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Offer to Purchase For Cash
AIMCO
AIMCO Properties, L.P.
is offering to purchase any and all units of limited partnership interest in
SHELTER PROPERTIES IV LIMITED PARTNERSHIP
FOR $574.10 PER UNIT IN CASH
Upon the terms and subject to the conditions set forth herein, we will accept
any and all units validly tendered in response to our offer. If units are
validly tendered and not properly withdrawn prior to the expiration date and
the purchase of all such units would result in there being less than 320
unitholders, we will purchase only 99% of the total number of units so tendered
by each limited partner.
Our offer and your withdrawal rights will expire at 5:00 p.m., New York City
time, on August 21, 2000, unless we extend the deadline.
You will not pay any partnership transfer fees if you tender your units. You
will pay any other fees and costs, including any transfer taxes.
Our offer is not subject to a minimum number of units being tendered.
Our offer price will be reduced for any distributions subsequently made by your
partnership prior to the expiration of our offer.
SEE "RISK FACTORS" BEGINNING ON PAGE 3 OF THIS OFFER TO PURCHASE FOR A
DESCRIPTION OF RISK FACTORS THAT YOU SHOULD CONSIDER IN CONNECTION WITH OUR
OFFER, INCLUDING THE FOLLOWING:
o We determined the offer price of $574.10 per unit without any
arms-length negotiations. Accordingly, our offer price may not reflect
the fair market value of your units.
o In November 1999, an independent investment banking firm estimated
that the net asset value, going concern value and liquidation value of
your partnership were $654.00, $575.00, and $625.00 per unit,
respectively.
o We are making this offer with a view to making a profit and,
therefore, there is a conflict between our desire to purchase your
units at a low price and your desire to sell your units at a high
price.
(Continued on next page)
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If you desire to accept our offer, you should complete and sign the
enclosed letter of transmittal, and mail or deliver the signed letter of
transmittal and any other required documents to River Oaks Partnership
Services, Inc., which is acting as Information Agent in connection with our
offer, at one of its addresses set forth on the back cover of this offer to
purchase. QUESTIONS AND REQUESTS FOR ASSISTANCE OR FOR ADDITIONAL COPIES OF
THIS OFFER TO PURCHASE OR THE LETTER OF TRANSMITTAL MAY ALSO BE DIRECTED TO THE
INFORMATION AGENT AT (888) 349-2005.
July 24, 2000
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(CONTINUED FROM PRIOR PAGE)
o Although your partnership's agreement of limited partnership provides
for termination in the year 2022, the prospectus pursuant to which
the units were sold in 1982 indicated that the properties owned by
your partnership might be sold within 3 to 8 years of their
acquisition if conditions permitted.
o Your general partner and the property manager of the residential
properties are subsidiaries of ours and, therefore, the general
partner has substantial conflicts of interest with respect to our
offer.
o Continuation of your partnership will result in our affiliates
continuing to receive management fees from your partnership. Such fees
would not be payable if your partnership was liquidated.
o It is possible that we may conduct a future offer at a higher price.
o For any units that we acquire from you, you will not receive any
future distributions from operating cash flow of your partnership or
upon a sale or refinancing of property owned by your partnership.
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TABLE OF CONTENTS
<TABLE>
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SUMMARY TERM SHEET................................................................................................1
RISK FACTORS......................................................................................................3
No Third Party Valuation or Appraisal; No Arms-Length Negotiation........................................3
Offer Price May Not Represent Fair Market Value..........................................................3
Offer Price Does Not Reflect Future Prospects............................................................3
Offer Price Based on Our Estimate of Liquidation Proceeds................................................3
Offer Price May Not Represent Liquidation Value..........................................................3
Continuation of the Partnership; No Time Frame Regarding Sale of Properties..............................3
Holding Units May Result in Greater Future Value.........................................................4
Conflicts of Interest With Respect to the Offer..........................................................4
No General Partner Recommendation........................................................................4
Conflicts of Interest Relating to Management Fees........................................................4
Possible Future Offer at a Higher Price..................................................................4
Recognition of Taxable Gain on a Sale of Your Units......................................................4
Loss of Future Distributions from Your Partnership.......................................................4
Recognition of Gain Resulting from Possible Future Reduction in Your Partnership Liabilities.............5
Possible Termination of Your Partnership for Federal Income Tax Purposes.................................5
Potential Delay in Payment...............................................................................5
Balloon Payment..........................................................................................5
THE OFFER.........................................................................................................5
Section 1. Terms of the Offer; Expiration Date; Proration.........................................5
Section 2. Acceptance for Payment and Payment for Units...........................................6
Section 3. Procedure for Tendering Units..........................................................7
Section 4. Withdrawal Rights......................................................................9
Section 5. Extension of Tender Period; Termination; Amendment; Subsequent Offering Period........10
Section 6. Certain Federal Income Tax Matters....................................................10
Section 7. Effects of the Offer..................................................................13
Section 8. Information Concerning Us and Certain of Our Affiliates...............................14
Section 9. Background and Reasons for the Offer..................................................18
Section 10. Position of the General Partner of Your Partnership With Respect to the Offer.........24
Section 11. Conflicts of Interest and Transactions with Affiliates................................25
Section 12. Future Plans of the Purchaser.........................................................26
Section 13. Certain Information Concerning Your Partnership.......................................26
Section 14. Voting Power..........................................................................32
Section 15. Source of Funds.......................................................................32
Section 16. Dissenters' Rights....................................................................33
Section 17. Conditions of the Offer...............................................................33
Section 18. Certain Legal Matters.................................................................34
Section 19. Fees and Expenses.....................................................................35
ANNEX I
OFFICERS AND DIRECTORS.................................................................................I-1
</TABLE>
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SUMMARY TERM SHEET
This summary term sheet highlights the most material information
regarding our offer, but it does not describe all of the details thereof. We
urge you to read this entire offer to purchase which contains the full details
of our offer. We have also included in the summary term sheet references to the
sections of this offer to purchase where a more complete discussion may be
found.
o THE OFFER. We are offering to acquire any and all of the limited
partnership interests (units) in Shelter Properties IV Limited
Partnership, your partnership, for $574.10 per unit, in cash, less any
distributions made by your partnership prior to the termination of the
offer. See "The Offer--Section 1. Terms of the Offer; Expiration Date;
Proration" and "The Offer--Section 9. Background and Reasons for the
Offer--Determination of Offer Price."
o FACTORS IN DETERMINING THE OFFER PRICE. In determining the offering
price per unit we considered:
o Our belief as to the per unit liquidation value of your
partnership;
o The determination of Robert A. Stanger & Co., Inc., an
independent investment firm, in November 1999, that $610 per
unit was a fair price for your units from a financial point
of view, based on their determination of the net asset value
($654.00), the going concern value of ($575.00) and the
liquidation value of ($625.00) of a unit in your partnership;
and
o The absence of a trading market for the units.
See "The Offer--Section 9. Background and Reasons for the
Offer--Comparison of Consideration to Alternative Consideration."
o PRORATIONS. If the purchase of all validly tendered units would result
in there being less than 320 unitholders, we will purchase only 99% of
the total number of units so tendered by each limited partner. See
"The Offer--Section 1. Terms of the Offer; Expiration Date;
Proration."
o EXPIRATION DATE. Our offer expires on August 21, 2000, unless
extended, and you can tender your units until our offer expires. See
"The Offer--Section 1. Terms of the Offer; Expiration Date;
Proration."
o RIGHT TO EXTEND THE EXPIRATION DATE. We can extend the offer in our
sole discretion, and we will send you a notice of any such extension.
See "The Offer--Section 5. Extension of Tender Period; Termination;
Amendment; Subsequent Offering Period."
o HOW TO TENDER. To tender your units, complete the accompanying letter
of transmittal and send it to the Information Agent, River Oaks
Partnership, Inc., at one of the addresses set forth on the back of
this offer to purchase. See "The Offer--Section 3. Procedures for
Tendering."
o WITHDRAWAL RIGHTS. You can withdraw your units at any time prior to
the expiration of the offer, including any extensions. In addition,
you can withdraw your units any time on or after September 22, 2000,
if we have not already accepted units for purchase and payment. See
"The Offer--Section 4. Withdrawal Rights."
o HOW TO WITHDRAW. To withdraw your units, you need to send a notice of
withdrawal to the Information Agent, identifying yourself and the
units to be withdrawn. See "The Offer--Section 4. Withdrawal Rights."
o TAX CONSEQUENCES. Your sale of units in this offer will be a taxable
transaction for federal income tax purposes, the consequences to each
limited partner may vary and you should consult your tax advisor on
the precise tax consequences to you. See "The Offer-Section 6. Certain
Federal Income Tax Matters."
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o AVAILABILITY OF FUNDS. We currently have cash and funds available
under a line of credit that are sufficient to enable us to purchase
all of the units sought in this offer. See "The Offer--Section 15.
Source of Funds."
o CONDITIONS TO THE OFFER. There are a number of conditions to our
offer, including our having adequate cash and available funds under
our line of credit, the absence of competing tender offers, the
absence of certain changes in your partnership, and the absence of
certain changes in the financial markets. See "The Offer--Section 17.
Condition to the Offer."
o REMAINING AS A LIMITED PARTNER. If you do not tender your units, you
will continue to remain a limited partner in your partnership and we
have no plans to alter the operations, business or financial position
of your partnership or to take your partnership private. See "The
Offer--Section 7. Effects of the Offer."
o WHO WE ARE. We are AIMCO Properties, L.P., the main operating
partnership of Apartment Investment and Management Company, a New York
Stock Exchange listed company. As of March 31, 2000, AIMCO owned or
controlled, held an equity interest in, or managed 352,517 apartment
units in 1,834 properties located in 48 states, the District of
Columbia and Puerto Rico. See "The Offer--Section 8. Information
Concerning Us and Certain of Our Affiliates."
o CONFLICTS OF INTEREST. Since our subsidiary receives fees for managing
your partnership and its properties, a conflict of interest exists
between our continuing the partnership and receiving such fees, and
the liquidation of the partnership and the termination of such fees.
See "The Offer--Section 11. Conflicts of Interests" and "The Offer--
Section 13. Certain Information Concerning Your Partnership."
o NO GENERAL PARTNER RECOMMENDATION. The general partner of your
partnership makes no recommendation as to whether or not you should
tender or refrain from tendering your units, and believes each
limited partner should make his or her own decision whether or not to
tender his or her units. See "The Offer -- Section 10. Position of the
General Partner of Your Partnership with Respect to the Offer."
o SUBSEQUENT OFFERING PERIOD. We do not intend to have a subsequent
offering period after the expiration date of the initial offering
period (including any extensions). See "The Offer- Extension of Tender
Period; Termination; Amendment; Subsequent Offer Period."
o ADDITIONAL INFORMATION. For more assistance in tendering your units,
please contact our Information Agent at one of the addresses or the
telephone number set forth on the back cover page of this offer to
purchase.
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RISK FACTORS
Before deciding whether or not to tender any of your units, you should
consider carefully the following risks and disadvantages of the offer:
NO THIRD PARTY VALUATION OR APPRAISAL; NO ARMS-LENGTH NEGOTIATION
We did not base our valuation of the properties owned by your
partnership on any third-party appraisal or valuation. We established the terms
of our offer without any arms-length negotiation. The terms of the offer could
differ if they were subject to independent third party negotiations. It is
uncertain whether our offer price reflects the value which would be realized
upon a sale of your units to a third party. Your general partner makes no
recommendation to you as to whether or not you should tender your units.
OFFER PRICE MAY NOT REPRESENT FAIR MARKET VALUE
There is no established or regular trading market for your units, nor
is there another reliable standard for determining the fair market value of the
units. Our offer price does not necessarily reflect the price that you would
receive in an open market for your units. Such prices could be higher than our
offer price.
OFFER PRICE DOES NOT REFLECT FUTURE PROSPECTS
Our offer price is based on your partnership's property income. It
does not ascribe any value to potential future improvements in the operating
performance of your partnership's residential properties.
OFFER PRICE BASED ON OUR ESTIMATE OF LIQUIDATION PROCEEDS
The offer price represents only our estimate of the amount you would
receive if we liquidated the partnership. In determining the liquidation value,
we used the direct capitalization method to estimate the value of your
partnership's residential properties because we think prospective purchasers of
the properties would value the properties using this method. In doing so, we
applied a capitalization rate to your partnership's estimated property income
for the year ending December 31, 2000, by multiplying the actual property
income for the six months ended June 30, 2000 by two. Actual property income
for 2000 could be higher or lower than such estimate. If property income for a
different period, actual 2000 property income or a different capitalization
rate was used, a higher valuation could result. Other methods of valuing your
units could also result in a higher valuation.
OFFER PRICE MAY NOT REPRESENT LIQUIDATION VALUE
The actual proceeds obtained from a liquidation are highly uncertain
and could be more than our estimate. Accordingly, our offer price could be less
than the net proceeds that you would realize upon an actual liquidation of your
partnership.
CONTINUATION OF THE PARTNERSHIP; NO TIME FRAME REGARDING SALE OF PROPERTIES
Your general partner, which is our subsidiary, is proposing to
continue to operate your partnership and not to attempt to liquidate it at the
present time. The general partner of your partnership believes that the market
for the sale of commercial properties is strong at this time. However, it is
not known when the residential properties owned by your partnership may be
sold. There may be no way to liquidate your investment in the partnership in
the future until the residential properties are sold and the partnership is
liquidated. The general partner of your partnership continually considers
whether a property should be sold or otherwise disposed of after consideration
of relevant factors, including prevailing economic conditions, availability of
favorable financing and tax considerations, with a view to achieving maximum
capital appreciation for your partnership. At the current time the general
partner of your partnership believes that a sale of the properties would not be
advantageous given market conditions, the condition of the properties and tax
considerations. In particular, the general partner considered the changes in
the local rental market, the potential for appreciation in the value of a
property and the tax consequences to you and your partners on a sale of
property. We cannot predict when any property will be sold or otherwise
disposed of.
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HOLDING UNITS MAY RESULT IN GREATER FUTURE VALUE
Although a liquidation of your partnership is not currently
contemplated in the near future, you might receive more value if you retain
your units until your partnership is liquidated.
CONFLICTS OF INTEREST WITH RESPECT TO THE OFFER
The general partner of your partnership is our subsidiary and,
therefore, has substantial conflicts of interest with respect to our offer. We
are making this offer with a view to making a profit. There is a conflict
between our desire to purchase your units at a low price and your desire to
sell your units at a high price. We determined our offer price without
negotiation with any other party, including any general or limited partner.
NO GENERAL PARTNER RECOMMENDATION
The general partner of your partnership makes no recommendation as to
whether or not you should tender or refrain from tendering your units. Although
the general partner believes the offer is fair, you must make your own decision
whether or not to participate in the offer, based upon a number of factors,
including several factors that may be personal to you, such as your financial
position, your need or desire for liquidity, your preferences regarding the
timing of when you might wish to sell your units, other financial opportunities
available to you, and your tax position and the tax consequences to you of
selling your units.
CONFLICTS OF INTEREST RELATING TO MANAGEMENT FEES
Since our subsidiary receives fees for managing your partnership and
its residential properties, a conflict of interest exists between our
continuing the partnership and receiving such fees, and the liquidation of the
partnership and the termination of such fees. Also a decision of the limited
partners of your partnership to remove, for any reason, the general partner of
your partnership or the residential property manager of any property owned by
your partnership would result in a decrease or elimination of the substantial
fees paid to them for services provided to your partnership.
POSSIBLE FUTURE OFFER AT A HIGHER PRICE
It is possible that we may conduct a future offer at a higher price.
Such a decision will depend on, among other things, the performance of the
partnership, prevailing economic conditions, and our interest in acquiring
additional limited partnership interests.
RECOGNITION OF TAXABLE GAIN ON A SALE OF YOUR UNITS
Your sale of units for cash will be a taxable sale, with the result
that you will recognize taxable gain or loss measured by the difference between
the amount realized on the sale and your adjusted tax basis in the units of
limited partnership interest of your partnership you transfer to us. The
"amount realized" with respect to a unit of limited partnership interest you
transfer to us will be equal to the sum of the amount of cash received by you
for the unit sold pursuant to the offer plus the amount of partnership
liabilities allocable to the unit. The particular tax consequences for you of
our offer will depend upon a number of factors related to your tax situation,
including your tax basis in the units you transfer to us, whether you dispose
of all of your units and whether you have available suspended passive losses,
credits or other tax items to offset any gain recognized as a result of your
sale of your units. Therefore, depending on your basis in the units and your
tax position, your taxable gain and any tax liability resulting from a sale of
units to us pursuant to the offer could exceed our offer price. Because the
income tax consequences of tendering units will not be the same for everyone,
you should consult your own tax advisor to determine the tax consequences of
the offer to you.
LOSS OF FUTURE DISTRIBUTIONS FROM YOUR PARTNERSHIP
If you tender your units in response to our offer, you will transfer
to us all right, title and interest in and to all of the units we accept, and
the right to receive all distributions in respect of such units on and after
the date on which we accept such units for purchase. Accordingly, for any units
that we acquire from you, you will not receive
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any future distributions from operating cash flow of your partnership or upon a
sale or refinancing of properties owned by your partnership.
RECOGNITION OF GAIN RESULTING FROM POSSIBLE FUTURE REDUCTION IN YOUR
PARTNERSHIP LIABILITIES
Generally, a decrease in your share of partnership liabilities is
treated, for federal income tax purposes, as a deemed cash distribution.
Although no general partner of your partnership has any current plan or
intention to reduce the liabilities of your partnership, it is possible that
future economic, market, legal, tax or other considerations may cause a general
partner to reduce the liabilities of your partnership. If you retain all or a
portion of your units and the liabilities of your partnership were to be
reduced, you would be treated as receiving a hypothetical distribution of cash
resulting from a decrease in your share of the liabilities of the partnership.
Any such hypothetical distribution of cash would be treated as a nontaxable
return of capital to the extent of your adjusted tax basis in your units and
thereafter as gain. Gain recognized by you on the disposition of retained units
with a holding period of 12 months or less may be classified as short-term
capital gain and subject to taxation at ordinary income tax rates.
POSSIBLE TERMINATION OF YOUR PARTNERSHIP FOR FEDERAL INCOME TAX PURPOSES
If there is a sale or exchange of 50% or more of the total interest in
capital and profits of your partnership within any 12-month period, including
sales or exchanges resulting from our offer, your partnership will terminate
for federal income tax purposes. Any such termination may, among other things,
subject the assets of your partnership to longer depreciable lives than those
currently applicable to the assets of your partnership. This would generally
decrease the annual average depreciation deductions allocable to you if you do
not tender all of your interests in your partnership, thereby increasing the
taxable income allocable to your interests in your partnership each year, but
would have no effect on the total depreciation deductions available over the
useful lives of the assets of your partnership. Any such termination may also
change (and possibly shorten), your holding period with respect to interests in
your partnership that you choose to retain.
POTENTIAL DELAY IN PAYMENT
We reserve the right to extend the period of time during which our
offer is open and thereby delay acceptance for payment of any tendered units.
The offer may be extended indefinitely, and no payment will be made in respect
of tendered units until the expiration of the offer and acceptance of units for
payment.
BALLOON PAYMENT
Your partnership has approximately $20,609,000 of balloon payments due
on its mortgage debt on November 15, 2002. Your partnership will have to
refinance such debt, sell assets or otherwise obtain additional funds prior to
the balloon payment dates, or it will be in default and could lose the
properties to foreclosure.
THE OFFER
SECTION 1. TERMS OF THE OFFER; EXPIRATION DATE; PRORATION.
Upon the terms and subject to the conditions of the offer, we will
accept (and thereby purchase) any and all units that are validly tendered on or
prior to the expiration date and not withdrawn in accordance with the
procedures set forth in "The Offer--Section 4. Withdrawal Rights." For purposes
of the offer, the term "expiration date" shall mean 5:00 p.m., New York City
time, on August 21, 2000, unless we in our sole discretion shall have extended
the period of time for which the offer is open, in which event the term
"expiration date" shall mean the latest time and date on which the offer, as
extended by us, shall expire. See "The Offer--Section 5. Extension of Tender
Period; Termination; Amendment; Subsequent Offering Period," for a description
of our right to extend the period of time during which the offer is open and to
amend or terminate the offer.
The purchase price per unit will automatically be reduced by the
aggregate amount of distributions per unit, if any, made by your partnership to
you on or after the commencement of our offer and prior to the date on which we
acquire your units pursuant to our offer.
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If, prior to the expiration date, we increase the consideration
offered to limited partners pursuant to the offer, the increased consideration
will be paid for all units accepted for payment pursuant to the offer, whether
or not the units were tendered prior to the increase in consideration.
We will pay any transfer fees imposed for the transfer of units by
your partnership. However, you will have to pay any taxes that arise from your
sale of units. You will also have to pay any fees or commissions imposed by
your broker, or by any custodian or other trustee of any Individual Retirement
Account or benefit plan which is the owner of record of your units. Although
the fees charged for transferring units from an Individual Retirement Account
vary, such fees are typically $25-$50 per transaction. Depending on the number
of units that you tender, any fees charged on a per transaction basis could
exceed the aggregate offer price you receive (as a result of proration or
otherwise).
If units are validly tendered prior to the expiration date and not
properly withdrawn prior to the expiration date in accordance with the
procedures set forth in "The Offer--Section 4. Withdrawal Rights" and the
purchase of all such units would result in (i) a "Rule 13e-3 transaction"
within the meaning of the Securities Exchange Act of 1934 (the "Exchange Act"),
or (ii) there being less than 320 unitholders, we will purchase only 99% of
the total number of units so tendered by each limited partner (subject to any
necessary adjustment for fractional units). If we are going to purchase only
99% of the units validly tendered, we will notify you of such fact. In such
case, you would continue to be a limited partner and receive a K-1 for tax
reporting purposes. See "The Offer--Section 7. Effects of the Offer--Effect on
Trading Market; Registration Under 12(g) of the Exchange Act."
If proration of tendered units is required, then, subject to our
obligation under Rule 14e-1(c) under the Exchange Act to pay limited partners
the purchase price in respect of units tendered or return those units promptly
after termination or withdrawal of the offer, we do not intend to pay for any
units accepted for payment pursuant to the offer until the final proration
results are known. Notwithstanding any such delay in payment, no interest will
be paid on the offer price.
The offer is conditioned on satisfaction of certain conditions. The
offer is not conditioned upon any minimum number of units being tendered. See
"The Offer--Section 17. Conditions to the Offer," which sets forth in full the
conditions of the offer. We reserve the right (but in no event shall we be
obligated), in our reasonable discretion, to waive any or all of those
conditions. If, on or prior to the expiration date, any or all of the
conditions have not been satisfied or waived, we reserve the right to (i)
decline to purchase any of the units tendered, terminate the offer and return
all tendered units to tendering limited partners, (ii) waive all the
unsatisfied conditions and purchase, subject to the terms of the offer, any and
all units validly tendered, (iii) extend the offer and, subject to the
withdrawal rights of limited partners, retain the units that have been tendered
during the period or periods for which the offer is extended, or (iv) amend the
offer. The transfer of units will be effective May 1, 2000.
This offer is being mailed to the persons shown by your partnership's
records to have been limited partners or, in the case of units owned of record
by Individual Retirement Accounts and qualified plans, beneficial owners of
units, as of July 21, 2000.
SECTION 2. ACCEPTANCE FOR PAYMENT AND PAYMENT FOR UNITS.
Upon the terms and subject to the conditions of the offer, we will
purchase, by accepting for payment, and will pay for, any and all units validly
tendered as promptly as practicable following the expiration date. A tendering
beneficial owner of units whose units are owned of record by an Individual
Retirement Account or other qualified plan will not receive direct payment of
the offer price; rather, payment will be made to the custodian of such account
or plan. In all cases, payment for units purchased pursuant to the offer will
be made only after timely receipt by the Information Agent of a properly
completed and duly executed letter of transmittal and other documents required
by the letter of transmittal. See "The Offer--Section 3. Procedure for
Tendering Units." UNDER NO CIRCUMSTANCES WILL INTEREST BE PAID ON THE OFFER
PRICE BY REASON OF ANY DELAY IN MAKING SUCH PAYMENT.
We will, upon the terms and subject to the conditions of the offer,
accept for payment and pay for any and all units validly tendered, with
appropriate adjustments to avoid purchases that would violate the agreement of
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limited partnership of your partnership and any relevant procedures or
regulations promulgated by the general partner. Accordingly, in some
circumstances, we may pay you the full offer price and accept an assignment of
your right to receive distributions and other payments and an irrevocable proxy
in respect of the units and defer, perhaps indefinitely, the transfer of
ownership of the units on the partnership books. In other circumstance we may
only be able to purchase units which, together with units previously
transferred within the preceding twelve months, do not exceed 50% of the
outstanding units.
If more units than can be purchased under the partnership agreement
are validly tendered prior to the expiration date and not properly withdrawn
prior to the expiration date in accordance with the procedures specified
herein, we will, upon the terms and subject to the conditions of the offer,
accept for payment and pay for those units so tendered which do not violate the
terms of the partnership agreement, pro rata according to the number of units
validly tendered by each limited partner and not properly withdrawn on or prior
to the expiration date, with appropriate adjustments to avoid purchases of
fractional units. If the number of units validly tendered and not properly
withdrawn on or prior to the expiration date is less than or equal to the
maximum number we can purchase under the partnership agreement, we will
purchase all units so tendered and not withdrawn, upon the terms and subject to
the conditions of the offer.
For purposes of the offer, we will be deemed to have accepted for
payment pursuant to the offer, and thereby purchased, validly tendered units,
if, as and when we give verbal or written notice to the Information Agent of
our acceptance of those units for payment pursuant to the offer. Payment for
units accepted for payment pursuant to the offer will be made through the
Information Agent, which will act as agent for tendering limited partners for
the purpose of receiving cash payments from us and transmitting cash payments
to tendering limited partners.
If any tendered units are not accepted for payment by us for any
reason, the letter of transmittal with respect to such units not purchased may
be destroyed by us or the Information Agent or returned to you. You may
withdraw tendered units until the expiration date (including any extensions).
In addition, you may withdraw any tendered units on or after September 22, 2000
if we have not accepted the validly tendered units for payment. After the
expiration date, the Information Agent may, on our behalf, retain tendered
units, and those units may not be otherwise withdrawn, if, for any reason,
acceptance for payment of, or payment for, any units tendered pursuant to the
offer is delayed or we are unable to accept for payment, purchase or pay for
units tendered pursuant to the offer. Any such action is subject, however, to
our obligation under Rule 14e-1(c) under the Exchange Act, to pay you the offer
price in respect of units tendered or return those units promptly after
termination or withdrawal of the offer.
We reserve the right to transfer or assign, in whole or in part, to
one or more of our affiliates, the right to purchase units tendered pursuant to
the offer, but no such transfer or assignment will relieve us of our
obligations under the offer or prejudice your rights to receive payment for
units validly tendered and accepted for payment pursuant to the offer.
SECTION 3. PROCEDURE FOR TENDERING UNITS.
VALID TENDER. To validly tender units pursuant to the offer, a
properly completed and duly executed letter of transmittal and any other
documents required by the letter of transmittal must be received by the
Information Agent, at one of its addresses set forth on the back cover of this
offer to purchase, on or prior to the expiration date. You may tender all or
any portion of your units. No alternative, conditional or contingent tenders
will be accepted.
SIGNATURE REQUIREMENTS. If the letter of transmittal is signed by the
registered holder of a unit and payment is to be made directly to that holder,
then no signature guarantee is required on the letter of transmittal.
Similarly, if a unit is tendered for the account of a member firm of a
registered national securities exchange, a member of the National Association
of Securities Dealers, Inc. or a commercial bank, savings bank, credit union,
savings and loan association or trust company having an office, branch or
agency in the United States (each an "Eligible Institution"), no signature
guarantee is required on the letter of transmittal. However, in all other
cases, all signatures on the letter of transmittal must be guaranteed by an
Eligible Institution.
In order for you to tender in the offer, your units must be validly
tendered and not withdrawn on or prior to the expiration date.
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THE METHOD OF DELIVERY OF THE LETTER OF TRANSMITTAL AND ALL OTHER
REQUIRED DOCUMENTS IS AT YOUR OPTION AND RISK AND DELIVERY WILL BE DEEMED MADE
ONLY WHEN ACTUALLY RECEIVED BY THE INFORMATION AGENT. IF DELIVERY IS BY MAIL,
REGISTERED MAIL WITH RETURN RECEIPT REQUESTED IS RECOMMENDED. IN ALL CASES,
SUFFICIENT TIME SHOULD BE ALLOWED TO ASSURE TIMELY DELIVERY.
APPOINTMENT AS PROXY; POWER OF ATTORNEY. By executing the letter of
transmittal, you are irrevocably appointing us and our designees as your proxy,
in the manner set forth in the letter of transmittal each with full power of
substitution, to the fullest extent of the your rights with respect to the
units tendered by you and accepted for payment by us. Each such proxy shall be
considered coupled with an interest in the tendered units. Such appointment
will be effective when, and only to the extent that, we accept the tendered
unit for payment. Upon such acceptance for payment, all prior proxies given by
you with respect to the units will, without further action, be revoked, and no
subsequent proxies may be given (and if given will not be effective). We and
our designees will, as to those units, be empowered to exercise all voting and
other rights as a limited partner as we, in our sole discretion, may deem
proper at any meeting of limited partners, by written consent or otherwise. We
reserve the right to require that, in order for units to be deemed validly
tendered, immediately upon our acceptance for payment of the units, we must be
able to exercise full voting rights with respect to the units, including voting
at any meeting of limited partners then scheduled or acting by written consent
without a meeting. By executing the letter of transmittal, you agree to execute
all such documents and take such other actions as shall be reasonably required
to enable the units tendered to be voted in accordance with our directions. The
proxy granted by you to us will remain effective and be irrevocable for a
period of ten years following the termination of our offer.
By executing the letter of transmittal, you also irrevocably
constitute and appoint us and our designees as your attorneys-in-fact, each
with full power of substitution, to the full extent of your rights with respect
to the units tendered by you and accepted for payment by us. Such appointment
will be effective when, and only to the extent that, we pay for your units and
will remain effective and be irrevocable for a period of ten years following
the termination of our offer. You will agree not to exercise any rights
pertaining to the tendered units without our prior consent. Upon such payment,
all prior powers of attorney granted by you with respect to such units will,
without further action, be revoked, and no subsequent powers of attorney may be
granted (and if granted will not be effective). Pursuant to such appointment as
attorneys-in-fact, we and our designees each will have the power, among other
things, (i) to transfer ownership of such units on the partnership books
maintained by your general partner (and execute and deliver any accompanying
evidences of transfer and authenticity it may deem necessary or appropriate in
connection therewith), (ii) upon receipt by the Information Agent of the offer
price, to become a substituted limited partner, to receive any and all
distributions made by your partnership on or after the date on which we acquire
such units, and to receive all benefits and otherwise exercise all rights of
beneficial ownership of such units in accordance with the terms of our offer,
(iii) to execute and deliver to the general partner of your partnership a
change of address form instructing the general partner to send any and all
future distributions to which we are entitled pursuant to the terms of the
offer in respect of tendered units to the address specified in such form, and
(iv) to endorse any check payable to you or upon your order representing a
distribution to which we are entitled pursuant to the terms of our offer, in
each case, in your name and on your behalf.
By executing the letter of transmittal, you will irrevocably
constitute and appoint us and any of our designees as your true and lawful
agent and attorney-in-fact with respect to such units, with full power of
substitution (such power of attorney being deemed to be an irrevocable power
coupled with an interest), to withdraw any or all of such units that have been
previously tendered in response to any other tender or exchange offer, provided
that the price per unit we are offering is equal to or higher than the price
per unit being offered in the other tender or exchange offer. Such appointment
is effective upon the execution and receipt of the letter of transmittal and
shall continue to be effective unless and until you validly withdraw such units
from this offer prior to the expiration date.
ASSIGNMENT OF INTEREST IN FUTURE DISTRIBUTIONS. By executing the
letter of transmittal, you will irrevocably assign to us and our assigns all of
your right, title and interest in and to any and all distributions made by your
partnership from any source and of any nature, including, without limitation,
distributions in the ordinary course, distributions from sales of assets,
distributions upon liquidation, winding-up, or dissolution, payments in
settlement of existing or future litigation, and all other distributions and
payments from and after the expiration date of our offer, in respect of the
units tendered by you and accepted for payment and thereby purchased by us. If,
after the unit is accepted for payment and purchased by us, you receive any
distribution from any source and of any nature, including, without limitation,
distributions in the ordinary course, distributions from sales of assets,
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distributions upon liquidation, winding-up or dissolution, payments in
settlement of existing or future litigation and all other distributions and
payments, from your partnership in respect of such unit, you will agree to
forward promptly such distribution to us.
DETERMINATION OF VALIDITY; REJECTION OF UNITS; WAIVER OF DEFECTS; NO
OBLIGATION TO GIVE NOTICE OF DEFECTS. All questions as to the validity, form,
eligibility (including time of receipt) and acceptance for payment of any
tender of units pursuant to our offer will be determined by us, in our
reasonable discretion, which determination shall be final and binding on all
parties. We reserve the absolute right to reject any or all tenders of any
particular unit determined by us not to be in proper form or if the acceptance
of or payment for that unit may, in the opinion of our counsel, be unlawful. We
also reserve the absolute right to waive or amend any of the conditions of the
offer that we are legally permitted to waive as to the tender of any particular
unit and to waive any defect or irregularity in any tender with respect to any
particular unit of any particular limited partner. Our interpretation of the
terms and conditions of the offer (including the letter of transmittal) will be
final and binding on all parties. No tender of units will be deemed to have
been validly made unless and until all defects and irregularities have been
cured or waived. Neither us, the Information Agent, nor any other person will
be under any duty to give notification of any defects or irregularities in the
tender of any unit or will incur any liability for failure to give any such
notification.
BACKUP FEDERAL INCOME TAX WITHHOLDING. To prevent the possible
application of back-up federal income tax withholding of 31% with respect to
payment of the offer price, you may have to provide us with your correct
taxpayer identification number. See the instructions to the letter of
transmittal and "The Offer--Section 6. Certain Federal Income Tax Matters."
FIRPTA WITHHOLDING. To prevent the withholding of federal income tax
in an amount equal to 10% of the amount realized on the disposition (the amount
realized is generally the offer price plus the partnership liabilities
allocable to each unit purchased), you must certify that you are not a foreign
person if you tender units. See the instructions to the letter of transmittal
and "The Offer--Section 6. Certain Federal Income Tax Matters."
TRANSFER TAXES. The amount of any transfer taxes (whether imposed on
the registered holder of units or any person) payable on account of the
transfer of units will be deducted from the purchase price unless satisfactory
evidence of the payment of such taxes or exemption therefrom is submitted.
BINDING AGREEMENT. A tender of a unit pursuant to any of the
procedures described above and the acceptance for payment of such unit will
constitute a binding agreement between the tendering unitholder and us on the
terms set forth in this offer to purchase and the related letter of
transmittal.
SECTION 4. WITHDRAWAL RIGHTS.
You may withdraw your tendered units at any time prior to the
expiration date, including any extensions thereof, or on or after September 22,
2000, if the units have not been previously accepted for payment.
For a withdrawal to be effective, a written notice of withdrawal must
be timely received by the Information Agent at one of its addresses set forth
on the back cover of the offer to purchase. Any such notice of withdrawal must
specify the name of the person who tendered, the number of units to be
withdrawn and the name of the registered holder of such units, if different
from the person who tendered. In addition, the notice of withdrawal must be
signed by the person who signed the letter of transmittal in the same manner as
the letter of transmittal was signed.
If purchase of, or payment for, a unit is delayed for any reason, or
if we are unable to purchase or pay for a unit for any reason, then, without
prejudice to our rights under the offer, tendered units may be retained by the
Information Agent; subject, however, to our obligation, pursuant to Rule
14e-1(c) under the Exchange Act, to pay the offer price in respect of units
tendered or return those units promptly after termination or withdrawal of our
offer.
Any units properly withdrawn will thereafter be deemed not to have
been validly tendered for purposes of our offer. However, withdrawn units may
be retendered at any time prior to the expiration date by following the
procedures described in "The Offer--Section 3. Procedures for Tendering Units."
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All questions as to the validity and form (including time of receipt)
of notices of withdrawal will be determined by us in our reasonable discretion,
which determination will be final and binding on all parties. Neither we, the
Information Agent, nor any other person will be under any duty to give
notification of any defects or irregularities in any notice of withdrawal or
incur any liability for failure to give any such notification.
SECTION 5. EXTENSION OF TENDER PERIOD; TERMINATION; AMENDMENT; SUBSEQUENT
OFFERING PERIOD.
We expressly reserve the right, in our reasonable discretion, at any
time and from time to time, (i) to extend the period of time during which our
offer is open and thereby delay acceptance for payment of, and the payment for,
any unit, (ii) to terminate the offer and not accept any units not theretofore
accepted for payment or paid for if any of the conditions to the offer are not
satisfied or if any event occurs that might reasonably be expected to result in
a failure to satisfy such conditions, (iii) upon the occurrence of any of the
conditions specified in "The Offer--Section 17. Conditions to the Offer," or
any event that might reasonably be expected to result in such occurrence, to
delay the acceptance for payment of, or payment for, any units not already
accepted for payment or paid for, and (iv) to amend our offer in any respect
(including, without limitation, by increasing or decreasing the consideration
offered, increasing or decreasing the units being sought, or both). Notice of
any such extension, termination or amendment will promptly be disseminated to
you in a manner reasonably designed to inform you of such change. In the case
of an extension of the offer, the extension may be followed by a press release
or public announcement which will be issued no later than 9:00 a.m., New York
City time, on the next business day after the scheduled expiration date of our
offer, in accordance with Rule 14e-1(d) under the Exchange Act.
If we extend the offer, or if we delay payment for a unit (whether
before or after its acceptance for payment) or are unable to pay for a unit
pursuant to our offer for any reason, then, without prejudice to our rights
under the offer, the Information Agent may retain tendered units and those
units may not be withdrawn except to the extent tendering unitholders are
entitled to withdrawal rights as described in "The Offer--Section 4. Withdrawal
Rights;" subject, however, to our obligation, pursuant to Rule 14e-l(c) under
the Exchange Act, to pay the offer price in respect of units tendered or return
those units promptly after termination or withdrawal of the offer.
If we make a material change in the terms of our offer, or if we waive
a material condition to our offer, we will extend the offer and disseminate
additional tender offer materials to the extent required by Rules 14d-4 and
14e-1 under the Exchange Act. The minimum period during which the offer must
remain open following any material change in the terms of the offer, other than
a change in price or a change in percentage of securities sought or a change in
any dealer's soliciting fee, if any, will depend upon the facts and
circumstances, including the materiality of the change, but generally will be
five business days. With respect to a change in price or, subject to certain
limitations, a change in the percentage of securities sought or a change in any
dealer's soliciting fee, if any, a minimum of ten business days from the date
of such change is generally required to allow for adequate dissemination to
unitholders. Accordingly, if, prior to the expiration date, we increase (other
than increases of not more than two percent of the outstanding units) or
decrease the number of units being sought, or increase or decrease the offer
price, and if the offer is scheduled to expire at any time earlier than the
tenth business day after the date that notice of such increase or decrease is
first published, sent or given to unitholders, the offer will be extended at
least until the expiration of such ten business days. As used in the offer to
purchase, "business day" means any day other than a Saturday, Sunday or a
Federal holiday, and consists of the time period from 12:01 a.m. through 12:00
Midnight, New York City time.
Pursuant to Rule 14d-11 under the Exchange Act, we may provide for a
subsequent offering period in tender offers for any and all outstanding units.
A subsequent offering period is an additional period of from three to twenty
business days following the expiration date of the offer, including any
extensions, in which unitholders may continue to tender units not tendered in
the offer for the offer price. We do no intend to have a subsequent offering
period.
SECTION 6. CERTAIN FEDERAL INCOME TAX MATTERS.
The following summary is a general discussion of certain of the United
States federal income tax
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consequences of the offer that may be relevant to (i) unitholders who tender
some or all of their units for cash pursuant to our offer, and (ii) unitholders
who do not tender any of their units pursuant to our offer. This discussion is
based on the Internal Revenue Code of 1986, as amended (the "Internal Revenue
Code"), Treasury Regulations, rulings issued by the Internal Revenue Service
(the "IRS"), and judicial decisions, all as of the date of this offer to
purchase. All of the foregoing are subject to change or alternative
construction, possibly with retroactive effect, and any such change or
alternative construction could affect the continuing accuracy of this summary.
This summary is based on the assumption that your partnership is operated in
accordance with its organizational documents including its certificate of
limited partnership and agreement of limited partnership. This summary is for
general information only and does not purport to discuss all aspects of federal
income taxation which may be important to a particular person in light of its
investment or tax circumstances, or to certain types of investors subject to
special tax rules (including financial institutions, broker-dealers, insurance
companies, and, except to the extent discussed below, tax-exempt organizations
and foreign investors, as determined for United States federal income tax
purposes), nor (except as otherwise expressly indicated) does it describe any
aspect of state, local, foreign or other tax laws. This summary assumes that
the units constitute capital assets in the hands of the unitholders (generally,
property held for investment). No advance ruling has been or will be sought
from the IRS regarding any matter discussed in this offer to purchase. Further,
no opinion of counsel has been obtained with regard to the offer.
THE UNITED STATES FEDERAL INCOME TAX TREATMENT OF A UNITHOLDER
PARTICIPATING IN THE OFFER DEPENDS IN SOME INSTANCES ON DETERMINATIONS OF FACT
AND INTERPRETATIONS OF COMPLEX PROVISIONS OF UNITED STATES FEDERAL INCOME TAX
LAW FOR WHICH NO CLEAR PRECEDENT OR AUTHORITY MAY BE AVAILABLE. ACCORDINGLY,
YOU SHOULD CONSULT YOUR TAX ADVISOR REGARDING THE UNITED STATES FEDERAL, STATE,
LOCAL AND FOREIGN TAX CONSEQUENCES OF SELLING THE LIMITED PARTNERSHIP INTERESTS
IN YOUR PARTNERSHIP REPRESENTED BY UNITS PURSUANT TO OUR OFFER OR OF A DECISION
NOT TO SELL IN LIGHT OF YOUR SPECIFIC TAX SITUATION.
TAX CONSEQUENCES TO LIMITED PARTNERS TENDERING UNITS FOR CASH. You
will recognize gain or loss on a sale of a unit of limited partnership of your
partnership equal to the difference between (i) your "amount realized" on the
sale and (ii) your adjusted tax basis in the unit sold. The "amount realized"
with respect to a unit of limited partnership of your partnership will be equal
to the sum of the amount of cash received by you for the unit sold pursuant to
the offer plus the amount of partnership liabilities allocable to the unit (as
determined under Section 752 of the Internal Revenue Code). Thus, your taxable
gain and tax liability resulting from a sale of a unit of limited partnership
of your partnership could exceed the cash received upon such sale.
ADJUSTED TAX BASIS. If you acquired your units of limited partnership
of your partnership for cash, your initial tax basis in such units was
generally equal to your cash investment in your partnership increased by your
share of partnership liabilities at the time you acquired such units. Your
initial tax basis generally has been increased by (i) your share of partnership
income and gains, and (ii) any increases in your share of partnership
liabilities, and has been decreased (but not below zero) by (i) your share of
partnership cash distributions, (ii) any decreases in your share of partnership
liabilities, (iii) your share of partnership losses, and (iv) your share of
nondeductible partnership expenditures that are not chargeable to capital. For
purposes of determining your adjusted tax basis in units of limited partnership
of your partnership immediately prior to a disposition of your units, your
adjusted tax basis in your units will include your allocable share of
partnership income, gain or loss for the taxable year of disposition. If your
adjusted tax basis is less than your share of partnership liabilities (e.g., as
a result of the effect of net loss allocations and/or distributions exceeding
the cost of your unit), your gain recognized with respect to a unit of limited
partnership of your partnership pursuant to the offer will exceed the cash
proceeds realized upon the sale of such unit.
CHARACTER OF GAIN OR LOSS RECOGNIZED PURSUANT TO THE OFFER. Except as
described below, the gain or loss recognized by you on a sale of a unit of
limited partnership of your partnership pursuant to the offer generally will be
treated as a long-term capital gain or loss if you held the unit for more than
one year. Long-term capital gains recognized by individuals and certain other
noncorporate taxpayers generally will be subject to a maximum United States
federal income tax rate of 20%. If the amount realized with respect to a unit
of limited partnership of your partnership that is attributable to your share
of "unrealized receivables" of your partnership exceeds the tax basis
attributable to those assets, such excess will be treated as ordinary income.
Among other things, "unrealized receivables" include depreciation recapture for
certain types of property. In addition, the maximum United States federal
income tax rate applicable to persons who are noncorporate taxpayers for net
capital gains attributable to the sale of depreciable real property (which may
be determined to include an interest in a partnership such as your
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units) held for more than one year is currently 25% (rather than 20%) with
respect to that portion of the gain attributable to depreciation deductions
previously taken on the property.
If you tender a unit of limited partnership interest of your
partnership in the offer, you will be allocated a share of partnership taxable
income or loss for the year of tender with respect to any units sold. You will
not receive any future distributions on units of limited partnership interest
of your partnership tendered on or after the date on which such units are
accepted for purchase and, accordingly, you may not receive any distributions
with respect to such accreted income. Such allocation and any partnership cash
distributions to you for that year will affect your adjusted tax basis in your
unit of limited partnership interest of your partnership and, therefore, the
amount of your taxable gain or loss upon a sale of a unit pursuant to the
offer.
PASSIVE ACTIVITY LOSSES. The passive activity loss rules of the
Internal Revenue Code limit the use of losses derived from passive activities,
which generally include investments in limited partnership interests such as
the units of limited partnership interest of your partnership. An individual,
as well as certain other types of investors, generally cannot use losses from
passive activities to offset nonpassive activity income received during the
taxable year. Passive losses that are disallowed for a particular tax year are
"suspended" and may be carried forward to offset passive activity income earned
by the investor in future taxable years. In addition, such suspended losses may
be claimed as a deduction, subject to other applicable limitations, upon a
taxable disposition of the investor's interest in such activity.
Accordingly, if your investment in your units is treated as a passive
activity, you may be able to reduce gain from the sale of your units of limited
partnership interest of your partnership pursuant to the offer with passive
losses in the manner described below. If you sell all or a portion of your
units of limited partnership interest of your partnership pursuant to the offer
and recognize a gain on your sale, you will generally be entitled to use your
current and "suspended" passive activity losses (if any) from your partnership
and other passive sources to offset that gain. In general, if you sell all or a
portion of your units of limited partnership interest of your partnership
pursuant to the offer and recognize a loss on such sale, you will be entitled
to deduct that loss currently (subject to other applicable limitations) against
the sum of your passive activity income from your partnership for that year (if
any) plus any passive activity income from other sources for that year. If you
sell all of your units pursuant to the offer, the balance of any "suspended"
losses from your partnership that were not otherwise utilized against passive
activity income as described in the two preceding sentences will generally no
longer be suspended and will generally therefore be deductible (subject to any
other applicable limitations) by you against any other income for that year,
regardless of the character of that income. You are urged to consult your tax
advisor concerning whether, and the extent to which, you have available
"suspended" passive activity losses from your partnership or other investments
that may be used to reduce gain from the sale of units pursuant to the offer.
INFORMATION REPORTING, BACKUP WITHHOLDING AND FIRPTA. If you tender
any units, you must report the transaction by filing a statement with your
United States federal income tax return for the year of the tender which
provides certain required information to the IRS. To prevent the possible
application of back-up United States federal income tax withholding of 31% with
respect to the payment of the offer consideration, you are generally required
to provide us with your correct taxpayer identification number. See the
instructions to the letter of transmittal.
Gain realized by a foreign person on the sale of a unit pursuant to
the offer will be subject to federal income tax under the Foreign Investment in
Real Property Tax Act of 1980. Under these provisions of the Internal Revenue
Code, the transferee of an interest held by a foreign person in a partnership
which owns United States real property generally is required to deduct and
withhold 10% of the amount realized on the disposition. Amounts withheld would
be creditable against a foreign person's United States federal income tax
liability and, if in excess thereof, a refund could be claimed from the
Internal Revenue Service by filing a United States income tax return. See the
instructions to the letter of transmittal.
TAX CONSEQUENCES TO NON-TENDERING AND PARTIALLY-TENDERING LIMITED
PARTNERS. Section 708 of the Internal Revenue Code provides that if there is a
sale or exchange of 50% or more of the total interest in capital and profits of
a partnership within any 12-month period, such partnership terminates for
United States federal income tax purposes. It is possible that our acquisition
of units pursuant to the offer alone or in combination with other transfers of
interests in your partnership could result in such a termination of your
partnership. If your partnership
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is deemed to terminate for tax purposes, the following Federal income tax
events will be deemed to occur: the terminated partnership will be deemed to
have contributed all of its assets (subject to its liabilities) to a new
partnership in exchange for an interest in the new partnership and, immediately
thereafter, the old partnership will be deemed to have distributed interests in
the new partnership to the remaining limited partners in proportion to their
respective interests in the old partnership in liquidation of the old
partnership.
You will not recognize any gain or loss upon such deemed contribution
of your partnership's assets to the new partnership or upon such deemed
distribution of interests in the new partnership, and your capital account in
your partnership will carry over to the new partnership. A termination of your
partnership for Federal income tax purposes may change (and possibly shorten)
your holding period with respect to your interests in your partnership that you
choose to retain. Gain recognized by you on the disposition of retained units
with a holding period of 12 months or less may be classified as short-term
capital gain and subject to taxation at ordinary income tax rates.
A termination of your partnership for Federal income tax purpose may
also subject the assets of your partnership to longer depreciable lives than
those currently applicable to the assets of your partnership. This would
generally decrease the annual average depreciation deductions allocable to you
for certain years following our offer if you do not tender all of your
interests in your partnership (thereby increasing the taxable income allocable
to your interests in your partnership each such year), but would have no effect
on the total depreciation deductions available over the useful lives of the
assets of your partnership. Additionally, upon a termination of your
partnership, the taxable year of your partnership will close for Federal income
tax purposes.
SECTION 7. EFFECTS OF THE OFFER.
CONTROL BY AIMCO. Because the general partner of your partnership is
our subsidiary, we have control over the management of your partnership. In
addition, we already own over 50% of the units in your partnership and we can
control the vote of the limited partners. In general, we will vote the units
owned by us in whatever manner we deem to be in our best interests, which may
not be in the interest of other limited partners. This could (1) prevent
non-tendering limited partners from taking action they desire but that we
oppose and (2) enable us to take action desired by us but opposed by
non-tendering limited partners. We also own the company that manages the
residential properties owned by your partnership. In the event that we acquire
a substantial number of units pursuant to the offer, removal of a property
manager may become more difficult or impossible.
DISTRIBUTIONS TO US. If we acquire units in the offer, we will
participate in any subsequent distributions to limited partners to the extent
of the units purchased.
PARTNERSHIP STATUS. We believe our purchase of units should not
adversely affect the issue of whether your partnership is classified as a
partnership for federal income tax purposes.
BUSINESS. Our offer will not affect the operation of the properties
owned by your partnership. We will continue to control the general partner of
your partnership and the residential property manager, both of which will
remain the same. Consummation of the offer will not affect your agreement of
limited partnership, the operations of your partnership, the business and
properties owned by your partnership, the management compensation payable to
your general partner or any other matter relating to your partnership, except
it would result in us increasing our ownership of units. We have no current
intention of changing the fee structure for your general partner or the manager
of your partnership's properties.
EFFECT ON TRADING MARKET; REGISTRATION UNDER 12(g) OF THE EXCHANGE
ACT. If a substantial number of units are purchased pursuant to the offer, the
result will be a reduction in the number of limited partners in your
partnership. In the case of certain kinds of equity securities, a reduction in
the number of security holders might be expected to result in a reduction in the
liquidity and volume of activity in the trading market for the security. In the
case of your partnership, however, there is no established public trading
market for the units and, therefore, we do not believe a reduction in the
number of limited partners will materially further restrict your ability to
find purchasers for your units through secondary market transactions.
The units are registered under Section 12(g) of the Exchange Act,
which means, among other things, that your partnership is required to file
periodic reports with the SEC and to comply with the SEC's proxy rules. We do
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not expect or intend that consummation of the offer will cause the units to
cease to be registered under Section 12(g) of the Exchange Act. If the units
were to be held by fewer than 300 persons, your partnership could apply to
de-register the units under the Exchange Act. Your partnership currently has
4,640 unitholders of record. If units are tendered which would result in less
than 320 unitholders, we will purchase no more than 99% of the units tendered
by each unitholder to assure that there are more than 300 unitholders after the
offer. See "The Offer--Section 1. Terms of the Offer; Expiration Date."
ACCOUNTING TREATMENT. Upon consummation of the offer, we will account
for our investment in any acquired units under the purchase method of
accounting. There will be no effect on the accounting treatment of your
partnership as a result of the offer.
SECTION 8. INFORMATION CONCERNING US AND CERTAIN OF OUR AFFILIATES.
GENERAL. We are AIMCO Properties, L.P., a Delaware limited
partnership. Together with our subsidiaries, we conduct substantially all of
the operations of Apartment Investment and Management Company, a Maryland
corporation ("AIMCO"). AIMCO is a real estate investment trust that owns and
manages multifamily apartment properties throughout the United States. AIMCO's
Class A Common Stock is listed and traded on the New York Stock Exchange under
the symbol "AIV." Based on apartment unit data compiled as of January 1, 1999,
by the National Multi Housing Council, we believe that we are the largest owner
and manager of multi-family apartment properties in the United States. As of
March 31, 2000, we:
- owned or controlled 121,449 units in 439 apartment properties;
- held an equity interest in 115,951 units in 671 apartment properties;
and
- managed 115,119 units in 724 apartment properties for third party
owners and affiliates.
Our general partner is AIMCO-GP, Inc., a Delaware corporation, which
is a wholly-owned subsidiary of AIMCO. Our principal executive offices are
located at Colorado Center, Tower Two, 2000 South Colorado Boulevard, Suite
2-1000, Denver, Colorado 80222, and our telephone number is (303) 757-8101.
The names, positions and business addresses of the directors and
executive officers of AIMCO and your general partner (which is our subsidiary)
as well as a biographical summary of the experience of such persons for the
past five years or more, are set forth on Annex I attached hereto and are
incorporated herein by reference.
We and AIMCO are both subject to the information and reporting
requirements of the Exchange Act and, in accordance therewith, file reports and
other information with the Securities and Exchange Commission relating to our
business, financial condition and other matters, including the complete
financial statements summarized below. Such reports and other information may
be inspected at the public reference facilities maintained by the SEC at
Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549; Citicorp
Center, 500 West Madison Street, Chicago, Illinois 60661; and 7 World Trade
Center, 13th Floor, New York, New York 10048. Copies of such material can also
be obtained from the Public Reference Room of the SEC in Washington, D.C. at
prescribed rates. The SEC also maintains a site on the World Wide Web at
http://www.sec.gov that contains reports, proxy and information statements and
other information regarding registrants that file electronically with the SEC.
In addition, information filed by AIMCO with the New York Stock Exchange may be
inspected at the offices of the New York Stock Exchange at 20 Broad Street, New
York, New York 10005.
For more information regarding AIMCO Properties, L.P., please refer to
the Annual Report on Form 10-K for the year ended December 31, 1999, and the
Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2000
(particularly the management's discussion and analysis of financial condition
and results of operations) and other reports and documents filed by us with the
SEC.
Except as described in "The Offer--Section 9. Background and Reasons
for the Offer" and "The Offer--Section 11. Conflicts of Interests and
Transactions with Affiliates," neither we nor, to the best of our knowledge,
any of the persons listed on Annex I attached hereto, (i) beneficially own or
have a right to acquire any units, (ii) has effected any transaction in the
units in the past 60 days, or (iii) have any contract, arrangement,
understanding or relationship with any other person with respect to any
securities of your partnership, including, but not limited to, contracts,
arrangements, understandings or relationships concerning transfer or voting
thereof, joint ventures, loan or option arrangements, puts or calls, guarantees
of loans, guarantees against loss or the giving or withholding of proxies.
Neither we nor our affiliates intend to tender any units beneficially owned in
this offer.
14
<PAGE> 18
SELECTED FINANCIAL INFORMATION OF AIMCO PROPERTIES, L.P. The historical
financial data set forth below for AIMCO Properties, L.P. for the three months
ended March 31, 2000 and 1999 is unaudited. The historical financial data set
forth below for AIMCO Properties, L.P. for the years ended December 31, 1999
and 1998 is based on audited financial statements. This information should be
read in conjunction with such financial statements, including the notes
thereto, and "Management's Discussion and Analysis of Financial Condition and
Results of Operations of the AIMCO Operating Partnership" included in the AIMCO
Properties, L.P.'s Annual Report on Form 10-K for the year ended December 31,
1999 and its Form 10-Q for the quarter ended March 31, 2000.
<TABLE>
<CAPTION>
THREE MONTHS ENDED YEAR ENDED
MARCH 31, DECEMBER 31,
----------------------- -----------------------
2000 1999 1999 1998
--------- --------- --------- ---------
(DOLLARS IN THOUSANDS, EXCEPT PER UNIT DATA)
<S> <C> <C> <C> <C>
OPERATING DATA:
RENTAL PROPERTY OPERATIONS:
Rental and other property revenue ................ $ 224,320 $ 110,552 $ 531,883 $ 373,963
Property operating expenses ...................... (90,751) (42,360) (213,959) (145,966)
Owned property management expenses ............... (7,816) (3,395) (15,322) (10,882)
Depreciation ..................................... (64,690) (26,616) (131,257) (83,908)
--------- --------- --------- ---------
Income from property operations .................. (61,063) (38,105) 171,345 133,207
--------- --------- --------- ---------
SERVICE COMPANY BUSINESS:
Management fees and other income ................. 13,310 7,978 428,877 22,675
Management and other expenses .................... (4,957) (8,902) (25,470) (16,960)
Income from service company business ............. 8,353 (924) 17,407 (5,715)
--------- --------- --------- ---------
General and administrative expenses .............. (3,211) (2,594) (12,016) (10,336)
Interest expense ................................. (56,224) (30,360) (139,124) (88,208)
Interest income .................................. 13,004 9,828 62,183 (28,170)
Equity in earnings (losses) of unconsolidated
subsidiaries (a) ............................. 2,445 2,695 (2,588) (2,665)
Equity in earnings (losses) of unconsolidated
real estate partnerships (b) ................. 3,215 2,790 (2,400) 12,009
Loss from IPLP exchange and assumption ........... -- (684) (684) (2,648)
Minority interest ................................ (3,721) (2,065) (5,788) (1,868)
Amortization of goodwill ......................... (1,575) (1,942) (5,860) (8,735)
Income from operations ........................... 23,349 14,849 82,475 (64,641)
--------- --------- --------- ---------
Gain on disposition of properties ................ 5,105 15 (1,785) 4,287
Income before extraordinary item ................. 28,454 14,864 80,690 68,928
Net income ....................................... $ 28,454 $ 14,846 $ 80,690 $ 68,928
--------- --------- --------- ---------
</TABLE>
15
<PAGE> 19
<TABLE>
<CAPTION>
THREE MONTHS ENDED YEAR ENDED
MARCH 31, DECEMBER 31,
--------------------------- ---------------------------
2000 1999 1999 1998
----------- ----------- ----------- -----------
(DOLLARS IN THOUSANDS, EXCEPT PER UNIT DATA)
<S> <C> <C> <C> <C>
BALANCE SHEET INFORMATION
(END OF PERIOD:)
Real estate, before accumulated depreciation ..... $ 4,995,886 $ 2,852,506 $ 4,508,535 $ 2,743,865
Real estate, net of accumulated depreciation ..... 4,507,911 5,917,753 4,092,543 2,515,710
Total assets ..................................... 6,017,807 4,291,931 5,684,251 4,186,764
Total mortgages and notes payable ................ 3,007,050 1,608,895 2,584,289 1,601,730
Partnership-obligated mandatory redeemable
convertible preferred securities of a
subsidiary trust ............................. 149,500 149,500 149,500 149,500
Partners' Capital ................................ 2,497,747 2,289,245 2,486,889 2,153,335
OTHER INFORMATION:
Total owned or controlled properties (end of
period) ...................................... 439 240 373 234
Total owned or controlled apartment units
(end of period) .............................. 121,449 63,069 106,148 61,672
Total equity apartment units (end of period) ..... 115,951 168,817 133,113 171,657
Units under management (end of
period) ...................................... 115,119 141,523 124,201 146,034
Basic earnings per Common OP Unit ................ $ 0.17 $ 0.03 $ 0.39 $ 0.80
Diluted earnings per Common OP Unit .............. $ 0.17 $ 0.03 $ 0.38 $ 0.78
Distributions paid per Common OP Unit ............ $ 0.70 $ 0.63 $ 2.50 $ 2.25
Cash flows provided by operating activities ...... $ 69,556 $ 65,545 $ 254,380 $ 144,152
Cash flows used in investing activities .......... (108,704) (25,667) (243,078) (342,541)
Cash flows provided by (used in) financing
activities ................................... 74,433 (54,149) 37,470 214,133
Funds from operations (c) ........................ $ 98,120 $ 65,299 $ 320,434 $ 193,830
Weighted average number of Common OP
Units outstanding ............................ 73,484 64,923 78,531 56,567
</TABLE>
----------
(a) Represents AIMCO Properties, L.P. equity in earnings of unconsolidated
subsidiaries.
(b) Represents AIMCO Properties, L.P.'s share of earnings from partnerships
that own 115,951apartment units at March 31, 2000 in which partnerships
AIMCO Properties, L.P. owns an equity interest.
(c) AIMCO Properties, L.P.'s management believes that the presentation of funds
from operations or "FFO", when considered with the financial data
determined in accordance with generally accepted accounting principles,
provides a useful measure of performance. However, FFO does not represent
cash flow and is not necessarily indicative of cash flow or liquidity
available to AIMCO Properties, L.P., nor should it be considered as an
alternative to net income or as an indicator of operating performance. The
Board of Governors of the National Association of Real Estate Investment
Trusts ("NAREIT") defines FFO as net income (loss), computed in accordance
with generally accepted accounting principles, excluding gains and losses
from debt restructuring and sales of property, plus real estate related
depreciation and amortization (excluding amortization of financing costs),
and after adjustments for unconsolidated partnerships and joint ventures.
AIMCO Properties, L.P. calculates FFO based on the NAREIT definition, as
adjusted for the amortization of goodwill, the non-cash deferred portion of
the income tax provision for unconsolidated subsidiaries and less the
payments of distributions on preferred limited partnership interests. AIMCO
Properties, L.P.'s management believes that presentation of FFO provides
investors with industry-accepted measurements which help facilitate an
understanding of its ability to make required dividend payments, capital
expenditures and principal payments on its debt. There can be no assurance
that AIMCO Properties, L.P.'s basis of computing FFO is comparable with
that of other REITs.
16
<PAGE> 20
The following is a reconciliation of net income to funds from operations:
<TABLE>
<CAPTION>
THREE MONTHS ENDED YEAR ENDED
MARCH 31, DECEMBER 31,
----------------------- -----------------------
2000 1999 1999 1998
--------- --------- --------- ---------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Net income ......................................... $ 28,454 $ 14,864 $ 80,690 $ 68,928
Gain loss on disposition of property ............... (5,105) (15) 1,785 (4,287)
Real estate depreciation, net of minority
interests ...................................... 56,976 25,095 121,084 79,869
Real estate depreciation related to
unconsolidated entities ........................ 18,960 21,105 104,754 34,765
Amortization ....................................... 2,083 12,999 36,731 26,177
Deferred taxes ..................................... 852 2,456 1,763 9,215
Expenses associated with convertible preferred
securities ..................................... -- -- 6,892 --
--------- --------- --------- ---------
Preferred unit distributions ....................... (4,101) (11,205) (33,265) (20,837)
--------- --------- --------- ---------
Funds from operations .............................. $ 98,120 $ 65,299 $ 320,434 $ 193,830
--------- --------- --------- ---------
</TABLE>
As of March 31, 2000, AIMCO Properties, L.P. had a net tangible book
value of $61.30 per common unit.
RATIOS OF EARNINGS TO FIXED CHARGES OF AIMCO PROPERTIES, L.P. The
following table shows AIMCO Properties, L.P.'s (i) ratio of income to fixed
charges and (ii) ratio of income to fixed charges and preferred unit
distributions.
<TABLE>
<CAPTION>
FOR THE THREE FOR THE YEAR
MONTHS ENDED ENDED
MARCH 31, DECEMBER 31,
----------------------- ----------------------
2000 1999 1999 1998
-------- -------- -------- -------
<S> <C> <C> <C> <C>
Ratio of earnings to fixed charges(1)................. 1.7:1 1.9:1 2.4:1 1.6:1
Ratio of earnings to combined fixed charges and
preferred unit distributions(2)....................... 1.3:1 1.3:1 1.7:1 1.7:1
</TABLE>
----------
(1) Our ratio of earnings to fixed charges was computed by dividing
earnings by fixed charges. For this purpose, "earnings" consists of
income before minority interests (which includes equity in earnings of
unconsolidated subsidiaries and partnerships only to the extent of
dividends received) plus fixed charges (other than any interest which
has been capitalized), and "fixed charges" consists of interest
expense (including amortization of loan costs) and interest which has
been capitalized.
(2) Our ratio of earnings to combined fixed charges and preferred unit
distributions was computed by dividing earnings by the total of fixed
charges and preferred unit distributions. For this purpose, "earnings"
consists of income before minority interests (which includes equity in
earnings of unconsolidated subsidiaries and partnerships only to the
extent of dividends received) plus fixed charges (other than any
interest which has been capitalized), "fixed charges" consists of
interest expense (including amortization of loan costs) and interest
which has been capitalized, and "preferred unit distributions"
consists of the amount of pre-tax earnings that would be required to
cover preferred unit distributions requirements.
17
<PAGE> 21
SECTION 9. BACKGROUND AND REASONS FOR THE OFFER.
GENERAL. We are in the business of acquiring direct and indirect
interests in apartment properties such as the properties owned by your
partnership. Our offer provides us with an opportunity to increase our
ownership interest in your partnership's properties while providing you and
other investors with an opportunity to liquidate your current investment.
On October 1, 1998, AIMCO merged (the "Insignia Merger") with Insignia
Financial Group, Inc. ("Insignia"). As a result of the Insignia Merger, AIMCO
acquired approximately 51% of the outstanding common shares of beneficial
interest of Insignia Properties Trust ("IPT"). Through the Insignia Merger,
AIMCO also acquired a majority ownership interest in the entity that manages
the residential properties owned by your partnership. On October 31, 1998, IPT
and AIMCO entered into an agreement and plan of merger, dated as of October 1,
1998, pursuant to which IPT merged with AIMCO on February 26, 1999. AIMCO then
contributed IPT's interest in Insignia Properties L.P., IPT's operating
partnership, to AIMCO's wholly owned subsidiary, AIMCO/IPT, Inc. AIMCO also
replaced IPT as the sole general partner of Insignia Properties L.P. As a
result, the general partner of your partnership is a wholly-owned subsidiary of
AIMCO/IPT and the residential property manager is our indirect wholly-owned
subsidiary. Together with its subsidiaries, AIMCO currently owns, in the
aggregate, approximately 57.82% of your partnership's outstanding limited
partnership units.
During our negotiations with Insignia in early 1998, we decided that
if the merger with Insignia were consummated, we could also benefit from making
offers for limited partnership interests of some of the limited partnerships
formerly controlled or managed by Insignia (the "Insignia Partnerships"). Such
offers would provide liquidity for the limited partners of the Insignia
Partnerships, and would provide AIMCO Properties, L.P. with a larger asset and
capital base and increased diversification. While some of the Insignia
Partnerships are public partnerships and information is publicly available on
such partnerships for weighing the benefits of making a tender offer, many of
the partnerships are private partnerships and information about such
partnerships comes principally from the general partner. Our control of the
general partner makes it possible for us to obtain access to such information.
Further, such control also means that we control the operations of the
partnerships and their properties. Insignia did not propose that we conduct
such tender offers, rather we initiated the offers on our own. As of the date
of this offering, AIMCO Properties, L.P. has made offers to most of the
Insignia Partnerships, including your partnership.
ALTERNATIVES CONSIDERED BY YOUR GENERAL PARTNER. Before we commenced
this offer, your general partner (which is our subsidiary) considered a number
of alternative transactions. The following is a brief discussion of the
advantages and disadvantages of the alternatives considered by your general
partner.
LIQUIDATION
One alternative would be for the partnership to sell its assets,
distribute the net liquidation proceeds to its partners in accordance with the
agreement of limited partnership, and thereafter dissolve. Partners would be at
liberty to use the net liquidation proceeds after taxes for investment,
business, personal or other purposes, at their option. If your partnership were
to sell its assets and liquidate, you and your partners would not need to rely
upon capitalization of income or other valuation methods to estimate the fair
market value of partnership assets. Instead, such assets would be valued
through negotiations with prospective purchasers (in many cases unrelated third
parties).
However, in the opinion of your general partner, which is our
subsidiary, the present time is not be the most desirable time to sell the
residential real estate assets of your partnership, and the proceeds realized
from any such sale would be uncertain. Your general partner believes it
currently is in the best interest of your partnership to continue holding its
real estate assets. See "The Offer--Section 13. Certain Information Concerning
Your Partnership--Investment Objectives and Policies; Sale or Financing of
Investments."
18
<PAGE> 22
CONTINUATION OF THE PARTNERSHIP WITHOUT THE OFFER
A second alternative would be for your partnership to continue as a
separate legal entity, with its own assets and liabilities and continue to be
governed by its existing agreement of limited partnership, without our offer. A
number of advantages could result from the continued operation of your
partnership. Given improving rental market conditions or improved operating
performance, the level of distributions might increase over time. It is
possible that the private resale market for properties could improve over time,
making a sale of the partnership's properties at some point in the future a
more attractive option than it is currently. The continuation of your
partnership will allow you to continue to participate in the net income and any
increases in revenue of your partnership and any net proceeds from the sale of
any property owned by your partnership. However, no assurance can be given as
to future operating results or as to the results of any future attempts to sell
any property owned by your partnership.
The primary disadvantage of continuing the operations of your
partnership is that you and your partners would be limited in your ability to
sell your units. Although you could sell your units to a third party, any such
sale would likely be at a discount from your pro rata share of the fair market
value of the properties owned by your partnership.
ALTERNATIVE TRANSACTIONS CONSIDERED BY US. Before we decided to make
our offer, we considered a number of alternative transactions, including
purchasing some or all of your partnership's properties or merging your
partnership with us. However, both of these alternatives would require a vote
of the limited partners. If the transaction was approved, all limited partners,
including those who wish to continue to participate in the ownership of your
partnership's properties, would be forced to participate in the transaction. If
the transaction was not approved, all limited partners, including those who
would like to dispose of their investment in your partnership's properties,
would be forced to retain their investment. We also considered an offer to
exchange units in your partnership for units of AIMCO Properties, L.P. However,
because of the expense and delay associated with making such an exchange offer,
we decided to make an offer for cash only. In addition, our historical
experience has been that most holders of limited partnership units, when given
a choice, prefer cash.
DETERMINATION OF OFFER PRICE. In establishing the offer price, we
reviewed certain publicly available information and certain information made
available to us by the general partner, which is our subsidiary, and our other
affiliates, including among other things: (i) the agreement of limited
partnership, as amended to date; (ii) the partnership's Annual Report on Form
10-KSB for the year ended December 31, 1999 and Quarterly Report on Form 10-QSB
for the quarter ended March 31, 2000; (iii) the operating budgets prepared by
the residential property manager with respect to the partnership's properties
for the year ending December 31, 2000; and (iv) tender offer statements,
solicitation/recommendation statements and beneficial ownership reports on
Schedules TO, 14D-1, 14D-9 and 13D. Our determination of the offer price was
based on our review and analysis of the foregoing information, the other
financial information and the analyses concerning the partnership summarized
below.
VALUATION OF UNITS. We determined our offer price by estimating the
value of each property owned by your partnership using the direct
capitalization method. This method involves applying a capitalization rate to
your partnership's annual residential property income. A capitalization rate is
a percentage (rate of return), commonly applied by purchasers of residential
real estate to property income to determine the present value of income
property. The lower the capitalization rate utilized, the higher the value
produced, and the higher the capitalization rate utilized, the lower the value
produced. We used your partnership's estimated property income for the year
ending December 31, 2000 by multiplying the actual property income for the six
months ended June 30, 2000 by two. Actual property income for 2000 could be
higher or lower than such estimate. Our method for selecting a capitalization
rate begins with each property being assigned a location and condition rating
(e.g., "A" for excellent, "B" for good, "C" for fair, and "D" for poor). We
then adjust the capitalization rate based on whether the property's mortgage
debt bears interest at a rate above or below 7.5% per annum. Generally, for
every 0.5% in excess of 7.5%, the capitalization rate would be increased by
0.25%. The evaluation of a property's location and condition, and the
determination of an appropriate capitalization rate for a property, which are
subjective in nature, and others evaluating the same property might use a
different capitalization rate and derive a different property value.
Property income is the difference between the revenues from the
property and related costs and expenses, excluding income derived from sources
other than its regular activities and before income deductions. Income
deductions include interest, income taxes, prior-year adjustments, charges to
reserves, write-off of intangibles,
19
<PAGE> 23
adjustments arising from major changes in accounting methods and other material
and nonrecurring items. In this respect, property income differs from net
income disclosed in the partnership's financial statements, which does not
exclude these income sources and deductions. The following is a reconciliation
of your partnership's property's income for the three months ended March 31,
2000 to your partnership's net operating income for the same period:
<TABLE>
<S> <C>
Net Income (Loss) .................................. $ 411,000
Other Non-Operating Expense ........................ (103,000)
Depreciation ....................................... 505,000
Interest ........................................... 515,000
-----------
Property Income .................................... $ 1,328,000
===========
</TABLE>
Although the direct capitalization method is a widely accepted way of
valuing real estate, there are a number of other methods available to value
real estate, each of which may result in different valuations of a property.
Further, in applying the direct capitalization method, others may make
different assumptions and obtain different results. The proceeds that you would
receive if you sold your units to someone else or if your partnership were
actually liquidated might be higher than our offer price.
We determined our offer price as follows:
o First, we estimated the value of the property owned by your
partnership. We used the direct capitalization method to
value the properties. We selected capitalization rates based
on our experience in valuing similar properties. The lower
the capitalization rate applied to a property's income, the
higher its value. We considered local market sales
information for comparable properties, estimated actual
capitalization rates (property income less capital reserves
divided by sales price) and then evaluated each property in
light of its relative competitive position, taking into
account property location, occupancy rate, overall property
condition and other relevant factors. We believe that
arms-length purchasers would base their purchase offers on
capitalization rates comparable to those used by us, however
there is no single correct capitalization rate and others
might use different rates. We used property income for the
six months ended June 30, 2000, annualized for the full year
ending December 31, 2000, and then divided such amount by the
property's capitalization rate to derive an estimated gross
property value as described in the table below entitled,
"Property Valuation.".
Based on the above, we estimated the gross property value of
each property as follows:
PROPERTY VALUATION
<TABLE>
<CAPTION>
2000 ESTIMATED
PROPERTY CAPITALIZATION GROSS PROPERTY
PROPERTY INCOME* RATE VALUE
-------- -------- -------------- --------------
<S> <C> <C> <C>
Baymeadows Apartments $ 3,142,000 10.65% $29,490,000
Quail Run Apartments 1,095,000 9.69% 11,301,000
Countrywood Village 1,632,000 9.89% 16,500,000
----------- -----------
Apartments
Total $ 5,869,000 $57,291,000
=========== ===========
</TABLE>
----------
* Property income for the six months ended June 30, 2000 has been
annualized by multiplying the six months results by two. Actual 2000
property income could be higher or lower.
o Second, we calculated the value of the equity of your
partnership by adding to the aggregate gross property value
of all properties owned by your partnership, the value of the
non-real estate assets of your partnership, and deducting the
liabilities of your partnership, including mortgage debt and
debt, if any, owed by your partnership to its general
partner, which is our subsidiary. We deducted from this value
certain other costs, including required capital expenditures,
deferred maintenance, and closing costs, to derive a net
equity value for your partnership of $28,702,166. Closing
costs, which are
20
<PAGE> 24
estimated to be 5% of the gross property value, include legal
and accounting fees, real property transfer taxes, title and
escrow costs and broker's fees.
o Third, using this net equity value, we determined the
proceeds that would be paid to holders of units in the event
of a liquidation of your partnership, based on the terms of
your partnership's agreement of limited partnership.
Accordingly, 100% of the estimated liquidation proceeds are
assumed to be distributed to holders of units. Our offer
price represents the per unit liquidation proceeds determined
in this manner.
<TABLE>
<CAPTION>
VALUATION OF UNITS
------------------
<S> <C>
Gross valuation of partnership properties .............................. $ 57,291,000
Plus: Cash and cash equivalents ....................................... 2,055,312
Plus: Other partnership assets, net of security deposits .............. 1,464,012
Less: Mortgage debt, including accrued interest ....................... (23,173,660)
Less: Accounts payable and accrued expenses ........................... (1,068,653)
Less: Other liabilities ............................................... (2,930,734)
Less: Distributions to GPs and SLPs ................................... (526)
------------
Partnership valuation before certain costs ............................. $ 33,636,751
Less: Estimated State Entity Taxes & State Non Resident Withholding ... (1,018,776)
Less: Extraordinary capital expenditures for deferred maintenance ..... (2,483,534)
Less: Closing costs ................................................... (1,432,275)
------------
Estimated net valuation of your partnership ............................ $ 28,702,166
Percentage of estimated net valuation allocated to holders of units .... 100.00%
------------
Estimated net valuation of units ....................................... $ 28,702,166
Total number of units ................................ 49,995
------------
Estimated valuation per unit ........................................... $ 574.10
============
Cash consideration per unit ............................................ $ 574.10
============
</TABLE>
COMPARISON OF CONSIDERATION TO ALTERNATIVE CONSIDERATION. To assist
holders of units in evaluating the offer, your general partner, which is our
subsidiary, has attempted to compare the offer price against: (a) prices at
which the units have sold in the secondary market; (b) estimates of the value
of the units on a liquidation basis; (c) Robert A. Stanger & Co., Inc.'s
November 1999 estimate of net asset value, going concern value and liquidation
value; and (d) the recent appraisals of your partnership's properties. The
general partner of your partnership believes that analyzing the alternatives in
terms of estimated value, based upon currently available data and, where
appropriate, reasonable assumptions made in good faith, establishes a
reasonable framework for comparing alternatives. Since the value of the
consideration for alternatives to the offer is dependent upon varying market
conditions, no assurance can be given that the estimated values reflect the
range of possible values.
The results of these comparative analyses are summarized in the chart
below. You should bear in mind that some of the alternative values are based on
a variety of assumptions that have been made by us. These assumptions relate
to, among other things, the operating results, if any, since March 31, 2000 as
to income and expenses of the properties, other projected amounts and the
capitalization rates that may be used by prospective buyers if your partnership
assets were to be liquidated.
In addition, these estimates are based upon certain information
available to your general partner, which is our subsidiary, or an affiliate at
the time the estimates were computed, and no assurance can be given that the
same conditions analyzed by it in arriving at the estimates of value would
exist at the time of the offer. The assumptions used have been determined by
the general partner of your partnership or an affiliate in good faith, and,
where appropriate, are based upon current and historical information regarding
your partnership and current real estate markets, and have been highlighted
below to the extent critical to the conclusions of the general partner of your
partnership. Actual results may vary from those set forth below based on
numerous factors, including interest rate fluctuations, tax law changes, supply
and demand for similar apartment properties, the manner in which your
partnership's properties are sold and changes in availability of capital to
finance acquisitions of apartment properties.
Under your partnership's agreement of limited partnership, the term of
the partnership will continue until December 31, 2022 unless sooner terminated
as provided in the agreement or by law.
21
<PAGE> 25
<TABLE>
<CAPTION>
COMPARISON TABLE PER UNIT
---------------- --------
<S> <C>
Cash offer price.............................................. $ 574.10
Alternatives
Highest cash tender offer price............................ $ 624.34(1)
Highest prices on secondary market......................... $ 525.00
Stanger's estimate of liquidation value.................... $ 625.00
Stanger's estimate of net asset value...................... $ 654.00
Stanger's estimate of going concern value.................. $ 575.00
Estimated liquidation proceeds............................. $ 574.10
</TABLE>
----------
(1) Highest price offered in the 1999 tender offers begun in November 1999.
PRIOR TENDER OFFERS
In November 1999, we commenced a tender offer at the price of $619.04
per unit, which price was determined principally upon our calculation of the
liquidation value of your partnership pursuant to a method set forth in a
proposed settlement of litigation, which proposed settlement has been
terminated. The method of determining the liquidation value was similar to that
used in this offer. We subsequently increased our offer price to $624.34 per
unit. We acquired 6,434 units pursuant to this offer. See "The Offer-Section
13. Certain Information Concerning Your Partnership-Legal Proceedings."
An unaffiliated third party made a tender offer for 4.9% of the units
in your partnership for $375.00 per unit, which offer expired on December 17,
1999.
In our May 31, 1999 tender offer, the original offer price of $536 per
unit was determined based upon our calculation of the liquidation value of your
partnership. Such offer price was based on (i) your partnership's property
income for each property for the year ended December 31, 1998, (ii) our
estimate of an appropriate capitalization rates (10.25% to 10.50%) for your
partnership's properties, (iii) the then current assets of your partnership,
(iv) estimated costs and fees (including applicable state sales taxes) for a
sale of the property, and winding up of your partnership, (v) estimated cost of
deferred maintenance, (vi) the mortgages for the properties, (vii) your
partnership's other liabilities and (viii) the percentage ownership interests
of the limited partners in your partnership. Pursuant to such offer and
thereafter, we purchased 1363.83 units at $356 per unit.
On April 5, 1999, an unaffiliated third party commenced a tender offer
for $75 per unit.
We are aware that tender offers may have been made by unaffiliated
third parties to acquire units in your partnership in exchange for cash. We are
unaware of the amounts offered, terms, tendering parties or number of units
involved in these tender offers.
PRICES ON SECONDARY MARKET
Secondary market sales information is not a reliable measure of value
because of the limited amount of any known trades. Except for offers made by
use and unaffiliated third parties, privately negotiated sales and sales
through intermediaries are the only means which may be available to a limited
partner to liquidate an investment in units because the units are not listed or
traded on any exchange or quoted on NASDAQ, on the Electronic Bulletin Board,
or in "pink sheets." Secondary sales activity for the units, including
privately negotiated sales, has been limited and sporadic.
Prior to our acquisition of the general partner in 1998, the general
partner received from time to time information on the prices at which units
were sold. However, it did not regularly receive or maintain information
regarding the bid or asked quotations of secondary market makers, if any. The
prices in the table below are based solely on information provided to the
general partner by sellers and buyers of units transferred in sale transactions
(i.e., excluding transactions believed to result from the death of a limited
partner, rollover to an IRA account, establishment of a trust, trustee to
trustee transfers, termination of a benefit plan, distributions from a
qualified or nonqualified plan, uniform gifts to minors, abandonment of units
or similar non-sale transactions). The transfer paperwork submitted to the
general partner often did not include the requested price information or
sometimes contained conflicting information as to the actual sales price.
22
<PAGE> 26
Sale prices not reported or disclosed could exceed the reported prices. Set
forth in the table below are the high and low sales prices of units for the
quarterly periods from January 1, 1998 to September 30, 1998, as reported by
your general partner:
<TABLE>
<CAPTION>
SALES PRICES OF PARTNERSHIP UNITS, AS REPORTED BY THE GENERAL PARTNER
HIGH LOW
---- ---
<S> <C> <C>
Fiscal Year Ended October 31, 1998:
Third Quarter....................................... $ 488.33 $ 380.00
Second Quarter...................................... 490.00 351.00
First Quarter....................................... 500.00 320.00
</TABLE>
Set forth below are the high and low sale prices of units for the
years ended December 31, 1998 and 1999 and the four months ended April 30,
2000, as reported by The Partnership Spectrum, which is an independent,
third-party source. The gross sales prices reported by The Partnership Spectrum
do not necessarily reflect the net sales proceeds received by sellers of units,
which typically are reduced by commissions and other secondary market
transaction costs to amounts less than the reported price. The Partnership
Spectrum represents only one source of secondary sales information, and other
services may contain prices for the units that equal or exceed the sales prices
reported in The Partnership Spectrum. We do not know whether the information
compiled by The Partnership Spectrum is accurate or complete.
<TABLE>
<CAPTION>
SALES PRICES OF PARTNERSHIP UNITS, AS REPORTED BY THE PARTNERSHIP
SPECTRUM
HIGH LOW
---- ---
<S> <C> <C>
Four Months Ended April 30, 2000:............................ $ -- $ --
Fiscal Year Ended December 31, 1999:......................... 521.17 521.17
Fiscal Year Ended October 31, 1998:.......................... 510.00 300.00
</TABLE>
Set forth in the table below are the high and low sales prices of
units for the years ended December 31, 1998 and 1999 and the six months ended
June 30, 2000, as reported by the American Partnership Board, which is an
independent, third-party source. The gross sales prices reported by American
Partnership Board do not necessarily reflect the net sales proceeds received by
sellers of units, which typically are reduced by commissions and other
secondary market transaction costs to amounts less than the reported prices.
The American Partnership Board represents one source of secondary sales
information, and other services may contain prices for units that equal or
exceed the sales prices reported by the American Partnership Board. We do not
know whether the information compiled by the American Partnership Board is
accurate or complete.
<TABLE>
<CAPTION>
SALES PRICES OF PARTNERSHIP UNITS, AS REPORTED BY THE AMERICAN
PARTNERSHIP BOARD
HIGH LOW
---- ---
<S> <C> <C>
Six Months Ended June 30, 2000:.............................. $ -- $ --
Fiscal Year Ended December 31, 1999:......................... 525.00 525.00
Fiscal Year Ended October 31, 1998:.......................... 510.00 381.00
</TABLE>
ESTIMATED LIQUIDATION PROCEEDS
Liquidation value is a measure of the price at which the assets of
your partnership would sell if disposed of by your partnership in an
arms-length transaction to a willing buyer that has access to relevant
information regarding the historical revenues and expenses of the business.
Your general partner, which is our subsidiary, estimated the liquidation value
of units using the same direct capitalization method and assumptions as we did
in valuing the units for the offer price. The liquidation analysis assumes that
your partnership's properties are sold to an independent third-party at the
current property value, that other balance sheet assets (excluding amortizing
assets) and liabilities of your partnership are sold at their book value, and
that the net proceeds of sale are allocated to your partners in accordance with
your partnership's agreement of limited partnership.
23
<PAGE> 27
The liquidation analysis assumes that the assets of your partnership
are sold in a single transaction. Should the assets be liquidated over time,
even at prices equal to those projected, distributions to limited partners from
cash flow from operations might be reduced because your partnership's fixed
costs, such as general and administrative expenses, are not proportionately
reduced with the liquidation of assets. However, for simplification purposes,
the sales of the assets are assumed to occur concurrently. The liquidation
analysis assumes that the assets are disposed of in an orderly manner and are
not sold in forced or distressed in which assets might be sold at substantial
discounts to their actual fair market value.
ROBERT A. STANGER & CO., INC.'S ESTIMATE OF NET ASSET VALUE, GOING
CONCERN AND LIQUIDATION VALUE
In connection with our prior offer to purchase units in your
partnership in November 1999, we retained Robert A. Stanger & Co., Inc.
("Stanger"), an independent investment banking firm, to render an opinion as to
the fairness of the consideration originally offered of $619.04 per unit from a
financial point of view. In rendering its opinion in November 1999, Stanger did
its own estimate of your partnerships' net asset value, going concern value and
liquidation value. Stanger estimated a net asset value of $654.00 per unit, a
going concern value of $575.00 per unit, and a liquidation value of $625.00 per
unit. Going concern value is a measure of the value of your partnership if it
continued operating as an independent stand-alone entity. The going concern
method relies on a number of assumptions, including among other things, (i)
rental rates for new leases and lease renewals; (ii) improvements needed to
prepare an apartment for a new lease or a renewal lease; (iii) lease periods;
(iv) capital expenditures; (v) broker's commissions; and (vi) discount rates
applied to future cash flows. An estimate of your partnership's net asset value
per unit is based on a hypothetical sale of your partnership's property and the
distribution to the limited partners and the general partner of the gross
proceeds of such sales, net of related indebtedness, together with the cash,
proceeds from temporary investments, and all other known assets that are
believed to have a liquidation value, after provision in full for all of the
liabilities of your partnership. The net asset value does not take into account
(i) timing considerations under "The Offer-Section 9. Background and Reasons
for the Offer --Comparison of Consideration to Alternative Consideration --
Estimated Liquidation Proceeds," and (ii) costs associated with winding up of
your partnership. Therefore, we believe that the estimate of net asset value
per unit does not necessarily represent the fair market value of a unit or the
amount the limited partner reasonably could expect to receive if the
partnership's property was sold and the partnership was liquidated. For this
above reason, we consider net asset value estimates to be less meaningful in
determining the offer consideration than the analysis described above under
"The Offer-Section 9. Background and Reasons for the Offer--Valuation of
Units."
For the tender offers commenced in November 1999, Stanger received
total fees for the opinion for your partnership of $17,000 and total fees for
all such partnerships of approximately $1,500,000. In addition, Stanger
received reimbursements for its reasonable legal, travel and out-of -pocket
expenses. In 1997, AIMCO retained Stanger to represent it in negotiations to
acquire interests in a real estate limited partnership. Such transaction was
never consummated and no fee was ever paid to Stanger in connection with such
proposed transaction. Stanger was also engaged and did render certain fairness
opinions in 1998 and 1999 for certain exchange offers we made and received fees
and expenses of $317,000.
ALLOCATION OF CONSIDERATION. We have allocated to the limited partners
the amount of the estimated net valuation of your partnership based on your
partnership's agreement of limited partnership as if your partnership was being
liquidated at the current time.
SECTION 10. POSITION OF THE GENERAL PARTNER OF YOUR PARTNERSHIP WITH RESPECT TO
THE OFFER.
The partnership and the general partner of your partnership have
provided the following information for inclusion in this Offer to Purchase:
The general partner of your partnership believes the offer price and
the structure of the transaction are fair to the limited partners. In making
such determination, the general partner considered all of the factors and
information set forth below, but did not quantify or otherwise attach
particular weight to any such factors or information:
o the offer gives you an opportunity to make an individual
decision on whether to tender your units or to continue to
hold them;
o the offer price and the method used to determine the offer
price;
o the offer price is based on an estimated value of your
partnership's properties that has been determined
24
<PAGE> 28
using a method believed to reflect the valuation of such
assets by buyers in the market for similar assets;
o the November 1999 fairness opinion of and valuations by
Stanger;
o prices at which the units have recently sold, to the extent
such information is available;
o the absence of an established trading market for your units;
o an analysis of possible alternative transactions, including
property sales, or a liquidation of the partnership; and
o an evaluation of the financial condition and results of
operations of your partnership.
The general partner of your partnership is remaining neutral and makes
no recommendation as to whether you should tender or refrain from tendering
your units in the offer. Although the general partner believes our offer is
fair, the general partner also believes that you must make your own decision
whether or not to participate in any offer, based upon a number of factors,
including several factors that may be personal to you, such as your financial
position, your need or desire for liquidity, your preferences regarding the
timing of when you might wish to sell your units, other financial opportunities
available to you, and your tax position and the tax consequences to you of
selling your units.
Neither the general partner of your partnership or its affiliates have
any plans or arrangements to tender any units. Except as otherwise provided in
"The Offer-Section 12. Future Plans of the Purchaser," the general partner does
not have any present plans or proposals which relate to or would result in an
extraordinary transaction, such as a merger, reorganization or liquidation,
involving your partnership; a purchase or sale or transfer of a material amount
of your partnership's assets; or any changes in your partnership's present
capitalization, indebtedness or distribution policies. For information relating
to certain relationships between your partnership and its general partner, on
one hand, and AIMCO and its affiliates, on the other and conflicts of interests
with respect to the tender offer, see "The Offer--Section 9. Background and
Reasons for the Offer" and "The Offer--Section 11. Conflicts of Interests and
Transactions with Affiliates." See also "The Offer--Section 9. Background and
Reasons for the Offer--Comparison to Alternative Consideration--Prior Tender
Offers" and "The Offer--Section 13. Certain Information Concerning Your
Partnership--Beneficial Ownership of Interests in Your Partnership," for
certain information regarding transactions in units of your partnership.
SECTION 11. CONFLICTS OF INTEREST AND TRANSACTIONS WITH AFFILIATES.
CONFLICTS OF INTEREST WITH RESPECT TO THE OFFER. The general partner
of your partnership became a majority-owned subsidiary of AIMCO on October 1,
1998, when AIMCO merged with Insignia. Your general partner became a
wholly-owned subsidiary of AIMCO on February 26, 1999, when IPT merged with
AIMCO. Accordingly, the general partner of your partnership has substantial
conflicts of interest with respect to the offer. The general partner of your
partnership has a fiduciary obligation to you, even as a subsidiary of AIMCO.
As a consequence of our ownership of units, we may have incentives to seek to
maximize the value of our ownership of units, which in turn may result in a
conflict for your general partner in attempting to reconcile our interests with
the interests of the other limited partners. We desire to purchase units at a
low price and you desire to sell units at a high price. Although the general
partner believes our offer is fair, the general partner makes no recommendation
as to whether you should tender or refrain from tendering your units. Such
conflicts of interest in connection with the offer differ from those conflicts
of interest that currently exist for your partnership. LIMITED PARTNERS ARE
URGED TO READ THIS OFFER TO PURCHASE IN ITS ENTIRETY BEFORE DECIDING WHETHER TO
TENDER THEIR UNITS.
CONFLICTS OF INTEREST THAT CURRENTLY EXIST FOR YOUR PARTNERSHIP. We
own both the general partner of your partnership and the property manager of
your partnership's residential properties. The general partner does not receive
an annual management fee but may receive reimbursements for expenses incurred
in its capacity as general partner. The general partner of your partnership
received total fees and reimbursements of $223,000 in 1997, $214,000 in 1998
and $210,000 in 1999. The property manager for the properties received
management fees of $558,000 in 1997, $576,000 in 1998 and $586,000 in 1999. We
have no current intention of changing the fee structure for your general
partner or the manager of your partnership's properties.
25
<PAGE> 29
COMPETITION AMONG PROPERTIES. Because AIMCO and your partnership both
invest in apartment properties, these properties may compete with one another
for tenants. Furthermore, you should bear in mind that AIMCO may acquire
properties in general market areas where your partnership properties are
located. It is believed that this concentration of properties in a general
market area will facilitate overall operations through collective advertising
efforts and other operational efficiencies. In managing AIMCO's properties, we
will attempt to reduce conflicts between competing properties by referring
prospective customers to the property considered to be most conveniently
located for the customer's needs.
FUTURE OFFERS. Although we have no current plans to conduct future
tender offers for your units, our plans may change based on future
circumstances, including tender offers made by third parties. Any such future
offers that we might make could be for consideration that is more or less than
the consideration we are currently offering.
SECTION 12. FUTURE PLANS OF THE PURCHASER.
As described above under "The Offer - Section 9. Background and
Reasons for the Offer," we own the general partner and thereby control the
management of your partnership. In addition, we own the manager of the
residential properties. We currently intend that, upon consummation of the
offer, your partnership will continue its business and operations as they are
currently being conducted. The offer is not expected to have any effect on
partnership operations.
We are in the business of acquiring direct and indirect interests in
apartment properties such as the properties owned by your partnership. As part
of our business we have made and continue to make tender offers for
partnerships which hold real property. Although we have no present intention to
do so, we may acquire additional units or sell units after completion or
termination of the offer. Any acquisition may be made through private
purchases, through one or more future tender or exchange offers, by merger,
consolidation or by any other means deemed advisable. Any acquisition may be at
a price higher or lower than the price to be paid for the units purchased
pursuant to this offer, and may be for cash, limited partnership interests in
AIMCO Properties, L.P. or other consideration. We also may consider selling
some or all of the units we acquire pursuant to the offer to persons not yet
determined, which may include our affiliates. We may also buy your
partnership's properties, although we have no present intention to do so. There
can be no assurance, however, that we will initiate or complete, or will cause
your partnership to initiate or complete, any subsequent transaction during any
specific time period following the expiration of the offer or at all.
Except as set forth herein, we do not have any present plans or
proposals which relate to or would result in an extraordinary transaction, such
as a merger, reorganization or liquidation, involving your partnership; a
purchase or sale or transfer of a material amount of your partnership's assets;
any changes in composition of your partnership's senior management or personnel
or their compensation; any changes in your partnership's present
capitalization, indebtedness or distribution policy; or any other material
changes in your partnership's structure or business. We or our affiliates may
loan funds to your partnership which may be secured by your partnership's
properties. If any such loans are made, upon default of such loans, we or our
affiliates could seek to foreclose on the loan and related mortgage or security
interest. However, we expect that, consistent with your general partner's
fiduciary obligations, the general partner will seek and review opportunities,
including opportunities identified by us, to engage in transactions which could
benefit your partnership, such as sales or refinancings of assets or a
combination of the partnership with one or more other entities, with the
objective of seeking to maximize returns to limited partners.
We have been advised that the possible future transactions the general
partner expects to consider on behalf of your partnership include: (i) payment
of extraordinary distributions; (ii) refinancing, reducing or increasing
existing indebtedness of the partnership; (iii) sales of assets, individually
or as part of a complete liquidation; and (iv) mergers or other consolidation
transactions involving the partnership. Any such merger or consolidation
transaction could involve other limited partnerships in which your general
partner or its affiliates serve as general partners, or a combination of the
partnership with one or more existing, publicly traded entities (including,
possibly, affiliates of AIMCO), in any of which limited partners might receive
cash, common stock or other securities or consideration. There is no assurance,
however, as to when or whether any of the transactions referred to above might
occur. If any such transaction is effected by the partnership and financial
benefits accrue to the limited partners of your partnership, we will
participate in those benefits to the extent of our ownership of units. The
agreement of limited partnership prohibits limited partners from voting on
actions taken by the partnership, unless otherwise specifically permitted
therein. Since we currently own a majority of the outstanding units, we can
control any vote of the limited partners. Our primary objective in seeking to
acquire the units pursuant to the offer is not, however, to influence the vote
on any particular transaction, but rather to generate a profit on the
investment represented by those units.
26
<PAGE> 30
SECTION 13. CERTAIN INFORMATION CONCERNING YOUR PARTNERSHIP.
GENERAL. Shelter Properties IV Limited Partnership was organized on
August 21, 1981 under the laws of the State of South Carolina. Its primary
business is real estate ownership and related operations. Your partnership was
formed for the purpose of making investments in various types of real
properties which offer potential capital appreciation and cash distributions to
its limited partners.
Your partnership's investment portfolio currently consists of the
following three residential apartment complexes:
The managing general partner of your partnership is Shelter Realty IV,
Corporation, which is a wholly-owned subsidiary of AIMCO. A wholly-owned
subsidiary of AIMCO serves as manager of the residential properties owned by
your partnership. As of June 30, 2000, there were 49,995 units issued and
outstanding, which were held of record by 4,640 limited partners. Your
partnership's principal executive offices are located at Colorado Center, Tower
Two, 2000 South Colorado Boulevard, Suite 2- 1000, Denver, Colorado 80222, and
its telephone number at that address is (303) 757-8101.
For additional information about your partnership, please refer to the
annual report prepared by your partnership which was sent to you prior to this
offer to purchase, particularly Item 2 of Form 10-KSB which contains detailed
information regarding the properties owned, including mortgages, rental rates
and taxes.
INVESTMENT OBJECTIVES AND POLICIES; SALE OR FINANCING OF INVESTMENTS.
In general, your general partner (which is our subsidiary) regularly evaluates
the partnership's properties by considering various factors, such as the
partnership's financial position and real estate and capital markets
conditions. The general partner monitors the properties' specific locale and
sub-market conditions (including stability of the surrounding neighborhood),
evaluating current trends, competition, new construction and economic changes.
The general partner oversees each asset's operating performance and
continuously evaluates the physical improvement requirements. In addition, the
financing structure for each property (including any prepayment penalties), tax
implications, availability of attractive mortgage financing to a purchaser, and
the investment climate are all considered. Any of these factors, and possibly
others, could potentially contribute to any decision by the general partner to
sell, refinance, upgrade with capital improvements or hold a particular
partnership property. If rental market conditions improve, the level of
distributions might increase over time. It is possible that the private resale
market for residential properties could improve over time, making a sale of the
partnership's properties in a private transaction at some point in the future a
more viable option than it is currently. After taking into account the
foregoing considerations, your general partner is not currently seeking a sale
of your partnership's residential properties primarily because it expects the
properties' operating performance to improve in the near term. In making this
assessment, your general partner noted the occupancy and rental rates at the
properties. In particular, the general partner noted that it has spent and
expects to spend approximately $2,484,000 for capital improvements at the
residential properties to repair and update the properties. Although there can
be no assurance as to future performance, these expenditures are expected to
improve the desirability of the property to tenants. The general partner does
not believe that a sale of the residential properties at the present time would
adequately reflect the properties' future prospects. Another significant factor
considered by your general partner is the likely tax consequences of a sale of
the properties for cash. Such a transaction would likely result in tax
liabilities for many limited partners. The general partner has not received any
recent indication of interest or offer to purchase the properties.
ORIGINALLY ANTICIPATED TERM OF YOUR PARTNERSHIP. Your partnership's
prospectus, dated June 8, 1982, pursuant to which units in your partnership
were sold, indicated that your partnership was intended to be self-liquidating
and that it was anticipated that the partnership's properties would be sold
within three to eight years of their acquisition, provided market conditions
permit. The prospectus also indicated that there could be no assurance that the
partnership would be able to so liquidate and that, unless sooner terminated as
provided in the partnership agreement, the existence of the partnership would
continue until the year 2022. The partnership currently owns three apartment
properties. Your general partner (which is our subsidiary) continually
considers whether a property should be sold or otherwise disposed of after
consideration of relevant factors, including prevailing economic conditions,
availability of favorable financing and tax considerations, with a view to
achieving maximum capital appreciation for your partnership.
27
<PAGE> 31
CAPITAL REPLACEMENTS. Your partnership has an ongoing program of
capital improvements, replacements and renovations, including roof
replacements, kitchen and bath renovations, balcony repairs (where applicable),
replacement of various building systems and other replacements and renovations
in the ordinary course of business. The general partner estimates that
$2,484,000 has been and is expected to be spent on capital improvements. Such
capital improvements are intended to be paid from operating cash flows, cash
reserves, or from short-term or long-term borrowings.
COMPETITION. There are other residential properties within the market
area of your partnership's properties. The number and quality of competitive
properties in such an area could have a material effect on the rental market
for the apartments at your partnership's properties and the rents that may be
charged for such apartments. While AIMCO is a significant factor in the United
States in the apartment industry, competition for apartments is local.
According to data published by the National Multi-Housing Council, as of
January 1, 1999, our then portfolio of 373,409 owned or managed apartment units
represents approximately 2.2% of the national stock of rental apartments in
structures with at least five apartments.
FINANCIAL DATA. The selected financial information of your partnership
set forth below for the years ended December 31, 1999 and 1998 is based on
audited financial statements. The selected financial information set forth
below for the three months ended March 31, 2000 and 1999 is based on unaudited
financial statements. This information should be read in conjunction with such
financial statements, including notes thereto, and "Management's Discussion and
Analysis of Financial Condition and Results of Operations of Your Partnership"
in the Annual Report on Form 10-KSB of your partnership for the year ended
December 31, 1999, and the Quarterly Report on Form 10-QSB for the quarter
ended March 31, 2000.
SHELTER PROPERTIES IV LIMITED PARTNERSHIP
(IN THOUSANDS, EXCEPT PER UNIT DATA)
<TABLE>
<CAPTION>
FOR THE THREE FOR THE YEAR
MONTHS ENDED ENDED
MARCH 31, DECEMBER 31,
------------------------ ------------------------
2000 1999 1999 1998
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
OPERATING DATA:
Total Revenues .......................... $ 2,992 $ 2,890 $ 11,667 $ 11,566
Net Income (Loss) ....................... 411 445 1,868 1,531
Net Income (Loss) per limited
partnership unit .................. $ 8.14 $ 8.82 $ 36.98 $ 30.32
Distributions per limited
partnership unit .................. -- -- $ 47.52 $ 16.08
</TABLE>
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
------------------------- -------------------------
2000 1999 1999 1998
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and Cash Equivalents ............... $ 2,791 $ 1,518 $ 3,614 $ 3,181
Real Estate, Net of Accumulated
Depreciation ........................ 25,851 26,526 26,329 26,689
Total Assets ............................ 31,042 30,832 32,538 33,336
Notes Payable ........................... 22,578 23,340 22,860 23,493
General Partners' Capital (Deficit) ..... (10) (18) (5) --
Limited Partners' Capital (Deficit) ..... 7,524 6,675 7,971 8,498
Partners' Capital (Deficit) ............. 7,514 6,657 7,966 8,498
Total Distributions ..................... -- (2,400) (2,400) (812)
Net Increase (Decrease) in Cash
and Cash Equivalents ............... (839) 547 433 1,334
Net Cash Provided by Operating
Activities ......................... 1,031 858 4,082 3,889
</TABLE>
----------
(1) On January 3, 2000, your partnership elected to change its fiscal year
end from November 30 to December 31, effective for the period ending
December 31, 1999.
28
<PAGE> 32
DESCRIPTION OF PROPERTIES. The following shows the location, the date
of purchase, the nature of your partnership's ownership interest in and the use
of each of your partnership's properties.
<TABLE>
<CAPTION>
DATE OF
PROPERTY PURCHASE TYPE OF OWNERSHIP USE
-------- -------- ----------------- ---
<S> <C> <C> <C>
Baymeadows Apartments............................ 9/30/82 Fee ownership subject to Apartment
Jacksonville, Florida first and second mortgages. 904 units
Quail Run Apartments............................. 1/03/83 Fee ownership subject Apartment
Columbia, South Carolina to first and second 332 units
mortgages.(1)
Countrywood Village Apartments................... 3/31/83 Fee ownership subject Apartment
Raleigh, North Carolina to first and second 384 units
mortgages.
</TABLE>
(1) Property is held by a limited partnership which the partnership owns a
99.99% interest in.
ACCUMULATED DEPRECIATION SCHEDULE. The following shows the gross
carrying value, accumulated depreciation and federal tax basis of each of your
partnership's properties as of [December] 31, 1999.
<TABLE>
<CAPTION>
GROSS
CARRYING ACCUMULATED FEDERAL
PROPERTY VALUE DEPRECIATION RATE METHOD TAX BASIS
-------- -------- ------------ ---- ------ ---------
(IN THOUSANDS) (IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Baymeadows Apartments $34,988 $20,162 5-36 yrs S/L $ 4,929
Quail Run Apartments 13,830 7,323 5-34 yrs S/L 1,878
Countrywood Village 13,838 8,842 5-30 yrs S/L 1,682
------- ------- -------
Apartments
Total $62,656 $36,327 $ 8,484
======= ======= =======
</TABLE>
SCHEDULE OF MORTGAGES. The following shows certain information
regarding the outstanding mortgages encumbering each of your partnership's
properties as of December 31, 1999.
<TABLE>
<CAPTION>
PRINCIPAL
PRINCIPAL STATED BALANCE
BALANCE AT INTEREST PERIOD MATURITY DUE AT
PROPERTY OCTOBER 31, 1999 RATE AMORTIZED DATE MATURITY
-------- ---------------- -------- --------- -------- ---------
(IN THOUSANDS) (IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Baymeadows
1st Mortgage .............. $ 13,731 7.60% (1) 11/15/02 $ 11,554
2nd Mortgage .............. 493 7.60% (1) 11/15/02 493
Quail Run
1st Mortgage .............. 5,343 7.60% (1) 11/15/02 4,660
2nd Mortgage .............. 199 7.60% (1) 11/15/02 199
Countrywood Village
1st Mortgage .............. 4,139 7.60% (1) 11/15/02 3,610
2nd Mortgage .............. 154 7.60% (1) 11/15/02 154
--------- ---------
Less unamortized discounts ..... (715) --
========= =========
$ 22,860 $ 20,671
</TABLE>
----------
(1) The principal balance is being amortized over 257 months with a
balloon payment due November 15, 2002.
29
<PAGE> 33
AVERAGE RENTAL RATES AND OCCUPANCY. The following shows the average rental
rates and occupancy percentages for each of your partnership's properties
during the periods indicated.
<TABLE>
<CAPTION>
AVERAGE RENTAL RATES AVERAGE OCCUPANCY
----------------------- -----------------------
PROPERTY 1999 1998 1999* 1998
-------- ---- ---- ---- ----
<S> <C> <C> <C> <C>
Baymeadows Apartment $8,106/unit $7,810/unit 94% 94%
Quail Run Apartments 8,490/unit 8,088/unit 88% 91%
Countrywood Apartments 7,677/unit 7,450/unit 91% 94%
</TABLE>
SCHEDULE OF REAL ESTATE TAXES AND RATES. The following shows the real
estate taxes and rates for 1999 for each of your partnership's properties.
<TABLE>
<CAPTION>
PROPERTY 1999 BILLING 1999 RATE
-------- ------------ ---------
(IN THOUSANDS)
<S> <C> <C>
Baymeadows Apartments $491* 2.07%
Quail Run Apartments 186* 1.75%
Countrywood Apartments 117* 1.33%
</TABLE>
* These properties have a fiscal year end different than the real estate tax
year, therefore, tax expense as stated in the partnership's statement of
operations does not agree to the 1999 billing.
BUDGETS. A summary of the operating budgets per property and for your
partnership for the year ending December 31, 2000, is as follows:
FISCAL 2000 OPERATING BUDGETS
SHELTER PROPERTIES IV LIMITED PARTNERSHIP
(IN THOUSANDS)
<TABLE>
<CAPTION>
BAYMEADOWS COUNTRYWOOD QUAIL RUN
APARTMENTS APARTMENTS APARTMENTS TOTAL
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Total Revenues $ 6,596,463 $ 2,780,057 $ 2,522,569 $ 11,899,089
Operating Expenses (3,603,457) (1,018,745) (1,202,227) (5,824,429)
Replacement Reserves - Net -- -- -- --
Debt Service (1,019,685) (277,949) (430,043) (1,727,677)
Capital Expenditures (2,945,800) -- -- (2,945,800)
------------ ------------ ------------ ------------
Net Cash Flow ($ 972,479) $ 1,483,363 $ 890,299 $ 1,401,185
============ ============ ============ ============
</TABLE>
The above budgets, at the time they were made, were forward-looking
information developed by the general partner of your partnership. Therefore,
the budgets were dependent upon future events with respect to the ability of
your partnership to meet such budgets. The budgets incorporated various
assumptions including, but not limited to, revenue (including occupancy rates),
various operating expenses, general and administrative expenses, depreciation
expenses, capital expenditures, and working capital levels. While the general
partner deemed such budgets to be reasonable and valid at the date made, there
is no assurance that the assumed facts will be validated or that the budgeted
results will actually occur. Any estimate of the future performance of a
business, such as your partnership's business, is forward-looking and based on
assumptions some of which inevitably will prove to be incorrect.
30
<PAGE> 34
The budgeted amounts provided above are figures that were not computed in
accordance with GAAP. In particular, items that are categorized as capital
expenditures for purposes of preparing the operating budgets are often
re-categorized as expenses when the financial statements are audited and
presented in accordance with GAAP. Therefore, the summary operating budgets
presented for fiscal 2000 should not necessarily be considered as indicative of
what the audited operating results for fiscal 2000 will be.
PROPERTY MANAGEMENT. Your partnership's properties are managed by an
entity which is a wholly- owned subsidiary of AIMCO. Pursuant to the management
agreement between the property manager and your partnership, the property
manager operates your partnership's properties, establishes rental policies and
rates and directs marketing activities. The property manager also is
responsible for maintenance, the purchase of equipment and supplies, and the
selection and engagement of all vendors, suppliers and independent contractors.
DISTRIBUTIONS. The following table shows, for each of the years
indicated, the distributions paid per unit for such years.
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31 AMOUNT
--------------------- ------
<S> <C>
1995........................... $19.80
1996........................... 19.80
1997........................... 15.84
1998........................... 16.08
1999 .......................... 0.00
2000 (through June 30)......... 59.40
-------
Total..................... $130.92
=======
</TABLE>
BENEFICIAL OWNERSHIP OF INTERESTS IN YOUR PARTNERSHIP. Together with our
subsidiaries, we currently own, in the aggregate, approximately 57.82% your
partnership's limited partnership units. Except as set forth herein, neither
we, nor, to the best of our knowledge, any of our affiliates, (i) beneficially
own or have a right to acquire any units, (ii) has effected any transactions in
the units in the past 60 days, or (iii) have any contract, arrangement,
understanding or relationship with any other person with respect to any
securities of your partnership, including, but not limited to, contracts,
arrangements, understandings or relationships concerning transfer or voting
thereof, joint ventures, loan or option arrangements, puts or calls, guarantees
of loans, guarantees against loss, or the giving or withholding of proxies.
COMPENSATION PAID TO THE GENERAL PARTNER AND ITS AFFILIATES. The following
table shows, for each of the years indicated, compensation paid to your general
partner and its affiliates on a historical basis.
<TABLE>
<CAPTION>
PARTNERSHIP PROPERTY
FEE AND MANAGEMENT
YEAR EXPENSES FEES TOTAL
---- ---------- ---------- --------
<S> <C> <C> <C>
1995.................................. $173,135 $513,750 $686,885
1996.................................. 196,000 540,000 736,000
1997.................................. 223,000 558,000 781,000
1998.................................. 214,000 576,000 790,000
1999.................................. 210,000 586,000 796,000
2000*................................. 200,000 608,000 808,000
</TABLE>
----------
* Actual fees and expenses paid through March 31, 2000 have been annualized by
multiplying such amount by four. The actual fees and expenses for 2000 could be
higher or lower.
LEGAL PROCEEDINGS. Your partnership may be a party to a variety of legal
proceedings related to its ownership of the partnership's properties, arising
in the ordinary course of the business, which are not expected to have a
material adverse effect on your partnership.
In March 1998, several putative unit holders of limited partnership
units of your partnership commenced an action entitled Rosalie Nuanes, et al.
v. Insignia Financial Group, Inc., et al. in the Superior Court of the State of
31
<PAGE> 35
California for the County of San Mateo. The plaintiffs named as defendants,
among others, your partnership, its general partner and several of their
affiliated partnerships and corporate entities. The action purports to assert
claims on behalf of a class of limited partners and derivatively on behalf of a
number of limited partnerships (including your partnership) which are named as
nominal defendants, challenging the acquisition of interests in certain general
partner entities by Insignia Financial Group, Inc. and entities which were, at
one time, affiliates of Insignia; past tender offers by the Insignia affiliates
to acquire limited partnership units; the management of partnerships by the
Insignia affiliates; and the Insignia Merger. The plaintiffs seek monetary
damages and equitable relief, including judicial dissolution of your
partnership. On June 25, 1998, the general partner filed a motion seeking
dismissal of the action. In lieu of responding to the motion, the plaintiffs
have filed an amended complaint The general partner filed demurrers to the
amended complaint which were heard February 1999.
Pending the ruling on such demurrers, settlement negotiations commenced.
On November 2, 1999, the parties executed and filed a Stipulation of
Settlement, settling claims, subject to final court approval, on behalf of your
partnership and all limited partners who owned units as of November 3, 1999.
Preliminary approval of the settlement was obtained on November 3, 1999 from
the Court, at which time the Court set a final approval hearing for December
10, 1999. Prior to the December 10, 1999 hearing, the Court received various
objections to the settlement, including a challenge to the Court's preliminary
approval based upon the alleged lack of authority of lead counsel at the time
to enter the settlement. On December 14, 1999, the general partner and its
affiliates terminated the proposed settlement. In February 2000, counsel for
some of the named plaintiffs filed a motion to disqualify lead and liaison
counsel who negotiated the settlement. On June 27, 2000, the Court entered an
order disqualifying them from the case. The Court will entertain applications
for lead counsel which must be filed by August 4, 2000. The Court has scheduled
a hearing on August 21, 2000 to address the issue of appointing lead counsel.
The general partner does not anticipate that costs associated with this case
will be material to your partnership's overall operations.
ADDITIONAL INFORMATION CONCERNING YOUR PARTNERSHIP. Your partnership files
annual, quarterly and special reports, proxy statements and other information
with the SEC. You may read and copy any document your partnership files at the
SEC's public reference rooms in Washington, D.C., New York, New York, and
Chicago, Illinois. Please call the SEC at 1-800-SEC-0330 for further
information on the public reference rooms. Your partnership's SEC filings are
also available to the public at the SEC's web site at http://www.sec.gov.
SECTION 14. VOTING POWER.
Decisions with respect to the day-to-day management of your partnership
are the responsibility of the general partner. Because the general partner of
your partnership is our affiliate, we control the management of your
partnership. Under your partnership's agreement of limited partnership, limited
partners holding a majority of the outstanding units must approve certain
extraordinary transactions, including the removal of the general partner, the
addition of a new general partner, most amendments to the partnership agreement
and the sale of all or substantially all of your partnership's assets. We
already own a majority of the outstanding units and have the ability to control
any vote of the limited partners.
SECTION 15. SOURCE OF FUNDS.
We expect that approximately $11,938,983.60 will be required to purchase
all of the limited partnership units that we are seeking in this offer
(exclusive of fees and expenses estimated to be $15,000). For more information
regarding fees and expenses, see "The Offer - Section 19. Fees and Expenses."
In addition to this offer, we are concurrently making offers to acquire
interests in approximately twelve other limited partnerships. If all such
offers were fully subscribed for cash, we would be required to pay
approximately $94,000,000 million for all such units. If for some reason we did
not have such funds available we might extend this offer for a period of time
sufficient for us to obtain additional funds, or we might terminate this offer.
However, based on our past experience with similar offers, we do not expect all
such offers to be fully subscribed. As a result, we expect that the funds that
will be necessary to consummate all the offers will be substantially less than
approximately $94,000,000 million. We believe that we have sufficient cash on
hand and available sources of financing to pay such amounts. As of March, 31,
we had $22 million of cash on hand and $90 million available for borrowing
under our existing lines of credit. We intend to repay any amounts borrowed to
finance the offer out of future working capital.
32
<PAGE> 36
Under our secured $350 million revolving credit facility with Bank of
America, BankBoston, N.A. and First Union National Bank, AIMCO Properties, L.P.
is the borrower and all obligations thereunder are guaranteed by AIMCO and
certain of its subsidiaries. The credit facility includes a swing line of up to
$30 million. The obligations under the credit facility are secured by AIMCO
Properties, L.P.'s pledge of its stock ownership in certain subsidiaries of
AIMCO as well as a pledge of its interests in notes issued by it to certain
subsidiaries of AIMCO. The annual interest rate under the credit facility is
based on either LIBOR or a base rate which is the higher of Bank of America's
reference rate or 0.5% over the federal funds rate, plus, in either case, an
applicable margin. The margin ranges between 2.05% and 2.55% in the case of
LIBOR-based loans and between 0.55% and 1.05% in the case of base rate loans,
based upon a fixed charge coverage ratio. The credit facility expires on July
31, 2001 unless extended at the discretion of AIMCO Properties, L.P., at which
time the revolving facility would be converted into a term loan for up to two
successive one-year periods. The financial covenants contained in the credit
facility require us to maintain a ratio of debt to gross asset value of no more
than 0.55 to 1.0, and an interest coverage ratio of 2.25 to 1.0, and a fixed
charge coverage ratio of at least 1.75 to 1.0. In addition, the credit facility
limits us from distributing more than 80% of our Funds From Operations (as
defined) (or such amounts as may be necessary for us to maintain our status as
a REIT), imposes minimum net worth requirements and provides other financial
covenants related to certain of our assets and obligations.
SECTION 16. DISSENTERS' RIGHTS.
Neither the agreement of limited partnership of your partnership nor
applicable law provides any right for you to have your units appraised or
redeemed in connection with, or as a result of, our offer. You have the
opportunity to make an individual decision on whether or not to tender your
units in the offer.
SECTION 17. CONDITIONS OF THE OFFER.
Notwithstanding any other provisions of our offer, we will not be required
to accept for payment and pay for any units tendered pursuant to our offer, may
postpone the purchase of, and payment for, units tendered, and may terminate or
amend our offer if at any time on or after the date of this offer to purchase
and at or before the expiration of our offer (including any extension thereof),
any of the following shall occur or may be reasonably expected to occur:
o any change (or any condition, event or development involving a
prospective change) shall have occurred or been threatened in the
business, properties, assets, liabilities, indebtedness,
capitalization, condition (financial or otherwise), operations,
licenses or franchises, management contract, or results of operations
or prospects of your partnership or local markets in which your
partnership owns property, including any fire, flood, natural
disaster, casualty loss, or act of God that, in our reasonable
judgment, are or may be materially adverse to your partnership or the
value of the units to us, or we shall have become aware of any facts
relating to your partnership, its indebtedness or its operations
which, in our reasonable judgment, has or may have material
significance with respect to the value of your partnership or the
value of the units to us; or
o there shall have occurred (i) any general suspension of trading in,
or limitation on prices for, securities on any national securities
exchange or the over-the-counter market in the United States, (ii) a
decline in the closing price of a share of AIMCO's Class A Common
Stock of more than 7.5% from the date hereof, (iii) any extraordinary
or material adverse change in the financial, real estate or money
markets or major equity security indices in the United States such
that there shall have occurred at least a 25 basis point increase in
LIBOR, the price of the 10-year Treasury Bond or the 30-year Treasury
Bond, or at least a 7.5% decrease in the S&P 500 Index or the Morgan
Stanley REIT Index, in each case, from the date hereof, (iii) any
material adverse change in the commercial mortgage financing markets,
(iv) a declaration of a banking moratorium or any suspension of
payments in respect of banks in the United States (not existing on
the date hereof), (vi) a commencement of a war, conflict, armed
hostilities or other national or international calamity directly or
indirectly involving the United States (not existing on the date
hereof), (vii) any limitation (whether or not mandatory) by any
governmental authority on, or any other event which, in our
reasonable judgment, might affect the extension of credit by banks or
other lending institutions, or (viii) in the case of any of the
foregoing existing at the time of the commencement of the offer, in
our reasonable judgment, a material acceleration or worsening
thereof; or
o there shall have been threatened, instituted or pending any action,
proceeding, application or counterclaim by any Federal, state, local
or foreign government, governmental authority or governmental agency,
or by any other person, before any governmental authority, court or
regulatory or administrative agency, authority or tribunal, which (i)
challenges or seeks to challenge our purchase of the units,
restrains, prohibits or delays the making or
33
<PAGE> 37
consummation of our offer, prohibits the performance of any of the
contracts or other arrangements entered into by us (or any affiliates
of ours), seeks to obtain any material amount of damages as a result of
the transactions contemplated by our offer, (ii) seeks to make the
purchase of, or payment for, some or all of the units pursuant to our
offer illegal or results in a delay in our ability to accept for
payment or pay for some or all of the units, (iii) seeks to prohibit or
limit the ownership or operation by us or any of our affiliates of the
entity serving as general partner of your partnership or to remove such
entity as general partner of your partnership, or seeks to impose any
material limitation on our ability or the ability of any affiliate of
ours to conduct your partnership's business or own such assets, (iv)
seeks to impose material limitations on our ability to acquire or hold
or to exercise full rights of ownership of the units including, but not
limited to, the right to vote the units purchased by us on all matters
properly presented to the limited partners, or (v) might result, in our
reasonable judgment, in a diminution in the value of your partnership
or a limitation of the benefits expected to be derived by us as a
result of the transactions contemplated by our offer or the value of
the units to us; or
o there shall be any action taken, or any statute, rule, regulation,
order or injunction shall be sought, proposed, enacted, promulgated,
entered, enforced or deemed applicable to our offer, your partnership,
any general partner of your partnership, us or any affiliate of ours
or your partnership, or any other action shall have been taken,
proposed or threatened, by any government, governmental authority or
court, that, in our reasonable judgment, might, directly or
indirectly, result in any of the consequences referred to in clauses
(i) through (v) of the immediately preceding paragraph; or
o your partnership shall have (i) changed, or authorized a change of,
the units or your partnership's capitalization, (ii) issued,
distributed, sold or pledged, or authorized, proposed or announced the
issuance, distribution, sale or pledge of (A) any equity interests
(including, without limitation, units), or securities convertible into
any such equity interests or any rights, warrants or options to acquire
any such equity interests or convertible securities, or (B) any other
securities in respect of, in lieu of, or in substitution for units
outstanding on the date hereof, (iii) purchased or otherwise acquired,
or proposed or offered to purchase or otherwise acquire, any
outstanding units or other securities, (iv) declared or paid any
dividend or distribution on any units or issued, authorized,
recommended or proposed the issuance of any other distribution in
respect of the units, whether payable in cash, securities or other
property, (v) authorized, recommended, proposed or announced an
agreement, or intention to enter into an agreement, with respect to any
merger, consolidation, liquidation or business combination, any
acquisition or disposition of a material amount of assets or
securities, or any release or relinquishment of any material contract
rights, or any comparable event, not in the ordinary course of
business, (vi) taken any action to implement such a transaction
previously authorized, recommended, proposed or publicly announced,
(vii) issued, or announced its intention to issue, any debt securities,
or securities convertible into, or rights, warrants or options to
acquire, any debt securities, or incurred, or announced its intention
to incur, any debt other than in the ordinary course of business and
consistent with past practice, (viii) authorized, recommended or
proposed, or entered into, any transaction which, in our reasonable
judgment, has or could have an adverse affect on the value of your
partnership or the units, (ix) proposed, adopted or authorized any
amendment of its organizational documents, (x) agreed in writing or
otherwise to take any of the foregoing actions or (xi) been notified
that any debt of your partnership or any of its subsidiaries secured by
any of its or their assets is in default or has been accelerated; or
o a tender or exchange offer for any units shall have been commenced or
publicly proposed to be made by another person or "group" (as defined
in Section 13(d)(3) of the Exchange Act), or it shall have been
publicly disclosed or we shall have otherwise learned that (i) any
person or group shall have acquired or proposed or be attempting to
acquire beneficial ownership of more than five percent of the units, or
shall have been granted any option, warrant or right, conditional or
otherwise, to acquire beneficial ownership of more than five percent of
the units, other than acquisitions for bona fide arbitrage purposes, or
(ii) any person or group shall have entered into a definitive agreement
or an agreement in principle or made a proposal with respect to a
merger, consolidation or other business combination with or involving
your partnership; or
o the offer to purchase may have an adverse effect on AIMCO's status as
a REIT; or
o we shall not have adequate cash or financing commitments available to
pay the for the units validly tendered.
34
<PAGE> 38
The foregoing conditions are for our sole benefit and may be asserted
by us regardless of the circumstances giving rise to such conditions or may be
waived by us in whole or in part at any time and from time to time in our
reasonable discretion. The failure by us at any time to exercise any of the
foregoing rights shall not be deemed a waiver of any such right, the waiver of
any such right with respect to any particular facts or circumstances shall not
be deemed a waiver with respect to any other facts or circumstances and each
right shall be deemed a continuing right which may be asserted at any time and
from time to time.
SECTION 18. CERTAIN LEGAL MATTERS.
GENERAL. Except as set forth in this Section 18, we are not, based on
information provided by your general partner (which is our subsidiary), aware
of any licenses or regulatory permits that would be material to the business of
your partnership, taken as a whole, and that might be adversely affected by our
acquisition of units as contemplated herein, or any filings, approvals or other
actions by or with any domestic or foreign governmental authority or
administrative or regulatory agency that would be required prior to the
acquisition of units by us pursuant to the offer, other than the filing of a
Tender Offer Statement on Schedule TO with the SEC (which has already been
filed) and any required amendments thereto. While there is no present intent to
delay the purchase of units tendered pursuant to the offer pending receipt of
any such additional approval or the taking of any such action, there can be no
assurance that any such additional approval or action, if needed, would be
obtained without substantial conditions or that adverse consequences might not
result to your partnership or its business, or that certain parts of its
business might not have to be disposed of or other substantial conditions
complied with in order to obtain such approval or action, any of which could
cause us to elect to terminate the offer without purchasing units thereunder.
Our obligation to purchase and pay for units is subject to certain conditions,
including conditions related to the legal matters discussed in this Section 18.
ANTITRUST. We do not believe that the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended, is applicable to the acquisition of units
contemplated by our offer.
MARGIN REQUIREMENTS. The units are not "margin securities" under the
regulations of the Board of Governors of the Federal Reserve System and,
accordingly, those regulations generally are not applicable to our offer.
STATE LAWS. We are not aware of any jurisdiction in which the making
of our offer is not in compliance with applicable law. If we become aware of
any jurisdiction in which the making of the offer would not be in compliance
with applicable law, we will make a good faith effort to comply with any such
law. If, after such good faith effort, we cannot comply with any such law, the
offer will not be made to (nor will tenders be accepted from or on behalf of)
unitholders residing in such jurisdiction. In those jurisdictions with
securities or blue sky laws that require the offer to be made by a licensed
broker or dealer, the offer shall be made on behalf of us, if at all, only by
one or more registered brokers or dealers licensed under the laws of that
jurisdiction.
SECTION 19. FEES AND EXPENSES.
Except as set forth herein, we will not pay any fees or commissions to
any broker, dealer or other person for soliciting tenders of units pursuant to
the offer. We have retained River Oaks Partnership Services, Inc. to act as
Information Agent in connection with our offer. The Information Agent may
contact holders of units by mail, e-mail, telephone, telex, telegraph and
personal interview and may request brokers, dealers and other nominee limited
partners to forward materials relating to the offer to beneficial owners of the
units. We will pay the Information Agent reasonable and customary compensation
for its services in connection with the offer, plus reimbursement for
out-of-pocket expenses, and will indemnify it against certain liabilities and
expenses in connection therewith, including liabilities under the Federal
securities laws. We will also pay all costs and expenses of printing and
mailing the offer and any related legal fees and expenses.
----------
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION ON BEHALF OF US NOT CONTAINED HEREIN OR IN THE LETTER OF
TRANSMITTAL AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT
BE RELIED UPON AS HAVING BEEN AUTHORIZED.
We have filed with the SEC a Tender Offer Statement on Schedule TO,
pursuant to Section 14(d)(1) and Rule 14d-3 under the Exchange Act, furnishing
certain additional information with respect to our offer, and may file
35
<PAGE> 39
amendments thereto. Your partnership has filed with the SEC a
Solicitation/Recommendation Statement on Schedule 14D-9 pursuant to Section
14(d)(4) and Rule 14d-9 under the Exchange Act, furnishing certain additional
information about your partnership's and the general partner's position
concerning our offer, and your partnership may file amendments thereto. The
Schedules TO and 14D-9 and any amendments to either Schedule, including
exhibits, may be inspected and copies may be obtained at the same place and in
the same manner as described in "The Offer--Section 13. Certain Information
Concerning Your Partnership--Additional Information Concerning Your
Partnership."
AIMCO PROPERTIES, L.P.
36
<PAGE> 40
ANNEX I
OFFICERS AND DIRECTORS
The names and positions of the executive officers of Apartment
Investment and Management Company ("AIMCO"), and AIMCO-GP, Inc. ("AIMCO-GP")
and the directors of AIMCO are set forth below. The two directors of AIMCO-GP
are Terry Considine and Peter Kompaniez. The two directors of the general
partner of your partnership are Peter K. Kompaniez and Patrick J. Foye. The
sole executive officer of the general partner of your partnership is Patrick J.
Foye, Executive Vice President. Unless otherwise indicated, the business
address of each executive officer and director is Colorado Center, Tower Two,
2000 South Colorado Boulevard, Suite 2-1000, Denver, Colorado 80222. Each
executive officer and director is a citizen of the United States of America.
<TABLE>
<CAPTION>
NAME POSITION
---- --------
<S> <C>
Terry Considine.............................. Chairman of the Board of Directors and Chief Executive Officer
Peter K. Kompaniez........................... Vice Chairman, President and Director
Thomas W. Toomey............................. Chief Operating Officer
Harry G. Alcock.............................. Executive Vice President and Chief Investment Officer
Joel F. Bonder............................... Executive Vice President, General Counsel and Secretary
Patrick J. Foye.............................. Executive Vice President
Lance J. Graber.............................. Executive Vice President--Acquisitions
Steven D. Ira................................ Co-Founder and Executive Vice President
Paul J. McAuliffe............................ Executive Vice President and Chief Financial Officer
James N. Bailey.............................. Director
Richard S. Ellwood........................... Director
J. Landis Martin............................. Director
Thomas L. Rhodes............................. Director
</TABLE>
<TABLE>
<CAPTION>
NAME PRINCIPAL OCCUPATIONS FOR THE LAST FIVE YEARS
---- ---------------------------------------------
<S> <C>
Terry Considine.............................. Mr. Considine has been Chairman of the Board of Directors and Chief
Executive Officer of AIMCO since July 1994. Mr. Considine serves as
Chairman and director of Asset Investors Corporation ("Asset Investors")
and Commercial Assets, Inc. ("Commercial Assets"), two other public real
estate investment trusts. Mr. Considine has been and remains involved as
a principal in a variety of other business activities.
Peter K. Kompaniez........................... Mr. Kompaniez has been Vice Chairman of the Board of Directors of
AIMCO since July 1994 and was appointed President in July 1997. Mr.
Kompaniez has also served as Chief Operating Officer of NHP
Incorporated ("NHP"), which was acquired by AIMCO in December
1997. From 1986 to 1993, he served as President and Chief Executive
Officer of Heron Financial Corporation ("HFC"), a United States holding
company for Heron International, N.V.'s real estate and related assets.
While at HFC, Mr. Kompaniez administered the acquisition, development
and disposition of approximately 8,150 apartment units (including 6,217
units that have been acquired by AIMCO) and 3.1 million square feet of
commercial real estate.
</TABLE>
I-1
<PAGE> 41
<TABLE>
<S> <C>
Thomas W. Toomey................................ Mr. Toomey served as Senior Vice President -- Finance and
Administration of AIMCO from January 1996 to March 1997, when he
was promoted to Executive Vice President -- Finance and Administration.
Mr. Toomey served as Executive Vice President -- Finance and
Administration until December 1999, when he was appointed Chief
Operating Officer. From 1990 until 1995, Mr. Toomey served in a similar
capacity with Lincoln Property Company ("LPC") as Vice President/Senior
Controller and Director of Administrative Services of Lincoln Property
Services where he was responsible for LPC's computer systems,
accounting, tax, treasury services and benefits administration. From 1984
to 1990, he was an audit manager with Arthur Andersen & Co. where he
served real estate and banking clients. Mr. Toomey received a B.S. in
Business Administration/Finance from Oregon State University.
Harry G. Alcock................................. Mr. Alcock served as a Vice President of AIMCO from July 1996 to
October 1997, when he was promoted to Senior Vice President --
Acquisitions. Mr. Alcock served as Senior Vice President -- Acquisitions
until October 1999, when he was promoted to Executive Vice President
and Chief Investment Officer. Mr. Alcock has had responsibility for
acquisition and financing activities of AIMCO since July 1994. From June
1992 until July 1994, Mr. Alcock served as Senior Financial Analyst for
PDI and HFC. From 1988 to 1992, Mr. Alcock worked for Larwin
Development Corp., a Los Angeles-based real estate developer, with
responsibility for raising debt and joint venture equity to fund land
acquisition and development. From 1987 to 1988, Mr. Alcock worked for
Ford Aerospace Corp. He received his B.S. from San Jose State
University.
Joel F. Bonder.................................. Mr. Bonder was appointed Executive Vice President, General Counsel and
Secretary of AIMCO effective December 1997. Prior to joining AIMCO,
Mr. Bonder served as Senior Vice President and General Counsel of NHP
from April 1994 until December 1997. Mr. Bonder served as Vice
President and Deputy General Counsel of NHP from June 1991 to March
1994 and as Associate General Counsel of NHP Incorporated from 1986
to 1991. From 1983 to 1985, Mr. Bonder practiced with the Washington,
D.C. law firm of Lane & Edson, P.C. and from 1979 to 1983 practiced
with the Chicago law firm of Ross and Hardies. Mr. Bonder received a
B.A. from the University of Rochester and a J.D. from Washington
University School of Law.
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Patrick J. Foye................................. Mr. Foye was appointed Executive Vice President of AIMCO in May
1998. He is responsible for acquisitions of partnership securities,
consolidation of minority interests, and corporate and other acquisitions.
Prior to joining AIMCO, Mr. Foye was a Merger and Acquisitions Partner
in the law firm of Skadden, Arps, Slate, Meagher & Flom LLP from 1989
to 1998 and was Managing Partner of the firm's Brussels, Budapest and
Moscow offices from 1992 through 1994. Mr. Foye is also Deputy
Chairman of the Long Island Power Authority and serves as a member of
the New York State Privatization Council. He received a B.A. from
Fordham College and a J.D. from Fordham Law School and was Associate
Editor of the Fordham Law Review.
Lance J. Graber................................. Mr. Graber was appointed Executive Vice President -- Acquisitions of
AIMCO in October 1999. His principal business function is acquisitions.
Prior to joining AIMCO, Mr. Graber was an Associate from 1991 through
1992 and then a Vice President from 1992 through 1994 at Credit Suisse
First Boston engaged in real estate financial advisory services and
principal investing. He was a Director there from 1994 to May 1999,
during which time he supervised a staff of seven in the making of principal
investments in hotel, multi-family and assisted living properties. Mr.
Graber received a B.S. and an M.B.A. from the Wharton School of the
University of Pennsylvania.
Steven D. Ira................................... Mr. Ira is a Co-Founder of AIMCO and has served as Executive Vice
President -- Property Operations of AIMCO since July 1994. From 1987
until July 1994, he served as President of Property Asset Management
("PAM"). Prior to merging his firm with PAM in 1987, Mr. Ira acquired
extensive experience in property management. Between 1977 and 1981
he supervised the property management of over 3,000 apartment and
mobile home units in Colorado, Michigan, Pennsylvania and Florida, and
in 1981 he joined with others to form the property management firm of
McDermott, Stein and Ira. Mr. Ira served for several years on the National
Apartment Manager Accreditation Board and is a former president of both
the National Apartment Association and the Colorado Apartment
Association. Mr. Ira is the sixth individual elected to the Hall of Fame of
the National Apartment Association in its 54-year history. He holds a
Certified Apartment Property Supervisor (CAPS) and a Certified
Apartment Manager designation from the National Apartment Association,
a Certified Property (CPM) designation from the National Institute of Real
Estate Management (IREM) and he is a member of the Boards of Directors
of the National Multi-Housing Council, the National Apartment
Association and the Apartment Association of Greater Orlando. Mr. Ira
received a B.S. from Metropolitan State College in 1975.
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Paul J. McAuliffe............................... Mr. McAuliffe has been Executive Vice President of AIMCO since
February 1999 and was appointed Chief Financial Officer in October
1999. Prior to joining AIMCO, Mr. McAuliffe was Senior Managing
Director of Secured Capital Corp and prior to that time had been a
Managing Director of Smith Barney, Inc. from 1993 to 1996, where he
was senior member of the underwriting team that lead AIMCO's initial
public offering in 1994. Mr. McAuliffe was also a Managing Director and
head of the real estate group at CS First Boston from 1990 to 1993 and he
was a Principal in the real estate group at Morgan Stanley & Co., Inc.
where he worked from 1983 to 1990. Mr. McAuliffe received a B.A. from
Columbia College and an M.B.A. from University of Virginia, Darden
School.
James N. Bailey................................. Mr. Bailey was appointed a Director of AIMCO. In 1973, Mr. Bailey co-
founded Cambridge Associates, Inc., which is an investment consulting
firm for nonprofit institutions and wealthy family groups. He is also co-
founder, treasurer and director of The Plymouth Rock Company, Direct
Response Corporation and Homeowners's Direct Corporation, all United
States personal lines insurance company. He received his MBA and JD
degrees in 1973 from Harvard Business School and Harvard Law School.
Richard S. Ellwood.............................. Mr. Ellwood was appointed a director of AIMCO in July 1994. Mr.
12 Auldwood Lane Ellwood is currently Chairman of the Audit Committee and a member of
Rumson, NJ 07660 the Compensation Committee. Mr. Ellwood is the founder and President
of R.S. Ellwood & Co., Incorporated, a real estate investment banking
firm. Prior to forming R.S. Ellwood & Co., Incorporated in 1987, Mr.
Ellwood had 31 years experience on Wall Street as an investment banker,
serving as: Managing Director and senior banker at Merrill Lynch Capital
Markets from 1984 to 1987; Managing Director at Warburg Paribas
Becker from 1978 to 1984; general partner and then Senior Vice President
and a director at White, Weld & Co. from 1968 to 1978; and in various
capacities at J.P. Morgan & Co. from 1955 to 1968. Mr. Ellwood
currently serves as director of Felcor Lodging Trust, Incorporated and
Florida East Coast Industries, Inc.
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J. Landis Martin................................ Mr. Martin was appointed a director of AIMCO in July 1994 and became
199 Broadway Chairman of the Compensation Committee on March 19, 1998. Mr.
Suite 4300 Martin is a member of the Audit Committee. Mr. Martin has served as
Denver, CO 80202 President and Chief Executive Officer of NL Industries, Inc., a
manufacturer of titanium dioxide since 1987. Mr. Martin has served as
Chairman of Tremont Corporation ("Tremont"), a holding company
operating through its affiliates Titanium Metals Corporation
("TIMET") and NL Industries, Inc. ("NL"), since 1990 and as Chief
Executive Officer and a director of Tremont since 1988. Mr. Martin
has served as Chairman of TIMET, an integrated producer of titanium
since 1987 and Chief Executive Officer since January, 1995. From 1990
until its acquisition by a predecessor of Halliburton Company
("Halliburton") in 1994, Mr. Martin served as Chairman of the Board
and Chief Executive Officer of Baroid Corporation, an oilfield
services company. In addition to Tremont, NL and TIMET, Mr. Martin is
a director of Halliburton, which is engaged in the petroleum
services, hydrocarbon and engineering industries, and Crown Castle
International Corporation, a communications company.
Thomas L. Rhodes................................ Mr. Rhodes was appointed a Director of AIMCO in July 1994 and is
215 Lexington Avenue currently a member of the Audit and Compensation Committees.
4th Floor Mr. Rhodes has served as the President and Director of National Review
New York, NY 10016 magazine since November 1992, where he has also served as a Director
since 1988. From 1976 to 1992, he held various positions at Goldman,
Sachs & Co. and was elected a General Partner in 1986 and served as a
General Partner from 1987 until November 1992. He is currently Co-
Chairman of the Board, Co-Chief Executive Officer and a Director of
Asset Investors and Commercial Assets. He also serves as a Director
of Delphi Financial Group and its subsidiaries, Delphi International
Ltd., Oracle Reinsurance Company and The Lynde and Harry Bradley
Foundation.
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The letter of transmittal and any other required documents should be sent or
delivered by each unitholder or such unitholder's broker, dealer, bank, trust
company or other nominee to the Information Agent at one of its addresses set
forth below.
THE INFORMATION AGENT FOR THE OFFER IS:
RIVER OAKS PARTNERSHIP SERVICES, INC.
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By Mail: By Overnight Courier: By Hand:
P.O. Box 2065 111 Commerce Road 111 Commerce Road
S. Hackensack, N.J. 07606-2065 Carlstadt, N.J. 07072 Carlstadt, N.J. 07072
Attn.: Reorganization Dept. Attn.: Reorganization Dept.
For information, please call:
TOLL FREE: (888) 349-2005
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