<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------------------
SCHEDULE 14D-1
TENDER OFFER STATEMENT PURSUANT TO SECTION 14(D)(1)
OF THE SECURITIES EXCHANGE ACT OF 1934
------------------------------------
CONSOLIDATED CAPITAL INSTITUTIONAL PROPERTIES/2
(Name of Subject Company)
REEDY RIVER PROPERTIES, L.L.C.
INSIGNIA PROPERTIES, L.P.
INSIGNIA PROPERTIES TRUST
INSIGNIA FINANCIAL GROUP, INC.
(Bidders)
UNITS OF LIMITED PARTNERSHIP INTEREST
(Title of Class of Securities)
NONE
(Cusip Number of Class of Securities)
------------------------------------
JEFFREY P. COHEN
SENIOR VICE PRESIDENT
INSIGNIA FINANCIAL GROUP, INC.
375 PARK AVENUE
SUITE 3401
NEW YORK, NEW YORK 10152
(212) 750-6070
(Name, Address and Telephone Number of Person Authorized
to Receive Notices and Communications on Behalf of Bidders)
COPY TO:
JOHN A. HEALY, ESQ.
ROGERS & WELLS
200 PARK AVENUE
NEW YORK, NEW YORK 10166
(212) 878-8000
------------------------------------
CALCULATION OF FILING FEE
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
Transaction Valuation*: $12,000,000 Amount of Filing Fee: $2,400
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
* For purposes of calculating the fee only. This amount assumes the
purchase of 300,000 units of limited partnership interest ("Units") of
the subject partnership for $40 per Unit. The amount of the filing
fee, calculated in accordance with Section 14(g)(3) and Rule 0-11(d)
under the Securities Exchange Act of 1934, as amended, equals 1/50th
of one percent of the aggregate of the cash offered by the bidders.
o Check box if any part of the fee is offset as provided by Rule
0-11(a)(2) and identify the filing with which the offsetting fee was
previously paid. Identify the previous filing by registration
statement number, or the form or schedule and the date of its filing.
Amount Previously Paid: Not Applicable Filing Party: Not Applicable
Form or Registration No.: Not Applicable Date Filed: Not Applicable
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- ---------------------------------- -----------------------------------
CUSIP No. NONE 14D-1 Page 2
- ---------------------------------- -----------------------------------
<S> <C>
========================================================================================================================
1. Name of Reporting Persons
S.S. or I.R.S. Identification Nos. of Above Persons
REEDY RIVER PROPERTIES, L.L.C.
- ------------------------------------------------------------------------------------------------------------------------
2. Check the Appropriate Box if a Member of a Group
(a) |_|
(b) |X|
- ------------------------------------------------------------------------------------------------------------------------
3. SEC Use Only
- ------------------------------------------------------------------------------------------------------------------------
4. Sources of Funds
AF
- ------------------------------------------------------------------------------------------------------------------------
5. Check if Disclosure of Legal Proceedings is Required Pursuant to Items 2(e) or 2(f)
| |
- ------------------------------------------------------------------------------------------------------------------------
6. Citizenship or Place of Organization
DELAWARE
- ------------------------------------------------------------------------------------------------------------------------
7. Aggregate Amount Beneficially Owned by Each Reporting Person
15,259
- ------------------------------------------------------------------------------------------------------------------------
8. Check if the Aggregate Amount in Row 7 Excludes Certain Shares
| |
- ------------------------------------------------------------------------------------------------------------------------
9. Percent of Class Represented by Amount in Row 7
1.7%
- ------------------------------------------------------------------------------------------------------------------------
10. Type of Reporting Person
OO
========================================================================================================================
<PAGE>
- ---------------------------------- -----------------------------------
CUSIP No. NONE 14D-1 Page 3
- ---------------------------------- -----------------------------------
========================================================================================================================
1. Name of Reporting Persons
S.S. or I.R.S. Identification Nos. of Above Persons
INSIGNIA PROPERTIES, L.P.
- ------------------------------------------------------------------------------------------------------------------------
2. Check the Appropriate Box if a Member of a Group
(a) |_|
(b) |X|
- ------------------------------------------------------------------------------------------------------------------------
3. SEC Use Only
- ------------------------------------------------------------------------------------------------------------------------
4. Sources of Funds
WC
- ------------------------------------------------------------------------------------------------------------------------
5. Check if Disclosure of Legal Proceedings is Required Pursuant to Items 2(e) or 2(f)
| |
- ------------------------------------------------------------------------------------------------------------------------
6. Citizenship or Place of Organization
DELAWARE
- ------------------------------------------------------------------------------------------------------------------------
7. Aggregate Amount Beneficially Owned by Each Reporting Person
15,259
- ------------------------------------------------------------------------------------------------------------------------
8. Check if the Aggregate Amount in Row 7 Excludes Certain Shares
| |
- ------------------------------------------------------------------------------------------------------------------------
9. Percent of Class Represented by Amount in Row 7
1.7%
- ------------------------------------------------------------------------------------------------------------------------
10. Type of Reporting Person
PN
========================================================================================================================
<PAGE>
- ---------------------------------- -----------------------------------
CUSIP No. NONE 14D-1 Page 4
- ---------------------------------- -----------------------------------
========================================================================================================================
1. Name of Reporting Persons
S.S. or I.R.S. Identification Nos. of Above Persons
INSIGNIA PROPERTIES TRUST
- ------------------------------------------------------------------------------------------------------------------------
2. Check the Appropriate Box if a Member of a Group
(a) |_|
(b) |X|
- ------------------------------------------------------------------------------------------------------------------------
3. SEC Use Only
- ------------------------------------------------------------------------------------------------------------------------
4. Sources of Funds
NOT APPLICABLE
- ------------------------------------------------------------------------------------------------------------------------
5. Check if Disclosure of Legal Proceedings is Required Pursuant to Items 2(e) or 2(f)
| |
- ------------------------------------------------------------------------------------------------------------------------
6. Citizenship or Place of Organization
MARYLAND
- ------------------------------------------------------------------------------------------------------------------------
7. Aggregate Amount Beneficially Owned by Each Reporting Person
15,259
- ------------------------------------------------------------------------------------------------------------------------
8. Check if the Aggregate Amount in Row 7 Excludes Certain Shares
| |
- ------------------------------------------------------------------------------------------------------------------------
9. Percent of Class Represented by Amount in Row 7
1.7%
- ------------------------------------------------------------------------------------------------------------------------
10. Type of Reporting Person
OO
========================================================================================================================
<PAGE>
- ---------------------------------- -----------------------------------
CUSIP No. NONE 14D-1 Page 5
- ---------------------------------- -----------------------------------
========================================================================================================================
1. Name of Reporting Persons
S.S. or I.R.S. Identification Nos. of Above Persons
INSIGNIA FINANCIAL GROUP, INC.
- ------------------------------------------------------------------------------------------------------------------------
2. Check the Appropriate Box if a Member of a Group
(a) |_|
(b) |X|
- ------------------------------------------------------------------------------------------------------------------------
3. SEC Use Only
- ------------------------------------------------------------------------------------------------------------------------
4. Sources of Funds
NOT APPLICABLE
- ------------------------------------------------------------------------------------------------------------------------
5. Check if Disclosure of Legal Proceedings is Required Pursuant to Items 2(e) or 2(f)
| |
- ------------------------------------------------------------------------------------------------------------------------
6. Citizenship or Place of Organization
DELAWARE
- ------------------------------------------------------------------------------------------------------------------------
7. Aggregate Amount Beneficially Owned by Each Reporting Person
15,259
- ------------------------------------------------------------------------------------------------------------------------
8. Check if the Aggregate Amount in Row 7 Excludes Certain Shares
| |
- ------------------------------------------------------------------------------------------------------------------------
9. Percent of Class Represented by Amount in Row 7
1.7%
- ------------------------------------------------------------------------------------------------------------------------
10. Type of Reporting Person
CO
========================================================================================================================
<PAGE>
- ---------------------------------- -----------------------------------
CUSIP No. NONE 14D-1 Page 6
- ---------------------------------- -----------------------------------
========================================================================================================================
1. Name of Reporting Persons
S.S. or I.R.S. Identification Nos. of Above Persons
ANDREW L. FARKAS
- ------------------------------------------------------------------------------------------------------------------------
2. Check the Appropriate Box if a Member of a Group
(a) |_|
(b) |X|
- ------------------------------------------------------------------------------------------------------------------------
3. SEC Use Only
- ------------------------------------------------------------------------------------------------------------------------
4. Sources of Funds
NOT APPLICABLE
- ------------------------------------------------------------------------------------------------------------------------
5. Check if Disclosure of Legal Proceedings is Required Pursuant to Items 2(e) or 2(f)
| |
- ------------------------------------------------------------------------------------------------------------------------
6. Citizenship or Place of Organization
UNITED STATES
- ------------------------------------------------------------------------------------------------------------------------
7. Aggregate Amount Beneficially Owned by Each Reporting Person
15,259
- ------------------------------------------------------------------------------------------------------------------------
8. Check if the Aggregate Amount in Row 7 Excludes Certain Shares
| |
- ------------------------------------------------------------------------------------------------------------------------
9. Percent of Class Represented by Amount in Row 7
1.7%
- ------------------------------------------------------------------------------------------------------------------------
10. Type of Reporting Person
IN
========================================================================================================================
</TABLE>
<PAGE>
ITEM 1. SECURITY AND SUBJECT COMPANY.
(a) The name of the subject company is Consolidated Capital
Institutional Properties/2, a California limited partnership (the
"Partnership"). The address of the Partnership's principal executive offices is
One Insignia Financial Plaza, Greenville, South Carolina 29602.
(b) This Tender Offer Statement on Schedule 14D-1 (the "Statement")
relates to an offer by Reedy River Properties, L.L.C., a Delaware limited
liability company (the "Purchaser"), to purchase up to 300,000 of the
outstanding units of limited partnership interest ("Units") of the Partnership
at a purchase price of $40 per Unit, net to the seller in cash, upon the terms
and subject to the conditions set forth in the Offer to Purchase dated October
30, 1997 (the "Offer to Purchase") and the related Assignment of Partnership
Interest (which, together with any supplements or amendments, collectively
constitute the "Offer"), copies of which are filed as Exhibits (a)(1) and
(a)(2) hereto, respectively. The information set forth in the Offer to Purchase
under "Introduction" is incorporated herein by reference.
(c) The information set forth in the Offer to Purchase in Section 13
("Background of the Offer") is incorporated herein by reference.
ITEM 2. IDENTITY AND BACKGROUND.
(a)-(d), (g) This Statement is being filed by the Purchaser, Insignia
Properties, L.P., a Delaware limited partnership ("IPLP"), Insignia Properties
Trust, a Maryland real estate investment trust ("IPT"), and Insignia Financial
Group, Inc., a Delaware corporation ("Insignia") (collectively, the "Bidders").
The information set forth in the Offer to Purchase under "Introduction," in
Section 11 ("Certain Information Concerning the Purchaser, IPLP, IPT and
Insignia") and in Schedules I, II and III to the Offer to Purchase is
incorporated herein by reference.
(e)-(f) During the last five years, none of the Bidders nor, to the
best of their knowledge, any of the persons listed in Schedules I, II and III
to the Offer to Purchase (i) has been convicted in a criminal proceeding
(excluding traffic violations or similar misdemeanors) or (ii) was a party to a
civil proceeding of a judicial or administrative body of competent jurisdiction
and as a result of such proceeding was or is subject to a judgment, decree or
final order enjoining further violations of or prohibiting activities subject
to federal or state securities laws or finding any violation with respect to
such laws.
ITEM 3. PAST CONTACTS, TRANSACTIONS OR NEGOTIATIONS WITH THE SUBJECT COMPANY.
(a)-(b) The information set forth in the Offer to Purchase under
"Introduction," in Section 10 ("Conflicts of Interest and Transactions with
Affiliates") and in Section 13 ("Background of the Offer") is incorporated
herein by reference.
ITEM 4. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
(a) The information set forth in the Offer to Purchase in Section 10
("Conflicts of Interest and Transactions with Affiliates") and in Section 12
("Source of Funds") is incorporated herein by reference.
(b)-(c) Not applicable.
7
<PAGE>
ITEM 5. PURPOSE OF THE TENDER OFFER AND PLANS OR PROPOSALS OF THE BIDDER.
(a)-(b), (e) The information set forth in the Offer to Purchase under
"Introduction" and in Section 8 ("Future Plans of Insignia, IPT and the
Purchaser") is incorporated herein by reference.
(c) The information set forth in the Offer to Purchase in Section 8
("Future Plans of Insignia, IPT and the Purchaser"), in Section 10 ("Conflicts
of Interest and Transactions with Affiliates") and in Section 13 ("Background
of the Offer") is incorporated herein by reference.
(d) Not applicable.
(f)-(g) The information set forth in the Offer to Purchase in Section
7 ("Effects of the Offer") is incorporated herein by reference.
ITEM 6. INTEREST IN SECURITIES OF THE SUBJECT COMPANY.
(a)-(b) The information set forth in the Offer to Purchase under
"Introduction," in Section 11 ("Certain Information Concerning the Purchaser,
IPLP, IPT and Insignia") is incorporated herein by reference.
ITEM 7. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH
RESPECT TO THE SUBJECT COMPANY'S SECURITIES.
The information set forth in the Offer to Purchase under
"Introduction," in Section 7 ("Effects of the Offer"), Section 10 ("Conflicts
of Interest and Transactions with Affiliates"), Section 11 ("Certain
Information Concerning the Purchaser, IPLP, IPT and Insignia") and Section 13
("Background of the Offer") is incorporated herein by reference.
ITEM 8. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED.
The information set forth in the Offer to Purchase under
"Introduction" and in Section 16 ("Fees and Expenses") is incorporated herein
by reference.
ITEM 9. FINANCIAL STATEMENTS OF CERTAIN BIDDERS.
The information set forth in the Offer to Purchase in Section 11
("Certain Information Concerning the Purchaser, IPLP, IPT and Insignia") is
incorporated herein by reference. In addition, the following are expressly
incorporated in this Statement by reference: (i) the audited financial
statements of Insignia set forth at Part I-Item 8 of Insignia's Annual Report
on Form 10-K for the year ended December 31, 1996, which is on file with the
Commission; and (ii) the unaudited financial statements of Insignia set forth
at Part I-Item 1 of Insignia's Quarterly Report on Form 10-Q/A for the period
ended June 30, 1997, which is on file with the Commission.
8
<PAGE>
ITEM 10. ADDITIONAL INFORMATION.
(a) Not applicable.
(b)-(d) The information set forth in the Offer to Purchase in Section
15 ("Certain Legal Matters") is incorporated herein by reference.
(e) None.
(f) The information set forth in the Offer to Purchase and the
related Assignment of Partnership Interest, copies of which are filed as
Exhibits (a)(1) and (a)(2) hereto, respectively, is incorporated herein by
reference in its entirety.
ITEM 11. MATERIAL TO BE FILED AS EXHIBITS.
(a)(1) Offer to Purchase, dated October 30, 1997.
(a)(2) Assignment of Partnership Interest and Related
Instructions.
(a)(3) Guidelines for Certification of Taxpayer Identification
Number on Substitute Form W-9.
(a)(4) Cover Letter, dated October 30, 1997, from the Purchaser
to the Limited Partners of the Partnership.
(b) Not applicable.
(c) Not applicable.
(d) Not applicable.
(e) Not applicable.
(f) Not applicable.
(z)(1) Summaries of appraisals referred to in the Offer to
Purchase in Section 13 ("Background of the Offer").
9
<PAGE>
SIGNATURE
After due inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete and
correct.
Dated: October 30, 1997
IPLP ACQUISITION I LLC
By: /s/ JEFFREY P. COHEN
--------------------------
Jeffrey P. Cohen
Manager
INSIGNIA PROPERTIES, L.P.
By: Insignia Properties Trust,
its General Partner
By: /s/ JEFFREY P. COHEN
--------------------------
Jeffrey P. Cohen
Senior Vice President
INSIGNIA PROPERTIES TRUST
By: /s/ JEFFREY P. COHEN
--------------------------
Jeffrey P. Cohen
Senior Vice President
INSIGNIA FINANCIAL GROUP, INC.
By: /s/ FRANK M. GARRISON
---------------------------
Frank M. Garrison
Executive Managing Director
10
<PAGE>
EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION
(a)(1) Offer to Purchase, dated October 30, 1997.
(a)(2) Assignment of Partnership Interest and
Related Instructions.
(a)(3) Guidelines for Certification of Taxpayer
Identification Number on Substitute Form
W-9.
(a)(4) Cover Letter, dated October 30, 1997, from
the Purchaser to the Limited Partners of the
Partnership.
(z)(1) Summaries of appraisals referred to in the
Offer to Purchase in Section 13 ("Background
of the Offer").
11
<PAGE>
Offer to Purchase for Cash
Up to 300,000 Units of Limited Partnership Interest
in
CONSOLIDATED CAPITAL INSTITUTIONAL PROPERTIES/2,
a California limited partnership
for
$40 Net Per Unit
by
REEDY RIVER PROPERTIES, L.L.C.
- -------------------------------------------------------------------------------
THE OFFER, WITHDRAWAL RIGHTS AND PRORATION PERIOD WILL EXPIRE AT 12:00 MIDNIGHT,
NEW YORK TIME, ON NOVEMBER 26, 1997, UNLESS THE OFFER IS EXTENDED.
- -------------------------------------------------------------------------------
IMPORTANT
Reedy River Properties, L.L.C., a Delaware limited liability company
(the "Purchaser"), is offering to purchase up to 300,000 of the outstanding
units of limited partnership interest ("Units") in Consolidated Capital
Institutional Properties/2, a California limited partnership (the
"Partnership"), at a purchase price of $40 per Unit (the "Purchase Price"), net
to the seller in cash, without interest, upon the terms and subject to the
conditions set forth in this Offer to Purchase and in the related Assignment of
Partnership Interest (which, together with any supplements or amendments,
collectively constitute the "Offer"). The Purchase Price is subject to
adjustment under certain circumstances, as described herein. Holders of Units
(each, a "Limited Partner") who tender their Units in response to the Offer
will not be obligated to pay any commissions or partnership transfer fees. The
Purchaser is an affiliate of ConCap Equities, Inc., which is the general
partner of the Partnership (the "General Partner").
Limited Partners are urged to consider the following factors:
o The Purchaser and the General Partner are both affiliates of
and controlled by Insignia Properties Trust ("IPT"), which
is controlled by Insignia Financial Group, Inc.
("Insignia"). IPT, through its operating partnership
Insignia Properties, L.P. ("IPLP"), currently owns 15,259
Units.
o The net liquidation value per Unit (the "Estimated
Liquidation Value") estimated by the Purchaser (which is an
affiliate of the General Partner) is $57.75. The Purchaser
does not believe, however, that the Estimated Liquidation
Value represents a fair estimate of the market value of a
Unit, primarily due to the fact that such estimate does not
take into account timing considerations, market
uncertainties and legal and other expenses that would be
incurred in connection with a liquidation of the
Partnership. See Section 13. Accordingly, the Purchaser does
not believe that the Estimated Liquidation Value should be
viewed as representative of the amount a Limited Partner can
realistically expect to obtain on a sale of a Unit in the
near term.
o The Purchaser will have the right to vote all Units acquired
pursuant to the Offer. Accordingly, if the Purchaser (which
is an affiliate of the General Partner) is successful in
acquiring a significant number of Units, it will be able to
significantly influence all voting decisions with respect to
the Partnership, including decisions regarding liquidation,
amendments to the Limited Partnership Agreement, removal and
replacement of the General Partner and mergers,
consolidations and other extraordinary transactions.
<PAGE>
o The Purchaser (which is an affiliate of the General Partner)
is making the Offer with a view to making a profit.
Accordingly, there is a conflict between the desire of the
Purchaser (which is an affiliate of the General Partner) to
purchase Units at a low price and the desire of the Limited
Partners to sell their Units at a high price.
THE OFFER IS NOT CONDITIONED ON FINANCING OR UPON ANY MINIMUM
AGGREGATE NUMBER OF UNITS BEING TENDERED.
----------------------------------------
Any Limited Partner desiring to tender Units should complete and sign
the Assignment of Partnership Interest or a facsimile copy thereof in
accordance with the Instructions to the Assignment of Partnership Interest and
mail or deliver the signed Assignment of Partnership Interest to the
Depositary. A Limited Partner may tender any or all of the Units owned by that
Limited Partner; provided, however, that because of restrictions in the
Partnership's Limited Partnership Agreement, a partial tender of Units must be
for a minimum of twenty Units (other than Limited Partners who hold Units in an
Individual Retirement Account or Keogh Plan). Tenders of fractional Units will
not be permitted, except by a Limited Partner who is tendering all of the Units
owned by that Limited Partner.
Questions and requests for assistance or for additional copies of this
Offer to Purchase and the Assignment of Partnership Interest may be directed to
the Information Agent at the address and telephone numbers set forth below and
on the back cover of this Offer to Purchase. No soliciting dealer fees or other
payments to brokers for tenders are being paid by the Purchaser (which is an
affiliate of the General Partner).
----------------------------------------
For More Information or for Further Assistance Please Call:
Beacon Hill Partners, Inc.
at
(800) 854-9486
October 30, 1997
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
INTRODUCTION.................................................................................................... 1
The Purchaser; Affiliation with the General Partner......................................................... 1
Some Factors to Be Considered by Limited Partners........................................................... 2
Reasons for and Effects of the Offer........................................................................ 3
Certain Tax Considerations.................................................................................. 3
Originally Anticipated Term of the Partnership; General Policy Regarding
Sales and Refinancings of Partnership Properties; Alternatives.......................................... 4
Conditions.................................................................................................. 5
Distributions............................................................................................... 5
Outstanding Units........................................................................................... 5
THE OFFER....................................................................................................... 6
Section 1. Terms of the Offer; Expiration Date; Proration.................................................. 6
Section 2. Acceptance for Payment and Payment for Units.................................................... 7
Section 3. Procedure for Tendering Units................................................................... 7
Valid Tender............................................................................................ 7
Signature Requirements.................................................................................. 8
Delivery of Assignment of Partnership Interest.......................................................... 8
Appointment as Proxy; Power of Attorney................................................................. 8
Assignment of Interest in Future Distributions.......................................................... 9
Determination of Validity; Rejection of Units; Waiver of Defects;
No Obligation to Give Notice of Defects.............................................................. 9
Backup Federal Income Tax Withholding................................................................... 9
FIRPTA Withholding...................................................................................... 9
Binding Obligation...................................................................................... 9
Section 4. Withdrawal Rights............................................................................... 9
Section 5. Extension of Tender Period; Termination; Amendment.............................................. 10
Section 6. Certain Federal Income Tax Matters.............................................................. 11
General................................................................................................. 11
Gain or Loss Generally.................................................................................. 11
Unrealized Receivables and Certain Inventory............................................................ 11
Passive Activity Loss Limitation........................................................................ 12
Partnership Termination................................................................................. 12
Backup Withholding and FIRPTA Withholding............................................................... 13
Section 7. Effects of the Offer............................................................................ 13
Limitations on Resales.................................................................................. 13
Effect on Trading Market; Registration Under Section 12(g) of the Exchange Act.......................... 13
Control of Limited Partner Voting Decisions by Purchaser;
Effect of Relationship with General Partner.......................................................... 14
Section 8. Future Plans of Insignia, IPT and the Purchaser................................................. 14
Section 9. Certain Information Concerning the Partnership and CCEP/2....................................... 15
General................................................................................................. 15
Originally Anticipated Term of Partnership; Alternatives................................................ 16
General Policy Regarding Sales and Refinancings of Partnership Properties............................... 16
Selected Financial and Property-Related Data............................................................ 17
Cash Distributions History.............................................................................. 21
Operating Budgets of the Partnership and CCEP/2......................................................... 22
Section 10. Conflicts of Interest and Transactions with Affiliates......................................... 22
Conflicts of Interest with Respect to the Offer......................................................... 22
i
<PAGE>
PAGE
Voting by the Purchaser................................................................................. 23
Financing Arrangements.................................................................................. 23
Transactions with Affiliates............................................................................ 23
Section 11. Certain Information Concerning the Purchaser, IPLP, IPT and Insignia........................... 24
The Purchaser........................................................................................... 24
IPT and IPLP............................................................................................ 24
Insignia................................................................................................ 25
Section 12. Source of Funds................................................................................ 27
Section 13. Background of the Offer........................................................................ 27
Affiliation with the General Partner.................................................................... 27
General Partner's Affiliation with CCEP/2............................................................... 28
Determination of Purchase Price......................................................................... 28
Section 14. Conditions of the Offer........................................................................ 34
Section 15. Certain Legal Matters.......................................................................... 36
General................................................................................................. 36
Antitrust............................................................................................... 36
Margin Requirements..................................................................................... 36
Section 16. Fees and Expenses.............................................................................. 36
Section 17. Miscellaneous.................................................................................. 36
SCHEDULE I - Transactions in the Units Effected by IPLP in the Past 60 Days...........................S-1
SCHEDULE II - Information Regarding the Managers of the Purchaser......................................S-2
SCHEDULE III - Information Regarding the Trustees and Executive Officers of IPT.........................S-3
SCHEDULE IV - Information Regarding the Directors and Executive Officers of Insignia...................S-5
SCHEDULE V - IPT Partnerships.........................................................................S-8
</TABLE>
ii
<PAGE>
TO THE LIMITED PARTNERS OF
CONSOLIDATED CAPITAL INSTITUTIONAL PROPERTIES/2
INTRODUCTION
Reedy River Properties, L.L.C. (the "Purchaser"), which is a Delaware
limited liability company and an affiliate of the General Partner (as defined
below), hereby offers to purchase up to 300,000 of the outstanding units of
limited partnership interest ("Units"), representing approximately 33% of the
Units outstanding, in Consolidated Capital Institutional Properties/2, a
California limited partnership (the "Partnership"), at a purchase price of $40
per Unit (the "Purchase Price"), net to the seller in cash, without interest,
upon the terms and subject to the conditions set forth in this Offer to
Purchase and in the related Assignment of Partnership Interest (which, together
with any supplements or amendments, collectively constitute the "Offer"). The
Offer is not conditioned on any aggregate minimum number of Units being
tendered. A Limited Partner may tender any or all of the Units owned by that
Limited Partner; provided, however, that because of restrictions in the
Partnership's Limited Partnership Agreement (the "Limited Partnership
Agreement"), a partial tender of Units must be for a minimum of twenty Units
(other than Limited Partners who hold Units in an Individual Retirement Account
("IRA") or Keogh Plan). Accordingly, any Limited Partner that owns twenty or
fewer Units (other than Limited Partners who hold Units in an IRA or Keogh
Plan) must tender all or none of its Units. Tenders of fractional Units will
not be permitted, except by a Limited Partner who is tendering all of the Units
owned by that Limited Partner. The Purchaser (which is an affiliate of the
General Partner) will pay all charges and expenses of Beacon Hill Partners,
Inc., who will serve as the Purchaser's information agent for the Offer (the
"Information Agent"), and Harris Trust Company of New York, who will act as the
depositary for the Offer (the "Depositary").
The Purchaser; Affiliation with the General Partner. ConCap Equities,
Inc., which is the general partner of the Partnership (the "General Partner"),
is a wholly-owned subsidiary of Insignia Properties Trust, a Maryland real
estate investment trust ("IPT"). The Purchaser is a newly-formed, wholly-owned
subsidiary of Insignia Properties, L.P., a Delaware limited partnership
("IPLP"), which is the operating partnership of IPT. IPT is the sole general
partner of IPLP (owning approximately 66% of the total equity interests in
IPLP), and Insignia Financial Group, Inc., a Delaware corporation ("Insignia"),
is the sole limited partner of IPLP (owning approximately 34% of the total
equity interests in IPLP). Insignia and its affiliates also own approximately
67% of the outstanding common shares of IPT. The Partnership owns a debt
obligation (the "Loan") owed by Consolidated Capital Equity Partners/Two, L.P.,
a California limited partnership ("CCEP/2"), in respect of amounts previously
borrowed from the Partnership by CCEP/2 and a predecessor partnership of
CCEP/2. The Loan is secured by mortgages or deeds of trust on real properties
owned by CCEP/2. ConCap Holdings, Inc., a Texas corporation ("ConCap
Holdings"), is the sole general partner of CCEP/2 and a wholly owned subsidiary
of the General Partner. See Sections 9 and 13. Since late December 1994,
Insignia Residential Group, L.P. ("IRG") and Insignia Commercial Group, Inc.
("ICG"), which are affiliates of Insignia and the Purchaser, have provided
property management services to the Partnership (until the sale of the
Partnership's sole remaining property in 1996) and CCEP/2, and Insignia
(directly or through affiliates) has performed asset management and partnership
administration services for the Partnership and CCEP/2. See Section 13. By
reason of these relationships, the General Partner has conflicts of interest in
considering the Offer. The General Partner has indicated in a Statement on
Schedule 14D-9 (the "Schedule 14D-9") filed with the Securities and Exchange
Commission (the "Commission") that it is remaining neutral and making no
recommendation as to whether Limited Partners should tender their Units in
response to the Offer. LIMITED PARTNERS ARE URGED TO READ THIS OFFER TO
PURCHASE AND THE RELATED MATERIALS AND THE SCHEDULE 14D-9 CAREFULLY AND IN
THEIR ENTIRETY BEFORE DECIDING WHETHER TO TENDER THEIR UNITS. See Section 10.
<PAGE>
Some Factors to Be Considered by Limited Partners. In considering the
Offer, Limited Partners may wish to consider the following factors:
Potential Adverse Aspects of the Offer for Limited Partners
o The Purchaser, the General Partner and ConCap Holdings
(which is the general partner of CCEP/2) are affiliates of
and controlled by IPT, which is controlled by Insignia. The
General Partner has conflicts of interest in considering the
Offer, including (i) as a result of the fact that a sale or
liquidation of the Partnership's or CCEP/2's assets would
result in a decrease or elimination of the fees paid to the
General Partner and/or its affiliates and (ii) the fact that
as a consequence of the Purchaser's ownership of Units, the
Purchaser (which is an affiliate of the General Partner) may
have incentives to seek to maximize the value of its
ownership of Units, which in turn may result in a conflict
for the General Partner in attempting to reconcile the
interests of the Purchaser (which is an affiliate of the
General Partner) with the interests of the other Limited
Partners. See Section 10.
o The net liquidation value per Unit (the "Estimated
Liquidation Value") estimated by the Purchaser (which is an
affiliate of the General Partner) is $57.75. See Section 13
for a discussion of why the Purchaser (which is an affiliate
of the General Partner) believes that the Estimated
Liquidation Value is not necessarily indicative of the fair
market value of a Unit. THE PURCHASER (WHICH IS AN AFFILIATE
OF THE GENERAL PARTNER) MAKES NO REPRESENTATION AND EXPRESSES
NO OPINION AS TO THE FAIRNESS OR ADEQUACY OF THE PURCHASE
PRICE.
o As with any rational investment decision, the Purchaser
(which is an affiliate of the General Partner) is making the
Offer with a view to making a profit. Accordingly, there is a
conflict between the desire of the Purchaser (which is an
affiliate of the General Partner) to purchase Units at a low
price and the desire of the Limited Partners to sell their
Units at a high price.
o If the Purchaser is successful in acquiring a significant
number of Units pursuant to the Offer, the Purchaser (which
is an affiliate of the General Partner) will have the right
to vote those Units and thereby significantly influence all
voting decisions with respect to the Partnership, including
decisions concerning liquidation, amendments to the Limited
Partnership Agreement, removal and replacement of the
General Partner and mergers, consolidations and other
extraordinary transactions. This means that (i)
non-tendering Limited Partners could be prevented from
taking action they desire but that IPT (which is an
affiliate of the General Partner) opposes and (ii) IPT
(which is an affiliate of the General Partner) may be able
to take action desired by IPT but opposed by the
non-tendering Limited Partners.
Potentially Beneficial Aspects of the Offer for Limited Partners
o Although there are some limited resale mechanisms available
to Limited Partners wishing to sell their Units, there is no
formal trading market for Units. Accordingly, THE OFFER
AFFORDS LIMITED PARTNERS AN OPPORTUNITY TO DISPOSE OF THEIR
UNITS FOR CASH WHICH OTHERWISE MIGHT NOT BE AVAILABLE TO
THEM.
o THE OFFER MAY BE ATTRACTIVE TO LIMITED PARTNERS WHO HAVE AN
IMMEDIATE NEED FOR CASH. The Purchase Price is approximately
12.6% greater than the highest reported sales price of any
Unit during the past six months (based on published
information and information provided by the General Partner).
However, reported secondary market sales prices do not take
into account commissions and transfer fees typically payable
by a Limited Partner in connection with a secondary market
sale. Therefore, the actual proceeds received by a Limited
Partner who sells Units in the secondary market are typically
significantly less than the reported sales prices.
2
<PAGE>
o LIMITED PARTNERS WHO SELL UNITS PURSUANT TO THE OFFER WILL
NOT BE CHARGED ANY SALES COMMISSIONS (WHICH GENERALLY RANGE
FROM 3% TO 10% OF THE SALES PRICE) OR PARTNERSHIP TRANSFER
FEES (WHICH ARE TYPICALLY $100 PER TRANSFER). The Purchaser
will pay all transfer fees imposed by the Partnership in
connection with sales of Units pursuant to the Offer.
o Real estate markets in the United States generally have
recovered and experienced an upward trend since the end of
the last recession. That recovery and upward trend might
continue. On the other hand, those markets also may be
adversely affected by a variety of factors, including
possible fluctuations in interest rates, economic slowdowns
and overbuilding. Accordingly, ownership of Units continues
to be a speculative investment. THE OFFER MAY PROVIDE LIMITED
PARTNERS WITH THE OPPORTUNITY TO LIQUIDATE THEIR INTERESTS IN
THE PARTNERSHIP AND REPLACE THEM WITH INVESTMENTS THAT ARE
LESS SPECULATIVE.
o The Offer may be attractive to Limited Partners who wish to
avoid in the future the expenses, delays and complications in
filing personal income tax returns which may be caused by
ownership of Units. In addition, A LIMITED PARTNER WHO SELLS
100% OF ITS UNITS PURSUANT TO THE OFFER WILL NO LONGER BE
SUBJECT TO THE PASSIVE ACTIVITY LOSS LIMITATION WITH RESPECT
TO "SUSPENDED" LOSSES ATTRIBUTABLE TO THOSE UNITS AND,
THEREFORE, WILL BE ABLE TO UTILIZE FULLY ANY SUCH LOSSES.
o The Offer may be attractive to those Limited Partners who
have become disenchanted with real estate investments
generally, and in particular with the perceived illiquidity
of investments made through limited partnerships, because it
may afford an immediate opportunity for those Limited
Partners to liquidate their investments in the Partnership.
On the other hand, Limited Partners who tender their Units
will be giving up the opportunity to participate in any
potential future benefits represented by the ownership of
those Units, including, for example, the right to
participate in any future distributions of cash or property,
whether from operations, the proceeds of a sale or
refinancing of one or more of the CCEP/2 Properties (as
defined below) or in connection with any future liquidation
of the Partnership. Instead, any such distributions of cash
or property with respect to Units tendered in the Offer and
purchased by the Purchaser will be paid to the Purchaser.
The Purchaser (which is an affiliate of the General Partner) makes no
recommendation to any Limited Partner as to whether to tender or refrain from
tendering Units and has been advised by the General Partner that the General
Partner also expects to make no recommendation. Each Limited Partner must make
its own decision, based on the Limited Partner's particular circumstances, as
to whether to tender Units and, if so, how many Units to tender. Limited
Partners should consult with their respective advisors regarding the financial,
tax, legal and other implications of accepting the Offer. LIMITED PARTNERS ARE
URGED TO READ THIS OFFER TO PURCHASE AND THE RELATED MATERIALS CAREFULLY AND IN
THEIR ENTIRETY BEFORE DECIDING WHETHER TO TENDER THEIR UNITS.
Reasons for and Effects of the Offer. The Purchaser's purpose in
making the Offer is to increase IPT's equity interest in the Partnership,
primarily for investment purposes and with a view to making a profit. Although
the number of Units sought in the Offer will not give the Purchaser (which is
an affiliate of the General Partner) absolute control over the Partnership, if
the Purchaser is successful in acquiring all or a substantial portion of the
Units it is tendering for, it will be in a position to exercise significant
influence over the outcome of any vote by Limited Partners. See Sections 8 and
10.
Certain Tax Considerations. A sale by a Limited Partner pursuant to
the Offer will result in taxable gain (or loss) equal to the excess (deficit)
of the amount realized by the Limited Partner for the Units sold over such
Limited Partner's adjusted tax basis in those Units, which may be taxable as
ordinary income or loss, capital gain or loss or gain from real estate
depreciation recapture. Limited Partners who have suspended "passive losses"
from the Partnership or other passive activity investments generally may deduct
these losses up to the amount of gain from the sale. A sale pursuant to the
Offer of all of a Limited Partner's Units will terminate his or her investment
in the Partnership and, commencing with the year following the year of sale,
the Limited Partner will no longer
3
<PAGE>
receive Partnership tax information or have to report the complicated tax
information currently required of Limited Partners. See Section 6.
Originally Anticipated Term of the Partnership; General Policy
Regarding Sales and Refinancings of Partnership Properties; Alternatives. The
Partnership was formed for the purpose of making loans to a predecessor
partnership of CCEP/2. CCEP/2's indebtedness in respect of the loans made to it
and its predecessor partnership by the Partnership now is represented by the
Loan. The Loan is secured by deeds of trust or mortgages on apartment complexes
and office buildings owned by CCEP/2 (each, a "CCEP/2 Property" and
collectively, the "CCEP/2 Properties"). The non-recourse provisions of the Loan
mean that CCEP/2's obligation to repay the Loan is secured only by the value of
the collateral (that is, the CCEP/2 Properties), and the Partnership has no
right to make further claims against CCEP/2 other than to the extent of the
value of those properties. According to the Partnership's Prospectus dated July
22, 1983, Equity Partners/Two (CCEP/2's predecessor in interest) anticipated
that it would sell and/or refinance its properties, and consequently repay the
Loan, approximately twelve years (subject to its right to extend the Loan up to
two additional years beyond its initial ten-year term) after their acquisition,
depending upon the then current real estate and money markets, economic climate
and income tax consequences to the partners of Equity Partners/Two. The
reorganization of Equity Partners/Two and its subsequent conversion into CCEP/2
in 1990 resulted in a de facto extension of the originally anticipated time
period. See Sections 9 and 13.
The Loan is scheduled to mature, and will be repayable in full, in
November 2000. Because the outstanding principal amount of the Loan, including
accrued unpaid interest, exceeds the General Partner's estimate of the fair
market value of the CCEP/2 Properties that secure the Loan by a very large
margin, the General Partner expects that at maturity either (i) the Partnership
will foreclose on or otherwise acquire outright ownership of the CCEP/2
Properties or (ii) the maturity of the Loan will be extended to a later date.
The General Partner, as a result of its affiliation with ConCap Holdings (which
is the general partner of CCEP/2), will have several conflicts of interest in
deciding which of these approaches is appropriate. See Section 13.
In general, the General Partner and ConCap Holdings (which is an
affiliate of the General Partner) regularly evaluate the assets of CCEP/2 by
considering various factors, such as the financial position of the Partnership
and CCEP/2 and real estate and capital markets conditions. In this process, the
General Partner and ConCap Holdings monitor each property's specific locale and
sub-market conditions, evaluating current trends, competition, new construction
and economic changes. The General Partner and ConCap Holdings oversee each
asset's operating performance and continuously evaluate the physical
improvement requirements. In addition, the financing structure for each
property, tax implications and the investment climate are all considered. Any
of these factors, and possibly others, could potentially contribute to any
decision of the General Partner or ConCap Holdings to sell, refinance, upgrade
with capital improvements or hold a particular CCEP/2 Property. The Partnership
and CCEP/2 could seek to arrange mortgage loans secured by the CCEP/2
Properties that would have priority over the Loan, and to use the proceeds of
those loans for distributions to the Limited Partners or other appropriate
purposes. The Participating Note Master Loan Agreement, dated July 22, 1983, by
and between the Partnership and Equity Partners/Two (the "Original Loan
Agreement"), contained a provision (the "CCEP/2 Debt Limit Provision") to the
effect that CCEP/2 was not permitted to incur indebtedness owed to unaffiliated
third parties on the CCEP/2 Properties in an amount that exceeded 25% of the
original aggregate purchase price of the CCEP/2 Properties. The Limited
Partnership Agreement describes the CCEP/2 Debt Limit Provision and references
further information as found in the Original Loan Agreement. The Amended Loan
Agreement, dated November 15, 1990, by and between the Partnership and Equity
Partners/Two (the "Amended Loan Agreement") which by its terms replaced the
Original Loan Agreement, does not contain the CCEP/2 Debt Limit Provision;
however, the Purchaser has been advised that the General Partner has not
determined whether the CCEP/2 Debt Limit Provision contained in the Original
Loan Agreement continues to apply despite the absence of that provision in the
Amended Loan Agreement. Such a determination is not likely to be made except in
connection with a future proposed financing, if any, and would depend heavily
on the advice received from legal counsel to the Partnership and the General
Partner. In any event, as a matter of law, CCEP/2 would need the consent of the
Partnership in order to incur mortgage indebtedness secured by the CCEP/2
Properties that would have priority over the deeds of trust securing the Loan.
The Limited Partnership Agreement provides that Limited Partners holding a
majority of the outstanding Units may, with the
4
<PAGE>
consent of the General Partner, approve amendments to the Amended Loan
Agreement. The General Partner has advised the Purchaser that it may in the
future, if it deems it necessary or appropriate under the circumstances,
solicit the consent of the Limited Partners in connection with the incurrence
of additional or new mortgage indebtedness that would be senior in priority to
the Loan. Because these plans are subject to change, there can be no assurance
that any consent, if deemed required, will be sought as described above, that
CCEP/2 will seek to obtain financing of the type described above, or as to the
amount or timing of any distribution that might be made to Limited Partners
from the proceeds of any such financing. The Purchaser has been advised that
the General Partner and ConCap Holdings are in the process of negotiating the
sale of Cosmopolitan Center in Atlanta, Georgia to an unaffiliated third party
for a price of $3,500,000, with closing expected to occur on November 19, 1997.
The net cash proceeds (after repayment of third party mortgage debt and payment
of transaction expenses and other costs of sale) from such expected sale would
be payable to the Partnership under the terms of the Loan; however, there can
be no assurance as to whether this sale will occur as expected or as to the
amount of cash proceeds that might result from such a sale. Moreover, no
determination has been made as to whether any net cash proceeds generated by
such potential financing or sale would be distributed to Limited Partners,
which determination will be made at the time of the financing or sale,
respectively, and will be based on, among other things, the Partnership's
working capital requirements at the time. Based on the above considerations and
except for the potential sale of Cosmopolitan Center, the General Partner and
ConCap Holdings are not currently contemplating the sale of any other CCEP/2
Properties.
Under the Limited Partnership Agreement the term of the Partnership
will continue until December 31, 2013, unless sooner terminated as provided in
the Limited Partnership 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 causing the Partnership to
merge with another entity or engage in a "roll-up" or similar transaction.
Conditions. The Offer is not conditioned on any aggregate minimum
number of Units being tendered. Certain other conditions do apply, however.
See Section 14.
Distributions. The Partnership made cash distributions to Limited
Partners of $10.98 per Unit in 1997 (through October 30), and made cash
distributions to Limited Partners of $3.27 per Unit in 1995. There was no
distribution to Limited Partners in 1996. Prior to 1995, the last distribution
made by the Partnership to Limited Partners was in 1991 ($2.20 per Unit). The
1997 distribution consisted primarily of surplus funds (approximately $9.90 per
Unit) from obtaining financing on certain of the CCEP/2 Properties which funds
were paid to the Partnership as a reduction of the outstanding principal
balance of the Loan; the remaining portion was from operating cash flow. The
Limited Partnership Agreement requires that the General Partner maintain
minimum working capital reserves ($7,157,000 as of June 30, 1997) equal to 5%
of net Invested Capital (as defined in the Limited Partnership Agreement). In
total, original investors in the Partnership have received $194.64 of their
original $250 investment made in 1983. See Section 9. The Partnership is
currently generating positive cash flow from operations, and the Purchaser
(which is an affiliate of the General Partner) believes that the Partnership
will continue to generate positive cash flow from operations, depending upon
the real estate, capital markets and general economic conditions at the time.
The potential for future distributions was considered by the Purchaser (which
is an affiliate of the General Partner) when establishing the Purchase Price.
Limited Partners who tender their Units in response to the Offer will retain
all of the distributions made through October 30, 1997, and will be entitled to
receive any subsequent distributions made by the Partnership prior to the date
on which the Purchaser pays for tendered Units pursuant to the Offer, although
any such subsequent distribution will result in a reduction of the Purchase
Price. See Section 1. However, tendering Limited Partners will not be entitled
to receive or retain any distributions in respect of tendered Units which are
made on or after the date on which the Purchaser pays for such Units pursuant
to the Offer, regardless of the fact that the record date (as opposed to the
payment date) for any such distribution may be a date prior to the date of
purchase. See Section 3.
Outstanding Units. According to information supplied by the
Partnership, as of October 1, 1997 there were 909,138 Units issued and
outstanding, which were held of record by 44,218 Limited Partners. IPLP
currently owns 15,259 Units. See Schedule I to this Offer to Purchase for a
list of transactions in the Units effected by IPLP within the past 60 days.
5
<PAGE>
THE OFFER
SECTION 1. TERMS OF THE OFFER; EXPIRATION DATE; PRORATION. Upon the
terms and subject to the conditions of the Offer, the Purchaser (which is an
affiliate of the General Partner) will accept for payment (and thereby
purchase) up to 300,000 Units that are validly tendered on or prior to the
Expiration Date and not withdrawn in accordance with the procedures set forth
in Section 4. For purposes of the Offer, the term "Expiration Date" shall mean
12:00 midnight, New York City time, on November 26, 1997, unless the Purchaser
(which is an affiliate of the General Partner) in its 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 the Purchaser, shall expire. See Section 5 for a
description of the Purchaser's right to extend the period of time during which
the Offer is open and to amend or terminate the Offer.
THE PURCHASE PRICE WILL AUTOMATICALLY BE REDUCED BY THE AGGREGATE
AMOUNT OF DISTRIBUTIONS PER UNIT, IF ANY, MADE BY THE PARTNERSHIP TO LIMITED
PARTNERS ON OR AFTER OCTOBER 30, 1997 AND PRIOR TO THE DATE ON WHICH THE
PURCHASER PAYS FOR UNITS PURCHASED PURSUANT TO THE OFFER.
If, prior to the Expiration Date, the Purchaser (which is an affiliate
of the General Partner) increases 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, regardless of whether the Units
were tendered prior to the increase in the consideration offered.
If more than 300,000 Units are validly tendered prior to the
Expiration Date and not properly withdrawn prior to the Expiration Date in
accordance with the procedures specified in Section 4, the Purchaser (which is
an affiliate of the General Partner) will, upon the terms and subject to the
conditions of the Offer, accept for payment and pay for an aggregate of 300,000
of the Units so tendered, 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 (i) purchases of
fractional Units and (ii) purchases that would violate Section 5.01 of the
Limited Partnership Agreement (which generally requires that a Limited Partner
transfer a minimum of twenty Units (other than Limited Partners who hold Units
in an IRA or Keogh Plan)). If the number of Units validly tendered and not
properly withdrawn on or prior to the Expiration Date is less than or equal to
300,000 Units, the Purchaser (which is an affiliate of the General Partner)
will purchase all Units so tendered and not withdrawn, upon the terms and
subject to the conditions of the Offer.
If proration of tendered Units is required, then, due to the
difficulty of determining the number of Units validly tendered and not
withdrawn, the Purchaser (which is an affiliate of the General Partner) may not
be able to announce the final results of such proration until at least
approximately seven business days after the Expiration Date. Subject to the
Purchaser's obligation under Rule 14e-1(c) under the Securities Exchange Act of
1934 (the "Exchange Act") to pay Limited Partners the Purchase Price in respect
of Units tendered or return those Units promptly after the termination or
withdrawal of the Offer, the Purchaser (which is an affiliate of the General
Partner) does 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 PURCHASE PRICE.
The Offer is conditioned on satisfaction of certain conditions. See
Section 14, which sets forth in full the conditions of the Offer. The Purchaser
(which is an affiliate of the General Partner) reserves the right (but in no
event shall be obligated), in its sole 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, the Purchaser reserves the right
to (i) decline to purchase any of the Units tendered and terminate the Offer,
(ii) waive all of the unsatisfied conditions and, subject to complying with
applicable rules and regulations of the Commission, purchase all Units validly
tendered, (iii) extend the Offer and, subject to the right of Limited Partners
to withdraw Units until the Expiration Date, retain the Units that have been
tendered during the period or periods for which the Offer is extended, and/or
(iv) amend the Offer.
6
<PAGE>
This Offer to Purchase and the related Assignment of Partnership
Interest are being mailed by the Purchaser (which is an affiliate of the
General Partner) to the persons shown by the Partnership's records to have been
Limited Partners or (in the case of Units owned of record by IRAs and qualified
plans) beneficial owners of Units as of October 1, 1997.
SECTION 2. ACCEPTANCE FOR PAYMENT AND PAYMENT FOR UNITS. Upon the
terms and subject to the conditions of the Offer, the Purchaser (which is an
affiliate of the General Partner) will accept for payment (and thereby
purchase) and will pay for all Units validly tendered and not withdrawn in
accordance with the procedures specified in Section 4, as promptly as
practicable following the Expiration Date. A tendering beneficial owner of
Units whose Units are owned of record by an IRA or other qualified plan will
not receive direct payment of the Purchase 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
Depositary of a properly completed and duly executed Assignment of Partnership
Interest (or a facsimile copy) and any other documents required by the
Assignment of Partnership Interest. See Section 3. UNDER NO CIRCUMSTANCES WILL
INTEREST BE PAID ON THE PURCHASE PRICE BY REASON OF ANY DELAY IN MAKING SUCH
PAYMENT.
For purposes of the Offer, the Purchaser (which is an affiliate of the
General Partner) will be deemed to have accepted for payment pursuant to the
Offer, and thereby purchased, validly tendered Units if, as and when the
Purchaser (which is an affiliate of the General Partner) gives verbal or
written notice to the Depositary of the Purchaser's acceptance of those Units
for payment pursuant to the Offer. Upon the terms and subject to the conditions
of the Offer, payment for Units accepted for payment pursuant to the Offer will
be made by deposit of the Purchase Price with the Depositary, which will act as
agent for tendering Limited Partners for the purpose of receiving payments from
the Purchaser and transmitting those payments to Limited Partners whose Units
have been accepted for payment.
If any tendered Units are not purchased for any reason, the Assignment
of Partnership Interest with respect to such Units will be destroyed by the
Purchaser (which is an affiliate of the General Partner). If for any reason
acceptance for payment of, or payment for, any Units tendered pursuant to the
Offer is delayed or the Purchaser is unable to accept for payment, purchase or
pay for Units tendered pursuant to the Offer, then, without prejudice to the
Purchaser's rights under Section 14, the Depositary may, nevertheless, on
behalf of the Purchaser (which is an affiliate of the General Partner) retain
tendered Units, and those Units may not be withdrawn except to the extent that
the tendering Limited Partners are entitled to withdrawal rights as described
in Section 4; subject, however, to the Purchaser's 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.
The Purchaser (which is an affiliate of the General Partner) reserves
the right to transfer or assign, in whole or from time to time in part, to one
or more of the Purchaser's affiliates, the right to purchase Units tendered
pursuant to the Offer, but any such transfer or assignment will not relieve the
Purchaser of its obligations under the Offer or prejudice the rights of
tendering Limited Partners to receive payment for Units validly tendered and
accepted for payment pursuant to the Offer.
SECTION 3. PROCEDURE FOR TENDERING UNITS.
Valid Tender. In order for a tendering Limited Partner to participate
in the Offer, its Units must be validly tendered and not withdrawn on or prior
to the Expiration Date. To validly tender Units, a properly completed and duly
executed Assignment of Partnership Interest (or a facsimile copy) and any other
documents required by the Assignment of Partnership Interest must be received
by the Depositary, at its address set forth on the back cover of this Offer to
Purchase, on or prior to the Expiration Date. A Limited Partner may tender any
or all of the Units owned by that Limited Partner; provided, however, that
because of restrictions in the Limited Partnership Agreement, a partial tender
of Units must be for a minimum of twenty Units (other than Limited Partners who
hold Units in an IRA or Keogh Plan). Accordingly, any Limited Partner that owns
twenty or fewer Units (other than Limited Partners who Units in an IRA or Keogh
Plan) must tender all or none of its Units. Tenders of fractional
7
<PAGE>
Units will not be permitted, except by a Limited Partner who is tendering all
of the Units owned by that Limited Partner. No alternative, conditional or
contingent tenders will be accepted.
Signature Requirements. If the Assignment of Partnership Interest is
signed by the registered holder of the Units and payment is to be made directly
to that holder, then no signature guarantee is required on the Assignment of
Partnership Interest. Similarly, if the Units are tendered for the account of a
member firm of a registered national securities exchange, a member of the
National Association of Securities Dealers, Inc. or a commercial bank, savings
bank, credit union, savings and loan association or trust company having an
office, branch or agency in the United States (each an "Eligible Institution"),
no signature guarantee is required on the Assignment of Partnership Interest.
HOWEVER, IN ALL OTHER CASES, ALL SIGNATURES ON THE ASSIGNMENT OF PARTNERSHIP
INTEREST MUST BE GUARANTEED BY AN ELIGIBLE INSTITUTION. Please contact the
Information Agent for assistance in obtaining a signature guarantee.
Delivery of Assignment of Partnership Interest. THE METHOD OF DELIVERY
OF THE ASSIGNMENT OF PARTNERSHIP INTEREST AND ALL OTHER REQUIRED DOCUMENTS IS
AT THE OPTION AND RISK OF THE TENDERING LIMITED PARTNER, AND DELIVERY WILL BE
DEEMED MADE ONLY WHEN ACTUALLY RECEIVED BY THE DEPOSITARY. IN ALL CASES,
SUFFICIENT TIME SHOULD BE ALLOWED TO ASSURE TIMELY DELIVERY.
Appointment as Proxy; Power of Attorney. By executing an Assignment of
Partnership Interest, a tendering Limited Partner irrevocably appoints the
Purchaser (which is an affiliate of the General Partner), and its managers and
designees as the Limited Partner's proxies, in the manner set forth in the
Assignment of Partnership Interest, each with full power of substitution, to
the full extent of the Limited Partner's rights with respect to the Units
tendered by the Limited Partner and accepted for payment by the Purchaser
(which is an affiliate of the General Partner). 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, the Purchaser (which is an
affiliate of the General Partner) accepts the tendered Units for payment. Upon
such acceptance for payment, all prior proxies given by the Limited Partner
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). The
Purchaser (which is an affiliate of the General Partner) and its managers and
designees will, as to those Units, be empowered to exercise all voting and
other rights of the Limited Partner as they in their sole discretion may deem
proper at any meeting of Limited Partners, by written consent or otherwise. The
Purchaser (which is an affiliate of the General Partner) reserves the right to
require that, in order for Units to be deemed validly tendered, immediately
upon the Purchaser's acceptance for payment of the Units, the Purchaser 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 an Assignment of Partnership Interest, a tendering
Limited Partner also irrevocably constitutes and appoints the Purchaser and its
managers and designees as the Limited Partner's attorneys-in-fact, each with
full power of substitution, to the full extent of the Limited Partner's rights
with respect to the Units tendered by the Limited Partner and accepted for
payment by the Purchaser. Such appointment will be effective when, and only to
the extent that, the Purchaser accepts the tendered Units for payment. The
tendering Limited Partner agrees not to exercise any rights pertaining to the
tendered Units without the prior consent of the Purchaser. Upon such acceptance
for payment, all prior powers of attorney granted by the Limited Partner 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, the Purchaser
and its managers and designees each will have the power, among other things,
(i) to transfer ownership of such Units on the Partnership books maintained by
the General Partner (and execute and deliver any accompanying evidences of
transfer and authenticity any of them may deem necessary or appropriate in
connection therewith), (ii) upon receipt by the Depositary (as the tendering
Limited Partner's agent) of the Purchase Price, to become a substituted Limited
Partner, to receive any and all distributions made by the Partnership on or
after the date on which the Purchaser purchases such Units, and to receive all
benefits and otherwise exercise all rights of beneficial ownership of such
Units in accordance with the terms of the Offer, (iii) to execute and deliver
to the General Partner a change of address form instructing the General Partner
to send any and all future distributions to which the Purchaser is 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
8
<PAGE>
to or upon the order of such Limited Partner representing a distribution to
which the Purchaser is entitled pursuant to the terms of the Offer, in each
case in the name and on behalf of the tendering Limited Partner.
Assignment of Interest in Future Distributions. By executing an
Assignment of Partnership Interest, a tendering Limited Partner irrevocably
assigns to the Purchaser (which is an affiliate of the General Partner) and its
assigns all of the right, title and interest of the Limited Partner in and to
any and all distributions made by the Partnership on or after the date on which
the Purchaser purchases such Units, in respect of the Units tendered by such
Limited Partner and accepted for payment by the Purchaser, regardless of the
fact that the record date for any such distribution may be a date prior to the
date of such purchase. The Purchaser will seek to be admitted to the
Partnership as a substituted Limited Partner upon consummation of the Offer.
Determination of Validity; Rejection of Units; Waiver of Defects; No
Obligation to Give Notice of Defects. All questions as to the validity, form,
eligibility (including time of receipt) and acceptance for payment of any
tender of Units pursuant to the Offer will be determined by the Purchaser
(which is an affiliate of the General Partner), in its sole discretion, which
determination shall be final and binding. The Purchaser (which is an affiliate
of the General Partner) reserves the absolute right to reject any or all
tenders of any particular Units determined by it not to be in proper form or if
the acceptance of or payment for those Units may, in the opinion of the
Purchaser's counsel, be unlawful. The Purchaser (which is an affiliate of the
General Partner) also reserves the absolute right to waive or amend any of the
conditions of the Offer that it is legally permitted to waive as to the tender
of any particular Units and to waive any defect or irregularity in any tender
with respect to any particular Units of any particular Limited Partner. The
Purchaser's interpretation of the terms and conditions of the Offer (including
the Assignment of Partnership Interest and the Instructions thereto) will be
final and binding. No tender of Units will be deemed to have been validly made
until all defects and irregularities have been cured or waived. None of the
Purchaser (which is an affiliate of the General Partner), the Information
Agent, the Depositary or any other person will be under any duty to give
notification of any defects or irregularities in the tender of any Units or
will incur any liability for failure to give any such notification.
Backup Federal Income Tax Withholding. To prevent the possible
application of backup federal income tax withholding of 31% with respect to
payment of the Purchase Price, each tendering Limited Partner must provide the
Purchaser (which is an affiliate of the General Partner) with the Limited
Partner's correct taxpayer identification number by completing the Substitute
Form W-9 included in the Assignment of Partnership Interest. See the
Instructions to the Assignment of Partnership Interest and Section 6.
FIRPTA Withholding. To prevent the withholding of federal income tax
in an amount equal to 10% of the amount of the Purchase Price plus Partnership
liabilities allocable to each Unit purchased, each tendering Limited Partner
must complete the FIRPTA Affidavit included in the Assignment of Partnership
Interest certifying the Limited Partner's taxpayer identification number and
address and that such Limited Partner is not a foreign person. See the
Instructions to the Assignment of Partnership Interest and Section 6.
Binding Obligation. A tender of Units pursuant to and in accordance
with the procedures described in this Section 3 and the acceptance for payment
of such Units will constitute a binding agreement between the tendering Limited
Partner and the Purchaser (which is an affiliate of the General Partner) on the
terms set forth in this Offer to Purchase and in the Assignment of Partnership
Interest.
SECTION 4. WITHDRAWAL RIGHTS. Tenders of Units pursuant to the Offer
are irrevocable, except that Units tendered pursuant to the Offer may be
withdrawn at any time prior to the Expiration Date and, unless already accepted
for payment as provided in this Offer to Purchase, may also be withdrawn at any
time after December 28, 1997. For withdrawal to be effective, a written or
facsimile transmission notice of withdrawal must be timely received by the
Depositary at its address set forth on the back cover of this Offer to
Purchase. Any such notice of withdrawal must specify the name of the person who
tendered the Units to be withdrawn and must be signed by the person(s) who
signed the Assignment of Partnership Interest in the same manner as the
Assignment of Partnership Interest was signed (including signature guarantees
by an Eligible Institution). Units properly withdrawn
9
<PAGE>
will be deemed not to be validly tendered for purposes of the Offer. Withdrawn
Units may be re-tendered, however, by following the procedures described in
Section 3 at any time prior to the Expiration Date.
If payment for Units is delayed for any reason or if the Purchaser
(which is an affiliate of the General Partner) is unable to pay for Units for
any reason, then, without prejudice to the Purchaser's rights under the Offer,
tendered Units may be retained by the Depositary and may not be withdrawn
except to the extent that tendering Limited Partners are entitled to withdrawal
rights as set forth in this Section 4; subject, however, to the Purchaser's
obligation, pursuant to 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.
All questions as to the validity and form (including time of receipt)
of notices of withdrawal will be determined by the Purchaser (which is an
affiliate of the General Partner), in its sole discretion, which determination
shall be final and binding. None of the Purchaser, the Information Agent, the
Depositary or 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. The
Purchaser (which is an affiliate of the General Partner) expressly reserves the
right, in its sole discretion, at any time and from time to time, (i) to extend
the period of time during which the Offer is open and thereby delay acceptance
for payment of, and the payment for, validly tendered Units, (ii) to terminate
the Offer and not accept for payment any Units not already accepted for payment
or paid for, (iii) upon the occurrence of any of the conditions specified in
Section 14, to delay the acceptance for payment of, or payment for, any Units
not already accepted for payment or paid for, and (iv) to amend the Offer in
any respect (including, without limitation, by increasing the consideration
offered, increasing or decreasing the number of Units being sought, or both).
Notice of any such extension, termination or amendment will be disseminated
promptly to Limited Partners in a manner reasonably designed to inform Limited
Partners of such change in compliance with Rule 14d-4(c) under the Exchange
Act. In the case of an extension of the Offer, the extension will be followed
by a press release or public announcement which will be issued no later than
9:00 a.m., New York City time, on the next business day after the then
scheduled Expiration Date, in accordance with Rule 14e-1(d) under the Exchange
Act.
If the Purchaser (which is an affiliate of the General Partner)
extends the Offer, or if the Purchaser (whether before or after its acceptance
for payment of Units) is delayed in its payment for Units or is unable to pay
for Units pursuant to the Offer for any reason, then, without prejudice to the
Purchaser's rights under the Offer, the Depositary may retain tendered Units
and those Units may not be withdrawn except to the extent tendering Limited
Partners are entitled to withdrawal rights as described in Section 4; subject,
however, to the Purchaser's obligation, pursuant to 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.
If the Purchaser (which is an affiliate of the General Partner) makes
a material change in the terms of the Offer or the information concerning the
Offer or waives a material condition of the Offer, the Purchaser will extend
the Offer and disseminate additional tender offer materials to the extent
required by Rules 14d-4(c) and 14d-6(d) under the Exchange Act. The minimum
period during which an offer must remain open following a material change in
the terms of the offer or information concerning the offer will depend upon the
facts and circumstances, including the relative materiality of the change in
the terms or information. In the Commission's view, an offer should remain open
for a minimum of five business days from the date the material change is first
published, sent or given to securityholders, and if material changes are made
with respect to information that approaches the significance of price or the
percentage of securities sought, a minimum of ten business days may be required
to allow for adequate dissemination to securityholders and investor response.
As used in this Offer to Purchase, "business day" means any day other than a
Saturday, Sunday or a federal holiday, and consists of the time period from
12:01 a.m. through 12:00 midnight, New York City time.
10
<PAGE>
SECTION 6. CERTAIN FEDERAL INCOME TAX MATTERS.
General. The following summary is a general discussion of certain of
the federal income tax consequences of a sale of Units pursuant to the Offer.
This summary is based on the Internal Revenue Code of 1986, as amended (the
"Code"), applicable Treasury regulations thereunder, administrative rulings,
practice and procedures and judicial authority, all as of the date of the
Offer. All of the foregoing are subject to change, and any such change could
affect the continuing accuracy of this summary. This summary does not discuss
all aspects of federal income taxation that may be relevant to a particular
Limited Partner in light of such Limited Partner's specific circumstances or to
certain types of Limited Partners subject to special treatment under the
federal income tax laws (for example, foreign persons, dealers in securities,
banks, insurance companies and tax-exempt organizations), nor (except as
otherwise expressly indicated) does it describe any aspect of state, local,
foreign or other tax laws. Sales of Units pursuant to the Offer will be taxable
transactions for federal income tax purposes, and also may be taxable
transactions under applicable state, local, foreign and other tax laws. EACH
LIMITED PARTNER SHOULD CONSULT ITS OWN TAX ADVISOR AS TO THE PARTICULAR TAX
CONSEQUENCES TO SUCH LIMITED PARTNER OF SELLING UNITS PURSUANT TO THE OFFER.
Gain or Loss Generally. In general, a Limited Partner will recognize
gain or loss on a sale of Units pursuant to the Offer equal to the difference
between (i) the Limited Partner's "amount realized" on the sale and (ii) the
Limited Partner's adjusted tax basis in the Units sold. Generally, a Limited
Partner's adjusted tax basis with respect to a Unit equals its cost, increased
by the amount of income and the amount of Partnership liabilities (as
determined under Code Section 752) allocated to the Unit, and decreased by (i)
any distributions made with respect to such Unit, (ii) the amount of deductions
or losses allocated to the Unit and (iii) any decrease in the amount of
Partnership liabilities (as determined under Code Section 752) allocated to the
Unit. Thus, the amount of a Limited Partner's adjusted tax basis in tendered
Units will vary depending upon the Limited Partner's particular circumstances.
The "amount realized" with respect to a Unit will be a sum equal to the amount
of cash received by the Limited Partner for the Unit pursuant to the Offer,
plus the amount of the Partnership's liabilities allocable to the Unit (as
determined under Code Section 752).
A portion of the gain or loss recognized by a Limited Partner on a
sale of a Unit pursuant to the Offer generally will be treated as a capital
gain or loss, if (as is generally expected to be the case) the Unit was held by
the Limited Partner as a capital asset. Under the Taxpayer Relief Act of 1997,
the capital gains rate for individuals and other non-corporate taxpayers is
reduced to 20% for sales of capital assets after July 28, 1997 if such assets
were held for more than 18 months. However, any gain from the sale of such
assets attributable to the recapture of depreciation with respect to real
property (as defined in Code Section 1250) is taxed at a maximum rate of 25%.
The 28% rate continues to apply to individual and noncorporate taxpayers who
sell a capital asset held for more than one year but not more than 18 months.
Corporate taxpayers are taxed at a maximum marginal rate of 35% for both
capital gains and ordinary income. The maximum marginal federal income tax rate
for ordinary income of individuals and other noncorporate taxpayers is 39.6%.
Capital losses are deductible only to the extent of capital gains, except that,
subject to the passive activity loss limitations discussed below, non-corporate
taxpayers may deduct up to $3,000 of capital losses in excess of the amount of
their capital gains against ordinary income. Excess capital losses generally
can be carried forward to succeeding years (a corporation's carryforward period
is five years and a non-corporate taxpayer can carry forward such losses
indefinitely); and a corporation is permitted to carry back excess capital
losses to the three preceding taxable years, provided the carryback does not
increase or produce a net operating loss for any of those years.
A tendering Limited Partner will be allocated a pro rata share of the
Partnership's taxable income or loss for the year of sale with respect to the
Units sold in accordance with the provisions of the Limited Partnership
Agreement concerning transfers of Units. Such allocation and any cash
distributed by the Partnership to the Limited Partner for that year will affect
the Limited Partner's adjusted tax basis in Units and, therefore, the amount of
such Limited Partner's taxable gain or loss upon a sale of Units pursuant to
the Offer.
Unrealized Receivables and Certain Inventory. If any portion of the
amount of gain realized by a Limited Partner is attributable to "unrealized
receivables" (which includes depreciation recapture) or "substantially
11
<PAGE>
appreciated inventory" as defined in Code Section 751, then a portion of the
Limited Partner's gain or loss may be ordinary rather than capital and, in
addition, a portion of such gain may be taxed at the 25% rate discussed above.
A portion, if not all, of the gain upon the sale of Units is expected to be
attributable to unrealized receivables. A Limited Partner who tenders Units
which are purchased pursuant to the Offer must file an information statement
with such Limited Partner's federal income tax return for the year of the sale
which provides the information specified in Treasury Regulation ss.
1.751-1(a)(3). A selling Limited Partner also must notify the Partnership of
the date of the transfer and the names, addresses and tax identification
numbers of the transferor(s) and transferee within 30 days of the date of the
transfer (or, if earlier, by January 15 of the following calendar year).
Passive Activity Loss Limitation. Under Code Section 469, a
non-corporate taxpayer or personal service corporation generally can deduct
"passive losses" in any year only to the extent of the person's passive income
for that year. Closely held corporations (other than personal service
corporations) may offset such losses against active income as well as passive
activity income for that year. A substantial portion of the Partnership's
post-1986 losses allocated to the Limited Partners from the Partnership are
believed to be passive losses. Thus, Limited Partners may have "suspended"
passive losses from the Partnership (i.e., post-1986 net taxable losses in
excess of statutorily permitted "phase-in" amounts which have not been used to
offset income from other passive activities). Substantially all gain from a
sale of Units pursuant to the Offer will be passive income.
If a Limited Partner sells less than all of its Units pursuant to the
Offer, suspended passive losses (including a portion of any loss recognized on
the sale of Units) can be currently deducted (subject to other applicable
limitations) to the extent of the Limited Partner's passive income from the
Partnership for that year (including any gain recognized on the sale of Units)
plus any other passive income for that year. If, on the other hand, a Limited
Partner sells 100% of its Units pursuant to the Offer, any "suspended" losses
and any losses recognized upon the sale of the Units will be offset first
against any other net passive gain to the Limited Partner from the sale of the
Units and any other net passive activity income from other passive activity
investments, and the balance of any "suspended" net losses from the Units will
no longer be subject to the passive activity loss limitation and, therefore,
will be deductible by such Limited Partner from its other income (subject to
any other applicable limitations), including ordinary income. A tendering
Limited Partner must sell all of its Units to receive these tax benefits. If
more than 300,000 of the outstanding Units are tendered, some tendering Limited
Partners may not be able to sell 100% of their Units pursuant to the Offer
because of proration of the number of Units to be purchased by the Purchaser.
See Section 1.
Partnership Termination. Section 708(b) of the Code provides that a
partnership terminates for income tax purposes if there is a sale or exchange
of 50% or more of the total interest in partnership capital and profits within
a twelve-month period (although successive transfers of the same interest
within a twelve-month period will be treated as a single transfer for this
purpose). Accordingly, it is possible that transfers of Units made pursuant to
the Offer, in combination with other transfers made within twelve months of the
Offer, will result in a termination of the Partnership. In the event of a
termination, the Partnership's tax year would close and the Partnership would
be treated for income tax purposes as if it had contributed all of its assets
and liabilities to a "new" partnership in exchange for an interest in the "new"
partnership. The Partnership would then be treated as making a distribution of
the interests in the "new" partnership to the new partners and the remaining
partners, followed by the liquidation of the Partnership. Because the "new"
partnership would be treated as having acquired its assets on the date of the
deemed contribution, a new depreciation recovery period would begin on such
date, and the Partnership's annual depreciation deductions over the next few
years would be substantially reduced, and the Partnership would have greater
taxable income (or less tax loss) than if no tax termination occurred. In
addition, depreciation may be required to be allocated to those Limited
Partners that have a higher tax basis, such as the Purchaser. A tax termination
will not affect a Limited Partner who sells all of his Units but will affect
the taxation of a Limited Partner in respect of any Units retained after the
date of the tax termination. A tax termination of the Partnership will also
terminate any partnership in which the Partnership holds a majority interest
(50% or more).
The Limited Partnership Agreement prohibits transfers of Units if a
transfer, when considered with all other transfers during the same applicable
twelve-month period, would cause a termination of the Partnership for tax
12
<PAGE>
purposes. The Purchaser believes that even if the maximum number of Units is
purchased pursuant to the Offer, those transfers will not cause a tax
termination.
Backup Withholding and FIRPTA Withholding. Limited Partners (other
than tax-exempt persons, corporations and certain foreign individuals) who
tender Units may be subject to 31% backup withholding unless those Limited
Partners provide a taxpayer identification number ("TIN") and certify that the
TIN is correct or properly certify that they are awaiting a TIN. A Limited
Partner may avoid backup withholding by properly completing and signing the
Substitute Form W-9 included as part of the Assignment of Partnership Interest.
If a Limited Partner who is subject to backup withholding does not properly
complete and sign the Substitute Form W-9, the Purchaser will withhold 31% from
payments to such Limited Partner.
Gain realized by a foreign Limited Partner on the sale of a Unit
pursuant to the Offer will be subject to federal income tax. Under Code Section
1445, 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 a tax equal to 10% of the amount realized on the disposition. In order
to comply with this requirement, the Purchaser will withhold 10% of the amount
realized by a tendering Limited Partner unless the Limited Partner properly
completes and signs the FIRPTA Affidavit included as part of the Assignment of
Partnership Interest certifying the Limited Partner's TIN and address, and that
such Limited Partner is not a foreign person. Amounts withheld would be
creditable against a foreign Limited Partner's federal income tax liability
and, if in excess thereof, a refund could be obtained from the Internal Revenue
Service by filing a U.S. income tax return.
SECTION 7. EFFECTS OF THE OFFER.
Limitations on Resales. The Limited Partnership Agreement prohibits
transfers of Units if a transfer, when considered with all other transfers
during the same applicable twelve-month period, would cause a termination of
the Partnership for federal or any applicable state income tax purposes. This
provision may limit sales of Units in the secondary market and in private
transactions for the twelve-month period following completion of the Offer. The
General Partner has advised the Purchaser that the Partnership will not process
any requests for recognition of substitution of Limited Partners upon a
transfer of Units during such twelve-month period which the General Partner
believes may cause a tax termination in contravention of the Limited
Partnership Agreement. In determining the number of Units for which the Offer
is made (representing approximately 33% of the outstanding Units if 300,000
Units are tendered), the Purchaser (which is an affiliate of the General
Partner) took this restriction into account so as to permit normal historical
levels of transfers to occur following the transfers of Units pursuant to the
Offer without violating this restriction.
Effect on Trading Market; Registration Under Section 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 the
case of certain kinds of equity securities, a reduction in the number of
security-holders might be expected to result in a reduction in the liquidity
and volume of activity in the trading market for the security. In this case,
however, there is no established public trading market for the Units and,
therefore, the Purchaser (which is an affiliate of the General Partner) does
not believe a reduction in the number of Limited Partners will materially
further restrict the Limited Partners' ability to find purchasers for their
Units through secondary market transactions. See Section 13 for certain limited
information regarding recent secondary market sales of the Units.
The Units are registered under Section 12(g) of the Exchange Act,
which means, among other things, that the Partnership is required to file
periodic reports with the Commission and to comply with the Commission's proxy
rules. The Purchaser (which is an affiliate of the General Partner) does 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, the Partnership could apply to de-register
the Units under the Exchange Act. Because the Units are widely held, however,
the Purchaser (which is an affiliate of the General Partner) believes that,
even if it purchases the maximum number of Units in the Offer, after that
purchase the Units will be held of record by more than 300 persons.
13
<PAGE>
Control of Limited Partner Voting Decisions by Purchaser; Effect of
Relationship with General Partner. The Limited Partnership Agreement provides
that the General Partner has absolute discretion as to whether to admit an
assignee of Units to the Partnership as a substituted Limited Partner. The
Purchaser (which is an affiliate of the General Partner) will seek to be
admitted to the Partnership as a substituted Limited Partner upon consummation
of the Offer and, if admitted, will have the right to vote each Unit purchased
pursuant to the Offer. Even if the Purchaser (which is an affiliate of the
General Partner) is not admitted to the Partnership as a substituted Limited
Partner, however, the Purchaser nonetheless will have the right to vote each
Unit purchased in the Offer pursuant to the irrevocable appointment by
tendering Limited Partners of the Purchaser and its managers and designees as
proxies with respect to the Units tendered by such Limited Partners and
accepted for payment by the Purchaser. See Section 3. As a result, the
Purchaser (which is an affiliate of the General Partner) could be in a position
to significantly influence all voting decisions with respect to the
Partnership. This could (i) prevent non-tendering Limited Partners from taking
action they desire but that IPT opposes and (ii) enable IPT to take action
desired by IPT but opposed by non-tendering Limited Partners. Under the Limited
Partnership Agreement, Limited Partners holding a majority of the Units are
entitled to take action with respect to a variety of matters, including:
removal of a general partner and in certain circumstances election of new or
successor general partners; dissolution of the Partnership; the sale of all or
substantially all of the assets of the Partnership; and most types of
amendments to the Limited Partnership Agreement. When voting on those and other
matters, IPLP and the Purchaser (which are affiliates of the General Partner)
will vote the Units owned by them in whatever manner they deem to be in the
best interests of IPT, which, because of their relationship with the General
Partner, also may be in the interest of the General Partner, but may not be in
the interest of other Limited Partners.
The Offer will not result in any change in the compensation payable to
the General Partner or its affiliates. However, as a result of the Offer, the
Purchaser (which is an affiliate of the General Partner) will participate, in
its capacity as a Limited Partner, in any subsequent distributions to Limited
Partners to the extent of the Units purchased pursuant to the Offer.
SECTION 8. FUTURE PLANS OF INSIGNIA, IPT AND THE PURCHASER. IPT,
through the Purchaser (which is an affiliate of the General Partner), is
seeking to acquire Units pursuant to the Offer in order to increase its equity
interest in the Partnership, primarily for investment purposes and with a view
to making a profit. Following the completion of the Offer, IPT and/or persons
related to or affiliated with it may acquire additional Units. Any such
acquisition may be made through private purchases, through one or more future
tender or exchange offers or by any other means deemed advisable. Any such
acquisition may be at a price higher or lower than the price to be paid for the
Units purchased pursuant to the Offer, and may be for cash or other
consideration. Insignia and IPT (which are affiliates of the General Partner)
also may consider disposing of some or all of the Units the Purchaser acquires
pursuant to the Offer, either directly or by a sale or other disposition of one
or more interests in IPT or the Purchaser itself, depending among other things
on the requirements from time to time of Insignia, IPT and their affiliates in
light of liquidity, strategic, tax and other considerations.
Neither IPT nor the Purchaser (which are affiliates of the General
Partner) has any present plans or intentions with respect to liquidating the
Partnership or selling assets, or obtaining financing on, or refinancing any of
the CCEP/2 Properties, other than the potential financing of the CCEP/2
Properties or the expected sale of Cosmopolitan Center (both, as described in
Section 9). IPT and the Purchaser expect that consistent with the General
Partner's fiduciary obligations, the General Partner will seek and review
opportunities (including opportunities identified by IPT and the Purchaser) to
engage in transactions which could benefit the Partnership, such as sales or
refinancings of CCEP/2 Properties or a combination of the Partnership with one
or more other entities, with the objective of seeking to maximize returns to
Limited Partners.
IPT and the Purchaser (which are affiliates of the General Partner)
have been advised that the possible future transactions the General Partner
expects to consider on behalf of the Partnership include (i) payment of
extraordinary distributions; (ii) refinancing, reducing or increasing existing
indebtedness of the Partnership; (iii) sales of assets, individually or as part
of a complete liquidation; and (iv) mergers or other consolidation transactions
involving the Partnership. Any such merger or consolidation transaction could
involve other limited partnerships in which the General Partner or its
affiliates serve as general partners, or a combination of the
14
<PAGE>
Partnership with one or more existing, publicly traded entities (including,
possibly, affiliates of IPT (which is an affiliate of the General Partner) or
IPT itself), 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 the Partnership, the Purchaser (and thus IPT) will
participate in those benefits to the extent of its ownership of Units. A merger
or other consolidation transaction and certain kinds of other extraordinary
transactions would require a vote of the Limited Partners, and if the Purchaser
is successful in acquiring a significant number of Units pursuant to the Offer
(or otherwise), IPT will be able to significantly influence the outcome of any
such vote. IPT's primary objective in seeking to acquire the Units through the
Purchaser 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 9. CERTAIN INFORMATION CONCERNING THE PARTNERSHIP AND CCEP/2.
Except as otherwise indicated, information contained in this Section 9 is based
upon documents and reports publicly filed by the Partnership (including
information on CCEP/2 and the CCEP/2 Properties contained in exhibits to the
Partnership's public documents) with the Commission. Although the Purchaser has
no information that any statements contained in this Section 9 are untrue, the
Purchaser cannot take responsibility for the accuracy or completeness of any
information contained in this Section 9 which is derived from such public
documents, or for any failure by the Partnership to disclose events which may
have occurred and may affect the significance or accuracy of any such
information but which are unknown to the Purchaser.
General. The Partnership was organized on April 12, 1983 under the
laws of the State of California. Its principal executive offices are located at
One Insignia Financial Plaza, Greenville, South Carolina 29602, and its
telephone number at that address is (864) 239-2747.
The Partnership was formed for the purpose of making loans to a
predecessor partnership of CCEP/2. CCEP/2's indebtedness in respect of the
loans made to it and its predecessor partnership by the Partnership now is
represented by the Loan. The Loan is secured by deeds of trust or mortgages on
the CCEP/2 Properties. The non-recourse provisions of the Loan mean that
CCEP/2's obligation to repay the Loan is secured only by the value of the
collateral (that is, the CCEP/2 Properties), and the Partnership has no right
to make further claims against CCEP/2 other than to the extent of the value of
those properties. The Loan Agreement provides that interest on the outstanding
principal balance accrues at a fixed rate (10% per year), although such
interest is payable only to the extent CCEP/2 has "excess cash flow" (generally
defined as net cash flow from operations after third party debt service and
capital improvements). Accrued unpaid interest is added to principal. At June
30, 1997, the aggregate outstanding principal balance of the Loan (including
interest accrued and added to principal pursuant to the terms of the Loan) was
approximately $228,000,000. This amount is substantially greater than the
estimated fair market value of the CCEP/2 Properties (which are the only source
of repayment for the Loan). Under the terms of the Loan, any net proceeds from
sales or refinancings of the CCEP/2 Properties are paid to the Partnership,
after payment of a 3% disposition fee to ConCap Holdings. ConCap Holdings
(which is an affiliate of the General Partner and the sole general partner of
CCEP/2) has full discretion with respect to conducting CCEP/2's business,
including managing the CCEP/2 Properties and initiating and approving capital
expenditures and asset dispositions and obtaining financing on, or refinancing
any CCEP/2 Property. Accordingly, the amounts of cash flows received by the
Partnership pursuant to the terms of the Loan depend heavily on the discretion
exercised by ConCap Holdings with respect to sales, obtaining financing on, or
refinancing any CCEP/2 Property.
CCEP/2's investment portfolio currently consists of seven office
buildings and four residential apartment complexes, all of which serve as
collateral for the Loan. The deeds of trust in favor of the Partnership that
encumber the CCEP/2 Properties are subordinated to the mortgage liens in favor
of unaffiliated third parties that secure an aggregate indebtedness (the
"Senior Mortgage Indebtedness") of $33,139,000 (as of June 30, 1997). Those
properties are as follows: a 115,829 square foot commercial complex in
Southfield, Michigan; a 101,823 square foot commercial complex in Southfield,
Michigan; a 68,283 square foot commercial complex in Atlanta, Georgia; a 64,762
square foot commercial complex in Southfield, Michigan; a 173,991 square foot
commercial complex in Southfield, Michigan; a 262,457 square foot commercial
complex in Richmond, Virginia; a 159,416
15
<PAGE>
square foot commercial complex in Santa Ana, California; a 90-unit residential
apartment complex in Littleton, Colorado; a 176-unit residential apartment
complex in Woodbridge, Illinois; a 330-unit residential apartment complex in
Cincinnati, Ohio; and a 257-unit residential apartment complex in Houston,
Texas.
Originally Anticipated Term of Partnership; Alternatives. According to
the Partnership's Prospectus dated July 22, 1983, Equity Partners/Two (CCEP/2's
predecessor in interest) anticipated that it would sell and/or refinance its
properties, and consequently repay the Loan, approximately twelve years
(subject to its right to extend the Loan up to two additional years beyond its
initial ten-year term) after their acquisition, depending upon the then current
real estate and money markets, economic climate and income tax consequences to
the partners of Equity Partners/Two. The reorganization of Equity Partners/Two
and its subsequent conversion into CCEP/2 in 1990 resulted in a de facto
extension of the originally anticipated time period. See Section 13. Under the
Limited Partnership Agreement, the term of the Partnership will continue until
December 31, 2013, unless sooner terminated as provided in the Limited
Partnership 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 causing the Partnership to merge with another
entity or engage in a "roll-up" or similar transaction.
General Policy Regarding Sales and Refinancings of Partnership
Properties. In general, the General Partner and ConCap Holdings (which is an
affiliate of the General Partner) regularly evaluate the assets of CCEP/2 by
considering various factors, such as the financial position of CCEP/2 and real
estate and capital markets conditions. In this process, the General Partner and
ConCap Holdings monitor each property's specific locale and sub-market
conditions, evaluating current trends, competition, new construction and
economic changes. The General Partner and ConCap Holdings oversee each asset's
operating performance and continuously evaluate the physical improvement
requirements. In addition, the financing structure for each property, tax
implications and the investment climate are all considered. Any of these
factors, and possibly others, could potentially contribute to any decision of
the General Partner or ConCap Holdings to sell, refinance, upgrade with capital
improvements or hold a particular CCEP/2 Property. The Partnership and CCEP/2
could seek to arrange mortgage loans secured by the CCEP/2 Properties that
would have priority over the Loan, and to use the proceeds of those loans for
distributions to the Limited Partners or other appropriate purposes. The
Original Loan Agreement contained the CCEP/2 Debt Limit Provision to the effect
that CCEP/2 was not permitted to incur indebtedness owed to unaffiliated third
parties on the CCEP/2 Properties in an amount that exceeded 25% of the original
aggregate purchase price of the CCEP/2 Properties. The Limited Partnership
Agreement describes the CCEP/2 Debt Limit Provision and references further
information as found in the Original Loan Agreement. The Amended Loan Agreement
which by its terms replaced the Original Loan Agreement, does not contain the
CCEP/2 Debt Limit Provision; however, the Purchaser has been advised that the
General Partner has not determined whether the CCEP/2 Debt Limit Provision
contained in the Original Loan Agreement continues to apply despite the absence
of that provision in the Amended Loan Agreement. Such a determination is not
likely to be made except in connection with a future proposed financing, if
any, and would depend heavily on the advice received from legal counsel to the
Partnership and the General Partner. In any event, as a matter of law, CCEP/2
would need the consent of the Partnership in order to incur mortgage
indebtedness secured by the CCEP/2 Properties that would have priority over the
deeds of trust securing the Loan. The Limited Partnership Agreement provides
that Limited Partners holding a majority of the outstanding Units may, with the
consent of the General Partner, approve amendments to the Amended Loan
Agreement. The General Partner has advised the Purchaser that it may in the
future, if it deems it necessary or appropriate under the circumstances,
solicit the consent of the Limited Partners in connection with the incurrence
of additional or new mortgage indebtedness that would be senior in priority to
the Loan. Because these plans are subject to change, there can be no assurance
that any consent, if deemed required, will be sought as described above, that
CCEP/2 will seek to obtain financing of the type described above, or as to the
amount or timing of any distribution that might be made to Limited Partners
from the proceeds of any such financing. The Purchaser has been advised that
the General Partner and ConCap Holdings are in the process of negotiating the
sale of Cosmopolitan Center in Atlanta, Georgia to an unaffiliated third party
for a price of $3,500,000, with closing expected to occur on November 19, 1997.
The net cash proceeds (after repayment of third party mortgage debt and payment
of transaction expenses and other costs of sale) from such sale would be
payable to the Partnership under the terms of the Loan; however, there can be
no assurance as to whether this sale will occur as expected or as to the amount
of cash proceeds that might result from such a sale. Moreover, no determination
has been made as to whether any net cash proceeds generated by such
16
<PAGE>
potential financings or sale would be distributed to Limited Partners, which
determination will be made at the time that such financing is obtained or upon
the sale, respectively, and will be based on, among other things, the
Partnership's working capital requirements at the time. There are no other
plans to sell any property at the present time.
Selected Financial and Property-Related Data. Set forth below are
summaries of certain financial and statistical information with respect to the
Partnership, CCEP/2 and each of the CCEP/2 Properties, all of which has been
excerpted or derived from the Partnership's Annual Reports on Form 10-K for the
years ended December 31, 1996, 1995, 1994, 1993 and 1992 and the Partnership's
Quarterly Reports on Form 10-Q for the periods ended June 30, 1997 and 1996.
Information on CCEP/2 and the CCEP/2 Properties is contained in exhibits to the
Partnership's Annual Reports on Form 10-K and Quarterly Reports on Form 10-Q.
More comprehensive financial and other information is included in such reports
and other documents filed by the Partnership with the Commission, and the
following summary is qualified in its entirety by reference to such reports and
other documents and all the financial information and related notes contained
therein.
17
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED CAPITAL INSTITUTIONAL PROPERTIES/2
SELECTED FINANCIAL DATA
(in thousands, except Unit data)
SIX MONTHS ENDED FISCAL YEAR ENDED
JUNE 30, DECEMBER 31,
------------------------ ------------------------------------------------------
1997 1996 1996 1995 1994 1993 1992
----------- ------------ ----------- ----------- ----------- ---------- -------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
Statements of Operations Data:
Rental Income................. -- $ 861 $ 1,210 $ 1,887 $ 1,798 $ 1,529 $ 1,744
Other Income.................. $ 920 $ 418 $ 860 $ 2,178 $ 2,559 $ 2,539 $ 3,313
Total Revenues............. $ 920 $ 1,279 $ 2,070 $ 4,065 $ 4,357 $ 4,068 $ 5,057
Income (Loss) from Operations
(before extraordinary item) $ 654 $ (312) $ (579) $ (2,616) $ (10,736) $ (3,146) $ (10,594)
Net Income (Loss)............. $ 654 $ (312) $ (579) $ (2,616) $ (10,736) $ (3,146) $ (10,594)
Net Income (Loss) per Unit.... $ 0.71 $ (.34) $ (.63) $ (2.85) $ (11.69) $ (3.43) $ (11.54)
AS OF AS OF
JUNE 30, DECEMBER 31,
------------------------ ------------------------------------------------------
1997 1996 1996 1995 1994 1993 1992
----------- ------------ ----------- ----------- ----------- ---------- -------
(UNAUDITED)
Balance Sheets Data:
Total Assets.................. $ 45,316 $ 55,206 $ 54,636 $ 55,494 $ 61,073 $ 71,775 $ 75,110
Total Liabilities............. $ 188 $ 473 $ 170 $ 449 $ 409 $ 375 $ 564
Limited Partners'
Equity (Deficit) ........... $ 45,691 $ 55,290 $ 55,026 $ 55,599 $ 61,162 $ 71,191 $ 74,906
Units Outstanding............. 909,138 909,138 909,138 909,138 909,145 909,154 909,174
Book Value per Unit........... $ 50.26 $ 60.82 $ 60.53 $ 61.16 $ 67.27 $ 78.30 $ 82.39
CONSOLIDATED CAPITAL EQUITY PARTNERS/TWO, L.P.
SELECTED FINANCIAL DATA*
(in thousands)
SIX MONTHS ENDED FISCAL YEAR ENDED
JUNE 30, DECEMBER 31,
----------------------- --------------------------------------------------------
1997 1996 1996 1995 1994 1993 1992
----------- ----------- ----------- ----------- ----------- ----------- -------
(UNAUDITED)
Statements of Operations Data:
Rental Income................. $ 9,111 $ 8,838 $ 17,650 $ 16,963 $ 17,923 $ 17,671 $ 17,703
Other Income.................. $ 44 $ 45 $ 114 $ 125 $ 55 $ 688 $ 13
Total Revenues............. $ 9,155 $ 8,883 $ 17,764 $ 17,088 $ 17,978 $ 18,359 $ 17,716
Income (Loss) from Operations
(before extraordinary item) $ (11,135) $ (11,394) $ (22,026) $ (36,270) $ (19,922) $ (17,149) $ (17,015)
Net Income (Loss)............. $ (11,135) $ (11,394) $ (22,026) $ (36,270) $ (19,922) $ (17,149) $ (17,015)
AS OF AS OF
JUNE 30, DECEMBER 31,
----------------------- --------------------------------------------------------
1997 1996 1996 1995 1994 1993 1992
----------- ----------- ----------- ----------- ----------- ----------- -------
(UNAUDITED)
Balance Sheets Data:
Total Assets.................. $ 48,135 $ 49,035 $ 48,867 $ 49,702 $ 68,190 $ 74,031 $ 78,613
Total Liabilities............. $ 262,366 $ 241,499 $ 251,963 $ 230,764 $ 212,982 $ 198,901 $ 186,334
Limited Partners' Equity
(Deficit) .................. $(212,103) $(190,552) $(201,079) $(179,265) $(143,358) $(123,635) $(106,657)
</TABLE>
- -------------
* Per unit data is not applicable because limited partnership interests in
CCEP/2 are closely held, and are not in the form of units. Limited Partners
in the Partnership do not own any equity interests in CCEP/2; rather, the
principal asset of the Partnership is the Loan, which is an obligation of
CCEP/2.
18
<PAGE>
Description of Properties. Set forth below is a table showing the
location, the nature of CCEP/2's ownership interest in and the use of the
CCEP/2 Properties. All fee ownership of the CCEP/2 Properties is held subject
to the Loan.
<TABLE>
<CAPTION>
PROPERTY TYPE OF OWNERSHIP USE
- ----------------------- ------------------------------------ ----------------------
<S> <C> <C>
Canyon Crest Apartments Fee ownership Residential Apartments
Littleton, Colorado (subject to first mortgage) (90 units)
Central Park Place Fee ownership Commercial Center
Southfield, Michigan (115,829 sq. ft.)
Central Park Plaza Fee ownership Commercial Center
Southfield, Michigan (101,823 sq. ft.)
Cosmopolitan Center Fee ownership Commercial Center
Atlanta, Georgia (68,283 sq. ft.)
Crescent Center Fee ownership Commercial Center
Southfield, Michigan (64,762 sq. ft.)
Highcrest Townhomes Fee ownership Residential Apartments
Woodbridge, Illinois (subject to first mortgage) (176 units)
Lahser Center I and II Fee ownership Commercial Center
Southfield, Michigan (173,991 sq. ft.)
Richmond Plaza Fee ownership Commercial Center
Richmond, Virginia (subject to first mortgage) (262,457 sq. ft.)
Town Center Plaza Fee ownership Commercial Center
Santa Ana, California (subject to first, second, third and (159,416 sq. ft.)
fourth mortgages)
Village Brooke Fee ownership Residential Apartments
Cincinnati, Ohio (subject to first mortgage) (330 units)
Windemere Apartments Fee ownership Residential Apartments
Houston, Texas (subject to first mortgage) (257 units)
</TABLE>
Accumulated Depreciation Schedule. Set forth below is a table showing
the gross carrying value and accumulated depreciation of the CCEP/2 Properties
as of December 31, 1996 ($ amounts in thousands).
<TABLE>
<CAPTION>
GROSS
CARRYING ACCUMULATED
PROPERTY VALUE DEPRECIATION RATE METHOD
- ----------------------------------- ------------- ------------- ---------- --------
<S> <C> <C> <C> <C>
Canyon Crest $ 3,219 $ 1,649 3-20 yrs. S/L
Central Park Plaza 11,119 6,071 1-20 yrs. S/L
Central Park Place 9,828 5,872 1-20 yrs. S/L
Cosmopolitan Center 3,921 3,425 1-20 yrs. S/L
Crescent Center 3,491 2,739 3-20 yrs. S/L
Lahser Center I and II 12,664 7,376 1-20 yrs. S/L
Highcrest Townhomes 7,318 3,731 3-20 yrs. S/L
Richmond Plaza 17,593 9,963 3-20 yrs. S/L
Town Center Plaza 15,887 9,655 1-20 yrs. S/L
Village Brooke 9,041 4,615 3-20 yrs. S/L
Windemere 6,204 3,092 3-20 yrs. S/L
---------- ----------
TOTALS $ 100,285 $ 58,188
========== ==========
</TABLE>
19
<PAGE>
Schedule of Mortgages. Set forth below is a table showing certain
information regarding the outstanding mortgages encumbering the CCEP/2
Properties as of December 31, 1996 ($ amounts in thousands). All CCEP/2
Properties, including those listed below, are held subject to the Loan.
<TABLE>
<CAPTION>
PRINCIPAL PRINCIPAL
BALANCE AT STATED BALANCE
DECEMBER 31, INTEREST PERIOD MATURITY DUE AT
PROPERTY 1996 RATE AMORTIZED DATE MATURITY
- -------------------------------------------- -------------- -------------- --------------- ---------------- ----------
<S> <C> <C> <C> <C> <C> <C>
Canyon Crest $ 2,000 7.33% (a) 11/01/03 $ 2,000
Highcrest Townhomes 4,000 7.33% (a) 11/01/03 4,000
Richmond Plaza 14,500 7.88% (a) 06/01/00 14,500
Town Center Plaza
First Mortgage 539 9.88% 25 yrs. 08/01/03 9
Second Mortgage 273 8.63% 25 yrs. 06/01/00 7
Third Mortgage 1,105 8.75% 25 yrs. 10/01/00 1,028
Other Mortgage 884 8.75% 26 yrs. 10/01/00 823
Village Brooke 6,879 8.00% 25 yrs. 12/01/02 6,161
Windemere 3,000 7.33% (a) 11/01/03 3,000
--------- -----------
TOTALS $ 33,180 $ 31,528
- ----------------------------- ========= ===========
</TABLE>
(a) Interest only.
Average Annual Rental Rate and Occupancy. Set forth below is a table
showing the average annual rental rates and occupancy percentages for the
CCEP/2 Properties during 1996.
AVERAGE
AVERAGE ANNUAL ANNUAL
PROPERTY RENTAL RATE OCCUPANCY
- ----------------------------------- ----------------------- ----------------
Canyon Crest $ 8,100/unit 95%
Highcrest Townhomes $ 9,559/unit 94%
Village Brooke $ 7,116/unit 89%
Windemere $ 5,985/unit 94%
Central Park Plaza $12.68/sq.ft. 95%
Central Park Place $13.66/sq.ft. 90%
Cosmopolitan Center $11.04/sq.ft. 87%
Crescent Center $10.91/sq.ft. 93%
Lahser Center I and II $12.85/sq.ft. 94%
Richmond Plaza $11.40/sq.ft. 90%
Town Center Plaza $13.43/sq.ft. 71%
20
<PAGE>
Schedule of Real Estate Taxes and Rates. Set forth below is a table
showing the real estate taxes and rates for 1996 for each of the CCEP/2
Properties.
<TABLE>
<CAPTION>
1996 1996
PROPERTY BILLING RATE
- ------------------------------------ ---------------------- -------------
<S> <C> <C>
Canyon Crest $ 13,000 8.39%
Central Park Plaza $ 119,000 5.65%
Central Park Place $ 114,000 5.81%
Cosmopolitan Center $ 41,000 1.61%
Crescent Center $ 61,000 2.78%
Lahser Center I and II $ 149,000 5.65%
Highcrest Townhomes $ 182,000 7.72%
Richmond Plaza $ 188,000 1.45%
Town Center Plaza $ 100,000 0.94%
Village Brooke $ 187,000 5.63%
Windemere $ 147,000 3.10%
</TABLE>
Other Information. The Partnership is subject to the information
reporting requirements of the Exchange Act and accordingly is required to file
reports and other information with the Commission relating to its business,
financial results and other matters. Such reports and other documents may be
inspected at the Commission's Public Reference Section, Room 1024, 450 Fifth
Street, N.W., Washington, D.C. 20549, where copies may be obtained at
prescribed rates, and at the regional offices of the Commission located in the
Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661,
and 7 World Trade Center, New York, New York 10048. Copies should be available
by mail upon payment of the Commission's customary charges by writing to the
Commission's principal offices at 450 Fifth Street, N.W., Washington, D.C.
20549. The Commission also maintains a web site that contains reports, proxy
and other information filed electronically with the Commission, the address of
which is http://www.sec.gov.
Cash Distributions History. The following table sets forth the cash
distributions to the Limited Partners and the General Partner made by the
Partnership since 1991. There were no distributions to Limited Partners in
1996, 1994, 1993 or 1992. Prior to the 1995 distribution, the last distribution
made by the Partnership was in 1991 ($2.20 per Unit). The 1997 distribution
consisted primarily of surplus funds (approximately $9.90 per Unit) from
obtaining financing on certain of the CCEP/2 Properties which funds were paid
to the Partnership as a reduction of the outstanding principal balance of the
Loan; the remaining portion was from operating cash flow. The Limited
Partnership Agreement requires that the General Partner maintain minimum
working capital reserves ($7,157,000 as of June 30, 1997) equal to 5% of net
Invested Capital (as defined in the Limited Partnership Agreement). In total,
original investors in the Partnership have received $194.64 of their original
$250 investment made in 1983.
21
<PAGE>
<TABLE>
<CAPTION>
PER UNIT
DISTRIBUTION TO DISTRIBUTION TO AGGREGATE
YEAR LIMITED PARTNERS(1) GENERAL PARTNER DISTRIBUTION(2)
---- -------------------- -------------------- ------------------
<S> <C> <C> <C>
1997* $10.98 $10,000 $9,992,000
1996 -- -- --
1995 3.27 30,000 3,003,000
1994 -- -- --
1993 -- -- --
1992 -- -- --
1991 2.20 20,000 2,020,000
</TABLE>
- -------------
(1) The amounts shown in this column only reflect actual cash distributions
paid directly to Limited Partners based on the weighted average numbers of
Units outstanding during the applicable year, and do not include amounts
withheld and paid directly to state tax authorities on behalf of Limited
Partners in respect of state income tax obligations.
(2) Pursuant to the Limited Partnership Agreement, cash distributions by the
Partnership generally are allocated 99% to the Limited Partners and 1% to
the General Partners.
* Through October 30, 1997.
Operating Budgets of the Partnership and CCEP/2. A summary of the combined
fiscal 1996 and 1997 operating budgets and the audited results of operations
for fiscal 1996 of the Partnership and CCEP/2 are set forth in the table below.
The budgeted amounts provided below are figures that were not computed in
accordance with generally accepted accounting principles ("GAAP").
Historically, budgeted operating results of operations for a particular fiscal
year have differed significantly in certain respects from the audited operating
results for that year. In particular, items that are categorized as capital
expenditures for purposes of preparing the operating budgets are often
re-categorized as expenses when the financial statements are audited and
presented in accordance with GAAP. Therefore, the summary operating budgets
presented for fiscal 1997 should not necessarily be considered as indicative of
what the audited operating results for fiscal 1997 will be. Furthermore, any
estimate of the future performance of a business, such as the Partnership's or
CCEP/2's business, is forward-looking and based on numerous assumptions, some
of which inevitably will prove to be incorrect. For this reason, it is probable
that the combined future operating results of the Partnership and CCEP/2 will
differ from those projected in the operating budget, and those differences may
be material. Therefore, such information should not be relied on by Limited
Partners.
<TABLE>
<CAPTION>
FISCAL 1996 FISCAL 1996 FISCAL 1997
BUDGETED AUDITED BUDGETED
--------------- --------------- ---------------
<S> <C> <C> <C>
Total Revenues from Property Operations................. $ 19,582,000 $ 18,860,000 $ 18,693,658
Total Operating Expenses ............................... $ 10,728,000 $ 11,804,000 $ 9,491,516
Net Operating Income.................................... $ 8,854,000 $ 7,056,000 $ 9,202,142
Capital Expenditures.................................... $ 5,614,000 $ 4,240,000 $ 3,656,356
</TABLE>
SECTION 10. CONFLICTS OF INTEREST AND TRANSACTIONS WITH AFFILIATES.
The General Partner and its affiliates have conflicts of interest with respect
to the Offer as set forth below.
Conflicts of Interest with Respect to the Offer. The General Partner
has conflicts of interest with respect to the Offer, including conflicts
resulting from its affiliation with IPT and the Purchaser. The General Partner
also would have a conflict of interest (i) as a result of the fact that a sale
or liquidation of the Partnership's assets would result in a decrease or
elimination of the fees paid to the General Partner and/or its affiliates and
(ii) as a consequence of the Purchaser's ownership of Units, because the
Purchaser (which is an affiliate of the General Partner) may have incentives to
seek to maximize the value of its ownership of Units, which in turn may result
in a conflict for the General Partner in attempting to reconcile the interests
of the Purchaser (which is an affiliate of the General Partner) with the
interests of the other Limited Partners. In addition, the Purchaser (which is
an affiliate of the General Partner) is making the Offer with a view to making
a profit. Accordingly, there is a conflict between the desire of the Purchaser
(which is an affiliate of the General Partner) to purchase Units at a low price
and the desire of the Limited Partners to sell their Units at a high price. The
General Partner has indicated in the Schedule 14D-9 that it is remaining
neutral and making no recommendation as to whether Limited Partners should
tender their Units pursuant to the Offer. LIMITED PARTNERS ARE URGED TO READ
THIS OFFER TO PURCHASE AND THE
22
<PAGE>
SCHEDULE 14D-9 AND THE RELATED MATERIALS CAREFULLY AND IN THEIR ENTIRETY BEFORE
DECIDING WHETHER TO TENDER THEIR UNITS.
Voting by the Purchaser. The Limited Partnership Agreement provides
that the General Partner has absolute discretion as to whether to admit an
assignee of Units to the Partnership as a substituted Limited Partner. The
Purchaser (which is an affiliate of the General Partner) will seek to be
admitted to the Partnership as a substituted Limited Partner upon consummation
of the Offer and, if admitted, will have the right to vote each Unit purchased
pursuant to the Offer. Even if the Purchaser (which is an affiliate of the
General Partner) is not admitted to the Partnership as a substituted Limited
Partner, however, the Purchaser nonetheless will have the right to vote each
Unit purchased in the Offer pursuant to the irrevocable appointment by
tendering Limited Partners of the Purchaser (which is an affiliate of the
General Partner) and its managers and designees as proxies with respect to the
Units tendered by such Limited Partners and accepted for payment by the
Purchaser. See Section 3. As a result, if the Purchaser (which is an affiliate
of the General Partner) is successful in acquiring a significant number of
Units pursuant to the Offer, the Purchaser will have the right to vote those
Units and thereby significantly influence all voting decisions with respect to
the Partnership. This could (i) prevent non-tendering Limited Partners from
taking action they desire but that IPT opposes and (ii) enable IPT to take
action desired by IPT but opposed by non-tendering Limited Partners. Under the
Limited Partnership Agreement, Limited Partners holding a majority of the Units
are entitled to take action with respect to a variety of matters, including:
removal of a general partner and in certain circumstances election of new or
successor general partners; dissolution of the Partnership; the sale of all or
substantially all of the assets of the Partnership; and most types of
amendments to the Limited Partnership Agreement. When voting on these matters,
IPLP and the Purchaser (which are affiliates of the General Partner) will vote
the Units owned by them in whatever manner they deem to be in IPT's best
interests, which, because of their relationship with the General Partner, also
may be in the interest of the General Partner, but may not be in the interest
of other Limited Partners. See Section 7.
Financing Arrangements. The Purchaser (which is an affiliate of the
General Partner) expects to pay for the Units it purchases pursuant to the
Offer with funds provided by IPLP as capital contributions. IPLP in turn
intends to use its cash on hand to make such contributions. See Section 12. It
is possible, however, that in connection with its future financing activities,
IPT or IPLP may cause or request the Purchaser (which is an affiliate of the
General Partner) to pledge the Units as collateral for loans, or otherwise
agree to terms which provide IPT, IPLP and the Purchaser with incentives to
generate substantial near-term cash flow from the Purchaser's investment in the
Units. This could be the case, for example, if a loan has a "balloon" maturity
after a relatively short time or bears a high or increasing interest rate. In
such a situation, the General Partner may experience a conflict of interest in
seeking to reconcile the best interests of the Partnership with the need of its
affiliates for cash flow from the Partnership's activities.
Transactions with Affiliates. Under the Limited Partnership Agreement,
the General Partner holds an interest in the Partnership and is entitled to
participate in certain cash distributions made by the Partnership to its
partners. The General Partner received from the Partnership in respect of its
interest in the Partnership cash distributions of $10,000 to date in 1997 and
$30,000 in 1995. There were no distributions made to the General Partner in
1996. In late December 1994, IRG and ICG (which are affiliates of the Purchaser
and the General Partner) assumed day-to-day property management
responsibilities for all of the Partnership's properties and the CCEP/2
Properties. The Partnership and CCEP/2 paid IRG and ICG property management
fees for property management services in the amounts of approximately $946,000
and $948,000 for the years ended December 31, 1996 and 1995, respectively, and
have paid IRG and ICG property management fees equal to $437,000 during the
first six months of 1997. The Partnership and CCEP/2 reimbursed the General
Partner, ConCap Holdings and their affiliates (including Insignia) for expenses
incurred in connection with asset management and partnership administration
services performed by them for the Partnership for the years ended December 31,
1996 and 1995 in the amounts of $654,000 and $708,000, respectively, and have
reimbursed them in the amount of $270,000 through June 30, 1997. The amounts of
reimbursements include approximately $45,000 for the year ended December 31,
1996 for construction oversight costs. CCEP/2 paid an affiliate $295,000 and
$615,000, respectively, for the years ended December 31, 1996 and 1995, and
$214,000 for the six months ended June 30, 1997 for lease commissions. In
addition, CCEP/2 is subject to an Investment Advisory Agreement between CCEP/2
and an
23
<PAGE>
affiliate of ConCap Holdings (which is an affiliate of the General Partner).
This agreement provides for an annual fee, payable in monthly installments, to
an affiliate of ConCap Holdings for advisory and consulting services for the
CCEP/2 Properties. Advisory fees paid pursuant to this agreement were $154,000
and $178,000, respectively, for the years ended December 31, 1996 and 1995, and
$77,000 for the six months ended June 30, 1997. On July 1, 1995, each of the
Partnership and CCEP/2 began insuring its properties under a master policy
through an agency and insurer unaffiliated with the General Partner. An
affiliate of the General Partner acquired, in the acquisition of a business,
certain financial obligations from an insurance agency which was later acquired
by the agent who placed the current year's master policy. The current agent
assumed the financial obligations to the affiliate of the General Partner who
receives payments on these obligations from the agent. Insignia and the General
Partner believe that the aggregate financial benefit derived by Insignia and
its affiliates from the arrangement described in the three preceding sentences
during the 18-month period ended December 31, 1996 and since that date was
immaterial.
SECTION 11. CERTAIN INFORMATION CONCERNING THE PURCHASER, IPLP, IPT
AND INSIGNIA.
The Purchaser. The Purchaser (which is an affiliate of the General
Partner) is a newly formed entity controlled by IPT and organized for the
purpose of acquiring the Units. The Purchaser is a wholly-owned subsidiary of
IPLP. The Purchaser (which is an affiliate of the General Partner) has not
engaged in any business activity other than in connection with the Offer and
another tender offer for units of limited partnership interests in another IPT
Partnership (as defined below) being made contemporaneously with the Offer, and
has no significant assets or liabilities at the present time. Upon consummation
of the Offer and such other offer, the Purchaser's only significant assets will
be the Units it acquires pursuant to the Offer and the other limited
partnership units it acquires pursuant to such other offer.
The principal executive offices of the Purchaser (which is an
affiliate of the General Partner) are located at One Insignia Financial Plaza,
Greenville, South Carolina 29602, and its telephone number is (864) 239-1000.
For certain information concerning the managers of the Purchaser (which is an
affiliate of the General Partner), see Schedule II to this Offer to Purchase.
IPT and IPLP. IPT was formed by Insignia in May 1996 for the purpose
of acquiring and owning interests in multifamily residential properties,
principally through ownership of limited and general partner interests in real
estate limited partnerships (including the Partnership). IPT has been organized
and will operate in a manner that will qualify it to be taxed as a real estate
investment trust ("REIT") under the Code. Substantially all of IPT's
investments are held through IPLP, which is the operating partnership of IPT.
IPT is presently the sole general partner and Insignia is presently the sole
limited partner of IPLP.
In forming IPT, Insignia and its affiliates (i) transferred to IPT
equity interests in corporations comprising or controlling the general partners
of 36 public real estate limited partnerships (including the Partnership) (the
"IPT Partnerships") in exchange for common shares of beneficial interest of IPT
and (ii) transferred to IPLP limited partner interests in the IPT Partnerships
(or equity interests in entities owning limited partner interests in the IPT
Partnerships) in exchange for units of limited partner interest in IPLP. The
IPT Partnerships own, in the aggregate, 184 properties containing approximately
42,000 residential apartment units and approximately 4.2 million square feet of
commercial space. See Schedule V for a list of the IPT Partnerships.
IPT does not operate as a self-administered and self-managed REIT, but
rather has engaged, and will for the foreseeable future continue to engage,
Insignia to act as advisor to IPT and IPLP. In such capacity, Insignia and its
affiliates will provide a broad range of services to IPT and IPLP, including
executive advisory, investment advisory, acquisition, administrative, financial
and accounting services, including in connection with the Offer.
On July 18, 1997, IPT, Insignia, MAE GP Corporation (which is an
affiliate of Insignia) and Angeles Mortgage Investment Trust, an unincorporated
California business trust ("AMIT"), entered into a definitive merger agreement
(the "AMIT Merger Agreement"), pursuant to which AMIT is to be merged with and
into IPT, with IPT being the surviving entity, in a stock for stock transaction
(the "AMIT Merger"). AMIT is a public company whose
24
<PAGE>
Class A shares trade on the American Stock Exchange under the symbol ANM.
Insignia and its affiliates currently own 96,800 (or approximately 3.7%) of the
2,617,000 outstanding AMIT Class A shares and all of the 1,675,113 outstanding
AMIT Class B shares. If the AMIT Merger is consummated, IPT will become a
publicly traded company (IPT presently intends to apply for listing of its
shares on the New York Stock Exchange, which listing would be subject to
completion of the AMIT Merger), and it is anticipated that Insignia and its
affiliates will own approximately 56% of post-merger IPT, the former AMIT
shareholders (other than Insignia and its affiliates) will own approximately
17% of post-merger IPT, and the current unaffiliated shareholders of IPT will
own the remaining 27% of post-merger IPT.
The AMIT Merger is expected to be completed in the fourth quarter of
1997. Consummation of the AMIT Merger is subject to several conditions,
including approval of the AMIT Merger Agreement and the AMIT Merger by the
respective shareholders of IPT and AMIT and the receipt by AMIT of a fairness
opinion from its financial advisor to the effect that the AMIT Merger is fair
to AMIT's shareholders from a financial point of view. Accordingly, there can
be no assurance as to when the AMIT Merger will occur, or that it will occur at
all.
IPT's principal executive offices are located at One Insignia
Financial Plaza, Greenville, South Carolina 29602, and its telephone number is
(864) 239-1000. For certain information concerning the trustees and executive
officers of IPT, see Schedule III to this Offer to Purchase. IPLP does not have
any officers or employees.
Set forth below is certain consolidated financial information with
respect to IPT and IPLP.
INSIGNIA PROPERTIES TRUST SELECTED
CONSOLIDATED FINANCIAL INFORMATION (in
thousands, except share and unit data)
<TABLE>
<CAPTION>
SIX MONTHS YEAR ENDED
ENDED JUNE 30, DECEMBER 31,
1997 1996
---------------- -------------------
(unaudited)
<S> <C> <C>
Statements of Operations Data:
Revenues............................................... $ 6,715 $ 9,705
Income Before Extraordinary Item....................... $ 1,248 $ 3,557
Net Income............................................. $ 1,248 $ 2,425
Supplemental Data:
Funds From Operations(1)............................... $ 8,718 $ 12,563
Weighted Average IPT Common Shares Outstanding......... 11,539,240 --
IPLP Units Outstanding................................. 8,399,499 8,399,499
---------- ----------
Weighted Average IPT Common
Shares and IPLP
Units Outstanding(2)............................... 19,938,739 --
========== =========
Balance Sheets Data:
Cash................................................... $ 35,520 $ 4,928
Investments in IPT Partnerships(3)..................... $ 124,951 $ 118,741
Long-Term Debt......................................... $ 19,950 $ 19,730
Shareholders' Equity(4)................................ $ 163,466 $ 70,639
</TABLE>
- -----------------
(1) Funds from Operations represent income or loss from real estate
operations, which is net income o accordance with GAAP, excluding gains or
losses from debt restructuring or sales of property, plus depreciation ar
loss in on for impairment.
(2) Assumes all outstanding IPLP units are exchanged for IPT Common Shares.
(3) Represents IPT's investment in 25 of the 36 IPT Partnerships which IPT
accounts for using the equity method. Of the remaining 11 IPT
Partnerships, IPT accounts for 10 using the cost method and one using the
consolidation method.
(4) Includes Insignia's investments in predecessor entities.
Insignia. Insignia is a fully integrated real estate services
organization. Insignia is the largest manager of multi-family residential
properties in the United States and is among the largest managers of
commercial properties. Insignia's real estate services include property
management, providing all of the day-to-day services
25
<PAGE>
necessary to operate a property, whether residential or commercial; asset
management, including long-term financial planning, monitoring and implementing
capital improvement plans, and development and execution of refinancings and
dispositions; real estate leasing and brokerage; maintenance and construction
services; marketing and advertising; investor reporting and accounting; and
investment banking, including assistance in workouts and restructurings,
mergers and acquisitions, and debt and equity securitizations.
Insignia provides property and/or asset management services for
approximately 2,600 properties, which include approximately 290,000 residential
units (including cooperative and condominium units), and in excess of 150
million square feet of retail, commercial and industrial space, located in over
500 cities in 48 states. Insignia currently provides partnership administration
services to approximately 900 limited partnerships having approximately 330,000
limited partners. Insignia is a public company whose stock is traded on the New
York Stock Exchange under the symbol IFS.
Insignia is subject to the information and reporting requirements of
the Exchange Act and in accordance therewith is required to file periodic
reports, proxy statements and other information with the Commission relating to
its business, financial condition and other matters. Certain information, as of
particular dates, concerning Insignia's business, principal properties, capital
structure, material pending legal proceedings, operating results, financial
condition, directors and officers (including their remuneration and stock
options granted to them), the principal holders of Insignia's securities, any
material interests of such persons in transactions with Insignia and certain
other matters is required to be disclosed in proxy statements and annual
reports distributed to Insignia's shareholders and filed with the Commission.
Such reports, proxy statements and other information may be inspected and
copied at the Commission's public reference facilities and should also be
available for inspection in the same manner as set forth with respect to the
Partnership in Section 9.
Insignia's principal executive offices are located at One Insignia
Financial Plaza, Greenville, South Carolina 29602, and its telephone number is
(864) 239-1000. For certain information concerning the directors and executive
officers of Insignia, see Schedule IV to this Offer to Purchase.
Set forth below is certain consolidated financial information with
respect to Insignia and its consolidated subsidiaries for its fiscal years
ended December 31, 1996, 1995 and 1994 and the six-month periods ended June 30,
1997 and 1996. More comprehensive financial and other information is included
in Insignia's Annual Report on Form 10-K for the year ended December 31, 1996
(including management's discussion and analysis of financial condition and
results of operations) and in other reports and documents filed by Insignia
with the Commission. The financial information set forth below is qualified in
its entirety by reference to such reports and documents filed with the
Commission and the financial statements and related notes contained therein.
These reports and other documents may be examined and copies thereof may be
obtained in the manner set forth above.
26
<PAGE>
INSIGNIA FINANCIAL GROUP, INC.
SELECTED CONSOLIDATED FINANCIAL INFORMATION
(in thousands, except per share data)
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
JUNE 30, DECEMBER 31,
------------------------- -----------------------------------
1997 1996 1996 1995 1994
------------ ------------ ------------ ------------ --------
(unaudited)
<S> <C> <C> <C> <C> <C>
Statements of Operations Data:
Total Revenues...................................... $ 154,527 $ 83,319 $ 227,074 $ 123,032 $ 75,451
Income Before Taxes and Extraordinary Item.......... $ 7,630 $ 7,690 $ 14,946 $ 10,093 $ 12,101
Net Income.......................................... $ 4,578 $ 4,768 $ 8,564 $ 5,806 $ 7,261
Earnings Per Share.................................. $ 0.14 $ 0.15 $ 0.27 $ 0.20 $ 0.35
</TABLE>
<TABLE>
<CAPTION>
AS OF AS OF
JUNE 30, DECEMBER 31,
------------------------- -----------------------------------
1997 1996 1996 1995 1994
------------ ------------ ------------ ------------ --------
(unaudited)
<S> <C> <C> <C> <C> <C>
Balance Sheets Data:
Cash and Cash Equivalents........................... $ 77,083 $ 57,366 $ 54,614 $ 49,846 $ 36,596
Receivables......................................... $ 58,536 $ 19,101 $ 46,040 $ 26,445 $ 13,572
Total Assets.................................... $ 530,224 $ 473,720 $ 492,402 $ 245,409 $ 174,272
Accounts Payable.................................... $ 6,965 $ 2,491 $ 1,711 $ 1,497 $ 3,478
Commissions Payable................................. $ 26,937 -- $ 18,736 $ 602 --
Accrued and Sundry Liabilities...................... $ 37,725 $ 27,158 $ 40,741 $ 25,619 $ 18,790
Long-Term Debt...................................... $ 58,674 $ 141,388 $ 69,140 $ 42,996 $ 73,198
Total Liabilities............................... $ 130,301 $ 258,622 $ 130,328 $ 70,714 $ 95,466
Redeemable Convertible Preferred Stock.............. -- -- -- $ 15,000 --
Redeemable Convertible Preferred Securities
of Subsidiary Trust............................... $ 143,978 -- $ 144,169 -- --
Minority Interest of Consolidated Subsidiaries...... $ 31,535 $ 2,690 -- $ 2,682 --
Shareholders' Equity............................ $ 224,410 $ 212,408 $ 217,905 $ 157,013 $ 78,806
</TABLE>
Except as otherwise set forth herein, none of the Purchaser (which is
an affiliate of the General Partner), IPLP, IPT, Insignia or, to the best of
the Purchaser's knowledge, any of the persons listed on Schedules II, III or IV
hereto, or any affiliate of the foregoing, (i) beneficially owns or has a right
to acquire any Units, (ii) has effected any transaction in the Units in the
last 60 days, or (iii) has any contract, arrangement, understanding or
relationship with any other person with respect to any securities of the
Partnership, including, but not limited to, contracts, arrangements,
understandings or relationships concerning the transfer or voting thereof,
joint ventures, loan or option arrangements, puts or calls, guarantees of
loans, guarantees against loss or the giving or withholding of proxies. Andrew
L. Farkas, who is the Chairman of the Board, Chief Executive Officer and
President of Insignia and a trustee of IPT, beneficially owns approximately 28%
of Insignia's outstanding common stock and, as a result, may be deemed to
beneficially own the Units owned by IPLP.
SECTION 12. SOURCE OF FUNDS. The Purchaser (which is an affiliate of
the General Partner) expects that approximately $13,000,000 will be required to
purchase 300,000 Units, if tendered, and to pay related fees and expenses. The
Purchaser (which is an affiliate of the General Partner) expects to obtain all
of those funds from IPLP, which in turn intends to use its cash on hand.
SECTION 13. BACKGROUND OF THE OFFER.
Affiliation with the General Partner. Upon the Partnership's formation
in 1983, Consolidated Capital Equities Corporation ("CCEC"), a Colorado
corporation, was the corporate general partner and Consolidated Capital
Management Company, a California general partnership, was the non-corporate
general partner. As a result of a succession of agreements, CCEC became the
Partnership's managing general partner. In 1988, through a series of
transactions, Southmark Corporation acquired control of CCEC. In December 1988,
CCEC filed for
27
<PAGE>
reorganization under Chapter 11 of the United States Bankruptcy Code. In 1990,
as part of CCEC's reorganization plan, the General Partner acquired CCEC's
general partner interests in the Partnership and in 15 other affiliated public
limited partnerships (the "Affiliated Partnerships") and the General Partner
replaced CCEC as the managing general partner of the Partnership (and as the
managing general partner of each of the Affiliated Partnerships). The selection
of the General Partner as the general partner of the Partnership (and of each
of the Affiliated Partnerships) was approved by a majority of the Limited
Partners in the Partnership (and by a majority of the limited partners in each
of the Affiliated Partnerships) pursuant to solicitations commenced in August
1990. Insignia acquired the stock of the General Partner through two
transactions in December 1994 and October 1995, and contributed that stock to
IPT in December 1996 in connection with IPT's formation.
General Partner's Affiliation with CCEP/2. In 1989, Equity
Partners/Two, defaulted on certain interest payments that were due under the
original loan agreement between the Partnership and Equity Partners/Two, and
Equity Partners/Two subsequently filed for reorganization under Chapter 11 of
the United States Bankruptcy Code. In November 1990, as part of Equity
Partners/Two's reorganization plan, the Partnership and Equity Partners/Two
executed the Loan Agreement and CCEP/2 renewed the deeds of trust on the CCEP/2
Properties. ConCap Holdings (which is an affiliate of the General Partner) is
the sole general partner of CCEP/2, and has full discretion with respect to
conducting CCEP/2's business, including managing the CCEP/2 Properties and
initiating and approving capital expenditures and asset dispositions and
obtaining financing on, or refinancing any CCEP/2 Property. Under the terms of
the Loan, any net proceeds from sales or refinancings of the CCEP/2 Properties
are paid to the Partnership, after payment of a 3% disposition fee to ConCap
Holdings.
Determination of Purchase Price. In establishing the Purchase Price,
the Purchaser (which is an affiliate of the General Partner) reviewed certain
publicly available information and certain information made available to it by
the General Partner and ConCap Holdings and its other affiliates, including
among other things: (i) the Partnership's Limited Partnership Agreement, as
amended to date; (ii) the Partnership's Annual Report on Form 10-K for the year
ended December 31, 1996 and the Partnership's Quarterly Report on Form 10-Q for
the period ended June 30, 1997; (iii) unaudited results of operations of the
CCEP/2 Properties for the period since the beginning of the Partnership's
current fiscal year; (iv) the operating budgets prepared by IRG and ICG with
respect to the CCEP/2 Properties for the year ending December 31, 1997; (v)
independent appraisals of certain of the CCEP/2 Properties; and (vi) other
information obtained by IRG, ICG, Insignia and other affiliates in their
capacities as providers of property management, asset management and
partnership administration services to the Partnership and CCEP/2. Information
on CCEP/2 and the CCEP/2 Properties is contained in exhibits to the
Partnership's Annual Report on Form 10-K for the year ended December 31, 1996
and the Partnership's Quarterly Report on Form 10-Q for the year ended June 30,
1997. Based on the above information, the Purchaser (which is an affiliate of
the General Partner) considered several factors, as discussed below.
Trading History of Units. Secondary market sales activity for the
Units, including privately negotiated sales, has been limited and sporadic.
According to information obtained from the General Partner, from July 1, 1995
to June 30, 1997 an aggregate of 44,023 Units (representing less than 4.9% of
the total outstanding Units) were transferred in sale transactions (excluding
the transfers of Units to IPLP by Insignia in connection with the formation of
IPT). Set forth in the table below are the high and low sales prices of Units
for the quarterly periods from July 1, 1995 to June 30, 1997, as reported by
the General Partner and 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 prices; thus the Purchaser
does not know whether the information compiled by The Partnership Spectrum is
accurate or complete. The transfer paperwork submitted to the General Partner
often does not include the requested price information or contains conflicting
information as to the actual sales price; accordingly, Limited Partners should
not rely upon this information as being completely accurate.
28
<PAGE>
CONSOLIDATED CAPITAL INSTITUTIONAL PROPERTIES/2
REPORTED SALES PRICES OF PARTNERSHIP UNITS
<TABLE>
<CAPTION>
AS REPORTED BY AS REPORTED BY
THE GENERAL PARTNER(1) THE PARTNERSHIP SPECTRUM(2)
------------------------------ -------------------------------
LOW SALES HIGH SALES LOW SALES HIGH SALES
PRICE PRICE PRICE PRICE
PER UNIT PER UNIT PER UNIT PER UNIT
-------------- --------------- ------------- -----------------
<S> <C> <C> <C> <C>
Fiscal Year Ended December 31, 1997:
Second Quarter(3)................................. $ 10 $35 $17 $35
First Quarter .................................... 10 44 30 48
Fiscal Year Ended December 31, 1996:
Fourth Quarter ................................... 10 43 30 46
Third Quarter..................................... 14 40 23 45
Second Quarter.................................... 10 45 25 40
First Quarter..................................... 11 38 23 37
Fiscal Year Ended December 31, 1995:
Fourth Quarter.................................... 10 40 25 37
Third Quarter..................................... 10 36 25 40
</TABLE>
(1) Although the General Partner requests and records information on the
prices at which Units are sold, it does not regularly receive or maintain
information regarding the bid or asked quotations of secondary market
makers, if any. The General Partner processes transfers of Units only 12
times per year - on the first day of each month. The prices in the table
are based solely on information provided to the General Partner by sellers
and buyers of Units transferred in sale transactions (i.e., excluding
transactions believed to result from the death of a Limited Partner,
rollover to an IRA account, establishment of a trust, trustee to trustee
transfers, termination of a benefit plan, distributions from a qualified
or non-qualified plan, uniform gifts, abandonment of Units or similar non-
sale transactions).
(2) 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 prices. The Purchaser
(which is an affiliate of the General Partner) does not know whether the
information compiled by The Partnership Spectrum is accurate or complete.
(3) In April 1997, the Partnership made a special distribution of $9.90 per
Unit to Limited Partners. The Purchaser believes that the special
distribution may have caused a decrease in the price per Unit reported
after that date.
The Purchaser (which is an affiliate of the General Partner) believes
that, although secondary market sales information probably is not a reliable
measure of value because of the limited and inefficient nature of the market
for Units, this information may be relevant to a Limited Partner's decision as
to whether to tender its Units pursuant to the Offer. At present, privately
negotiated sales and sales through intermediaries (e.g., through the trading
system operated by Chicago Partnership Board, Inc., which publishes sell offers
by holders of Units) are the only means available to a Limited Partner to
liquidate an investment in Units (other than the Offer) because the Units are
not listed or traded on any exchange or quoted on NASDAQ.
Appraisals. Certain of the CCEP/2 Properties have been appraised in
the past several years by independent, third party appraisers (either Koeppel
Tener Real Estate Services, Inc. ("KTR") or Joseph J. Blake & Associates, Inc.
("Blake")). According to the appraisal reports, the scope of the appraisals
included an inspection of each property and an analysis of the respective
surrounding markets. In each case, the applicable independent appraiser relied
principally on the income capitalization approach to valuation and secondarily
on the sales comparison approach, and represented that its report was prepared
in accordance with the Code of Professional Ethics and Standards of
Professional Appraisal Practice of the Appraisal Institute and the Uniform
Standards of Professional Appraisal Practice, and in compliance with the
Appraisal Standards set forth in the Financial Institutions Reform, Recovery
and Enforcement Act of 1989 (known as "FIRREA"). The estimated market values of
the fee simple estate of each of the CCEP/2 Properties specified in the most
recent appraisal reports for the CCEP/2 Properties which have been appraised
within the past three years are set forth in the table below, and copies of the
summaries of those appraisals have been filed as exhibits to the Purchaser's
Tender Offer Statement on Schedule 14D-1 filed with the Commission.
29
<PAGE>
<TABLE>
<CAPTION>
APPRAISED DATE OF
PROPERTY NAME VALUE APPRAISAL APPRAISER
- --------------- ------------ ----------- -----------
<S> <C> <C> <C>
Canyon Crest $3,800,000 4/23/96 Blake
Highcrest Townhomes $8,250,000 4/12/96 KTR
Windemere $6,250,000 4/30/96 KTR
</TABLE>
Purchaser's Estimate of Gross Real Estate Value. In estimating the
gross real estate value of the CCEP/2 Properties (except where noted below),
the Purchaser utilized the capitalization of income approach. The estimate of
the gross real estate value of the CCEP/2 Properties prepared by the Purchaser
does not purport to be an estimate of the aggregate fair market value of the
Units themselves, nor should it be viewed as such by Limited Partners. Neither
the Purchaser nor any of its affiliates prepared any estimates of the values of
the CCEP/2 Properties based upon any other valuation method.
RESIDENTIAL PROPERTIES
The following is a description of the methodology employed by the
Purchaser in preparing such estimates for the residential properties owned by
CCEP/2 (as used below, "net operating income" is calculated before
depreciation, amortization, debt service payments and certain capital
expenditure items):
CANYON CREST APARTMENTS. In estimating the value of this property, the
Purchaser reviewed the income ($512,602) generated by the property for the
eight months ended August 31, 1997 (comprised of $483,090 of gross rental
income and $29,512 of other income), and then deducted from this amount the
total operating expenses of the property for the first eight months of 1997
($184,614), resulting in the Purchaser's estimate of net operating income for
the first eight months of 1997 ($327,988). The Purchaser then annualized this
amount, resulting in estimated annual net operating income of $491,982, and
then reduced that annualized net operating income amount by $400 per apartment
unit, representing the Purchaser's estimate of the adjustment that would be
imputed by a third party purchaser in underwriting the operating expenses,
including normal replacement reserves, of the property for valuation purposes.
Finally, the Purchaser capitalized its estimated adjusted net operating income
amount ($455,982) at a 10% capitalization rate, resulting in an estimated gross
property value of $4,559,820.
HIGHCREST TOWNHOMES. In estimating the value of this property, the
Purchaser reviewed the income ($1,125,065) generated by the property for the
eight months ended August 31, 1997 (comprised of $1,080,824 of gross rental
income and $44,241 of other income), and then deducted from this amount the
total operating expenses of the property for the first eight months of 1997
($571,782), resulting in the Purchaser's estimate of net operating income for
the first eight months of 1997 ($553,281). The Purchaser then annualized this
amount, resulting in estimated annual net operating income of $829,925, and
then reduced that annualized net operating income amount by $250 per apartment
unit, representing the Purchaser's estimate of the adjustment that would be
imputed by a third party purchaser in underwriting the operating expenses,
including normal replacement reserves, of the property for valuation purposes.
Finally, the Purchaser capitalized its estimated adjusted net operating income
amount ($785,925) at a 10% capitalization rate, resulting in an estimated gross
property value of $7,859,250.
VILLAGE BROOKE. In estimating the value of this property, the
Purchaser reviewed the income ($1,506,264) generated by the property for the
eight months ended August 31, 1997 (comprised of $1,411,935 of gross rental
income and $94,329 of other income), and then deducted from this amount the
total operating expenses of the property for the first eight months of 1997
($846,151), resulting in the Purchaser's estimate of net operating income for
the first eight months of 1997 ($660,113). The Purchaser then annualized this
amount, resulting in estimated annual net operating income of $990,170, and
then increased that annualized net operating income amount by $400 per
apartment unit, representing the Purchaser's estimate of the adjustment that
would be imputed by a third party purchaser in underwriting the operating
expenses, including normal replacement reserves, of the property for valuation
purposes. Finally, the Purchaser capitalized its estimated adjusted net
operating income amount ($1,123,370) at a 10% capitalization rate, resulting in
an estimated gross property value of $11,233,700.
30
<PAGE>
WINDEMERE. In estimating the value of this property, the Purchaser
reviewed the income ($1,124,603) generated by the property for the eight months
ended August 31, 1997 (comprised of $1,063,412 of gross rental income and
$61,191 of other income), and then deducted from this amount the total
operating expenses of the property for the first eight months of 1997
($588,019), resulting in the Purchaser's estimate of net operating income for
the first eight months of 1997 ($536,584). The Purchaser then annualized this
amount, resulting in estimated annual net operating income of $804,876, and
then reduced that annualized net operating income amount by $300 per apartment
unit, representing the Purchaser's estimate of the adjustment that would be
imputed by a third party purchaser in underwriting the operating expenses,
including normal replacement reserves, of the property for valuation purposes.
Finally, the Purchaser capitalized its estimated adjusted net operating income
amount ($727,776) at a 10% capitalization rate, resulting in an estimated gross
property value of $7,277,760.
COMMERCIAL PROPERTIES
The following is a description of the methodology employed by the
Purchaser in preparing the estimates of the values of the commercial properties
owned by CCEP/2:
CENTRAL PARK PLACE. In estimating the value of this property, the
Purchaser reviewed the income ($1,082,734) generated by the property for the
eight months ended August 31, 1997 (comprised of $1,040,061 of gross rental
income and $42,673 of other income), and then deducted from this amount the
total operating expenses of the property for the first eight months of 1997
($620,174), resulting in the Purchaser's estimate of net operating income for
the first eight months of 1997 ($462,560). The Purchaser then annualized this
amount, resulting in estimated annual net operating income of $693,840. The
Purchaser then capitalized that estimated annual net operating income amount at
an 11% capitalization rate, resulting in an estimated gross property value of
$6,307,636. Finally, the Purchaser reduced the estimated gross property value
by $270,000 to reflect capital expenditures that the Purchaser believes a third
party purchaser would deem necessary at the time of acquisition or in
connection with recently executed leases, resulting in an estimated gross
property value of $6,037,636.
CENTRAL PARK PLAZA. In estimating the value of this property, the
Purchaser reviewed the income ($957,338) generated by the property for the
eight months ended August 31, 1997 (comprised only of gross rental income), and
then deducted from this amount the total operating expenses of the property for
the first eight months of 1997 ($475,011), resulting in the Purchaser's
estimate of net operating income for the first eight months of 1997 ($482,327).
The Purchaser then annualized this amount, resulting in estimated annual net
operating income of $723,491. The Purchaser then capitalized that estimated
annual net operating income amount at a 10.5% capitalization rate, resulting in
an estimated gross property value of $6,890,390. Finally, the Purchaser reduced
the estimated gross property value by $213,000 to reflect capital expenditures
that the Purchaser believes a third party purchaser would deem necessary at the
time of acquisition or in connection with recently executed leases, resulting
in an estimated gross property value of $6,677,390.
COSMOPOLITAN CENTER. The Purchaser has been informed that, pursuant to
a letter of intent, a third party purchaser has indicated it is willing to pay
a purchase price for the property of $3,500,000. Accordingly, for purposes of
this evaluation, the Purchaser has determined the value of the property to be
$3,500,000.
CRESCENT CENTER. In estimating the value of this property, the
Purchaser reviewed the income ($511,878) generated by the property for the
eight months ended August 31, 1997 (comprised of $468,475 of gross rental
income and $43,403 of other income), and then deducted from this amount the
total operating expenses of the property for the first eight months of 1997
($308,216), resulting in the Purchaser's estimate of net operating income for
the first eight months of 1997 ($203,662). The Purchaser then annualized this
amount, resulting in estimated annual net operating income of $305,493. The
Purchaser then capitalized that estimated annual net operating income amount at
an 11% capitalization rate, resulting in an estimated gross property value of
$2,777,209. Finally, the Purchaser reduced the estimated gross property value
by $100,000 to reflect capital expenditures that the Purchaser believes a third
party purchaser would deem necessary at the time of acquisition or in
connection with recently executed leases, resulting in an estimated gross
property value of $2,677,209.
31
<PAGE>
LAHSER CENTER I AND II. In estimating the value of this property, the
Purchaser reviewed the income ($1,524,190) generated by the property for the
eight months ended August 31, 1997 (comprised of $1,448,429 of gross rental
income and $75,761 of other income), and then deducted from this amount the
total operating expenses of the property for the first eight months of 1997
($899,371), resulting in the Purchaser's estimate of net operating income for
the first eight months of 1997 ($624,819). The Purchaser then annualized this
amount, resulting in estimated annual net operating income of $937,229, and
then increased that annualized net operating income amount by $80,000,
representing the Purchaser's estimate of the adjustment that would be imputed
by a third party purchaser in underwriting the operating expenses, including
normal replacement reserves, and to reflect rental revenues from current leases
in effect on the property for valuation purposes. The Purchaser then
capitalized that estimated adjusted net operating income amount ($1,017,229) at
an 11.75% capitalization rate, resulting in an estimated gross property value
of $8,657,268. Finally, the Purchaser reduced the estimated gross property
value by $453,000 to reflect capital expenditures that the Purchaser believes a
third party purchaser would deem necessary at the time of acquisition or in
connection with recently executed leases, resulting in an estimated gross
property value of $8,204,268.
RICHMOND PLAZA. In estimating the value of this property, the
Purchaser reviewed the income ($2,545,040) generated by the property for the
eight months ended August 31, 1997 (comprised of $298,921 of gross rental
income and $2,246,119 of other income), and then deducted from this amount the
total operating expenses of the property for the first eight months of 1997
($1,054,542), resulting in the Purchaser's estimate of net operating income for
the first eight months of 1997 ($1,490,498). The Purchaser then annualized this
amount, resulting in estimated annual net operating income of $2,235,747. The
Purchaser then capitalized that estimated annual net operating income amount at
a 12% capitalization rate, resulting in an estimated gross property value of
$18,631,225. Finally, the Purchaser reduced the estimated gross property value
by $1,000,000 to reflect capital expenditures that the Purchaser believes a
third party purchaser would deem necessary at the time of acquisition or in
connection with recently executed leases, resulting in an estimated gross
property value of $17,631,225.
TOWN CENTER PLAZA. In estimating the value of this property, the
Purchaser reviewed the income ($1,020,654) generated by the property for the
eight months ended August 31, 1997 (comprised of $997,312 of gross rental
income and $23,342 of other income), and then deducted from this amount the
total operating expenses of the property for the first eight months of 1997
($572,387), resulting in the Purchaser's estimate of net operating income for
the first eight months of 1997 ($448,267). The Purchaser then annualized this
amount, resulting in estimated annual net operating income of $672,401, and
then reduced that annualized net operating income amount by $70,000,
representing the Purchaser's estimate of the adjustment that would be imputed
by a third party purchaser in underwriting the operating expenses, including
normal replacement reserves, and to reflect rental revenues from current leases
in effect on the property for valuation purposes. The Purchaser then
capitalized that estimated adjusted net operating income amount ($602,401) at a
10.5% capitalization rate, resulting in an estimated gross property value of
$5,737,152. Finally, the Purchaser reduced the estimated gross property value
by $400,000 to reflect capital expenditures that the Purchaser believes a third
party purchaser would deem necessary at the time of acquisition or in
connection with recently executed leases, resulting in an estimated gross
property value of $5,337,152.
* * *
Based on the individual estimates of the gross values of the CCEP/2
Properties described above, the Purchaser estimated that the current aggregate
gross real estate value of the CCEP/2 Properties is $80,995,410 (the "Gross
Real Estate Value Estimate"). The property-specific capitalization rates used
by the Purchaser in the valuation estimates described above were based upon the
Purchaser's, IPT's and Insignia's general knowledge of the revenues and
expenses associated with operating multi-family properties in the markets in
which the CCEP/2 Properties are located, their general knowledge of property
values in those markets and their experience in the real estate market in
general.
Although there are several other methods of estimating the value of
real estate of this type, the Purchaser believes that this approach represents
a reasonable method of estimating the aggregate gross value of the CCEP/2
Properties (without taking into account the costs of disposing of the
properties), subject to the substantial
32
<PAGE>
uncertainties inherent in any estimate of value. The use of other assumptions,
however, particularly as to the applicable capitalization rate, could produce
substantially different results. None of the Purchaser, IPT or Insignia
solicited any offers or inquiries from prospective buyers of the CCEP/2
Properties in connection with preparing the Purchaser's estimates of the fair
market values of those properties, and the actual amounts for which the CCEP/2
Properties might be sold could be significantly higher or significantly lower
than the Purchaser's estimates.
The Gross Real Estate Value Estimate does not take into account (i)
the third-party debt (which is senior to the Loan) encumbering the CCEP/2
Properties or the other liabilities of the Partnership and CCEP/2, (ii) cash
and other assets held by the Partnership and CCEP/2, (iii) real estate
transaction costs that would be incurred on a sale of the CCEP/2 Properties,
such as brokerage commissions and other selling and closing expenses, (iv)
timing considerations or (v) costs associated with winding up the Partnership
and CCEP/2. For this reason, the Purchaser considers the Gross Real Estate
Value Estimate to be less meaningful in evaluating the Purchase Price offered
by the Purchaser than its pro forma estimate of the net liquidation value per
Unit described below.
Purchaser's Pro Forma Estimate of Net Liquidation Value per Unit. The
Purchaser is offering to purchase Units, which are a relatively illiquid
investment, and is not offering to purchase the Partnership's underlying assets
or assume any of its liabilities. Consequently, the Purchaser does not believe
that the per-Unit amount which might be distributed to Limited Partners
following a future sale of all of the CCEP/2 Properties necessarily reflects
the present fair value of a Unit. Conversely, the realizable value of the
Partnership's assets clearly is a relevant factor in determining the price a
prudent purchaser would offer for Units.
The Loan held by the Partnership is not typical of the kinds of loans
traded in the secondary loan markets. Loans generally are traded at prices that
reflect the yield the purchaser expects to realize from scheduled payments
(including payments due at maturity) on the purchased loans. Because the Loan
is unusual, the Purchaser believes a conventional loan valuation analysis is
probably not a realistic approach to valuation. The Purchaser believes a
purchaser of the Loan more likely would view the Loan as approximately
equivalent to outright ownership of the CCEP/2 Properties, because the
outstanding principal amount of the Loan, approximately $228,000,000 as of June
30, 1997, including interest accrued and added to principal pursuant to the
terms of the Loan exceeds the Purchaser's estimate of the aggregate gross
property value of the CCEP/2 Properties ($80,995,410 as of June 30, 1997). It
is very unlikely that CCEP/2 would voluntarily transfer title to the CCEP/2
Properties any earlier than that, even though the aggregate indebtedness under
the Loan exceeds the value of the CCEP/2 Properties by a large amount, because
disposition of the CCEP/2 Properties will have substantial adverse tax
consequences for the partners in CCEP/2. Any disposition of the CCEP/2
Properties would result in net cash proceeds, after repayment of the Senior
Mortgage Indebtedness and payment of transaction expenses and other costs of
sale. Indeed, it is possible that CCEP/2 might seek bankruptcy protection when
the Loan matures and becomes repayable in full, simply in order to further
postpone the adverse tax consequences associated with disposition of the CCEP/2
Properties. Accordingly, while the pro forma liquidation analysis described
below reflects an approach that may be relevant in evaluating the Purchaser's
Offer, the Purchaser believes the Estimated Liquidation Value per Unit does not
accurately reflect the current fair market value per Unit.
In performing this analysis, the Purchaser made a pro forma
calculation of the amount each Limited Partner might receive in a theoretical
orderly liquidation of the Partnership (which may not be realistically
possible, particularly in the near term, due to real estate market conditions,
the general difficulty of disposing of real estate in a short period of time,
and other general economic factors), based on the Gross Real Estate Value
Estimate described above, the assumption that the Loan could be sold for an
aggregate price equal to the value of the aggregate value of the CCEP/2
Properties, and the other considerations described below. The Purchaser based
its pro forma liquidation analysis on the Gross Real Estate Value Estimate (and
thus on the Purchaser's estimates, described above, of the values of the CCEP/2
Properties), as opposed to the appraised values of those properties (as
described above), because the Purchaser believes that the Gross Real Estate
Value Estimate represents the best estimate, based on currently available
information, of the values of the CCEP/2 Properties.
In estimating the pro forma net liquidation value per Unit, the
Purchaser adjusted its Gross Real Estate Value Estimate of $80,995,410 to
reflect the Partnership's other assets and liabilities (excluding prepaid and
deferred
33
<PAGE>
expenses and security deposits). Specifically, the Purchaser added the amounts
of cash, accounts receivable and escrow deposits shown on the Partnership's and
CCEP/2's unaudited balance sheets at June 30, 1997 ($10,582,000), and
subtracted the Senior Mortgage Indebtedness encumbering the CCEP/2 Properties
($33,139,000) and all other liabilities shown on the balance sheets of the
Partnership and CCEP/2 ($2,145,000). The Purchaser then deducted from that
amount $1,619,908, representing a reserve equal to 2% of the Gross Real Estate
Value Estimate (which represents the Purchaser's estimate of the probable costs
of real estate transfer taxes and other disposition expenses). The result,
$54,673,502, represents the Purchaser's pro forma estimate of the aggregate net
liquidation proceeds (before provision for the costs described in the following
sentence) which could be realized on an orderly liquidation of the Partnership,
based on the assumptions implicit in the calculations described above. The
Purchaser did not, however, deduct any amounts in respect of the legal and
other costs which the Purchaser expects would be incurred in a liquidation,
including the cost of exerting rights as a mortgagee under the Loan or costs of
negotiating purchase and sale contracts, possibly conducting a consent
solicitation in order to obtain the Limited Partners' approvals for the sales
as may be required by the Limited Partnership Agreement, and winding up the
Partnership, because of the difficulty of estimating those amounts.
To complete its pro forma estimate of the amount of the theoretical
liquidation proceeds that would be distributable per Unit, the Purchaser then
deducted $1,640,205 (which represents the 3% non-subordinated disposition fee
payable to ConCap Holdings upon a sale of the CCEP/2 Properties), resulting in
net aggregate liquidation proceeds of $53,033,297. The Purchaser then deducted
1% which is the percentage allocable to the General Partner in respect of its
non-subordinated interest in the Partnership, and the remaining $52,502,964 was
then divided by the 909,138 Units reported as outstanding by the General
Partner as of October 1, 1997. The resulting estimated pro forma liquidation
value was $57.75 per Unit (the "Estimated Liquidation Value"), before provision
for the legal and other costs of liquidating the Partnership described in the
last sentence of the preceding paragraph.
The Purchaser's pro forma liquidation analysis described above is
merely theoretical and does not itself reflect the value of the Units because
(i) there is no assurance that any such liquidation in fact will occur in the
foreseeable future, (ii) any such liquidation prior to the currently-scheduled
maturity of the Loan on November 15, 2000 would require the consent of the
partners in CCEP/2, and the Purchaser believes those partners would not consent
because of the substantially adverse tax consequences of such a liquidation to
those partners, and (iii) any liquidation in which the estimated fair market
values described above might be realized would take an extended period of time
(at least a year, and quite possibly significantly longer), during which time
the Partnership and its partners would continue to be exposed to the risk of
fluctuations in asset values because of changing market conditions and other
factors. For any property sales in which the Partnership is required to
indemnify the buyer for matters arising after the closing, a portion of the
sales proceeds could be held by the Partnership until all possible claims were
satisfied, further extending the delay in the receipt by the Limited Partners
of liquidation proceeds. In light of these factors, the Purchaser (which is an
affiliate of the General Partner) believes the actual current value of the
Units is substantially less than its estimate of the Estimated Liquidation
Value. Conversely, there is a substantial possibility that the per-Unit value
realized in an orderly liquidation could be greater than the Estimated
Liquidation Value. A reduction in either operating expenses or capital
expenditures from the levels reflected in the property operating statements for
the six months ending June 30, 1997 would result in a higher liquidation value
under the method described above. Similarly, a higher liquidation value would
result if a buyer applied lower capitalization rates (reflecting a willingness
to accept a lower rate of return on its investment) to the applicable net
operating income generated by the CCEP/2 Properties than the capitalization
rates applied by the Purchaser. For example, a 5% increase or decrease in the
value of the CCEP/2 Properties would produce a corresponding increase or
decrease in the Estimated Liquidation Value of approximately $4 per Unit.
Furthermore, the analysis described above is based on a series of assumptions,
some of which may not be correct. Accordingly, this analysis should be viewed
merely as indicative of the Purchaser's approach to valuing Units and not as
any way predictive of the likely result of any future transactions.
SECTION 14. CONDITIONS OF THE OFFER. Notwithstanding any other term of
the Offer, the Purchaser (which is an affiliate of the General Partner) will
not be required to accept for payment or to pay for any Units tendered if all
authorizations, consents, orders or approvals of, or declarations or filings
with, or expirations of waiting
34
<PAGE>
periods imposed by, any court, administrative agency or commission or other
governmental authority or instrumentality, domestic or foreign, necessary for
the consummation of the transactions contemplated by the Offer shall not have
been filed, occurred or been obtained. Furthermore, notwithstanding any other
term of the Offer and in addition to the Purchaser's right to withdraw the
Offer at any time before the Expiration Date, the Purchaser (which is an
affiliate of the General Partner) will not be required to accept for payment or
pay for any Units not theretofore accepted for payment or paid for and may
terminate or amend the Offer as to such Units if, at any time on or after the
date of the Offer and before the Expiration Date, any of the following
conditions exists:
(a) a preliminary or permanent injunction or other order of any
federal or state court, government or governmental authority or agency shall
have been issued and shall remain in effect which (i) makes illegal, delays or
otherwise directly or indirectly restrains or prohibits the making of the Offer
or the acceptance for payment, purchase of or payment for any Units by the
Purchaser (which is an affiliate of the General Partner), (ii) imposes or
confirms limitations on the ability of the Purchaser effectively to exercise
full rights of ownership of any Units, including without limitation the right
to vote any Units acquired by the Purchaser pursuant to the Offer or otherwise
on all matters properly presented to the Partnership's Limited Partners, (iii)
requires divestiture by the Purchaser of any Units, (iv) causes any material
diminution of the benefits to be derived by the Purchaser as a result of the
transactions contemplated by the Offer, or (v) might materially adversely
affect the business, properties, assets, liabilities, financial condition,
operations, results of operations or prospects of the Purchaser or the
Partnership;
(b) there shall be any action taken, or any statute, rule, regulation
or order proposed, enacted, enforced, promulgated, issued or deemed applicable
to the Offer by any federal or state court, government or governmental
authority or agency, which might, directly or indirectly, result in any of the
consequences referred to in clauses (i) through (v) of paragraph (a) above;
(c) any change or development shall have occurred or been threatened
since the date of the Offer to Purchase, in the business, properties, assets,
liabilities, financial condition, operations, results of operations or
prospects of the Partnership, which is or may be materially adverse to the
Partnership, or the Purchaser (which is an affiliate of the General Partner)
shall have become aware of any fact that does or may have a material adverse
effect on the value of the Units;
(d) there shall have occurred (i) any general suspension of trading
in, or limitation on prices for, securities on any national securities exchange
or in the over-the-counter market in the United States, (ii) a declaration of a
banking moratorium or any suspension of payments in respect of banks in the
United States, (iii) any limitation by any governmental authority on, or other
event which might affect, the extension of credit by lending institutions or
result in any imposition of currency controls in the United States, (iv) a
commencement of a war or armed hostilities or other national or international
calamity directly or indirectly involving the United States, (v) a material
change in United States or other currency exchange rates or a suspension of, or
imposition of a limitation on, the markets thereof, or (vi) in the case of any
of the foregoing existing at the time of the commencement of the Offer, a
material acceleration or worsening thereof; or
(e) it shall have been publicly disclosed or the Purchaser (which is
an affiliate of the General Partner) shall have otherwise learned that (i) more
than ten percent of the outstanding Units have been or are proposed to be
acquired by another person (including a "group" within the meaning of Section
13(d)(3) of the Exchange Act), or (ii) any person or group that prior to such
date had filed a Statement with the Commission pursuant to Section 13(d) or (g)
of the Exchange Act has increased or proposes to increase the number of Units
beneficially owned by such person or group as disclosed in such Statement by
two percent or more of the outstanding Units.
The foregoing conditions are for the sole benefit of the Purchaser
(which is an affiliate of the General Partner) and may be asserted by the
Purchaser regardless of the circumstances giving rise to such conditions or may
be waived by the Purchaser in whole or in part at any time and from time to
time in its sole discretion. Any determination by the Purchaser (which is an
affiliate of the General Partner) concerning the events described above will be
final and binding upon all parties.
35
<PAGE>
SECTION 15. CERTAIN LEGAL MATTERS.
General. The Purchaser (which is an affiliate of the General Partner)
is not aware of any filings, approvals or other actions by any domestic or
foreign governmental or administrative agency that would be required prior to
the acquisition of Units by the Purchaser (which is an affiliate of the General
Partner) pursuant to the Offer, other than the filing of a Tender Offer
Statement on Schedule 14D-1 with the Commission (which has already been filed)
and any required amendments thereto. Should any such approval or other action
be required, it is the Purchaser's present intention that such additional
approval or action would be sought. Although there is no present intent to
delay the purchase of Units tendered pursuant to the Offer pending receipt of
any such additional approval or the taking of any such action, there can be no
assurance that any such additional approval or action, if needed, would be
obtained without substantial conditions or that adverse consequences might not
result to the Partnership's business, or that certain parts of the
Partnership's business might not have to be disposed of or other substantial
conditions complied with in order to obtain such approval or action, any of
which could cause the Purchaser (which is an affiliate of the General Partner)
to elect to terminate the Offer without purchasing Units thereunder.
Antitrust. The Purchaser (which is an affiliate of the General
Partner) does not believe that the Hart-Scott- Rodino Antitrust Improvements
Act of 1976, as amended, is applicable to the acquisition of Units contemplated
by the Offer.
Margin Requirements. The Units are not "margin securities" under the
regulations of the Board of Governors of the Federal Reserve System and,
accordingly, those regulations generally are not applicable to the Offer.
SECTION 16. FEES AND EXPENSES. Except as set forth in this Section 16,
the Purchaser (which is an affiliate of the General Partner) will not pay any
fees or commissions to any broker, dealer or other person for soliciting
tenders of Units pursuant to the Offer. The Purchaser (which is an affiliate of
the General Partner) has retained Beacon Hill Partners, Inc. to act as the
Information Agent and Harris Trust Company of New York to act as the Depositary
in connection with the Offer. The Purchaser (which is an affiliate of the
General Partner) will pay the Information Agent and the Depositary reasonable
and customary compensation for their respective services in connection with the
Offer, plus reimbursement for out-of-pocket expenses, and has agreed to
indemnify the Information Agent and the Depositary against certain liabilities
and expenses in connection therewith, including liabilities under the federal
securities laws. The Purchaser (which is an affiliate of the General Partner)
will also pay all costs and expenses of printing and mailing the Offer and its
legal fees and expenses.
SECTION 17. MISCELLANEOUS. The Purchaser (which is an affiliate of the
General Partner) is not aware of any jurisdiction in which the making of the
Offer is not in compliance with applicable law. If the Purchaser (which is an
affiliate of the General Partner) becomes aware of any jurisdiction in which
the making of the Offer would not be in compliance with applicable law, the
Purchaser will make a good faith effort to comply with any such law. If, after
such good faith effort, the Purchaser (which is an affiliate of the General
Partner) cannot comply with any such law, the Offer will not be made to (nor
will tenders be accepted from or on behalf of) Limited Partners residing in
such jurisdiction. In those jurisdictions whose securities or blue sky laws
require the Offer to be made by a licensed broker or dealer, the Offer will be
deemed to be made on behalf of the Purchaser (which is an affiliate of the
General Partner) by one or more registered brokers or dealers licensed under
the laws of that jurisdiction.
No person has been authorized to give any information or to make any
representation on behalf of the Purchaser (which is an affiliate of the General
Partner) not contained in this Offer to Purchase or in the Assignment of
Partnership Interest and, if given or made, such information or representation
must not be relied upon as having been authorized.
The Purchaser (which is an affiliate of the General Partner), IPLP,
IPT and Insignia have filed with the Commission a Tender Offer Statement on
Schedule 14D-1, pursuant to Rule 14d-3 under the Exchange Act, furnishing
certain additional information with respect to the Offer, and may file
amendments thereto. The Schedule 14D-1 and any amendments thereto, including
exhibits, may be inspected and copies may be obtained at the same
36
<PAGE>
places and in the same manner as set forth in Section 9 (except that they will
not be available at the regional offices of the Commission).
REEDY RIVER PROPERTIES, L.L.C.
OCTOBER 30, 1997
37
<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
SCHEDULE I
TRANSACTIONS IN THE UNITS
EFFECTED BY IPLP WITHIN THE PAST 60 DAYS
Number of Price
DATE Units Purchased Per Unit
---- --------------- --------
9/17/97 20 $31
9/17/97 8 31
9/17/97 85 31
S-1
<PAGE>
SCHEDULE II
INFORMATION REGARDING THE MANAGERS OF THE PURCHASER
Set forth in the table below are the name and the present principal occupations
or employment and the name, principal business and address of any corporation
or other organization in which such occupation or employment is conducted, and
the five-year employment history of each of the managers of the Purchaser. Each
person identified below is employed by Insignia and is a United States citizen.
The principal business address of the Purchaser and, unless otherwise
indicated, the business address of each person identified below, is One
Insignia Financial Plaza, Greenville, South Carolina 29602.
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION
OR EMPLOYMENT AND
NAME FIVE-YEAR EMPLOYMENT HISTORY
<S> <C>
Jeffrey P. Cohen Jeffrey P. Cohen has been a Manager of the Purchaser since its inception in
375 Park Avenue October 1997. For additional information regarding Mr. Cohen, see Schedule
Suite 3401 III.
New York, NY 10152
John K. Lines John K. Lines has been a Manager of the Purchaser since its inception in
October 1997. For additional information regarding Mr. Lines, see Schedules
III and IV.
Ronald Uretta Ronald Uretta has been a Manager of the Purchaser since its inception in
October 1997. For additional information regarding Mr. Uretta, see Schedules
III and IV.
</TABLE>
S-2
<PAGE>
SCHEDULE III
INFORMATION REGARDING THE
TRUSTEES AND EXECUTIVE OFFICERS OF IPT
Set forth in the table below are the name and the present principal occupations
or employment and the name, principal business and address of any corporation
or other organization in which such occupation or employment is conducted, and
the five-year employment history of each of the trustees and executive officers
of IPT. Each person identified below is employed by Insignia and is a United
States citizen. The principal business address of IPT and, unless otherwise
indicated, the business address of each person identified below, is One
Insignia Financial Plaza, Greenville, South Carolina 29602. Trustees are
identified by an asterisk.
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION
OR EMPLOYMENT AND
NAME FIVE-YEAR EMPLOYMENT HISTORY
- ---- ----------------------------
<S> <C>
Andrew L. Farkas* Andrew L. Farkas has served as a Trustee of IPT since
December 1996, and has served as Chairman of the Board of
Trustees and Chief Executive Officer of IPT since January 1997.
For additional information regarding Mr. Farkas, see Schedule IV.
James A. Aston* James A. Aston has served as a Trustee and President of IPT since
its inception in May 1996. For additional information regarding
Mr. Aston, see Schedule IV.
Frank M. Garrison* Frank M. Garrison has served as a Trustee of IPT since December
102 Woodmont Boulevard 1996. Mr. Garrison also served as an Executive Managing
Suite 400 Director of IPT from January 1997 to April 1997. For additional
Nashville, TN 37205 information regarding Mr. Garrison, see Schedule IV.
Jeffrey P. Cohen Jeffrey P. Cohen has served as a Senior Vice President of IPT
375 Park Avenue since August 1997, and served as a Vice President of IPT from
Suite 3401 June 1997 until August 1997. Since April 1997, Mr. Cohen's
New York, NY 10152 principal occupation has been to serve as a Senior Vice President
-- Investment Banking of Insignia. Prior to April 1997, Mr.
Cohen's principal occupation was as an attorney with the law firm
of Rogers & Wells, New York, New York.
William D. Falls William D. Falls has served as the Controller of IPT since August
1997. Since April 1995, Mr. Falls' principal occupation has been
to serve as an accountant with Insignia. Prior to April 1995, Mr.
Falls' principal occupation was as a senior auditor with the
accounting firm of Ernst & Young LLP.
William H. Jarrard, Jr. William H. Jarrard, Jr. has served as a Senior Vice President of
IPT since August 1997, and served as Vice President and Director
of Operations of IPT from December 1996 until August 1997. Mr.
Jarrard's principal employment has been with Insignia for more
than the past five years. From January 1994 to September 1997,
Mr. Jarrard served as Managing Director-- Partnership
Administration of Insignia.
S-3
<PAGE>
PRESENT PRINCIPAL OCCUPATION
OR EMPLOYMENT AND
NAME FIVE-YEAR EMPLOYMENT HISTORY
- ---- ----------------------------
John K. Lines John K. Lines has served as Secretary of IPT since December
1996, and has served as a Senior Vice President of IPT since
August 1997. Mr. Lines served as a Vice President IPT from May
1996 until August 1997. For additional information regarding Mr.
Lines, see Schedule IV.
Ronald Uretta Ronald Uretta has served as Treasurer of IPT since December
1996, and has served as a Senior Vice President of IPT since
August 1997. Mr. Uretta served as a Vice President of IPT from
December 1996 until August 1997 and as Chief Financial Officer
of IPT from May 1996 until December 1996. For additional
information regarding Mr. Uretta, see Schedule IV.
Carroll D. Vinson Carroll D. Vinson has served as Chief Operating Officer
of IPT since May 1997. Since August 1994, Mr. Vinson's principal
occupation has been to serve as President of the various
corporate general partners of partnerships controlled by
Metropolitan Asset Enhancement, L.P., which is an affiliate of
Insignia.
</TABLE>
S-4
<PAGE>
SCHEDULE IV
INFORMATION REGARDING THE
DIRECTORS AND EXECUTIVE OFFICERS OF INSIGNIA
Set forth in the table below are the name and the present principal
occupations or employment and the name, principal business and address of any
corporation or other organization in which such occupation or employment is
conducted, and the five-year employment history of each of the directors and
executive officers of Insignia. Unless otherwise indicated, each person
identified below is employed by Insignia and is a United States citizen. The
principal business address of Insignia and, unless otherwise indicated, the
business address of each person identified below, is One Insignia Financial
Plaza, Greenville, South Carolina 29602. Directors are identified by an
asterisk.
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION
OR EMPLOYMENT AND
NAME FIVE-YEAR EMPLOYMENT HISTORY
- ---- ----------------------------
<S> <C>
Andrew L. Farkas* Andrew L. Farkas has been a Director and Chairman,
President and Chief Executive Officer of Insignia since its
inception in January 1991. Mr. Farkas has also been President of
Metropolitan Asset Group, Ltd. ("MAG"), a real estate investment
banking firm, since 1983.
Robert J. Denison* Robert J. Denison has been a Director of Insignia since
1212 North Summit Drive May 1996. For more than the past five years, Mr. Denison's
Santa Fe, NM 87501 principal occupation has been as a General Partner
of First Security Company II, L.P., an investment advisory firm.
Robin L. Farkas* Robin L. Farkas has been a Director of Insignia since August 1993. Mr.
730 Park Avenue Farkas is the retired Chairman of the Board and Chief Executive Officer of
New York, NY 10021 Alexander's Inc., a real estate company. He also serves as a director of Refac
Technology Development Corporation, Noodle Kiddoodle, and Containerways
International Ltd.
Merril M. Halpern* Merril M. Halpern has been a Director of Insignia since August 1993. For
535 Madison Avenue more than the past five years, Mr. Halpern's principal occupation has been as
New York, NY 10022 Chairman of the Board of Directors and Co-Chief Executive Officer of
Charterhouse Group International, Inc., a privately-owned
investment firm which, among other things, actively engages in
making private equity investments in a broad range of industrial
and service companies located primarily in the United States. Mr.
Halpern is also a director of American Disposal Services, Inc.,
Designer Holdings Ltd. and Microwave Power Devices, Inc.
Robert G. Koen* Robert G. Koen has been a Director of Insignia since August 1993. Since
125 West 55th Street February 1996, Mr. Koen has been a partner in the law firm of Akin, Gump,
New York, NY 10019 Strauss, Hauer & Feld, which represents Insignia and certain of its affiliates
from time to time. From January 1991 to February 1996, Mr. Koen was a
partner in the law firm LeBoeuf, Lamb, Greene & MacRae.
Michael I. Lipstein* Michael I. Lipstein has been a Director of Insignia since
110 East 59th Street August 1993. For more than the past five years, Mr. Lipstein's principal
New York, NY 10022 occupation has been as a self-employed consultant in the real estate business,
including ownership, management and lending.
</TABLE>
S-5
<PAGE>
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION
OR EMPLOYMENT AND
NAME FIVE-YEAR EMPLOYMENT HISTORY
- ---- ----------------------------
<S> <C>
Buck Mickel* Buck Mickel has been a Director of Insignia since August 1993. For
301 N. Main Street more than the past five years, Mr. Mickel's principal occupation
Greenville, SC 29601 has been to serve as Chairman of the Board and Chief Executive
Officer of RSI Holdings, a company which distributes outdoor
equipment. Mr. Mickel is also a director of Fluor Corporation,
The Liberty Corporation, NationsBank Corporation, Emergent Group,
Inc., Delta Woodside Industries, Inc., Duke Power Company, and
Textile Hall Corporation.
James A. Aston James A. Aston's principal employment has been with
Insignia for more than the past five years. Mr. Aston currently
serves as Chief Financial Officer of Insignia (since August 1996)
and with the Office of the Chairman (since July 1994).
Albert J. Frazia Albert Frazia has been a Senior Vice President -- Human
Resources of Insignia since August 1997. Prior to August 1997,
Mr. Frazia's principal employment for more than the prior five
years was as Director -- Human Resources of E&Y Kenneth Leventhal
Real Estate Group, New York, New York.
Frank M. Garrison Frank M. Garrison's principal employment has been with Insignia for more
102 Woodmont Boulevard than the past five years. Mr. Garrison currently serves as an Executive
Suite 400 Managing Director of Insignia (since July 1994) and as President of Insignia
Nashville, TN 37205 Financial Services, a division of Insignia (since July 1994).
Jeffrey L. Goldberg Jeffrey L. Goldberg's principal employment has been with Insignia for more
375 Park Avenue than the past five years. Mr. Goldberg currently serves as a Managing
Suite 3401 Director -- Investment Banking of Insignia (since July 1994).
New York, NY 10152
Edward S. Gordon Edward S. Gordon has been with the Office of the Chairman of Insignia since
200 Park Avenue July 1996. Prior to July 1996, Mr. Gordon's principal employment for more
New York, NY 10166 than the prior five years was as a founder and Chairman of Edward S. Gordon
Company, Incorporated ("ESG"), a commercial property management
and brokerage firm located in New York, New York that was
acquired by Insignia in June 1996.
Albert H. Gossett Albert H. Gossett's principal employment has been with
Insignia for more than the past five years. Mr. Gossett currently
serves as a Senior Vice President of Insignia (since July 1994)
and as Chief Information Officer of Insignia (since January
1991).
Henry Horowitz Henry Horowitz's principal employment has been with
Insignia since January 1993. Mr. Horowitz currently serves as an
Executive Managing Director of Insignia (since June 1994) and
Chief Operating Officer of Insignia Commercial Group (since
January 1997). From January 1987 to January 1993, Mr. Horowitz's
principal employment was as Chief Executive Officer of First
Resource Realty, Inc., a commercial property management
organization located in Oklahoma that Insignia acquired in
January 1993.
S-6
<PAGE>
PRESENT PRINCIPAL OCCUPATION
OR EMPLOYMENT AND
NAME FIVE-YEAR EMPLOYMENT HISTORY
- ---- ----------------------------
Neil Kreisel Neil Kreisel has been an Executive Managing Director of Insignia since
909 Third Avenue September 1995 and President of Insignia Residential Group since September
New York, NY 10022 1997. Prior to September 1995, Mr. Kreisel's principal occupation was to
serve as President and Chief Executive Officer of Kreisel
Company, Inc., a residential property management firm located in
New York, New York which Insignia acquired in September 1995.
John K. Lines John K. Lines has been General Counsel of Insignia since June 1994 and
Secretary since July 1994. From May 1993 until June 1994, Mr.
Lines' principal employment was as Assistant General Counsel and
Vice President of Ocwen Financial Corporation, a thrift holding
company located in West Palm Beach, Florida. From October 1991
until April 1993, Mr. Lines' principal employment was as Senior
Attorney of Banc One Corporation, a bank holding company in
Columbus, Ohio.
Martha Long Martha Long has been a Senior Vice President -- Finance of Insignia since
January 1997 and Controller of Insignia since June 1994. Prior to
June 1994, Ms. Long was Senior Vice President and Controller of
The First Savings Bank located in Greenville, South Carolina.
Stephen C. Schoenbaechler Stephen C. Schoenbaechler's principal employment has been with Insignia for
more than the past five years. Mr. Schoenbaechler currently
serves as a Senior Vice President -- Investment Banking of
Insignia (since April 1997).
Thomas R. Shuler Thomas R. Shuler's principal employment has been with Insignia for more
than the past five years. Mr. Shuler currently serves as Chief
Operating Officer of Insignia Residential Group (since January
1997).
Stephen B. Siegel Stephen B. Siegel has been an Executive Managing Director of Insignia since
200 Park Avenue July 1996 and President of Insignia Commercial Group since January 1997.
New York, NY 10166 From February 1992 until July 1996, Mr. Siegel's principal employment was
as President of ESG.
Ronald Uretta Ronald Uretta's principal employment has been with Insignia for more than the
past five years. Mr. Uretta currently serves as Chief Operating
Officer (since August 1996) and Treasurer (since January 1992) of
Insignia.
</TABLE>
S-7
<PAGE>
SCHEDULE V
IPT PARTNERSHIPS
Consolidated Capital Growth Fund
Consolidated Capital Institutional Properties
Consolidated Capital Institutional Properties/2
Consolidated Capital Institutional Properties/3
Consolidated Capital Properties III
Consolidated Capital Properties IV
Consolidated Capital Properties V
Consolidated Capital Properties VI
Shelter Properties I Limited Partnership
Shelter Properties II Limited Partnership
Shelter Properties III Limited Partnership
Shelter Properties IV Limited Partnership
Shelter Properties V Limited Partnership
Shelter Properties VI Limited Partnership
Shelter Properties VII Limited Partnership
National Property Investors III
National Property Investors 4
National Property Investors 5
National Property Investors 6
National Property Investors 7
National Property Investors 8
Century Properties Fund XIV
Century Properties Fund XV
Century Properties Fund XVI
Century Properties Fund XVII
Century Properties Fund XVIII
Century Properties Fund XIX
Century Properties Fund XX
Century Properties Growth Fund XXII
Century Pension Income Fund XXIII
Century Pension Income Fund XXIV
Johnstown/Consolidated Income Partners
Davidson Growth Plus, L.P.
Multi-Benefit Realty Fund 87-1
U.S. Realty Partners, L.P.
Fox Strategic Housing Income Partners
S-8
<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
Manually signed facsimile copies of the Assignment of
Partnership Interest will be accepted. The Assignment of Partnership Interest
and any other required documents should be sent or delivered by each Limited
Partner or such Limited Partner's broker, dealer, bank, trust company or other
nominee to the Depositary as set forth below.
The Depositary for the Offer is:
HARRIS TRUST COMPANY OF NEW YORK
<TABLE>
<CAPTION>
<S> <C> <C> <C>
By Mail: By Facsimile: To Confirm: By Hand/Overnight Delivery:
Wall Street Station (212) 701-7636 (212) 701-7624 Wall Street Plaza
P.O. Box 1023 88 Pine Street, 19th Floor
New York, New York New York, New York 10005
10268-1023
</TABLE>
Questions and requests for assistance or for additional
copies of this Offer to Purchase and the Assignment of Partnership Interest may
be directed to the Information Agent at its telephone number and address listed
below. You may also contact your broker, dealer, bank, trust company or other
nominee for assistance concerning the Offer.
The Information Agent for the Offer is:
BEACON HILL PARTNERS, INC.
90 Broad Street
20th Floor
New York, New York 10004
(800) 854-9486
(Toll Free)
(212) 843-8500
(Call Collect)
<PAGE>
<TABLE>
<CAPTION>
ASSIGNMENT OF PARTNERSHIP INTEREST
FOR THE TENDER OF UNITS OF LIMITED PARTNERSHIP INTEREST IN
CONSOLIDATED CAPITAL INSTITUTIONAL PROPERTIES/2
PURSUANT TO THE OFFER TO PURCHASE DATED OCTOBER 30, 1997
- ----------------------------------------------------------------------------------------------------------------------------
THE OFFER, WITHDRAWAL RIGHTS AND PRORATION PERIOD WILL EXPIRE AT
12:00 MIDNIGHT, NEW YORK TIME, ON NOVEMBER 26, 1997 UNLESS THE OFFER IS EXTENDED
- ----------------------------------------------------------------------------------------------------------------------------
The Depositary for the Offer is:
HARRIS TRUST COMPANY OF NEW YORK
<S> <C> <C>
By Mail: By Facsimile: To Confirm: By Hand/Overnight Delivery:
Wall Street Station (212) 701-7636 (212) 701-7624 Receive Window
P.O. Box 1023 Wall Street Plaza
New York, New York 10268-1023 88 Pine Street, 19th Floor
New York, New York 10005
</TABLE>
IF YOU HAVE ANY QUESTIONS OR NEED ASSISTANCE IN COMPLETING THIS
ASSIGNMENT OF PARTNERSHIP INTEREST, PLEASE CALL OUR INFORMATION AGENT,
BEACON HILL PARTNERS, TOLL FREE AT (800) 854-9486.
DELIVERY OF THIS ASSIGNMENT OF PARTNERSHIP INTEREST (OR A FACSIMILE COPY)
OR ANY OTHER REQUIRED DOCUMENTS TO AN ADDRESS OR FACSIMILE NUMBER OTHER THAN
AS SET FORTH ABOVE DOES NOT CONSTITUTE VALID DELIVERY.
PLEASE CAREFULLY READ THE ACCOMPANYING INSTRUCTIONS
Ladies and Gentlemen:
The undersigned hereby tenders to Reedy River Properties, L.L.C., a
Delaware limited liability company (the "Purchaser"), the number of the
undersigned's units of limited partnership interest ("Units") in Consolidated
Capital Institutional Properties/2, a California limited partnership (the
"Partnership"), specified below, at a price of $40 per Unit (the "Purchase
Price"), net to the seller in cash, upon the terms and subject to the
conditions set forth in the offer to purchase dated October 30, 1997 (the
"Offer to Purchase"), receipt of which is hereby acknowledged, and in this
Assignment of Partnership Interest (which, together with any supplements or
amendments, collectively constitute the "Offer"). The undersigned understands
and agrees that the Purchase Price will automatically be reduced by the
aggregate amount of distributions per Unit, if any, made by the Partnership on
or after October 30, 1997 and prior to the date on which the Purchaser pays for
the Units purchased pursuant to the Offer. Holders of Units ("Limited
Partners") who tender their Units will not be obligated to pay any commissions
or Partnership transfer fees, which commissions and Partnership transfer fees,
if any, will be borne by the Purchaser. The Purchaser reserves the right to
transfer or assign, in whole or from time to time in part, to one or more of
its affiliates, the right to purchase Units tendered pursuant to the Offer.
Subject to and effective upon acceptance for payment of and payment for
the Units tendered hereby, the undersigned hereby sells, assigns and transfers
to or upon the order of the Purchaser all right, title and interest in and to
all of the Units tendered hereby. The undersigned understands that upon
acceptance for payment of and payment for the tendered Units, the Purchaser
will be entitled to seek admission to the Partnership as a substituted Limited
Partner in substitution for the undersigned as to all the tendered Units.
The undersigned irrevocably appoints the Purchaser and its managers and
designees as the attorneys-in-fact and proxies of the undersigned, each with
full power of substitution, to exercise all voting and other rights with
respect to the Units tendered by the undersigned and purchased by the
Purchaser. Such power of attorney and proxy shall be considered coupled with
an interest in the tendered Units and is irrevocable. When the Units tendered
hereby are accepted for payment pursuant to the Offer, all prior proxies and
powers given by the undersigned with respect to the Units will, without
further action, be revoked, and no subsequent proxies or powers may be given
(and if given will not be effective). The Purchaser and its managers and
designees will, with respect to the Units, be empowered to exercise all
voting and other rights of the undersigned as they in their sole discretion
may deem proper, whether at any meeting of the Partnership's Limited Partners,
by written consent or otherwise, subject to the restrictions in the Limited
Partnership Agreement of the Partnership. The foregoing proxy and power may
be exercised by the Purchaser or any of the other persons referred to above
acting alone.
In addition to and without limiting the generality of the foregoing, the
undersigned hereby irrevocably (a) appoints the Purchaser and its managers and
designees (each an "Agent") as the undersigned's attorneys-in-fact, each with
full power of substitution, with an irrevocable instruction to each Agent to
execute all or any instrument of transfer and/or other documents in the Agent's
discretion in relation to the Units tendered hereby and accepted for payment by
the Purchaser, and to do all such other acts and things as may in the opinion
of the Agent be necessary or expedient for the purpose of, or in connection
with, the undersigned's acceptance of the Offer and to vest in the Purchaser,
or as it may direct, those Units, effective when, and only to the extent that,
the Purchaser accepts the tendered Units for payment; (b) authorizes and
requests the Partnership and general partner (the "General Partner") to take
any and all acts as may be required to effect the transfer of the undersigned's
Units to the Purchaser (or its designee) and admit the Purchaser (or its
designee) as a substituted Limited Partner in the Partnership; (c) assigns to
the Purchaser and its assigns all of the right, title and interest of the
undersigned in and to any and all distributions made by the Partnership from
and after the expiration of the Offer in respect of the Units tendered by the
undersigned; (d) grants to the Purchaser and its assigns the right to receive
any and all distributions made by the Partnership on or after the date on which
the Purchaser pays for the Units tendered by the undersigned (regardless of the
record date for any such distribution), and to receive all benefits and
otherwise exercise all rights of beneficial ownership of such Units; (e)
empowers the Purchaser and the Agent to execute and deliver to the General
Partner a change of address form instructing the General Partner to send any
and all future distributions to the address specified in the form, and to
endorse any check payable to or upon the order of such Limited Partner
representing a distribution to which the Purchaser is entitled pursuant to the
terms of the Offer, in each case in the name and on behalf of the tendering
Limited Partner; and (f) agrees not to exercise any rights pertaining to the
Units without the prior consent of the Purchaser.
The undersigned hereby represents and warrants that the undersigned owns
the Units tendered hereby and has full power and authority to validly tender,
sell, assign and transfer the Units tendered hereby and that when the same are
purchased by the Purchaser, the Purchaser will acquire good, marketable and
unencumbered title thereto, free and clear of all liens, restrictions, charges,
encumbrances, conditional sales agreements or other obligations relating to the
sale or transfer thereof, and such Units will not be subject to any adverse
claims. The undersigned will, upon request, execute and deliver any additional
documents deemed by the Purchaser to be necessary or desirable to complete the
sale, assignment and transfer of the Units tendered hereby.
The undersigned understands that a tender of Units pursuant to the
procedures described in the Offer to Purchase and in the Instructions to this
Assignment of Partnership Interest will constitute a binding agreement between
the undersigned and the Purchaser upon the terms and subject to the conditions
of the Offer. All authority herein conferred or agreed to be conferred shall
survive the death or incapacity of the undersigned, and any obligation of the
undersigned hereunder shall be binding upon the heirs, personal
representatives, successors and assigns of the undersigned.
THIS TENDER IS IRREVOCABLE, EXCEPT THAT UNITS TENDERED PURSUANT TO THE
OFFER MAY BE WITHDRAWN AS DESCRIBED IN SECTION 4 OF THE OFFER TO PURCHASE.
<PAGE>
PLEASE COMPLETE ALL SHADED AREAS
SIGN HERE TO TENDER YOUR UNITS
B
O
X
A
- -------------------------------------------------------------------------------
The undersigned hereby tenders the number of Units specified below pursuant
to the terms of the Offer. The undersigned hereby certifies, under penalties of
perjury, that the information and representations provided in Boxes A, B and C
of this Assignment of Partnership Interest, which have been duly completed by
the undersigned, are true and correct as of the date hereof.
X-----------------------------------------------------------------------------
X-----------------------------------------------------------------------------
SIGNATURE(S) OF LIMITED PARTNER
DATE:
-------------------------------------------------------------------------
(MUST BE SIGNED BY REGISTERED LIMITED PARTNER EXACTLY AS
NAME(S) APPEAR(S) IN THE PARTNERSHIP'S RECORDS. IF SIGNATURE IS BY
AN OFFICER OF A CORPORATION, ATTORNEY-IN-FACT, AGENT, EXECUTOR,
ADMINISTRATOR, TRUSTEE, GUARDIAN OR OTHER PERSON(S) ACTING IN
FIDUCIARY OR REPRESENTATIVE CAPACITY, PLEASE COMPLETE THE LINE
CAPTIONED "CAPACITY (FULL TITLE):" AND SEE INSTRUCTION 5.)
PRINT NAME(S):
-------------------------------------------------
-------------------------------------------------
CAPACITY (FULL TITLE):
------------------------------------------
ADDRESS:
---------------------------------------------------------
- -----------------------------------------------------------------
(INCLUDE ZIP CODE)
(THE ADDRESS PROVIDED ABOVE MUST BE THE REGISTERED ADDRESS OF THE
LIMITED PARTNER)
- ---------------------------- ------------------------------------
AREA CODE AND SOCIAL SECURITY NUMBER
TELEPHONE NUMBER OR TAXPAYER IDENTIFICATION
NUMBER OF NUMBER OF
UNITS TENDERED: UNITS OWNED:
---------------- ----------------
(If no indication is given, all Units owned of record by the Limited Partner
will be deemed tendered.)
- -------------------------------------------------------------------------------
GUARANTEE OF SIGNATURE(S)
(SEE INSTRUCTIONS - SECTION 1)
AUTHORIZED SIGNATURE: NAME OF FIRM:
----------------------- ------------------
NAME: ADDRESS:
-------------------------------------- -----------------------
DATE: AREA CODE AND TEL. NO.:
-------------------------------------- ----------
- -------------------------------------------------------------------------------
IMPORTANT!
LIMITED PARTNERS MUST ALSO COMPLETE BOTH BOX B AND BOX C BELOW.
B
O
X
B
<PAGE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
SUBSTITUTE PART 1-- PLEASE PROVIDE YOUR TIN IN THE BOX AT RIGHT AND ---------------------
Form W-9 CERTIFY BY SIGNING AND DATING BELOW Social Security Number(s) or
Department of Employer Identification Number
the Treasury
Internal Revenue
Service
- -----------------------------------------------------------------------------------------------------------------------------------
PAYER'S PART 2-- Certification-- Under penalties of perjury, I certify that: (1) The number shown on this form is my
REQUEST FOR correct a result of Identification Number (or I am waiting for a number to be issued to me) and (2) I am not
TAXPAYER subject to back-up withholdilding. because I have not been notified by the Internal Revenue Service ("IRS")
IDENTIFICATION that I am subject to back-up withholding as failure to report all interest or dividends, or the IRS has
NUMBER (TIN) notified me that I am no longer subject to back-up withholding
------------------------------------------------------------------------------------------------------------------------
Certification Instructions -- You must cross out item (2) above if you have been notified by the IRS that
you are subject to back-up withholding because of underreporting interest or dividends on your
tax However, if after being notified by the IRS that you were subject to back-up withholding
you received another notification from the IRS that you are no longer subject to back-up
withholding, do not cross out item (2).
SIGNATURE: DATE:
----------------------------------- ---------------
- -----------------------------------------------------------------------------------------------------------------------------------
PART 3--
AWAITING TIN [__]
- -----------------------------------------------------------------------------------------------------------------------------------
CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER
*(TO BE COMPLETED ONLY IF THE BOX IN PART 3 ABOVE IS CHECKED)
I certify under penalties of perjury that a taxpayer identification number
has not been issued to me, and either (a) I have mailed or delivered an
application to receive a taxpayer identification number to the appropriate
Internal Revenue Service Center or Social Security Administration Office, or
(b) I intend to mail or deliver an application in the near future. I understand
that if I do not provide a taxpayer identification number within sixty days, 31
percent of all reportable payments made to me thereafter will be withheld until
I provide a number.
SIGNATURE SIGNATURE
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
B
O
X
C
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
FIRPTA AFFIDAVIT -- CERTIFICATE OF NON-FOREIGN STATUS
<S> <C>
Section 1445 of the Internal Revenue Code provides that a transferee of a U.S. real property interest must withhold tax if
the transferor is a foreign person. To inform the Purchaser that withholding of tax is not required upon this disposition of a U.S.
real property interest, the undersigned hereby certifies the following on behalf of the tendering Limited Partner named above:
1. The Limited Partner, if an individual, is not a nonresident alien for purposes of U.S. income taxation, and if not an
individual, is not a foreign corporation, foreign partnership, foreign trust, or foreign estate (as those terms are
defined in the Internal Revenue Code and Income Tax Regulations);
2. The Limited Partner's Social Security Number (for individuals) or Employer Identification Number (for non-individuals)
is:_________________; and
3. The Limited Partner's address is: _________________________
I understand that this certification may be disclosed to the Internal Revenue Service by the transferee and that any false
statement I have made here could be punished by fine, imprisonment, or both.
Under penalties of perjury I declare that I have examined this certification and to the best of my knowledge and belief it is
true, correct and complete.
_________________________________________________ ______________________________________________________
Signature Signature
Title:___________________________________________ Title:______________________________
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
INSTRUCTIONS
TO
ASSIGNMENT OF PARTNERSHIP INTEREST
FOR
CONSOLIDATED CAPITAL INSTITUTIONAL PROPERTIES/2
FORMING PART OF TERMS AND CONDITIONS OF THE OFFER
- -------------------------------------------------------------------------------
IF YOU HAVE ANY QUESTIONS OR NEED ASSISTANCE COMPLETING THE ASSIGNMENT OF
PARTNERSHIP INTEREST, PLEASE CALL BEACON HILL PARTNERS TOLL FREE AT
(800) 854-9486 OR COLLECT AT (212) 843-8500
- -------------------------------------------------------------------------------
1. GUARANTEE OF SIGNATURES. If the Assignment of Partnership Interest
is signed by the registered holder of the Units and payment is to be made
directly to that holder, then no signature guarantee is required on the
Assignment of Partnership Interest. Similarly, if the Units are tendered for
the account of a member firm of a registered national securities exchange, a
member of the National Association of Securities Dealers, Inc. or a commercial
bank, savings bank, credit union, savings and loan association or trust company
having an office, branch or agency in the United States (each an "Eligible
Institution"), no signature guarantee is required on the Assignment of
Partnership Interest. HOWEVER, IN ALL OTHER CASES, ALL SIGNATURES ON THE
ASSIGNMENT OF PARTNERSHIP INTEREST MUST BE GUARANTEED BY AN ELIGIBLE
INSTITUTION. A notarization is not the same thing as a signature guarantee, and
a notarization of the Assignment of Partnership Interest will not be
sufficient. IN THE MAJORITY OF CASES, THE LOCAL BANK AT WHICH YOU DO YOUR DAY
TO DAY BANKING IS AN ELIGIBLE INSTITUTION AND WILL BE ABLE TO PROVIDE YOU WITH
THE REQUIRED MEDALLION GUARANTEE.
2. DELIVERY OF ASSIGNMENT OF PARTNERSHIP INTEREST. The Assignment of
Partnership Interest is to be completed by all Limited Partners who wish to
tender Units in response to the Offer. For a Limited Partner validly to tender
Units, a properly completed and duly executed Assignment of Partnership
Interest (or a facsimile copy), along with the required signature guarantees by
an Eligible Institution and any other required documents, must be received by
the Depositary at one of its addresses set forth on the Assignment of
Partnership Interest on or prior to the Expiration Date (as defined in the
Offer to Purchase).
THE METHOD OF DELIVERY OF THE ASSIGNMENT OF PARTNERSHIP INTEREST AND
ALL OTHER REQUIRED DOCUMENTS IS AT THE OPTION AND RISK OF THE TENDERING LIMITED
PARTNER AND DELIVERY WILL BE DEEMED MADE ONLY WHEN ACTUALLY RECEIVED BY THE
DEPOSITARY. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ASSURE TIMELY
DELIVERY.
No alternative, conditional or contingent tenders will be accepted,
and no fractional Units will be purchased (except from a Limited Partner who is
tendering all of the Units owned by that Limited Partner). All tendering
Limited Partners, by execution of the Assignment of Partnership Interest, waive
any right to receive any notice of the acceptance of their Units for payment.
3. INADEQUATE SPACE. If the space provided herein is inadequate,
additional information may be provided on a separate signed schedule attached
hereto.
4. MINIMUM TENDERS. A Limited Partner may tender any or all of his or
her Units; provided, however, that because of restrictions in the Partnership's
Limited Partnership Agreement, a partial tender of Units must be for a minimum
of twenty Units (other than Limited Partners who hold Units in an Individual
Retirement Account or Keogh Plan). Tenders of fractional Units will be
permitted only by a Limited Partner who is tendering all Units owned by that
Limited Partner.
5. SIGNATURES ON ASSIGNMENT OF PARTNERSHIP INTEREST. If the Assignment
of Partnership Interest is signed by the registered Limited Partner(s), the
signature(s) must correspond exactly with the name(s) as shown on the records
of the Partnership, without alteration, enlargement or any change whatsoever.
If any of the Units tendered hereby are held of record by two or more
joint Limited Partners, each such Limited Partner must sign the Assignment of
Partnership Interest.
If the Assignment of Partnership Interest is signed by trustees,
executors, administrators, guardians, attorneys-in-fact, agents, officers of
corporations or others acting in a fiduciary or representative capacity, such
persons should so indicate when signing, and proper evidence satisfactory to
the Depositary of their authority to so act must be submitted.
6. WAIVER OF CONDITIONS. The Purchaser expressly reserves the
absolute right, in its sole discretion, to waive any of the specified
conditions of the Offer, in whole or in part, in the case of any Units
tendered.
7. REQUESTS FOR ASSISTANCE AND ADDITIONAL COPIES. Questions or
requests for assistance may be directed to Beacon Hill Partners, the
Information Agent, at its address and telephone number set forth on the back
cover of the Offer to Purchase. Copies of the Offer to Purchase and the
Assignment of Partnership Interest may be obtained from the Information Agent.
(Continued on Reverse Side)
<PAGE>
8. SUBSTITUTE FORM W-9. Each tendering Limited Partner is required to
provide the Depositary with a correct taxpayer identification number ("TIN"),
generally the Limited Partner's social security or federal employer's
identification number, on Substitute Form W-9, which is provided under
"Important Tax Information" below. You must cross out item (2) in the
Certification box on Substitute Form W-9 if you are subject to back-up
withholding. Failure to provide the information on the form may subject the
tendering Limited Partner to 31% federal income tax withholding on the payments
made to the Limited Partner with respect to Units purchased pursuant to the
Offer. The box in Part 3 of the form may be checked if the tendering Limited
Partner has not been issued a TIN and has applied for a TIN or intends to apply
for a TIN in the near future. If the box in Part 3 is checked and the
Depositary is not provided with a TIN within sixty (60) days, thereafter the
Depositary will withhold 31% on all such payments of the Purchase Price until a
TIN is provided to the Depositary.
9. FIRPTA AFFIDAVIT. To avoid potential withholding of tax pursuant to
Section 1445 of the Internal Revenue Code in an amount equal to 10% of the
purchase price for Units purchased pursuant to the Offer, plus the amount of
any liabilities of the Partnership allocable to such Units, each Limited
Partner who or which is a United States person must complete the FIRPTA
Affidavit contained in the Assignment of Partnership Interest stating, under
penalties of perjury, such Limited Partner's TIN and address, and that such
Limited Partner is not a foreign person. Tax withheld under Section 1445 of the
Internal Revenue Code is not an additional tax. If withholding results in an
overpayment of tax, a refund may be obtained from the IRS.
IMPORTANT: THE ASSIGNMENT OF PARTNERSHIP INTEREST (OR A FACSIMILE COPY)
(TOGETHER WITH ALL OTHER REQUIRED DOCUMENTS) MUST BE RECEIVED BY THE DEPOSITARY
ON OR PRIOR TO THE EXPIRATION DATE.
----------------
IMPORTANT TAX INFORMATION
To prevent backup withholding on payments made to a Limited Partner or
other payee with respect to Units purchased pursuant to the Offer, the Limited
Partner is required to notify the Depositary of the Units of the Limited
Partner's correct TIN by completing the form below, certifying that the TIN
provided on Substitute Form W-9 is correct (or that such Limited Partner is
awaiting a TIN) and that (1) the Limited Partner has not been notified by the
Internal Revenue Service that the Limited Partner is subject to backup
withholding as a result of failure to report all interest or dividends or (2)
the Internal Revenue Service has notified the Limited Partner that the Limited
Partner is no longer subject to backup withholding. If backup withholding
applies, the Depositary is required to withhold 31% of any payments made to the
Limited Partner. Backup withholding is not an additional tax. Rather, the
federal income tax liability of persons subject to backup withholding will be
reduced by the amount of tax withheld. If withholding results in an overpayment
of taxes, a refund may be obtained from the Internal Revenue Service.
The Limited Partner is required to give the Depositary the TIN (e.g.,
social security number or employer identification number) of the record owner
of the Units. If the Units are in more than one name or are not in the name of
the actual owner, consult the enclosed "Guidelines for Certification of
Taxpayer Identification Number on Substitute Form W-9" for additional guidance
on which number to report.
Certain Limited Partners (including, among others, all corporations
and certain foreign individuals) are not subject to these backup withholding
and reporting requirements. In order for a foreign individual to qualify as an
exempt recipient, that Limited Partner must submit to the Depositary a properly
completed Internal Revenue Service Form W-8, signed under penalties of perjury,
attesting to that Limited Partner's exempt status. A Form W-8 can be obtained
from the Depositary. See the enclosed "Guidelines for Certification of Taxpayer
Identification Number on Substitute Form W-9" for additional institutions.
----------------
INDIVIDUAL RETIREMENT ACCOUNT (IRAS)
PLEASE NOTE THAT A TENDERING BENEFICIAL OWNER OF UNITS WHOSE UNITS ARE
OWNED OF RECORD BY AN INDIVIDUAL RETIREMENT ACCOUNT (IRA) OR OTHER QUALIFIED
PLAN WILL NOT RECEIVE DIRECT PAYMENT OF THE PURCHASE PRICE, RATHER, PAYMENT
WILL BE MADE TO THE CUSTODIAN OF SUCH ACCOUNT OR PLAN. IF THE UNITS ARE HELD IN
AN IRA ACCOUNT, THE CUSTODIAN OF THE ACCOUNT MUST SIGN THE ASSIGNMENT OF
PARTNERSHIP INTEREST.
<PAGE>
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
GUIDELINES FOR DETERMINING THE PROPER IDENTIFICATION NUMBER TO GIVE THE
PAYER--Social Security numbers have nine digits separated by two hyphens:
i.e. 000-00-0000. Employer identification numbers have nine digits separated
by only one hyphen: i.e., 00-0000000. The table below will help determine the
number to give the payer.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------
GIVE THE
TAXPAYER
FOR THIS TYPE OF ACCOUNT: IDENTIFICATION
NUMBER OF--
- ----------------------------------------------------------------------
<S> <C>
1. An individual's account The individual
2. Two or more individuals The actual owner of
(joint account) the account or, if
combined funds, the first
individual on the account(1)
3. Husband and wife The actual owner of
(joint account) the account or, if joint
funds, either person(1)
4. Custodian account of a minor The minor(2)
(Uniform Gift to Minors Act)
5. Adult and minor (joint account) The adult or, if the
minor is the only
contributor, the
minor(1)
6. Account in the name of guardian or The ward, minor, or
committee for a designated ward, incompetent(3)
minor, or incompetent person(3)
7. a.The usual revocable savings trust The grantor-trustee(1)
account (grantor is also trustee)
b.So-called trust account that is not The actual owner(1)
a legal or valid trust under State
law
8. Sole proprietorship account The owner(4)
- ----------------------------------------------------------------------
<CAPTION>
- --------------------------------------- ------------------------------
FOR THIS TYPE OF ACCOUNT: GIVE THE
TAXPAYER
IDENTIFICATION
NUMBER OF--
- ----------------------------------------------------------------------
<S> <C>
9. A valid trust, estate or pension The legal entity (Do not
trust furnish the identifying number
of the personal representative
or trustee unless the legal
entity itself is not
designated in the account
title.)(5)
10. Corporate account The corporation
11. Religious, charitable, or The organization
educational organization account
12. Partnership account held in the The partnership
name of the business
13. Association, club, or other The organization
tax-exempt organization
14. A broker or registered nominee The broker or nominee
15. Account with the Department of The public entity
Agriculture in the name of a public
entity (such as a State or local
government, school district, or
prison) that receives agricultural
program payments
- ----------------------------------------------------------------------
</TABLE>
<PAGE>
(1) List first and circle the name of the person whose number you furnish.
(2) Circle the minor's name and furnish the minor's social security number.
(3) Circle the ward's, minor's or incompetent person's name and furnish such
person's social security number or employer identification number.
(4) Show your individual name. You may also enter your business name. You
may use your social security number or employer identification number.
(5) List first and circle the name of the legal trust, estate, or pension
trust.
NOTE: If no name is circled when there is more than one name, the number will
be considered to be that of the first name listed.
<PAGE>
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
PAGE 2
OBTAINING A NUMBER
If you do not have a taxpayer identification number or you do not know your
number, obtain Form SS-5, Application for a Social Security Number Card (for
individuals), or Form SS-4, Application for Employer Identification Number
(for businesses and all other entities), at the local office of the Social
Security Administration or the Internal Revenue Service and apply for a
number.
PAYEES EXEMPT FROM BACKUP WITHHOLDING
Payees specifically exempted from backup withholding on ALL payments include
the following:
o A corporation.
o A financial institution.
o An organization exempt from tax under section 501(a) of the Internal
Revenue Code of 1986, as amended (the "Code"), or an individual
retirement plan.
o The United States or any agency or instrumentality thereof.
o A State, the District of Columbia, a possession of the United States, or
any subdivision or instrumentality thereof.
o A foreign government, a political subdivision of a foreign government,
or any agency or instrumentality thereof.
o An international organization or any agency or instrumentality thereof.
o A registered dealer in securities or commodities registered in the U.S.
or a possession of the U.S.
o A real estate investment trust.
o A common trust fund operated by a bank under section 584(a) of the Code.
o An exempt charitable remainder trust, or a non-exempt trust described in
section 4947(a)(1).
o An entity registered at all times under the Investment Company Act of
1940.
o A foreign central bank of issue.
o A futures commission merchant registered with the Commodity Futures
Trading Commission.
Payments of dividends and patronage dividends not generally subject to backup
withholding include the following:
o Payments to nonresident aliens subject to withholding under section 1441
of the Code.
o Payments to partnerships not engaged in a trade or business in the U.S.
and which have at least one nonresident partner.
o Payments of patronage dividends where the amount received is not paid in
money.
o Payments made by certain foreign organizations.
o Payments made to an appropriate nominee.
o Section 404(k) payments made by an ESOP.
Payments of interest not generally subject to backup withholding include the
following:
o Payments of interest on obligations issued by individuals.
NOTE: You may be subject to backup withholding if this interest is $600
or more and is paid in the course of the payer's trade or business and
you have not provided your correct taxpayer identification number to the
payer.
o Payments of tax-exempt interest (including exempt-interest dividends
under section 852 of the Code).
o Payments described in section 6049(b)(5) of the Code to nonresident
aliens.
o Payments on tax-free covenant bonds under section 1451 of the Code.
o Payments made by certain foreign organizations.
o Payments of mortgage interest to you.
o Payments made to an appropriate nominee.
Exempt payees described above should file substitute Form W-9 to avoid
possible erroneous backup withholding. FILE THIS FORM WITH THE PAYER. FURNISH
YOUR TAXPAYER IDENTIFICATION NUMBER, WRITE "EXEMPT" ON THE FACE OF THE FORM,
AND RETURN IT TO THE PAYER. IF THE PAYMENTS ARE INTEREST, DIVIDENDS, OR
PATRONAGE DIVIDENDS, ALSO SIGN AND DATE THE FORM. IF YOU ARE A NONRESIDENT
ALIEN OR A FOREIGN ENTITY NOT SUBJECT TO BACKUP WITHHOLDING, FILE WITH PAYER
A COMPLETED INTERNAL REVENUE FORM W-8 (CERTIFICATE OF FOREIGN STATUS).
Certain payments other than interest, dividends, and patronage dividends,
that are not subject to information reporting are also not subject to backup
withholding. For details, see the regulations under sections 6041, 6041A(a),
6045, and 6050A.
PRIVACY ACT NOTICE--Section 6109 requires most recipients of dividend,
interest, or other payments to give correct taxpayer identification numbers
to payers who must report the payments to the IRS. The IRS uses the numbers
for identification purposes. Payers must be given the numbers whether or not
recipients are required to file a tax return. Payers must generally withhold
31% of taxable interest, dividend, and certain other payments to a payee who
does not furnish a correct taxpayer identification number to a payer. Certain
penalties may also apply.
PENALTIES
(1) PENALTY FOR FAILURE TO FURNISH TAXPAYER IDENTIFICATION NUMBER--If you
fail to furnish your correct taxpayer identification number to a payer, you
are subject to a penalty of $50 for each such failure unless your failure is
due to reasonable cause and not to willful neglect.
(2) FAILURE TO REPORT CERTAIN DIVIDEND AND INTEREST PAYMENTS--If you fail to
include any portion of an includible payment for interest, dividends, or
patronage dividends in gross income, such failure will be treated as being
due to negligence and will be subject to a penalty of 20% on any portion of
an underpayment attributable to that failure unless there is clear and
convincing evidence to the contrary.
(3) CIVIL PENALTY FOR FALSE INFORMATION WITH RESPECT TO WITHHOLDING--If you
make a false statement with no reasonable basis that results in no imposition
of backup withholding, you are subject to a penalty of $500.
(4) CRIMINAL PENALTY FOR FALSIFYING INFORMATION--Willfully falsifying
certifications or affirmations may subject you to criminal penalties
including fines and/or imprisonment.
FOR ADDITIONAL INFORMATION CONTACT YOUR TAX CONSULTANT OR THE INTERNAL
REVENUE SERVICE
<PAGE>
Exhibit (a)(4)
REEDY RIVER PROPERTIES, L.L.C.
One Insignia Financial Plaza
Greenville, South Carolina 29602
October 30, 1997
To: The Limited Partners of
Consolidated Capital Institutional Properties/2
Enclosed for your review and consideration are documents relating to
an offer by Reedy River Properties, L.L.C. ("Reedy River") to purchase your
units of limited partnership interests in Consolidated Capital Institutional
Properties/2 for $40 in cash per unit. This offer will expire at 12:00
midnight, New York City time, on November 26, 1997 (unless extended by Reedy
River).
Reedy River is an affiliate of the General Partner of the Partnership.
THE ENCLOSED DOCUMENTS CONTAIN IMPORTANT INFORMATION AND SHOULD BE
READ CAREFULLY AND IN THEIR ENTIRETY BEFORE YOU DECIDE WHETHER TO SELL YOUR
UNITS TO REEDY RIVER PURSUANT TO THIS OFFER.
If you have any questions concerning the terms of the offer, or need
assistance in completing the forms necessary to tender your units, please
contact our Information Agent, Beacon Hill Partners, at (800) 854-9486.
Thank you.
Sincerely,
Reedy River Properties, L.L.C.
<PAGE>
[TO COME]
<PAGE>
EXECUTIVE SUMMARY 1
- -------------------------------------------------------------------------------
VALUATION DATE: March 25, 1996
PROPERTY NAME: Canyon Crest Apartments
ADDRESS: 5754 South Lowell Way, Littleton, Arapaho
County, Colorado 80123
TAX REFERENCE: 20771-84-1509
DESCRIPTION: The subject is a 90 unit apartment complex
that was reportedly completed in 1970 and
includes ten residential buildings
containing 92,212 (plus or minus) square
feet of net rentable area. Amenities at the
subject include a leasing office, a heated
pool, a hot tub, a playground, five laundry
rooms, and 45 (plus or minus) covered and
76 (plus or minus) open parking spaces. As
of the date of inspection, the subject was
observed as being in average condition.
According to the Property Condition
Assessment conducted by Inspection and
Valuation International, the subject
suffers from $5,000 of deferred maintenance
requiring immediate attention and $55,000
of maintenance that needs to be cured
within one year. Items cited by the report
include replacing some of the subject's
roofs, replacing the hot water boilers,
and continued replacement of major
appliances. A complete listing of deferred
maintenance items and cost to cure are
listed in the Addenda section of this
report. Site improvements include asphalt
paving and concrete sidewalks, lighting,
drainage and landscaping.
LAND ACRES: 3.5 (plus or minus) acres (152,460 (plus or
minus) square feet)
ZONING: "T", Transitional District, under the
jurisdiction of the City of Littleton. The
improvements appear to represent a legal
non-conforming use due to the complex
exceeding maximum density requirement and
not meeting minimum parking requirements.
<PAGE>
EXECUTIVE SUMMARY 2
- -------------------------------------------------------------------------------
MARKET BRIEF: Rental rates in most submarkets of the
Denver apartment market have increased over
the last year. According to the Denver Area
Apartment Vacancy Survey, Apartment
Association of Metro Denver, 4th Quarter
1995, rents for one-bedroom units increased
6.1%, two-bedroom, one-bath units increased
8.1%, two-bedroom, two-bath units increased
5.8%, and three-bedroom units increased
7.3%. The only unit type to report a
decrease was efficiency units, which had a
rental rate decrease of 4.3%. The subject
offers no efficiencies. Since the beginning
of 1993, a reported 9,431 units have been
constructed. This represents a significant
increase in construction compared to the
previous six years. As of the end of 1995,
the Denver area had an average occupancy
rate of 95.7%. The subject's submarket
reported an average occupancy of 93.1% as
of the end of 1995.
SUBJECT COMPANY: 98%
PROPERTY RIGHTS APPRAISED: Fee Simple Estate
HIGHEST AND BEST USE: Multifamily rental apartment complex
INDICATED "AS CURED"
VALUE BY APPROACHES:
INCOME CAPITALIZATION APPROACH: $3,800,000
SALES COMPARISON APPROACH: $3,800,000
COST APPROACH: $3,800,000
FINAL CONCLUSION OF MARKET
VALUE: $3,800,000
VALUE PER SF: $41.21
VALUE PER UNIT: $42,222
EGIM: 5.35x
EFFECTIVE OAR: 10.27%
INSURABLE VALUE: $3,450,000
<PAGE>
EXECUTIVE SUMMARY 3
- -------------------------------------------------------------------------------
COMMENT
In estimating the subject's "as cured" market value, the Income Capitalization
Approach was given the most weight due to the income-producing nature of the
subject. The Sales Comparison Approach was also given weight due to the number
of recent comparable sales in the subject's market. Due to market participants
espousing the lack of the Cost Approach's applicability in a market where
estimating depreciation from all forms is extremely subjective, the Cost
Approach was given little weight in the reconciliation of a final value
estimate.
<PAGE>
SUMMARY OF SALIENT FACTS AND CONCLUSIONS
PROPERTY NAME: Windemere Apartments
LOCATION OF PROPERTY: 2909 Hayes Road
Houston, Harris County, Texas
PURPOSE OF THE APPRAISAL: To estimate the Market Value of the subject
property.
PROPERTY RIGHTS APPRAISED: Fee Simple Estate
SITE DATA AND ZONING: The subject parcel is roughly rectangular in
shape and contains approximately 8.6 acres
of land. The City of Houston has no official
zoning ordinance. Land use is often
controlled by deed restrictions and all
development plans must be approved by the
City of Houston Planning Department.
IMPROVEMENT DATA: The subject consist of 257 apartment units
totaling 214,055 square feet of net rentable
area. The structural improvements consist
of 19 residential buildings and an office/
leasing building. Exterior finish consist of
painted wood siding and brick veneer with
pitched roofs. Additional amenities include
a club room, two laundry rooms, fitness
center, two swimming pools, controlled
access entry gates, concrete paved parking,
concrete walkways, fencing and landscaping.
The improvements were completed in 1980.
HIGHEST AND BEST USE To hold the site for future multifamily
AS VACANT: residential development.
AS IMPROVED: Considered to be that of the existing
improvements.
<PAGE>
SUMMARY OF SALIENT FACTS AND CONCLUSIONS (Continued)
TENANT DATA: Windemere Apartments caters primarily to
adults and families employed in the
surrounding area. Leases are typically
signed for six to 12-month terms. The
subject is reportedly 94% occupied and 100%
leased as of the date of appraisal.
DATE OF VALUE ESTIMATE: March 26, 1996
SUMMARY OF STABILIZED
PRO FORMA:
TOTALS PER UNIT
Potential Gross Income $1,681,555 $ 6,543
Vacancy & Credit Loss 134,524 523
----------- -------
Effective Gross Income $1,547,031 $ 6,020
Operating Expenses 922,856 3,591
----------- -------
Net Operating Income $ 624,175 $ 2,429
VALUE CONCLUSIONS
The Cost Approach: N/A
The Income Capitalization
Approach: $6,250,000
The Sales Comparison Approach: $6,250,000
FINAL VALUE ESTIMATE: $6,250,000
<PAGE>
SUMMARY OF SALIENT FACTS AND CONCLUSIONS
PROPERTY NAME: Highcrest Townhome Apartments
LOCATION OF PROPERTY: 3514 West 83rd Street
Woodridge, DuPage County, Illinois
Houston, Harris County, Texas
PURPOSE OF THE APPRAISAL: To estimate the Market Value of the subject.
PROPERTY RIGHTS APPRAISED: Fee Simple Estate
HIGHEST AND BEST USE: As Vacant - To develop for multi-family use.
As Improved - Considered to be that
of the existing improvements.
SITE DATA AND ZONING: The subject parcel is irregular and contains
approximately 9.91 acres of land zoned A-2
multifamily development by the Village of
Woodridge.
IMPROVEMENT DATA: The subject consists of 176 units totaling
206,200 square feet of net rentable area. The
structural improvements consist of 10 residential
buildings. Exterior finish consists of vinyl
siding and brick veneer, pitched roofs, and
concrete slab foundations. The improvements were
completed in 1968. Additional amenities include
one swimming pool, asphalt parking areas,
concrete walkways and landscaping.
TENANT DATA: The Highcrest Townhome Apartments caters
primarily to adults and families employed in the
surrounding area. Leases are typically signed for
six to 12-month terms. The subject was 95%
occupied as of the date of inspection.
DATE OF VALUE ESTIMATE: March 19, 1996
<PAGE>
SUMMARY OF SALIENT FACTS AND CONCLUSIONS (Continued)
SUMMARY OF STABILIZED PRO FORMA:
TOTALS PER UNIT
------ --------
Potential Gross Income $1,769,715 $10,055
Vacancy & Credit Loss (88,486) (503)
Employee Discounts (30,960) (176)
---------- --------
Effective Gross Income $1,650,269 $9,377
Operating Expenses 825,443 4,690
---------- --------
Net Operating Income $ 824,826 $ 4,687
VALUE CONCLUSIONS
The Sales Comparison Approach: $8,150,000
The Income Capitalization
Approach: $8,250,000
FINAL VALUE ESTIMATE: $8,250,000
