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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 V LIMITED PARTNERSHIP
FOR $736.00 PER UNIT IN CASH
Upon the terms and subject to the conditions set forth herein, we will accept
any and all units validly tendered in response to our offer. If units are
validly tendered and not properly withdrawn prior to the expiration date and the
purchase of all such units would result in there being less than 320
unitholders, we will purchase only 99% of the total number of units so tendered
by each limited partner.
Our offer and your withdrawal rights will expire at 5:00 p.m., New York City
time, on June 28, 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 $736.00 per unit without any
arms-length negotiations. Accordingly, our offer price may not reflect
the fair market value of your units.
o In November 1999, an independent investment banking firm estimated
that the net asset value, going concern value and liquidation value of
your partnership were $770, $713 and $701 per unit, respectively.
(Continued on next page)
If you desire to accept our offer, you should complete and sign the
enclosed acknowledgment and agreement in accordance with the instructions
thereto and in the letter of transmittal attached as Annex II hereto and mail or
deliver the signed acknowledgment and agreement 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 ACKNOWLEDGMENT AND AGREEMENT
MAY ALSO BE DIRECTED TO THE INFORMATION AGENT AT (888) 349-2005.
May 24, 2000
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(continued from cover page)
o Although your partnership's agreement of limited partnership provides
for termination in the year 2023, the prospectus pursuant to which the
units were sold in 1983 indicated that the properties owned by your
partnership might be sold within three to eight years of their
acquisition if conditions permitted.
o Your general partner and the property manager of the properties are
subsidiaries of ours and, therefore, the general partner has
substantial conflicts of interest with respect to our offer.
o We are making this offer with a view to making a profit and,
therefore, there is a conflict between our desire to purchase your
units at a low price and your desire to sell your units at a high
price.
o 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>
<S> <C>
SUMMARY TERM SHEET 1
RISK FACTORS 3
No Third Party Valuation or Appraisal; No Arms-Length Negotiation 3
No Fairness Opinion From a Third Party 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 4
Holding Units May Result in Greater Future Value 4
Conflicts of Interest With Respect to the Offer 4
No General Partner Recommendation 4
Conflicts of Interest Relating to Management Fees 4
Possible Future Offer at a Higher Price 4
Recognition of Taxable Gain on a Sale of Your Units 4
Loss of Future Distributions from Your Partnership 5
Recognition of Gain Resulting from Possible Future Reduction in Your Partnership Liabilities 5
Possible Termination of Your Partnership for Federal Income Tax Purposes 5
Potential Delay in Payment 6
Balloon Payments 6
THE OFFER 6
Section 1. Terms of the Offer; Expiration Date; Proration 7
Section 2. Acceptance for Payment and Payment for Units 7
Section 3. Procedure for Tendering Units 8
Section 4. Withdrawal Rights 10
Section 5. Extension of Tender Period; Termination; Amendment; Subsequent Offering Period 11
Section 6. Certain Federal Income Tax Matters 12
Section 7. Effects of the Offer 14
Section 8. Information Concerning Us and Certain of Our Affiliates 15
Section 9. Background and Reasons for the Offer 20
Section 10. Position of the General Partner of Your Partnership With Respect to the
Offer 26
Section 11. Conflicts of Interest and Transactions with Affiliates 27
Section 12. Future Plans of the Purchaser 28
Section 13. Certain Information Concerning Your Partnership 29
Section 14. Voting Power 36
Section 15. Source of Funds 36
Section 16. Dissenters' Rights 36
Section 17. Conditions of the Offer 36
Section 18. Certain Legal Matters 38
Section 19. Fees and Expenses 39
ANNEX I
Officers and Directors I-1
ANNEX II
Letter of Transmittal II-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 V Limited Partnership,
your partnership for $736 per unit in cash, less and 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 The fact that we believe the per unit liquidation value of your
partnership is equal to our offer price per unit.
o On November 11, 1999, Robert A. Stanger & Co., Inc., an
independent investment firm, rendered an opinion that $770 per
unit was a fair offer price for units in your partnership from a
financial point of view and determined the net asset value, the
going concern value and liquidation value of a unit in your
partnership to be $770, $713 and $701.
o There is no 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 June 28, 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
acknowledgment and agreement and send it to the Information Agent, River
Oaks Partnership, Inc., at one of the address set forth on the back of this
offer to purchase. See "The Offer--Section 3. Procedures for Tendering."
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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 July 28, 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 in a notice of
withdrawal identifying yourself and the units to be withdrawn. See "The
Offer--Section 4. Withdrawal Rights."
o TAX CONSEQUENCES. Your sale of units will be a taxable transaction for
federal income tax purposes, the consequences to each limited partner may
vary and you should consult your tax advisor on the precise tax
consequences to you. See "The Offer-Section 6. Certain Federal Income Tax
Matters."
o AVAILABILITY OF FUNDS. We currently have the necessary cash and a line of
credit to consummate the offers. See "The Offer--Section 15. Source of
Funds."
o CONDITIONS TO THE OFFER. There are a number of conditions to our offer,
including having adequate cash, including borrowings under a line of
credit, lack of competing tender offers, lack of certain changes in your
partnership, and lack 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 December 31, 1999, AIMCO owned or controlled, held an
equity interest in or managed 363,462 apartment units in 1,942 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. The general partner of your partnership and the
property manager are our subsidiaries and we and our affiliates currently
own 63.19% of the outstanding units in your partnership. 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 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. See "Terms of the Offer--Section
10. Position of the General Partner of Your Partnership With Respect to the
Offer."
o SUBSEQUENT OFFERING PERIOD. We will not 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 telephone numbers
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.
NO FAIRNESS OPINION FROM A THIRD PARTY
We did not obtain an opinion from a third party that our offer price is
fair from a financial point of view.
OFFER PRICE MAY NOT REPRESENT FAIR MARKET VALUE
There is no established or regular trading market for your units, nor is
there another reliable standard for determining the fair market value of the
units. Our offer price does not necessarily reflect the price that you would
receive in an open market for your units. Such prices could be higher than our
offer price.
OFFER PRICE 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 for the properties the direct capitalization method to estimate the
value of your partnership's properties because we think a prospective purchaser
of the properties would value the properties using this method. In doing so, we
applied a capitalization rate to your partnership's property income for the
three months ended March 31, 2000, annualized for the full year ended December
31, 2000. If property income for a different period 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.
It is not known when the properties owned by your partnership may be sold. There
may be no way to liquidate your investment in a partnership in the future until
the properties are sold and the partnership is liquidated. The general partner
of your partnership continually considers whether a property should be sold or
otherwise disposed
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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.
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 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 we or our subsidiaries receive fees for managing your partnership and
its properties, a conflict of interest exists between our continuing the
partnership and receiving such fees, and the liquidation of the partnership and
the termination of such fees. Another conflict is the fact that a decision of
the limited partners of your partnership to remove, for any reason, the general
partner of your partnership or the property manager of any property owned by
your partnership would result in a decrease or elimination of the substantial
fees paid to them for services provided to your partnership.
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
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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 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. 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.
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.
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BALLOON PAYMENTS
Your partnership has approximately $7,127,000 and $12,000,000 of balloon
payments due on its mortgage debt in November 2002 and November 2003,
respectively. Your partnership will have to refinance such debt, sell assets or
otherwise obtain additional funds prior to the balloon payment dates, or it will
be in default and could lose the properties to foreclosure.
THE OFFER
SECTION 1. TERMS OF THE OFFER; EXPIRATION DATE; PRORATION.
Upon the terms and subject to the conditions of the offer, we will accept
(and thereby purchase) any and all units that are validly tendered on or prior
to the expiration date and not withdrawn in accordance with the procedures set
forth in "The Offer -- Section 4. Withdrawal Rights." For purposes of the offer,
the term "expiration date" shall mean 5:00 p.m., New York City time, on June 28,
2000, unless we in our sole discretion shall have extended the period of time
for which the offer is open, in which event the term "expiration date" shall
mean the latest time and date on which the offer, as extended by us, shall
expire. See "The Offer -- Section 5. Extension of Tender Period; Termination;
Amendment; Subsequent Offering Period," for a description of our right to extend
the period of time during which the offer is open and to amend or terminate the
offer.
The purchase price per unit will automatically be reduced by the aggregate
amount of distributions per unit, if any, made by your partnership to you on or
after the commencement of our offer and prior to the date on which we acquire
your units pursuant to our offer.
If, prior to the expiration date, we increase the consideration offered to
limited partners pursuant to the offer, the increased consideration will be paid
for all units accepted for payment pursuant to the offer, whether or not the
units were tendered prior to the increase in consideration.
We will pay any transfer fees imposed for the transfer of units by your
partnership. However, you will have to pay any taxes that arise from your sale
of units. You will also have to pay any fees or commissions imposed by your
broker, or by any custodian or other trustee of any Individual Retirement
Account or benefit plan which is the owner of record of your units. Although the
fees charged for transferring units from an Individual Retirement Account vary,
such fees are typically $25-$50 per transaction. Depending on the number of
units that you tender, any fees charged on a per transaction basis could exceed
the aggregate offer price you receive (as a result of proration or otherwise).
If units are validly tendered prior to the expiration date and not properly
withdrawn prior to the expiration date in accordance with the procedures set
forth in "The Offer--Section 4. Withdrawal Rights" and the purchase of all such
units would result in (i) a "Rule 13e-3 transaction" within the meaning of the
Securities Exchange Act of 1934 (the "Exchange Act") , or (ii) there being less
than 320 unitholders, we will purchase only 99% of the total number of units so
tendered by each limited partner (subject to any necessary adjustment for
fractional units). If we are going to purchase only 99% of the units validly
tendered, we will notify you of such fact. In such case, you would continue to
be a limited partner and receive a K-1 for tax reporting purposes. See "The
Offer--Section 7. Effects of the Offer--Effect on Trading Market; Registration
Under 12(g) of the Exchange Act."
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If proration of tendered units is required, then, subject to our obligation
under Rule 14e-1(c) under the Exchange Act to pay limited partners the purchase
price in respect of units tendered or return those units promptly after
termination or withdrawal of the offer, we do not intend to pay for any units
accepted for payment pursuant to the offer until the final proration results are
known. Notwithstanding any such delay in payment, no interest will be paid on
the cash offer price.
The offer is conditioned on satisfaction of certain conditions. THE OFFER
IS NOT CONDITIONED UPON ANY MINIMUM NUMBER OF UNITS BEING TENDERED. See "The
Offer--Section 17. Conditions 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 March 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 May 31, 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 acknowledgment and agreement and other documents required by
the acknowledgment and agreement and the letter of transmittal attached hereto
as Annex II. See "The Offer--Section 3. Procedure for Tendering Units." UNDER NO
CIRCUMSTANCES WILL INTEREST BE PAID ON THE OFFER PRICE BY REASON OF ANY DELAY IN
MAKING SUCH PAYMENT.
We will, upon the terms and subject to the conditions of the offer, accept
for payment and pay for any and all units validly tendered, with appropriate
adjustments to avoid purchases that would violate the agreement of limited
partnership of your partnership and any relevant procedures or regulations
promulgated by the general partner. Accordingly, in some circumstances, we may
pay you the full offer price and accept an assignment of your right to receive
distributions and other payments and an irrevocable proxy in respect of the
units and defer, perhaps indefinitely, the transfer of ownership of the units on
the partnership books. In other circumstance we may only be able to purchase
units which, together with units previously transferred within the preceding
twelve months, do not exceed 50% of the outstanding units.
If more units than can be purchased under the partnership agreement are
validly tendered prior to the expiration date and not properly withdrawn prior
to the expiration date in accordance with the procedures specified herein, we
will, upon the terms and subject to the conditions of the offer, accept for
payment and pay for those units so tendered which do not violate the terms of
the partnership agreement, pro rata according to the number of units validly
tendered by each limited partner and not properly withdrawn on or prior to the
expiration date, with appropriate adjustments to avoid purchases of fractional
units. If the number of units validly tendered and not properly withdrawn on or
prior to the
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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 acknowledgment and agreement 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, if we have not accepted units for payment by July 28, 2000, you may
then withdraw any tendered units. 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 acknowledgment and agreement and any other documents
required by the acknowledgment and agreement and the letter of transmittal
attached hereto as Annex II 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 acknowledgment and agreement 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 acknowledgment and
agreement . 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 acknowledgment and agreement. However, in all other cases, all
signatures on the acknowledgment and agreement must be guaranteed by an Eligible
Institution.
In order for you to tender in the offer, your units must be validly
tendered and not withdrawn on or prior to the expiration date.
THE METHOD OF DELIVERY OF THE ACKNOWLEDGMENT AND AGREEMENT 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.
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APPOINTMENT AS PROXY; POWER OF ATTORNEY. By executing the acknowledgment
and agreement, 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 acknowledgment and agreement 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 acknowledgment and agreement, 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 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
consideration, to become a substituted limited partner, to receive any and all
distributions made by your partnership on or after the date on which we acquire
such units, and to receive all benefits and otherwise exercise all rights of
beneficial ownership of such units in accordance with the terms of our offer,
(iii) to execute and deliver to the general partner of your partnership a change
of address form instructing the general partner to send any and all future
distributions to which we are entitled pursuant to the terms of the offer in
respect of tendered units to the address specified in such form, and (iv) to
endorse any check payable to you or upon your order representing a distribution
to which we are entitled pursuant to the terms of our offer, in each case, in
your name and on your behalf.
By executing the acknowledgment and agreement, 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 acknowledgment and agreement and
shall continue to be effective unless and until you withdraw such units from
this offer prior to the expiration date.
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ASSIGNMENT OF INTEREST IN FUTURE DISTRIBUTIONS. By executing the
acknowledgment and agreement, you will through the letter of transmittal
attached hereto as Annex II, irrevocably assign to us and our assigns all of
your right, title and interest in and to any and all distributions made by your
partnership from any source and of any nature, including, without limitation,
distributions in the ordinary course, distributions from sales of assets,
distributions upon liquidation, winding-up, or dissolution, payments in
settlement of existing or future litigation, and all other distributions and
payments from and after the expiration date of our offer, in respect of the
units tendered by you and accepted for payment and thereby purchased by us. If,
after the unit is accepted for payment and purchased by us, you receive any
distribution from any source and of any nature, including, without limitation,
distributions in the ordinary course, distributions from sales of assets,
distributions upon liquidation, winding-up or dissolution, payments in
settlement of existing or future litigation and all other distributions and
payments, from your partnership in respect of such unit, you will agree to
forward promptly such distribution to us.
DETERMINATION OF VALIDITY; REJECTION OF UNITS; WAIVER OF DEFECTS; NO
OBLIGATION TO GIVE NOTICE OF DEFECTS. All questions as to the validity, form,
eligibility (including time of receipt) and acceptance for payment of any tender
of units pursuant to our offer will be determined by us, in our reasonable
discretion, which determination shall be final and binding on all parties. We
reserve the absolute right to reject any or all tenders of any particular unit
determined by us not to be in proper form or if the acceptance of or payment for
that unit may, in the opinion of our counsel, be unlawful. We also reserve the
absolute right to waive or amend any of the conditions of the offer that we are
legally permitted to waive as to the tender of any particular unit and to waive
any defect or irregularity in any tender with respect to any particular unit of
any particular limited partner. Our interpretation of the terms and conditions
of the offer (including the letter of transmittal attached hereto as Annex II
and the acknowledgment and agreement ) 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
attached hereto as Annex II, the acknowledgment and agreement 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 attached
hereto as Annex II, the acknowledgment and agreement 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 to
such person will be deducted from the purchase price unless satisfactory
evidence of the payment of such taxes or exemption therefrom is submitted.
BINDING AGREEMENT. A tender of a unit pursuant to any of the procedures
described above and the acceptance for payment of such unit will constitute a
binding agreement between the tendering unitholder and us on the terms set forth
in this offer to purchase and the related letter of transmittal.
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SECTION 4. WITHDRAWAL RIGHTS.
You may withdraw tendered units at any time prior to the expiration date,
including any extensions thereof, or on or after July 28, 2000, if the units
have not been previously accepted for payment.
For a withdrawal to be effective, a written notice of withdrawal must be
timely received by the Information Agent at one of its addresses set forth on
the back cover of the offer to purchase. Any such notice of withdrawal must
specify the name of the person who tendered, the number of units to be withdrawn
and the name of the registered holder of such units, if different from the
person who tendered. In addition, the notice of withdrawal must be signed by the
person who signed the letter of transmittal in the same manner as the letter of
transmittal was signed.
If purchase of, or payment for, a unit is delayed for any reason, or if we
are unable to purchase or pay for a unit for any reason, then, without prejudice
to our rights under the offer, tendered units may be retained by the Information
Agent; subject, however, to our obligation, pursuant to Rule 14e-1(c) under the
Exchange Act, to pay the offer price in respect of units tendered or return
those units promptly after termination or withdrawal of our offer.
Any units properly withdrawn will thereafter be deemed not to have been
validly tendered for purposes of our offer. However, withdrawn units may be
re-tendered at any time prior to the expiration date by following the procedures
described in "The Offer--Section 3. Procedures for Tendering Units."
All questions as to the validity and form (including time of receipt) of
notices of withdrawal will be determined by us in our reasonable discretion,
which determination will be final and binding on all parties. Neither we, the
Information Agent, nor any other person will be under any duty to give
notification of any defects or irregularities in any notice of withdrawal or
incur any liability for failure to give any such notification.
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," 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.
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If we make a material change in the terms of our offer, or if we waive a
material condition to our offer, we will extend the offer and disseminate
additional tender offer materials to the extent required by Rule 14e-1 under the
Exchange Act. The minimum period during which the offer must remain open
following any material change in the terms of the offer, other than a change in
price or a change in percentage of securities sought or a change in any dealer's
soliciting fee, if any, will depend upon the facts and circumstances, including
the materiality of the change, 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. In a public release, the Securities and Exchange
Commission (the "SEC") has expressed the view that the inclusion of a subsequent
offering period would constitute a material change to the terms of the offer
requiring us to disseminate new information to unitholders in a manner
reasonably calculated to inform them of such change sufficiently in advance of
the expiration date (generally five business days). In the event we elect to
include a subsequent offering period, we will so notify you consistent with the
requirements of the SEC.
SECTION 6. CERTAIN FEDERAL INCOME TAX MATTERS.
The following summary is a general discussion of certain of the United
States federal income tax consequences of the offer that may be relevant to (i)
unitholders who tender some or all of their units for cash pursuant to our
offer, and (ii) unitholders who do not tender any of their units pursuant to our
offer. This discussion is based on the Internal Revenue Code of 1986, as amended
(the "Internal Revenue Code"), Treasury Regulations, rulings issued by the
Internal Revenue Service (the "IRS"), and judicial decisions, all as of the date
of this offer to purchase. All of the foregoing are subject to change or
alternative construction, possibly with retroactive effect, and any such change
or alternative construction could affect the continuing accuracy of this
summary. This summary is based on the assumption that your partnership is
operated in accordance with its organizational documents including its
certificate of limited partnership and agreement of limited partnership. This
summary is for general information only and does not purport to discuss all
aspects of 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.
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THE UNITED STATES FEDERAL INCOME TAX TREATMENT OF A UNITHOLDER
PARTICIPATING IN THE OFFER DEPENDS IN SOME INSTANCES ON DETERMINATIONS OF FACT
AND INTERPRETATIONS OF COMPLEX PROVISIONS OF UNITED STATES FEDERAL INCOME TAX
LAW FOR WHICH NO CLEAR PRECEDENT OR AUTHORITY MAY BE AVAILABLE. ACCORDINGLY, YOU
SHOULD CONSULT YOUR TAX ADVISOR REGARDING THE UNITED STATES FEDERAL, STATE,
LOCAL AND FOREIGN TAX CONSEQUENCES OF SELLING THE LIMITED PARTNERSHIP INTERESTS
IN YOUR PARTNERSHIP REPRESENTED BY UNITS PURSUANT TO OUR OFFER OR OF A DECISION
NOT TO SELL IN LIGHT OF YOUR SPECIFIC TAX SITUATION.
TAX CONSEQUENCES TO LIMITED PARTNERS TENDERING UNITS FOR CASH. You will
recognize gain or loss on a sale of a unit of limited partnership of your
partnership equal to the difference between (i) your "amount realized" on the
sale and (ii) your adjusted tax basis in the unit sold. The "amount realized"
with respect to a unit of limited partnership of your partnership will be equal
to the sum of the amount of cash received by you for the unit sold pursuant to
the offer plus the amount of partnership liabilities allocable to the unit (as
determined under Section 752 of the Internal Revenue Code). Thus, your taxable
gain and tax liability resulting from a sale of a unit of limited partnership of
your partnership could exceed the cash received upon such sale.
ADJUSTED TAX BASIS. If you acquired your units of limited partnership of
your partnership for cash, your initial tax basis in such units was generally
equal to your cash investment in your partnership increased by your share of
partnership liabilities at the time you acquired such units. Your initial tax
basis generally has been increased by (i) your share of partnership income and
gains, and (ii) any increases in your share of partnership liabilities, and has
been decreased (but not below zero) by (i) your share of partnership cash
distributions, (ii) any decreases in your share of partnership liabilities,
(iii) your share of partnership losses, and (iv) your share of nondeductible
partnership expenditures that are not chargeable to capital. For purposes of
determining your adjusted tax basis in units of limited partnership of your
partnership immediately prior to a disposition of your units, your adjusted tax
basis in your units will include your allocable share of partnership income,
gain or loss for the taxable year of disposition. If your adjusted tax basis is
less than your share of partnership liabilities (e.g., as a result of the effect
of net loss allocations and/or distributions exceeding the cost of your unit),
your gain recognized with respect to a unit of limited partnership of your
partnership pursuant to the offer will exceed the cash proceeds realized upon
the sale of such unit.
CHARACTER OF GAIN OR LOSS RECOGNIZED PURSUANT TO THE OFFER. Except as
described below, the gain or loss recognized by you on a sale of a unit of
limited partnership of your partnership pursuant to the offer generally will be
treated as a long-term capital gain or loss if you held the unit for more than
one year. Long-term capital gains recognized by individuals and certain other
noncorporate taxpayers generally will be subject to a maximum United States
federal income tax rate of 20%. If the amount realized with respect to a unit of
limited partnership of your partnership that is attributable to your share of
"unrealized receivables" of your partnership exceeds the tax basis attributable
to those assets, such excess will be treated as ordinary income. Among other
things, "unrealized receivables" include depreciation recapture for certain
types of property. In addition, the maximum United States federal income tax
rate applicable to persons who are noncorporate taxpayers for net capital gains
attributable to the sale of depreciable real property (which may be determined
to include an interest in a partnership such as your units) held 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,
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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 attached hereto as Annex II and the acknowledgment and
agreement.
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 and attached hereto as Annex II and acknowledgment and
agreement.
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
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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 is deemed to
terminate for tax purposes, the following Federal income tax events will be
deemed to occur: the terminated partnership will be deemed to have contributed
all of its assets (subject to its liabilities) to a new partnership in exchange
for an interest in the new partnership and, immediately thereafter, the old
partnership will be deemed to have distributed interests in the new partnership
to the remaining limited partners in proportion to their respective interests in
the old partnership in liquidation of the old partnership.
SECTION 7. EFFECTS OF THE OFFER.
CONTROL BY AIMCO. Because the general partner of your partnership is
our subsidiary, we have control over the management of your partnership. In
addition, we already own over 50% of the units in your partnership and we can
control the vote of the limited partners. In general, we will vote the units
owned by us in whatever manner we deem to be in our best interests, which may
not be in the interest of other limited partners. This could (1) prevent
non-tendering limited partners from taking action they desire but that we oppose
and (2) enable us to take action desired by us but opposed by non-tendering
limited partners. We also own the company that manages the 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 property manager, both of which will remain the same.
Consummation of the offer will not affect your agreement of limited partnership,
the operations of any partnership, the business and properties owned by your
partnership, the management compensation payable to your general partner or any
other matter relating to your partnership, except it would result in us
increasing our ownership of units. We have no current intention of changing the
fee structure for your general partner or the manager of your partnership's
properties.
EFFECT ON TRADING MARKET; REGISTRATION UNDER 12(g) OF THE EXCHANGE ACT.
If a substantial number of units are purchased pursuant to the offer, the result
will be a reduction in the number of limited partners in your partnership. In
the case of certain kinds of equity securities, a reduction in the number of
securityholders might be expected to result in a reduction in the liquidity and
volume of activity in the trading market for the security. In the case of your
partnership, however, there is no established public trading market for the
units and, therefore, we do not believe a reduction in the number of limited
partners will materially further restrict your ability to find purchasers for
your units through secondary market transactions.
The units are registered under Section 12(g) of the Exchange Act, which
means, among other things, that your partnership is required to file periodic
reports with the SEC and to comply with the SEC's proxy rules. We do not expect
or intend that consummation of the offer will cause the units to cease to be
registered under Section 12(g) of the Exchange Act. If the units were to be held
by fewer than 300 persons, your partnership could apply to de-register the units
under the Exchange Act. Your partnership currently has __ unitholders of record.
If units are tendered which would result in less than
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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." As of December 31, 1999, we owned or managed 363,462 apartment
units in 1,942 properties located in 48 states, the District of Columbia and
Puerto Rico. 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
December 31, 1999, we:
- owned or controlled 106,148 units in 373 apartment properties;
- held an equity interest in 133,113 units in 751 apartment
properties; and
- managed 124,201 units in 818 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.
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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 for the quarterly periods 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.
17
<PAGE> 21
SUMMARY FINANCIAL INFORMATION OF AIMCO PROPERTIES, L.P. The historical
summary financial data for AIMCO Properties, L.P. for the three months ended
March 31, 2000 and 1999 is unaudited. The historical summary financial data 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 Operating Partnership's Form
10-K for the year ended December 31, 1999 and 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 42,877 22,675
Management and other expenses (4,957) (8,902) (25,470) (16,960)
Income from service company business 8,353 (924) 17,407 5,715
----------- ----------- ----------- -----------
General and administrative expenses (3,211) (2,594) (12,016) (10,336)
----------- ----------- ----------- -----------
Interest expense (56,224) (30,360) (139,124) (88,208)
Interest income 13,004 9,828 62,183 28,170
Equity in earnings 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
----------- ----------- ----------- -----------
Extraordinary item-- early extinguishment
of debt -- -- -- --
Net income $ 28,454 $ 14,864 $ 80,690 $ 68,928
----------- ----------- ----------- ===========
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 2,591,753 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
Redeemable Partnership Units -- -- -- --
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) 168,817 133,113 171,657
Units under management (end of period) 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 $ 0.6250 $ 2.25 $ 2.50
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>
18
<PAGE> 22
----------
(a) Represents AIMCO Properties, L.P. equity earnings in unconsolidated
subsidiaries.
(b) Represents AIMCO Properties, L.P.'s share of earnings from partnerships
that own 115,951 apartment units at March 31, 2000 in which
partnerships AIMCO Properties, L.P. owns an equity interest.
(c) AIMCO Properties, L.P.'s management believes that the presentation of
funds from operations or "FFO", when considered with the financial data
determined in accordance with generally accepted accounting principles,
provides a useful measure of performance. However, FFO does not
represent cash flow and is not necessarily indicative of cash flow or
liquidity available to AIMCO Properties, L.P., nor should it be
considered as an alternative to net income 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
dividends on preferred stock. AIMCO Properties, L.P. management
believes that presentation of FFO provides investors with
industry-accepted measurements which help facilitate an understanding
of its ability to make required dividend payments, capital expenditures
and principal payments on its debt. There can be no assurance that
AIMCO Properties, L.P.'s basis of computing FFO is comparable with that
of other REITS.
The following is a reconciliation of net income to funds from
operations:
<TABLE>
<CAPTION>
THREE MONTHS ENDED YEAR ENDED
MARCH 31, DECEMBER 31,
---------------------- ----------------------
2000 1999 1999 1998
--------- --------- --------- ---------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Net income $ 28,454 $ 14,864 $ 80,690 $ 68,928
Extraordinary item -- -- -- --
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>
19
<PAGE> 23
RATIOS OF EARNINGS TO FIXED CHARGES OF AIMCO PROPERTIES, L.P. The
following table shows for the AIMCO Properties, L.P. (i) the ratio of income to
fixed charges and (ii) the ratio of income to fixed charges and preferred unit
distributions.
<TABLE>
<CAPTION>
FOR THE YEARS
ENDED
DECEMBER 31,
-------------------
1999 1998
------ ------
<S> <C> <C>
Ratio of earnings to fixed
charges (1) 2.4:1 1.6:1
Ratio of earnings to combined 1.7:1 1.7:1
fixed charges and preferred unit
distributions (2)
</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.
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
20
<PAGE> 24
common shares of beneficial interest of Insignia Properties Trust ("IPT").
Through the Insignia Merger, AIMCO also acquired a majority ownership interest
in the entity that manages the properties owned by your partnership. On October
31, 1998, IPT and AIMCO entered into an agreement and plan of merger, dated as
of October 1, 1998, pursuant to which IPT merged with AIMCO on February 26,
1999. AIMCO then contributed IPT's interest in Insignia Properties L.P., IPT's
operating partnership, to AIMCO's wholly owned subsidiary, AIMCO/IPT, Inc. AIMCO
also replaced IPT as the sole general partner of Insignia Properties L.P. As a
result, the general partner of your partnership is a wholly owned subsidiary of
AIMCO/IPT and the property manager is our indirect wholly owned subsidiary.
Together with its subsidiaries, AIMCO currently owns, in the aggregate,
approximately 63.19% 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 approximately 40 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 may not be the most desirable time to sell the
real estate assets of your partnership in a private transaction, 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. Liquidation of the partnership assets may
trigger a prepayment penalty under the mortgages for the properties. Although
there might be a prepayment penalty of approximately 1 to 2% of the outstanding
balance of the mortgages depending on when and under what circumstances they are
prepaid, such prepayment penalties are not a significant factor in determining
when a property may be sold. See "The Offer--Section 13. Certain Information
Concerning Your Partnership--Investment Objectives and Policies; Sale or
Financing of Investments."
CONTINUATION OF THE PARTNERSHIP WITHOUT THE OFFER
A second alternative would be for your partnership to continue as a
separate legal entity, with its own assets and liabilities and continue to be
governed by its existing agreement of limited partnership, without our offer. A
number of advantages could result from the continued operation of your
partnership. Given improving rental market conditions or improved operating
performance, the level of distributions might increase over time. It is possible
that the private resale market for properties could improve over time, making a
sale of the
21
<PAGE> 25
partnership's properties in a private transaction 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 attempts to sell any
property owned by your partnership.
There are several risks and disadvantages that result from continuing
the operations of your partnership without our offer. If your partnership were
to continue operating as presently structured, your partnership could be forced
to borrow on terms that could result in net losses from operations. In addition,
continuation of your partnership without our offer would deny you and your
partners the benefits of our offer. For example, you might have no opportunity
for liquidity unless you were to sell your units in a private transaction. 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
all 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 November 30, 1999 and Quarterly Report on Form 10-QSB
for the quarter ended March 31, 2000 and for the one-month period ended December
31, 1999; (iii) the operating budgets prepared by the property manager with
respect to the partnership's properties for the year ending December 31, 2000;
and (iv) tender offer statements, solicitation/recommendation statements and
beneficial ownership reports on Schedules TO, 14D-1, 14D-9 and 13D. Our
determination of the offer price was based on our review and analysis of the
foregoing information, the other financial information and the analyses
concerning the partnership summarized below.
VALUATION OF UNITS. We determined our offer price by estimating the
value of each property owned by your partnership using the direct capitalization
method. This method involves applying a capitalization rate to your
partnership's annual property income. A capitalization rate is a percentage
(rate of return), commonly applied by purchasers of residential real estate to
property income to determine the present value of income property. The lower the
capitalization rate utilized the higher the value produced, and the higher the
capitalization rate utilized the lower the value produced. We used your
partnership's property income for the three months ended March 31, 2000, and
then annualized such income for the year ending December 31, 2000. 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, is subjective in nature, and others evaluating the same property might
use a different capitalization rate and derive a different property value.
Property income is the difference between the revenues from the
property and related costs and expenses, excluding income derived from sources
other than its regular activities and before income deductions. Income
deductions include interest, income taxes, prior-year adjustments, charges to
reserves, write-off of
22
<PAGE> 26
intangibles, adjustments arising from major changes in accounting methods and
other material and nonrecurring items. In this respect, property income differs
from net income disclosed in the partnership's financial statements, which does
not exclude these income sources and deductions. The following is a
reconciliation of your partnership's property income for the year ended November
30, 1999 to your partnership's net operating income for the same period:
<TABLE>
<S> <C>
Net Income (Loss) $ 1,965,000
Other Non-Operating Expense (975,000)
Depreciation 2,969,000
Interest 2,718,000
Extraordinary item-loss on early extinguishment of
150,000
debt
-----------
Property Income $ 6,827,000
===========
</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
using the direct capitalization method. 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 the property income
for the year ended November 30, 1999 and then divided such amount by
the property's capitalization rate to derive an estimated gross
property value as described in the following table.
23
<PAGE> 27
Based on the above, we estimated the gross property value of each property
as follows:
<TABLE>
<CAPTION>
1999 ESTIMATED
PROPERTY CAPITALIZATION GROSS PROPERTY
PROPERTY INCOME RATE VALUE
-------- ----------- -------------- --------------
<S> <C> <C> <C>
Foxfire Apartments $ 1,037,000 10.50% $ 9,873,000
Old Salem Apartments 1,669,000 11.05% 15,101,000
Woodland Village Apartments 1,149,000 10.74% 10,700,000
Lake Johnson Mews Apartments 1,021,000 10.63% 9,600,000
The Lexington Green Apartments 915,000 10.50% 8,711,000
Millhopper Village Apartments 621,000 10.90% 5,700,000
Tar River Estates 415,000 (1) 9,000,000
----------- --------------
Total $ 6,827,000 $ 68,685,000
=========== ==============
</TABLE>
(1) Tar River Estates valuation was calculated based upon operations prior to
the damage incurred on certain buildings in October 1999 due to flooding.
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) or its affiliates after
consideration of any applicable subordination provisions affecting
payment of such debt. 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
$38,758,376. Closing costs, which are estimated to be 5% of the gross
property value, include legal and accounting fees, real property
transfer taxes, title and escrow costs and broker's fees.
o Third, using this net equity value, we determined the proceeds that
would be paid to holders of units in the event of a liquidation of your
partnership, based on the terms of your partnership's agreement of
limited partnership. Accordingly, 100% of the estimated liquidation
proceeds are assumed to be distributed to holders of units. Our offer
price represents the per unit liquidation proceeds determined in this
manner.
<TABLE>
<S> <C>
Gross valuation of partnership properties $ 68,685,000
Plus: Cash and cash equivalents 8,800,314
Plus: Other partnership assets, net of security deposits 3,333,744
Less: Mortgage debt, including accrued interest (37,553,845)
Less: Accounts payable and accrued expenses (1,184,418)
Less: Other liabilities (204,921)
------------
Partnership valuation before taxes and certain costs 41,875,873
Less: Extraordinary capital expenditures for deferred maintenance (1,811,382)
Less: Closing costs (1,306,115)
------------
Estimated net valuation of your partnership $ 38,758,376
Percentage of estimated net valuation allocated to holders of units 100%
------------
Estimated net valuation of units 38,757,077
Total number of units 52,638.00
------------
Estimated valuation per unit 736.00
============
Cash consideration per unit $ 736.00
============
</TABLE>
24
<PAGE> 28
COMPARISON OF CONSIDERATION TO ALTERNATIVE CONSIDERATION. To assist
holders of units in evaluating the offer, your general partner (which is our
subsidiary) has attempted to compare the offer price against: (a) prices at
which the units have sold in the secondary market; (b) estimates of the value of
the units on a liquidation basis; [(c) your general partner's estimate of net
asset value; (d) an affiliate's estimate of net liquidation value; (e) the
recent appraisals of your partnership's properties;] and (f) Robert A. Stanger &
Co., Inc.'s estimate of net asset value, going concern value and liquidation
value. The general partner of your partnership believes that analyzing the
alternatives in terms of estimated value, based upon currently available data
and, where appropriate, reasonable assumptions made in good faith, establishes a
reasonable framework for comparing alternatives. Since the value of the
consideration for alternatives to the offer is dependent upon varying market
conditions, no assurance can be given that the estimated values reflect the
range of possible values.
The results of these comparative analyses are summarized in the chart
below. You should bear in mind that some of the alternative values are based on
a variety of assumptions that have been made by us. These assumptions relate to,
among other things, the operating results, if any, since March 31, 2000 as to
income and expenses of the property, other projected amounts and the
capitalization rates that may be used by prospective buyers if your partnership
assets were to be liquidated.
In addition, these estimates are based upon certain information
available to your general partner (which is our subsidiary) 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 is 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, 2023, unless sooner terminated
as provided in the agreement or by law. Limited partners could, as an
alternative to tendering their units, take a variety of possible actions,
including voting to liquidate the partnership or amending the agreement of
limited partnership to authorize limited partners to cause the partnership to
merge with another entity or engage in a "roll-up" or similar transaction.
COMPARISON TABLE
<TABLE>
<CAPTION>
PER UNIT
--------
<S> <C>
Cash offer price $736.00
Alternatives:
Prior cash tender offer price $544, $520, $300,
$370 and $721.86
Prices on secondary market $476 - $553.38
Stanger's estimate of liquidation value $701
Stanger's estimate of net asset value $770
Stanger's estimate of going concern value $713
Estimated liquidation proceeds $736.00
</TABLE>
PRIOR TENDER OFFERS
In November 1999, we commenced a tender offer at the original offer
price of $715.73 per unit, ultimately increased to $721.86 per unit. The offer
price was determined based upon our calculation of the
25
<PAGE> 29
liquidation value of your partnership pursuant to a method set forth in a
proposed settlement of litigation, which proposed settlement has been
terminated. See "The Offer--Section 13. Certain Information Regarding Your
Partnership--Legal Proceedings." The method of determining the liquidation value
was similar to that used in this offer. On December 30, 1999, we purchased 7,168
units at a cash price of $721.86 per unit pursuant to such offer.
In our June 1999 tender offer, the original offer price of $544 per
unit was determined based upon our calculation of the liquidation value of your
partnership. Such offer price was based on similar method to that used in this
offer. Pursuant to such offer and thereafter, we purchased 1,160 units at a cash
purchase price of $544 per unit.
Prior to the Insignia Merger, tender offers had been made to acquire
units of your partnership. On July 21, 1998, IPT, then an affiliate of Insignia
and now our affiliate, commenced a tender offer at a cash purchase price of $520
per unit.
In November 1999, an unaffiliated 3rd party, began a tender offer
for 4.9% of the units in your partnership for $370 per unit. In March 1999, this
unaffiliated 3rd party commenced a tender offer for $300 per unit.
In April 1999, an unaffiliated 3rd party, commenced a tender offer
for $520 per unit.
We are aware that tender offers may have been made by unaffiliated
third parties to acquire units in your partnership in exchange for cash. We are
unaware of the amounts offered, terms, tendering parties or number of units
involved in these tender offers. In connection with tender offers made by
Insignia affiliates with respect to partnerships for which we are making offers,
some limited partners filed lawsuits, all but one of which of which have been
settled. See "The Offer--Section 13. Certain Information Concerning Your
Partnership--Legal Proceedings. We are not aware of any merger, consolidation or
other combination involving any of the Insignia Partnerships, or any
acquisitions of any of such partnerships or a material amount of the assets of
such partnerships.
PRICES ON SECONDARY MARKET
Secondary market sales information is not a reliable measure of
value because of the limited amount of any known trades. At present, privately
negotiated sales and sales through intermediaries are the only means which may
be available to a limited partner to liquidate an investment in units (other
than our offer) because the units are not listed or traded on any exchange or
quoted on NASDAQ, on the Electronic Bulletin Board, or in "pink sheets."
Secondary sales activity for the units, including privately negotiated sales,
has been limited and sporadic.
Set forth below are the high and low sale prices of units for the
years ended December 31, 1998 and 1999 and the two months ended February 29,
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 sales prices
reported in The Partnership Spectrum. We do not know whether the information
compiled by The Partnership Spectrum is accurate or complete.
SALES PRICES OF PARTNERSHIP UNITS, AS REPORTED BY THE PARTNERSHIP SPECTRUM
<TABLE>
<CAPTION>
HIGH LOW
------- -------
<S> <C> <C>
Two Months Ended February 29, 2000: $ -- $ --
Fiscal Year Ended December 31, 1999: 476 553.38
Fiscal Year Ended December 31, 1998: 507.26 536.05
</TABLE>
26
<PAGE> 30
ESTIMATED LIQUIDATION PROCEEDS
Liquidation value is a measure of the price at which the assets of
your partnership would sell if disposed of in an arms-length
transaction between a willing buyer and your partnership, each
having access to relevant information regarding the historical
revenues and expenses of the business. Your general partner (which
is our subsidiary) estimated the liquidation value of units using
the same direct capitalization method and assumptions as we did in
valuing the units for the offer price. The liquidation analysis
assumes that your partnership's properties are sold to an
independent third-party buyer at the current property value and that
other balance sheet assets (excluding amortizing assets) and
liabilities of your partnership are sold at their book value, and
that the net proceeds of sale are allocated to your partners in
accordance with your partnership's agreement of limited partnership.
The liquidation analysis assumes that the assets of your partnership
are sold in a single transaction. Should the assets be liquidated
over time, even at prices equal to those projected, distributions to
limited partners from cash flow from operations might be reduced
because your partnership's fixed costs, such as general and
administrative expenses, are not proportionately reduced with the
liquidation of assets. However, for simplification purposes, the
sales of the assets are assumed to occur concurrently. The
liquidation analysis assumes that the assets are disposed of in an
orderly manner and are not sold in forced or distressed sales where
sellers might be expected to dispose of their interests at
substantial discounts to their actual fair market value.
STANGER'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") to render an opinion as to the fairness of the consideration
originally offered of $770 per unit from a financial point of view. Stanger is
not affiliated with us or your general partner. Stanger is one of the leaders in
the field of analyzing and evaluating complex real estate transactions. In
rendering its opinion, Stanger did its own independent estimate of your
partnerships' net asset value, going concern value and liquidation value.
Stanger estimated a net asset value of $770 per unit, a going concern value of
$713 per unit, and a liquidation value of $701 per unit.
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 sale,
net of related indebtedness, together with the cash, proceeds from temporary
investments, and all other assets that are believed to have a liquidation value,
after provisions in full for all of the other known liabilities of your
partnership. The net asset value does not take into account (i) timing
considerations and (ii) costs associated with winding up of your partnership.
Going concern value is a measure of the value of your partnership if
it continued operating as an independent stand-alone entity. The estimated value
of the partnership on a going concern basis is not intended to reflect the
distributions payable to limited partners if its assets were to be sold at their
current market value. The estimated the going-concern value of your partnership
was determined by analyzing projected cash flows and performing a discounted
cash flow analysis.
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.
27
<PAGE> 31
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 fact that the price offered for your units is based on an
estimated value of your partnership's properties that has been
determined using a method believed to reflect the valuation of
such assets by buyers in the market for similar assets.
o 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 a
property sale, or a liquidation of the partnership.
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.
28
<PAGE> 32
The general partner of your partnership has a fiduciary obligation to
obtain a fair offer price for you, even as a subsidiary of AIMCO. As a
consequence of our ownership of units, we may have incentives to seek to
maximize the value of our ownership of units, which in turn may result in a
conflict for your general partner in attempting to reconcile our interests with
the interests of the other limited partners. Additionally, we desire to purchase
units at a low price and you desire to sell units at a high price. The general
partner of your partnership makes no recommendation as to whether you should
tender or refrain from tendering your units. Such conflicts of interest in
connection with the offer and the operation of AIMCO differ from those conflicts
of interest that currently exist for your partnership. Your general partner has
filed a Solicitation/Recommendation Statement on Schedule 14D-9 with the SEC,
which indicates that it is making no recommendation as to whether limited
partners should tender their units pursuant to the offer. LIMITED PARTNERS ARE
URGED TO READ THIS OFFER TO PURCHASE IN ITS ENTIRETY BEFORE DECIDING WHETHER TO
TENDER THEIR UNITS.
CONFLICTS OF INTEREST THAT CURRENTLY EXIST FOR YOUR PARTNERSHIP. We
own both the general partner of your partnership and the property manager of
your partnership's properties. The general partner does not receive an annual
management fee but may receive reimbursements for expenses incurred in its
capacity as general partner. The general partner of your partnership received
total fees and reimbursements of $286,000 in 1997, $239,000 in 1998 and $254,000
in 1999. The property manager received management fees of $670,000 in 1997,
$710,000 in 1998 and $725,000 in 1999. We have no current intention of changing
the fee structure for your general partner or the manager of your partnership's
properties.
COMPETITION AMONG PROPERTIES. Because AIMCO and your partnership
both invest in apartment properties, these properties may compete with one
another for tenants. Furthermore, you should bear in mind that AIMCO may acquire
properties in general market areas where your partnership properties are
located. It is believed that this concentration of properties in a general
market area will facilitate overall operations through collective advertising
efforts and other operational efficiencies. In managing AIMCO's properties, we
will attempt to reduce conflicts between competing properties by referring
prospective customers to the property considered to be most conveniently located
for the customer's needs.
FUTURE OFFERS. Although we have no current plans to conduct future
tender offers for your units, our plans may change based on future
circumstances, including tender offers made by third parties. Any such future
offers that we might make could be for consideration that is more or less than
the consideration we are currently offering.
SECTION 12. FUTURE PLANS OF THE PURCHASER.
As described above under "The Offer - Section 9. Background and
Reasons for the Offer," we own the general partner and thereby control the
management of your partnership. In addition, we own the manager of the
properties. We currently intend that, upon consummation of the offer, we will
hold the units acquired and your partnership will continue its business and
operations substantially as they are currently being conducted. The offer is not
expected to have any effect on partnership operations.
Although we have no present intention to do so, 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;
29
<PAGE> 33
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: (1) payment
of extraordinary distributions; (2) refinancing, reducing or increasing existing
indebtedness of the partnership; (3) sales of assets, individually or as part of
a complete liquidation; and (4) mergers or other consolidation transactions
involving the partnership. Any such merger or consolidation transaction could
involve other limited partnerships in which your general partner or its
affiliates serve as general partners, or a combination of the partnership with
one or more existing, publicly traded entities (including, possibly, affiliates
of AIMCO), in any of which limited partners might receive cash, common stock or
other securities or consideration. There is no assurance, however, as to when or
whether any of the transactions referred to above might occur. If any such
transaction is effected by the partnership and financial benefits accrue to the
limited partners of your partnership, we will participate in those benefits to
the extent of our ownership of units. The agreement of limited partnership
prohibits limited partners from voting on actions taken by the partnership,
unless otherwise specifically permitted therein. Limited partners may vote on a
liquidation, and since we currently own a majority of the outstanding units, we
can control any vote of the limited partners. Our primary objective in seeking
to acquire the units pursuant to the offer is not, however, to influence the
vote on any particular transaction, but rather to generate a profit on the
investment represented by those units.
SECTION 13. CERTAIN INFORMATION CONCERNING YOUR PARTNERSHIP.
GENERAL. Shelter Properties V 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 seven residential apartment complexes: Foxfire Apartments, a 266-unit
complex in Atlanta, Georgia; Old Salem Apartments, a 364-unit complex in
Charlottesville, Virginia; Woodland Village Apartments, a 308-unit complex in
Columbia, South Carolina; Lake Johnson Mews Apartments, a 201-unit complex in
Raleigh, North Carolina; The Lexington Apartments, a 267-unit complex in
Sarasota, Florida; Millhopper Village Apartments, a 136-unit complex in
Gainesville, Florida; and Tar River Estates, a 402-unit complex in Greenville,
North Carolina.
The general partner of your partnership is Shelter Realty V
Corporation, which is a wholly owned subsidiary of AIMCO. A wholly owned
subsidiary of AIMCO serves as manager of the properties owned by your
partnership. As of May 22, 2000, there were 52,538 units issued and outstanding,
which were held of record by 1,930 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,
30
<PAGE> 34
such as the partnership's financial position and real estate and capital markets
conditions. The general partner monitors the properties' specific locale and
sub-market conditions (including stability of the surrounding neighborhood)
evaluating current trends, competition, new construction and economic changes.
The general partner oversees each asset's operating performance and continuously
evaluates the physical improvement requirements. In addition, the financing
structure for each property (including any prepayment penalties), tax
implications, availability of attractive mortgage financing to a purchaser, and
the investment climate are all considered. Any of these factors, and possibly
others, could potentially contribute to any decision by the general partner to
sell, refinance, upgrade with capital improvements or hold a particular
partnership property. If rental market conditions improve, the level of
distributions might increase over time. It is possible that the private resale
market for properties could improve over time, making a sale of the
partnership's properties in a private transaction at some point in the future a
more viable option than it is currently. After taking into account the foregoing
considerations, your general partner is not currently seeking a sale of your
partnership's properties primarily because it expects the properties' operating
performance to improve in the near term. In particular, the general partner
noted that it expects to spend approximately $1,811,382 for capital improvements
at the properties in 2000 to repair and update the properties. Although there
can be no assurance as to future performance, however, these expenditures are
expected to improve the desirability of the property to tenants. The general
partner does not believe that a sale of the properties at the present time would
adequately reflect the properties' future prospects. Another significant factor
considered by your general partner is the likely tax consequences of a sale of
the properties for cash. Such a transaction would likely result in tax
liabilities for many limited partners. The general partner has not received any
recent indication of interest or offer to purchase the properties.
ORIGINALLY ANTICIPATED TERM OF YOUR PARTNERSHIP. Your partnership's
prospectus, dated May 27, 1983, 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 2023. The partnership currently owns seven apartment
properties. Your general partner (which is our subsidiary) continually considers
whether a property should be sold or otherwise disposed of after consideration
of relevant factors, including prevailing economic conditions, availability of
favorable financing and tax considerations, with a view to achieving maximum
capital appreciation for your partnership. We cannot predict when any of the
properties will be sold or otherwise disposed of. However, there is no current
plan or intention to sell the properties in the near future.
Under your partnership's agreement of limited partnership, the term of
the partnership will continue until December 31, 2023, unless sooner terminated
as provided in the agreement or by law. Limited partners could, as an
alternative to tendering their units, take a variety of possible actions,
including voting to liquidate the partnership or amending the agreement of
limited partnership to authorize limited partners to cause the partnership to
merge with another entity or engage in a "roll-up" or similar transaction.
CAPITAL REPLACEMENTS Your partnership has an ongoing program of capital
improvements, replacements and renovations, including roof replacements, kitchen
and bath renovations, balcony repairs (where applicable), replacement of various
building systems and other replacements and renovations in the ordinary course
of business. All capital improvement and renovation costs, which are budgeted at
$1,811,382 for 2000, are expected 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 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.
31
<PAGE> 35
FINANCIAL DATA. The selected financial information of your partnership
set forth below for the years ended November 30, 1999 and 1998 is based on
audited financial statements. The selected financial information set forth below
for the three month-period ended March 31, 2000 and 1999 [and the one-month
period ended December 31, 1999 and 1998] is based on unaudited financial
statements. This information should be read in conjunction with such financial
statements, including notes thereto, and "Management's Discussion and Analysis
of Financial Condition and Results of Operations of Your Partnership" in the
Annual Report on Form 10-KSB of your partnership for the year ended November 30,
1999, and the Quarterly Report on Form 10-QSB for the quarter ended March 31,
2000.
SHELTER PROPERTIES V LIMITED PARTNERSHIP
(IN THOUSANDS, EXCEPT PER UNIT DATA)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS FOR THE ONE MONTH
ENDED ENDED FOR THE YEAR ENDED
MARCH 31, DECEMBER 31,(1) NOVEMBER 30,
---------------------- ---------------------- ----------------------
(UNAUDITED) (UNAUDITED)
2000 1999 1999 1998 1999 1998
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
OPERATING DATA:
Total Revenues ....................... $ 3,645 $ 3,630 $ 1,195 $ 1,215 $ 14,649 $ 14,116
Net Income (Loss) .................... 509 545 184 250 1,965 1,431
Net Income per limited
partnership unit .................. 9.59 10.28 3.46 4.70 37.02 26.97
Distributions per limited
partnership unit .................. -- 35.80 -- -- 57.84 67.49
</TABLE>
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,(1) NOVEMBER 30,
---------------------- ---------------------- ----------------------
(UNAUDITED) (UNAUDITED)
2000 1999 1999 1998 1999 1998
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and Cash Equivalents ............ $ 9,757 $ 1,786 $ 8,852 $ 2,892 $ 7,795 $ 3,375
Real Estate, Net of
Accumulated Depreciation ............. 31,806 32,372 24,462 29,185 31,885 32,924
Total Assets ......................... 43,277 36,176 37,255 36,663 45,036 39,005
Notes Payable ........................ 37,038 31,001 37,322 31,240 37,222 31,108
General Partners' Capital
(Deficit) ............................ (334) (340) (339) (324) (341) (327)
Limited Partners' Capital
(Deficit) ............................ 5,288 4,602 4,784 5,943 4,602 5,696
Partners' Capital (Deficit) .......... 4,954 4,262 4,445 5,619 4,261 5,369
Net Increase (Decrease) in
Cash and Cash Equivalents ............ 905 (1,106) 746 (541) 4,420 28
Net Cash Provided by
Operating Activities ................. (239) 1,080 295 646 5,377 4,638
</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.
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.
32
<PAGE> 36
<TABLE>
<CAPTION>
Date of
Property Purchase Type of Ownership Use
-------- -------- ----------------- ----
<S> <C> <C> <C>
Foxfire Apartments 07/19/83 Fee ownership, subject to Apartment
Atlanta, Georgia first mortgage (1) 266 units
Old Salem Apartments 08/25/83 Fee ownership, subject to Apartment
Charlottesville, Virginia first mortgage 364 units
Woodland Village Apartments 09/01/83 Fee ownership, subject to Apartment
Columbia, South Carolina first mortgage 308 units
Lake Johnson Mews Apartments 09/30/83 Fee ownership, subject to Apartment
Raleigh, North Carolina first mortgage 201 units
The Lexington Green Apartments 10/31/83 Fee ownership, subject to Apartment
Sarasota, Florida first mortgage (1) 267 units
Millhopper Village Apartments 11/22/83 Fee ownership, subject to Apartment
Gainesville, Florida first mortgage 136 units
Tar River Estates 01/18/84 Fee ownership, subject to Apartment
first mortgage (1) 402 units
</TABLE>
-----------------
(1) Property is held by a limited partnership in which your limited partnership
owns a 99.99% interest.
ACCUMULATED DEPRECIATION SCHEDULE. The following shows the gross
carrying value, accumulated depreciation and federal tax basis of each of your
partnership's properties as of November 30, 1999.
<TABLE>
<CAPTION>
Gross
Carrying Accumulated Federal
Property Value Depreciation Rate Method Tax Basis
-------- -------- ------------ -------- ------ ---------
(in thousands) (in thousands)
<S> <C> <C> <C> <C> <C>
Foxfire Apartments $10,847 6,689 5-29 yrs S/L $1,486
Old Salem Apartments 17,421 9,959 5-28 yrs S/L 2,849
Woodland Village Apartments 12,301 7,147 5-30 yrs S/L 1,832
Lake Johnson Mews Apartments 8,565 4,876 5-30 yrs S/L 1,191
The Lexington Green Apartments 10,385 5,360 5-34 yrs S/L 2,507
Millhopper Village Apartments 5,828 3,504 5-29 yrs S/L 765
Tar River Estates 10,614 6,541 5-27 yrs S/L 2,147
$75,961 $44,076 $12,777
======= ======= =======
</TABLE>
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<PAGE> 37
SCHEDULE OF MORTGAGES. The following shows certain information
regarding the outstanding mortgages encumbering each of your partnership's
properties as of November 30, 1999.
<TABLE>
<CAPTION>
Principal
Principal Stated Balance
Balance At Interest Period Maturity Due At
Property November 30, 1999 Rate Amortized Date Maturity
-------- ----------------- -------- --------- -------- ---------
(in thousands) (in thousands)
<S> <C> <C> <C> <C> <C>
Foxfire Apartments
1st mortgage $ 7,200 7.79% (1) 11/01/19 $ 59
Old Salem Apartments
1st mortgage 10,157 8.02% (1) 12/01/19 85
Woodland Village
Apartments
1st mortgage 4,950 7.33% none 11/01/03 4,950
Lake Johnson Mews
Apartments
1st mortgage 4,350 7.33% none 11/01/03 4,350
The Lexington Green
Apartments
1st mortgage 3,280 7.60% none 11/15/02 2,870
2nd mortgage 123 7.60% none 11/15/02 123
Millhopper Village
Apartments
1st mortgage 2,700 7.33% none 11/01/03 2,700
Tar River Estates
1st mortgage 4,531 7.60% (2) 11/15/02 3,965
2nd mortgage 169 7.60% none 11/15/02 169
Total $37,460 $19,761
=======
Less: unamortized 238
discount
Total $37,222
=======
</TABLE>
-----------
(1) The principal balance is being amortized over 240 months.
(2) The principal balance is being amortized over 257 months with a balloon
payment due November 15, 2002.
AVERAGE ANNUAL RENTAL RATES AND OCCUPANCY. The following shows the
average annual rental rates and occupancy percentages for each of your
partnership's properties during the past two years.
<TABLE>
<CAPTION>
Average Annual Rental Rates Average Annual
--------------------------- -------------------------
Occupancy
---------
Property 1999 1998 1999 1998
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C>
Foxfire Apartments $ 8,071 $ 7,776 94% 93%
Old Salem Apartments 7,578 7,402 96% 94%
Woodland Village Apartments 7,723 7,493 94% 93%
Lake Johnson Mews Apartments 8,710 8,389 95% 95%
The Lexington Green Apartments 7,918 7,762 97% 94%
Millhopper Village Apartments 8,462 8,129 96% 96%
Tar River Estates 6,366 6,176 82% 96%
</TABLE>
SCHEDULE OF REAL ESTATE TAXES AND RATES. The following shows the real
estate taxes and rates for the year ended November 30, 1999 for each of your
partnership's properties.
<TABLE>
<CAPTION>
Property 1999 Billing 1999 Rate
-------- ------------ ---------
(in thousands)
<S> <C> <C>
Foxfire Apartments $ 102 3.79%
Old Salem Apartments 87 0.72%
Woodland Village Apartments 157 32.74%
Lake Johnson Mews Apartments 68 1.28%
The Lexington Green Apartments 194 2.47%
Millhopper Village Apartments 79 2.65%
Tar River Estates 136 1.46%
$ 823
=====
</TABLE>
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
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<PAGE> 38
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.
YEAR ENDED NOVEMBER 30 AMOUNT
---------------------- ------
1995 $ 4.76
1996 9.52
1997 95.16
1998 67.49
1999 57.84
Three months ended
March 31, 2000 38.07
-------
Total $272.84
=======
--------------
OPERATING BUDGETS OF THE PARTNERSHIP. A summary of the operating
budgets of your partnership's properties for the year ending on December 31,
2000 is as follows:
<TABLE>
<CAPTION>
Woodland Lake Johnson
Foxfire Old Salem Village Mews
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Total Revenues $ 2,117,912 $ 2,276,617 $ 2,276,617 $ 1,711,285
Operating Expenses (968,654) (1,003,464) (1,003,464) (598,670)
Replacement Reserves - Net -- 92,400 92,400 69,948
Debt Service (362,415) (362,832) (362,832) (316,143)
Capital Expenditures -- -- -- --
------------ ------------ ------------ ------------
Net Cash Flow $ 786,843 $ 1,002,721 $ 1,002,721 $ 866,420
============ ============ ============ ============
</TABLE>
<TABLE>
<CAPTION>
The Lexington Millhopper Tar River
Green Village Estates Total
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Total Revenues $ 2,159,235 $ 1,162,539 $ 1,732,806 $ 13,437,011
Operating Expenses (1,110,229) (469,679) (983,595) (6,137,755)
Replacement Reserves - Net -- 37,404 -- 292,152
Debt Service (274,691) (197,916) (349,793) (2,226,622)
Capital Expenditures -- -- -- --
------------ ------------ ------------ ------------
Net Cash Flow $ 774,315 $ 532,348 $ 399,418 $ 5,364,786
============ ============ ============ ============
</TABLE>
The above budget, at the time it was made, was forward-looking
information developed by the general partner of your partnership. Therefore, the
budget was dependent upon future events with respect to the ability of your
partnership to meet such budget. The budget incorporated various assumptions
including, but not limited to, revenue (including occupancy rates), various
operating expenses, general and administrative expenses, capital expenditures,
and working capital levels. While the general partner deemed such budget to be
reasonable and valid at the date made, there is no assurance that the assumed
facts will be validated or that the budgeted results will actually occur. Any
estimate of the future performance of a business, such as your partnership's
business, is forward-looking and based on assumptions some of which inevitably
will prove to be incorrect.
The budget amounts provided above are figures that were not computed in
accordance with GAAP. In particular, items that are categorized as capital
expenditures for purposes of preparing the operating budget are
35
<PAGE> 39
often re-categorized as expenses when the financial statements are audited and
presented in accordance with GAAP. Therefore, the summary operating budget
presented for fiscal 2000 should not necessarily be considered as indicative of
what the audited operating results for fiscal 2000 will be.
BENEFICIAL OWNERSHIP OF INTERESTS IN YOUR PARTNERSHIP. Together with
our subsidiaries, we currently own, in the aggregate, approximately 63.19% your
partnership's limited partnership units. Except as set forth above, neither we,
nor, to the best of our knowledge, any of our affiliates, (i) beneficially own
or have a right to acquire any units, (ii) 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
FEES AND MANAGEMENT
YEAR ENDED NOVEMBER 30, EXPENSES FEES
----------------------- ----------- ----------
<S> <C> <C>
1995 $200,000 $615,000
1996 238,000 632,000
1997 286,000 670,000
1998 239,000 710,000
1999 254,000 725,000
</TABLE>
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.
On March 24, 1998, certain persons claiming to own limited partner
interests in certain of the limited partnerships for which our subsidiaries act
as general partner (including your partnership) filed the purported class and
derivative action against Insignia Financial Group, Inc., AIMCO, the general
partners of the partnerships, certain persons and entities who purportedly
formerly controlled the general partners, and additional entities affiliated
with and individuals who are officers, directors and/or principals of several of
the defendants. The complaint contains allegations that, among other things, (i)
the defendants breached fiduciary duties owed to the plaintiffs, or aided and
abetted in those purported breaches, by selling or agreeing to sell their
"fiduciary positions" as stockholders, officers and directors of the general
partners for a profit and retaining said profit rather than distributing it to
the plaintiffs; (ii) the defendants breached fiduciary duties, or aided and
abetted in those purported breaches, by mismanaging the partnerships and
misappropriating assets of the partnerships by (a) manipulating the operations
of the partnerships to depress the trading price of limited partnership units of
the partnerships; (b) coercing and fraudulently inducing unitholders to sell
units to certain of the defendants at depressed prices; and (c) using the voting
control obtained by purchasing units at depressed prices to entrench certain of
the defendants' positions of control over the partnerships; and (iii) the
defendants breached their fiduciary duties to the plaintiffs by (a) selling
assets of the partnerships such as mailing lists of unitholders and (b) causing
the general partners to enter into exclusive arrangements with their affiliates
to sell goods and services to the general partners, the unitholders and tenants
of properties owned by the partnerships. The complaint also alleges that the
foregoing allegations constitute violations of various California securities,
corporate and partnership statutes, as well as conversion and common law fraud.
The complaint seeks unspecified compensatory and punitive damages, an injunction
blocking the sale of control of the general partners and a court order directing
the defendants to discharge their fiduciary duties to the plaintiffs. On June
25, 1998, the defendants filed motions seeking dismissal of the action. In lieu
of responding to the motion, plaintiffs filed an amended complaint. On October
14, 1998, the AIMCO and Insignia defendants filed demurrers to the amended
complaint. The demurrers (which are requests to dismiss the action as a matter
of law)
36
<PAGE> 40
were heard on February 8, 1999, but no decision has been reached by the Court. A
settlement of this lawsuit was reached between certain plaintiffs and
defendants, but such settlement has been terminated.
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 votes of
the limited partners.
SECTION 15. SOURCE OF FUNDS.
We expect that approximately $13,985,472 will be required to purchase all
of the 19,002 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
interest in approximately 40 other limited partnerships. If all such offers were
fully subscribed for cash, we would be required to pay approximately $187
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 of the offers will be substantially less than $187 million. We
believe that we have sufficient cash on hand and available sources of financing
to pay such amounts. As of March 31, 2000, we had $22 million of cash on hand
and $90 million available for borrowing under our existing lines of credit.
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.
37
<PAGE> 41
SECTION 16. DISSENTERS' RIGHTS.
Neither the agreement of limited partnership of your partnership nor
applicable law provides any right for you to have your units appraised or
redeemed in connection with, or as a result of, our offer. You have the
opportunity to make an individual decision on whether or not to tender your
units in the offer.
SECTION 17. CONDITIONS OF THE OFFER.
Notwithstanding any other provisions of our offer, we will not be required
to accept for payment and pay for any units tendered pursuant to our offer, may
postpone the purchase of, and payment for, units tendered, and may terminate or
amend our offer if at any time on or after the date of this offer to purchase
and at or before the expiration of our offer (including any extension thereof),
any of the following shall occur or may be reasonably expected to occur:
(a) any change (or any condition, event or development involving a
prospective change) shall have occurred or been threatened in the business,
properties, assets, liabilities, indebtedness, capitalization, condition
(financial or otherwise), operations, licenses or franchises, management
contract, or results of operations or prospects of your partnership or local
markets in which your partnership owns property, including any fire, flood,
natural disaster, casualty loss, or act of God that, in our reasonable judgment,
are or may be materially adverse to your partnership or the value of the units
to us, or we shall have become aware of any facts relating to your partnership,
its indebtedness or its operations which, in our reasonable judgment, has or may
have material significance with respect to the value of your partnership or the
value of the units to us; or
(b) there shall have occurred (i) any general suspension of trading in, or
limitation on prices for, securities on any national securities exchange or the
over-the-counter market in the United States, (ii) a decline in the closing
price of a share of AIMCO's Class A Common Stock of more than 7.5% from the date
hereof, (iii) any extraordinary or material adverse change in the financial,
real estate or money markets or major equity security indices in the United
States such that there shall have occurred at least a 25 basis point increase in
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
(c) there shall have been threatened, instituted or pending any action,
proceeding, application or counterclaim by any Federal, state, local or foreign
government, governmental authority or governmental agency, or by any other
person, before any governmental authority, court or regulatory or administrative
agency, authority or tribunal, which (i) challenges or seeks to challenge our
purchase of the units, restrains, prohibits or delays the making or consummation
of our offer, prohibits the performance of any of the contracts or other
arrangements entered into by us (or any affiliates of ours), seeks to obtain any
material amount of damages as a result of the transactions contemplated by our
offer, (ii) seeks to make the purchase of, or payment for, some or all of the
units pursuant to our offer illegal or results in a delay in our ability to
accept for payment or pay for some or all of the units, (iii) seeks to prohibit
or limit the ownership or operation by us or any of our affiliates of the entity
serving as general partner of 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
38
<PAGE> 42
(d) there shall be any action taken, or any statute, rule, regulation,
order or injunction shall be sought, proposed, enacted, promulgated, entered,
enforced or deemed applicable to our offer, your partnership, any general
partner of your partnership, us or any affiliate of ours or your partnership, or
any other action shall have been taken, proposed or threatened, by any
government, governmental authority or court, that, in our reasonable judgment,
might, directly or indirectly, result in any of the consequences referred to in
clauses (i) through (v) of paragraph (c) above; or
(e) 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
(f) a tender or exchange offer for any units shall have been commenced or
publicly proposed to be made by another person or "group" (as defined in Section
13(d)(3) of the 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
(g) the offer to purchase may have an adverse effect on AIMCO's status as a
REIT; or
(h) we shall not have adequate cash or financing commitments available to
pay the for the units validly tendered.
The foregoing conditions are for our sole benefit and may be asserted by us
regardless of the circumstances giving rise to such conditions or may be waived
by us in whole or in part at any time and from time to time in our reasonable
discretion. The failure by us at any time to exercise any of the foregoing
rights shall not be deemed a waiver of any such right, the waiver of any such
right with respect to any particular facts or circumstances shall not be deemed
a waiver with respect to any other facts or circumstances and each right shall
be deemed a continuing right which may be asserted at any time and from time to
time.
SECTION 18. CERTAIN LEGAL MATTERS.
GENERAL. Except as set forth in this Section 18, we are not, based on
information provided by your general partner (which is our subsidiary), aware of
any licenses or regulatory permits that would be material to
39
<PAGE> 43
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 ATTACHED HERETO AS ANNEX II AND THE ACKNOWLEDGMENT AND AGREEMENT
AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED
UPON AS HAVING BEEN AUTHORIZED.
We have filed with the SEC a Tender Offer Statement on Schedule TO,
pursuant to Section 14(d)(1) and Rule 14d-3 under the Exchange Act, furnishing
certain additional information with respect to our offer, and may file
amendments thereto. Your partnership has filed with the SEC a
Solicitation/Recommendation Statement on Schedule 14D-9 pursuant to Section
14(d)(4) and Rule 14d-9 under the Exchange Act, furnishing certain additional
information about your partnership's and the general partner's position
concerning our offer, and your partnership may file amendments thereto. The
Schedules TO and 14D-9 and any amendments to either Schedule, including
exhibits, may be inspected and copies may be obtained at the same place and in
the same manner as described in "The Offer--Section 13. Certain Information
Concerning Your Partnership--Additional Information Concerning Your
Partnership."
AIMCO PROPERTIES, L.P.
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<PAGE> 44
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
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 the Company 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 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 the Company 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 the
Company) and 3.1 million square feet of commercial real estate.
</TABLE>
41
<PAGE> 45
<TABLE>
<S> <C>
Thomas W. Toomey Mr. Toomey served as Senior Vice President -- Finance and Administration of
the Company 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 the Company 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 the Company 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 the Company effective December 1997. Prior to joining the
Company, 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.
Patrick J. Foye Mr. Foye was appointed Executive Vice President of the Company in May 1998.
He is responsible for acquisitions of partnership securities, consolidation
of minority interests, and corporate and other acquisitions. Prior to
joining the Company, 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.
</TABLE>
42
<PAGE> 46
<TABLE>
<S> <C>
Lance J. Graber Mr. Graber was appointed Executive Vice President -- Acquisitions of the
Company in October 1999. His principal business function is acquisitions.
Prior to joining the Company, 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 the Company and has served as Executive Vice
President -- Property Operations of the Company 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.
Paul J. McAuliffe Mr. McAuliffe has been Executive Vice President of the Company since
February 1999 and was appointed Chief Financial Officer in October 1999.
Prior to joining the Company, 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.
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Martha L. Long Ms. Long has been Senior Vice President and Controller of the Managing
General Partner and AIMCO since October 1998, as a result of the
acquisition of Insignia Financial Group, Inc. From June 1994 until January
1997, she was the Controller for Insignia, and was promoted to Senior Vice
President - Finance and Controller in January 1997, retaining that title
until October 1998. From 1988 to June 1994, Ms. Long was Senior Vice
President and Controller for the First Savings Bank, FSB in Greenville,
South Carolina.
Richard S. Ellwood Mr. Ellwood was appointed a director of the Company in July 1994. Mr.
12 Auldwood Lane Ellwood is currently Chairman of the Audit Committee and a member of the
Rumson, NJ 07660 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.
J. Landis Martin Mr. Martin was appointed a director of the Company in July 1994 and became
199 Broadway Chairman of the Compensation Committee on March 19, 1998. Mr. Martin is a
Suite 4300 member of the Audit Committee. Mr. Martin has served as President and Chief
Denver, CO 80202 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.
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Thomas L. Rhodes Mr. Rhodes was appointed a Director of the Company in July 1994 and is
215 Lexington Avenue currently a member of the Audit and Compensation Committees. Mr. Rhodes has
4th Floor served as the President and Director of National Review magazine since
New York, NY 10016 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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