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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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SCHEDULE 14D-9
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SOLICITATION/RECOMMENDATION STATEMENT
PURSUANT TO SECTION 14(D)(4)
OF THE SECURITIES EXCHANGE ACT OF 1934
SHELTER PROPERTIES VII LIMITED PARTNERSHIP,
A SOUTH CAROLINA LIMITED PARTNERSHIP
(Name of Subject Company)
SHELTER PROPERTIES VII LIMITED PARTNERSHIP,
A SOUTH CAROLINA LIMITED PARTNERSHIP
(Name of Person(s) Filing Statement)
UNITS OF LIMITED PARTNERSHIP INTEREST
(Title of Class of Securities)
N/A
(Cusip Number of Class of Securities)
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WILLIAM H. JARRARD, JR.
PRESIDENT
SHELTER REALTY VII CORPORATION
ONE INSIGNIA FINANCIAL PLAZA
P.O. BOX 19059
GREENVILLE, SOUTH CAROLINA 29602
(864) 239-1300
(Name, Address and Telephone Number of Person
Authorized to Receive Notice and Communications on Behalf of
the person(s) filing statement)
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ITEM 1. SECURITY AND SUBJECT COMPANY.
The name of the subject company is Shelter Properties VII
Limited Partnership, a South Carolina limited partnership (the "Partnership"),
and the address of the principal executive offices of the Partnership is One
Insignia Financial Plaza, Greenville, South Carolina 29602. The title of the
class of equity securities to which this statement relates is the units of
limited partnership interest ("Units") of the Partnership.
ITEM 2. TENDER OFFER OF THE BIDDER.
This statement relates to an offer by Madison River Properties,
L.L.C., a Delaware limited liability company (the "Purchaser"), to purchase up
to 7,000 of the outstanding Units at a purchase price of $350 per Unit, net to
the seller in cash, without interest, upon the terms and subject to the
conditions set forth in an Offer to Purchase dated December 17, 1997 (the
"Offer to Purchase") and related Assignment of Partnership Interest (which
collectively constitute the "Offer"). A Tender Offer Statement on Schedule
14D-1 with respect to the Offer has been filed by the Purchaser, Insignia
Properties, L.P., a Delaware limited partnership ("IPLP"), Insignia Properties
Trust, a Maryland real estate investment trust ("IPT") and Insignia Financial
Group, Inc., a Delaware corporation ("Insignia") (collectively, the
"Bidders").
The address of the Purchaser's principal executive offices is
One Insignia Financial Plaza, P.O. Box 19059, Greenville, South Carolina
29602.
ITEM 3. IDENTITY AND BACKGROUND.
(a) The name and business address of the Partnership, which is
the person filing this statement, are set forth in Item 1 above.
(b)(1) Shelter Realty VII Corporation, which is the corporate
general partner of the Partnership (the "General Partner"), is a wholly-owned
subsidiary of IPT. The individual general partner of the Partnership, N.
Barton Tuck, Jr., is prohibited by the Limited Partnership Agreement from
participating in the activities of the Partnership.
In December 1990, Insignia purchased substantially all of the assets
of U.S. Shelter Corporation, a major property management and real estate
services company and an affiliate of the General Partner. In connection with
this acquisition, Insignia acquired general partner interests in approximately
150 limited partnerships, including the Partnership. The Purchaser is a newly
formed, wholly-owned subsidiary of IPLP, which is the operating partnership of
IPT. IPT is the sole general partner of IPLP (owning approximately 66% of the
total equity interests in IPLP), and Insignia is the sole limited partner of
IPLP (owning approximately 34% of the total equity interests in IPLP).
Insignia and its affiliates also own approximately 67% of the outstanding
common shares of IPT.
For more than the past three years, Insignia Residential Group,
L.P. ("IRG"), which is an affiliate of Insignia and the Purchaser, has
provided property management services to the Partnership, and Insignia
(directly or through affiliates) has performed asset management, partnership
administration and investor relations services for the Partnership.
By reason of the relationships described in the two preceding
paragraphs, the General Partner has conflicts of interest in considering the
Offer.
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The Partnership paid IRG property management fees for property
management services in the amounts of approximately $182,000 and $171,000 for
the years ended December 31, 1996 and 1995, respectively, and has paid IRG
property management fees equal to $137,000 during the first nine months of
1997. The Partnership reimbursed the General Partner and its affiliates
(including Insignia) for expenses incurred in connection with asset management
and partnership administration services performed by them for the Partnership
during 1996 and 1995 in the amounts of $97,000 and $68,000, respectively, and
has reimbursed them for such services in the amount of $103,000 through
September 30, 1997. The reimbursement amounts for the year ended December 31,
1996 and the nine-month period ended September 30, 1997 include $18,000 and
$45,000, respectively, which was paid to an affiliate for costs incurred in
connection with construction oversight services. The Partnership insures its
properties under a master policy through an agency and insurer unaffiliated
with the General Partner. An affiliate of the General Partner acquired, in the
acquisition of a business, certain financial obligations from an insurance
agency which was later acquired by the agent who placed the current year's
master policy. The current agent assumed the financial obligations to the
affiliate of the General Partner who receives payments on these obligations
from the agent. Insignia and the General Partner believe that the aggregate
financial benefit derived by Insignia and its affiliates from the arrangement
described in the three preceding sentences is immaterial.
As described above, the Purchaser and the General Partner are
affiliates of and controlled by IPT, which is controlled by Insignia. The
General Partner has conflicts of interest in considering the Offer, including
(i) as a result of the fact that a sale or liquidation of the Partnership's
assets would result in a decrease or elimination of the fees paid to the
General Partner and/or its affiliates and (ii) the fact that as a consequence
of the Purchaser's ownership of Units, the Purchaser (which is an affiliate of
the General Partner) may have incentives to seek to maximize the value of its
ownership of Units, which in turn may result in a conflict for the General
Partner in attempting to reconcile the interests of the Purchaser (which is an
affiliate of the General Partner) with the interests of the other Limited
Partners. In addition, the Purchaser (which is an affiliate of the General
Partner) is making the Offer with a view to making a profit. Accordingly,
there is a conflict between the desire of the Purchaser (which is an affiliate
of the General Partner) to purchase Units at a low price and the desire of the
Limited Partners to sell their Units at a high price.
As described in the Offer to Purchase, the Purchaser (which is
an affiliate of the General Partner) expects to pay for the Units it purchases
pursuant to the Offer with funds provided by IPLP as capital contributions.
IPLP in turn intends to use its cash on hand to make such contributions. It is
possible, however, that in connection with its future financing activities,
IPT or IPLP may cause or request the Purchaser (which is an affiliate of the
General Partner) to pledge the Units as collateral for loans, or otherwise
agree to terms which provide IPT, IPLP and the Purchaser with incentives to
generate substantial near-term cash flow from the Purchaser's investment in
the Units. This could be the case, for example, if a loan has a "balloon"
maturity after a relatively short time or bears a high or increasing interest
rate. In such a situation, the General Partner may experience a conflict of
interest in seeking to reconcile the best interests of the Partnership with
the need of its affiliates for cash flow from the Partnership's activities.
If the Purchaser is successful in acquiring a significant number
of Units pursuant to the Offer, the Purchaser (which is an affiliate of the
General Partner) will have the right to vote those Units and thereby
significantly influence all voting decisions with respect to the Partnership,
including decisions concerning liquidation, amendments to the Partnership's
Limited Partnership Agreement (the "Limited Parntership Agreement"), removal
and replacement of the
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General Partner and mergers, consolidations and other extraordinary
transactions. This means that (i) non-tendering Limited Partners could be
prevented from taking action they desire but that IPT (which is an affiliate
of the General Partner) opposes and (ii) IPT (which is an affiliate of the
General Partner) may be able to take action desired by IPT but opposed by the
non-tendering Limited Partners.
Under the Limited Partnership Agreement, Limited Partners
holding a majority of the Units are entitled to take action with respect to a
variety of matters, including removal of a general partner and in certain
circumstances election of new or successor general partners, dissolution of
the Partnership, the sale of all or substantially all of the assets of the
Partnership, and most types of amendments to the Limited Partnership
Agreement. In general, IPLP and the Purchaser (which are affiliates of the
General Partner) will vote the Units owned by them in whatever manner they
deem to be in the best interests of IPT, which, because of their relationship
with the General Partner, also may be in the interest of the General Partner,
but may not be in the interest of other Limited Partners.
To the best knowledge of the General Partner, except as
described in this Schedule 14D-9, there are no other material agreements,
arrangements, understandings or any actual or potential conflicts of interest
between the Partnership, the General Partner and their affiliates and the
Bidders, their executive officers, directors or affiliates.
ITEM 4. THE SOLICITATION OR RECOMMENDATION.
Because of the existing and potential future conflicts of
interest described in Item 3 above, the Partnership and the General Partner
are remaining neutral and making no recommendation as to whether Limited
Partners should tender their Units in response to the Offer.
ITEM 5. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED.
Neither the Partnership nor any person acting on its behalf has
employed, retained or compensated, or intends to employ, retain or compensate,
any person or class of person to make solicitations or recommendation to
Limited Partners on its behalf concerning the Offer.
ITEM 6. RECENT TRANSACTIONS AND INTEREST WITH RESPECT TO SECURITIES.
(a) No transactions in the Units have been effected during the
past 60 days by the Partnership or the General Partner or, to the knowledge of
the General Partner, by any of its current or former executive officers,
directors or affiliates.
(b) To the knowledge of the Partnership, neither the General
Partner nor any of its current or former executive officers, directors or
affiliates intends to tender pursuant to the Offer any Units beneficially
owned by them.
ITEM 7. CERTAIN NEGOTIATIONS AND TRANSACTIONS BY THE SUBJECT COMPANY.
None.
ITEM 8. ADDITIONAL INFORMATION TO BE FURNISHED.
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None.
ITEM 9. MATERIAL TO BE FILED AS EXHIBITS.
(a) Form of cover letter to Limited Partners of the
Partnership dated December 17, 1997.
(b) None.
(c) None.
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SIGNATURE
After reasonable inquiry and to the best of my knowledge and
belief, I certify that the information set forth in this statement is true,
complete and correct.
Dated: December 17, 1997
SHELTER PROPERTIES VII LIMITED PARTNERSHIP,
a South Carolina limited partnership
By: Shelter Realty VII Corporation
Its Corporate General Partner
By: /s/ William H. Jarrard, Jr.
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William H. Jarrard, Jr.
President
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EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION
(a) Form of cover letter to Limited Partners from the
Partnership dated December 17, 1997
(b) None.
(c) None.
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Exhibit (a)
Shelter Properties VII Limited Partnership
December 17, 1997
Dear Limited Partner:
Enclosed is the Schedule 14D-9 which was filed by Shetler Properties
VII Limited Partnership (the "Partnership") with the Securities and Exchange
Commission in connection with an offer (the "Offer") by Madison River
Properties, L.L.C., a Delaware limited liability company (the "Purchaser"),
Insignia Properties, L.P., a Delaware limited partnership ("IPLP"), Insignia
Properties Trust, a Maryland real estate investment trust ("IPT"), and
Insignia Financial Group, Inc., a Delaware corporation ("Insignia," and
together with IPLP, IPT and the Purchaser, the "Bidders"), to purchase units
of limited partnership interest ("Units") in the Partnership.
The Partnership's general partners are Shelter Realty VII Corporation
(the "General Partner"), which is an affiliate of the Bidders, and N. Barton
Tuck, Jr., an individual who is prohibited by the Parthnership's Limited
Partnership Agreement from participating in the activities of the Partnership.
Due to the affiliation between the General Partner of the Partnership and the
Bidders, the General Partner is subject to certain conflicts of interest in
connection with the response to the Offer.
AS A RESULT OF THE EXISTING AND POTENTIAL CONFLICTS OF INTEREST,
NEITHER THE PARTNERSHIP NOR THE GENERAL PARTNER EXPRESSES ANY OPINION AS TO
THE OFFER AND EACH IS REMAINING NEUTRAL AND MAKING NO RECOMMENDATION AS TO
WHETHER LIMITED PARTNERS SHOULD TENDER THEIR UNITS IN RESPONSE TO THE OFFER.
Limited Partners are advised to carefully read the enclosed Schedule
14D-9.
Shelter Properties VII Limited Partnership
