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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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SCHEDULE 14D-9
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SOLICITATION/RECOMMENDATION STATEMENT PURSUANT TO SECTION 14(D)(4)
OF THE SECURITIES EXCHANGE ACT OF 1934
ANGELES INCOME PROPERTIES, LTD. II,
A CALIFORNIA LIMITED PARTNERSHIP
(Name of Subject Company)
ANGELES INCOME PROPERTIES, LTD. II,
A CALIFORNIA LIMITED PARTNERSHIP
(Name of Person(s) Filing Statement)
UNITS OF LIMITED PARTNERSHIP INTEREST
(Title of Class of Securities)
N/A
(Cusip Number of Class of Securities)
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CARROLL D. VINSON
PRESIDENT
ANGELES REALTY CORPORATION II
ONE INSIGNIA FINANCIAL PLAZA
GREENVILLE, SOUTH CAROLINA 29602
(864) 239-2747
(Name, Address and Telephone Number of Person
Authorized to Receive Notice and Communications on Behalf of
the person(s) filing statement)
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ITEM 1. SECURITY AND SUBJECT COMPANY.
The name of the subject company is Angeles Income Properties, Ltd.
II, a California limited partnership (the "Partnership"), and the address of
the principal executive offices of the Partnership is One Insignia Financial
Plaza, Greenville, South Carolina 29602. The title of the class of equity
securities to which this statement relates is the units of limited partnership
interest ("Units") of the Partnership.
ITEM 2. TENDER OFFER OF THE BIDDER.
This statement relates to an offer by Broad River Properties,
L.L.C., a Delaware limited liability company (the "Purchaser"), to purchase up
to 40,000 of the outstanding Units at a purchase price of $150 per Unit, net
to the seller in cash, without interest, upon the terms and subject to the
conditions set forth in an Offer to Purchase dated April 24, 1998 (the "Offer
to Purchase") and related Assignment of Partnership Interest (which
collectively constitute the "Offer"). A Tender Offer Statement on Schedule
14D-1 with respect to the Offer has been filed by the Purchaser, Insignia
Properties, L.P., a Delaware limited partnership ("IPLP"), Insignia Properties
Trust, a Maryland real estate investment trust ("IPT") and Insignia Financial
Group, Inc., a Delaware corporation ("Insignia") (collectively, the
"Bidders").
The address of the Purchaser's principal executive offices is One
Insignia Financial Plaza, Greenville, South Carolina 29602.
ITEM 3. IDENTITY AND BACKGROUND.
(a) The name and business address of the Partnership, which is the
person filing this statement, are set forth in Item 1 above.
(b)(1) Angeles Realty Corporation II, which is the managing general
partner of the Partnership (the "Managing General Partner"), is a direct,
wholly-owned subsidiary of Angeles Securitization Corporation ("ASC"), and IAP
GP Corporation ("IAP") owns all of the equity interests in ASC. IAP in turn is
a direct, wholly-owned subsidiary of IPT. The other general partners of the
Partnership, Elliot Accommodation Trust and Elliot Family Partnership, are
prohibited by the Partnership's Limited Partnership Agreement (the "Limited
Partnership Agreement") from participating in the activities of the
Partnership.
ASC acquired all of the outstanding stock of the Managing General
Partner (which is the general partner in ten other affiliated public limited
partnerships) in November 1992 from Angeles Real Estate Corporation, which in
turn was a wholly-owned subsidiary of Angeles Corporation. At the time of such
acquisition, IAP and ASC were (and thus the Managing General Partner became)
wholly-owned subsidiaries of MAE GP Corporation ("MAE GP"). Effective March 7,
1998, MAE GP was merged with an into IPT, with IPT being the surviving entity
(the "MAE GP Merger"). As a result of the MAE GP Merger, IAP, ASC and the
Managing General Partner are now wholly-owned subsidiaries of IPT and the
Partnership is controlled by IPT. In connection with the MAE GP Merger,
effective February 17, 1998, Insignia contributed 3,845 Units owned by it and
its subsidiaries (representing all Units then owned by such entities) to IPLP
in exchange for additional units of partnership interest in IPLP. The
Purchaser is a newly-formed, wholly-owned subsidiary of IPLP, which is the
operating partnership of IPT. IPT is the sole general partner of IPLP (owning
approximately 66% of the total equity interests in IPLP), and Insignia is the
sole limited partner of IPLP (owning approximately 34% of the total equity
interests in IPLP). Insignia and its affiliates also own approximately 68% of
the outstanding common shares of IPT.
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For more than the past three years, Insignia Residential Group,
L.P. ("IRG") and Insignia Commercial Group, Inc. ("ICG"), which are affiliates
of Insignia and the Purchaser, have provided property management services to
the Partnership, and Insignia (directly or through affiliates) has performed
asset management, partnership administration and investor relations services
for the Partnership.
By reason of the relationships described in the three preceding
paragraphs, the Managing General Partner has conflicts of interest in
considering the Offer.
The Partnership paid IRG and ICG property management fees for
property management services in the amounts of approximately $335,000,
$322,000 and $326,000 for the years ended December 31, 1997, 1996 and 1995,
respectively, and has paid IRG and ICG property management fees equal to
$85,398 during the first three months of 1998. The Partnership reimbursed the
Managing General Partner and its affiliates (including Insignia) for expenses
incurred in connection with asset management and partnership administration
services performed by them for the Partnership for the years ended December
31, 1997, 1996 and 1995 in the amounts of $229,000, $217,000 and $261,000,
respectively, and has reimbursed them for such services in the amount of
$41,563 through March 31, 1998. The reimbursement amount for the year ended
December 31, 1997 includes $54,000 which was paid to an affiliate of the
Managing General Partner for costs incurred in connection with construction
oversight services. For the period January 1, 1996 through August 31, 1997,
the Partnership insured its properties under a master policy through an agency
and insurer unaffiliated with the Managing General Partner. An affiliate of
the Managing General Partner acquired, in the acquisition of a business,
certain financial obligations from an insurance agency which was later
acquired by the agent who placed the current year's master policy. That agent
assumed the financial obligations to the affiliate of the Managing General
Partner who received payments on these obligations from the agent. Insignia
and the Managing General Partner believe that the aggregate financial benefit
derived by Insignia and its affiliates from such arrangement was immaterial.
As described above, the Purchaser and the Managing General Partner
are affiliates of and controlled by IPT, which is controlled by Insignia. The
Managing General Partner has conflicts of interest with respect to the Offer,
including conflicts resulting from its affiliation with IPT and the Purchaser.
The Managing General Partner also would have a conflict of interest (i) as a
result of the fact that a sale or liquidation of the Partnership's assets
would result in a decrease or elimination of the fees paid to the Managing
General Partner and/or its affiliates and (ii) as a consequence of the
Purchaser's ownership of Units, because the Purchaser (which is an affiliate
of the Managing General Partner) may have incentives to seek to maximize the
value of its ownership of Units, which in turn may result in a conflict for
the Managing General Partner in attempting to reconcile the interests of the
Purchaser (which is an affiliate of the Managing General Partner) with the
interests of the other Limited Partners. In addition, the Purchaser (which is
an affiliate of the Managing General Partner) is making the Offer with a view
to making a profit. Accordingly, there is a conflict between the desire of the
Purchaser (which is an affiliate of the Managing General Partner) to purchase
Units at a low price and the desire of the Limited Partners to sell their
Units at a high price.
As described in the Offer to Purchase, the Purchaser (which is an
affiliate of the Managing General Partner) expects to pay for the Units it
purchases pursuant to the Offer with funds provided by IPLP as capital
contributions. IPLP in turn intends to use its cash on hand and borrowings
from its credit facility with a commercial bank and financial institution to
make such contributions. See Section 12. It is possible, however, that in
connection with its future financing activities, IPT or IPLP may cause or
request the Purchaser (which is an affiliate of the Managing General Partner)
to pledge the Units as collateral for loans, or otherwise agree to
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terms which provide IPT, IPLP and the Purchaser with incentives to generate
substantial near-term cash flow from the Purchaser's investment in the Units.
This could be the case, for example, if a loan has a "balloon" maturity after
a relatively short time or bears a high or increasing interest rate. In such a
situation, the Managing General Partner may experience a conflict of interest
in seeking to reconcile the best interests of the Partnership with the need of
its affiliates for cash flow from the Partnership's activities.
If the Purchaser is successful in acquiring a significant number of
Units pursuant to the Offer, the Purchaser (which is an affiliate of the
Managing General Partner) will have the right to vote those Units and thereby
significantly influence all voting decisions with respect to the Partnership,
including decisions concerning liquidation, amendments to the Limited
Partnership Agreement and removal and replacement of the Managing General
Partner. This means that (i) non-tendering Limited Partners could be prevented
from taking action they desire but that IPT (which is an affiliate of the
Managing General Partner) opposes and (ii) IPT (which is an affiliate of the
Managing General Partner) may be able to take action desired by IPT but
opposed by the non-tendering Limited Partners.
Under the Limited Partnership Agreement, Limited Partners holding a
majority of the Units are entitled to take action with respect to a variety of
matters including: removal of the Managing General Partner or the other
non-managing general partners and in certain circumstances election of a new
or successor managing general partner or non-managing general partners;
dissolution of the Partnership; and most types of amendments to the Limited
Partnership Agreement. In general, IPLP and the Purchaser (which are
affiliates of the Managing General Partner) will vote the Units owned by them
in whatever manner they deem to be in IPT's best interests, which, because of
their relationship with the Managing General Partner, also may be in the
interest of the Managing General Partner, but may not be in the interest of
other Limited Partners. This could (i) prevent non-tendering Limited Partners
from taking action they desire but that IPT opposes and (ii) enable IPT to
take action desired by IPT but opposed by non-tendering Limited Partners.
To the best knowledge of the Managing General Partner, except as
described in this Schedule 14D-9, there are no other material agreements,
arrangements, understandings or any actual or potential conflicts of interest
between the Partnership, the Managing General Partner and their affiliates and
the Bidders, their executive officers, directors or affiliates.
ITEM 4. THE SOLICITATION OR RECOMMENDATION.
Because of the existing and potential future conflicts of interest
described in Item 3 above, the Partnership and the Managing General Partner
are remaining neutral and making no recommendation as to whether Limited
Partners should tender their Units in response to the Offer.
ITEM 5. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED.
Neither the Partnership nor any person acting on its behalf has
employed, retained or compensated, or intends to employ, retain or compensate,
any person or class of person to make solicitations or recommendation to
Limited Partners on its behalf concerning the Offer.
ITEM 6. RECENT TRANSACTIONS AND INTEREST WITH RESPECT TO SECURITIES.
(a) Except as described in Schedule I attached hereto, no
transactions in the Units have been effected during the past 60 days by the
Partnership or the Managing General Partner
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or, to the knowledge of the Managing General Partner, by any of its current
executive officers, directors or affiliates.
(b) To the knowledge of the Partnership, neither the Managing
General Partner nor any of its current or former executive officers, directors
or affiliates intends to tender pursuant to the Offer any Units beneficially
owned by them.
ITEM 7. CERTAIN NEGOTIATIONS AND TRANSACTIONS BY THE SUBJECT COMPANY.
None.
ITEM 8. ADDITIONAL INFORMATION TO BE FURNISHED.
Litigation. On March 24, 1998, certain persons claiming to own
limited partner interests in certain limited partnerships (including the
Partnership) whose general partners (the "General Partners") are affiliates of
Insignia (the "Partnerships") filed a purported class and derivative action in
California Superior Court in the County of San Mateo (the "Complaint") against
Insignia, the General Partners (including the Managing General Partner),
certain persons and entities who purportedly formerly controlled the General
Partners, and additional entities affiliated with and individuals who are
officers, directors and/or principals of several of the defendants. The
complaint contains allegations that, among other things, (i) the defendants
breached their fiduciary duties to the plaintiffs by selling or agreeing to
sell their "fiduciary positions" as stockholders, officers and directors of
the General Partners for a profit and retaining said profit rather than
distributing it to the plaintiffs; (ii) the defendants breached their
fiduciary duties by mismanaging the Partnerships and misappropriating the
assets of the Partnerships by (a) manipulating the operations of the
Partnerships to depress the trading price of limited partnership units (the
"Units") of the Partnerships; (b) coercing and fraudulently inducing
unitholders to sell Units to certain of the defendants at depressed prices;
and (c) using the voting control obtained by purchasing Units at depressed
prices to entrench certain of the defendants' positions of control over the
Partnerships; and (iii) the defendants breached their fiduciary duties to the
plaintiffs by (a) selling assets of the Partnerships such as mailing lists of
unitholders; and (b) causing the General Partners to enter into exclusive
arrangements with their affiliates to sell goods and services to the General
Partners, the unitholders and tenants of Partnership properties. The complaint
also alleges that the foregoing allegations constitute violations of various
California securities, corporate and partnership statutes, as well as
conversion and common law fraud. The complaint seeks unspecified compensatory
and punitive damages, an injunction blocking the sale of control of the
General Partners to AIMCO (as defined in the Offer to Purchase) and a court
order directing the defendants to discharge their fiduciary duties to the
plaintiffs. As of the date of this response, defendants have not served or
filed a reply to the complaint. IPT and Insignia believe that the allegations
contained in the Complaint are without merit and intend to vigorously contest
the plaintiffs' action.
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ITEM 9. MATERIAL TO BE FILED AS EXHIBITS.
(a) Form of cover letter to Limited Partners of the Partnership
dated April 24, 1998.
(b) None.
(c) None.
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SIGNATURE
After reasonable inquiry and to the best of my knowledge and
belief, I certify that the information set forth in this statement is true,
complete and correct.
Dated: April 24, 1998
Angeles Income Properties, Ltd. II,
a California limited partnership
By: Angeles Realty Corporation II,
its Managing General Partner
By: /s/ Carroll D. Vinson
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Carroll D. Vinson
President
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SCHEDULE I
TRANSACTIONS IN THE UNITS
EFFECTED BY IPLP WITHIN THE PAST 60 DAYS
Number of Price
DATE Units Purchased Per Unit
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3/13/98 10 $135
3/13/98 30 135
3/13/98 15 135
3/13/98 10 135
3/13/98 20 135
3/26/98 20 135
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EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION
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(a) Form of cover letter to Limited Partners from the
Partnership dated April 24, 1998.
(b) None.
(c) None.
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Exhibit (a)
Angeles Income Properties, Ltd. II
April 24, 1998
Dear Limited Partner:
Enclosed is the Schedule 14D-9 which was filed by Angeles Income
Properties, Ltd. II (the "Partnership") with the Securities and Exchange
Commission in connection with an offer (the "Offer") by Broad River
Properties, L.L.C., a Delaware limited liability company (the "Purchaser"),
Insignia Properties, L.P., a Delaware limited partnership ("IPLP"), Insignia
Properties Trust, a Maryland real estate investment trust ("IPT"), and
Insignia Financial Group, Inc., a Delaware corporation ("Insignia," and
together with IPLP, IPT and the Purchaser, the "Bidders"), to purchase units
of limited partnership interest ("Units") in the Partnership.
The Partnership's managing general partner (the "Managing General
Partner") is Angeles Realty Corporation II, which is an affiliate of the
Bidders. Due to the affiliation between the Managing General Partner of the
Partnership and the Bidders, the Managing General Partner is subject to
certain conflicts of interest in connection with the response to the Offer.
AS A RESULT OF THE EXISTING AND POTENTIAL CONFLICTS
OF INTEREST, NEITHER THE PARTNERSHIP NOR THE MANAGING
GENERAL PARTNER EXPRESSES ANY OPINION AS TO THE OFFER
AND EACH IS REMAINING NEUTRAL AND MAKING NO RECOMMENDATION AS TO WHETHER
LIMITED PARTNERS SHOULD TENDER THEIR UNITS IN RESPONSE TO THE OFFER.
Limited Partners are advised to carefully read the enclosed
Schedule 14D-9.
Angeles Income Properties, Ltd. II
