<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 29549
-----------------------
SCHEDULE 14D-1
TENDER OFFER STATEMENT PURSUANT TO SECTION 14(d)(1)
OF THE SECURITIES EXCHANGE ACT OF 1934
AND
SCHEDULE 13D
UNDER THE SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. 1)
DAVIDSON DIVERSIFIED REAL ESTATE II, L.P.
(Name of Subject Company)
AIMCO PROPERTIES, L.P.
(Bidder)
UNITS OF LIMITED PARTNERSHIP INTEREST
(Title of Class of Securities)
NONE
(CUSIP Number of Class of Securities)
PATRICK J. FOYE
APARTMENT INVESTMENT AND MANAGEMENT COMPANY
1873 SOUTH BELLAIRE STREET, 17TH FLOOR
DENVER, COLORADO 80222
(303) 757-8101
(Name, Address and Telephone Number of Person Authorized
to Receive Notices and Communications on Behalf of Bidder)
COPY TO:
JONATHAN L. FRIEDMAN
SKADDEN, ARPS, SLATE, MEAGHER & FLOM LLP
300 SOUTH GRAND, 34TH FLOOR
LOS ANGELES, CALIFORNIA 90071
(213) 687-5000
-----------------------
<PAGE> 2
CALCULATION OF FILING FEE
- --------------------------------------------------------------------------------
Transaction Valuation* $1,388,708 Amount of Filing Fee: $277.74
- --------------------------------------------------------------------------------
* For purposes of calculating the fee only. This amount assumes the
purchase of 479.03 units of limited partnership interest of the subject
partnership for $2,899 per unit. The amount of the filing fee,
calculated in accordance with Section 14(g)(1)(B)(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 bidder.
[ ] 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: Filing Parties:
Form or Registration No.: Date Filed:
(Continued on following pages)
Page 2 of 13
<PAGE> 3
Page 3 of 13
CUSIP No. NONE 14D-1 AND 13D/A
1. NAME OF REPORTING PERSONS
S.S. OR I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS
AIMCO PROPERTIES, L.P.
84-1275621
2. CHECK THE APPROPRIATE BOX IF A MEMBER OF GROUP
(a) [ ]
(b) [X]
3. SEC USE ONLY
4. SOURCE OF FUNDS
WC, BK
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
4.25
8. CHECK IF THE AGGREGATE AMOUNT IN ROW (7) EXCLUDES CERTAIN SHARES
[ ]
9. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (7)
0.4%
10. TYPE OF REPORTING PERSON
PN
<PAGE> 4
Page 4 of 13
CUSIP No. NONE 14D-1 AND 13D/A
1. NAME OF REPORTING PERSONS
S.S. OR I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS
AIMCO-GP, 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
4.25
8. CHECK IF THE AGGREGATE AMOUNT IN ROW (7) EXCLUDES CERTAIN SHARES
[ ]
9. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (7)
0.4%
10. TYPE OF REPORTING PERSON
CO
<PAGE> 5
Page 5 of 13
CUSIP No. NONE 14D-1 AND 13D/A
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
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
158.25
8. CHECK IF THE AGGREGATE AMOUNT IN ROW (7) EXCLUDES CERTAIN SHARES
[ ]
9. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (7)
12.9%
10. TYPE OF REPORTING PERSON
PN
<PAGE> 6
Page 6 of 13
CUSIP No. NONE 14D-1 AND 13D/A
1. NAME OF REPORTING PERSONS
I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY)
AIMCO/IPT, INC.
2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP
(a) [ ]
(b) [X]
3. SEC USE ONLY
4. SOURCE OF FUNDS
Not Applicable
5. CHECK BOX 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
158.25
8. CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (7) EXCLUDES CERTAIN
SHARES [ ]
9. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (7)
12.9%
10. TYPE OF REPORTING PERSON
CO
<PAGE> 7
Page 7 of 13
CUSIP No. NONE 14D-1 AND 13D/A
1. NAME OF REPORTING PERSONS
S.S. OR I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS
APARTMENT INVESTMENT AND MANAGEMENT COMPANY
84-129577
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
162.75
8. CHECK IF THE AGGREGATE AMOUNT IN ROW (7) EXCLUDES CERTAIN SHARES
[ ]
9. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (7)
13.3%
10. TYPE OF REPORTING PERSON
CO
<PAGE> 8
SCHEDULE 14D-1/AMENDMENT NO. 1 TO SCHEDULE 13D
This Statement (the "Statement") constitutes (a) the initial Schedule
14D-1 of AIMCO Properties, L.P. (the "AIMCO OP"), relating to AIMCO OP's offer
to purchase units of limited partnership interest ("Units") of Davidson
Diversified Real Estate II, L.P. (the "Partnership"); and (b) Amendment No. 1 to
the Schedule 13D (the "Schedule 13D") originally filed with the Securities and
Exchange Commission (the "Commission") on January 29, 1999, by Cooper River
Properties, L.L.C. ("Cooper River"), Insignia Properties, L.P. ("IPLP"),
Insignia Properties Trust ("IPT"), and Apartment Investment and Management
Company ("AIMCO"). Cooper River, AIMCO/IPT, Inc. ("AIMCO/IPT"), IPLP, AIMCO OP,
AIMCO-GP, Inc. ("AIMCO-GP") and AIMCO are herein referred to as the "Reporting
Persons." The item numbers and responses thereto are set forth below in
accordance with the requirements of Schedule 14D-1.
(1) SECURITY AND SUBJECT COMPANY.
(a) The name of the subject company is Davidson Diversified Real Estate
II, L.P., a Delaware limited partnership. The address of the Partnership's
principal executive offices is 1873 South Bellaire Street, 17th Floor, Denver,
Colorado 80222.
(b) This Statement relates to an offer by AIMCO OP to purchase up to
479.03 of the 1,224.25 outstanding units of limited partnership interest (the
"Units") of the Partnership at a purchase price per Unit, net to the seller, of
$2,899 in cash (less the amount of any distributions paid by the Partnership on
and after July 30, 1999), upon the terms and subject to the conditions set forth
in an Offer to Purchase, dated July 30, 1999 (as amended or supplemented from
time to time, the "Offer to Purchase"), and the related Letter of Transmittal
and Instructions thereto (as amended or supplemented from time to time, the
"Letter of Transmittal"), copies of which are filed as Exhibits (a)(1) and
(a)(2) hereto, respectively.
(c) The information set forth in the Offer to Purchase under "The Offer
- -- Section 9. Background and Reasons for the Offer -- Prices on Secondary
Market" is incorporated herein by reference.
(2) IDENTITY AND BACKGROUND.
(a)-(d), (g) This Statement is being filed by AIMCO Properties, L.P., a
Delaware limited partnership, and, insofar as this Statement constitutes
Amendment No. 1 to the Schedule 13D, by Cooper River Properties, L.L.C., a
Delaware limited liability company, Insignia Properties, L.P., a Delaware
limited partnership, AIMCO/IPT, Inc., a Delaware corporation, AIMCO GP, Inc., a
Delaware corporation and Apartment Investment and Management Company, a Maryland
corporation. The sole general partner of AIMCO OP is AIMCO-GP. AIMCO-GP is a
wholly owned subsidiary of AIMCO. On February 26, 1999, IPT was merged into
AIMCO, and AIMCO contributed IPT's interest in IPLP to AIMCO's wholly owned
subsidiary, AIMCO/IPT. AIMCO/IPT also replaced IPT as the sole general partner
of IPLP. The principal business of the Reporting Persons is the ownership,
acquisition, development, expansion and management of multi-family apartment
properties. The principal executive offices of the Reporting Persons are located
at 1873 South Bellaire Street, 17th Floor, Denver, Colorado 80222. The
information set forth in the Offer to Purchase under "The Offer -- Section 8.
Information Concerning Us and Certain of Our Affiliates" is incorporated herein
by reference. The executive officers and directors of AIMCO and AIMCO-GP are
listed on Annex I to the Offer to Purchase ("Annex I"), which is incorporated
herein by reference.
(e)-(f) During the last five years, none of the Reporting Persons nor,
to the best of their knowledge, any of the persons listed in Annex I (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
Page 8 of 13
<PAGE> 9
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.
(3) PAST CONTACTS, TRANSACTIONS OR NEGOTIATIONS WITH THE SUBJECT
COMPANY.
(a)-(b) The information set forth in Item 1 of Part I and Items 9
through 12 of Part III of the Partnership's Form 10-KSB for the year ended
December 31, 1998, and the financial statements and notes thereto included
therein, and the information set forth in the Offer to Purchase under "The Offer
- -- Section 9. Background and Reasons for the Offer -- General," "The Offer --
Section 9. Background and Reasons for the Offer -- Prior Tender Offers," "The
Offer -- Section 11. Conflicts of Interest and Transactions with Affiliates,"
"The Offer -- Section 13. Certain Information Concerning Your Partnership --
Distributions" and "The Offer -- Section 13. Certain Information Concerning Your
Partnership -- Compensation Paid to the General Partner and Its Affiliates" is
incorporated herein by reference.
(4) SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
(a)-(c) The information set forth in the Offer to Purchase under "The
Offer -- Section 15. Source of Funds" is incorporated herein by reference.
(5) PURPOSE OF THE TENDER OFFER AND PLANS OR PROPOSALS OF THE BIDDER.
(a)-(g) The information set forth in the Offer to Purchase under "The
Offer -- Section 9. Background and Reasons for the Offer," "The Offer -- Section
12. Future Plans of the Purchaser" and "The Offer -- Section 7. Effects of the
Offer" is incorporated herein by reference.
(6) INTEREST IN SECURITIES OF THE SUBJECT COMPANY.
(a)-(b) Cooper River directly owns 122.75 Units, IPLP directly owns
35.50 Units, AIMCO OP directly owns 4.25 Units, and AIMCO directly owns 0.25
Units (for an aggregate of 162.75 Units), representing 10.03%, 2.90%, 0.35% and
0.02%, respectively, or a total of 13.3% of the outstanding Units based on the
1,224.25 Units outstanding at December 31, 1998.
IPLP, AIMCO/IPT and AIMCO may be deemed to beneficially own the Units
directly owned by Cooper River by reason of each of their relationship with
Cooper River. AIMCO/IPT and AIMCO may be deemed to beneficially own the units
directly owned by IPLP by reason of each of their relationships with IPLP.
Cooper River is a wholly owned subsidiary of IPLP, and AIMCO/IPT is the sole
general partner of IPLP (owning approximately 66.17% of the total equity
interests). AIMCO/IPT is a wholly owned subsidiary of AIMCO. AIMCO may be deemed
to beneficially own the Units directly owned by AIMCO OP by reason of its
relationship with AIMCO OP. AIMCO GP is the sole general partner of AIMCO OP,
and AIMCO GP is a wholly-owned subsidiary of AIMCO.
Accordingly, for purposes of this Statement: (i) Cooper River is
reporting that it shares the power to vote or direct the vote and the power to
dispose or direct the disposition of the 122.75 Units directly owned by it; (ii)
IPLP is reporting that it shares the power to vote or direct the vote and the
power to dispose and direct the disposition of the 35.50 Units owned by it and
the 122.75 Units directly owned by Cooper River; (iii) AIMCO/IPT is reporting
that it shares the power to vote or direct the vote and the power to dispose or
direct the disposition of the 122.75 Units directly owned by Cooper River and
the 35.50 Units directly owned by IPLP; (iv) AIMCO OP is reporting that it
shares the power to vote or direct the vote and the power to dispose or direct
the disposition of the 4.25 Units directly owned by it; (v) AIMCO-GP is
reporting that it shares the power to vote or direct the disposition of the 4.25
Units owned by AIMCO OP and (vi) AIMCO is reporting that it shares the power to
vote or direct the vote and the power to dispose or
Page 9 of 13
<PAGE> 10
direct the disposition of the 0.25 Units directly owned by it, the 122.75 Units
directly owned by Cooper River, the 35.50 Units directly owned by IPLP and the
4.25 Units directly owned by AIMCO OP.
(7) CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH
RESPECT TO THE SUBJECT COMPANY'S SECURITIES.
Not applicable.
(8) PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED.
The information set forth in the Offer to Purchase under "The Offer --
Fees and Expenses" is incorporated herein by reference.
(9) FINANCIAL STATEMENTS OF CERTAIN BIDDERS.
The financial statements included in AIMCO OP's Annual Report on Form
10-K for the year ended December 31, 1998, which are listed on the Index to
Financial Statements on page F-1 of such report, are incorporated herein by
reference. Such report may be inspected at the public reference facilities
maintained by the Commission at Judiciary Plaza, 450 Fifth Street, N.W.,
Washington, D.C. 20549; Citicorp Center, 500 West Madison Street, Chicago,
Illinois 60661; and 7 World Trade Center, 13th Floor, New York, New York 10048.
Copies of such material can also be obtained from the Public Reference Room of
the Commission in Washington, D.C. at prescribed rates and from the Commission's
web site at www.sec.gov.
(10) ADDITIONAL INFORMATION.
(a) Not applicable.
(b)-(d) The information set forth in the Offer to Purchase under "The
Offer -- Section 18. Certain Legal Matters" is incorporated herein by reference.
(e) The information set forth in the Offer to Purchase under "The Offer
- -- Section 9. Background and Reasons for the Offer -- Certain Litigation" is
incorporated herein by reference
(f) The Offer to Purchase is hereby incorporated by reference.
(11) MATERIAL TO BE FILED AS EXHIBITS.
(a)(1) Offer to Purchase, dated July 30, 1999.
(a)(2) Letter of Transmittal and related Instructions.
(a)(3) Letter, dated July 30, 1999, from AIMCO OP to the Limited
Partners of the Partnership.
(b) Amended and Restated Credit Agreement (Unsecured
Revolver-to-Term Facility), dated as of October 1, 1998, among
AIMCO OP, Bank of America National Trust and Savings
Association, and BankBoston, N.A. (Exhibit 10.1 to AIMCO's
Current Report on Form 8-K, dated October l, 1998, is
incorporated herein by this reference).
(b)(2) First Amendment to Credit Agreement, dated as of November 6,
1998, by and among AIMCO OP, the financial institutions listed
on the signature pages thereof and Bank of America National
Trust and Savings Association (Exhibit 10.2 to AIMCO's Annual
Report on Form 10-K for the fiscal year ended December 31, 1998,
is incorporated herein by this reference).
(c) Not applicable.
Page 10 of 13
<PAGE> 11
(d) Not applicable.
(e) Not applicable.
(f) Not applicable.
(z)(1) Agreement of Joint Filing, dated July 30, 1999, among AIMCO,
AIMCO-GP, AIMCO OP, AIMCO/IPT, IPLP and Cooper River.
Page 11 of 13
<PAGE> 12
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: July 30, 1999
COOPER RIVER PROPERTIES, L.L.C.
By: /s/ Patrick J. Foye
---------------------------------
Executive Vice President
AIMCO/IPT, INC.
By: /s/ Patrick J. Foye
---------------------------------
Executive Vice President
INSIGNIA PROPERTIES, L.P.
By: AIMCO/IPT, INC.
(General Partner)
By: /s/ Patrick J. Foye
---------------------------------
Executive Vice President
AIMCO PROPERTIES, L.P.
By: AIMCO-GP, INC.
(General Partner)
By: /s/ Patrick J. Foye
---------------------------------
Executive Vice President
AIMCO-GP, INC.
By: /s/ Patrick J. Foye
---------------------------------
Executive Vice President
APARTMENT INVESTMENT
AND MANAGEMENT COMPANY
By: /s/ Patrick J. Foye
---------------------------------
Executive Vice President
Page 12 of 13
<PAGE> 13
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
----------- -----------
<S> <C>
(a)(1) Offer to Purchase, dated July 30, 1999.
(a)(2) Letter of Transmittal and related Instructions.
(a)(3) Letter, dated July 30, 1999, from AIMCO OP to the
Limited Partners of the Partnership.
(b) Amended and Restated Credit Agreement (Unsecured
Revolver-to-Term Facility), dated as of October 1,
1998, among AIMCO OP, Bank of America National Trust
and Savings Association, and BankBoston, N.A.
(Exhibit 10.1 to AIMCO's Current Report on Form 8-K,
dated October l, 1998, is incorporated herein by this
reference).
(b)(2) First Amendment to Credit Agreement, dated as of
November 6, 1998, by and among AIMCO OP, the
financial institutions listed on the signature pages
thereof and Bank of America National Trust and
Savings Association (Exhibit 10.2 to AIMCO's Annual
Report on Form 10-K for the fiscal year ended
December 31, 1998, is incorporated herein by this
reference).
(c) Not applicable.
(d) Not applicable.
(e) Not applicable.
(f) Not applicable.
(z)(1) Agreement of Joint Filing, dated July 30, 1999, among
AIMCO, AIMCO-GP, AIMCO OP, AIMCO/IPT, IPLP and Cooper
River.
</TABLE>
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<PAGE> 1
OFFER TO PURCHASE FOR CASH
AIMCO PROPERTIES, L.P.
IS OFFERING TO PURCHASE UP TO 479.03 UNITS OF LIMITED PARTNERSHIP INTEREST IN
DAVIDSON DIVERSIFIED REAL ESTATE II
FOR $2,899.00 PER UNIT IN CASH
We will only accept a maximum of 479.03 units in response to our offer. If more
units are tendered to us, we will generally accept units on a pro rata basis
according to the number of units tendered by each person.
We will pay for accepted units promptly after expiration of the offer.
Our offer price will be reduced for any distributions subsequently made by your
partnership prior to the expiration of our offer.
Our offer and your withdrawal rights will expire at 5:00 p.m., New York City
time, on August 27, 1999, unless we extend the deadline.
YOU WILL NOT PAY ANY FEES OR COMMISSIONS IF YOU TENDER YOUR UNITS.
Our offer is subject to a minimum of 35% of the units being tendered.
SEE "RISK FACTORS" BEGINNING ON PAGE 1 OF THIS OFFER TO PURCHASE FOR A
DESCRIPTION OF RISK FACTORS THAT YOU SHOULD CONSIDER IN CONNECTION WITH OUR
OFFER, INCLUDING THE FOLLOWING:
o We determined the offer price of $2,899.00 per unit without any
arms-length negotiations. Accordingly, our offer price may not reflect
the fair market value of your units.
o While secondary sales activity in the units of your partnership has
been limited to and sporadic, sales prices for units in your
partnership ranged from $700 to $8,100 since July 1, 1997.
o As of June 30, 1998, your general partner (which is our subsidiary)
estimated the net asset value of your units to be $11,182 per unit and
an affiliate estimated the net liquidation value of your units to be
$10,924.92 per unit.
o Although your partnership's agreement of limited partnership provides
for termination in the year 2008, the prospectus pursuant to which the
units were sold in October 1984 indicated that the properties owned by
your partnership might be sold within 3 to 7 years of their acquisition
if conditions permitted.
o Your general partner and the property manager of the residential
properties are subsidiaries of ours and, therefore, the general partner
has substantial conflicts of interest with respect to our offer.
o We are making this offer with a view to making a profit and,
therefore, there is a conflict between our desire to purchase your units
at a low price and your desire to sell your units at a high price.
o Continuation of your partnership will result in our affiliates
continuing to receive management fees from your partnership. Such fees
would not be payable if your partnership was liquidated.
o It is possible that we may conduct a subsequent offer at a higher
price.
o For any units that we acquire from you, you will not receive any
future distributions from operating cash flow of your partnership or
upon a sale or refinancing of properties owned by your partnership.
<PAGE> 2
o If we acquire a substantial number of units, we will increase our
ability to influence voting decisions with respect to your partnership
and may control such voting decisions, including but not limited to the
removal of the general partner, most amendments to the partnership
agreement and the sale of all or substantially all of your
partnership's assets.
If you desire to accept our offer, you should complete and sign the letter
of transmittal in accordance with the instructions thereto and mail or deliver
the signed letter of transmittal and any other required documents to River Oaks
Partnership Services, Inc., which is acting as Information Agent in connection
with our offer, at one of its addresses set forth on the back cover of this
offer to purchase. QUESTIONS AND REQUESTS FOR ASSISTANCE OR FOR ADDITIONAL
COPIES OF THIS OFFER TO PURCHASE OR THE LETTER OF TRANSMITTAL MAY ALSO BE
DIRECTED TO THE INFORMATION AGENT AT (888) 349-2005.
July 30, 1999
2
<PAGE> 3
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
INTRODUCTION 4
RISK FACTORS 4
No Third Party Valuation or Appraisal; No Arms-Length
Negotiation 4
No Fairness Opinion From a Third Party 4
Offer Price May Not Represent Fair Market Value 4
Offer Price Does Not Reflect Future Prospects 5
Offer Price Based on Our Estimate of Liquidation
Proceeds 5
Offer Price May Not Represent Liquidation Value 5
Continuation of the Partnership; No Time Frame Regarding
Sale of Properties 5
Holding Units May Result in Greater Future Value 5
Conflicts of Interest With Respect to the Offer 5
No General Partner Recommendation 5
Conflicts of Interest Relating to Management Fees 7
Possible Subsequent Offer at a Higher Price 7
Recognition of Taxable Gain on a Sale of Your Units 7
Loss of Future Distributions from Your Partnership 7
Possible Increase in Control of Your Partnership by Us 7
Recognition of Gain Resulting from Possible Future
Reduction in Your Partnership Liabilities 7
Risk of Inability to Transfer Units for 12-Month Period 8
Potential Delay in Payment 8
Balloon Payment 8
THE OFFER 9
Section 1. Terms of the Offer; Expiration Date;
Proration 9
Section 2. Acceptance for Payment and Payment for Units 9
Section 3. Procedure for Tendering Units 11
Section 4. Withdrawal Rights 13
Section 5. Extension of Tender Period; Termination;
Amendment 13
Section 6. Certain Federal Income Tax Matters 14
Section 7. Effects of the Offer 16
Section 8. Information Concerning Us and Certain of Our
Affiliates 18
Section 9. Background and Reasons for the Offer 19
Section 10. Position of the General Partner of Your
Partnership With Respect to the Offer 26
Section 11. Conflicts of Interest and Transactions with
Affiliates 27
Section 12. Future Plans of the Purchaser 28
Section 13. Certain Information Concerning Your
Partnership 28
Section 14. Voting Power 36
Section 15. Source of Funds 36
Section 16. Dissenters' Rights 36
Section 17. Conditions of the Offer 36
Section 18. Certain Legal Matters 38
Section 19. Fees and Expenses 40
ANNEX I -- OFFICERS AND DIRECTORS I-1
</TABLE>
i
<PAGE> 4
INTRODUCTION
We are offering to purchase up to 479.03 units, representing approximately
39.13% of the outstanding units of limited partnership interest in your
partnership, for the purchase price of $2,899.00 per unit, net to the seller in
cash, without interest, less the amount of distributions, if any, made by your
partnership in respect of any unit from the date hereof until the expiration
date. Our offer is made upon the terms and subject to the conditions set forth
in this offer to purchase and in the accompanying letter of transmittal.
If you tender your units in response to our offer you will not be obligated
to pay any commissions or partnership transfer fees but will be obligated to
pay any transfer taxes (see Instruction 8 to the letter of transmittal). We
have retained River Oaks Partnership Services, Inc. to act as the Information
Agent in connection with our offer. We will pay all charges and expenses in
connection with the services of the Information Agent. The offer is conditioned
on a minimum of 35% of the units being tendered. However, certain other
conditions do apply. See "The Offer -- Section 17." You may tender all or any
portion of the units that you own. Under no circumstances will we be required
to accept any unit if the transfer of that unit to us would be prohibited by
the agreement of limited partnership of your partnership.
Our offer will expire at 5:00 p.m., New York City time, on August 27, 1999,
unless extended. If you desire to accept our offer, you must complete and sign
the letter of transmittal in accordance with the instructions contained therein
and forward or hand deliver it, together with any other required documents, to
the Information Agent. You may withdraw your tender of units pursuant to the
offer at any time prior to the expiration date of our offer and, if we have not
accepted such units for payment, on or after September 30, 1999.
We are AIMCO Properties, L.P., a Delaware limited partnership. Together
with our subsidiaries, we conduct substantially all of the operations of
Apartment Investment and Management Company, or AIMCO. AIMCO is a
self-administered and self-managed real estate investment trust engaged in the
ownership, acquisition, development, expansion and management of multifamily
apartment properties. As of March 31, 1999, AIMCO owned or managed 373,409
apartment units in 2,071 properties located in 49 states, the District of
Columbia and Puerto Rico. AIMCO's Class A Common Stock is listed and traded on
the New York Stock Exchange under the symbol "AIV."
As a result of our October 1, 1998 merger with Insignia Financial Group,
Inc. and our February 26, 1999 merger with Insignia Properties Trust, we
acquired a 100% ownership interest in the general partner of your partnership
and the company that manages the residential properties owned by your
partnership.
RISK FACTORS
Before deciding whether or not to tender any of your units, you should
consider carefully the following risks and disadvantages of the offer:
NO THIRD PARTY VALUATION OR APPRAISAL; NO ARMS-LENGTH NEGOTIATION
We did not base our valuation of the properties owned by your partnership
on any third-party appraisal or valuation. We established the terms of our
offer without any arms-length negotiation. The terms of the offer could differ
if they were subject to independent third party negotiations. It is uncertain
whether our offer price reflects the value which would be realized upon a sale
of your units to a third party.
NO FAIRNESS OPINION FROM A THIRD PARTY
We did not obtain an opinion from a third party that our offer price is
fair from a financial point of view.
OFFER PRICE MAY NOT REPRESENT FAIR MARKET VALUE
There is no established or regular trading market for your units, nor is
there another reliable standard for determining the fair market value of the
units. Our offer price does not necessarily reflect the price that you would
receive in an open market for your
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units. Such prices could be higher than our offer price.
OFFER PRICE DOES NOT REFLECT FUTURE PROSPECTS
Except for the four residential properties, our offer price is based on
your partnership's historical property income. It does not ascribe any value to
potential future improvements in the operating performance of your
partnership's residential properties. The value of the commercial properties is
based on offers for such properties.
OFFER PRICE BASED ON OUR ESTIMATE OF LIQUIDATION PROCEEDS
The offer price represents only our estimate of the amount you would
receive if we liquidated the partnership. In determining the liquidation value,
we used the direct capitalization method to estimate the value of your
partnership's residential properties because we think a prospective purchaser
of the properties would value the properties using this method. In doing so, we
applied a capitalization rate to your partnership's property income for the
year ended December 31, 1998. If property income for a different period or a
different capitalization rate was used, a higher valuation could result. Other
methods of valuing your units could also result in a higher valuation.
OFFER PRICE MAY NOT REPRESENT LIQUIDATION VALUE
The actual proceeds obtained from a liquidation are highly uncertain and
could be more than our estimate. Accordingly, our offer price could be less
than the net proceeds that you would realize upon an actual liquidation of your
partnership.
CONTINUATION OF THE PARTNERSHIP; NO TIME FRAME REGARDING SALE OF PROPERTIES
Your general partner (which is our subsidiary) is proposing to continue to
operate your partnership and not to attempt to liquidate it at the present
time. Thus, our offer does not satisfy any expectation that you would receive
the return of your investment in the partnership through a sale of any
property. Your partnership currently holds one commercial property, which is
currently being marketed for sale. While offers have been received for the
purchase of such properties, it is unknown whether or not such properties will
be sold or for what price. The general partner of your partnership believes
that the market for the sale of commercial properties is favorable at this
time. However, It is not known when the residential properties owned by your
partnership may be sold. There may be no way to liquidate your investment in
the partnership in the future until the residential properties are sold and the
partnership is liquidated. The general partner of your partnership continually
considers whether a property should be sold or otherwise disposed of after
consideration of relevant factors, including prevailing economic conditions,
availability of favorable financing and tax considerations, with a view to
achieving maximum capital appreciation for your partnership. At the current
time the general partner of your partnership believes that a sale of the
residential properties would not be advantageous given market conditions, the
condition of the properties and tax considerations. In particular, the general
partner considered the changes in the local rental market, the potential for
appreciation in the value of the properties and the tax consequences to you and
your partners on a sale of the properties. We cannot predict when any property
will be sold or otherwise disposed of.
HOLDING UNITS MAY RESULT IN GREATER FUTURE VALUE
You might receive more value if you retain your units until your
partnership is liquidated.
CONFLICTS OF INTEREST WITH RESPECT TO THE OFFER
The general partner of your partnership is our subsidiary and, therefore,
has substantial conflicts of interest with respect to our offer. We are making
this offer with a view to making a profit. There is a conflict between our
desire to purchase your units at a low price and your desire to sell your units
at a high price. We determined our offer price without negotiation with any
other party, including any general or limited partner.
NO GENERAL PARTNER RECOMMENDATION
The general partner of your partnership makes no recommendation as to
whether you should tender or refrain from tendering
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your units. Although the general partner believes the offer is fair, you must
make your own decision whether or not to participate in the offer, based upon a
number of factors, including your financial position, your need or desire for
liquidity, other financial opportunities available to you, and your tax
position and the tax consequences to you of selling your units.
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CONFLICTS OF INTEREST RELATING TO MANAGEMENT FEES
Since our subsidiaries receive fees for managing your partnership and its
residential properties, a conflict of interest exists between our continuing
the partnership and receiving such fees, and the liquidation of the partnership
and the termination of such fees. Another conflict is the fact that a decision
of the limited partners of your partnership to remove, for any reason, the
general partner of your partnership or the property manager of any residential
property owned by your partnership would result in a decrease or elimination of
the substantial fees paid to them for services provided to your partnership.
POSSIBLE SUBSEQUENT OFFER AT A HIGHER PRICE
It is possible that we may conduct a subsequent offer at a higher price.
Such a decision will depend on, among other things, the performance of the
partnership, prevailing economic conditions, and our interest in acquiring
additional limited partnership interests.
RECOGNITION OF TAXABLE GAIN ON A SALE OF YOUR UNITS
Your sale of units for cash will be a taxable sale, with the result that
you will recognize taxable gain or loss measured by the difference between the
amount realized on the sale and your adjusted tax basis in the units of limited
partnership interest of your partnership you transfer to us. The "amount
realized" with respect to a unit of limited partnership interest of your
partnership you transfer to us will be equal to the sum of the amount of cash
received by you for the unit sold pursuant to the offer plus the amount of
partnership liabilities allocable to the unit. The particular tax consequences
for you of our offer will depend upon a number of factors related to your tax
situation, including your tax basis in your units of limited partnership
interest of your partnership you transfer to us, whether you dispose of all of
your units and whether you have available suspended passive losses, credits or
other tax items to offset any gain recognized as a result of your sale of your
units of limited partnership interest of your partnership. Therefore, depending
on your basis in the units and your tax position, your taxable gain and any tax
liability resulting from a sale of units to us pursuant to the offer could
exceed our offer price. Because the income tax consequences of tendering units
will not be the same for everyone, you should consult your own tax advisor to
determine the tax consequences of the offer to you.
LOSS OF FUTURE DISTRIBUTIONS FROM YOUR PARTNERSHIP
If you tender your units in response to our offer, you will transfer to us
all right, title and interest in and to all of the units we accept, and the
right to receive all distributions in respect of such units on and after the
date on which we accept such units for purchase. Accordingly, for any units
that we acquire from you, you will not receive any future distributions from
operating cash flow of your partnership or upon a sale or refinancing of
properties owned by your partnership.
POSSIBLE INCREASE IN CONTROL OF YOUR PARTNERSHIP BY US
Decisions with respect to the day-to-day management of your partnership are
the responsibility of the general partner. Because the general partner of your
partnership is our affiliate, we control the management of your partnership.
Under your partnership's agreement of limited partnership, limited partners
holding a majority of the outstanding units must approve certain extraordinary
transactions, including the removal of the general partner, the addition of a
new general partner, most amendments to the partnership agreement and the sale
of all or substantially all of your partnership's assets. If we acquire all the
units we are tendering for we will own a majority of the outstanding units and
will have the ability to control any vote of the limited partners.
RECOGNITION OF GAIN RESULTING FROM POSSIBLE FUTURE REDUCTION IN YOUR
PARTNERSHIP LIABILITIES
Generally, a decrease in your share of partnership liabilities is treated,
for Federal income tax purposes, as a deemed cash distribution. Although no
general partner of your partnership has any current plan or intention to reduce
the liabilities of your partnership, it is possible that future economic,
market, legal, tax or other considerations may cause a general partner to
reduce the liabilities of your partnership. If you retain all or a portion of
your units of limited partnership interest, and the liabilities of your
partnership were to be reduced, you will be treated as receiving a hypothetical
distribution of cash resulting from a decrease in your share of the liabilities
of the partnership. Any such hypothetical distribution of cash would be treated
as a nontaxable return of capital to the extent of your adjusted tax basis in
your units and thereafter as gain.
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RISK OF INABILITY TO TRANSFER UNITS FOR 12-MONTH PERIOD
Your partnership's agreement of limited partnership prohibits any transfer
of an interest if such transfer, together with all other transfers during the
preceding 12 months, would cause 50% or more of the total interest in capital
and profits of your partnership to be transferred within such 12-month period.
If we acquire a significant percentage of the interest in your partnership, you
may not be able to transfer your units for a 12-month period following our
offer.
POTENTIAL DELAY IN PAYMENT
We reserve the right to extend the period of time during which our offer is
open and thereby delay acceptance for payment of any tendered units. The offer
may be extended indefinitely and no payment will be made in respect of rendered
units until the expiration of the offer and acceptance of units for payment.
BALLOON PAYMENT
Your partnership has approximately $22,122,000 of balloon payments due on
its mortgage debt between January 2000 and December 2009. Your partnership will
have to refinance such debt or sell its properties prior to the balloon payment
dates, or it will be in default and could lose the properties to foreclosure.
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THE OFFER
SECTION 1. TERMS OF THE OFFER; EXPIRATION DATE; PRORATION.
Upon the terms and subject to the conditions of the offer, we will accept
(and thereby purchase) up to 479.03 units that are validly tendered on or prior
to the expiration date and not withdrawn in accordance with the procedures set
forth in "The Offer -- Section 4." For purposes of the offer, the term
"expiration date" shall mean 5:00 p.m., New York City time, on August 27, 1999,
unless we in our sole discretion shall have extended the period of time for
which the offer is open, in which event the term "expiration date" shall mean
the latest time and date on which the offer, as extended by us, shall expire.
See "The Offer -- Section 5" for a description of our right to extend the
period of time during which the offer is open and to amend or terminate the
offer.
The purchase price per unit will automatically be reduced by the aggregate
amount of distributions per unit, if any, made by your partnership to you on or
after the commencement of our offer and prior to the date on which we acquire
your units pursuant to our offer.
If, prior to the expiration date, we increase the consideration offered to
limited partners pursuant to the offer, the increased consideration will be
paid for all units accepted for payment pursuant to the offer, whether or not
the units were tendered prior to the increase in consideration.
If more than 479.03 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, we will, upon the terms and subject to the
conditions of the offer, accept for payment and pay for an aggregate of 479.03
f 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 purchases of fractional
units. If the number of units validly tendered and not properly withdrawn on or
prior to the expiration date is less than or equal to 479.03 units, we 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, subject to our 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 termination or withdrawal of the offer, we
do not intend to pay for any units accepted for payment pursuant to the offer
until the final proration results are known. Notwithstanding any such delay in
payment, no interest will be paid on the cash offer price.
The offer is conditioned on satisfaction of certain conditions. THE OFFER
IS CONDITIONED UPON A MINIMUM OF 35% OF THE UNITS BEING TENDERED. See "The
Offer -- Section 17," which sets forth in full the conditions of the offer. We
reserve the right (but in no event shall we be obligated), in our reasonable
discretion, to waive any or all of those conditions. If, on or prior to the
expiration date, any or all of the conditions have not been satisfied or
waived, we reserve the right to (i) decline to purchase any of the units
tendered, terminate the offer and return all tendered units to tendering
limited partners, (ii) waive all the unsatisfied conditions and purchase all
units validly tendered, (iii) extend the offer and, subject to the withdrawal
rights of limited partners, retain the units that have been tendered during the
period or periods for which the offer is extended, or (iv) amend the offer. The
transfer of units will be effective May 1, 1999.
This offer is being mailed to the persons shown by your partnership's
records to have been limited partners or, in the case of units owned of record
by Individual Retirement Accounts and qualified plans, beneficial owners of
units, as of July 30, 1999.
SECTION 2. ACCEPTANCE FOR PAYMENT AND PAYMENT FOR UNITS.
Upon the terms and subject to the conditions of the offer, we will
purchase, by accepting for payment, and will pay for, up to 479.03 units
validly tendered as promptly as practicable following the expiration date. A
tendering beneficial owner of units whose units are owned of record by an
Individual Retirement Account or other qualified plan will not receive direct
payment of the offer price; rather, payment will be made to the custodian of
such account or plan. In all cases, payment for units purchased pursuant to the
offer will be made only after timely receipt by the Information Agent of a
properly completed and duly executed letter of transmittal and other documents
required by the letter of transmittal. See "The Offer -- Section 3." UNDER NO
CIRCUMSTANCES WILL INTEREST BE PAID ON THE OFFER PRICE BY REASON OF ANY DELAY
IN MAKING
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SUCH PAYMENT.
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We will, upon the terms and subject to the conditions of the offer, accept
for payment and pay for up to 479.03 units, with appropriate adjustments to
avoid purchases that would violate the agreement of limited partnership of your
partnership and any relevant procedures or regulations promulgated by the
general partner. Accordingly, in some circumstances, we may accept an
assignment of your right to receive distributions and other payments in respect
of the units and defer, perhaps indefinitely, the transfer of ownership of
units on the partnership books.
For purposes of the offer, we will be deemed to have accepted for payment
pursuant to the offer, and thereby purchased, validly tendered units, if, as
and when we give verbal or written notice to the Information Agent of our
acceptance of those units for payment pursuant to the offer. Payment for units
accepted for payment pursuant to the offer will be made through the Information
Agent, which will act as agent for tendering limited partners for the purpose
of receiving cash payments from us and transmitting cash payments to tendering
limited partners.
If any tendered units are not accepted for payment by us for any reason,
the letter of transmittal with respect to such units not purchased may be
destroyed by us or the Information Agent. If, for any reason, acceptance for
payment of, or payment for, any units tendered pursuant to the offer is delayed
or we are unable to accept for payment, purchase or pay for units tendered
pursuant to the offer, then, without prejudice to our rights under "The Offer
- -- Section 17," the Information Agent may, nevertheless, on our behalf 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 "The Offer -- Section 4;" subject, however, to our obligation under Rule
14e-1(c) under the Exchange Act, to pay you the offer price in respect of units
tendered or return those units promptly after termination or withdrawal of the
offer.
We reserve the right to transfer or assign, in whole or in part, to one or
more of our affiliates, the right to purchase units tendered pursuant to the
offer, but no such transfer or assignment will relieve us of our obligations
under the offer or prejudice your rights to receive payment for units validly
tendered and accepted for payment pursuant to the offer.
SECTION 3. PROCEDURE FOR TENDERING UNITS.
Valid Tender. To validly tender units pursuant to the offer, a properly
completed and duly executed letter of transmittal and any other documents
required by such letter of transmittal must be received by the Information
Agent, at one of its addresses set forth on the back cover of this offer to
purchase, on or prior to the expiration date. You may tender all or any portion
of your units. No alternative, conditional or contingent tenders will be
accepted.
Signature Requirements. If the letter of transmittal is signed by the
registered holder of a unit and payment is to be made directly to that holder,
then no signature guarantee is required on the letter of transmittal.
Similarly, if a unit is tendered for the account of a member firm of a
registered national securities exchange, a member of the National Association
of Securities Dealers, Inc. or a commercial bank, savings bank, credit union,
savings and loan association or trust company having an office, branch or
agency in the United States (each an "Eligible Institution"), no signature
guarantee is required on the letter of transmittal. However, in all other
cases, all signatures on the letter of transmittal must be guaranteed by an
Eligible Institution.
In order for you to tender in the offer, your units must be validly
tendered and not withdrawn on or prior to the expiration date.
THE METHOD OF DELIVERY OF THE LETTER OF TRANSMITTAL AND ALL OTHER REQUIRED
DOCUMENTS IS AT YOUR OPTION AND RISK AND DELIVERY WILL BE DEEMED MADE ONLY WHEN
ACTUALLY RECEIVED BY THE INFORMATION AGENT. IF DELIVERY IS BY MAIL, REGISTERED
MAIL WITH RETURN RECEIPT REQUESTED IS RECOMMENDED. IN ALL CASES, SUFFICIENT
TIME SHOULD BE ALLOWED TO ASSURE TIMELY DELIVERY.
Appointment as Proxy; Power of Attorney. By executing the letter of
transmittal, you are irrevocably appointing us and our designees as your proxy,
in the manner set forth in the letter of transmittal, each with full power of
substitution, to the fullest extent of the your rights with respect to the
units tendered by you and accepted for payment by us. Each such proxy shall be
considered coupled with an interest in the tendered units. Such appointment
will be effective when, and only to the extent that, we accept the tendered
unit for payment. Upon such acceptance for payment, all prior proxies given by
you with respect to the units will, without further action, be revoked, and no
subsequent proxies may be given (and if given will not be effective). We and
our designees will, as to those units, be empowered to exercise all voting and
other rights as a limited partner as we, in our sole discretion, may deem
proper at any meeting of limited partners, by written consent or otherwise. We
reserve the right to require that, in order for units to be deemed validly
tendered, immediately upon our acceptance for payment for the units, we must be
able to exercise full voting
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rights with respect to the units, including voting at any meeting of limited
partners then scheduled or acting by written consent without a meeting. By
executing the letter of transmittal, you agree to execute all such documents
and take such other actions as shall be reasonably required to enable the units
tendered to be voted in accordance with our directions. The proxy and power of
attorney granted by you to us upon your execution of the letter of transmittal
will remain effective and be irrevocable for a period of ten years following
the termination of our offer.
By executing the letter of transmittal, you also irrevocably constitute and
appoint us and our managers and designees as your attorneys-in-fact, each with
full power of substitution, to the full extent of your rights with respect to
the units tendered by you and accepted for payment by us. Such appointment will
be effective when, and only to the extent that, we pay for your units. You
agree not to exercise any rights pertaining to the tendered units without our
prior consent. Upon such payment, all prior powers of attorney granted by you
with respect to such units will, without further action, be revoked, and no
subsequent powers of attorney may be granted (and if granted will not be
effective). Pursuant to such appointment as attorneys-in-fact, we and our
managers and designees each will have the power, among other things, (i) to
transfer ownership of such units on the partnership books maintained by your
general partner (and execute and deliver any accompanying evidences of transfer
and authenticity it may deem necessary or appropriate in connection therewith),
(ii) upon receipt by the Information Agent of the offer consideration, to
become a substituted limited partner, to receive any and all distributions made
by your partnership on or after the date on which we acquire such units, and to
receive all benefits and otherwise exercise all rights of beneficial ownership
of such units in accordance with the terms of our offer, (iii) to execute and
deliver to the general partner of your partnership a change of address form
instructing the general partner to send any and all future distributions to
which we are entitled pursuant to the terms of the offer in respect of tendered
units to the address specified in such form, and (iv) to endorse any check
payable to you or upon your order representing a distribution to which we are
entitled pursuant to the terms of our offer, in each case, in your name and on
your behalf.
Assignment of Interest in Future Distributions. By executing the letter of
transmittal, you will irrevocably assign to us and our assigns all of your
right, title and interest in and to any and all distributions made by your
partnership from any source and of any nature, including, without limitation,
distributions in the ordinary course, distributions from sales of assets,
distributions upon liquidation, winding-up, or dissolution, payments in
settlement of existing or future litigation, and all other distributions and
payments from and after the expiration date of our offer, in respect of the
units tendered by you and accepted for payment and thereby purchased by us. If,
after the unit is accepted for payment and purchased by us, you receive any
distribution from any source and of any nature, including, without limitation,
distributions in the ordinary course, distributions from sales of assets,
distributions upon liquidation, winding-up or dissolution, payments in
settlement of existing or future litigation and all other distributions and
payments, from your partnership in respect of such unit, you will agree to
forward promptly such distribution to us.
Determination of Validity; Rejection of Units; Waiver of Defects; No
Obligation to Give Notice of Defects. All questions as to the validity, form,
eligibility (including time of receipt) and acceptance for payment of any
tender of units pursuant to our offer will be determined by us, in our
reasonable discretion, which determination shall be final and binding on all
parties. We reserve the absolute right to reject any or all tenders of any
particular unit determined by us not to be in proper form or if the acceptance
of or payment for that unit may, in the opinion of our counsel, be unlawful. We
also reserve the absolute right to waive or amend any of the conditions of the
offer that we are legally permitted to waive as to the tender of any particular
unit and to waive any defect or irregularity in any tender with respect to any
particular unit of any particular limited partner. Our interpretation of the
terms and conditions of the offer (including the letter of transmittal) will be
final and binding on all parties. No tender of units will be deemed to have
been validly made unless and until all defects and irregularities have been
cured or waived. Neither us, the Information Agent, nor any other person will
be under any duty to give notification of any defects or irregularities in the
tender of any unit or will incur any liability for failure to give any such
notification.
Backup Federal Income Tax Withholding. To prevent the possible application
of back-up Federal income tax withholding of 31% with respect to payment of the
offer price, you may have to provide us with your correct taxpayer
identification number. See the instructions to the letter of transmittal and
"The Offer -- Section 6."
FIRPTA Withholding. To prevent the withholding of Federal income tax in an
amount equal to 10% of the amount realized on the disposition (the amount
realized is generally the offer price plus the partnership liabilities
allocable to each unit purchased), you must certify that you are not a foreign
person if you tender units. See the instructions to the letter of transmittal
and "The Offer -- Section 6."
Transfer Taxes. The amount of any transfer taxes (whether imposed on the
registered holder of units or any person) payable on
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account of the transfer to such person will be deducted from the purchase price
unless satisfactory evidence of the payment of such taxes or exemption
therefrom is submitted.
Binding Agreement. A tender of a unit pursuant to any of the procedures
described above and the acceptance for payment of such unit will constitute a
binding agreement between the tendering unitholder and us on the terms set
forth in this offer to purchase and the related letter of transmittal.
SECTION 4. WITHDRAWAL RIGHTS.
You may withdraw tendered units at any time prior to the expiration date or
on or after September30, 1999, if the units have not been previously accepted
for payment.
For a withdrawal to be effective, a written notice of withdrawal must be
timely received by the Information Agent at one of its addresses set forth on
the back cover of the offer to purchase. Any such notice of withdrawal must
specify the name of the person who tendered, the number of units to be
withdrawn and the name of the registered holder of such units, if different
from the person who tendered. In addition, the notice of withdrawal must be
signed by the person who signed the letter of transmittal in the same manner as
the letter of transmittal was signed.
If purchase of, or payment for, a unit is delayed for any reason, or if we
are unable to purchase or pay for a unit for any reason, then, without
prejudice to our rights under the offer, tendered units may be retained by the
Information Agent; subject, however, to our obligation, pursuant to Rule
14e-1(c) under the Exchange Act, to pay the offer price in respect of units
tendered or return those units promptly after termination or withdrawal of our
offer.
Any units properly withdrawn will thereafter be deemed not to have been
validly tendered for purposes of our offer. However, withdrawn units may be
re-tendered at any time prior to the expiration date by following the
procedures described in "The Offer -- Section 3."
All questions as to the validity and form (including time of receipt) of
notices of withdrawal will be determined by us in our reasonable discretion,
which determination shall be final and binding on all parties. Neither we, the
Information Agent, nor any other person will be under any duty to give
notification of any defects or irregularities in any notice of withdrawal or
incur any liability for failure to give any such notification.
SECTION 5. EXTENSION OF TENDER PERIOD; TERMINATION; AMENDMENT.
We expressly reserve the right, in our reasonable discretion, at any time
and from time to time, (i) to extend the period of time during which our offer
is open and thereby delay acceptance for payment of, and payment for, any unit,
(ii) to terminate the offer and not accept any units not theretofore accepted
for payment or paid for if any of the conditions to the offer are not satisfied
or if any event occurs that might reasonably be expected to result in a failure
to satisfy such conditions, (iii) upon the occurrence of any of the conditions
specified in "The Offer -- Section 17," to delay the acceptance for payment of,
or payment for, any units not already accepted for payment or paid for, and
(iv) to amend our offer in any respect (including, without limitation, by
increasing the consideration offered, increasing or decreasing the units being
sought, or both). Notice of any such extension, termination or amendment will
promptly be disseminated to you in a manner reasonably designed to inform you
of such change. In the case of an extension of the offer, the extension will be
followed by a press release or public announcement which will be issued no
later than 9:00 a.m., New York City time, on the next business day after the
scheduled expiration date of our offer, in accordance with Rule 14e-1(d) under
the Exchange Act.
If we extend the offer, or if we delay payment for a unit (whether before
or after its acceptance for payment) or are unable to pay for a unit pursuant
to our offer for any reason, then, without prejudice to our rights under the
offer, the Information Agent may retain tendered units and those units may not
be withdrawn except to the extent tendering unitholders are entitled to
withdrawal rights as described in "The Offer -- Section 4;" subject, however,
to our obligation, pursuant to Rule 14e-1(c) under the Exchange Act, to pay the
offer price in respect of units tendered or return those units promptly after
termination or withdrawal of the offer.
If we make a material change in the terms of our offer, or if we waive a
material condition to our offer, we will extend the offer and disseminate
additional tender offer materials to the extent required by Rule 14e-1 under
the Exchange Act. The minimum period
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during which the offer must remain open following any material change in the
terms of the offer, other than a change in price or a change in percentage of
securities sought or a change in any dealer's soliciting fee, if any, will
depend upon the facts and circumstances, including the materiality of the
change. With respect to a change in price or, subject to certain limitations, a
change in the percentage of securities sought or a change in any dealer's
soliciting fee, if any, a minimum of ten business days from the date of such
change is generally required to allow for adequate dissemination to
unitholders. Accordingly, if prior to the expiration date, we increase (other
than increases of not more than two percent of the outstanding units) or
decrease the number of units being sought, or increase or decrease the offer
price, and if the offer is scheduled to expire at any time earlier than the
tenth business day after the date that notice of such increase or decrease is
first published, sent or given to unitholders, the offer will be extended at
least until the expiration of such ten business days. As used in the offer to
purchase, "business day" means any day other than a Saturday, Sunday or a
Federal holiday, and consists of the time period from 12:01 a.m. through 12:00
midnight, New York City time.
SECTION 6. CERTAIN FEDERAL INCOME TAX MATTERS.
The following summary is a general discussion of certain of the United
States federal income tax consequences of the offer that may be relevant to (i)
unitholders who tender some or all of their units for cash pursuant to our
offer, and (ii) unitholders who do not tender any of their units pursuant to
our offer. This discussion is based on the Internal Revenue Code of 1986, as
amended (the "Internal Revenue Code"), Treasury regulations, rulings issued by
the Internal Revenue Service (the "IRS"), and judicial decisions, all as of the
date of this offer to purchase. All of the foregoing are subject to change or
alternative construction, possibly with retroactive effect, and any such change
or alternative construction could affect the continuing accuracy of this
summary. This summary is based on the assumption that your partnership is
operated in accordance with its organizational documents including its
certificate of limited partnership and agreement of limited partnership. This
summary is for general information only and does not purport to discuss all
aspects of United States federal income taxation which may be important to a
particular person in light of its investment or tax circumstances, or to
certain types of investors subject to special tax rules (including financial
institutions, broker-dealers, insurance companies, and, except to the extent
discussed below, tax-exempt organizations and foreign investors, as determined
for United States federal income tax purposes), nor (except as otherwise
expressly indicated) does it describe any aspect of state, local, foreign or
other tax laws. This summary assumes that the units constitute capital assets
in the hands of the unitholders (generally, property held for investment). No
advance ruling has been or will be sought from the IRS regarding any matter
discussed in this offer to purchase. Further, no opinion of counsel has been
obtained with regard to the offer.
THE UNITED STATES FEDERAL INCOME TAX TREATMENT OF A UNITHOLDER
PARTICIPATING IN THE OFFER DEPENDS IN SOME INSTANCES ON DETERMINATIONS OF FACT
AND INTERPRETATIONS OF COMPLEX PROVISIONS OF UNITED STATES FEDERAL INCOME TAX
LAW FOR WHICH NO CLEAR PRECEDENT OR AUTHORITY MAY BE AVAILABLE. ACCORDINGLY,
YOU SHOULD CONSULT YOUR TAX ADVISOR REGARDING THE UNITED STATES FEDERAL, STATE,
LOCAL AND FOREIGN TAX CONSEQUENCES OF SELLING THE LIMITED PARTNERSHIP INTERESTS
IN YOUR PARTNERSHIP REPRESENTED BY UNITS PURSUANT TO OUR OFFER OR OF A DECISION
NOT TO SELL IN LIGHT OF YOUR SPECIFIC TAX SITUATION.
Tax Consequences to Limited Partners Tendering Units for Cash. You will
recognize gain or loss on a sale of a unit of limited partnership of your
partnership equal to the difference between (i) your "amount realized" on the
sale and (ii) your adjusted tax basis in the unit sold. The "amount realized"
with respect to a unit of limited partnership of your partnership will be equal
to the sum of the amount of cash received by you for the unit sold pursuant to
the offer plus the amount of partnership liabilities allocable to the unit (as
determined under Section 752 of the Internal Revenue Code). Thus, your taxable
gain and tax liability resulting from a sale of a unit of limited partnership
of your partnership could exceed the cash received upon such sale.
Adjusted Tax Basis. If you acquired your units of limited partnership of
your partnership for cash, your initial tax basis in such units was generally
equal to your cash investment in your partnership increased by your share of
partnership liabilities at the time you acquired such units. Your initial tax
basis generally has been increased by (i) your share of partnership income and
gains, and (ii) any increases in your share of partnership liabilities, and has
been decreased (but not below zero) by (i) your share of partnership cash
distributions, (ii) any decreases in your share of partnership liabilities,
(iii) your share of partnership losses, and (iv) your share of nondeductible
partnership expenditures that are not chargeable to capital. For purposes of
determining your adjusted tax basis in units of limited partnership of your
partnership immediately prior to a disposition of your units, your adjusted tax
basis in your units will include your allocable share of partnership income,
gain or loss for the taxable year of disposition. If your adjusted tax basis is
less than your share of partnership liabilities (e.g., as a result of the
effect of net loss allocations and/or distributions exceeding the cost of your
unit), your gain recognized with respect to a unit of limited partnership of
your partnership pursuant to the offer will exceed the cash proceeds realized
upon the sale of such unit.
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Character of Gain or Loss Recognized Pursuant to the Offer. Except as
described below, the gain or loss recognized by you on a sale of a unit of
limited partnership of your partnership pursuant to the offer generally will be
treated as a long-term capital gain or loss if you held the unit for more than
one year. Long-term capital gains recognized by individuals and certain other
noncorporate taxpayers generally will be subject to a maximum United States
federal income tax rate of 20%. If the amount realized with respect to a unit
of limited partnership of your partnership that is attributable to your share
of "unrealized receivables" of your partnership exceeds the tax basis
attributable to those assets, such excess will be treated as ordinary income.
Among other things, "unrealized receivables" include depreciation recapture for
certain types of property. In addition, the maximum United States federal
income tax rate applicable to persons who are noncorporate taxpayers for net
capital gains attributable to the sale of depreciable real property (which may
be determined to include an interest in a partnership such as your units) held
for more than one year is currently 25% (rather than 20%) with respect to that
portion of the gain attributable to depreciation deductions previously taken on
the property.
If you tender a unit of limited partnership interest of your partnership in
the offer, you will be allocated a share of partnership taxable income or loss
for the year of tender with respect to any units sold. You will not receive any
future distributions on units of limited partnership interest of your
partnership tendered on or after the date on which such units are accepted for
purchase and, accordingly, you may not receive any distributions with respect
to such accreted income. Such allocation and any partnership cash distributions
to you for that year will affect your adjusted tax basis in your unit of
limited partnership interest of your partnership and, therefore, the amount of
your taxable gain or loss upon a sale of a unit pursuant to the offer.
Passive Activity Losses. The passive activity loss rules of the Internal
Revenue Code limit the use of losses derived from passive activities, which
generally include investments in limited partnership interests such as the
units of limited partnership interest of your partnership. An individual, as
well as certain other types of investors, generally cannot use losses from
passive activities to offset nonpassive activity income received during the
taxable year. Passive losses that are disallowed for a particular tax year are
"suspended" and may be carried forward to offset passive activity income earned
by the investor in future taxable years. In addition, such suspended losses may
be claimed as a deduction, subject to other applicable limitations, upon a
taxable disposition of the investor's interest in such activity.
Accordingly, if your investment in your units is treated as a passive
activity, you may be able to reduce gain from the sale of your units of limited
partnership interest of your partnership pursuant to the offer with passive
losses in the manner described below. If you sell all or a portion of your
units of limited partnership interest of your partnership pursuant to the offer
and recognize a gain on your sale, you will generally be entitled to use your
current and "suspended" passive activity losses (if any) from your partnership
and other passive sources to offset that gain. In general, if you sell all or a
portion of your units of limited partnership interest of your partnership
pursuant to the offer and recognize a loss on such sale, you will be entitled
to deduct that loss currently (subject to other applicable limitations) against
the sum of your passive activity income from your partnership for that year (if
any) plus any passive activity income from other sources for that year. If you
sell all of your units pursuant to the offer, the balance of any "suspended"
losses from your partnership that were not otherwise utilized against passive
activity income as described in the two preceding sentences will generally no
longer be suspended and will generally therefore be deductible (subject to any
other applicable limitations) by you against any other income for that year,
regardless of the character of that income. You are urged to consult your tax
advisor concerning whether, and the extent to which, you have available
"suspended" passive activity losses from your partnership or other investments
that may be used to reduce gain from the sale of units pursuant to the offer.
Information Reporting, Backup Withholding and FIRPTA. If you tender any
units, you must report the transaction by filing a statement with your United
States federal income tax return for the year of the tender which provides
certain required information to the IRS. To prevent the possible application of
back-up United States federal income tax withholding of 31% with respect to the
payment of the offer consideration, you are generally required to provide us
with your correct taxpayer identification number. See the instructions to the
letter of transmittal.
Gain realized by a foreign person on the sale of a unit pursuant to the
offer will be subject to United States federal income tax under the Foreign
Investment in Real Property Tax Act of 1980. Under these provisions of the
Internal Revenue Code, the transferee of an interest held by a foreign person
in a partnership which owns United States real property generally is required
to deduct and withhold 10% of the amount realized on the disposition. Amounts
withheld would be creditable against a foreign person's United States federal
income tax liability and, if in excess thereof, a refund could be claimed from
the Internal Revenue Service by filing a United States income tax return. See
the instructions to the letter of transmittal.
Tax Consequences to Non-Tendering and Partially-Tendering Limited Partners.
Section 708 of the Internal Revenue Code
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provides that if there is a sale or exchange of 50% or more of the total
interest in capital and profits of a partnership within any 12-month period,
such partnership terminates for United States federal income tax purposes. It
is possible that our acquisition of units pursuant to the offer alone or in
combinations with other transfers or interests in your partnership could result
in such a termination of your partnership. If your partnership is deemed to
terminate for tax purposes, the following United States federal income tax
events will be deemed to occur: the terminated partnership will be deemed to
have contributed all of its assets (subject to its liabilities) to a new
partnership in exchange for an interest in the new partnership and, immediately
thereafter, the old partnership will be deemed to have distributed interests in
the new partnership to the remaining limited partners in proportion to their
respective interests in the old partnership in liquidation of the old
partnership.
A remaining limited partner will generally not recognize any gain or loss
upon the deemed distribution or upon the deemed contribution and the capital
accounts of the remaining limited partners in the old partnership will carry
over intact into the new partnership. A termination may change (and possibly
shorten) a remaining partner's holding period with respect to its retained
units in your partnership for United States federal income tax purposes.
The new partnership's adjusted tax basis in its assets will be the same as
the old partnership's basis in such assets immediately before the termination.
A termination may also subject the assets of the new partnership to depreciable
lives in excess of those currently applicable to the old partnership. This
would generally decrease the annual average depreciation deductions allocable
to the remaining limited partners for a number of years following consummation
of the offer (thereby increasing the taxable income allocable to their units in
each such year), but would have no effect on the total depreciation deductions
available over the useful lives of the assets of your partnership.
Elections as to certain tax matters previously made by the old partnership
prior to termination will not be applicable to the new partnership unless the
new partnership chooses to make the same elections.
Additionally, upon a termination for tax purposes, the old partnership's
taxable year will close for all limited partners. In the case of a remaining
limited partner or a partially tendering limited partner reporting on a tax
year other than a calendar year, the closing of the partnership's taxable year
may result in more than 12 months' taxable income or loss of the old
partnership being includible in such limited partner's taxable income for the
year of termination.
SECTION 7. EFFECTS OF THE OFFER.
Future Control by AIMCO. Because the general partner of your partnership is
our subsidiary, we have control over the management of your partnership. If we
are successful in acquiring more than 37.95% of the units pursuant to the
offer, we will own in excess of 50% of the total outstanding units and, as a
result, will be able to control the outcome of all voting decisions with
respect to your partnership. Even if we acquire a lesser number of units
pursuant to the offer, however, because we currently own approximately 13.05%
of the outstanding limited partnership units, we will be able to significantly
influence the outcome of all voting decisions with respect to your partnership.
In general, we will vote the units owned by us in whatever manner we deem to be
in our best interests, which may not be in the interest of other limited
partners. This could (1) prevent non-tendering limited partners from taking
action they desire but that we oppose and (2) enable us to take action desired
by us but opposed by non-tendering limited partners. We also own the company
that manages the residential properties owned by your partnership. In the event
that we acquire a substantial number of units pursuant to the offer, removal of
a property manager may become more difficult or impossible.
Distributions to Us. If we acquire units in the offer, we will participate
in any subsequent distributions to limited partners to the extent of the units
purchased.
Partnership Status. We believe our purchase of units should not adversely
affect the issue of whether your partnership is classified as a partnership for
Federal income tax purposes.
Business. Our offer will not affect the operation of the properties owned
by your partnership. We will continue to control the general partner of your
partnership and the residential property manager, both of which will remain the
same. Consummation of the offer will not affect your agreement of limited
partnership, the operations of your partnership, the business and properties
owned by your partnership, the management compensation payable to your general
partner or any other matter relating to your partnership, except that it would
result in us increasing our ownership of units. We have no current intention of
changing the fee structure for your general partner or the manager of your
partnership's residential properties.
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Effect on Trading Market; Registration Under 12(g) of the Exchange Act. If
a substantial number of units are purchased pursuant to the offer, the result
will be a reduction in the number of limited partners in your partnership. In
the case of certain kinds of equity securities, a reduction in the number of
securityholders might be expected to result in a reduction in the liquidity and
volume of activity in the trading market for the security. In this case,
however, there is no established public trading market for the units and,
therefore, we do not believe a reduction in the number of limited partners will
materially further restrict your ability to find purchasers for your units
through secondary market transactions.
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The units are registered under Section 12(g) of the Exchange Act, which
means, among other things, that your partnership is required to file periodic
reports with the SEC and to comply with the SEC's proxy rules. We do not expect
or intend that consummation of the offer will cause the units to cease to be
registered under Section 12(g) of the Exchange Act. If the units were to be
held by fewer than 300 persons, your partnership could apply to de-register the
units under the Exchange Act. Because the units are widely-held, however, we
believe that, even if we purchase the maximum number of units in the offer, the
units will be held of record by more than 300 persons.
SECTION 8. INFORMATION CONCERNING US AND CERTAIN OF OUR AFFILIATES.
We are AIMCO Properties, L.P., a Delaware limited partnership. Together
with our subsidiaries, we conduct substantially all of the operations of
Apartment Investment and Management Company, a Maryland corporation ("AIMCO").
AIMCO is a real estate investment trust that owns and manages multifamily
apartment properties throughout the United States. Based on apartment unit data
compiled by the National Multi-Housing Council, we believe that, as of March
31, 1999, AIMCO was one of the largest owners and managers of multifamily
apartment properties in the United States, with a total portfolio of 373,409
apartment units in 2,071 properties located in 49 states, the District of
Columbia and Puerto Rico. AIMCO's Class A Common Stock is listed and traded on
the New York Stock Exchange under the symbol "AIV." As of March 31, 1999,
AIMCO:
o owned or controlled 63,069 units in 240 apartment properties;
o held an equity interest in 168,817 units in 891 apartment properties; and
o managed 141,523 units in 940 apartment properties for third party owners
and affiliates.
Our general partner is AIMCO-GP, Inc., which is a wholly owned subsidiary
of AIMCO. Our principal executive offices are located at 1873 South Bellaire
Street, Denver, Colorado 80222, and our telephone number is (303) 757-8101.
The names, positions and business addresses of the directors and executive
officers of AIMCO and your general partner (which is our subsidiary) as well as
a biographical summary of the experience of such persons for the past five
years or more, are set forth on Annex I attached hereto and are incorporated
herein by reference.
We and AIMCO are both subject to the information and reporting requirements
of the Exchange Act and, in accordance therewith, file reports and other
information with the Securities and Exchange Commission relating to our
business, financial condition and other matters. Such reports and other
information may be inspected at the public reference facilities maintained by
the SEC at Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549;
Citicorp Center, 500 West Madison Street, Chicago, Illinois 60661; and 7 World
Trade Center, 13th Floor, New York, New York 10048. Copies of such material can
also be obtained from the Public Reference Room of the SEC in Washington, D.C.
at prescribed rates. The SEC also maintains a site on the World Wide Web at
http://www.sec.gov that contains reports, proxy and information statements and
other information regarding registrants that file electronically with the SEC.
In addition, information filed by AIMCO with the New York Stock Exchange may be
inspected at the offices of the New York Stock Exchange at 20 Broad Street, New
York, New York 10005.
For more information regarding AIMCO Properties, L.P., please refer to the
Annual Report on Form 10-K for the year ended December 31, 1998, and the
Quarterly Report on Form 10-Q for the quarterly period ended March 31, 1999
(particularly the management's discussion and analysis of financial condition
and results of operations) and other reports and documents filed by it with the
SEC.
Except as described below in "The Offer -- Section 9" and "The Offer --
Section 11," neither we nor, to the best of our knowledge, any of the persons
listed on Annex I attached hereto, (i) beneficially own or have a right to
acquire any units, (ii) have effected any transaction in the units in the past
60 days, or (iii) have any contract, arrangement, understanding or relationship
with any other person with respect to any securities of your partnership,
including, but not limited to, contracts, arrangements, understandings or
relationships concerning transfer or voting thereof, joint ventures, loan or
option arrangements, puts or calls, guarantees of loans, guarantees against
loss or the giving or withholding of proxies (except for previous tender offers
we may have conducted for units).
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SECTION 9. BACKGROUND AND REASONS FOR THE OFFER.
General. We are in the business of acquiring direct and indirect interests
in apartment properties such as the properties owned by your partnership. Our
offer provides us with an opportunity to increase our ownership interest in
your partnership's properties while providing you and other investors with an
opportunity to liquidate your current investment.
On October 1, 1998, AIMCO merged (the "Insignia Merger") with Insignia
Financial Group, Inc. ("Insignia"). As a result of the Insignia Merger, AIMCO
acquired approximately 51% of the outstanding common shares of beneficial
interest of Insignia Properties Trust ("IPT"). The general partner of your
partnership is a wholly owned subsidiary of IPT. Through the Insignia Merger,
AIMCO also acquired a majority ownership interest in the entity that manages
the residential properties owned by your partnership. On October 31, 1998, IPT
and AIMCO entered into an agreement and plan of merger, dated as of October 1,
1998, pursuant to which IPT merged with AIMCO on February 26, 1999 (the "IPT
Merger"). Together with its subsidiaries, AIMCO currently owns, in the
aggregate, approximately 13.05% of the outstanding limited partnership units of
your partnership.
One of the reasons we chose to acquire Insignia is that we would be able to
make the tender offers to acquire limited partnership interests of some of the
limited partnerships formerly controlled or managed by Insignia (the "Insignia
Partnerships"). Such offers would provide liquidity for the limited partners of
the Insignia Partnerships, and would provide AIMCO Properties, L.P. with a
larger asset and capital base and increased diversification. As of the date of
this offering, AIMCO Properties, L.P. proposes to make offers to approximately
90 of the Insignia Partnerships, including your partnership.
During our negotiations with Insignia in early 1998, we decided that if the
merger with Insignia were consummated, we could also benefit from making offers
for limited partnership interests in the Insignia Partnerships. While some of
the Insignia Partnerships are public partnerships and information is publicly
available on such partnerships for weighing the benefits of making a tender
offer, many of the partnerships are private partnerships and information about
such partnerships comes principally from the general partner. Our control of
the general partner makes it possible to obtain access to such information.
Further, such control also means that we control the operations of the
partnerships and their properties. Insignia did not propose that we conduct
such tender offers, rather we initiated the offers on our own. We determined in
June of 1998 that if the merger with Insignia were consummated, we would offer
to limited partners of certain of the Insignia Partnerships limited partnership
units of AIMCO Properties, L.P. and/or cash.
Prior Tender Offers. Prior to the Insignia Merger, a number of tender
offers had been made to acquire units of your partnership. On December 15,
1998, Cooper River Properties L.L.C., then an affiliate of Insignia and now our
affiliate, commenced a tender offer pursuant to which it acquired 197.50 units
(representing approximately 16.13% of the number outstanding) at a cash
purchase price of $3,067 per unit.
We are aware that tender offers may have been made by unaffiliated third
parties to acquire units in your partnership in exchange for cash. We are
unaware of the amounts offered, terms, tendering parties or number of units
involved in these tender offers. In connection with tender offers made by
Insignia affiliates with respect to partnerships for which we are making
offers, some limited partners filed lawsuits. We are not aware of any merger,
consolidation or other combination involving any of the Insignia Partnerships,
or any acquisitions of any of such partnerships or a material amount of the
assets of such partnerships.
Certain Litigation. On March 24, 1998, certain persons claiming to own
limited partner interests in certain of the limited partnerships for which our
subsidiaries act as general partner (including your partnership) filed a
purported class and derivative action in California Superior Court in the
County of San Mateo against AIMCO, Insignia, the general partners of the
partnerships, certain persons and entities who purportedly formerly controlled
the general partners, and additional entities affiliated with and individuals
who are officers, directors and/or principals of several of the defendants. The
complaint contains allegations that, among other things, (i) the defendants
breached fiduciary duties owed to the plaintiffs, or aided and abetted in those
purported breaches, by selling or agreeing to sell their "fiduciary positions"
as stockholders, officers and directors of the general partners for a profit
and retaining said profit rather than distributing it to the plaintiffs; (ii)
the defendants breached fiduciary duties, or aided and abetted in those
purported breaches, by mismanaging the partnerships and misappropriating assets
of the partnerships by (a) manipulating the operations of the partnerships to
depress the trading price of limited partnership units of the partnerships; (b)
coercing and fraudulently inducing unitholders to sell units to certain of the
defendants at depressed prices; and (c) using the voting control obtained by
purchasing units at depressed prices to entrench certain of the defendants'
positions of control over the partnerships; and (iii) the defendants breached
their fiduciary duties to the plaintiffs by (a) selling assets of the
partnerships such as mailing lists
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of unitholders and (b) causing the general partners to enter into exclusive
arrangements with their affiliates to sell goods and services to the general
partners, the unitholders and tenants of properties owned by the partnerships.
The complaint also alleges that the foregoing allegations constitute violations
of various California securities, corporate and partnership statutes, as well
as conversion and common law fraud. The complaint seeks unspecified
compensatory and punitive damages, an injunction blocking the sale of control
of the general partners and a court order directing the defendants to discharge
their fiduciary duties to the plaintiffs. On June 25, 1998, the defendants
filed motions seeking dismissal of the action. In lieu of responding to the
motion, plaintiffs have filed an amended complaint. On October 14, 1998, the
AIMCO and Insignia defendants filed demurrers to the amended complaint. The
demurrers (which are requests to dismiss the action as a matter of law) were
heard on February 8, 1999, but no decision has been reached by the Court. While
no assurances can be given, we believe that the ultimate outcome of this
litigation will not have a material adverse effect on us.
Alternatives Considered by Your General Partner. Before we commenced this
offer, your general partner (which is our subsidiary) considered a number of
alternative transactions. The following is a brief discussion of the advantages
and disadvantages of the alternatives considered by your general partner.
Liquidation
One alternative would be for the partnership to sell its assets, distribute
the net liquidation proceeds to its partners in accordance with the agreement
of limited partnership, and thereafter dissolve. Partners would be at liberty
to use the net liquidation proceeds after taxes for investment, business,
personal or other purposes, at their option. If your partnership were to sell
its assets and liquidate, you and your partners would not need to rely upon
capitalization of income or other valuation methods to estimate the fair market
value of partnership assets. Instead, such assets would be valued through
negotiations with prospective purchasers (in many cases unrelated third
parties). Currently, your partnership is marketing for sale its one commercial
property.
However, in the opinion of your general partner (which is our subsidiary),
the present time may not be the most desirable time to sell the residential
real estate assets of your partnership in a private transaction, and the
proceeds realized from any such sale would be uncertain. Your general partner
believes it currently is in the best interest of your partnership to continue
holding its residential real estate assets. Although there might be a
prepayment penalty of approximately 1 to 2% of the outstanding balance of the
mortgages depending on when and under what circumstances they are prepaid, such
prepayment penalties are not a significant factor in determining when a
property may be sold. See "The Offer -- Section 13. Certain Information
Concerning Your Partnership -- Investment Objectives and Policies; Sale or
Financing of Investments."
Continuation of the Partnership Without the Offer
A second alternative would be for your partnership to continue as a
separate legal entity, with its own assets and liabilities and continue to be
governed by its existing agreement of limited partnership, without our offer. A
number of advantages could result from the continued operation of your
partnership. Given improving rental market conditions, the level of
distributions might increase over time. It is possible that the private resale
market for properties could improve over time, making a sale of the
partnership's properties in a private transaction at some point in the future a
more attractive option than it is currently. The continuation of your
partnership will allow you to continue to participate in the net income and any
increases in revenue of your partnership and any net proceeds from the sale of
any property owned by your partnership. However, no assurance can be given as
to future operating results or as to the results of any attempts to sell any
property owned by your partnership. Currently, your partnership is marketing
its one commercial property for sale and has received offers for such property.
There are several risks and disadvantages that result from continuing the
operations of your partnership without our offer. If your partnership were
continue operating as presently structured, your partnership could be forced to
borrow on terms that could result in net losses from operations. In addition,
continuation of your partnership without our offer would deny you and your
partners the benefits of our offer. For example, you would have no opportunity
for liquidity unless you were to sell your units in a private transaction. Any
such sale would likely be at a discount from your pro rata share of the fair
market value of the properties owned by your partnership.
Sale of Assets Your partnership could sell the properties it owns and not
liquidate. Your general partner (which is our subsidiary) considers the sale of
partnership properties from time to time and is currently marketing its one
commercial property for
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sale. However, any such sale would likely be a taxable transaction and, without
a liquidating distribution, would not provide limited partners with any cash to
pay any tax liabilities arising as a result thereof.
Alternative Transactions Considered by Us. Before we decided to make our
offer, we considered a number of alternative transactions, including purchasing
some or all of your partnership's properties or merging your partnership with
us. However, both of these alternatives would require a vote of all the limited
partners. If the transaction was approved, all limited partners, including
those who wish to continue to participate in the ownership of your
partnership's properties, would be forced to participate in the transaction. If
the transaction was not approved, all limited partners, including those who
would like to dispose of their investment in your partnership's properties,
would be forced to retain their investment. We also considered an offer to
exchange units in your partnership for units of AIMCO Properties, L.P. However
because of the expense and delay associated with making such an exchange offer,
we decided to make an offer for cash only. In addition, our historical
experience has been that most holders of limited partnership units, when given
a choice, prefer cash.
Determination of Offer Price. In establishing the offer price, we reviewed
certain publicly available information and certain information made available
to us by the general partner (which is our subsidiary) and our other
affiliates, including among other things: (i) the agreement of limited
partnership, as amended to date; (ii) the partnership's Annual Report on Form
10-KSB for the year ended December 31, 1998; (iii) unaudited results of
operations of the partnership's properties for the period since the beginning
of the partnership's current fiscal year and to date in 1999; (iv) the
operating budgets prepared by the residential property manager with respect to
the partnership's properties for the year ending December 31, 1999; and (v)
tender offer statements, solicitation/recommendation statements and beneficial
ownership reports on Schedules 14D-1, 14D-9 and 13D. Our determination of the
offer price was based on our review and analysis of the foregoing information,
the other financial information and the analyses concerning the partnership
summarized below.
Valuation of Units. We determined our offer price by estimating the value
of each property owned by your partnership. For the residential properties, we
used the direct capitalization method. This method involves applying a
capitalization rate to your partnership's annual property income. A
capitalization rate is a percentage (rate of return), commonly applied by
purchasers of residential real estate to property income to determine the
present value of income property. The lower the capitalization rate utilized
the higher the value produced, and the higher the capitalization rate utilized
the lower the value produced. We used your partnership's property income for
the fiscal year ended December 31, 1998. Our method for selecting a
capitalization rate begins with each property being assigned a location and
condition rating (e.g., "A" for excellent, "B" for good, "C" for fair, and "D"
for poor). We then adjust the capitalization rate based on whether the mortgage
debt that the property is subject to bears interest at a rate above or below
7.5% per annum. Generally, for every 0.5% in excess of 7.5%, the capitalization
rate would be increased by 0.25%. The evaluation of a property's location and
condition, and the determination of an appropriate capitalization rate for a
property, is subjective in nature, and others evaluating the same property
might use a different capitalization rate and derive a different property
value.
Property income is the difference between the revenues from the property
and related costs and expenses, excluding income derived from sources other
than its regular activities and before income deductions. Income deductions
include interest, income taxes, prior-year adjustments, charges to reserves,
write-off of intangibles, adjustments arising from major changes in accounting
methods and other material and nonrecurring items. In this respect, property
income differs from net income disclosed in the partnership's financial
statements, which does not exclude these income sources and deductions. The
following is a reconciliation of your partnership's property income for the
year ended December 31, 1998, to your partnership's net operating income for
the same period.
<TABLE>
<S> <C>
Net Income (Loss) $ (783,000)
Other Non-Operating Expense 1,601,000
Depreciation 2,038,000
Interest 2,244,000
Property Income $5,100,000
</TABLE>
Although the direct capitalization method is a widely accepted way of
valuing real estate, there are a number of other methods available to value
real estate, each of which may result in different valuations of a property.
Further, in applying the direct capitalization method, others may make
different assumptions and obtain different results. The proceeds that you would
receive if you sold your units to someone else or if your partnership were
actually liquidated might be higher than our offer price. We determined our
offer price as follows:
21
<PAGE> 22
Your partnership currently holds one commercial property, The Shoppes at
River Rock located in Murfreesboro, Tennessee. This property is currently being
marketed for sale and the table below reflects the current offers to purchase
the property. There can be no assurance, however, that such property will be
sold or the price or costs of any sale. If we have received any offers to
purchase a property, the value we ascribed to such property is the highest
offer, which is then discounted to reflect the uncertainty of the actual
closing price for a sale and the likelihood of price negotiations up until the
closing date.
<TABLE>
<CAPTION>
PROPERTY OFFER PRICE(S)
-------- -------------
<S> <C>
Shoppes at River Rock $ 2,210,000
</TABLE>
22
<PAGE> 23
o First, we estimated the value of each property owned by your
partnership. We valued residential properties using the direct
capitalization method. We selected capitalization rates based on our
experience in valuing similar properties. The lower the capitalization
rate applied to a property's income, the higher its value. We
considered local market sales information for comparable properties,
estimated actual capitalization rates (property income less capital
reserves divided by sales price) and then evaluated each property in
light of its relative competitive position, taking into account
property location, occupancy rate, overall property condition and other
relevant factors. We believe that arms-length purchasers would base
their purchase offers on capitalization rates comparable to those used
by us, however there is no single correct capitalization rate and
others might use different rates. We divided the fiscal 1998 property
income by the property's capitalization rate to derive an estimated
gross property value as described in the following table. For the
commercial property, we used the highest offer price, discounted to
reflect the uncertainties in closing a sale.
<TABLE>
<CAPTION>
FISCAL 1998 ESTIMATED
PROPERTY CAPITALIZATION GROSS PROPERTY
PROPERTY INCOME RATE VALUE
--------------------------------- ----------- ------------- ---------------
<S> <C> <C> <C>
Big Walnut....................... $732,000 10.75% $6,806,000
Greenspring Manor................ 671,000 11.25% 5,967,000
LaFontenay I & II................ 817,000 10.00% 8,170,000
Trails 670,000 9.75% 6,869,000
Shoppes at River Rock N/A N/A 2,210,000
Estimated Total Gross Property Value $30,022,000
</TABLE>
o Second, we calculated the value of the equity of your partnership by
adding to the aggregate gross property value of all properties owned by
your partnership, the value of the non-real estate assets of your
partnership, and deducting the liabilities of your partnership,
including mortgage debt and debt owed by your partnership to its
general partner (which is our subsidiary) or its affiliates after
consideration of any applicable subordination provisions affecting
payment of such debt. We deducted from this value certain other costs
including required capital expenditures, deferred maintenance, and
closing costs to derive a net equity value for your partnership of
$3,549,327. Closing costs, which are estimated to be 5% of the gross
property value, include legal and accounting fees, real property,
transfer taxes, title and escrow costs and broker's fees.
o Third, using this net equity value, we determined the proceeds that
would be paid to holders of units in the event of a liquidation of your
partnership, based on the terms of your partnership's agreement of
limited partnership. Accordingly, 99.99% of the estimated liquidation
proceeds are assumed to be distributed to holders of units. Our offer
price represents the per unit liquidation proceeds determined in this
manner.
<TABLE>
<S> <C>
Gross valuation of partnership properties 35,480,485
Plus: Cash and cash equivalents 1,046,109
Plus: Other partnership assets, net of security deposits 2,865,390
Less: Mortgage debt, including accrued interest (27,895,221)
Less: Accounts payable and accrued expenses (544,117)
Less: Other liabilities (2,228,918)
-----------
Partnership valuation before taxes and certain costs 8,723,729
Less: Disposition fees 0
Less: Extraordinary capital expenditures and deferred maintenance (2,864,117)
Less: Closing costs (2,310,285)
-----------
Estimated net valuation of your partnership 3,549,327
Percentage of estimated net valuation allocated to holders of units 99.99%
-----------
Estimated net valuation of units 3,548,968
Total number of units 1,224.25
===========
Estimated valuation per unit 2,899
===========
Cash consideration per unit 2,899
-----------
</TABLE>
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<PAGE> 24
Comparison of Consideration to Alternative Consideration. To assist holders
of units in evaluating the offer, your general partner (which is our
subsidiary) has attempted to compare the offer price against: (a) prices at
which the units have sold in the secondary market; (b) estimates of the value
of the units on a liquidation basis; (c) your general partner's estimate of net
asset value; and (d) an affiliate's estimate of net liquidation value. The
general partner of your partnership believes that analyzing the alternatives in
terms of estimated value, based upon currently available data and, where
appropriate, reasonable assumptions made in good faith, establishes a
reasonable framework for comparing alternatives. Since the value of the
consideration for alternatives to the offer is dependent upon varying market
conditions, no assurance can be given that the estimated values reflect the
range of possible values.
The results of these comparative analyses are summarized in the following
chart. You should bear in mind that the estimated values assigned to the
alternate forms of consideration are based on a variety of assumptions that
have been made by us. These assumptions relate to, among other things: the
operating results, if any, since December 31, 1998 as to income and expenses of
each property, other projected amounts and the capitalization rates that may be
used by prospective buyers if your partnership assets were to be liquidated.
In addition, these estimates are based upon certain information available
to your general partner (which is our subsidiary) at the time the estimates
were computed, and no assurance can be given that the same conditions analyzed
by it in arriving at the estimates of value would exist at the time of the
offer. The assumptions used have been determined by the general partner of your
partnership in good faith, and, where appropriate, are based upon current and
historical information regarding your partnership and current real estate
markets, and have been highlighted below to the extent critical to the
conclusions of the general partner of your partnership. Actual results may vary
from those set forth below based on numerous factors, including interest rate
fluctuations, tax law changes, supply and demand for similar apartment
properties, the manner in which your partnership's properties are sold and
changes in availability of capital to finance acquisitions of apartment
properties.
Under your partnership's agreement of limited partnership, the term of the
partnership will continue until December 31, 2008, unless sooner terminated as
provided in the agreement or by law. Limited partners could, as an alternative
to tendering their units, take a variety of possible actions, including voting
to liquidate the partnership or amending the agreement of limited partnership
to authorize limited partners to cause the partnership to merge with another
entity or engage in a "roll-up" or similar transaction.
COMPARISON TABLE
<TABLE>
<CAPTION>
PER UNIT
--------------
<S> <C>
Cash offer price $ 2,899
Alternatives:
Prices on secondary market $700 to $8,100
Estimated liquidation proceeds $ 2,899
General partner's estimate of net asset
value $ 11,182
Affiliate's estimate of net liquidation
value $ 10,924.92
</TABLE>
Prices on Secondary Market
Secondary market sales information is not a reliable measure of value
because of the lack of any known trades. At present, privately negotiated sales
and sales through intermediaries are the only means which may be available to a
limited partner to liquidate an investment in units (other than our offer)
because the units are not listed or traded on any exchange or quoted on NASDAQ,
on the Electronic Bulletin Board, or in "pink sheets." Secondary sales activity
for the units, including privately negotiated sales, has been limited and
sporadic.
Although the general partner requests and sometimes receives 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 prices in the table below are based solely on information provided
to the general partner by sellers and buyers of units transferred in sale
transactions (i.e., excluding transactions believed to result from the death of
a limited partner, rollover to an IRA account, establishment of a trust,
trustee to trustee transfers, termination of a benefit plan, distributions from
a qualified or nonqualified plan, uniform gifts to minors, abandonment of units
or similar non-sale transactions). The transfer paperwork submitted to the
general partner often does not include the requested price information or
contains conflicting information as to the actual sales price. Sale prices not
reported or disclosed could exceed the reported prices. According to
information obtained from your general partner (which is our subsidiary) from
January 1, 1996 to September 30, 1998, an aggregate of 59.75 units
(representing approximately
24
<PAGE> 25
4.9% of the total outstanding units) were transferred (including any tender
offers) in sale transactions. Set forth in the table below are the high and low
sales prices of units for the quarterly periods from January 1, 1996 to
September 30, 1998, as reported by your general partner:
SALES PRICES OF PARTNERSHIP UNITS, AS REPORTED BY THE GENERAL PARTNER
<TABLE>
<CAPTION>
AS REPORTED BY
THE GENERAL PARTNER
HIGH SALES LOW SALES
PRICE PRICE
PER UNIT PER UNIT
---------------- --------------
<S> <C> <C>
Fiscal Year Ended December 31, 1998:
Third Quarter $ 7,242.00 $ 3,200.00
Second Quarter $ 6,409.00 $ 2,500.00
First Quarter $ 5,500.00 $ 5,400.00
Fiscal Year Ended December 31, 1997:
Fourth Quarter $ 7,391.00 $ 700.00
Third Quarter $ 8,100.00 $ 3,000.00
Second Quarter $ 3,000.00 $ 1,200.00
First Quarter $ 6,500.00 $ 3,000.00
Fiscal Year Ended December 31, 1996:
Fourth Quarter $ 5,000.00 $ 2,800.00
Third Quarter $ 4,000.00 $ 3,000.00
Second Quarter $ 6,200.00 $ 2,450.00
First Quarter $ 4,000.00 $ 937.50
</TABLE>
Set forth below are the high and low sale prices of units for the years
ended December 31, 1996, 1997 and 1998 and for the first six months of 1999, as
reported by The Partnership Spectrum, which is an independent, third-party
source. The gross sales prices reported by The Partnership Spectrum do not
necessarily reflect the net sales proceeds received by sellers of units, which
typically are reduced by commissions and other secondary market transaction
costs to amounts less than the reported price. The Partnership Spectrum
represents only one source of secondary sales information, and other services
may contain prices for the units that equal or exceed sales prices reported in
The Partnership Spectrum. We do not know whether the information compiled by
The Partnership Spectrum is accurate or complete.
SALES PRICES OF PARTNERSHIP UNITS, AS REPORTED BY THE PARTNERSHIP SPECTRUM
<TABLE>
<CAPTION>
HIGH LOW
---- ---
<S> <C> <C>
Fiscal Year Ended December 31, 1999
First Six Months $5,500 $3,500
Fiscal Year Ended December 31, 1998: $7,802 $3,712
Fiscal Year Ended December 31, 1997: $8,100 $6,350
</TABLE>
Set forth in the table below are the high and low sales prices of units for
the year ended December 31, 1998, the first quarter of 1999 and the two months
ended May 31, 1999, as reported by the American Partnership Board, which is an
independent, third-party source. The gross sales prices reported by American
Partnership Board do not necessarily reflect the net sales proceeds received by
sellers of units, which typically are reduced by commissions and other
secondary market transaction costs to amounts less than the reported prices.
The American Partnership Board represents one source of secondary sales
information, and the other services may contain prices for units that equal or
exceed sales prices reported by the American Partnership Board. We do not know
whether the information compiled by the American Partnership Board is accurate
or complete.
SALES PRICES OF PARTNERSHIP UNITS, AS REPORTED BY THE AMERICAN PARTNERSHIP
BOARD
<TABLE>
<CAPTION>
HIGH LOW
---- ---
<S> <C> <C>
Fiscal Year Ended December 31, 1999
Two Months ended May 31, 1999 $ - $ -
First Quarter $5,387 $5,387
Fiscal Year Ended December 31, 1998: $7,173 $6,900
</TABLE>
Estimated Liquidation Proceeds
Liquidation value is a measure of the price at which the assets of your
partnership would sell if disposed of in an arms-length
25
<PAGE> 26
transaction between a willing buyer and your partnership, each having access to
relevant information regarding the historical revenues and expenses of the
business. Your general partner (which is our subsidiary) estimated the
liquidation value of units using the same direct capitalization method and
assumptions as we did in valuing the units for the offer price. The liquidation
analysis also assumed that your partnership's properties were sold to an
independent third-party buyer at the current property value and that other
balance sheet assets (excluding amortizing assets) and liabilities of your
partnership were sold at their book value, and that the net proceeds of sale
were allocated to your partners in accordance with your partnership's agreement
of limited partnership.
The liquidation analysis assumes that the assets of your partnership are
sold in a single transaction. Should the assets be liquidated over time, even
at prices equal to those projected, distributions to limited partners from cash
flow from operations might be reduced because your partnership's relatively
fixed costs, such as general and administrative expenses, are not
proportionately reduced with the liquidation of assets. However, for
simplification purposes, the sales of the assets are assumed to occur
concurrently. The liquidation analysis assumes that the assets would be
disposed of in an orderly manner and not sold in forced or distressed sales
where sellers might be expected to dispose of their interests at substantial
discounts to their actual fair market value.
General Partner's Annual Estimates of Net Asset Value
Your general partner (which is our subsidiary) prepared an estimate of your
partnership's net asset value per unit in connection with an offer to purchase
up to 4.9% of the outstanding units commenced by an unaffiliated party in 1998.
That estimate of your partnership's net asset value per unit as of June 30,
1998 was $11,182. This estimated net asset value is based on a hypothetical
sale of the partnership's properties and the distribution to the limited
partners and the general partner of the gross proceeds of such sales, net of
related indebtedness, together with the cash, proceeds from temporary
investments, and all other assets that are believed to have liquidation value,
after provision in full for all of the other known liabilities of your
partnership. This net asset value does not take into account (i) timing
considerations, (ii) costs associated with winding up the partnership, or (iii)
$2,864,117 in deferred maintenance costs. Therefore, we believe that this
estimate of net asset value per unit does not necessarily represent either the
fair market value of a unit or the amount a limited partner reasonably could
expect to receive if the partnership's properties were sold and the partnership
was liquidated. For this reason, we considered this net asset value estimate to
be less meaningful in determining the offer price than our analysis described
above.
Affiliate's Estimate of Net Liquidation Value
An affiliate of your general partner which is now an affiliate of ours,
prepared an estimate of your partnership's net liquidation value per unit in
connection with a tender offer to purchase units for $6,000 each which closed
in September, 1998. That estimate of your partnership's net liquidation value
per unit as of June 30, 1998 was $10,924.92. This estimated net liquidation
value is based on the an income capitalization approached similar to the one we
used, adjusted for your partnership's other assets and liabilities (excluding
prepaid and deferred expenses and security deposits). Four percent was then
deducted from the resulting amount to cover the estimated costs of selling the
properties. This final amount was then divided by the number of units
outstanding to obtain the $10,924.92 per unit. While this value is higher than
our offer price per unit, because different income and capitalization rates
were used and we believe that the income capitalization amounts used overstate
the value of the properties.
Allocation of Consideration. We have allocated to the limited partners the
amount of the estimated net valuation of your partnership based on your
partnership's agreement of limited partnership as if your partnership was being
liquidated at the current time. In valuing your units, we have assumed that
99.99% of the estimated liquidation proceeds are distributed to holders of
units.
SECTION 10. POSITION OF THE GENERAL PARTNER OF YOUR PARTNERSHIP WITH RESPECT
TO THE OFFER.
The general partner of your partnership believes the offer price and the
structure of the transaction are fair to the limited partners. In making such
determination, the general partner considered all of the factors and
information set forth below, but did not quantify or otherwise attach
particular weight to any such factors or information:
o The offer gives you an opportunity to make an individual decision on
whether to tender your units or to continue to hold them.
o Our offer price, and the method we used to determine our offer price.
26
<PAGE> 27
o The fact that the price offered for your units is based on an estimated
value of your partnership's properties that has been determined using a
method believed to reflect the valuation of such assets by buyers in
the market for similar assets.
o Prices at which the units have recently sold, to the extent such
information is available.
o The absence of an established trading market for your units.
o An analysis of possible alternative transactions, including a property
sale or refinancing, or a liquidation of the partnership.
o An evaluation of the financial condition and results of operations of
your partnership including the decrease in property income of your
partnership from $5,590,000 for the year ended December 31, 1997 to
$5,100,000 for the year ended December 31, 1998.
The general partner of your partnership makes no recommendation as to
whether you should tender or refrain from tendering your units. Although the
general partner believes the offer is fair, you must make your own decision
whether or not to participate in the offer, based upon a number of factors,
including your financial position, your need or desire for liquidity, other
financial opportunities available to you, and your tax position and the tax
consequences to you of selling your units.
SECTION 11. CONFLICTS OF INTEREST AND TRANSACTIONS WITH AFFILIATES.
Conflicts of Interest With Respect to the Offer. The general partner of
your partnership became a majority-owned subsidiary of AIMCO on October 1,
1998, when AIMCO merged with Insignia. Your general partner became a wholly
owned subsidiary of AIMCO on February 26, 1999 when IPT merged with AIMCO.
Accordingly, the general partner of your partnership has substantial conflicts
of interest with respect to the offer. The general partner of your partnership
has a fiduciary obligation to obtain a fair offer price for you, even as a
subsidiary of AIMCO. It also has a duty to remove the property manager for your
partnership's residential properties, under certain circumstances, even though
the property manager is also an affiliate of AIMCO. The conflicts of interest
include: (1) the fact that a decision to remove, for any reason, the general
partner of your partnership from its current position as a general partner of
your partnership would result in a decrease or elimination of the substantial
management fees paid to an affiliate of the general partner of your partnership
for managing your partnership's properties; and (2) as a consequence of our
ownership of units, because we may have incentives to seek to maximize the
value of our ownership of units, which in turn may result in a conflict for
your general partner in attempting to reconcile our interests with the
interests of the other limited partners. Additionally, we desire to purchase
units at a low price and you desire to sell units at a high price. The general
partner of your partnership makes no recommendation as to whether you should
tender or refrain from tendering your units. Such conflicts of interest in
connection with the offer and the operation of AIMCO differ from those
conflicts of interest that currently exist for your partnership. See "Risk
Factors -- Conflicts of Interest With Respect to the Offer." Your general
partner has filed a Solicitation/Recommendation Statement on Schedule 14D-9
with the SEC, which indicates 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 SCHEDULE 14D-9 AND THE RELATED MATERIALS CAREFULLY AND IN
THEIR ENTIRETY BEFORE DECIDING WHETHER TO TENDER THEIR UNITS.
Conflicts of Interest That Currently Exist for Your Partnership. We own
both the general partner of your partnership and the manager of your
partnership's residential properties. The general partner does not receive an
annual management fee but may receive reimbursements for expenses incurred in
its capacity as general partner. The general partner of your partnership
received total fees and reimbursements of $257,000 in 1996, $252,000 in 1997
and $390,000 in 1998. The reimbursement amount to your general partner for the
1998 fiscal year included $111,000 which was paid to an affiliate of your
general partner for costs incurred in connection with construction oversight
services. The property manager for the residential properties received
management fees of $381,000 in 1996, $436,000 in 1997 and $421,000 in 1998. We
have no current intention of changing the fee structure for your general
partner or the manager of your partnership's residential properties.
Competition Among Properties. Because AIMCO and your partnership both
invest in apartment properties, these properties may compete with one another
for tenants. Furthermore, you should bear in mind that AIMCO may acquire
properties in general market areas where your partnership properties are
located. It is believed that this concentration of properties in a general
market area will facilitate overall operations through collective advertising
efforts and other operational efficiencies. In managing AIMCO's
27
<PAGE> 28
properties, we will attempt to reduce such conflicts between competing
properties by referring prospective customers to the property considered to be
most conveniently located for the customer's needs.
Future Offers. Although we have no current plans to conduct future tender
offers for your units, our plans may change based on future circumstances. Any
such future offers that we might make could be for consideration that is more
or less than the consideration we are currently offering.
SECTION 12. FUTURE PLANS OF THE PURCHASER.
As described above under "The Offer -- Section 9. Background and Reasons
for the Offer," we own the general partner and thereby control the management
of your partnership. In addition, we own the manager of your partnership's
residential properties. We currently intend that, upon consummation of the
offer, your partnership will continue its business and operations substantially
as they are currently being conducted. The offer is not expected to have any
effect on partnership operations.
Although we have no present intention to do so, we may acquire additional
units or sell units after completion or termination of the offer. Any
acquisition may be made through private purchases, through one or more future
tender or exchange offers, by merger, consolidation or by any other means
deemed advisable. Any acquisition may be at a price higher or lower than the
price to be paid for the units purchased pursuant to this offer, and may be for
cash, limited partnership interests in AIMCO Properties, L.P. or other
consideration. We also may consider selling some or all of the units we acquire
pursuant to the offer to persons not yet determined, which may include our
affiliates. We may also buy your partnership's properties, although we have no
present intention to do so. There can be no assurance, however, that we will
initiate or complete, or will cause your partnership to initiate or complete,
any subsequent transaction during any specific time period following the
expiration of the offer or at all.
Except as set forth herein, we do not have any present plans or proposals
which relate to or would result in an extraordinary transaction, such as a
merger, reorganization or liquidation, involving your partnership or any of
your partnership's subsidiaries; a sale or transfer of a material amount of
your partnership's assets (or assets of the partnership's subsidiaries); any
changes in composition of your partnership's senior management or personnel or
their compensation; any changes in your partnership's present capitalization or
distribution policy; or any other material changes in your partnership's
structure or business. We or our affiliates may loan funds to your partnership
which may be secured by your partnership's property. If any such loans are
made, upon default of such loans, the lender could seek to foreclose on the
loan and related mortgage or security interest. However, we expect that
consistent with your general partner's fiduciary obligations, the general
partner will seek and review opportunities (including opportunities identified
by us) to engage in transactions which could benefit your partnership, such as
sales or refinancings of assets or a combination of the partnership with one or
more other entities, with the objective of seeking to maximize returns to
limited partners. As noted above, the general partner is currently marketing
your partnership's commercial properties for sale.
We have been advised that the possible future transactions the general
partner expects to consider on behalf of your partnership include: (1) payment
of extraordinary distributions; (2) refinancing, reducing or increasing
existing indebtedness of the partnership; (3) sales of assets, individually or
as part of a complete liquidation; and (4) mergers or other consolidation
transactions involving the partnership. Any such merger or consolidation
transaction could involve other limited partnerships in which your general
partner or its affiliates serve as general partners, or a combination of the
partnership with one or more existing, publicly traded entities (including,
possibly, affiliates of AIMCO), in any of which limited partners might receive
cash, common stock or other securities or consideration. There is no assurance,
however, as to when or whether any of the transactions referred to above might
occur. If any such transaction is effected by the partnership and financial
benefits accrue to the limited partners of your partnership, we will
participate in those benefits to the extent of our ownership of units. The
agreement of limited partnership prohibits limited partners from voting on
actions taken by the partnership, unless otherwise specifically permitted
therein. Limited partners may vote on a liquidation, and if we are successful
in acquiring a substantial number of units pursuant to the offer, we will be
able to control the outcome of any such vote. Even if we acquire a lesser
number of units pursuant to the offer, however, because we currently own
approximately 13.05% of the outstanding units we will be able to significantly
influence the outcome of any such vote. Our primary objective in seeking to
acquire the units pursuant to the offer is not, however, to influence the vote
on any particular transaction, but rather to generate a profit on the
investment represented by those units.
SECTION 13. CERTAIN INFORMATION CONCERNING YOUR PARTNERSHIP.
General. Davidson Diversified Real Estate II was organized in June 1994,
under the laws of the State of Delaware. Its primary
28
<PAGE> 29
business is real estate ownership and related operations. Your partnership was
formed for the purpose of making investments in various types of real
properties which offer potential capital appreciation and cash distributions to
its limited partners.
Your partnership's investment portfolio currently consists of the following
four residential apartment complexes: Big Walnut, a -251 unit complex in
Columbus, Ohio; Greenspring Manor, a 582-unit complex in Indianapolis, Indiana;
LaFontenay I & II, a 260-unit complex in Louisville, Kentucky, and Trails; a
248-unit complex in Nashville, Tennessee. Your partnership also owns the
following commercial property, The Shoppes at River Rock, a 160,000 square foot
complex in Murfreesboro, Tennessee.
The general partner of your partnership is Davidson Diversified Properties,
Inc., which is a wholly owned subsidiary of AIMCO. A wholly owned subsidiary of
AIMCO serves as manager of the residential properties owned by your
partnership. As of December 31, 1998, there were 1,224.25 units issued and
outstanding, which were held of record by 1,620 limited partners. Your
partnership's principal executive offices are located at 1873 South Bellaire
Street, 17th Floor, Denver, Colorado 80222, and its telephone number at that
address is (303) 757-8101.
For additional information about your partnership, please refer to the
annual report prepared by your partnership which was sent to you prior to this
offer to purchase, particularly Item 2 of Form 10-KSB which contains detailed
information regarding the properties owned, including mortgages, rental rates
and taxes.
Investment Objectives and Policies; Sale or Financing of Investments. In
general, your general partner (which is our subsidiary) regularly evaluates the
partnership's properties by considering various factors, such as the
partnership's financial position and real estate and capital markets
conditions. The general partner monitors the properties' specific locale and
sub-market conditions (including stability of the surrounding neighborhood)
evaluating current trends, competition, new construction and economic changes.
The general partner oversees each asset's operating performance and
continuously evaluates the physical improvement requirements. In addition, the
financing structure for each property (including any prepayment penalties), tax
implications, availability of attractive mortgage financing to a purchaser, and
the investment climate are all considered. Any of these factors, and possibly
others, could potentially contribute to any decision by the general partner to
sell, refinance, upgrade with capital improvements or hold a particular
partnership property. If rental market conditions improve, the level of
distributions might increase over time. It is possible that the private resale
market for properties could improve over time, making a sale of the
partnership's properties in a private transaction at some point in the future a
more viable option than it is currently. After taking into account the
foregoing considerations, your general partner is not currently seeking a sale
of your partnership's properties primarily because it expects the properties'
operating performance to improve in the near term. In making this assessment,
your general partner noted the occupancy and rental rates at the properties in
1998 compared to 1997. For more detailed information regarding the average
occupancy and rental rates, see "Average Annual Rental Rates and Occupancy"
below. In particular, the general partner noted that it expects to spend
approximately $2,864,117 for capital improvements at the residential properties
in 1999 to repair and update the properties'. Improvements include HVAC,
roofing, electrical repairs, parking lot repairs, floor covering replacements,
landscaping, gutters and down spouts, and exterior painting. Although there can
be no assurance as to future performance, however, these expenditures are
expected to improve the desirability of the property to tenants. The general
partner does not believe that a sale of the residential properties at the
present time would adequately reflect the properties' future prospects. Another
significant factor considered by your general partner is the likely tax
consequences of a sale of the residential properties for cash. Such a
transaction would likely result in tax liabilities for many limited partners.
The general partner has not received any recent indication of interest or offer
to purchase the residential properties.
The general partner believes that the market for the sale of commercial
properties is favorable at this time. Your partnership is currently marketing
its one commercial property for sale and has received offers for such property.
Originally Anticipated Term of Partnership. Your partnership's prospectus,
dated October 16, 1984, pursuant to which units in your partnership were sold,
indicated that your partnership was intended to be self-liquidating and that it
was anticipated that the partnership's properties would be sold within 3 to 7
years of their acquisition, provided market conditions permit. The prospectus
also indicated that there could be no assurance that the partnership would be
able to so liquidate and that, unless sooner terminated as provided in the
partnership agreement, the existence of the partnership would continue until
the year 2008. The partnership currently owns four apartment properties and one
commercial property. Your general partner (which is our subsidiary) continually
considers whether a property should be sold or otherwise disposed of after
consideration of relevant factors, including prevailing economic conditions,
availability of favorable financing and tax considerations, with a view to
achieving maximum capital
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<PAGE> 30
appreciation for your partnership. As noted above, the general partner is
currently marketing the commercial properties for sale. We cannot predict when
any of the properties will be sold or otherwise disposed of. However, there is
no current plan or intention to sell the residential properties in the near
future.
Under your partnership's agreement of limited partnership, the term of the
partnership will continue until December 31, 2008, unless sooner terminated as
provided in the agreement or by law. Limited partners could, as an alternative
to tendering their units, take a variety of possible actions, including voting
to liquidate the partnership or amending the agreement of limited partnership
to authorize limited partners to cause the partnership to merge with another
entity or engage in a "roll-up" or similar transaction.
Capital Replacement. Your partnership has an ongoing program of capital
improvements, replacements and renovations, including roof replacements,
kitchen and bath renovations, balcony repairs (where applicable), replacement
of various building systems and other replacements and renovations in the
ordinary course of business. All capital improvement and renovation costs are
expected to be paid from operating cash flows, cash reserves, or from
short-term or long-term borrowings.
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<PAGE> 31
Competition. There are other residential properties within the market area
of your partnership's properties. The number and quality of competitive
properties in such an area could have a material effect on the rental market
for the apartments at your partnership's properties and the rents that may be
charged for such apartments. While we are a significant factor in the United
States in the apartment industry, competition for apartments is local.
According to data published by the National Multi-Housing Council, as of
January 1, 1999, our portfolio of 373,409 owned or managed apartment units
represents approximately 2.2% of the national stock of rental apartments in
structures with at least five apartments.
Selected Financial and Property-Related Data. The summary financial
information of Davidson Diversified Real Estate II for the years ended December
1998 and 1997 is based on audited financial statements. The summary financial
information for the three months ended March 31, 1999 and 1998 is based on
unaudited financial statements. This information should be read in conjunction
with such financial statements, including notes thereto, and "Management's
Discussion and Analysis of Financial Condition and Results of Operations of
Your Partnership" in the Annual Report on Form 10-KSB of your partnership for
the year ended December 31, 1998.
DAVIDSON DIVERSIFIED REAL ESTATE II
<TABLE>
<CAPTION>
FOR THE THREE
MONTHS ENDED FOR THE YEAR ENDED
MARCH 31, DECEMBER 31,
--------- ------------
1999 1998 1998 1997
---- ---- ---- ----
(IN THOUSANDS, EXCEPT PER UNIT DATA)
<S> <C> <C> <C> <C>
OPERATING DATA:
Total Revenues $ 2,332 $ 2,094 $ 9,143 $ 8,885
Net income (Loss) (62) (372) (783) (819)
Net Income per limited partnership unit (49.83) (298.14) (626.51) (655.91)
Distributions per limited partnership unit 0.00 0.00 0.00 80.05
</TABLE>
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
--------- ------------
1999 1998 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and Cash Equivalents $ 1,180 $ 928 $ 971 $ 885
Real Estate, Net of Accumulated
Depreciation 22,175 22,961 22,515 23,281
Total Assets 48,745 47,450 48,476 47,784
Notes Payable 26,060 26,664 26,215 26,807
General Partners' Capital (Deficit) (485) (475) (484) (468)
Limited Partners' Capital (Deficit) (2,023) (1,560) (1,962) (1,195)
Partners' Capital (Deficit) (2,508) (2,035) (2,446) (1,663)
Total Distributions 0.00 0.00 0.00 (100)
Net increase (decrease) in cash and cash
equivalents 209 43 86 (119)
Net cash provided by operating activities 568 541 1,694 1,292
</TABLE>
Description of Properties. The following shows the location, the date of
purchase, the nature of your partnership's ownership interest in and the use of
each of your partnership's properties.
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<PAGE> 32
<TABLE>
<CAPTION>
Date Of Type of
Property Purchase Ownership Use
-------- -------- --------- ---
<S> <C> <C> <C>
Big Walnut Apts 3/28/85 Fee Ownership subject Apts-
Columbus, OH to 1st & 2nd mortgages 251 units
La Fontenay Apts 10/31/84 Fee Ownership subject Apts-
Louisiville, KY to 1st mortgage 260 units
The Trails Apts 8/30/85 Fee Ownership subject Apts-
Nashville, TN to 1st mortgage 248 units
Greensprings Manor 9/30/85 Fee Ownership subject Apts-
Indianapolis, IN to 1st & 2nd mortgages 582 units
Shoppes at River Rock 12/31/84 Fee Ownership subject Commercial
Murfreesboro, TN to 1st mortgage 120,000sf
</TABLE>
Accumulated Depreciation Schedule. The following shows the gross carrying
value, accumulated depreciation and federal tax basis of each of your
partnership's properties as of December 31, 1998.
<TABLE>
<CAPTION>
Gross
Carrying Accumulated Federal
Property Value Depreciation Rate Method Tax Basis
-------- ----- ------------ ---- ------ -----------
(in thousands) (in thousands)
<S> <C> <C> <C> <C> <C>
Big Walnut Apartments $ 8,540 $ 4,485 5-25 yrs. S/L $ 2,470
LaFontaney I & II
Apartments 9,252 4,624 5-25 yrs. S/L 3,198
The Trails Apartments 8,943 4,090 5-25 yrs. S/L 3,270
Greensprings Manor
Apartments 12,192 6,443 5-25 yrs. S/L 4,265
Shoppes At River Rock 6,678 3,448 5-25 yrs. S/L 2,961
------- ------- -------
$45,605 $23,090 $16,164
======= ======= =======
</TABLE>
Schedule of Mortgages. The following shows certain information regarding
the outstanding mortgages encumbering each of your partnership's properties as
of December 31, 1998.
<TABLE>
<CAPTION>
Principal
Principal Stated Balance
Balance At Interest Period Maturity Due At
Property December 1998 Rate Amortized Date Maturity
-------- ------------- ---- --------- ---- --------
(in thousands) (in thousands)
<S> <C> <C> <C> <C> <C>
Big Walnut Apartments
1st mortgage $ 4,622 7.60% 257 months 11/15/02 $ 3,912
2nd mortgage 167 7.60% none 11/15/02 167
</TABLE>
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<PAGE> 33
<TABLE>
<S> <C> <C> <C> <C> <C>
LaFontenay I & II
Apartments
1st mortgage 7,240 7.50% 360 months 09/01/07 6,369
The Trails Apartments
1st mortgage 5,751 (1) 240 months 12/01/09 3,015
Greensprings Manor
Apartments
1st mortgage 8,124 7.60% 257 months 11/15/02 6,875
2nd mortgage 294 7.60% none 11/15/02 294
Shoppes At River Rock
1st mortgage 1,571 10.125% 180 months 01/15/00 1,490
-------- -------
27,769 $22,122
=======
Less unamortized discounts (1,554)
--------
Total $ 26,215
========
</TABLE>
(1) Adjustable rate based on 75% of the interest rate on new-issue long-term
A-rate utility bonds as determined on the first day of each calendar
quarter. The rate at December 31, 1998 was 4.9875%.
Average Annual Rental Rate and Occupancy. The following shows the average
annual rental rates and occupancy percentages for each of your partnership's
properties during the past two years.
<TABLE>
<CAPTION>
Average Annual Average Annual
Rental Rates Occupancy
Property 1998 1997 1998 1997
- -------- ---- ---- ---- ----
<S> <C> <C> <C> <C>
Big Walnut Apartments $6,577/unit $6,339/unit 94% 94%
LaFontenay I & II Apartments 7,347/unit 7,106/unit 92% 94%
The Trails Apartments 7,044/unit 6,798/unit 92% 92%
Greensprings Manor Apartments 4,934/unit 4,987/unit 88% 86%
Shoppes At River Rock 6.70/sq. ft. 8.93/sq. ft. 71% 71%
</TABLE>
Schedule of Real Estate Taxes and Rates. The following shows the real
estate taxes and rates for 1998 for each of your partnership's properties.
<TABLE>
<CAPTION>
1998 1998
Billing Rate
------- ----
(in thousands)
<S> <C> <C>
Big Walnut Apartments $ 122 5.90%
LaFontenay I & II Apartments 72 .93%
The Trails Apartments 128 3.43%
Greensprings Manor Apartments 275 7.32%
Shoppes At River Rock 133 2.75%
</TABLE>
Property Management. Your partnership's residential properties are managed
by an entity which is a wholly owned subsidiary of AIMCO. Pursuant to the
management agreement between the property manager and your partnership, the
property manager operates your partnership's residential properties,
establishes rental policies and rates and directs marketing activities. The
property manager also is responsible for maintenance, the purchase of equipment
and supplies, and the selection and engagement of all vendors, suppliers and
independent contractors.
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<PAGE> 34
Distributions. The following table shows, for each of the years indicated,
the distributions paid per unit in such years.
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31 AMOUNT
----------- ------
<S> <C>
1995 $ 0.00
1996 80.05
1997 80.05
1998 0.00
---------
Total $ 160.10
</TABLE>
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<PAGE> 35
<TABLE>
<CAPTION>
BIG WALNUT GREENSPRING LAFONTENAY TRAILS
<S> <C> <C> <C> <C>
Total Revenues 1,673,884 2,813,465 1,965,581 1,716,957
Operating Expenses (207,395) (717,792) (425,627) (317,425)
Replacement Reserves - Net -- -- 78,000 --
Debt Service (579,037) (921,360) (629,394) (536,727)
Capital Expenditures -- -- (107,900) (102,920)
Net Cash Flow 887,452 1,174,313 880,660 759,885
</TABLE>
Operating Budgets of the Partnership. A summary of the operating budgets of
your partnership's properties for the year ending on December 31, 1999 is as
follows:
The above budgets at the time they were made were forward-looking
information developed by your general partner (which is our subsidiary).
Therefore, the budgets were dependent upon future events with respect to the
ability of your partnership to meet such budget. The budgets incorporated
various assumptions including, but not limited to, lease revenue (including
occupancy rates), various operating expenses, general and administrative
expenses, depreciation expenses, capital expenditures, and working capital
levels. While we deemed such budgets to be reasonable and valid at the date
made, there is no assurance that the assumed facts will be validated or that
the circumstances will actually occur. Any estimate of the future performance
of a business, such as your partnership's business, is forward-looking and
based on assumptions some of which inevitably will prove to be incorrect.
The budget amounts provided above are figures that were not computed in
accordance with GAAP. In particular, items that are categorized as capital
expenditures for purposes of preparing the operating budget are often
re-categorized as expenses when the financial statements are audited and
presented in accordance with GAAP. Therefore, the summary operating budget
presented for fiscal 1999 should not necessarily be considered as indicative of
what the audited operating results for fiscal 1999 will be. For the year ended
December 31, 1998, the partnership reported revenues of $7,667,209, operating
expenses of $4,375,180 and replacement reserves and capital expenditures of
$402,000.
Beneficial Ownership of Interests in Your Partnership. Together with our
subsidiaries, we currently own, in the aggregate, approximately 13.05% of the
outstanding limited partnership units of your partnership. Except as set forth
above, neither we, nor, to the best of our knowledge, any of our affiliates,
(i) beneficially own or have a right to acquire any units, (ii) have effected
any transactions in the units in the past 60 days, or (iii) have any contract,
arrangement, understanding or relationship with any other person with respect
to any securities of your partnership, including, but not limited to,
contracts, arrangements, understandings or relationships concerning transfer or
voting thereof, joint ventures, loan or option arrangements, puts or calls,
guarantees of loans, guarantees against loss or the giving or withholding of
proxies.
Compensation Paid to the General Partner and its Affiliates. The following
table shows, for each of the years indicated, compensation paid to your general
partner and its affiliates:
<TABLE>
<CAPTION>
PARTNERSHIP PROPERTY
FEES AND MANAGEMENT
YEAR EXPENSES FEES
------ ----------- -----------
<S> <C> <C>
1995 $173,000 $370,000
1996 257,000 381,000
1997 252,000 436,000
1998 390,000 421,000
</TABLE>
Legal Proceedings. Your partnership may be party to a variety of legal
proceedings related to its ownership of the partnership's properties and
management and leasing business, respectively, arising in the ordinary course
of the business, which are not expected to have a material adverse effect on
your partnership.
Additional Information Concerning Your Partnership. Your partnership files
annual, quarterly and special reports, proxy statements and other information
with the SEC. You may read and copy any document your partnership files at the
SEC's public reference rooms in Washington, D.C., New York, New York, and
Chicago, Illinois. Please call the SEC at 1-800-SEC-0330 for further
information on the public reference rooms. Your partnership's SEC filings are
also available to the public at the SEC's web
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<PAGE> 36
site at http://www.sec.gov.
SECTION 14. VOTING POWER.
Decisions with respect to the day-to-day management of your partnership are
the responsibility of the general partner. Because the general partner of your
partnership is our affiliate, we control the management of your partnership.
Under your partnership's agreement of limited partnership, limited partners
holding a majority of the outstanding units must approve certain extraordinary
transactions, including the removal of the general partner, the addition of a
new general partner, most amendments to the partnership agreement and the sale
of all or substantially all of your partnership's assets. If we acquire all the
units we are offering to purchase, we will own a majority of the outstanding
units and will have the ability to control any vote of the limited partners.
If we acquire a substantial number of additional units pursuant to our
offer, we may be in a position to influence or control voting decisions with
respect to the limited partners of your partnership. See "The Offer -- Section
7. Effect of the Offer."
SECTION 15. SOURCE OF FUNDS.
We expect that approximately $1,388,706 will be required to purchase all of
the 479.03 limited partnership units that we are seeking in this offer
(exclusive of fees and expenses estimated to be $11,000). For more information
regarding fees and expenses, see "The Offer -- Section 19. Fees and Expenses"
in the Offer to Purchase.
In addition to this offer, we are concurrently making offers to acquire
interests in approximately 100 other limited partnerships. If all such offers
were fully subscribed for cash, we would be required to pay approximately $260
million for all such units. If for some reason we did not have such funds
available we might extend this offer for a period of time sufficient for us to
obtain additional funds, or we might terminate this offer. However, based on
our past experience with similar offers, we do not expect all such offers to be
fully subscribed. Also, in some offers, investors have been offered a choice of
cash or securities. As a result, we expect that the funds that will be
necessary to consummate all the offers will be substantially less than $200
million. We believe that we have sufficient cash on hand and available sources
of financing to pay such amounts. As of March 31, 1999, we had $38,000,000 of
cash on hand and $145,000,000 available for borrowing under our existing lines
of credit.
Under our $145 million revolving credit facility with Bank of America
National Trust and Savings Association ("Bank of America") and BankBoston,
N.A., AIMCO Properties, L.P. is the borrower and all obligations thereunder are
guaranteed by AIMCO and certain of its subsidiaries. The annual interest rate
under the credit facility is based on either LIBOR or Bank of America's
reference rate, at our election, plus, an applicable margin. We elect which
interest rate will be applicable to particular borrowings under the credit
facility. The margin ranges between 2.25% and 2.75% in the case of LIBOR-based
loans and between 0.75% and 1.25% in the case of base rate loans, depending
upon a ratio of our consolidated unsecured indebtedness to the value of certain
unencumbered assets. The credit facility matures on September 30, 1999 unless
extended, at the discretion of the lenders. The credit facility provides for
the conversion of the revolving facility into a three year term loan. The
availability of funds to us under the credit facility is subject to certain
borrowing base restrictions and other customary restrictions, including
compliance with financial and other covenants thereunder. The financial
covenants require us to maintain a ratio of debt to gross asset value of no
more than 0.55 to 1.0, an interest coverage ratio of 2.25 to 1.0 and a fixed
charge coverage ratio of at least 1.7 to 1.0 from January 1, 1999 through June
30, 1999, and 1.8 to 1.0 thereafter. In addition, the credit facility limits us
from distributing more than 80% of our Funds From Operations (as defined) to
holders of our units, imposes minimum net worth requirements and provides other
financial covenants related to certain unencumbered assets.
SECTION 16. DISSENTERS' RIGHTS.
Neither the agreement of limited partnership of your partnership nor
applicable law provides any right for you to have your units appraised or
redeemed in connection with, or as a result of, our offer. You have the
opportunity to make an individual decision on whether or not to tender your
units in the offer.
SECTION 17. CONDITIONS OF THE OFFER.
Notwithstanding any other provisions of our offer, we will not be required
to accept for payment and pay for any units tendered pursuant to our offer, may
postpone the purchase of, and payment for, units tendered, and may terminate or
amend our offer if at any
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<PAGE> 37
time on or after the date of this offer to purchase, and at or before the
expiration of our offer (including any extension thereof), any of the following
shall occur or may be reasonably expected to occur:
(a) any change (or any condition, event or development involving a
prospective change) shall have occurred or been threatened in the business,
properties, assets, liabilities, indebtedness, capitalization, condition
(financial or otherwise), operations, licenses or franchises, management
contract, or results of operations or prospects of your partnership or
local markets in which your partnership owns property, including any fire,
flood, natural disaster, casualty loss, or act of God that, in our
reasonable judgment, are or may be materially adverse to your partnership
or the value of the units to us, or we shall have become aware of any facts
relating to your partnership, its indebtedness or its operations which, in
our reasonable judgment, has or may have material significance with respect
to the value of your partnership or the value of the units to us; or
(b) there shall have occurred (i) any general suspension of trading in,
or limitation on prices for, securities on any national securities exchange
or the over-the-counter market in the United States, (ii) a decline in the
closing price of a share of AIMCO's Class A Common Stock of more than 7.5%
from the date hereof, (iii) any extraordinary or material adverse change in
the financial, real estate or money markets or major equity security
indices in the United States such that there shall have occurred at least a
25 basis point increase in 30-day LIBOR, the price of the 10-year Treasury
Bond or the 30-year Treasury Bond, or at least a 7.5% decrease in the S&P
500 Index, the Morgan Stanley REIT Index, in each case from the date
hereof, (iii) any material adverse change in the commercial mortgage
financing markets, (iv) a declaration of a banking moratorium or any
suspension of payments in respect of banks in the United States, (vi) a
commencement of a war, conflict, armed hostilities or other national or
international calamity directly or indirectly involving the United States,
(vii) any limitation (whether or not mandatory) by any governmental
authority on, or any other event which, in our reasonable judgment, might
affect the extension of credit by banks or other lending institutions, or
(viii) in the case of any of the foregoing existing at the time of the
commencement of the offer, in our reasonable judgment, a material
acceleration or worsening thereof; or
(c) there shall have been threatened, instituted or pending any action,
proceeding, application or counterclaim by any Federal, state, local or
foreign government, governmental authority or governmental agency, or by
any other person, before any governmental authority, court or regulatory or
administrative agency, authority or tribunal, which (i) challenges or seeks
to challenge our purchase of the units, restrains, prohibits or delays the
making or consummation of our offer, prohibits the performance of any of
the contracts or other arrangements entered into by us (or any affiliates
of ours), seeks to obtain any material amount of damages as a result of the
transactions contemplated by our offer, (ii) seeks to make the purchase of,
or payment for, some or all of the units pursuant to our offer illegal or
results in a delay in our ability to accept for payment or pay for some or
all of the units, (iii) seeks to prohibit or limit the ownership or
operation by us or any of our affiliates of the entity serving as general
partner of the partnership or to remove such entity as general partner of
your partnership, or seeks to impose any material limitation on our ability
or the ability of any affiliate of ours to conduct your partnership's
business or own such assets, (iv) seeks to impose material limitations on
our ability to acquire or hold or to exercise full rights of ownership of
the units including, but not limited to, the right to vote the units
purchased by us on all matters properly presented to the limited partners,
or (v) might result, in our reasonable judgment, in a diminution in the
value of your partnership or a limitation of the benefits expected to be
derived by us as a result of the transactions contemplated by our offer or
the value of the units to us; or
(d) there shall be any action taken, or any statute, rule, regulation,
order or injunction shall be sought, proposed, enacted, promulgated,
entered, enforced or deemed applicable to our offer, your partnership, any
general partner of your partnership, us or any affiliate of ours or your
partnership, or any other action shall have been taken, proposed or
threatened, by any government, governmental authority or court, that, in
our reasonable judgment, might, directly or indirectly, result in any of
the consequences referred to in clauses (i) through (vi) of paragraph (c)
above; or
(e) your partnership shall have (i) changed, or authorized a change of,
the units or your partnership's capitalization, (ii) issued, distributed,
sold or pledged, or authorized, proposed or announced the issuance,
distribution, sale or pledge of (A) any equity interests (including,
without limitation, units), or securities convertible into any such equity
interests or any rights, warrants or options to acquire any such equity
interests or convertible securities, or (B) any other securities in respect
of, in lieu of, or in substitution for units outstanding on the date
hereof, (iii) purchased or otherwise acquired, or proposed or offered to
purchase or otherwise acquire, any outstanding units or other securities,
(iv) declared or paid any dividend or distribution on any units or issued,
authorized, recommended or proposed the issuance of any other distribution
in respect of the units, whether payable in cash, securities or other
property, (v) authorized, recommended, proposed or announced an agreement,
or intention to enter into an agreement, with respect to any merger,
consolidation, liquidation or business combination, any acquisition or
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<PAGE> 38
disposition of a material amount of assets or securities, or any release or
relinquishment of any material contract rights, or any comparable event,
not in the ordinary course of business, (vi) taken any action to implement
such a transaction previously authorized, recommended, proposed or publicly
announced, (vii) issued, or announced its intention to issue, any debt
securities, or securities convertible into, or rights, warrants or options
to acquire, any debt securities, or incurred, or announced its intention to
incur, any debt other than in the ordinary course of business and
consistent with past practice, (viii) authorized, recommended or proposed,
or entered into, any transaction which, in our reasonable judgment, has or
could have an adverse affect on the value of your partnership or the units,
(ix) proposed, adopted or authorized any amendment of its organizational
documents, (x) agreed in writing or otherwise to take any of the foregoing
actions or (xi) been notified that any debt of your partnership or any of
its subsidiaries secured by any of its or their assets is in default or has
been accelerated; or
(f) a tender or exchange offer for any units shall have been commenced
or publicly proposed to be made by another person or "group" (as defined in
Section 13(d)(3) of the Exchange Act), or it shall have been publicly
disclosed or we shall have otherwise learned that (i) any person or group
shall have acquired or proposed or be attempting to acquire beneficial
ownership of more than five percent of the units, or shall have been
granted any options, warrant or right, conditional or otherwise, to acquire
beneficial ownership of more than five percent of the units, other than
acquisitions for bona fide arbitrage purposes, or (ii) any person or group
shall have entered into a definitive agreement or an agreement in principle
or made a proposal with respect to a merger, consolidation or other
business combination with or involving your partnership; or
(g) we shall not have adequate cash or financing commitments available
to pay the for the units validly tendered; or
(h) the offer to purchase may have an adverse effect on AIMCO's status
as a REIT; or
(i) a minimum of 35% of the units has not been validly tendered.
The foregoing conditions are for our sole benefit and may be asserted by us
regardless of the circumstances giving rise to such conditions or may be waived
by us in whole or in part at any time and from time to time in our reasonable
discretion. The failure by us at any time to exercise any of the foregoing
rights shall not be deemed a waiver of any such right, the waiver of any such
right with respect to any particular facts or circumstances shall not be deemed
a waiver with respect to any other facts or circumstances and each right shall
be deemed a continuing right which may be asserted at any time and from time to
time.
SECTION 18. CERTAIN LEGAL MATTERS.
General. Except as set forth in this Section 18, we are not, based on
information provided by your general partner (which is our subsidiary), aware
of any licenses or regulatory permits that would be material to the business of
your partnership, taken as a whole, and that might be adversely affected by our
acquisition of units as contemplated herein, or any filings, approvals or other
actions by or with any domestic or foreign governmental authority or
administrative or regulatory agency that would be required prior to the
acquisition of units by us pursuant to the offer, other than the filing of a
Tender Offer Statement on Schedule 14D-1 with the SEC (which has already been
filed) and any required amendments thereto. While there is no present intent to
delay the purchase of units tendered pursuant to the offer pending receipt of
any such additional approval or the taking of any such action, there can be no
assurance that any such additional approval or action, if needed, would be
obtained without substantial conditions or that adverse consequences might not
result to your partnership or its business, or that certain parts of its
business might not have to be disposed of or other substantial conditions
complied with in order to obtain such approval or action, any of which could
cause us to elect to terminate the offer without purchasing units thereunder.
Our obligation to purchase and pay for units is subject to certain conditions,
including conditions related to the legal matters discussed in this Section 18.
Antitrust. We do not believe that the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended, is applicable to the acquisition of units
contemplated by our offer.
Margin Requirements. The units are not "margin securities" under the
regulations of the Board of Governors of the Federal Reserve System and,
accordingly, those regulations generally are not applicable to our offer.
State Laws. We are not aware of any jurisdiction in which the making of our
offer is not in compliance with applicable law. If we become aware of any
jurisdiction in which the making of the offer would not be in compliance with
applicable law, we will make a
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<PAGE> 39
good faith effort to comply with any such law. If, after such good faith
effort, we cannot comply with any such law, the offer will not be made to (nor
will tenders be accepted from or on behalf of) unitholders residing in such
jurisdiction. In those jurisdictions with securities or blue sky laws that
require the offer to be made by a licensed broker or dealer, the offer shall be
made on behalf of us, if at all, only by one or more registered brokers or
dealers licensed under the laws of that jurisdiction.
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<PAGE> 40
SECTION 19. FEES AND EXPENSES.
Except as set forth in this Section 19, we will not pay any fees or
commissions to any broker, dealer or other person for soliciting tenders of
units pursuant to the offer. We have retained River Oaks Partnership Services,
Inc. to act as Information Agent in connection with our offer. The Information
Agent may contact holders of units by mail, telephone, telex, telegraph and
personal interview and may request brokers, dealers and other nominee limited
partners to forward materials relating to the offer to beneficial owners of the
units. We will pay the Information Agent reasonable and customary compensation
for its services in connection with the offer, plus reimbursement for
out-of-pocket expenses, and will indemnify it against certain liabilities and
expenses in connection therewith, including liabilities under the Federal
securities laws. We will also pay all costs and expenses of printing and
mailing the offer and its legal fees and expenses.
---------------
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION ON BEHALF OF US NOT CONTAINED HEREIN OR IN THE LETTER OF
TRANSMITTAL AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT
BE RELIED UPON AS HAVING BEEN AUTHORIZED.
We have filed with the Commission a Tender Offer Statement on Schedule
14D-1, pursuant to Section 14(d)(1) and Rule 14d-3 under the Exchange Act,
furnishing certain additional information with respect to our offer, and may
file amendments thereto. The Schedule 14D-1 and any amendments thereto,
including exhibits, may be inspected and copies may be obtained at the same
place and in the same manner as described in "The Offer -- Section 13" under
"Additional Information Concerning Your Partnership."
AIMCO PROPERTIES, L.P.
40
<PAGE> 41
ANNEX I
OFFICERS AND DIRECTORS
The names and positions of the executive officers of Apartment Investment
and Management Company ("AIMCO"), AIMCO-GP, Inc. ("AIMCO-GP") and the directors
of AIMCO are set forth below. The two directors of AIMCO-GP are Terry Considine
and Peter Kompaniez. The two directors of the general partner of your
partnership are Peter K. Kompaniez and Patrick J. Foye. The two executive
officers of the general partner of your partnership are Patrick J. Foye,
Executive Vice President, and Carla R. Stoner, Senior Vice President -- Real
Estate Accounting. Unless otherwise indicated, the business address of each
executive officer and director is 1873 South Bellaire Street, 17th Floor,
Denver, Colorado 80222. Each executive officer and director is a citizen of the
United States of America.
<TABLE>
<CAPTION>
NAME POSITION
---- --------
<S> <C>
Terry Considine Chairman of the Board of Directors and Chief Executive Officer
Peter K. Kompaniez Vice Chairman, President and Director
Thomas W. Toomey Executive Vice President-- Finance and Administration
Joel F. Bonder Executive Vice President, General Counsel and Secretary
Patrick J. Foye Executive Vice President
Steven D. Ira Executive Vice President and Co-Founder
Harry G. Alcock Senior Vice President-- Acquisitions
Troy D. Butts Senior Vice President and Chief Financial Officer
Richard S. Ellwood Director
J. Landis Martin Director
Thomas L. Rhodes Director
John D. Smith Director
</TABLE>
<TABLE>
<CAPTION>
NAME PRINCIPAL OCCUPATIONS FOR THE LAST FIVE YEARS
---- ---------------------------------------------
<S> <C>
Terry Considine................................. Chief Executive Officer of AIMCO and AIMCO-GP since July 1994. He is the
sole owner of Considine Investment Co. and prior to July 1994 was owner of
approximately 75% of Property Asset Management, L.L.C., Limited Liability
Company, a Colorado limited liability company, and its related entities
(collectively, "PAM"), one of AIMCO's predecessors. On October 1, 1996,
Mr. Considine was appointed Co-Chairman and director of Asset Investors
Corp. and Commercial Asset Investors, Inc., two other public real estate
investment trusts, and appointed as a director of Financial Assets
Management, LLC, a real estate investment trust manager. Mr. Considine has
been involved as a principal in a variety of real estate activities,
including the acquisition, renovation, development and disposition of
properties. Mr. Considine has also controlled entities engaged in other
businesses such as television broadcasting, gasoline distribution and
environmental laboratories. Mr. Considine received a B.A. from Harvard
College, a J.D. from Harvard Law School and was formerly admitted as a
member of the Massachusetts Bar (inactive).
Peter K. Kompaniez.............................. Mr. Kompaniez has been Vice Chairman and a director of AIMCO since July
1994 and was appointed President of AIMCO in July1997. Mr. Kompaniez has
served as Vice President of AIMCO-GP from July 1994 through July 1998 and
was appointed President in July 1998. Mr. Kompaniez has been a director of
AIMCO-GP since July 1994. Since September 1993, Mr. Kompaniez has owned
75% of PDI Realty Enterprises, Inc., a Delaware corporation ("PDI"), one
of AIMCO's predecessors, and serves as its President and Chief Executive
Officer. From 1986 to 1993, he served as President and Chief Executive
Officer of Heron Financial Corporation ("HFC"), a United States holding
Company for Heron International, N.V.'s real estate and related assets.
While at HFC, Mr. Kompaniez administered the Acquisition, development and
disposition of approximately 8,150 apartment units (including 6,217 units
that have been acquired by the AIMCO) and 3.1 million square feet of
Commercial real estate. Prior to joining HFC, Mr. Kompaniez was a senior
partner with the law firm of Loeb and Loeb where he had extensive real
estate and REIT experience. Mr. Kompaniez received a B.A. from Yale
College and a J.D. from the University of California (Boalt Hall).
Thomas W. Toomey................................ Mr. Toomey has served as Senior Vice President-- Finance and
Administration of AIMCO since January 1996 and was promoted to Executive
Vice-President-Finance and Administration in March 1997. Mr. Toomey has
been Executive Vice President -- Finance and Administration of AIMCO-GP
similar capacity with Lincoln Property Company ("LPC") as well as Vice
President/Senior Controller and Director of Administrative Services of
Lincoln Property Services where he was responsible for LPC's computer
systems, accounting, tax, treasury services and benefits administration.
From 1984 to 1990, he was an audit manager with Arthur Andersen & Co.
where he served real estate and banking clients. From 1981 to 1983, Mr.
Toomey was on the audit staff of Kenneth Leventhal & Company. Mr. Toomey
received a B.S. in Business Administration/Finance from Oregon State
University and is a Certified Public Accountant.
</TABLE>
I-1
<PAGE> 42
<TABLE>
<S> <C>
Joel F. Bonder.................................. Mr. Bonder has served as Executive Vice President and General Counsel of
AIMCO since December 8, 1997. Mr. Bonder has been Executive Vice President
and General Counsel of AIMCO-GP since July 1998. Prior to joining AIMCO,
Mr. Bonder served as Senior Vice President and General Counsel of NHP
Incorporated from April 1994 until December 1997. Mr. Bonder served as
Vice President and Deputy General Counsel of NHP Incorporated from June
1991 to March 1994 and as Associate General Counsel of NHP from 1986 to
1991. From 1983 to 1985, Mr. Bonder was with the Washington, D.C. law firm
of Lane & Edson, P.C. From 1979 to 1983, Mr. Bonder practiced with the
Chicago law firm of Ross and Hardies. Mr. Bonder received an A.B. from the
University of Rochester and a J.D. from Washington University School of
Law.
Patrick J. Foye................................. Mr. Foye has served as Executive Vice President of AIMCO and AIMCO-GP
since May 1998. Prior to joining AIMCO, Mr. Foye was a partner in the law
firm of Skadden, Arps, Slate, Meagher & Flom LLP from 1989 to 1998 and was
Managing Partner of the firm's Brussels, Budapest and Moscow offices from
1992 through 1994. Mr. Foye is also Deputy Chairman of the Long Island
Power Authority and serves as a member of the New York State Privatization
Council. He received a B.A. from Fordham College and a J.D. from Fordham
University Law School.
Steven D. Ira................................... Mr. Ira is a Co-Founder of AIMCO and has served as Executive Vice
President of AIMCO since July 1994. Mr. Ira has been Executive Vice
President of AIMCO-GP since July 1998. From 1987 until July 1994, he
served as President of PAM. Prior to merging his firm with PAM in 1987,
Mr. Ira acquired extensive experience in property management. Between 1977
and 1981 he supervised the property management of over 3,000 apartment and
mobile home units in Colorado, Michigan, Pennsylvania and Florida, and in
1981 he joined with others to form the property management firm of
McDermott, Stein and Ira. Mr. Ira served for several years on the National
Apartment Manager Accreditation Board and is a former president of both
the National Apartment Association and the Colorado Apartment Association.
Mr. Ira is the sixth individual elected to the Hall of Fame of the
National Apartment Association in its 54-year history. He holds a
Certified Apartment Property Supervisor (CAPS) and a Certified Apartment
Manager designation from the National Apartment Association, a Certified
Property Manager (CPM) designation from the National Institute of Real
Estate Management (IREM) and he is a member of the Board of Directors of
the National Multi-Housing Council, the National Apartment Association and
the Apartment Association of Metro Denver. Mr. Ira received a B.S. from
Metropolitan State College in 1975.
Harry G. Alcock................................. Mr. Alcock has served as Vice President of AIMCO and AIMCO-GP since July
1996, and was promoted to Senior Vice President-- Acquisitions in October
1997, with responsibility for acquisition and financing activities since
July 1994. From June 1992 until July 1994, Mr. Alcock served as Senior
Financial Analyst for PDI and HFC. From 1988 to 1992, Mr. Alcock worked
for Larwin Development Corp., a Los Angeles based real estate developer,
with responsibility for raising debt and joint venture equity to fund land
acquisitions and development. From 1987 to 1988, Mr. Alcock worked for
Ford Aerospace Corp. He received his B.S. from San Jose State University.
Troy D. Butts................................... Mr. Butts has served as Senior Vice President and Chief Financial Officer
of AIMCO since November 1997. Mr. Butts has been Senior Vice President and
Chief Financial Officer of AIMCO-GP since July 1998. Prior to joining
AIMCO, Mr. Butts served as a Senior Manager in the audit practice of the
Real Estate Services Group for Arthur Andersen LLP in Dallas, Texas. Mr.
Butts was employed by Arthur Andersen LLP for ten years and his clients
were primarily publicly-held real estate companies, including office and
multi-family real estate investment trusts. Mr. Butts holds a Bachelor of
Business Administration degree in Accounting from Angelo State University
and is a Certified Public Accountant.
Richard S. Ellwood.............................. Mr. Ellwood was appointed a Director of AIMCO in July 1994 and is
12 Auldwood Lane currently Chairman of the Audit Committee. Mr. Ellwood is the founder and
Rumson, NJ 07660 President of R.S. Ellwood & Co., Incorporated, a real estate investment
banking firm. Prior to forming R.S. Ellwood & Co., Incorporated in 1987,
Mr. Ellwood had 31 years experience on Wall Street as an investment
banker, serving as: Managing Director and senior banker at Merrill Lynch
Capital Markets from 1984 to 1987; Managing Director at Warburg Paribas
Becker from 1978 to 1984; general partner and then Senior Vice President
and a director at White, Weld & Co. from 1968 to 1978; and in various
capacities at J.P. Morgan & Co. from 1955 to 1968. Mr. Ellwood currently
serves as a director of FelCor Suite Hotels, Inc. and Florida East Coast
Industries, Inc.
J. Landis Martin................................ Mr. Martin was appointed a Director of AIMCO in July 1994 and became
199 Broadway Chairman of the Compensation Committee in March 1998. Mr. Martin has
Suite 4300 served as President and Chief Executive Officer and a Director of NL
Denver, CO 80202 Industries, Inc., a manufacturer of titanium dioxide, since 1987. Mr.
Martin has served as Chairman of Tremont Corporation, a holding company
operating through its affiliates Titanium Metals Corporation ("TIMET") and
NL Industries, Inc., since 1990 and as Chief Executive Officer and a
director of Tremont since 1998. Mr. Martin has served as Chairman of
Timet, an integrated producer of titanium, since 1987 and Chief Executive
Officer since January 1995. From 1990 until its acquisition by Dresser
Industries, Inc. ("Dresser") in 1994, Mr. Martin served as Chairman of the
Board and Chief Executive Officer of Baroid Corporation, an oilfield
services company. In addition to Tremont, NL and TIMET, Mr. Martin is a
director of Dresser, which is engaged in the petroleum services,
hydrocarbon and engineering industries.
</TABLE>
I-2
<PAGE> 43
<TABLE>
<S> <C>
Carla R. Stoner................................. Ms. Stoner joined AIMCO in July 1997 as Vice President of Finance and
Administration and became Senior Vice President-- Real Estate Accounting
in November 1998. Prior to joining AIMCO, Ms. Stoner was with National
Housing Partners since 1989. While at National Housing Partners, Ms.
Stoner served as a real estate controller from 1989 to 1992, as Vice
President of Accounting from 1992 to 1995 and as Interim Chief Information
Officer from 1995 to July 1997. Prior to joining National Housing
Partners, Ms. Stoner was a Senior Auditor with Deloitte & Touche from 1984
to 1989. Ms. Stoner received a B.A. in accounting from Virginia Tech.
Thomas L. Rhodes................................ Mr. Rhodes was appointed a Director of AIMCO in July 1994. Mr. Rhodes has
215 Lexington Avenue served as the President and a Director of National Review magazine since
4th Floor November 30, 1992, where he has also served as a Director since 1998. From
New York, NY 10016 1976 to 1992, he held various positions at Goldman, Sachs & Co. and was
elected a General Partner in 1986 and served as a General Partner from
1987 until November 27, 1992. He is currently Co-Chairman of the Board,
Co-Chief Executive Officer and a Director of Commercial Assets Inc. and
Asset Investors Corporation. He also serves as a Director of Delphi
Financial Group, Inc. and its subsidiaries, Delphi International Ltd.,
Oracle Reinsurance Company, and the Lynde and Harry Bradley Foundation.
Mr. Rhodes is Chairman of the Empire Foundation for Policy Research, a
Founder and Trustee of Change NY, a Trustee of The Heritage Foundation,
and a Trustee of the Manhattan Institute.
John D. Smith................................... Mr. Smith was appointed a Director of AIMCO in November 1994. Mr. Smith is
3400 Peachtree Road Suite 831 Principal and President of John D. Smith Developments. Mr. Smith has been
Atlanta, GA 30326 a shopping center developer, owner and consultant for over 8.6 million
square feet of shopping center projects including Lenox Square in Atlanta,
Georgia. Mr. Smith is a Trustee and former President of the International
Council of Shopping Centers and was selected to be a member of the
American Society of Real Estate Counselors. Mr. Smith served as a Director
for Pan-American Properties, Inc. (National Coal Board of Great Britain)
formerly known as Continental Illinois Properties. He also serves as a
director of American Fidelity Assurance Companies and is retained as an
advisor by Shop System Study Society, Tokyo, Japan.
</TABLE>
I-3
<PAGE> 44
The letter of transmittal and any other required documents should be sent
or delivered by each unitholder or such unitholder's broker, dealer, bank,
trust company or other nominee to the Information Agent at one of its addresses
set forth below.
The Information Agent for the Offer Is:
RIVER OAKS PARTNERSHIP SERVICES, INC.
<TABLE>
<CAPTION>
By Mail: By Overnight Courier: By Hand:
<S> <C> <C>
P.O. Box 2065 111 Commerce Road 111 Commerce Road
S. Hackensack, N.J. 07606-2065 Carlstadt, N.J. 07072 Carlstadt, N.J. 07072
Attn.: Reorganization Dept.
</TABLE>
For information, please call:
TOLL FREE (888) 349-2005
I-4
<PAGE> 1
LETTER OF TRANSMITTAL
TO TENDER UNITS OF LIMITED PARTNERSHIP IN
DAVIDSON DIVERSIFIED REAL ESTATE II, L.P. (THE "PARTNERSHIP")
PURSUANT TO AN OFFER TO PURCHASE
DATED JULY 30, 1999 (THE "OFFER DATE")
BY
AIMCO PROPERTIES, L.P.
- --------------------------------------------------------------------------------
THE OFFER AND WITHDRAWAL RIGHTS WILL
EXPIRE AT 5:00 P.M., NEW YORK TIME,
ON AUGUST 27, 1999, UNLESS EXTENDED (THE "EXPIRATION DATE")
- --------------------------------------------------------------------------------
WE ARE OFFERING TO PURCHASE UNITS IN YOUR PARTNERSHIP FOR $2,899 PER UNIT.
The Information Agent for the offer is:
RIVER OAKS PARTNERSHIP SERVICES, INC.
<TABLE>
<S> <C> <C>
By Mail: By Overnight Courier: By Hand:
P.O. Box 2065 111 Commerce Road 111 Commerce Road
S. Hackensack, N.J. 07606-2065 Carlstadt, N.J. 07072 Carlstadt, N.J. 07072
Attn.: Reorganization Dept. Attn.: Reorganization Dept.
By Telephone:
TOLL FREE (888) 349-2005
</TABLE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
DESCRIPTION OF UNITS TENDERED
- --------------------------------------------------------------------------------------------------------------------
Name(s) and Address(es) of Registered Holder(s) (Please Units in Davidson Diversified Real Estate II, L.P.
indicate changes or corrections to the name, address
and tax identification number printed below.)
- --------------------------------------------------------------------------------------------------------------------
2. Number of 3. Total
1. Total Number of Units Tendered Number of
Units Owned for Cash Units Tendered
(#) (#) (#)
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 2
To participate in the offer, you must send a duly completed and executed copy of
this Letter of Transmittal and any other documents required by this Letter of
Transmittal so that such documents are received by River Oaks Partnership
Services, Inc., the Information Agent, on or prior to the Expiration Date,
unless extended. THE METHOD OF DELIVERY OF THIS LETTER OF TRANSMITTAL AND ALL
OTHER REQUIRED DOCUMENTS IS AT YOUR OPTION AND RISK, AND DELIVERY WILL BE DEEMED
MADE ONLY WHEN ACTUALLY RECEIVED BY THE INFORMATION AGENT. IF DELIVERY IS BY
MAIL, REGISTERED MAIL WITH RETURN RECEIPT REQUESTED IS RECOMMENDED. IN ALL
CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ASSURE TIMELY DELIVERY. DELIVERY OF
THIS LETTER OF TRANSMITTAL OR ANY OTHER REQUIRED DOCUMENTS TO AN ADDRESS OTHER
THAN AS SET FORTH ABOVE DOES NOT CONSTITUTE VALID DELIVERY.
--------------------------
IF YOU HAVE THE CERTIFICATE ORIGINALLY ISSUED TO REPRESENT YOUR
INTEREST IN THE PARTNERSHIP PLEASE SEND IT TO THE INFORMATION
AGENT WITH THIS LETTER OF TRANSMITTAL.
---------------------------
FOR INFORMATION OR ASSISTANCE IN CONNECTION WITH THE OFFER OR THE
COMPLETION OF THIS LETTER OF TRANSMITTAL, PLEASE CONTACT THE INFORMATION AGENT
AT (888) 349-2005 (TOLL FREE).
THE INSTRUCTIONS ACCOMPANYING THIS LETTER OF TRANSMITTAL SHOULD BE READ
CAREFULLY BEFORE THIS LETTER OF TRANSMITTAL IS COMPLETED.
- --------------------------------------------------------------------------------
SPECIAL PAYMENT INSTRUCTIONS
(SEE INSTRUCTIONS 2, 4 AND 9)
To be completed ONLY if the consideration for the pur chase price of Units
accepted for payment is to be issued in the name of someone other than the
undersigned.
[ ] Issue consideration to:
Name
-------------------------------------------------------------------
(Please Type or Print)
Address
----------------------------------------------------------------
- ------------------------------------------------------------------------
- ------------------------------------------------------------------------
(Include Zip Code)
- ------------------------------------------------------------------------
(Tax Identification or Social Security No.)
(See Substitute Form W-9)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTIONS 2, 4 AND 9)
To be completed ONLY if the consideration for the purchase price of
Units accepted for payment is to be sent to someone other than the undersigned
or to the undersigned at an address other than that shown above.
[ ] Mail consideration to:
Name
-------------------------------------------------------------------
(Please Type or Print)
Address
----------------------------------------------------------------
- ------------------------------------------------------------------------
- ------------------------------------------------------------------------
(Include Zip Code)
- --------------------------------------------------------------------------------
NOTE: SIGNATURES MUST BE PROVIDED BELOW
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
2
<PAGE> 3
Ladies and Gentlemen:
The undersigned hereby acknowledges that he or she has received and reviewed
(i) the Purchaser's Offer to Purchase relating to the offer by AIMCO Properties,
L.P. (the "Purchaser") to purchase Limited Partnership Interests (the "Units")
in the Partnership and (ii) this Letter of Transmittal and the Instructions
hereto, as each may be supplemented or amended from time to time (collectively,
the "Offer").
Upon the terms and subject to the conditions set forth in the Offer to
Purchase, and this Letter of Transmittal, the undersigned hereby tenders to the
Purchaser the Units set forth in the box above entitled "Description of Units
Tendered," including all interests in any limited partnership represented by
such units (collectively, the "Units"), at the price indicated on the Offer to
Purchase, less the amount of distributions, if any, made by the Partnership from
the Offer Date until the Expiration Date (the "Offer Price"), net to the
undersigned in cash, without interest.
Subject to and effective upon acceptance for payment of any of the Units
tendered hereby in accordance with the terms of the Offer, the undersigned
hereby irrevocably sells, assigns, transfers, conveys and delivers to, or upon
the order of, the Purchaser all right, title and interest in and to such Units
tendered hereby that are accepted for payment pursuant to the Offer, including,
without limitation, (i) all of the undersigned's interest in the capital of the
Partnership, and the undersigned's interest in all profits, losses and
distributions of any kind to which the undersigned shall at any time be entitled
in respect of the Units; (ii) all other payments, if any, due or to become due
to the undersigned in respect of the Units, under or arising out of the
agreement of limited partnership of the Partnership (the "Partnership
Agreement"), or any agreement pursuant to which the Units were sold (the
"Purchase Agreement"), whether as contractual obligations, damages, insurance
proceeds, condemnation awards or otherwise; (iii) all of the undersigned's
claims, rights, powers, privileges, authority, options, security interests,
liens and remedies, if any, under or arising out of the Partnership Agreement or
Purchase Agreement or the undersigned's ownership of the Units, including,
without limitation, all voting rights, rights of first offer, first refusal or
similar rights, and rights to be substituted as a limited partner of the
Partnership; and (iv) all present and future claims, if any, of the undersigned
against the Partnership, the other partners of the Partnership, or the general
partner and its affiliates, including the Purchaser, under or arising out of the
Partnership Agreement, the Purchase Agreement, the undersigned's status as a
limited partner, or the terms or conditions of the Offer, for monies loaned or
advanced, for services rendered, for the management of the Partnership or
otherwise.
The undersigned hereby irrevocably constitutes and appoints the Purchaser
and any designees of the Purchaser as the true and lawful agent and
attorney-in-fact of the undersigned with respect to such Units, with full power
of substitution (such power of attorney being deemed to be an irrevocable power
coupled with an interest), to vote or act in such manner as any such attorney
and proxy or substitute shall, in its sole discretion, deem proper with respect
to such Units, to do all such acts and things necessary or expedient to deliver
such Units and transfer ownership of such Units on the partnership books
maintained by the general partner of the Partnership, together with all
accompanying evidence of transfer and authenticity to, or upon the order of, the
Purchaser, to sign any and all documents necessary to authorize the transfer of
the Units to the Purchaser including, without limitation, the "Transferor's
(Seller's) Application for Transfer" created by the National Association of
Securities Dealers, Inc., if required, and upon receipt by the Information Agent
(as the undersigned's agent) of the Offer Price, to become a substitute limited
partner, to receive any and all distributions made by the Partnership from and
after the Expiration Date of the Offer (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, all in accordance with the terms
of the Offer. This appointment is effective upon the purchase of the Units by
the Purchaser as provided in the Offer and shall be irrevocable for a period of
ten years following the termination of the Offer. Upon the purchase of Units
pursuant to the Offer, all prior proxies and consents given by the undersigned
with respect to such Units will be revoked and no subsequent proxies or consents
may be given (and if given will not be deemed effective).
In addition to and without limiting the generality of the foregoing, the
undersigned hereby irrevocably (i) requests and authorizes (subject to and
effective upon acceptance for payment of any Unit tendered hereby) the
Partnership and its general partners to take any and all actions as may be
required to effect the transfer of the undersigned's Units to the Purchaser (or
its designee) and to admit the Purchaser as a substitute limited partner in the
Partnership under the terms of the Partnership Agreement; (ii) empowers the
Purchaser and its agent to execute and deliver to each 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 unitholder 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
3
<PAGE> 4
unitholder; (iii) agrees not to exercise any rights pertaining to the Units
without the prior consent of the Purchaser; and (iv) requests and consents to
the transfer of the Units, to be effective on the books and records of the
Partnership as of the Offer date.
NOTWITHSTANDING ANY PROVISION IN A PARTNERSHIP AGREEMENT OR ANY PURCHASE
AGREEMENT TO THE CONTRARY, THE UNDERSIGNED HEREBY DIRECTS EACH GENERAL PARTNER
OF THE PARTNERSHIP TO MAKE ALL DISTRIBUTIONS AFTER THE PURCHASER ACCEPTS THE
TENDERED UNITS FOR PAYMENT TO THE PURCHASER OR ITS DESIGNEE. Subject to and
effective upon acceptance for payment of any Unit tendered hereby, the
undersigned hereby requests that the Purchaser be admitted to the Partnership as
a substitute limited partner under the terms of the Partnership Agreement. Upon
request, the undersigned will execute and deliver additional documents deemed by
the Information Agent or the Purchaser to be necessary or desirable to complete
the assignment, transfer and purchase of Units tendered hereby and will hold any
distributions received from the Partnership after the Expiration Date in trust
for the benefit of the Purchaser and, if necessary, will promptly forward to the
Purchaser any such distributions immediately upon receipt. The Purchaser
reserves the right to transfer or assign, in whole or in part, from time to
time, to one or more of its 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 unitholders to receive payment for Units validly tendered and accepted
for payment pursuant to the Offer.
By executing this Letter of Transmittal, the undersigned represents that
either (i) the undersigned is not a plan subject to Title I of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"), or Section 4975 of
the Internal Revenue Code of 1986, as amended (the "Code"), or an entity deemed
to hold "plan assets" within the meaning of 29 C.F.R. Section 2510.3-101 of any
such plan, or (ii) the tender and acceptance of Units pursuant to the Offer will
not result in a nonexempt prohibited transaction under Section 406 of ERISA or
Section 4975 of the Code.
The undersigned understands that a tender of Units to the Purchaser will
constitute a binding agreement between the undersigned and the Purchaser upon
the terms and subject to the conditions of the Offer. The undersigned recognizes
that under certain circumstances set forth in the Offer, the Purchaser may not
be required to accept for payment any of the Units tendered hereby. In such
event, the undersigned understands that any Letter of Transmittal for Units not
accepted for payment may be destroyed by the Purchaser (or its agent). EXCEPT AS
STATED IN THE OFFER, THIS TENDER IS IRREVOCABLE, PROVIDED THAT UNITS TENDERED
PURSUANT TO THE OFFER MAY BE WITHDRAWN AT ANY TIME PRIOR TO THE EXPIRATION DATE,
OR UNLESS ALREADY ACCEPTED FOR PAYMENT, ANY TIME AFTER 60 DAYS FROM THE OFFER
DATE.
THE UNDERSIGNED HAS BEEN ADVISED THAT THE PURCHASER IS AN AFFILIATE OF THE
GENERAL PARTNER OF THE PARTNERSHIP AND NO SUCH GENERAL PARTNER MAKES ANY
RECOMMENDATION AS TO WHETHER TO TENDER OR REFRAIN FROM TENDERING UNITS IN THE
OFFER. THE UNDERSIGNED HAS MADE HIS OR HER OWN DECISION TO TENDER UNITS.
The undersigned hereby represents and warrants for the benefit of the
Partnership and the Purchaser that the undersigned owns the Units tendered
hereby and has full power and authority and has taken all necessary action to
validly tender, sell, assign, transfer, convey and deliver the Units tendered
hereby and that when the same are accepted for payment 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 and that the transfer and
assignment contemplated herein are in compliance with all applicable laws and
regulations.
Our records indicate that the undersigned owns the number of Units set forth
in the box above entitled "Description of Units Tendered" under the column
entitled "Total Number of Units Owned." If you would like to tender only a
portion of your Units, please so indicate in the space provided in the box above
entitled "Description of Units Tendered."
All authority herein conferred or agreed to be conferred shall survive the
death or incapacity of the undersigned, and any obligations of the undersigned
shall be binding upon the heirs, personal representatives, trustees in
bankruptcy, legal representatives, and successors and assigns of the
undersigned.
The undersigned further represents and warrants that, to the extent a
certificate evidencing the Units tendered hereby (the "original certificate") is
not delivered by the undersigned together with this Letter of Transmittal, (i)
the undersigned represents and warrants to the Purchaser that the undersigned
has not sold, transferred, conveyed, assigned, pledged,
4
<PAGE> 5
deposited or otherwise disposed of any portion of the Units, (ii) the
undersigned has caused a diligent search of its records to be taken and has been
unable to locate the original certificate, (iii) if the undersigned shall find
or recover the original certificate evidencing the Units, the undersigned will
immediately and without consideration surrender it to the Purchaser; and (iv)
the undersigned shall at all times indemnify, defend, and save harmless the
Purchaser and the Partnership, its successors, and its assigns from and against
any and all claims, actions, and suits whether groundless or otherwise, and from
and against any and all liabilities, losses, damages, judgments, costs, charges,
counsel fees, and other expenses of every nature and character by reason of
honoring or refusing to honor the original certificate when presented by or on
behalf of a holder in due course of a holder appearing to or believed by the
partnership to be such, or by issuance or delivery of a replacement certificate,
or the making of any payment, delivery, or credit in respect of the original
certificate without surrender thereof, or in respect of the replacement
certificate.
5
<PAGE> 6
================================================================================
SIGNATURE BOX
(SEE INSTRUCTION 2)
- --------------------------------------------------------------------------------
Please sign exactly as your name is printed on the front of this Letter of
Transmittal. For joint owners, each joint owner must sign. (See Instruction 2).
TRUSTEES, EXECUTORS, ADMINISTRATORS, GUARDIANS, ATTORNEYS-IN-FACT, OFFICERS
OF A CORPORATION OR OTHER PERSONS ACTING IN A FIDUCIARY OR REPRESENTATIVE
CAPACITY, PLEASE COMPLETE THIS BOX AND SEE INSTRUCTION 2.
The signatory hereto hereby tenders the Units indicated in this Letter of
Transmittal to the Purchaser pursuant to the terms of the Offer, and certifies
under penalties of perjury that the statements in Box A, Box B and, if
applicable, Box C and Box D are true.
X
-----------------------------------------------------------------
(Signature of Owner)
X
-----------------------------------------------------------------
(Signature of Joint Owner)
Name and Capacity (if other than individuals):
---------------------
Title:
-------------------------------------------------------------
Address:
-----------------------------------------------------------
-----------------------------------------------------------------
(City) (State) (Zip)
Area Code and Telephone No. (Day):
---------------------------------
(Evening):
------------------------------
SIGNATURE GUARANTEE (IF REQUIRED)
(SEE INSTRUCTION 2)
Name and Address of Eligible Institution:
---------------------------------
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Authorized Signature: X
-----------------------------------------------------
Name:
-----------------------------------------------------------------------
Title: Date:
--------------------------------------- -------------
================================================================================
6
<PAGE> 7
INSTRUCTIONS
FOR COMPLETING LETTER OF TRANSMITTAL
1. REQUIREMENTS OF TENDER. To be effective, a duly completed and signed
Letter of Transmittal (or facsimile thereof) and any other required
documents must be received by the Information Agent at one of its
addresses (or its facsimile number) set forth herein before
5:00 p.m., New York Time, on the Expiration Date, unless extended.
To ensure receipt of the Letter of Transmittal and any other
required documents, it is suggested that you use overnight courier
delivery or, if the Letter of Transmittal and any other required
documents are to be delivered by United States mail, that you use
certified or registered mail, return receipt requested.
WHEN TENDERING, YOU MUST SEND ALL PAGES OF THE LETTER OF TRANSMITTAL,
INCLUDING TAX CERTIFICATIONS (BOXES A, B, AND C).
THE METHOD OF DELIVERY OF THE LETTER OF TRANSMITTAL AND ALL OTHER
REQUIRED DOCUMENTS IS AT THE OPTION AND RISK OF THE TENDERING UNITHOLDER
AND DELIVERY WILL BE DEEMED MADE ONLY WHEN ACTUALLY RECEIVED BY THE
INFORMATION AGENT. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO
ASSURE TIMELY DELIVERY.
2. SIGNATURE REQUIREMENTS.
INDIVIDUAL AND JOINT OWNERS -- After carefully reading and completing the
Letter of Transmittal, to tender Units, unitholders must sign at the "X"
in the Signature Box of the Letter of Transmittal. The signature(s) must
correspond exactly with the names printed (or corrected) on the front of
the Letter of Transmittal. If the Letter of Transmittal is signed by the
unitholder (or beneficial owner in the case of an IRA), no signature
guarantee on the Letter of Transmittal is required. If any tendered Units
are registered in the names of two or more joint owners, all such owners
must sign this Letter of Transmittal.
IRAS/ELIGIBLE INSTITUTIONS -- For Units held in an IRA account, the
beneficial owner should sign in the Signature Box and no signature
guarantee is required. Similarly, if Units are tendered for the account
of a member firm of a registered national security exchange, a member
firm of the National Association of Securities Dealers, Inc. or a
commercial bank, savings bank, credit union, savings and loan association
or trust company having an office, branch or agency in the United States
(each an "Eligible Institution"), no signature guarantee is required.
TRUSTEES, CORPORATIONS, PARTNERSHIP AND FIDUCIARIES -- Trustees,
executors, administrators, guardians, attorneys-in-fact, officers of a
corporation, authorized partners of a partnership or other persons acting
in a fiduciary or representative capacity must sign at the "X" in the
Signature Box and have their signatures guaranteed by an Eligible
Institution by completing the signature guarantee set forth in the
Signature Box of the Letter of Transmittal. If the Letter of Transmittal
is signed by trustees, administrators, guardians, attorneys-in-fact,
officers of a corporation, authorized partners of a partnership or others
acting in a fiduciary or representative capacity, such persons should, in
addition to having their signatures guaranteed, indicate their title in
the Signature Box and must submit proper evidence satisfactory to the
Purchaser of their authority to so act (see Instruction 3 below).
3. DOCUMENTATION REQUIREMENTS. In addition to the information required
to be completed on the Letter of Transmittal, additional
documentation may be required by the Purchaser under certain
circumstances including, but not limited to, those listed below.
Questions on documentation should be directed to the Information
Agent at its telephone number set forth herein.
<TABLE>
<S> <C> <C>
DECEASED OWNER (JOINT TENANT) -- Copy of death certificate.
DECEASED OWNER (OTHERS) -- Copy of death certificate (see also
Executor/Administrator/Guardian below).
EXECUTOR/ADMINISTRATOR/GUARDIAN -- Copy of court appointment documents for executor or
administrator; and
(a) a copy of applicable provisions of the will (title
page, executor(s)' powers, asset distribution); or
(b) estate distribution documents.
ATTORNEY-IN-FACT -- Current power of attorney.
</TABLE>
8
<PAGE> 8
<TABLE>
<S> <C> <C>
CORPORATION/PARTNERSHIP -- Corporate resolution(s) or other evidence of authority
to act. Partnership should furnish a copy of the part
nership agreement.
TRUST/PENSION PLANS -- Unless the trustee(s) are named in the registration, a
copy of the cover page of the trust or pension plan,
along with a copy of the section(s) setting forth names
and powers of trustee(s) and any amendments to such
sections or appointment of successor trustee(s).
</TABLE>
4. SPECIAL PAYMENT AND DELIVERY INSTRUCTIONS. If consideration is to be
issued in the name of a person other than the person signing the
Signature Box of the Letter of Transmittal or if consideration is to
be sent to someone other than such signer or to an address other
than that set forth on the Letter of Transmittal in the box entitled
"Description of Units Tendered," the appropriate boxes on the Letter
of Transmittal should be completed.
5. TAX CERTIFICATIONS. The unitholder(s) tendering Units to the
Purchaser pursuant to the Offer must furnish the Purchaser with the
unitholder(s)' taxpayer identification number ("TIN") and certify as
true, under penalties of perjury, the representations in Box A, Box
B and, if applicable, Box C. By signing the Signature Box, the
unitholder(s) certifies that the TIN as printed (or corrected) on
this Letter of Transmittal in the box entitled "Description of Units
Tendered" and the representations made in Box A, Box B and, if
applicable, Box C, are correct. See attached Guidelines for
Certification of Taxpayer Identification Number on Substitute Form
W-9 for guidance in determining the proper TIN to give the
Purchaser.
U.S. PERSONS. A unitholder that is a U.S. citizen or a resident alien
individual, a domestic corporation, a domestic partnership, a domestic
trust or a domestic estate (collectively, "U.S. Persons"), as those terms
are defined in the Code, should follow the instructions below with
respect to certifying Box A and Box B.
BOX A - SUBSTITUTE FORM W-9.
Part (i), Taxpayer Identification Number -- Tendering unitholders must
certify to the Purchaser that the TIN as printed (or corrected) on this
Letter of Transmittal in the box entitled "Description of Units Tendered"
is correct. If a correct TIN is not provided, penalties may be imposed by
the Internal Revenue Service (the "IRS"), in addition to the unitholder
being subject to backup withholding.
Part (ii), Backup Withholding -- In order to avoid 31% Federal income tax
backup withholding, the tendering unitholder must certify, under penalty
of perjury, that such unitholder is not subject to backup withholding.
Certain unitholders (including, among others, all corporations and
certain exempt non-profit organizations) are not subject to backup
withholding. Backup withholding is not an additional tax. If withholding
results in an overpayment of taxes, a refund may be obtained from the
IRS. DO NOT CHECK THE BOX IN BOX A, PART (II), UNLESS YOU HAVE BEEN
NOTIFIED BY THE IRS THAT YOU ARE SUBJECT TO BACKUP WITHHOLDING.
When determining the TIN to be furnished, please refer to the following
as a guide:
Individual accounts - should reflect owner's TIN.
Joint accounts - should reflect the TIN of the owner whose name appears
first.
Trust accounts - should reflect the TIN assigned to the trust.
IRA custodial accounts - should reflect the TIN of the custodian (not
necessary to provide).
Custodial accounts for the benefit of minors should reflect the TIN of
the minor.
Corporations, partnership or other business entities - should reflect the
TIN assigned to that entity.
By signing the Signature Box, the unitholder(s) certifies that the TIN as
printed (or corrected) on the front of the Letter of Transmittal is
correct.
BOX B - FIRPTA AFFIDAVIT -- Section 1445 of the Code requires that each
unitholder transferring interests in a partnership with real estate
assets meeting certain criteria certify under penalty of perjury the
representations made in Box B, or be subject to withholding of tax equal
to 10% of the purchase price for interests purchased. Tax withheld under
Section 1445 of the Code is not an additional tax. If withholding results
in an overpayment of tax, a refund may be obtained from the IRS. PART (i)
SHOULD BE CHECKED ONLY IF THE TENDERING UNITHOLDER IS NOT A U.S. PERSON,
AS DESCRIBED THEREIN.
9
<PAGE> 9
BOX C - FOREIGN PERSONS -- In order for a tendering unitholder who is a
Foreign Person (i.e., not a U.S. Person, as defined above) to qualify as
exempt from 31% backup withholding, such foreign Unitholder must certify,
under penalties of perjury, the statement in Box C of this Letter of
Transmittal, attesting to that Foreign Person's status by checking the
box preceding such statement. UNLESS THE BOX IS CHECKED, SUCH UNITHOLDER
WILL BE SUBJECT TO 31% WITHHOLDING OF TAX.
6. VALIDITY OF LETTER OF TRANSMITTAL. All questions as to the validity,
form, eligibility (including time of receipt) and acceptance of a
Letter of Transmittal and other required documents will be
determined by the Purchaser and such determination will be final and
binding. The Purchaser's interpretation of the terms and conditions
of the Offer (including these Instructions for this Letter of
Transmittal) will be final and binding. The Purchaser will have the
right to waive any irregularities or conditions as to the manner of
tendering. Any irregularities in connection with tenders, unless
waived, must be cured within such time as the Purchaser shall
determine. This Letter of Transmittal will not be valid until any
irregularities have been cured or waived. Neither the Purchaser nor
the Information Agent are under any duty to give notification of
defects in a Letter of Transmittal and will incur no liability for
failure to give such notification.
7. ASSIGNEE STATUS. Assignees must provide documentation to the
Information Agent which demonstrates, to the satisfaction of the
Purchaser, such person's status as an assignee.
8. TRANSFER TAXES. The amount of any transfer taxes (whether imposed on
the registered holder or such person) payable on account of the
transfer to such person will be deducted from the purchase price
unless satisfactory evidence of the payment of such taxes or
exemption therefrom is submitted.
10
<PAGE> 10
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
IDENTIFICATION
FOR THIS TYPE OF ACCOUNT: NUMBER OF - -
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
1. An individual account The individual
2. Two or more individuals (joint account) The actual owner of the account or, if combined
funds, the first individual on the account
3. Husband and wife (joint account) The actual owner of the account or, if joint funds,
either person
4. Custodian account of a minor (Uniform Gift to The minor (2)
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 committee The ward, minor or incompetent person (3)
for a designated ward, minor or incompetent
person (3)
7. a. The usual revocable savings trust account The grantor trustee (1)
(grantor is also trustee)
b. So-called trust account that is not a legal The actual owner (1)
or valid trust under state law
8. Sole proprietorship account The owner (4)
9. A valid trust, estate or pension trust The legal entity (Do not 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 educational The organization
organization account
12. Partnership account held in the name of the The partnership
business
13. Association, club, or other tax-exempt The organization
organization
14. A broker or registered nominee The broker or nominee
15. Account with the Department of Agriculture The public entity
in the name of a public entity (such as a
State or local government, school district, or
prison) that receives agricultural program
payments
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
(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 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.
11
<PAGE> 11
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
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:
- A corporation.
- A financial institution.
- 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.
- The United States or any agency or instrumentality thereof.
- A State, the District of Columbia, a possession of the United States, or
any subdivision or instrumentality thereof.
- A foreign government, a political subdivision of a foreign government, or
any agency or instrumentality thereof.
- An international organization or any agency or instrumentality thereof.
- A registered dealer in securities or commodities registered in the U.S.
or a possession of the U.S.
- A real estate investment trust.
- A common trust fund operated by a bank under section 584(a) of the Code.
- An exempt charitable remainder trust, or a non-exempt trust described in
section 4947 (a)(1).
- An entity registered at all times under the Investment Company Act of
1940.
- A foreign central bank of issue.
- 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:
- Payments to nonresident aliens subject to withholding under section 1441
of the Code.
- Payments to Partnerships not engaged in a trade or business in the U.S.
and which have at least one nonresident partner.
- Payments of patronage dividends where the amount received is not paid in
money.
- Payments made by certain foreign organizations.
- Payments made to an appropriate nominee.
- Section 404(k) payments made by an ESOP.
12
<PAGE> 12
Payments of interest not generally subject to backup withholding include the
following:
- 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. Payments of tax exempt interest (including exempt interest
dividends under section 852 of the Code).
- Payments described in section 6049(b)(5) of the Code to nonresident
aliens.
- Payments on tax-free covenant bonds under section 1451 of the Code.
- Payments made by certain foreign organizations.
- Payments of mortgage interest to you.
- Payments made to an appropriate nominee.
Exempt payees described above should file a 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 of the Code.
PRIVACY ACT NOTICE - - Section 6109 of the Code 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) 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.
(3) 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.
13
<PAGE> 13
The Information Agent for the offer is:
RIVER OAKS PARTNERSHIP SERVICES, INC.
<TABLE>
<S> <C> <C>
By Mail: By Overnight Courier: By Hand:
P.O. Box 2065 111 Commerce Road 111 Commerce Road
S. Hackensack, N.J. 07606-2065 Carlstadt, N.J. 07072 Carlstadt, N.J. 07072
Attn.: Reorganization Dept. Attn.: Reorganization Dept.
By Telephone:
TOLL FREE (888) 349-2005
</TABLE>
14
<PAGE> 1
AIMCO PROPERTIES, L.P.
1873 SOUTH BELLAIRE STREET, 17TH FLOOR
DENVER, COLORADO 80222
July 30, 1999
Dear Unitholder:
We are offering to acquire up to 479.03 units in your partnership,
Davidson Diversified Real Estate II, L.P. Our offer presents you with the
following two options, which you are free to accept or reject in any
combination you like:
1. You may tender each of your units in exchange for $2,899
in cash, in which case you may recognize a gain or loss for federal
income tax purposes.
2. You may retain any or all of your units. If you choose to
retain any or all of your units, your rights as a holder of units will
remain unchanged. You will continue to participate in gains and losses
of your partnership, and you will receive distributions, if any,
payable in respect of your units.
We are offering to acquire up to 479.03 outstanding units in your
partnership. Our offer is subject to a minimum of 35% of the units being
tendered. If more units are tendered than we are offering to acquire, we will
prorate the purchase so that the same approximate percentage of units tendered
by each partner will be purchased. YOU WILL NOT BE REQUIRED TO PAY ANY
COMMISSIONS OR FEES IN CONNECTION WITH ANY DISPOSITION OF YOUR UNITS PURSUANT
TO OUR OFFER. Our offer price will be reduced for any distributions
subsequently made by your partnership prior to the expiration of our offer.
There are advantages and disadvantages to you of accepting or
declining our offer. The terms of the offer are more fully described in the
enclosed materials. These documents describe the material risks and
opportunities associated with the offer, including certain tax considerations.
Please review these documents carefully. The general partner of your
partnership makes no recommendation as to whether you should tender or refrain
from tendering your units. Although the general partner believes the offer is
fair, you must make your own decision whether or not to participate in the
offer, based upon a number of factors, including your financial position, your
need or desire for liquidity, other financial opportunities available to you,
and your tax position and the tax consequences to you of selling your units.
If you desire to tender any of your units in response to our offer,
you should complete and sign the enclosed letter of transmittal in accordance
with the enclosed instructions and mail or deliver the signed letter of
transmittal and any other required documents to River Oaks Partnership
Services, Inc., which is acting as the Information Agent in connection with our
offer, at the address set forth on the back cover of the enclosed Offer to
Purchase. The offer will expire at 5:00 p.m., New York City time, on August 27,
1999, unless extended. If you have questions or require further information,
please call the Information Agent, toll free, at (888) 349-2005.
Very truly yours,
AIMCO PROPERTIES, L.P.
<PAGE> 1
Exhibit (z)(1)
AGREEMENT OF JOINT FILING
Cooper River Properties, L.L.C., AIMCO/IPT, Inc., Insignia Properties,
L.P., AIMCO Properties, L.P., AIMCO-GP, Inc. and Apartment Investment and
Management Company agree that the Amendment No. 1 to Schedule 13D to which this
agreement is attached as an exhibit, and all further amendments thereto, and all
filings under Schedule 14D-1 to which this agreement is attached as an exhibit,
and all amendments thereto, shall be filed on behalf of each of them. This
agreement is intended to satisfy the requirements of Rule 13d-1(f)(1)(iii) under
the Securities Exchange Act of 1934, as amended.
Dated: July 30, 1999
COOPER RIVER PROPERTIES, L.L.C.
By: /s/Patrick J. Foye
--------------------------------
Executive Vice President
AIMCO/IPT, INC.
By: /s/Patrick J. Foye
--------------------------------
Executive Vice President
INSIGNIA PROPERTIES, L.P.
By: AIMCO/IPT, INC.
(General Partner)
By: /s/Patrick J. Foye
--------------------------------
Executive Vice President
AIMCO PROPERTIES, L.P.
By: AIMCO-GP, INC.
(General Partner)
By: /s/Patrick J. Foye
--------------------------------
Executive Vice President
AIMCO-GP, INC.
By: /s/Patrick J. Foye
--------------------------------
Executive Vice President
APARTMENT INVESTMENT
AND MANAGEMENT COMPANY
By: /s/Patrick J. Foye
--------------------------------
Executive Vice President
