offer or be delayed in continuing or consummating the Offer. In such
case, the Purchaser may not be obligated to accept for purchase or pay
for any Units tendered.
Section 16. Fees and Expenses. The Purchaser will not pay any
fees or commissions to any broker, dealer or other person for soliciting
tenders of Units pursuant to the Offer. The Purchaser will pay all
costs and expenses of printing and mailing the Offer.
Section 17. Miscellaneous. The Purchaser is not aware of any
jurisdiction in which the making of the Offer is not in compliance with
applicable law. If the Purchaser becomes aware of any jurisdiction in
which the making of the Offer would not be in compliance with applicable
law, the Purchaser will make a good faith effort to comply with any such
law. If, after such good faith effort, the Purchaser cannot comply with
any such law, the Offer will not be made to (nor will tenders be
accepted from or on behalf of) the holders of Units residing in such
jurisdiction.
No person has been authorized to give any information or to make
any representation on behalf of the Purchaser 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.
22
The Purchaser has filed with the Commission a Schedule 14D-1,
pursuant to Rule 14d-3 under the Exchange Act, furnishing certain
additional information with respect to the Offer, and may file
amendments thereto. The Schedule 14D-1 and any amendments thereto,
including exhibits, may be inspected and copies may be obtained at the
same places and in the same manner as set forth in Section 9 hereof
(except that they will not be available at the regional offices of the
Commission).
DEFOREST VENTURES I L.P.
June 2, 1995
23
Exhibit A
NOTE AND SECURITY AGREEMENT
, 1995
Loan # [ ]
The undersigned borrower (the "Borrower"), for value received,
promises to pay to DeForest Ventures I L.P., a Delaware limited
partnership (the "Lender"), the Principal Amount of this Note as
determined pursuant to Section 1 below, and accrued interest thereon,
on the terms and conditions herein set forth.
This Note evidences a non-recourse loan (the "Loan") made by the
Lender to the Borrower in connection with the offer to purchase (the
"Offer") units of limited partnership interest ("Units") of Century
Properties Fund XVI, a California limited partnership (the
"Partnership"), made by the Lender pursuant to that certain Offer to
Purchase dated June 2, 1995 and the accompanying Letter of Transmittal.
The Borrower tendered Units in the Offer, certain of which, after
application of the proration provisions of the Offer (the "Proration
Provisions"), were accepted for purchase (the "Purchased Units") and
certain of which (the "Retained Units"), after application of the
Proration Provisions, were not accepted for purchase and are pledged
hereby as collateral for the Loan evidenced by this Note.
1. Principal Amount. The principal amount (the "Principal
Amount") of this Note shall be that amount which is equal to the
number of Retained Units multiplied by $16.27. The Principal
Amount of this Note shall be due and payable on January 2, 1996
(the "Maturity Date"), and shall not be prepayable except through
the application of "Distributions" (as defined below) in accordance
with Section 7 of this Note.
2. Interest. This Note shall bear interest at a rate per
annum of 9%. Interest on this Note shall accrue from the date of
this Note (which shall be the date which is two days after the
Expiration Date (as defined in the Offer) of the Offer) and shall
be payable in arrears on the Maturity Date. Interest shall not be
prepayable except through the application of Distributions in
accordance with Section 7 of this Note. Interest will be computed
on the basis of a 365-day year and the actual number of days
elapsed.
3. Payment of Principal and Interest. The Principal Amount
of this Note, and accrued interest thereon, may be paid, at the
election of the Borrower, EITHER (i) by delivery to the Lender on
or after the Maturity Date but not later than January 17, 1996 of
a certified check made payable to the Lender in an amount (the
"Cash Payment Amount") equal to the sum of (x) the Principal
Amount, plus (y) the amount of accrued interest on the Principal
Amount through the date of payment, minus (z) the amount of all
Distributions applied on or prior to the date of payment in
accordance with Section 7 of this Note, OR (ii) by transferring
ownership of the Retained Units to the Lender. In order for the
Borrower to elect to make payment pursuant to the preceding clause
(i), the Lender must receive the Cash Payment Amount on or prior to
January 17, 1996. If the Cash Payment Amount is not so received by
the Lender on or prior to such date, the Borrower shall be deemed
to have elected the payment option set forth in clause (ii) above.
4. Non-recourse. Anything contained herein to the contrary
notwithstanding, no recourse shall be had for the payment of the
Loan evidenced by this Note or for any claim based thereon or
otherwise in respect thereof or for the payment or performance of
any other obligation based on or in respect of the Loan, and no
personal liability shall be asserted or enforceable, against (i)
the Borrower or (ii) any officer, director, partner, shareholder or
affiliate of the Borrower, and the enforcement of any judgment for
breach by the Borrower of its obligations hereunder shall be made
only against the Collateral. The foregoing provisions of this
Section shall not prevent recourse to the Collateral or constitute
a waiver, release or discharge of the Loan evidenced by this Note
or impair in any manner any right, remedy or recourse the Lender
may have against Borrower for actual fraud.
5. Security Interest. In order to secure the due and punc-
tual payment of all amounts due hereunder and performance of all
other obligations of the Borrower under this Note, the Borrower
hereby grants to the Lender a first priority security interest in
all of the Borrower's right, title and interest in and to the
Retained Units and all proceeds thereof (together, the
"Collateral"). The Borrower represents and warrants that it owns
and has full power and authority to pledge the Collateral and that,
other than this pledge, the Collateral is free and clear of all
liens, restrictions, charges, encumbrances, conditional sales
agreements or other obligations relating to the sale or transfer
thereof and is not subject to any adverse claims. The Lender will
have all the rights of a secured party under the Uniform Commercial
Code (as in effect in all applicable jurisdictions) with respect to
the Collateral. The Borrower irrevocably appoints the designees of
the Lender as the Borrower's attorney-in-fact to execute and cause
to be filed or recorded any and all documents on behalf of the
Borrower as may be necessary to perfect or continue the perfection
of the security interest herein granted, including, without
limitation, filing Uniform Commercial Code financing statements
with respect to the Collateral on behalf of the Borrower, or
without the signature of the Borrower, to the extent permitted by
law.
6. Delivery and Transfer of Collateral. Letters of Trans-
mittal regarding the tendered Units have heretofore been delivered
to the Lender. The Lender shall have the right at any time upon
the occurrence of a failure by Borrower to make any payments
2
hereunder when due (a "Default"), to endorse, assign or otherwise
transfer to or register in the name of the Lender any or all of the
Collateral. If the Lender has not timely received the Cash Payment
Amount from the Borrower as provided in Section 3 of this Note then
the Lender may endorse, assign or otherwise transfer the Retained
Units to the Lender and cause the Retained Units to be registered
in the name of the Lender. The Borrower hereby agrees with the
Lender that the Partnership shall make an appropriate notation on
the Partnership's Unit register which evidences the delivery and,
when applicable, the transfer of the Collateral. If requested by
the Lender, the Borrower will execute and deliver any assignment or
other instrument reasonably requested by the Lender to confirm the
validity of any action taken by the Lender pursuant to the
provisions of this Section 6. The Borrower hereby agrees promptly
to notify the Lender in writing prior to changing its address,
principal place of business or chief executive office or name.
7. Distributions. The Borrower agrees that all
distributions, income, profits or proceeds paid or payable to the
Borrower in respect of the Collateral ("Distributions") shall be
applied by the Lender first to reduce the amounts owing hereunder
in respect of accrued interest hereon and second, if any
Distributions remain unapplied, to reduce the Principal Amount
hereof. The Lender shall remit all amounts remaining after such
applications to the Borrower.
8. Voting Rights. So long as no Default has occurred here-
under, the Borrower shall be entitled to exercise any and all
voting and other consensual rights pertaining the Collateral for
any purpose not inconsistent with the terms or purpose of this
Note; provided, however, that the Borrower shall not in any way
exercise such rights in favor of a dissolution of the Partnership
or in any manner which may have an adverse affect on the value of
the Collateral or on the Lender's rights hereunder.
9. Default; Acceleration. Upon the occurrence of a Default,
all rights of the Borrower to exercise voting and other consensual
rights shall cease without any action or the giving of any notice
and such rights shall thereupon be vested in the Lender. Upon the
commencement of any bankruptcy or similar proceeding (whether
voluntary or involuntary) with respect to the Borrower, the
insolvency of the Borrower or any assignment by the Borrower for
the benefit of its creditors, the Principal Amount and all accrued
interest hereon shall automatically and immediately become due and
payable by the Borrower.
10. Prepayment. Other than through the application of
Distributions, this Note may not be prepaid in whole or in part.
11. Joint and Several Liability. If this Note is signed by
more than one Borrower, the obligations of each such Borrower
hereunder shall be joint and several obligations of each such
Borrower.
3
12. Notices. Except as otherwise expressly provided herein,
all notices and other communications provided for hereunder shall
be in writing and shall be delivered personally, by telecopier or
by express courier service by registered or certified mail, return
receipt requested, postage prepaid, as follows:
(a) If to the Lender:
DeForest Ventures I L.P.
5665 Northside Drive, N.W.
Suite 370
Atlanta, Georgia 30328-5805
(b) If to the Borrower, to the same address to which copies
of the Offer were sent, unless another address is specified in a
notice delivered to the Lender pursuant to Section 6 of this Note.
All such notices and communications shall, when mailed or
personally delivered, be effective upon receipt, or when
telegraphed, telexed, or cabled, be effective upon confirmation of
receipt by addressee or when sent by overnight courier, be
effective one day after delivery to such courier, except that
notices and communications to the Lender shall not be effective
until received by the Lender.
13. Miscellaneous.
(a) The Borrower hereby waives diligence, presentment,
demand, protest, notice of the acceptance of this Note and all
other notices of any kind relating to the enforcement of this Note.
No delay or omission on the part of the Lender in exercising any
right hereunder shall operate as a waiver of any such right or of
any other right hereunder and a waiver of any such right on any one
occasion shall not be construed as a bar to or waiver of any such
right on any future occasion.
(b) The Borrower agrees to pay on demand all costs and
expenses (including legal costs and attorneys' fees) incurred or
paid by the Lender in enforcing this Note.
(c) This Note shall be governed by and construed in
accordance with the laws of the State of New York, without giving
effect to the conflict of laws provisions thereof.
(d) If any one or more of the provisions contained in this
Note shall be invalid, illegal or unenforceable in any respect
under any applicable law, the validity, legality and enforceability
of the remaining provisions contained herein shall not in any way
be affected or impaired.
(e) The provisions of this Note may, from time to time, be
amended, or compliance with any agreement or condition contained
3
herein waived, with the written consent of the Lender and the
Borrower.
(f) This Note shall inure to the benefit of any successor or
assign of the Lender and any other holder of this Note.
(g) Upon request of the Lender, the Borrower shall execute
and deliver any and all documents and instruments as the Lender may
deem necessary to effectuate the terms of, and to carry out the
intent of, this Note.
(h) This Note may be executed in any number of counterparts,
each of which together shall constitute a single instrument.
(i) Nothing set forth in this Note shall be construed as a
commitment by the Lender to make any advance or loan to or for the
benefit of the Borrower other than the Loan to be made with respect
to the Retained Units upon consummation of the Offer.
5
NOTE AND SECURITY AGREEMENT SIGNATURE PAGE
WITNESSETH, the undersigned hereby executes this Note and
Security Agreement as of the date first above written.
BORROWER(1)
-------------------------------------
-------------------------------------
-------------------------------------
-------------------------------------
-------------------------------------
-------------------------------------
-------------------------------------
-------------------------------------
-------------------------------------
- --------------
(1) Each Borrower most sign exactly as such Borrower's name appears on
the face of the Letter of Transmittal.
6
Schedule 1
DIRECTORS AND EXECUTIVE OFFICERS
Set forth below is the name, current business address, present
principal occupation, and employment history for at least the past five
years of each director and executive officer of DeForest Capital.
Except for Mr. Koenigsberger, who is a citizen of Guatemala, each person
listed below is a citizen of the United States.
Present Principal Occupation or Employment;
Material Occupation, Position, Office
or Employment for the Past Five Years
Michael L. Ashner. Since October 1994, Mr. Ashner has been a
Director, President and Co-Chairman of DeForest Capital and DeForest
Capital II Corporation ("DeForest Capital II"), the general partner of
the NPI Purchaser. Since June 1994, Mr. Ashner has been a Director,
President and Co-Chairman of NPI, and since December 1984 has been a
Director and President of NPI Equity. Mr. Ashner has also been a
Director and executive officer of NPI Property Management Corporation
("NPI Management"), the general partner of NPI-AP Management, L.P.,
since April 1984, and is currently NPI Management's Chairman. Since
1981, Mr. Ashner has also served as President of Exeter Capital
Corporation, a firm which has organized and administered real estate
limited partnerships. Mr. Ashner's business address is 100 Jericho
Quadrangle, Suite 214, Jericho, New York 11753.
Martin Lifton. Since October 1994, Mr. Lifton has been a Director
and Chairman of DeForest Capital and DeForest Capital II, and since June
1994 has been a Director and Chairman of NPI. Since November 1991, Mr.
Lifton has been a Director and executive officer of NPI Equity, and is
currently NPI Equity's Chairman. Mr. Lifton has also been a Director
and/or executive officer of NPI Management since November 1991, and is
currently a Director and NPI Management's Co-Chairman. Mr. Lifton has
also served as Chairman and President of The Lifton Company, a real
estate investment firm, since January 1985, and as Chairman of The Bank
of Great Neck, a Great Neck, New York bank, since March 1986. Mr.
Lifton's business address is 100 Jericho Quadrangle, Suite 214, Jericho,
New York 11753.
W. Edward Scheetz. Mr. Scheetz has been a Director of DeForest
Capital, DeForest Capital II, NPI and NPI Equity since October 1994.
Since May 1993, Mr. Scheetz has been a limited partner of Apollo Real
Estate Advisors, L.P. ("Apollo"), the managing general partner of Apollo
Real Estate Investment Fund, L.P., a private investment fund. Mr.
Scheetz has also served as a Director of Roland International, Inc.
("Roland"), a real estate investment company, since January 1994, as a
Director of Capital Apartment Properties, Inc. ("CAP"), a multi-family
residential real estate investment trust, since January 1994 and as a
Director of Southwest Realty Corp. ("SRC"), an office portfolio real
estate investment trust since January 1995. From 1989, to May 1993, Mr.
Scheetz was a principal of Trammell Crow Ventures, a national real
estate investment firm. Mr. Scheetz' business address is 1301 Avenue of
the Americas, 38th floor, New York, New York 10019.
Ricardo Koenigsberger. Mr. Koenigsberger has been a Director of
DeForest Capital, DeForest Capital II, NPI and NPI Equity since October
1994. Since October 1990, Mr. Koenigsberger has been an associate of
Apollo and of Lion Advisors, L.P., which acts as financial advisor to
and representative for certain institutional investors with respect to
securities investments. For more than one year prior thereto, Mr.
Koenigsberger was an associate with Drexel Burnham Lambert Incorporated.
Mr. Koenigsberger's business address is 1301 Avenue of the Americas,
38th floor, New York, New York 10019.
1
Arthur N. Queler. Mr. Queler has been a Director, Executive Vice
President, Secretary and Treasurer of DeForest Capital and DeForest
Capital II since October 1994, and of NPI since June 1994. Mr. Queler
has been a Director and executive officer of NPI Equity and NPI
Management since December 1984 and April 1984, respectively. Mr. Queler
has also served as President of ANQ Securities, Inc., a NASD registered
broker-dealer firm which has been responsible for supervision of
licensed brokers and coordination with a nationwide broker-dealer
network for the marketing of NPI investment programs, since 1983. Mr.
Queler's business address is 5665 Northside Drive, N.W., Suite 370,
Atlanta, Georgia 30328.
Lee S. Neibart. Mr. Neibart has been a Director of DeForest
Capital, DeForest Capital II, NPI and NPI Equity since October 1994.
Mr. Neibart has directed portfolio management for Apollo since 1993.
From 1989 to 1993, Mr. Neibart also served as Executive Vice President
and Chief Operating Officer of the Robert Martin Company, a private real
estate development and management firm based in Westchester County, New
York, and from 1982 to 1985 Mr. Neibart served as President of the New
York Chapter of the National Association of Industrial Office Parks, a
professional real estate organization. Mr. Neibart is also a Director
of Roland, a Director of CAP and a Director of SRC. Mr. Neibart's
business address is 1301 Avenue of the Americas, 38th floor, New York,
New York 10019.
G. Bruce Lifton. Since October 1994, Mr. Lifton has been a
Director and Vice President of DeForest Capital and DeForest Capital II.
Mr. Lifton has also been Vice President of NPI and NPI Equity since
January 1991 and November 1991, respectively, and a Director and Vice
President of NPI Management since June 1994. Mr. Lifton has also served
as Vice President of The Lifton Company since September 1986. Mr.
Lifton is a son of Martin Lifton and the brother of Steven Lifton. Mr.
Lifton's business address is 5665 Northside Drive, N.W., Suite 370,
Atlanta, Georgia 30328.
Steven Lifton. Mr. Lifton has been a Vice President of DeForest
Capital and DeForest Capital II since October 1994 and of NPI Management
since June 1994. Since June 1994, Mr. Lifton has been a Director and
Vice President of NPI. Mr. Lifton has been Vice President of NPI
Equity since November 1991 and a Director since October 1994. Mr.
Lifton has also served as Senior Vice President of The Lifton Company
since September 1984 and as a Director of The Bank of Great Neck since
March 1986. Steven Lifton is a son of Martin Lifton and the brother of
G. Bruce Lifton. Mr. Lifton's business address is 100 Jericho
Quadrangle, Suite 214, Jericho, New York 11753.
2
Schedule 2
FINANCIAL STATEMENTS OF THE PURCHASER AND DEFOREST CAPITAL
INDEPENDENT AUDITORS' REPORT
The Partners
DeForest Ventures I L.P.
We have audited the accompanying balance sheet of DeForest Ventures
I L.P., as of May 15, 1995, and the statements of income, changes
in partners' capital and of cash flows for the periods from
September 30, 1994 (inception) to December 31, 1994 and January 1,
1995 to May 15, 1995. These financial statements are the
responsibility of the Partnership's management. Our responsibility
is to express an opinion on these financial statements based on our
audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements. An audit also
includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of
DeForest Ventures I L.P., as of May 15, 1995, and the results of
its operations and its cash flows for the periods September 30,
1994 (inception) to December 31, 1994 and January 1, 1995 to May
15, 1995, in conformity with generally accepted accounting
principles.
Tauber & Balser, P.C.
Atlanta, Georgia
May 26, 1995
F-1
DEFOREST VENTURES I L.P.
BALANCE SHEET
MAY 15, 1995
ASSETS
Investments in limited partnerships . . . . . . . . . . . $ 36,425,000
Cash. . . . . . . . . . . . . . . . . . . . . . . . . . . 407,000
Other assets. . . . . . . . . . . . . . . . . . . . . . . 818,000
Restricted cash . . . . . . . . . . . . . . . . . . . . . 4,364,000
------------
$ 42,014,000
============
LIABILITIES AND PARTNERS' EQUITY
Note payable. . . . . . . . . . . . . . . . . . . . . . . $ 25,689,000
Accounts payable and accrued expenses . . . . . . . . . . 1,183,000
Accrued litigation settlement . . . . . . . . . . . . . . 4,350,000
Other liability . . . . . . . . . . . . . . . . . . . . . 123,000
Partners' equity. . . . . . . . . . . . . . . . . . . . . 10,669,000
------------
$ 42,014,000
============
SEE NOTES TO FINANCIAL STATEMENTS
F-2
DEFOREST VENTURES I L.P.
STATEMENTS OF INCOME
JANUARY 1, 1995 TO MAY 15, 1995 AND
SEPTEMBER 30, 1994 (INCEPTION) TO DECEMBER 31, 1994
1995 1994
---- ----
REVENUES:
Income from investments
in partnerships . . . . . . . . . $ 100,000 $ 405,000
Interest. . . . . . . . . . . . . . 23,000 117,000
----------- ---------
123,000 522,000
EXPENSES:
Interest . . . . . . . . . . . . . . 1,371,000 306,000
General, administrative,
and other. . . . . . . . . . . . . 389,000 106,000
----------- ---------
1,760,000 412,000
----------- ---------
NET INCOME (LOSS) . . . . . . . . . . $(1,637,000) $ 110,000
=========== =========
- --------------------------------------------------------------------------------
DEFOREST VENTURES I L.P.
STATEMENTS OF CHANGES IN PARTNERS' CAPITAL
JANUARY 1,1995 TO MAY 15, 1995 AND
SEPTEMBER 30, 1994 (INCEPTION) TO DECEMBER 31, 1994
GENERAL LIMITED
PARTNER PARTNERS TOTAL
------- -------- -----
PARTNERS' CAPITAL, BEGINNING . . $ - $ - $ -
CAPITAL CONTRIBUTED. . . . . . . 119,000 11,781,000 11,900,000
NET INCOME . . . . . . . . . . . 1,000 109,000 110,000
-------- ----------- -----------
PARTNERS' CAPITAL,
DECEMBER 31, 1994. . . . . . . 120,000 11,890,000 12,010,000
CAPITAL CONTRIBUTED. . . . . . . - 296,000 296,000
NET INCOME . . . . . . . . . . . (16,000) (1,621,000) (1,637,000)
-------- ----------- -----------
PARTNERS' CAPITAL,
MAY 15, 1995 $104,000 $10,565,000 $10,669,000
======== =========== ===========
SEE NOTES TO FINANCIAL STATEMENTS
F-3
DEFOREST VENTURES I L.P.
STATEMENTS OF CASH FLOWS
JANUARY 1, 1995 TO MAY 15, 1995 AND
SEPTEMBER 30, 1994 (INCEPTION) TO DECEMBER 31, 1994
1995 1994
---- ----
Cash flows from operating activities:
Net income . . . . . . . . . . . . . . . . $(1,637,000) $ 110,000
----------- -----------
Adjustments:
Undistributed earnings from partnership
investments . . . . . . . . . . . . . . . (100,000) (404,000)
Amortization . . . . . . . . . . . . . . . 101,000 29,000
Changes in:
Other assets . . . . . . . . . . . . . . (5,000) -
Accounts payable and other liabilities . 999,000 306,000
----------- -----------
Total adjustments. . . . . . . . . . . . . 995,000 (69,000)
----------- -----------
Net cash provided (used) by operating
activities. . . . . . . . . . . . . . . . (642,000) 41,000
----------- -----------
Cash flows from investing activities:
Cash payments for investments
in partnerships. . . . . . . . . . . . . (606,000) (30,963,000)
Cash payments for organizational costs . . - (200,000)
Cash restricted for investments. . . . . . (4,364,000) -
----------- -----------
Net cash used in investing activities. . . . (4,970,000) (31,163,000)
----------- -----------
Cash flows from financing activities:
Proceeds from notes payable. . . . . . . . 4,466,000 21,224,000
Proceeds from capital contributions. . . . 296,000 11,900,000
Cash payments for loan fees. . . . . . . . (44,000) (701,000)
----------- -----------
Net cash provided from financing
activities. . . . . . . . . . . . . . . . . 4,718,000 32,423,000
----------- -----------
Net increase (decrease) in cash
and equivalents . . . . . . . . . . . . . . (894,000) 1,301,000
Cash, beginning. . . . . . . . . . . . . . . 1,301,000 -
----------- -----------
Cash, ending . . . . . . . . . . . . . . . . $ 407,000 $ 1,301,000
=========== ============
Supplemental disclosures of cash flow information:
Cash paid during the period for interest. . . $ 554,000 $ 151,000
=========== ============
Non-cash financing and investing activities:
In 1995, accrued litigation settlement of $4,350,000 increased
investments in limited partnerships.
SEE NOTES TO FINANCIAL STATEMENTS
F-4
DEFOREST VENTURES I L.P.
NOTES TO FINANCIAL STATEMENTS
MAY 15, 1995
NOTE 1 - ORGANIZATION
DeForest Ventures I L.P., a Delaware Limited Partnership
("DeForest"), was formed on September 30, 1994 for the purpose of
acquiring limited partnership units in various affiliated limited
partnerships (the "Limited Partnerships"). The general partner of
DeForest is DeForest Capital I Corporation ("DeForest Capital").
Concurrently with this transaction, DeForest Ventures II L.P.
("DeForest II"), a Delaware Limited Partnership, was formed for the
purpose of acquiring limited partnership units in various other
affiliated limited partnerships.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Investment in Limited Partnerships:
Investment in limited partnership units are carried at the sum of
the per unit purchase price plus acquisition costs adjusted for
DeForest's share of earnings or losses.
Income recognition:
Income or loss on the limited partnership units owned are
recognized quarterly based on the reported income or loss of the
respective Limited Partnerships.
NOTE 3 - INVESTMENT IN LIMITED PARTNERSHIPS
DeForest holds limited partner units in various Limited
Partnerships that are accounted for on the equity method.
DeForest's cost was approximately equal to its share of the net
assets.
F-5
DEFOREST VENTURES I L.P.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
MAY 15, 1995
NOTE 3 - INVESTMENT IN LIMITED PARTNERSHIPS (CONTINUED)
Summary financial information of the Limited Partnerships as of the
quarter ended March 31, 1995 are as follows (000's omitted):
Land and buildings . . . . . . . . . . . . . $ 444,037
Other assets . . . . . . . . . . . . . . . . 48,905
Notes payable - real estate. . . . . . . . . (347,554)
Other liabilities. . . . . . . . . . . . . . (17,874)
---------
Net assets . . . . . . . . . . . . . . . . . $ 127,514
=========
DeForest share of net assets . . . . . . . . $ 36,425
=========
Net income for period. . . . . . . . . . . . $ 974
=========
DeForest share of net income . . . . . . . . $ 100
=========
The limited partnerships are:
Percentage Carrying
owned value
---------- --------
Century Properties Fund XII . . . . . . . 34% $ 1,955,000
Century Properties Fund XIII. . . . . . . 38 4,132,000
Century Properties Fund XIV . . . . . . . 37 3,484,000
Century Properties Fund XV. . . . . . . . 38 5,128,000
Century Properties Fund XVI . . . . . . . 31 689,000
Century Properties Fund XVII. . . . . . . 29 2,062,000
Century Properties Fund XVIII . . . . . . 24 461,000
Century Properties Fund XIX . . . . . . . 23 1,371,000
Century Properties Fund XXII. . . . . . . 18 1,357,000
MRI Business Properties Fund, Ltd. . . . 27 4,503,000
MRI Business Properties Fund, Ltd. II . . 29 7,526,000
MRI Business Properties Fund, Ltd. III. . 25 4,757,000
-----------
$36,425,000
The limited partnerships are engaged in the business of owning and
operating commercial and residential real estate.
F-6
DEFOREST VENTURES I L.P.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
MAY 15, 1995
NOTE 4 - RESTRICTED CASH
Under the terms of the loan agreement, funds advanced are deposited
to a restricted account and are used only for the acquisition of
limited partnership units and associated costs. The balance at May
15, 1995 represents the expected outlay necessary to comply with
the settlement of the litigation described in Note 7.
The restricted cash is invested in short-term highly liquid
investments, consisting of U.S. Government securities. The
carrying amount approximates fair value because of the short-term
maturity of these investments.
NOTE 5 - NOTE PAYABLE
DeForest and DeForest II obtained loans of $21,224,000 and
$13,251,000, respectively, which were used to fund the acquisition
of units in the Limited Partnerships. Under the terms of the
loans, interest at a rate per annum of 250 basis points over LIBOR
is payable monthly. As of May 15, 1995 the LIBOR rate was 6.0625%.
The lender is also entitled to additional interest on the amended
loans in the form of a residual fee. Payment of the residual fee
is subordinate to the return of capital contributions together with
a 15% return thereon. The additional interest is calculated on a
formula basis and has been accrued to achieve a minimum 17% per
annum effective rate of return. The formula could result in
additional interest greater than a 17% per annum return.
Principal is payable upon receipt of proceeds from sales of
properties in the Limited Partnerships. The loans are cross
defaulted and cross-collateralized with all the tendered limited
partnership units. The obligation of DeForest II at May 15, 1995
was $13,709,000. All outstanding common stock and partnership
interests of certain affiliates are pledged as additional
collateral. The loans are due November 21, 1995, with a right to
extend for two consecutive one-year periods. The basis points over
LIBOR increase 100 points with each extension.
On May 8, 1995, the loans were amended to provide for the
additional debt financing to be used in connection with the
consummation of the settlement of the litigation described in Note
7. As amended, the lender has agreed to provide up to an aggregate
of an additional $20,525,452 of financing to DeForest and DeForest
II.
F-7
DEFOREST VENTURES I L.P.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
MAY 15, 1995
NOTE 6 - RELATED PARTIES
Shareholders who control DeForest Capital also control the managing
general partner of all of the Limited Partnerships.
NOTE 7 - LITIGATION
On May 19, 1995, a settlement was approved by the U.S. District
Court for the Northern District of Georgia for a class action for
claims relating to tender offers made for the purchase of limited
partnership units in the Limited Partnerships. Pursuant to the
terms of the settlement, in consideration for dismissal and release
of all claims made in the class action, among other things,
DeForest will pay additional amounts to each unit holder who
tendered their units of the Limited Partnerships. Total payments
to be made under the settlement are approximately $4,350,000, which
has been accrued by DeForest. In addition, a second tender offer
will be made to all holders of limited partnership units in the
Limited Partnerships who had not previously sold their shares at
prices in excess of the initial tender price. Unless an appeal is
filed, the Court's order will become final, binding, and non-appealable
on June 19, 1995.
F-8
Independent Auditors' Report
Board of Directors
DeForest Capital I Corporation
We have audited the accompanying balance sheet of DeForest Capital
I Corporation, as of May 15, 1995. This financial statement is the
responsibility of the Company's management. Our responsibility is
to express an opinion on this financial statement based on our
audit.
We conducted our audit in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the
financial statement is free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements. An audit also
includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit
provides a reasonable basis for our opinion.
In our opinion, the financial statement referred to above present
fairly, in all material respects, the financial position of
DeForest Capital I Corporation, as of May 15, 1995, in conformity
with generally accepted accounting principles.
Tauber & Balser, P.C.
Atlanta, Georgia
May 26, 1995
F-9
DEFOREST CAPITAL I CORPORATION
BALANCE SHEET
MAY 15, 1995
ASSET
Investment in DeForest Ventures I L.P. . . . . . . $ 104,000
===========
STOCKHOLDERS' EQUITY
Capital stock, par value $.01,
7,500 shares authorized, 600
issued and outstanding . . . . . . . . . . . . . $ 6
Additional paid in capital . . . . . . . . . . . . 1,118,994
Notes receivable from stockholders. . . . . . . . . (1,000,000)
Deficit . . . . . . . . . . . . . . . . . . . . . . (15,000)
-----------
$ 104,000
===========
- --------------------------------------------------------------------------------
DEFOREST CAPITAL I CORPORATION
NOTES TO FINANCIAL STATEMENT
MAY 15, 1995
NOTE 1 - ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICY
DeForest Capital I Corporation ("DeForest Capital I"), a Delaware
Corporation, was incorporated on September 30, 1994 and serves as
the general partner of DeForest Ventures I L.P. ("DeForest").
DeForest was formed for the purpose of acquiring limited
partnership units in various limited partnerships (the "Limited
Partnerships").
NOTE 2 - STOCKHOLDERS' EQUITY
Shareholders of DeForest Capital I have contributed $119,000 in
cash and $1,000,000 in negotiable demand promissory notes.
NOTE 3 - RELATED PARTIES
Shareholders who control DeForest Capital I also control the
general partners of all of the Limited Partnerships.
F-10
NOTE 4 - INVESTMENT IN DEFOREST I
DeForest has a 1% investment as the general partner in DeForest I
that is accounted for on the equity method. The investment is
carried at cost, adjusted for its share or earnings or losses.
Summary financial information of DeForest I as of May 15, 1995 is
as follows (000's omitted):
Investment in limited partnerships . . . $ 37,813
Cash . . . . . . . . . . . . . . . . . . 407
Cash, restricted for investments . . . . 4,364
Other assets . . . . . . . . . . . . . . 818
Note payable . . . . . . . . . . . . . . (25,689)
Accrued litigation settlement. . . . . . (4,350)
Other liabilities. . . . . . . . . . . . (1,306)
--------
Net assets . . . . . . . . . . . . . . . $ 10,669
========
NOTE 5 - LITIGATION
On May 19, 1995, a settlement was approved by the U.S. District
Court for the Northern District of Georgia for a class action for
claims relating to tender offers made for the purchase of limited
partnership units in the Limited Partnerships. Pursuant to the
terms of the settlement, in consideration for dismissal and release
of all claims made in the class action, among other things,
DeForest will pay additional amounts to each unit holder who
tendered their units of the Limited Partnerships. In addition, a
second tender offer will be made to all holders of limited
partnership units in the Limited Partnerships who had not
previously sold their shares at prices in excess of the initial
tender price. Unless an appeal is filed, the Court's order will
become final, binding, and non-appealable on June 19, 1995.
F-11
Schedule 3
Subject Partnerships
NPI PARTNERSHIPS
National Property Investors II
National Property Investors III
National Property Investors 4
National Property Investors 5
National Property Investors 6
National Property Investors 7
National Property Investors 8
FOX PARTNERSHIPS
Century Properties Fund XII
Century Properties Fund XIII
Century Properties Fund XIV
Century Properties Fund XV
Century Properties Fund XVI
Century Properties Fund XVII
Century Properties Fund XVIII
Century Properties Fund XIX
Century Properties Growth Fund XXII
MRI Business Properties Fund, Ltd.
MRI Business Properties Fund, Ltd. II
MRI Business Properties Fund, Ltd. III
The Letter of Transmittal, signature page for the Note and Security
Agreement and any other required documents should be sent or delivered
by each Unitholder or his broker, dealer, commercial bank, trust company
or other nominee to the Purchaser at its address set forth below:
DEFOREST VENTURES I L.P.
By Hand, Mail (insured or registered
recommended) or Overnight Delivery:
DeForest Ventures I L.P.
c/o Gemisys
7103 South Revere Parkway
Englewood, CO 80112
For Telephone Information:
(404) 916-9055 or (404) 850-9640
Any questions or requests for assistance or for additional copies of
this Offer to Purchase, the Letter of Transmittal and other tender offer
materials may be directed to the Purchaser at the telephone number and
address listed above. You may also contact your broker for assistance
concerning the Offer. To confirm delivery of your Letter of Transmittal
and related documents, please contact the Purchaser.
Exhibit (a)(2)
CENTURY PROPERTIES FUND XVI
LETTER OF TRANSMITTAL
Taxpayer Identification Number
THE OFFER, WITHDRAWAL RIGHTS AND PRORATION
PERIOD WILL EXPIRE AT 12:00 MIDNIGHT, NEW
YORK CITY TIME, ON JUNE 30, 1995 (the
"Expiration Date") UNLESS EXTENDED.
Deliver to: DeForest Ventures I L.P.
c/o Gemisys
7103 South Revere Parkway
Englewood, CO 80112
For assistance (404) 916-9055 or
call: (404) 850-9640
To participate in the Offer, a duly executed copy of this Letter of
Transmittal, the attached signature page to the Note and Security
Agreement and any other documents required by this Letter of Transmittal
must be received by the Purchaser on or prior to the Expiration Date.
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. The method of delivery of all documents is at the election
and risk of the tendering Unitholder. Please use the pre-addressed,
postage-paid envelope provided.
This Letter of Transmittal is to be completed by Unitholders of
Century Properties Fund XVI, a California limited partnership (the
"Partnership"), pursuant to the procedures set forth in the Offer to
Purchase (as defined below). Capitalized terms used herein and not
defined herein have the meanings ascribed to such terms in the Offer to
Purchase.
PLEASE CAREFULLY READ THE ACCOMPANYING INSTRUCTIONS
Gentlemen:
The undersigned hereby tenders to DeForest Ventures I L.P., a Delaware
limited partnership (the "Purchaser"), the number of units ("Units") of
limited partnership interest in the Partnership set forth above at
$16.27 per Unit upon the terms and subject to the conditions set forth
in the Offer to Purchase, dated June 2, 1995 (the "Offer to Purchase"),
and this Letter of Transmittal (which together constitute the "Offer").
Receipt of the Offer to Purchase is hereby acknowledged. By executing
this Letter of Transmittal, the undersigned hereby revokes all previous
requests, if any, for exclusion from the Settlement and acknowledges
that the undersigned shall be bound by the Settlement and all orders and
final judgments rendered in the Action.
The undersigned recognizes that, if more than 24,031 Units are
validly tendered prior to or on the Expiration Date and not properly
withdrawn, the Purchaser will, upon the terms of the Offer and subject
to the delivery of Loan Proceeds, accept for payment from among those
Units tendered prior to or on the Expiration Date 24,031 Units on a pro
rata basis, with adjustments to avoid purchases of certain fractional
Units, based upon the number of Units validly tendered prior to the
Expiration Date and not withdrawn. The undersigned agrees that, if more
than 21,579 Units are validly tendered prior to or on the Expiration
Date and not properly withdrawn, subject to the proration requirements
and other terms of the Offer, the undersigned will receive from the
Purchaser, $16.27 for each Unit tendered in a combination of Purchase
Proceeds and Loan Proceeds, all as described in the Offer to Purchase.
Subject to and effective upon acceptance for payment of any of the
Units tendered hereby, the undersigned hereby sells, assigns and
transfers to, or upon the order of, Purchaser all right, title and
interest in and to such Units which are purchased pursuant to the Offer.
The undersigned hereby irrevocably constitutes and appoints 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 deliver such Units and transfer ownership of such
Units on the books of the Partnership, together with all accompanying
evidences of transfer and authenticity, to or upon the order of the
Purchaser and, upon payment of the purchase price in respect of such
Units by the Purchaser, to receive all benefits and otherwise exercise
all rights of beneficial ownership of such Units all in accordance with
the terms of the Offer. Subject to and effective upon the purchase of
any Units 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 of the
Partnership. 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). In addition, by executing
this Letter of Transmittal, the undersigned assigns to the Purchaser all
of the undersigned's rights to receive distributions from the
Partnership with respect to Units which are purchased pursuant to the
Offer.
By validly tendering Units hereby, the undersigned agrees to
receive a Loan in respect of Retained Units if more than 21,579 Units
are validly tendered prior to or on the Expiration Date and not properly
withdrawn and the Offer is consummated. The undersigned agrees to be
bound by the terms of any such Loan, including the terms of repayment
and the pledge of the Retained Units to secure repayment of the Loan.
The undersigned acknowledges that the complete terms of the Note and
Security Agreement are set forth in Exhibit A to the Offer to Purchase.
The undersigned directs the Partnership to deliver any and all
distributions payable on the Retained Units to the Purchaser for credit
against amounts outstanding in respect of the Loan and the Purchaser
may, in the name and on behalf of the undersigned, execute and deliver
to the Partnership a written confirmation of such direction. In
addition, by executing this Letter of Transmittal, the undersigned
appoints the designees of the Purchaser as its attorney-in-fact (such
appointment being coupled with an interest, and irrevocable) to execute
and cause to be filed and recorded any and all documents on behalf of
the undersigned and to take any and all other actions reasonably deemed
necessary by the Purchaser to perfect or continue the perfection of the
security interest in the Retained Units that secures any Loan made to
the undersigned.
The undersigned hereby represents and warrants that the undersigned
owns the Units tendered hereby within the meaning of Rule 13d-3 under
the Securities Exchange Act of 1934, as amended, and has full power and
authority to validly tender, sell, assign and transfer the Units
tendered hereby, and that when any such Units are purchased 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 claim. The undersigned further represents and warrants that
any Retained Units will, when pledged to secure a Loan to the
undersigned, be free and clear of all liens, restrictions, charges,
encumbrances, conditional sales agreements or other obligations relating
to the sale or transfer thereof, and such Retained Units will not be
subject to any adverse claim, other than the pledge to secure the Loan.
Upon request, the undersigned will execute and deliver any additional
documents deemed by the Purchaser to be necessary or desirable to
complete the assignment, transfer, purchase or pledge of Units tendered
hereby.
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 to Purchase, 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 will be destroyed by the Purchaser. 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, successors
and assigns of the undersigned. Except as stated in the Offer to
Purchase, this tender is irrevocable.
TO TENDER UNITS, SIGN AT THE "X" BELOW IN BOX A AND SIGN THE ATTACHED
NOTE AND SECURITY AGREEMENT SIGNATURE PAGE. TO AVOID WITHHOLDING ON
AMOUNTS PAYABLE WITH RESPECT TO UNITS, COMPLETE BOXES B, C AND D, AS
APPLICABLE (SEE INSTRUCTIONS 3A, 3B AND 4, RESPECTIVELY).
DO NOT RETURN CERTIFICATES WITH THIS LETTER OF TRANSMITTAL
BOX A
SIGN HERE TO TENDER
Certification - Under penalties of perjury, the undersigned hereby
certifies the following:
(1) The TIN shown in the Substitute Form W-9 (Box B) is the
correct TIN of the Unitholder who is submitting this Letter of
Transmittal (and who is required by law to provide such TIN), or such
Unitholder is waiting for a TIN to be issued and either (a) has mailed
or delivered an application to receive a TIN to the appropriate IRS
Center or Social Security Administration Office or (b) intends to mail
or deliver an application in the near future (it being understood that
if such Unitholder does not provide a TIN to the Purchaser within sixty
(60) days, 31% of all reportable payments made to the Unitholder
thereafter will be withheld until a TIN is provided to the Purchaser); and
(2) The Unitholder who is submitting this Letter of Transmittal and
who is required by law to provide such TIN is not subject to backup
withholding either because such Unitholder (a) is exempt from backup
withholding, or (b) has not been notified by the IRS that such
Unitholder is subject to backup withholding as a result of a failure to
report all interest or dividends or (c) the IRS has notified such
Unitholder that such Unitholder is no longer subject to backup
withholding. (See Instruction 3(A))
If the undersigned is unable to certify that the Unitholder
submitting this Letter of Transmittal is not subject to backup
withholding, such Unitholder should so indicate by striking through
certification (2) above.
(3) The undersigned has completed the FIRPTA Affidavit (Box C) or
the Substitute Form W-8 (Box D), as applicable, and the information
provided by the undersigned therein is true and accurate. (See
Instructions 3(B) and 4)
SIGNATURE(S) OF UNITHOLDER(S)
All registered Unitholders must sign exactly as name(s) appear(s) above.
(Attach additional sheets, if necessary)
(Signature) X
-- ---------------------------------------
(Signature) X Date , 1995
-- --------------------------------------- -------
If signing as a trustee, executor, administrator, guardian,
attorney-in-fact, officer of a corporation or other person acting in a
fiduciary or representative capacity, please provide the following
information and see Instruction 1.
Name(s) and Capacity-----------------------------------------------------
Address------------------------------------------------------------------
Area Code and Telephone No.----------------------------------------------
Notarization of Signature
(If required. See Instruction 1)
STATE OF---------------------------------)
) ss.:
COUNTY OF--------------------------------)
On this-----day of---------------, 1995, before me came personally
- ----------------------------- ------------------------------, to me
known to be the person who executed the foregoing Letter of Transmittal.
--------------------------------
Notary Public
OR
Signature Guarantee
(If required. See Instruction 1)
Name and Address of Eligible Institution-------------------------------------
Authorized Signature---------------------- Name--------------------
Title------------- Date---------------, 1995
BOX B
SUBSTITUTE FORM W-9
(Attach additional copies for joint Unitholders)
(See Instruction 3(A))
Please provide the TIN of the Unitholder submitting this Letter of
Transmittal or, if such Unitholder is awaiting a TIN, check the
"Awaiting TIN" box.
Social Security Number or
Employer Identification Number------------------------------------------
Awaiting TIN [ ]
BOX C
FIRPTA AFFIDAVIT (For U.S. Persons)
(Attach additional copies for joint Unitholders)
(See Instruction 3(B))
Under Section 1445(e)(5) of the Internal Revenue Code and Treas.
Reg. 1.I445-11T(d), a transferee must withhold tax equal to 10% of the
amount realized with respect to certain transfers of an interest in a
partnership in which 50% or more of the value of the gross assets
consists of U.S. real property interests and 90% or more of the value of
the gross assets consist of U.S. real property interests plus cash or
cash equivalents, if 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 interest in the Partnership, the person
signing this Letter of Transmittal hereby certifies the following under
penalties of perjury:
(1) The Unitholder, if an individual, is not a nonresident alien
for purposes of U.S. income taxation, and if not an individual, is not a
foreign corporation, foreign partnership, foreign trust, or foreign
estate (as those terms are defined in the Internal Revenue Code and
Income Tax Regulations);
(2) The Unitholder's U.S. social security number (for
individuals) or employer identification number (for non-individuals) is
- ------------------------------------------;
(3) The Unitholder's home address (for individuals), or office
address and (if applicable) place of incorporation (for non-individuals)
is------------------------------------------------------------------------
- --------------------------------------------------------------------------
The person submitting 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.
BOX D
SUBSTITUTE FORM W-8
(Attach additional copies for joint Unitholders)
(See Instruction 4)
By checking this box / /, the person submitting this Letter of
Transmittal certifies 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:
(1) Is a nonresident alien individual or a foreign corporation,
partnership, estate or trust;
(2) 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
(3) 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.
INSTRUCTIONS
Forming Part of the Terms and Conditions of the Offer
1. Tender, Signature Requirements; Delivery. After carefully reading
and completing this Letter of Transmittal, in order to tender Units a
Unitholder must sign at the "X" in Box A of this Letter of Transmittal.
The signature must correspond exactly with the name printed on the front
of this Letter of Transmittal without any change whatsoever. If this
Letter of Transmittal is signed by the registered Unitholder of the
Units, no notarization or signature guarantee on this Letter of
Transmittal 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 notarization or
signature guarantee is required. In all other cases, signatures on this
Letter of Transmittal must either be notarized or guaranteed by an
Eligible Institution, by completing the Notarization or Signature
Guarantee set forth in BOX A of this Letter of Transmittal. If any
tendered Units are registered in the names of two or more joint holders,
all such holders must sign this Letter of Transmittal. If this Letter
of Transmittal is signed by trustees, administrators, guardians,
attorneys-in-fact, officers of corporations, or others acting in a
fiduciary or representative capacity, such persons should so indicate
when signing and must submit proper evidence satisfactory to the
Purchaser of their authority to so act. For Units to be validly
tendered, a properly completed and duly executed Letter of Transmittal
(or facsimile thereof), together with any required notarizations or
signature guarantees in BOX A, the attached signature page to the Note
and Security Agreement and any other documents required by this Letter
of Transmittal, must be received by the Purchaser prior to or on the
Expiration Date at its address set forth on the front of this Letter of
Transmittal. No alternative, conditional or contingent tenders will be
accepted. All tendering Unitholders by execution of this Letter of
Transmittal waive any right to receive any notice of the acceptance of
their tender.
2. Transfer Taxes. The Purchaser will pay or cause to be paid all
transfer taxes, if any, payable in respect of Units accepted for payment
pursuant to the Offer.
3. U.S. Persons. A Unitholder who or which is a United States citizen
or resident alien individual, a domestic corporation, a domestic
partnership, a domestic trust or a domestic estate (collectively,
"United States persons") as those terms are defined in the Internal
Revenue Code and Income Tax Regulations, should complete the following:
(A) Substitute Form W-9. In order to avoid 31% federal income tax
backup withholding on payments to the Unitholder, the tendering
Unitholder must provide to the Purchaser the Unitholder's correct
Taxpayer Identification Number ("TIN") by completing the Substitute Form
W-9 set forth in BOX B of this Letter of Transmittal, and, by signing in
Box A, must certify under penalties of perjury, that such Unitholder is
not subject to such backup withholding. If a correct TIN is not
provided, penalties may be imposed by the Internal Revenue Service
("IRS") in addition to the Unitholder being subject to backup
withholding. Certain Unitholders (including, among others, all
corporations) 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.
The TIN that must be provided on the Substitute Form W-9 is that of
the registered Unitholder indicated on the front of this Letter of
Transmittal. If the tendering Unitholder has applied for but has not
been issued a TIN or intends to apply for a TIN in the near future, the
Unitholder should check the "Applied For" box in Box B of this Letter of
Transmittal. If the "Applied For" box is checked in the Substitute Form
W-9 and the Purchaser is not provided with the Unitholder's TIN within
60 days, the Purchaser will withhold 31% of all subsequent payments, if
any, to the Unitholder until such TIN is provided to the Purchaser.
(B) FIRPTA Affidavit. To avoid potential withholding of tax
pursuant to Section 1445 of the Internal Revenue Code in an amount equal
to 10% of the amounts payable to the Unitholder plus the amount of any
liabilities of the Partnership allocable to each Unit tendered, a
Unitholder who or which is a United States person must complete the
FIRPTA Affidavit contained in BOX C of this Letter of Transmittal
stating, under penalties of perjury, such Unitholder's TIN and address,
and that such Unitholder is not a foreign person. Tax withheld under
Section 1445 of the Internal Revenue Code is not an additional tax. If
withholding results in an overpayment of tax, a refund may be obtained
from the IRS.
4. Foreign Persons. In order for a Unitholder who or which is a foreign
person (i.e., a person who is not a United States person as defined in 3
above) to qualify as exempt from 31% backup withholding, such foreign
Unitholder must certify, under penalties of perjury, the statement in
BOX D of this Letter of Transmittal attesting to that foreign person's
status by checking the box preceding such statement. In any event, the
Purchaser intends to withhold from a foreign Unitholder 10% of the
amounts payable to the Unitholder plus the amount of liabilities of the
Partnership allocable to each Unit tendered, pursuant to Section 1445 of
the Internal Revenue Code. Backup withholding and tax withheld under
Section 1445 of the Internal Revenue Code are not additional taxes. If
withholding results in an overpayment of tax, a refund may be obtained
from the IRS.
5. Additional Copies of Offer to Purchase and Letter of Transmittal.
Requests for assistance or additional copies of the Offer to Purchase
and this Letter of Transmittal may be obtained from the Purchaser by
calling (404) 916-9055 or (404) 850-9640.
NOTE AND SECURITY AGREEMENT SIGNATURE PAGE
WITNESSETH, the undersigned hereby executes this Note and Security
Agreement as of the date first above written.
BORROWER(1)
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(1) Each Borrower must sign exactly as such Borrower's name appears on
the face of the Letter of Transmittal.
Exhibit (a)(3)
DEFOREST VENTURES I L.P.
5665 NORTHSIDE DRIVE, N.W., SUITE 370
ATLANTA, GEORGIA 30328
June 2, 1995
Dear Limited Partner:
As described in the enclosed Offer to Purchase and related Letter
of Transmittal (the "Offer"), DeForest Ventures I L.P. is offering to
purchase Units of Limited Partnership Interest of the Partnership
identified in the Offer.
The Offer is being made in accordance with the settlement of a
class action lawsuit brought against, among others, DeForest Ventures
I L.P. We suggest that you review the enclosed Offer to Purchase for
information pertaining to the settlement of the class action.
Please note that in order to tender any of your Units in the
Partnership, you must tender all of your Units in the Partnership - no
partial tenders will be accepted.
We suggest that you review the enclosed Offer with your personal
financial and tax advisor. After carefully reading the enclosed Offer,
if you elect to tender your Units, mail (using the enclosed
pre-addressed, postage-paid envelope) a duly completed and executed copy
of the Letter or Transmittal, the Note and Security Agreement signature
page and any documents required by the Letter of Transmittal to:
DeForest Ventures I L.P.
c/o Gemisys
7103 South Revere Parkway
Englewood, Colorado 80112
If you have any questions, please call DeForest Ventures I L.P. at
the number set forth in the Offer.
DEFOREST VENTURES I L.P.
Exhibit (g)(i)
CENTURY PROPERTIES FUND XVI
(A Limited Partnership)
NOTE 2 TO
FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992
2. TRANSACTIONS WITH THE GENERAL PARTNERS AND AFFILIATES
In accordance with the Partnership Agreement, the Partnership may
be charged by the general partners and affiliates for services provided
to the Partnership. From March 1988 to December 1992 such amounts were
assigned pursuant to a services agreement by the general partners and
affiliates to Metric Realty Services, L.P., ("MRS") which performed
partnership management and other services for the Partnership.
On January 1, 1993, Metric Management, Inc., ("MMI"), successor to
MRS, a company which is not affiliated with the general partners,
commenced providing certain property and portfolio management services
to the Partnership under a new services agreement. As provided in the
new services agreement, effective January 1, 1993, no reimbursements
were made to the general partners and affiliates after December 31,
1992. Subsequent to December 31, 1992, reimbursements were made to MMI.
On December 16, 1993, the services agreement with MMI was modified and,
as a result thereof, MGP began directly providing cash management and
other Partnership services on various dates commencing December 23,
1993. On March 1, 1994, NPI Management commenced providing certain
property management services. Related party expenses for the years ended
December 31, 1994, 1993 and 1992 were as follows:
1994 1993 1992
---- ---- ----
Property management fees $103,000 $ - $113,000
Reimbursement of expenses:
Partnership accounting and
investor services 129,000 - 107,000
Professional services 18,000 - 13,000
-------- -------- --------
Total $250,000 $ - $233,000
======== ======== ========
Property management fees are included in operating expenses.
Reimbursed expenses are primarily included in general and administrative
expenses.
In accordance with the Partnership Agreement, the general partners
received a Partnership management incentive allocation equal to five
percent of net and taxable income or loss. The general partners were
also allocated their two percent continuing interest in the
Partnership's net and taxable income or loss after the preceding
allocation.
Exhibit (g)(ii)
CENTURY PROPERTIES FUND XVI
NOTE 2 TO
FINANCIAL STATEMENTS
FORM 10-Q - MARCH 31, 1995
2. Transactions with Related Parties
(a) An affiliate of NPI, Inc. received reimbursement of administrative
expenses amounting to $36,000 and $35,000 during the three months ended
March 31, 1995 and 1994, respectively. These reimbursements are
included in general and administrative expenses.
(b) An affiliate of NPI, Inc. is entitled to receive a management fee
equal to 5% of the annual gross receipts from certain properties it
manages. For the three months ended March 31, 1995 and 1994, affiliates
of NPI, Inc. received fees of $33,000 and $9,000, respectively, which
are included in operating expenses.
Exhibit (g)(iii)
CENTURY PROPERTIES FUND XVI
(A limited partnership)
PART I
Item 1. Business.
On August 10, 1994, NPI, Inc., entered into an agreement with an
affiliate ("Apollo") of Apollo Real Estate Advisors, L.P. to sell to
Apollo up to one-third of the stock of NPI, Inc. In addition, Apollo
obtained general and limited partnership interests in NPI-AP Management,
L.P. ("NPI-AP"). NPI Property Management Corporation ("NPI
Management"), an affiliate of the Managing General Partner, became the
managing general partner of NPI-AP.
On October 12, 1994, NPI, Inc. sold one-third of its stock to
Apollo. Apollo is entitled to designate three of the seven directors of
the Managing General Partner and NPI Equity II. In addition, the
approval of certain major actions on behalf of Registrant requires the
affirmative vote of at least five directors of the Managing General
Partner.
On October 12, 1994, affiliates of Apollo acquired (I) one-third of
the stock of the respective general partners of DeForest Ventures I L.P.
("DeForest I") and DeForest Ventures II L.P. and (ii) an additional
equity interest in NPI-AP, an affiliate of NPI (bringing its total
equity interest in such entity to one-third). NPI-AP is a limited
partner of DeForest I which was formed for the purpose of making tender
offers (the "Tender Offers") for limited partnership interests in
Registrant as well as 11 affiliated limited partnerships.
