<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------------------
SCHEDULE 14D-1
TENDER OFFER STATEMENT PURSUANT TO SECTION 14(d)(1)
OF THE SECURITIES EXCHANGE ACT OF 1934
------------------------------------
SHELTER PROPERTIES VII LIMITED PARTNERSHIP
(Name of Subject Company)
MADISON RIVER PROPERTIES, L.L.C.
INSIGNIA PROPERTIES, L.P.
INSIGNIA PROPERTIES TRUST
INSIGNIA FINANCIAL GROUP, INC.
(Bidders)
UNITS OF LIMITED PARTNERSHIP INTEREST
(Title of Class of Securities)
NONE
(Cusip Number of Class of Securities)
------------------------------------
JEFFREY P. COHEN
SENIOR VICE PRESIDENT
INSIGNIA FINANCIAL GROUP, INC.
375 PARK AVENUE
SUITE 3401
NEW YORK, NEW YORK 10152
(212) 750-6070
(Name, Address and Telephone Number of Person Authorized
to Receive Notices and Communications on Behalf of Bidders)
COPY TO:
JOHN A. HEALY, ESQ.
ROGERS & WELLS
200 PARK AVENUE
NEW YORK, NEW YORK 10166
(212) 878-8000
------------------------------------
CALCULATION OF FILING FEE
- -------------------------------------------------------------------------------
Transaction Valuation*: $2,450,000 Amount of Filing Fee: $490
- -------------------------------------------------------------------------------
* For purposes of calculating the fee only. This amount assumes the
purchase of 7,000 units of limited partnership interest ("Units") of
the subject partnership for $350 per Unit. The amount of the filing
fee, calculated in accordance with Section 14(g)(3) and Rule 0-11(d)
under the Securities Exchange Act of 1934, as amended, equals 1/50th
of one percent of the aggregate of the cash offered by the bidders.
[ ] Check box if any part of the fee is offset as provided by Rule
0-11(a)(2) and identify the filing with which the offsetting fee was
previously paid. Identify the previous filing by registration
statement number, or the form or schedule and the date of its filing.
Amount Previously Paid: Not Applicable Filing Party: Not Applicable
Form or Registration No.: Not Applicable Date Filed: Not Applicable
- -------------------------------------------------------------------------------
<PAGE>
ITEM 1. SECURITY AND SUBJECT COMPANY.
(a) The name of the subject company is Shelter Properties VII Limited
Partnership, a South Carolina limited partnership (the "Partnership"). The
address of the Partnership's principal executive offices is One Insignia
Financial Plaza, Greenville, South Carolina 29602.
(b) This Tender Offer Statement on Schedule 14D-1 (the "Statement")
relates to an offer by Madison River Properties, L.L.C., a Delaware limited
liability company (the "Purchaser"), to purchase up to 7,000 of the
outstanding units of limited partnership interest ("Units") of the Partnership
at a purchase price of $350 per Unit, net to the seller in cash, upon the
terms and subject to the conditions set forth in the Offer to Purchase dated
December 17, 1997 (the "Offer to Purchase") and the related Assignment of
Partnership Interest (which, together with any supplements or amendments,
collectively constitute the "Offer"), copies of which are filed as Exhibits
(a)(1) and (a)(2) hereto, respectively. The information set forth in the Offer
to Purchase under "Introduction" is incorporated herein by reference.
(c) The information set forth in the Offer to Purchase in Section 13
("Background of the Offer") is incorporated herein by reference.
ITEM 2. IDENTITY AND BACKGROUND.
(a)-(d), (g) This Statement is being filed by the Purchaser, Insignia
Properties, L.P., a Delaware limited partnership ("IPLP"), Insignia Properties
Trust, a Maryland real estate investment trust ("IPT"), and Insignia Financial
Group, Inc., a Delaware corporation ("Insignia") (collectively, the
"Bidders"). The information set forth in the Offer to Purchase under
"Introduction," in Section 11 ("Certain Information Concerning the Purchaser,
IPLP, IPT and Insignia") and in Schedules I, II and III to the Offer to
Purchase is incorporated herein by reference.
(e)-(f) During the last five years, none of the Bidders nor, to the
best of their knowledge, any of the persons listed in Schedules I, II and III
to the Offer to Purchase (i) has been convicted in a criminal proceeding
(excluding traffic violations or similar misdemeanors) or (ii) was a party to
a civil proceeding of a judicial or administrative body of competent
jurisdiction and as a result of such proceeding was or is subject to a
judgment, decree or final order enjoining further violations of or prohibiting
activities subject to federal or state securities laws or finding any
violation with respect to such laws.
ITEM 3. PAST CONTACTS, TRANSACTIONS OR NEGOTIATIONS WITH THE SUBJECT COMPANY.
(a)-(b) The information set forth in the Offer to Purchase under
"Introduction," in Section 10 ("Conflicts of Interest and Transactions with
Affiliates") and in Section 13 ("Background of the Offer") is incorporated
herein by reference.
ITEM 4. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
(a) The information set forth in the Offer to Purchase in Section 10
("Conflicts of Interest and Transactions with Affiliates") and in Section 12
("Source of Funds") is incorporated herein by reference.
(b)-(c) Not applicable.
2
<PAGE>
ITEM 5. PURPOSE OF THE TENDER OFFER AND PLANS OR PROPOSALS OF THE BIDDER.
(a)-(b), (e) The information set forth in the Offer to Purchase under
"Introduction" and in Section 8 ("Future Plans of Insignia, IPT and the
Purchaser") is incorporated herein by reference.
(c) The information set forth in the Offer to Purchase in Section 8
("Future Plans of Insignia, IPT and the Purchaser"), in Section 10 ("Conflicts
of Interest and Transactions with Affiliates") and in Section 13 ("Background
of the Offer") is incorporated herein by reference.
(d) Not applicable.
(f)-(g) The information set forth in the Offer to Purchase in Section
7 ("Effects of the Offer") is incorporated herein by reference.
ITEM 6. INTEREST IN SECURITIES OF THE SUBJECT COMPANY.
(a)-(b) The information set forth in the Offer to Purchase under
"Introduction," in Section 11 ("Certain Information Concerning the Purchaser,
IPLP, IPT and Insignia") is incorporated herein by reference.
ITEM 7. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT
TO THE SUBJECT COMPANY'S SECURITIES.
The information set forth in the Offer to Purchase under
"Introduction," in Section 7 ("Effects of the Offer"), Section 10 ("Conflicts
of Interest and Transactions with Affiliates"), Section 11 ("Certain
Information Concerning the Purchaser, IPLP, IPT and Insignia") and Section 13
("Background of the Offer") is incorporated herein by reference.
ITEM 8. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED.
The information set forth in the Offer to Purchase under
"Introduction" and in Section 16 ("Fees and Expenses") is incorporated herein
by reference.
ITEM 9. FINANCIAL STATEMENTS OF CERTAIN BIDDERS.
The information set forth in the Offer to Purchase in Section 11
("Certain Information Concerning the Purchaser, IPLP, IPT and Insignia") is
incorporated herein by reference. In addition, the following are expressly
incorporated in this Statement by reference: (i) the audited financial
statements of Insignia set forth at Part I-Item 8 of Insignia's Annual Report
on Form 10-K for the year ended December 31, 1996, which is on file with the
Commission; and (ii) the unaudited financial statements of Insignia set forth
at Part I-Item 1 of Insignia's Quarterly Report on Form 10-Q/A for the period
ended September 30, 1997, which is on file with the Commission.
3
<PAGE>
ITEM 10. ADDITIONAL INFORMATION.
(a) Not applicable.
(b)-(d) The information set forth in the Offer to Purchase in Section
15 ("Certain Legal Matters") is incorporated herein by reference.
(e) None.
(f) The information set forth in the Offer to Purchase and the
related Assignment of Partnership Interest, copies of which are filed as
Exhibits (a)(1) and (a)(2) hereto, respectively, is incorporated herein by
reference in its entirety.
ITEM 11. MATERIAL TO BE FILED AS EXHIBITS.
(a)(1) Offer to Purchase, dated December 17, 1997.
(a)(2) Assignment of Partnership Interest and Related
Instructions.
(a)(3) Guidelines for Certification of Taxpayer Identification
Number on Substitute Form W-9.
(a)(4) Cover Letter, dated December 17, 1997, from the Purchaser
to the Limited Partners of the Partnership.
(b) Not applicable.
(c) Not applicable.
(d) Not applicable.
(e) Not applicable.
(f) Not applicable.
(z)(1) Summaries of appraisals referred to in the Offer to
Purchase in Section 13 ("Background of the Offer").
4
<PAGE>
SIGNATURE
After due inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete and
correct.
Dated: December 17, 1997
MADISON RIVER PROPERTIES, L.L.C.
By: /s/ JEFFREY P. COHEN
--------------------------
Jeffrey P. Cohen
Manager
INSIGNIA PROPERTIES, L.P.
By: Insignia Properties Trust,
its General Partner
By: /s/ JEFFREY P. COHEN
--------------------------
Jeffrey P. Cohen
Senior Vice President
INSIGNIA PROPERTIES TRUST
By: /s/ JEFFREY P. COHEN
--------------------------
Jeffrey P. Cohen
Senior Vice President
INSIGNIA FINANCIAL GROUP, INC.
By: /s/ FRANK M. GARRISON
--------------------------
Frank M. Garrison
Executive Managing Director
5
<PAGE>
EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION
(a)(1) Offer to Purchase, dated December 17, 1997.
(a)(2) Assignment of Partnership Interest and Related
Instructions.
(a)(3) Guidelines for Certification of Taxpayer Identification
Number on Substitute Form W-9.
(a)(4) Cover Letter, dated December 17, 1997, from the Purchaser
to the Limited Partners of the Partnership.
(z)(1) Summaries of appraisals referred to in the Offer to
Purchase in Section 13 ("Background of the Offer").
6
<PAGE>
Offer to Purchase for Cash
Up to 7,000 Units of Limited Partnership Interest
in
SHELTER PROPERTIES VII LIMITED PARTNERSHIP,
a South Carolina limited partnership
for
$350 Net Per Unit
by
MADISON RIVER PROPERTIES, L.L.C.
- -------------------------------------------------------------------------------
THE OFFER, WITHDRAWAL RIGHTS AND PRORATION PERIOD WILL
EXPIRE AT 12:00 MIDNIGHT, NEW YORK TIME, ON JANUARY 15,
1998, UNLESS THE OFFER IS EXTENDED.
- -------------------------------------------------------------------------------
IMPORTANT
Madison River Properties, L.L.C., a Delaware limited liability
company (the "Purchaser"), is offering to purchase up to 7,000 of the
outstanding units of limited partnership interest ("Units") in Shelter
Properties VII Limited Partnership, a South Carolina limited partnership (the
"Partnership"), at a purchase price of $350 per Unit (the "Purchase Price"),
net to the seller in cash, without interest, upon the terms and subject to the
conditions set forth in this Offer to Purchase and in the related Assignment
of Partnership Interest (which, together with any supplements or amendments,
collectively constitute the "Offer"). The Purchase Price is subject to
adjustment under certain circumstances, as described herein. Holders of Units
(each, a "Limited Partner") who tender their Units in response to the Offer
will not be obligated to pay any commissions or partnership transfer fees. The
Purchaser is an affiliate of Shelter Realty VII Corporation, which is the
corporate general partner of the Partnership (the "General Partner").
Limited Partners are urged to consider the following factors:
o The Purchaser and the General Partner are both affiliates of
and controlled by Insignia Properties Trust ("IPT"), which
is controlled by Insignia Financial Group, Inc.
("Insignia"). IPT, through its operating partnership
Insignia Properties, L.P. ("IPLP"), currently owns 247
Units.
o The net asset value per Unit most recently estimated by the
General Partner was $634 as of December 31, 1996, and the
net liquidation value per Unit (the "Estimated Liquidation
Value") estimated by the Purchaser (which is an affiliate of
the General Partner) in connection with the Offer is
$577.14. The Purchaser does not believe, however, that
either the General Partner's net asset value estimate or the
Estimated Liquidation Value represents a fair estimate of
the market value of a Unit, primarily due to the fact that
such estimates do not take into account timing
considerations, market uncertainties and legal and other
expenses that would be incurred in connection with a
liquidation of the Partnership. See Section 13. Accordingly,
the Purchaser does not believe that such estimates should be
viewed as representative of the amount a Limited Partner can
realistically expect to obtain on a sale of a Unit in the
near term.
o The Purchaser will have the right to vote all Units acquired
pursuant to the Offer. Accordingly, if the Purchaser (which
is an affiliate of the General Partner) is successful in
acquiring a significant number of Units, it will be able to
significantly influence all voting decisions with respect to
the Partnership, including decisions regarding liquidation,
amendments to the Limited Partnership Agreement, removal and
replacement of the General Partner and mergers,
consolidations and other extraordinary transactions.
<PAGE>
o The Purchaser (which is an affiliate of the General Partner)
is making the Offer with a view to making a profit.
Accordingly, there is a conflict between the desire of the
Purchaser (which is an affiliate of the General Partner) to
purchase Units at a low price and the desire of the Limited
Partners to sell their Units at a high price.
THE OFFER IS NOT CONDITIONED ON FINANCING OR UPON ANY MINIMUM
AGGREGATE NUMBER OF UNITS BEING TENDERED.
----------------------------------------
Any Limited Partner desiring to tender Units should complete and sign
the Assignment of Partnership Interest in accordance with the Instructions to
the Assignment of Partnership Interest and mail or deliver the signed
Assignment of Partnership Interest to the Depositary. A Limited Partner may
tender any or all of the Units owned by that Limited Partner; provided,
however, that because of restrictions in the Partnership's Limited Partnership
Agreement, in order for a partial tender to be valid, after the sale of Units
pursuant to the Offer, the Limited Partner must continue to hold a minimum of
three Units (or, in the case of Limited Partners who hold Units in an
Individual Retirement Account, at least two Units). Tenders of fractional
Units will not be permitted, except by a Limited Partner who is tendering all
of the Units owned by that Limited Partner.
Questions and requests for assistance or for additional copies of
this Offer to Purchase and the Assignment of Partnership Interest may be
directed to the Information Agent at the address and telephone numbers set
forth below and on the back cover of this Offer to Purchase. No soliciting
dealer fees or other payments to brokers for tenders are being paid by the
Purchaser (which is an affiliate of the General Partner).
----------------------------------------
For More Information or for Further Assistance Please Call:
Beacon Hill Partners, Inc.
at
(800) 854-9486
December 17, 1997
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S> <C>
PAGE
INTRODUCTION.................................................................................................... 1
The Purchaser; Affiliation with the General Partner......................................................... 1
Some Factors to Be Considered by Limited Partners........................................................... 1
Reasons for and Effects of the Offer........................................................................ 3
Certain Tax Considerations.................................................................................. 3
Originally Anticipated Term of the Partnership; General Policy Regarding Sales
and Refinancings of Partnership Properties; Alternatives............................................. 3
Conditions.................................................................................................. 4
Distributions............................................................................................... 4
Outstanding Units........................................................................................... 4
THE OFFER....................................................................................................... 5
Section 1. Terms of the Offer; Expiration Date; Proration.................................................. 5
Section 2. Acceptance for Payment and Payment for Units.................................................... 6
Section 3. Procedure for Tendering Units................................................................... 6
Valid Tender............................................................................................ 6
Signature Requirements.................................................................................. 6
Delivery of Assignment of Partnership Interest.......................................................... 7
Appointment as Proxy; Power of Attorney................................................................. 7
Assignment of Interest in Future Distributions.......................................................... 7
Determination of Validity; Rejection of Units; Waiver of Defects; No Obligation
to Give Notice of Defects.......................................................................... 8
Backup Federal Income Tax Withholding................................................................... 8
FIRPTA Withholding...................................................................................... 8
Binding Obligation...................................................................................... 8
Section 4. Withdrawal Rights............................................................................... 8
Section 5. Extension of Tender Period; Termination; Amendment.............................................. 9
Section 6. Certain Federal Income Tax Matters.............................................................. 9
General................................................................................................. 9
Gain or Loss Generally.................................................................................. 10
Unrealized Receivables and Certain Inventory............................................................ 10
Passive Activity Loss Limitation........................................................................ 10
Partnership Termination................................................................................. 11
Backup Withholding and FIRPTA Withholding............................................................... 11
Section 7. Effects of the Offer............................................................................ 12
Limitations on Resales.................................................................................. 12
Effect on Trading Market; Registration Under Section 12(g) of the Exchange Act.......................... 12
Control of Limited Partner Voting Decisions by Purchaser;
Effect of Relationship with General Partner........................................................ 12
Section 8. Future Plans of Insignia, IPT and the Purchaser................................................. 13
Section 9. Certain Information Concerning the Partnership.................................................. 13
General................................................................................................. 14
Originally Anticipated Term of Partnership; Alternatives................................................ 14
General Policy Regarding Sales and Refinancings of Partnership Properties............................... 14
Selected Financial and Property-Related Data............................................................ 14
Cash Distributions History.............................................................................. 16
Operating Budgets of the Partnership.................................................................... 17
Section 10. Conflicts of Interest and Transactions with Affiliates......................................... 17
Conflicts of Interest with Respect to the Offer......................................................... 17
i
<PAGE>
Page
Voting by the Purchaser................................................................................. 17
Financing Arrangements.................................................................................. 18
Transactions with Affiliates............................................................................ 18
Section 11. Certain Information Concerning the Purchaser, IPLP, IPT and Insignia........................... 18
The Purchaser........................................................................................... 18
IPT and IPLP............................................................................................ 18
Insignia................................................................................................ 20
Section 12. Source of Funds................................................................................ 22
Section 13. Background of the Offer........................................................................ 22
Determination of Purchase Price......................................................................... 22
Section 14. Conditions of the Offer........................................................................ 26
Section 15. Certain Legal Matters.......................................................................... 27
General................................................................................................. 27
Antitrust............................................................................................... 27
Margin Requirements..................................................................................... 28
Section 16. Fees and Expenses.............................................................................. 28
Section 17. Miscellaneous.................................................................................. 28
SCHEDULE I - Information Regarding the Managers of the Purchaser...........................................S-1
SCHEDULE II - Information Regarding the Trustees and Executive Officers of IPT..............................S-2
SCHEDULE III - Information Regarding the Directors and Executive Officers of Insignia........................S-4
SCHEDULE IV - IPT Partnerships..............................................................................S-7
</TABLE>
ii
<PAGE>
TO THE LIMITED PARTNERS OF
SHELTER PROPERTIES VII LIMITED PARTNERSHIP
INTRODUCTION
Madison River Properties, L.L.C. (the "Purchaser"), which is a
Delaware limited liability company and an affiliate of the General Partner,
hereby offers to purchase up to 7,000 Units, representing approximately 40% of
the Units outstanding, in Shelter Properties VII Limited Partnership, a South
Carolina limited partnership (the "Partnership"), at a purchase price of $350
per Unit (the "Purchase Price"), net to the seller in cash, without interest,
upon the terms and subject to the conditions set forth in this Offer to
Purchase and in the related Assignment of Partnership Interest (which,
together with any supplements or amendments, collectively constitute the
"Offer"). The Offer is not conditioned on any aggregate minimum number of
Units being tendered. A Limited Partner may tender any or all of the Units
owned by that Limited Partner; provided, however, that because of restrictions
in the Partnership's Limited Partnership Agreement (the "Limited Partnership
Agreement"), in order for a partial tender to be valid, after the sale of
Units pursuant to the Offer, the Limited Partner must continue to hold a
minimum of three Units (or, in the case of Limited Partners who hold Units in
an Individual Retirement Account ("IRA"), at least two Units). Tenders of
fractional Units will not be permitted, except by a Limited Partner who is
tendering all of the Units owned by that Limited Partner. The Purchaser (which
is an affiliate of the General Partner) will pay all charges and expenses of
Beacon Hill Partners, Inc., who will serve as the Purchaser's information
agent for the Offer (the "Information Agent"), and Harris Trust Company of New
York, who will act as depositary for the Offer (the "Depositary").
The Purchaser; Affiliation with the General Partner. Shelter Realty
VII Corporation, which is the corporate general partner of the Partnership
(the "General Partner"), is a wholly-owned subsidiary of Insignia Properties
Trust, a Maryland real estate investment trust ("IPT"). The 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.
The Purchaser is a newly-formed, wholly-owned subsidiary of Insignia
Properties, L.P., a Delaware limited partnership ("IPLP"), which is the
operating partnership of IPT. IPT is the sole general partner of IPLP (owning
approximately 66% of the total equity interests in IPLP), and Insignia
Financial Group, Inc., a Delaware corporation ("Insignia"), is the sole
limited partner of IPLP (owning approximately 34% of the total equity
interests in IPLP). Insignia and its affiliates also own approximately 67% of
the outstanding common shares of IPT. 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 these relationships, the General Partner has
conflicts of interest in considering the Offer. The General Partner has
indicated in a Statement on Schedule 14D-9 (the "Schedule 14D-9") filed with
the Securities and Exchange Commission (the "Commission") that it is remaining
neutral and making no recommendation as to whether Limited Partners should
tender their Units in response to the Offer. LIMITED PARTNERS ARE URGED TO
READ THIS OFFER TO PURCHASE AND THE RELATED MATERIALS AND THE SCHEDULE 14D-9
CAREFULLY AND IN THEIR ENTIRETY BEFORE DECIDING WHETHER TO TENDER THEIR UNITS.
See Sections 10 and 13.
Some Factors to Be Considered by Limited Partners. In considering the
Offer, Limited Partners may wish to consider the following factors:
Potential Adverse Aspects of the Offer for Limited Partners
o The Purchaser 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
<PAGE>
Units, which in turn may result in a conflict for the
General Partner in attempting to reconcile the interests of
the Purchaser (which is an affiliate of the General Partner)
with the interests of the other Limited Partners. See
Section 10.
o The net asset value per Unit most recently estimated by the
General Partner was $634 as of December 31, 1996, and the
net liquidation value per Unit (the "Estimated Liquidation
Value") estimated by the Purchaser (which is an affiliate of
the General Partner) in connection with the Offer is
$577.14. See Section 13 for a discussion of why the
Purchaser (which is an affiliate of the General Partner)
believes that such estimates are not necessarily indicative
of the fair market value of a Unit. THE PURCHASER (WHICH IS
AN AFFILIATE OF THE GENERAL PARTNER) MAKES NO REPRESENTATION
AND EXPRESSES NO OPINION AS TO THE FAIRNESS OR ADEQUACY OF
THE PURCHASE PRICE.
o As with any rational investment decision, the Purchaser
(which is an affiliate of the General Partner) is making the
Offer with a view to making a profit. Accordingly, there is
a conflict between the desire of the Purchaser (which is an
affiliate of the General Partner) to purchase Units at a low
price and the desire of the Limited Partners to sell their
Units at a high price.
o If the Purchaser is successful in acquiring a significant
number of Units pursuant to the Offer, the Purchaser (which
is an affiliate of the General Partner) will have the right
to vote those Units and thereby significantly influence all
voting decisions with respect to the Partnership, including
decisions concerning liquidation, amendments to the Limited
Partnership Agreement, removal and replacement of the
General Partner and mergers, consolidations and other
extraordinary transactions. This means that (i)
non-tendering Limited Partners could be prevented from
taking action they desire but that IPT (which is an
affiliate of the General Partner) opposes and (ii) IPT
(which is an affiliate of the General Partner) may be able
to take action desired by IPT but opposed by the
non-tendering Limited Partners.
Potentially Beneficial Aspects of the Offer for Limited Partners
o Although there are some limited resale mechanisms available
to Limited Partners wishing to sell their Units, there is no
formal trading market for Units. Moreover, the Purchaser
understands that the operations of the Chicago Partnership
Board, one of the leading partnership interest "auction"
intermediaries, have been suspended by securities
regulators. Accordingly, THE OFFER AFFORDS LIMITED PARTNERS
AN OPPORTUNITY TO DISPOSE OF THEIR UNITS FOR CASH WHICH
OTHERWISE MIGHT NOT BE AVAILABLE TO THEM.
o THE OFFER MAY BE ATTRACTIVE TO LIMITED PARTNERS WHO HAVE AN
IMMEDIATE NEED FOR CASH. The Purchase Price is approximately
29% greater than the highest reported sales price of any
Unit during the past three months (based on published
information and information provided by the General
Partner). However, reported secondary market sales prices do
not take into account commissions and transfer fees
typically payable by a Limited Partner in connection with a
secondary market sale. Therefore, the actual proceeds
received by a Limited Partner who sells Units in the
secondary market are typically significantly less than the
reported sales prices.
o LIMITED PARTNERS WHO SELL UNITS PURSUANT TO THE OFFER WILL
NOT BE CHARGED ANY SALES COMMISSIONS (WHICH GENERALLY RANGE
FROM 3% TO 10% OF THE SALES PRICE) OR PARTNERSHIP TRANSFER
FEES (WHICH ARE TYPICALLY $100 PER TRANSFER). The Purchaser
will pay all transfer fees imposed by the Partnership in
connection with sales of Units pursuant to the Offer.
o Real estate markets in the United States generally have
recovered and experienced an upward trend since the end of
the last recession. That recovery and upward trend might
continue. On the other hand, those markets also may be
adversely affected by a variety of factors, including
possible fluctuations in interest rates, economic slowdowns
and overbuilding. Accordingly, ownership of
2
<PAGE>
Units continues to be a speculative investment. THE OFFER
MAY PROVIDE LIMITED PARTNERS WITH THE OPPORTUNITY TO
LIQUIDATE THEIR INTERESTS IN THE PARTNERSHIP AND REPLACE
THEM WITH INVESTMENTS THAT ARE LESS SPECULATIVE.
o The Offer may be attractive to Limited Partners who wish to
avoid in the future the expenses, delays and complications
in filing personal income tax returns which may be caused by
ownership of Units. In addition, A LIMITED PARTNER WHO SELLS
100% OF ITS UNITS PURSUANT TO THE OFFER WILL NO LONGER BE
SUBJECT TO THE PASSIVE ACTIVITY LOSS LIMITATION WITH RESPECT
TO "SUSPENDED" LOSSES ATTRIBUTABLE TO THOSE UNITS AND,
THEREFORE, WILL BE ABLE TO UTILIZE FULLY ANY SUCH LOSSES.
o The Offer may be attractive to those Limited Partners who
have become disenchanted with real estate investments
generally, and in particular with the perceived illiquidity
of investments made through limited partnerships, because it
may afford an immediate opportunity for those Limited
Partners to liquidate their investments in the Partnership.
On the other hand, Limited Partners who tender their Units
will be giving up the opportunity to participate in any
potential future benefits represented by the ownership of
those Units, including, for example, the right to
participate in any future distributions of cash or property,
whether from operations, the proceeds of a sale or
refinancing of one or more of the Partnership's properties
or in connection with any future liquidation of the
Partnership. Instead, any such distributions of cash or
property with respect to Units tendered in the Offer and
purchased by the Purchaser will be paid to the Purchaser.
The Purchaser (which is an affiliate of the General Partner) makes no
recommendation to any Limited Partner as to whether to tender or refrain from
tendering Units and has been advised by the General Partner that the General
Partner also expects to make no recommendation. Each Limited Partner must make
its own decision, based on the Limited Partner's particular circumstances, as
to whether to tender Units and, if so, how many Units to tender. Limited
Partners should consult with their respective advisors regarding the
financial, tax, legal and other implications of accepting the Offer. LIMITED
PARTNERS ARE URGED TO READ THIS OFFER TO PURCHASE AND THE RELATED MATERIALS
CAREFULLY AND IN THEIR ENTIRETY BEFORE DECIDING WHETHER TO TENDER THEIR UNITS.
Reasons for and Effects of the Offer. The Purchaser's purpose in
making the Offer is to increase IPT's equity interest in the Partnership,
primarily for investment purposes and with a view to making a profit. Although
the number of Units sought in the Offer will not give the Purchaser (which is
an affiliate of the General Partner) absolute control over the Partnership, if
the Purchaser is successful in acquiring all or a substantial portion of the
Units it is tendering for, it will be in a position to exercise significant
influence over the outcome of any vote by Limited Partners. See Sections 8, 10
and 13.
Certain Tax Considerations. A sale by a Limited Partner pursuant to
the Offer will result in taxable gain (or loss) equal to the excess (deficit)
of the amount realized by the Limited Partner for the Units sold over such
Limited Partner's adjusted tax basis in those Units which may be taxable as
ordinary income or loss, capital gain or loss or gain from real estate
depreciation recapture. If a Limited Partner has suspended "passive losses"
from the Partnership or other passive activity investments, such Limited
Partner generally may deduct these losses up to the amount of any gain from
the sale. A sale pursuant to the Offer of all of a Limited Partner's Units
will terminate his or her investment in the Partnership and, commencing with
the year following the year of sale, the Limited Partner will no longer
receive Partnership tax information or have to report the complicated tax
information currently required of Limited Partners. See Section 6.
Originally Anticipated Term of the Partnership; General Policy
Regarding Sales and Refinancings of Partnership Properties; Alternatives.
According to the Partnership's Prospectus dated March 18, 1985 the General
Partner anticipated that the Partnership would sell and/or refinance its
properties three to eight years after their acquisition, depending upon the
then current real estate and money markets, economic climate and income tax
consequences to the Limited Partners. In general, the General Partner
regularly evaluates the Partnership's properties by considering various
factors, such as the Partnership's financial position and real estate and
capital
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market conditions. The General Partner monitors each property's specific
locale and sub-market conditions 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, tax
implications and the investment climate are all considered. Any of these
factors, and possibly others, could potentially contribute to any decision of
the General Partner to sell, refinance, upgrade with capital improvements or
hold a particular Partnership property. Based on the above considerations, the
General Partner has determined that it is not in the best interest of Limited
Partners to sell or refinance any other property at the present time. Under
the Limited Partnership Agreement the term of the Partnership will continue
until December 31, 2024, unless sooner terminated as provided in the Limited
Partnership Agreement or by law. Limited Partners could, as an alternative to
tendering their Units, take a variety of possible actions, including voting to
liquidate the Partnership or causing the Partnership to merge with another
entity or engage in a "roll-up" or similar transaction.
Conditions. The Offer is not conditioned on any aggregate minimum
number of Units being tendered. Certain other conditions do apply, however.
See Section 14.
Distributions. The Partnership made a cash distribution to Limited
Partners of $17.53 per Unit in 1997 (through December 17). Prior to the 1997
distribution, the only other distribution made by the Partnership was in 1985
($11.19 per Unit). In total, original investors in the Partnership have
received distributions of only $28.72 in respect of their original $1,000
investment made in 1985. See Section 9. However, the Partnership is currently
generating positive cash flow from operations, and the Purchaser (which is an
affiliate of the General Partner) believes that the Partnership will continue
to generate positive cash flow from operations. The potential for future
distributions was considered by the Purchaser (which is an affiliate of the
General Partner) when establishing the Purchase Price. Limited Partners who
tender their Units in response to the Offer will retain any distributions made
through December 17, 1997, and will be entitled to receive and retain any
subsequent distributions made by the Partnership prior to the date on which
the Purchaser pays for tendered Units pursuant to the Offer, although any such
subsequent distribution will result in a reduction of the Purchase Price. See
Section 1. However, tendering Limited Partners will not be entitled to receive
or retain any distributions in respect of tendered Units which are made on or
after the date on which the Purchaser pays for such Units pursuant to the
Offer, regardless of the fact that the record date (as opposed to the payment
date) for any such distribution may be a date prior to the date of purchase.
See Section 3.
Outstanding Units. According to information supplied by the
Partnership, as of December 1, 1997 there were 17,343 Units issued and
outstanding, which were held of record by 1,710 Limited Partners. IPLP
currently owns 247 Units.
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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, the Purchaser (which is an
affiliate of the General Partner) will accept for payment (and thereby
purchase) up to 7,000 Units that are validly tendered on or prior to the
Expiration Date and not withdrawn in accordance with the procedures set forth
in Section 4. For purposes of the Offer, the term "Expiration Date" shall mean
12:00 midnight, New York City time, on January 15, 1998, unless the Purchaser
(which is an affiliate of the General Partner) in its sole discretion shall
have extended the period of time for which the Offer is open, in which event
the term "Expiration Date" shall mean the latest time and date on which the
Offer, as extended by the Purchaser, shall expire. See Section 5 for a
description of the Purchaser's right to extend the period of time during which
the Offer is open and to amend or terminate the Offer.
THE PURCHASE PRICE WILL AUTOMATICALLY BE REDUCED BY THE AGGREGATE
AMOUNT OF DISTRIBUTIONS PER UNIT, IF ANY, MADE BY THE PARTNERSHIP TO LIMITED
PARTNERS ON OR AFTER DECEMBER 17, 1997 AND PRIOR TO THE DATE ON WHICH THE
PURCHASER PAYS FOR UNITS PURCHASED PURSUANT TO THE OFFER.
If, prior to the Expiration Date, the Purchaser (which is an
affiliate of the General Partner) increases the consideration offered to
Limited Partners pursuant to the Offer, the increased consideration will be
paid for all Units accepted for payment pursuant to the Offer, regardless of
whether the Units were tendered prior to the increase in the consideration
offered.
If more than 7,000 Units are validly tendered prior to the Expiration
Date and not properly withdrawn prior to the Expiration Date in accordance
with the procedures specified in Section 4, the Purchaser (which is an
affiliate of the General Partner) will, upon the terms and subject to the
conditions of the Offer, accept for payment and pay for an aggregate of 7,000
of the Units so tendered, pro rata according to the number of Units validly
tendered by each Limited Partner and not properly withdrawn on or prior to the
Expiration Date, with appropriate adjustments to avoid (i) purchases of
fractional Units and (ii) purchases that would violate Section 9.1 of the
Limited Partnership Agreement (which generally requires that, in order for a
partial tender to be valid, a Limited Partner continues to hold a minimum of
three 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 7,000
Units, the Purchaser (which is an affiliate of the General Partner) will
purchase all Units so tendered and not withdrawn, upon the terms and subject
to the conditions of the Offer.
If proration of tendered Units is required, then, subject to the
Purchaser's obligation under Rule 14e-1(c) under the Securities Exchange Act
of 1934 (the "Exchange Act") to pay Limited Partners the Purchase Price in
respect of Units tendered or return those Units promptly after the termination
or withdrawal of the Offer, the Purchaser (which is an affiliate of the
General Partner) does not intend to pay for any Units accepted for payment
pursuant to the Offer until the final proration results are known.
NOTWITHSTANDING ANY SUCH DELAY IN PAYMENT, NO INTEREST WILL BE PAID ON THE
PURCHASE PRICE.
The Offer is conditioned on satisfaction of certain conditions. See
Section 14, which sets forth in full the conditions of the Offer. The
Purchaser (which is an affiliate of the General Partner) reserves the right
(but in no event shall be obligated), in its sole discretion, to waive any or
all of those conditions. If, on or prior to the Expiration Date, any or all of
the conditions have not been satisfied or waived, the Purchaser reserves the
right to (i) decline to purchase any of the Units tendered and terminate the
Offer, (ii) waive all of the unsatisfied conditions and, subject to complying
with applicable rules and regulations of the Commission, purchase all Units
validly tendered, (iii) extend the Offer and, subject to the right of Limited
Partners to withdraw Units until the Expiration Date, retain the Units that
have been tendered during the period or periods for which the Offer is
extended, and/or (iv) amend the Offer.
This Offer to Purchase and the related Assignment of Partnership
Interest are being mailed by the Purchaser (which is an affiliate of the
General Partner) to the persons shown by the Partnership's records to have
been Limited
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Partners or (in the case of Units owned of record by IRAs and qualified plans)
beneficial owners of Units as of December 1, 1997.
SECTION 2. ACCEPTANCE FOR PAYMENT AND PAYMENT FOR UNITS. Upon the
terms and subject to the conditions of the Offer, the Purchaser (which is an
affiliate of the General Partner) will accept for payment (and thereby
purchase) and will pay for all Units validly tendered and not withdrawn in
accordance with the procedures specified in Section 4, as promptly as
practicable following the Expiration Date. A tendering beneficial owner of
Units whose Units are owned of record by an IRA or other qualified plan will
not receive direct payment of the Purchase Price; rather, payment will be made
to the custodian of such account or plan. In all cases, payment for Units
purchased pursuant to the Offer will be made only after timely receipt by the
Depositary of a properly completed and duly executed Assignment of Partnership
Interest and any other documents required by the Assignment of Partnership
Interest. See Section 3. UNDER NO CIRCUMSTANCES WILL INTEREST BE PAID ON THE
PURCHASE PRICE BY REASON OF ANY DELAY IN MAKING SUCH PAYMENT.
For purposes of the Offer, the Purchaser (which is an affiliate of
the General Partner) will be deemed to have accepted for payment pursuant to
the Offer, and thereby purchased, validly tendered Units if, as and when the
Purchaser (which is an affiliate of the General Partner) gives verbal or
written notice to the Depositary of the Purchaser's acceptance of those Units
for payment pursuant to the Offer. Upon the terms and subject to the
conditions of the Offer, payment for Units accepted for payment pursuant to
the Offer will be made by deposit of the Purchase Price with the Depositary,
which will act as agent for tendering Limited Partners for the purpose of
receiving payments from the Purchaser and transmitting those payments to
Limited Partners whose Units have been accepted for payment.
If any tendered Units are not purchased for any reason, the
Assignment of Partnership Interest with respect to such Units will be
destroyed by the Purchaser (which is an affiliate of the General Partner). If
for any reason acceptance for payment of, or payment for, any Units tendered
pursuant to the Offer is delayed or the Purchaser is unable to accept for
payment, purchase or pay for Units tendered pursuant to the Offer, then,
without prejudice to the Purchaser's rights under Section 14, the Depositary
may, nevertheless, on behalf of the Purchaser (which is an affiliate of the
General Partner) retain tendered Units, and those Units may not be withdrawn
except to the extent that the tendering Limited Partners are entitled to
withdrawal rights as described in Section 4; subject, however, to the
Purchaser's obligation under Rule 14e-1(c) under the Exchange Act to pay
Limited Partners the Purchase Price in respect of Units tendered or return
those Units promptly after termination or withdrawal of the Offer.
The Purchaser (which is an affiliate of the General Partner) reserves
the right to transfer or assign, in whole or from time to time in part, to one
or more of the Purchaser's affiliates, the right to purchase Units tendered
pursuant to the Offer, but any such transfer or assignment will not relieve
the Purchaser of its obligations under the Offer or prejudice the rights of
tendering Limited Partners to receive payment for Units validly tendered and
accepted for payment pursuant to the Offer.
SECTION 3. PROCEDURE FOR TENDERING UNITS.
Valid Tender. In order for a tendering Limited Partner to participate
in the Offer, its Units must be validly tendered and not withdrawn on or prior
to the Expiration Date. To validly tender Units, a properly completed and duly
executed Assignment of Partnership Interest and any other documents required
by the Assignment of Partnership Interest must be received by the Depositary,
at its address set forth on the back cover of this Offer to Purchase, on or
prior to the Expiration Date. A Limited Partner may tender any or all of the
Units owned by that Limited Partner; provided, however, that because of
restrictions in the Limited Partnership Agreement, in order for a partial
tender to be valid, after the sale of Units pursuant to the Offer, the Limited
Partner must continue to hold a minimum of three Units (or, in the case of
Limited Partners who hold Units in an IRA, at least two Units). Tenders of
fractional Units will not be permitted, except by a Limited Partner who is
tendering all of the Units owned by that Limited Partner. No alternative,
conditional or contingent tenders will be accepted.
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Signature Requirements. If the Assignment of Partnership Interest is
signed by the registered holder of the Units and payment is to be made
directly to that holder, then no signature guarantee is required on the
Assignment of Partnership Interest. Similarly, if the Units are tendered for
the account of a member firm of a registered national securities exchange, a
member of the National Association of Securities Dealers, Inc. or a commercial
bank, savings bank, credit union, savings and loan association or trust
company having an office, branch or agency in the United States (each an
"Eligible Institution"), no signature guarantee is required on the Assignment
of Partnership Interest. HOWEVER, IN ALL OTHER CASES, ALL SIGNATURES ON THE
ASSIGNMENT OF PARTNERSHIP INTEREST MUST BE GUARANTEED BY AN ELIGIBLE
INSTITUTION. Please contact the Information Agent for assistance in obtaining
a signature guarantee.
Delivery of Assignment of Partnership Interest. The method of
delivery of the Assignment of Partnership Interest and all other required
documents is at the option and risk of the tendering Limited Partner, and
delivery will be deemed made only when actually received by the Depositary. In
all cases, sufficient time should be allowed to assure timely delivery.
Appointment as Proxy; Power of Attorney. By executing an Assignment
of Partnership Interest, a tendering Limited Partner irrevocably appoints the
Purchaser (which is an affiliate of the General Partner), and its managers and
designees as the Limited Partner's proxies, in the manner set forth in the
Assignment of Partnership Interest, each with full power of substitution, to
the full extent of the Limited Partner's rights with respect to the Units
tendered by the Limited Partner and accepted for payment by the Purchaser
(which is an affiliate of the General Partner). Each such proxy shall be
considered coupled with an interest in the tendered Units. Such appointment
will be effective when, and only to the extent that, the Purchaser (which is
an affiliate of the General Partner) accepts the tendered Units for payment.
Upon such acceptance for payment, all prior proxies given by the Limited
Partner with respect to the Units will, without further action, be revoked,
and no subsequent proxies may be given (and if given will not be effective).
The Purchaser (which is an affiliate of the General Partner) and its managers
and designees will, as to those Units, be empowered to exercise all voting and
other rights of the Limited Partner as they in their sole discretion may deem
proper at any meeting of Limited Partners, by written consent or otherwise.
The Purchaser (which is an affiliate of the General Partner) reserves the
right to require that, in order for Units to be deemed validly tendered,
immediately upon the Purchaser's acceptance for payment of the Units, the
Purchaser must be able to exercise full voting rights with respect to the
Units, including voting at any meeting of Limited Partners then scheduled or
acting by written consent without a meeting.
By executing an Assignment of Partnership Interest, a tendering
Limited Partner also irrevocably constitutes and appoints the Purchaser and
its managers and designees as the Limited Partner's attorneys-in-fact, each
with full power of substitution, to the full extent of the Limited Partner's
rights with respect to the Units tendered by the Limited Partner and accepted
for payment by the Purchaser. Such appointment will be effective when, and
only to the extent that, the Purchaser accepts the tendered Units for payment.
The tendering Limited Partner agrees not to exercise any rights pertaining to
the tendered Units without the prior consent of the Purchaser. Upon such
acceptance for payment, all prior powers of attorney granted by the Limited
Partner with respect to such Units will, without further action, be revoked,
and no subsequent powers of attorney may be granted (and if granted will not
be effective). Pursuant to such appointment as attorneys-in-fact, the
Purchaser and its managers and designees each will have the power, among other
things, (i) to transfer ownership of such Units on the Partnership books
maintained by the General Partner (and execute and deliver any accompanying
evidences of transfer and authenticity any of them may deem necessary or
appropriate in connection therewith), (ii) upon receipt by the Depositary (as
the tendering Limited Partner's agent) of the Purchase Price, to become a
substituted Limited Partner, to receive any and all distributions made by the
Partnership on or after the date on which the Purchaser purchases such Units,
and to receive all benefits and otherwise exercise all rights of beneficial
ownership of such Units in accordance with the terms of the Offer, (iii) to
execute and deliver to the General Partner a change of address form
instructing the General Partner to send any and all future distributions to
which the Purchaser is entitled pursuant to the terms of the Offer in respect
of tendered Units to the address specified in such form, and (iv) to endorse
any check payable to or upon the order of such Limited Partner representing a
distribution to which the Purchaser is entitled pursuant to the terms of the
Offer, in each case in the name and on behalf of the tendering Limited
Partner.
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Assignment of Interest in Future Distributions. By executing an
Assignment of Partnership Interest, a tendering Limited Partner irrevocably
assigns to the Purchaser (which is an affiliate of the General Partner) and
its assigns all of the right, title and interest of the Limited Partner in and
to any and all distributions made by the Partnership on or after the date on
which the Purchaser purchases such Units, in respect of the Units tendered by
such Limited Partner and accepted for payment by the Purchaser, regardless of
the fact that the record date for any such distribution may be a date prior to
the date of such purchase. The Purchaser will seek to be admitted to the
Partnership as a substituted Limited Partner upon consummation of the Offer.
Determination of Validity; Rejection of Units; Waiver of Defects; No
Obligation to Give Notice of Defects. All questions as to the validity, form,
eligibility (including time of receipt) and acceptance for payment of any
tender of Units pursuant to the Offer will be determined by the Purchaser
(which is an affiliate of the General Partner), in its sole discretion, which
determination shall be final and binding. The Purchaser (which is an affiliate
of the General Partner) reserves the absolute right to reject any or all
tenders of any particular Units determined by it not to be in proper form or
if the acceptance of or payment for those Units may, in the opinion of the
Purchaser's counsel, be unlawful. The Purchaser (which is an affiliate of the
General Partner) also reserves the absolute right to waive or amend any of the
conditions of the Offer that it is legally permitted to waive as to the tender
of any particular Units and to waive any defect or irregularity in any tender
with respect to any particular Units of any particular Limited Partner. The
Purchaser's interpretation of the terms and conditions of the Offer (including
the Assignment of Partnership Interest and the Instructions thereto) will be
final and binding. No tender of Units will be deemed to have been validly made
until all defects and irregularities have been cured or waived. None of the
Purchaser (which is an affiliate of the General Partner), the Information
Agent, the Depositary or any other person will be under any duty to give
notification of any defects or irregularities in the tender of any Units or
will incur any liability for failure to give any such notification.
Backup Federal Income Tax Withholding. To prevent the possible
application of backup federal income tax withholding of 31% with respect to
payment of the Purchase Price, each tendering Limited Partner must provide the
Purchaser (which is an affiliate of the General Partner) with the Limited
Partner's correct taxpayer identification number by completing the Substitute
Form W-9 included in the Assignment of Partnership Interest. See the
Instructions to the Assignment of Partnership Interest and Section 6.
FIRPTA Withholding. To prevent the withholding of federal income tax
in an amount equal to 10% of the amount of the Purchase Price plus Partnership
liabilities allocable to each Unit purchased, each tendering Limited Partner
must complete the FIRPTA Affidavit included in the Assignment of Partnership
Interest certifying the Limited Partner's taxpayer identification number and
address and that such Limited Partner is not a foreign person.
See the Instructions to the Assignment of Partnership Interest and Section 6.
Binding Obligation. A tender of Units pursuant to and in accordance
with the procedures described in this Section 3 and the acceptance for payment
of such Units will constitute a binding agreement between the tendering
Limited Partner and the Purchaser (which is an affiliate of the General
Partner) on the terms set forth in this Offer to Purchase and in the
Assignment of Partnership Interest.
SECTION 4. WITHDRAWAL RIGHTS. Tenders of Units pursuant to the Offer
are irrevocable, except that Units tendered pursuant to the Offer may be
withdrawn at any time prior to the Expiration Date and, unless already
accepted for payment as provided in this Offer to Purchase, may also be
withdrawn at any time after February 14, 1998. For withdrawal to be effective,
a written or facsimile transmission notice of withdrawal must be timely
received by the Depositary at its address set forth on the back cover of this
Offer to Purchase. Any such notice of withdrawal must specify the name of the
person who tendered the Units to be withdrawn and must be signed by the
person(s) who signed the Assignment of Partnership Interest in the same manner
as the Assignment of Partnership Interest was signed (including signature
guarantees by an Eligible Institution). Units properly withdrawn will be
deemed not to be validly tendered for purposes of the Offer. Withdrawn Units
may be re-tendered, however, by following the procedures described in Section
3 at any time prior to the Expiration Date.
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If payment for Units is delayed for any reason or if the Purchaser
(which is an affiliate of the General Partner) is unable to pay for Units for
any reason, then, without prejudice to the Purchaser's rights under the Offer,
tendered Units may be retained by the Depositary and may not be withdrawn
except to the extent that tendering Limited Partners are entitled to
withdrawal rights as set forth in this Section 4; subject, however, to the
Purchaser's obligation, pursuant to Rule 14e-1(c) under the Exchange Act, to
pay Limited Partners the Purchase Price in respect of Units tendered or return
those Units promptly after termination or withdrawal of the Offer.
All questions as to the validity and form (including time of receipt)
of notices of withdrawal will be determined by the Purchaser (which is an
affiliate of the General Partner), in its sole discretion, which determination
shall be final and binding. None of the Purchaser, the Information Agent, the
Depositary or any other person will be under any duty to give notification of
any defects or irregularities in any notice of withdrawal or incur any
liability for failure to give any such notification.
SECTION 5. EXTENSION OF TENDER PERIOD; TERMINATION; AMENDMENT. The
Purchaser (which is an affiliate of the General Partner) expressly reserves
the right, in its sole discretion, at any time and from time to time, (i) to
extend the period of time during which the Offer is open and thereby delay
acceptance for payment of, and the payment for, validly tendered Units, (ii)
to terminate the Offer and not accept for payment any Units not already
accepted for payment or paid for, (iii) upon the occurrence of any of the
conditions specified in Section 14, to delay the acceptance for payment of, or
payment for, any Units not already accepted for payment or paid for, and (iv)
to amend the Offer in any respect (including, without limitation, by
increasing the consideration offered, increasing or decreasing the number of
Units being sought, or both). Notice of any such extension, termination or
amendment will be disseminated promptly to Limited Partners in a manner
reasonably designed to inform Limited Partners of such change in compliance
with Rule 14d-4(c) under the Exchange Act. In the case of an extension of the
Offer, the extension will be followed by a press release or public
announcement which will be issued no later than 9:00 a.m., New York City time,
on the next business day after the then scheduled Expiration Date, in
accordance with Rule 14e-1(d) under the Exchange Act.
If the Purchaser (which is an affiliate of the General Partner)
extends the Offer, or if the Purchaser (whether before or after its acceptance
for payment of Units) is delayed in its payment for Units or is unable to pay
for Units pursuant to the Offer for any reason, then, without prejudice to the
Purchaser's rights under the Offer, the Depositary may retain tendered Units
and those Units may not be withdrawn except to the extent tendering Limited
Partners are entitled to withdrawal rights as described in Section 4; subject,
however, to the Purchaser's obligation, pursuant to Rule 14e-1(c) under the
Exchange Act, to pay Limited Partners the Purchase Price in respect of Units
tendered or return those Units promptly after termination or withdrawal of the
Offer.
If the Purchaser (which is an affiliate of the General Partner) makes
a material change in the terms of the Offer or the information concerning the
Offer or waives a material condition of the Offer, the Purchaser will extend
the Offer and disseminate additional tender offer materials to the extent
required by Rules 14d-4(c) and 14d-6(d) under the Exchange Act. The minimum
period during which an offer must remain open following a material change in
the terms of the offer or information concerning the offer will depend upon
the facts and circumstances, including the relative materiality of the change
in the terms or information. In the Commission's view, an offer should remain
open for a minimum of five business days from the date the material change is
first published, sent or given to securityholders, and if material changes are
made with respect to information that approaches the significance of price or
the percentage of securities sought, a minimum of ten business days may be
required to allow for adequate dissemination to securityholders and investor
response. As used in this Offer to Purchase, "business day" means any day
other than a Saturday, Sunday or a federal holiday, and consists of the time
period from 12:01 a.m. through 12:00 midnight, New York City time.
SECTION 6. CERTAIN FEDERAL INCOME TAX MATTERS.
General. The following summary is a general discussion of certain of
the federal income tax consequences of a sale of Units pursuant to the Offer.
This summary is based on the Internal Revenue Code of 1986, as amended (the
"Code"), applicable Treasury regulations thereunder, administrative rulings,
practice and procedures and judicial
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authority, all as of the date of the Offer. All of the foregoing are subject
to change, and any such change could affect the continuing accuracy of this
summary. This summary does not discuss all aspects of federal income taxation
that may be relevant to a particular Limited Partner in light of such Limited
Partner's specific circumstances or to certain types of Limited Partners
subject to special treatment under the federal income tax laws (for example,
foreign persons, dealers in securities, banks, insurance companies and
tax-exempt organizations), nor (except as otherwise expressly indicated) does
it describe any aspect of state, local, foreign or other tax laws. Sales of
Units pursuant to the Offer will be taxable transactions for federal income
tax purposes, and also may be taxable transactions under applicable state,
local, foreign and other tax laws. EACH LIMITED PARTNER SHOULD CONSULT ITS OWN
TAX ADVISOR AS TO THE PARTICULAR TAX CONSEQUENCES TO SUCH LIMITED PARTNER OF
SELLING UNITS PURSUANT TO THE OFFER.
Gain or Loss Generally. In general, a Limited Partner will recognize
gain or loss on a sale of Units pursuant to the Offer equal to the difference
between (i) the Limited Partner's "amount realized" on the sale and (ii) the
Limited Partner's adjusted tax basis in the Units sold. Generally, a Limited
Partner's adjusted tax basis with respect to a Unit equals its cost, increased
by the amount of income and the amount of Partnership liabilities (as
determined under Code Section 752) allocated to the Unit, and decreased by (i)
any distributions made with respect to such Unit, (ii) the amount of
deductions or losses allocated to the Unit and (iii) any decrease in the
amount of Partnership liabilities (as determined under Code Section 752)
allocated to the Unit. Thus, the amount of a Limited Partner's adjusted tax
basis in tendered Units will vary depending upon the Limited Partner's
particular circumstances. The "amount realized" with respect to a Unit will be
a sum equal to the amount of cash received by the Limited Partner for the Unit
pursuant to the Offer, plus the amount of the Partnership's liabilities
allocable to the Unit (as determined under Code Section 752).
A portion of the gain or loss recognized by a Limited Partner on a
sale of a Unit pursuant to the Offer generally will be treated as a capital
gain or loss, if (as is generally expected to be the case) the Unit was held
by the Limited Partner as a capital asset. Under the Taxpayer Relief Act of
1997, the capital gains rate for individuals and other non-corporate taxpayers
is reduced to 20% for sales of capital assets after July 28, 1997 if such
assets were held for more than 18 months. However, any gain from the sale of
such assets attributable to the recapture of depreciation with respect to real
property (as defined in Code Section 1250) is taxed at a maximum rate of 25%.
The 28% rate continues to apply to individual and noncorporate taxpayers who
sell a capital asset held for more than one year but not more than 18 months.
Corporate taxpayers are taxed at a maximum marginal rate of 35% for both
capital gains and ordinary income. The maximum marginal federal income tax
rate for ordinary income of individuals and other noncorporate taxpayers is
39.6%. Capital losses are deductible only to the extent of capital gains,
except that, subject to the passive activity loss limitations discussed below,
non-corporate taxpayers may deduct up to $3,000 of capital losses in excess of
the amount of their capital gains against ordinary income. Excess capital
losses generally can be carried forward to succeeding years (a corporation's
carryforward period is five years and a non-corporate taxpayer can carry
forward such losses indefinitely); and a corporation is permitted to carry
back excess capital losses to the three preceding taxable years, provided the
carryback does not increase or produce a net operating loss for any of those
years.
A tendering Limited Partner will be allocated a pro rata share of the
Partnership's taxable income or loss for the year of sale with respect to the
Units sold in accordance with the provisions of the Limited Partnership
Agreement concerning transfers of Units. Such allocation and any cash
distributed by the Partnership to the Limited Partner for that year will
affect the Limited Partner's adjusted tax basis in Units and, therefore, the
amount of such Limited Partner's taxable gain or loss upon a sale of Units
pursuant to the Offer.
Unrealized Receivables and Certain Inventory. If any portion of the
amount of gain realized by a Limited Partner is attributable to "unrealized
receivables" (which includes depreciation recapture) or "substantially
appreciated inventory" as defined in Code Section 751, then a portion of the
Limited Partner's gain or loss may be ordinary rather than capital and, in
addition, a portion of such gain may be taxed at the 25% rate discussed above.
A portion, if not all, of the gain upon the sale of Units is expected to be
attributable to unrealized receivables. A Limited Partner who tenders Units
which are purchased pursuant to the Offer must file an information statement
with such Limited Partner's federal income tax return for the year of the sale
which provides the information
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specified in Treasury Regulation ss. 1.751-1(a)(3). A selling Limited Partner
also must notify the Partnership of the date of the transfer and the names,
addresses and tax identification numbers of the transferor(s) and transferee
within 30 days of the date of the transfer (or, if earlier, by January 15 of
the following calendar year).
Passive Activity Loss Limitation. Under Code Section 469, a
non-corporate taxpayer or personal service corporation generally can deduct
"passive losses" in any year only to the extent of the person's passive income
for that year. Closely held corporations (other than personal service
corporations) may offset such losses against active income as well as passive
activity income for that year. A substantial portion of any post-1986 losses
of Limited Partners from the Partnership would have been passive losses. Thus,
Limited Partners may have "suspended" passive losses from the Partnership
(i.e., post-1986 net taxable losses in excess of statutorily permitted
"phase-in" amounts which have not been used to offset income from other
passive activities or from the Partnership). Substantially all gain or loss
from a sale of Units pursuant to the Offer will be passive income or loss.
If a Limited Partner sells less than all of its Units pursuant to the
Offer, suspended passive losses, if any (including a portion of any loss
recognized on the sale of Units), can be currently deducted (subject to other
applicable limitations) to the extent of the Limited Partner's passive income
from the Partnership for that year (including any gain recognized on the sale
of Units) plus any other passive income for that year. If, on the other hand,
a Limited Partner sells 100% of its Units pursuant to the Offer, any
"suspended" losses and any losses recognized upon the sale of the Units will
be offset first against any other net passive gain to the Limited Partner from
the sale of the Units and any other net passive activity income from other
passive activity investments, and the balance of any "suspended" net losses
from the Units will no longer be subject to the passive activity loss
limitation and, therefore, will be deductible by such Limited Partner from its
other income (subject to any other applicable limitations), including ordinary
income. If a tendering Limited Partner has suspended passive losses from the
Partnership, such Limited Partner must sell all of its Units to receive these
tax benefits. If more than 7,000 of the outstanding Units are tendered, some
tendering Limited Partners may not be able to sell 100% of their Units
pursuant to the Offer because of proration of the number of Units to be
purchased by the Purchaser. See Section 1.
Partnership Termination. Section 708(b) of the Code provides that a
partnership terminates for income tax purposes if there is a sale or exchange
of 50% or more of the total interest in partnership capital and profits within
a twelve-month period (although successive transfers of the same interest
within a twelve-month period will be treated as a single transfer for this
purpose). In the event of a termination, the Partnership's tax year would
close and the Partnership would be treated for income tax purposes as if it
had contributed all of its assets and liabilities to a "new" partnership in
exchange for an interest in the "new" partnership. The Partnership would then
be treated as making a distribution of the interests in the "new" partnership
to the new partners and the remaining partners, followed by the liquidation of
the Partnership. Because the "new" partnership would be treated as having
acquired its assets on the date of the deemed contribution, a new depreciation
recovery period would begin on such date, the Partnership's annual
depreciation deductions over the next few years would be substantially
reduced, and the Partnership would have greater taxable income (or less tax
loss) than if no tax termination occurred. In addition, depreciation may be
required to be allocated to those Limited Partners that have a higher tax
basis. A tax termination of the Partnership would also terminate any
partnership in which the Partnership holds a majority interest (50% or more).
The Limited Partnership Agreement prohibits transfer of Units if a
transfer, when considered with all other transfers during the same applicable
twelve-month period, would cause a termination of the Partnership for tax
purposes. The Purchaser believes that even if the maximum number of Units is
purchased pursuant to the Offer, those transfers will not cause a tax
termination of the Partnership.
Backup Withholding and FIRPTA Withholding. Limited Partners (other
than tax-exempt persons, corporations and certain foreign individuals) who
tender Units may be subject to 31% backup withholding unless those Limited
Partners provide a taxpayer identification number ("TIN") and certify that the
TIN is correct or properly certify that they are awaiting a TIN. A Limited
Partner may avoid backup withholding by properly completing and signing the
Substitute Form W-9 included as part of the Assignment of Partnership
Interest. If a
11
<PAGE>
Limited Partner who is subject to backup withholding does not properly
complete and sign the Substitute Form W-9, the Purchaser will withhold 31%
from payments to such Limited Partner.
Gain realized by a foreign Limited Partner on the sale of a Unit
pursuant to the Offer will be subject to federal income tax. Under Code
Section 1445, the transferee of an interest held by a foreign person in a
partnership which owns United States real property generally is required to
deduct and withhold a tax equal to 10% of the amount realized on the
disposition. In order to comply with this requirement, the Purchaser will
withhold 10% of the amount realized by a tendering Limited Partner unless the
Limited Partner properly completes and signs the FIRPTA Affidavit included as
part of the Assignment of Partnership Interest certifying the Limited
Partner's TIN and address, and that such Limited Partner is not a foreign
person. Amounts withheld would be creditable against a foreign Limited
Partner's federal income tax liability and, if in excess thereof, a refund
could be obtained from the Internal Revenue Service by filing a U.S. income
tax return.
SECTION 7. EFFECTS OF THE OFFER.
Limitations on Resales. The Limited Partnership Agreement prohibits
transfers of Units if a transfer, when considered with all other transfers
during the same applicable twelve-month period, would cause a termination of
the Partnership for federal or any applicable state income tax purposes. This
provision may limit sales of Units in the secondary market and in private
transactions for the twelve-month period following completion of the Offer.
The General Partner has advised the Purchaser that the Partnership will not
process any requests for recognition of substitution of Limited Partners upon
a transfer of Units during such twelve-month period which the General Partner
believes may cause a tax termination in contravention of the Limited
Partnership Agreement. In determining the number of Units for which the Offer
is made (representing approximately 40% of the outstanding Units if 7,000
Units are tendered), the Purchaser (which is an affiliate of the General
Partner) took this restriction into account so as to permit normal historical
levels of transfers to occur following the transfers of Units pursuant to the
Offer without violating this restriction.
Effect on Trading Market; Registration Under Section 12(g) of the
Exchange Act. If a substantial number of Units are purchased pursuant to the
Offer, the result will be a reduction in the number of Limited Partners. In
the case of certain kinds of equity securities, a reduction in the number of
security-holders might be expected to result in a reduction in the liquidity
and volume of activity in the trading market for the security. In this case,
however, there is no established public trading market for the Units and,
therefore, the Purchaser (which is an affiliate of the General Partner) does
not believe a reduction in the number of Limited Partners will materially
further restrict the Limited Partners' ability to find purchasers for their
Units through secondary market transactions. See Section 13 for certain
limited information regarding recent secondary market sales of the Units.
The Units are registered under Section 12(g) of the Exchange Act,
which means, among other things, that the Partnership is required to file
periodic reports with the Commission and to comply with the Commission's proxy
rules. The Purchaser (which is an affiliate of the General Partner) does not
expect or intend that consummation of the Offer will cause the Units to cease
to be registered under Section 12(g) of the Exchange Act. If the Units were to
be held by fewer than 300 persons, the Partnership could apply to de-register
the Units under the Exchange Act. Because the Units are widely held, however,
the Purchaser (which is an affiliate of the General Partner) believes that,
even if it purchases the maximum number of Units in the Offer, after that
purchase the Units will be held of record by more than 300 persons.
Control of Limited Partner Voting Decisions by Purchaser; Effect of
Relationship with General Partner. The Limited Partnership Agreement provides
that the General Partner has absolute discretion as to whether to admit an
assignee of Units to the Partnership as a substituted Limited Partner. The
Purchaser (which is an affiliate of the General Partner) will seek to be
admitted to the Partnership as a substituted Limited Partner upon consummation
of the Offer and, if admitted, will have the right to vote each Unit purchased
pursuant to the Offer. Even if the Purchaser (which is an affiliate of the
General Partner) is not admitted to the Partnership as a substituted Limited
Partner, however, the Purchaser nonetheless will have the right to vote each
Unit purchased in the Offer pursuant to the irrevocable appointment by
tendering Limited Partners of the Purchaser and its managers and designees as
12
<PAGE>
proxies with respect to the Units tendered by such Limited Partners and
accepted for payment by the Purchaser. See Section 3. As a result, the
Purchaser (which is an affiliate of the General Partner) could be in a
position to significantly influence all voting decisions with respect to the
Partnership. 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. This could (i)
prevent nontendering Limited Partners from taking action they desire but that
IPT opposes and (ii) enable IPT to take action desired by IPT but opposed by
non-tendering Limited Partners. Under the Limited Partnership Agreement,
Limited Partners holding a majority of the Units are entitled to take action
with respect to a variety of matters, including: removal of a general partner
and in certain circumstances election of new or successor general partners;
dissolution of the Partnership; the sale of all or substantially all of the
assets of the Partnership; and most types of amendments to the Limited
Partnership Agreement.
The Offer will not result in any change in the compensation payable
to the General Partner or its affiliates. However, as a result of the Offer,
the Purchaser (which is an affiliate of the General Partner) will participate,
in its capacity as a Limited Partner, in any subsequent distributions to
Limited Partners to the extent of the Units purchased pursuant to the Offer.
SECTION 8. FUTURE PLANS OF INSIGNIA, IPT AND THE PURCHASER. IPT,
through the Purchaser (which is an affiliate of the General Partner), is
seeking to acquire Units pursuant to the Offer in order to increase its equity
interest in the Partnership, primarily for investment purposes and with a view
to making a profit. Following the completion of the Offer, IPT and/or persons
related to or affiliated with it may acquire additional Units. Any such
acquisition may be made through private purchases, through one or more future
tender or exchange offers or by any other means deemed advisable. Any such
acquisition may be at a price higher or lower than the price to be paid for
the Units purchased pursuant to the Offer, and may be for cash or other
consideration. Insignia and IPT (which are affiliates of the General Partner)
also may consider disposing of some or all of the Units the Purchaser acquires
pursuant to the Offer, either directly or by a sale or other disposition of
one or more interests in IPT or IPLP, depending among other things on the
requirements from time to time of Insignia, IPT and their affiliates in light
of liquidity, strategic, tax and other considerations.
Neither IPT nor the Purchaser (which are affiliates of the General
Partner) has any present plans or intentions with respect to a liquidation of
the Partnership or a sale of assets or refinancing of any of the Partnership's
properties. However, IPT and the Purchaser expect that consistent with the
General Partner's fiduciary obligations, the General Partner will seek and
review opportunities (including opportunities identified by IPT and the
Purchaser) to engage in transactions which could benefit the Partnership, such
as sales or refinancings of assets or a combination of the Partnership with
one or more other entities, with the objective of seeking to maximize returns
to Limited Partners.
IPT and the Purchaser (which are affiliates of the General Partner)
have been advised that the possible future transactions the General Partner
expects to consider on behalf of the Partnership include (i) payment of
extraordinary distributions; (ii) refinancing, reducing or increasing existing
indebtedness of the Partnership; (iii) sales of assets, individually or as
part of a complete liquidation; and (iv) mergers or other consolidation
transactions involving the Partnership. Any such merger or consolidation
transaction could involve other limited partnerships in which the General
Partner or its affiliates serve as general partners, or a combination of the
Partnership with one or more existing, publicly traded entities (including,
possibly, affiliates of IPT (which is an affiliate of the General Partner) or
IPT itself), in any of which Limited Partners might receive cash, common stock
or other securities or consideration. There is no assurance, however, as to
when or whether any of the transactions referred to above might occur. If any
such transaction is effected by the Partnership and financial benefits accrue
to the Limited Partners of the Partnership, the Purchaser (and thus IPT) will
participate in those benefits to the extent of its ownership of Units. A
merger or other consolidation transaction and certain kinds of other
extraordinary transactions would require a vote of the Limited Partners, and
if the Purchaser is successful in acquiring a significant number of Units
pursuant to the Offer (or otherwise), IPT will be able to significantly
influence the outcome of any such vote. IPT's primary objective in seeking to
acquire the Units through the
13
<PAGE>
Purchaser pursuant to the Offer is not, however, to influence the vote on any
particular transaction, but rather to generate a profit on the investment
represented by those Units.
SECTION 9. CERTAIN INFORMATION CONCERNING THE PARTNERSHIP. Except as
otherwise indicated, information contained in this Section 9 is based upon
documents and reports publicly filed by the Partnership with the Commission.
Although the Purchaser has no information that any statements contained in
this Section 9 are untrue, the Purchaser cannot take responsibility for the
accuracy or completeness of any information contained in this Section 9 which
is derived from such public documents, or for any failure by the Partnership
to disclose events which may have occurred and may affect the significance or
accuracy of any such information but which are unknown to the Purchaser.
General. The Partnership was organized on October 29, 1984 under the
laws of the State of South Carolina. Its principal executive offices are
located at One Insignia Financial Plaza, Greenville, South Carolina 29602, and
its telephone number at that address is (864) 239-2747.
The Partnership's primary business is real estate ownership and
related operations. The Partnership was formed for the purpose of acquiring
existing apartment properties which offered the potential for appreciation in
value and cash distributions to the Limited Partners from operations.
The Partnership's investment portfolio currently consists of two
residential apartment complexes: a 378- unit complex in Memphis, Tennessee;
and a 188-unit complex in Fort Collins, Colorado.
Originally Anticipated Term of Partnership; Alternatives. According
to the Partnership's Prospectus dated March 18, 1985, the General Partner
anticipated that the Partnership would sell and/or refinance its properties
three to eight years after their acquisition, depending upon the then current
real estate and money markets, economic climate and income tax consequences to
the Limited Partners. Under the Limited Partnership Agreement, the term of the
Partnership will continue until December 31, 2024, unless sooner terminated as
provided in the Limited Partnership Agreement or by law. Limited Partners
could, as an alternative to tendering their Units, take a variety of possible
actions including voting to liquidate the Partnership or causing the
Partnership to merge with another entity or engage in a "roll-up" or similar
transaction.
General Policy Regarding Sales and Refinancings of Partnership
Properties. In general, the General Partner regularly evaluates the
Partnership's properties by considering various factors, such as the
Partnership's financial position and real estate and capital market
conditions. The General Partner monitors each property's specific locale and
sub-market conditions 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, tax implications and
the investment climate are all considered. Any of these factors, and possibly
others, could potentially contribute to any decision of the General Partner to
sell, refinance, upgrade with capital improvements or hold a particular
Partnership property. There are no plans to sell or refinance either property
at the present time.
Selected Financial and Property-Related Data. Set forth below is a
summary of certain financial and statistical information with respect to the
Partnership and its properties, all of which has been excerpted or derived
from the Partnership's Annual Reports on Form 10-KSB for the years ended
December 31, 1996, 1995, 1994, 1993 and 1992 and the Partnership's Quarterly
Reports on Form 10-QSB for the periods ended September 30, 1997 and 1996. More
comprehensive financial and other information is included in such reports and
other documents filed by the Partnership with the Commission, and the
following summary is qualified in its entirety by reference to such reports
and other documents and all the financial information and related notes
contained therein.
14
<PAGE>
SHELTER PROPERTIES VII LIMITED PARTNERSHIP
SELECTED FINANCIAL DATA
(in thousands, except Unit data)
<TABLE>
<CAPTION>
NINE MONTHS ENDED FISCAL YEAR ENDED
SEPTEMBER 30, DECEMBER 31,
----------------------- ----------------------------------------------------------
1997 1996 1996 1995 1994 1993 1992
---------- ------------ ----------- ----------- ----------- ---------- -------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
Statements of Operations Data:
Rental Income................. $ 2,664 $ 2,615 $ 3,517 $ 3,308 $ 3,170 $ 2,958 $ 2,829
Other Income.................. $ 129 $ 114 $ 170 $ 153 $ 109 $ 73 $ 75
Total Revenues............. $ 2,793 $ 2,729 $ 3,687 $ 3,461 $ 3,279 $ 3,031 $ 2,904
Income (Loss) from Operations
(before extraordinary item) $ 64 $ 135 $ 220 $ (78) $ 315 $ (312) $ (502)
Net Income (Loss)............. $ 64 $ 135 $ 220 $ (78) $ 315 $ (372) $ (502)
Net Income (Loss) per Unit.... $ 3.65 $ 7.73 $ 12.56 $ (4.46) $ .02 $(21.24) $(28.65)
AS OF AS OF
SEPTEMBER 30, DECEMBER 31,
----------------------- ----------------------------------------------------------
1997 1996 1996 1995 1994 1993 1992
---------- ------------ ----------- ----------- ----------- ---------- -------
(UNAUDITED)
Balance Sheets Data:
Total Assets.................. $12,609 $12,920 $13,084 $12,959 $13,248 $13,393 $12,807
Total Liabilities............. $11,505 $11,660 $11,740 $11,834 $12,046 $12,191 $11,232
Limited Partners' Equity
(Deficit)...................... $ 1,238 $ 1,396 $ 1,479 $ 1,262 $ 1,339 $ 1,339 $ 1,707
Units Outstanding............. 17,343 17,343 17,343 17,343 17,343 17,343 17,343
Book Value per Unit........... $ 71.38 $ 80.49 $ 85.28 $ 72.77 $ 77.21 $ 77.21 $ 98.43
</TABLE>
Description of Properties. Set forth below is a table showing the
location, the date of purchase, the nature of the Partnership's ownership
interest in and the use of each of the Partnership's properties.
<TABLE>
<CAPTION>
DATE OF
PROPERTY PURCHASE TYPE OF OWNERSHIP USE
- ----------------------------------- ---------- ------------------------------- -----------
<S> <C> <C> <C>
Hickory Ridge Apartments 08/27/85 Fee ownership Residential Apartments
Memphis, Tennessee (subject to first mortgage) (378)
Governor's Park Apartments 09/30/85 Fee ownership Residential Apartments
Fort Collins, Colorado (subject to first and second (188 units)
mortgages)
</TABLE>
Accumulated Depreciation Schedule. Set forth below is a table showing
the gross carrying value, accumulated depreciation and federal tax basis of
each of the Partnership's properties as of December 31, 1996 ($ amounts in
thousands).
<TABLE>
<CAPTION>
GROSS
CARRYING ACCUMULATED FEDERAL
PROPERTY VALUE DEPRECIATION RATE METHOD TAX BASIS
-------------- -------- ------------ -------- -------- ------------
<S> <C> <C> <C> <C> <C>
Hickory Ridge Apartments $13,292 $6,290 5-29 yrs. S/L $6,640
Governor's Park Apartments 7,261 2,844 5-39 yrs. S/L 3,322
------- ------ ------
TOTALS $20,553 $9,134 $9,962
======= ====== ======
</TABLE>
15
<PAGE>
Schedule of Mortgages. Set forth below is a table showing certain
information regarding the outstanding mortgages encumbering each of the
Partnership's properties as of December 31, 1996 ($ amounts in thousands).
<TABLE>
<CAPTION>
PRINCIPAL PRINCIPAL
BALANCE AT STATED BALANCE
DECEMBER 31, INTEREST PERIOD MATURITY DUE AT
PROPERTY 1996 RATE AMORTIZED DATE MATURITY
- ---------------------------------- --------------- ---------- ------------ ------------ -----------
<S> <C> <C> <C> <C> <C>
Hickory Ridge Apartments $ 6,622 7.50% (a) 03/01/01 $ 6,057
Governor's Park Apartments
First Mortgage 4,589 7.83% (b) 10/15/03 4,099
Second Mortgage 147 7.83% none 10/15/03 147
-------- ------------
11,358 $ 10,303
========
Less unamortized discounts (72)
--------
TOTALS $ 11,286
========
</TABLE>
(a) The principal balance is being amortized over 300 months with a balloon
payment due March 1, 2001.
(b) The principal balance is being amortized over 344 months with a balloon
payment due October 15, 2003.
Average Annual Rental Rate and Occupancy. Set forth below is a table
showing the average annual rental rates and occupancy percentages for each of
the Partnership's properties during the past two years.
<TABLE>
<CAPTION>
PROPERTY AVERAGE ANNUAL RENTAL RATE AVERAGE ANNUAL OCCUPANCY
------------------ ---------------------------- --------------------------
1996 1995 1996 1995
------ ------ ------ ------
<S> <C> <C> <C> <C>
Hickory Ridge Apartments $5,971/unit $5,666/unit 96% 97%
Governor's Park Apartments $7,637/unit $7,356/unit 95% 90%
</TABLE>
Schedule of Real Estate Taxes and Rates. Set forth below is a table
showing the real estate taxes and rates for 1996 for each of the Partnership's
properties.
<TABLE>
<CAPTION>
1996 1996
PROPERTY BILLING RATE
- ---------------------------------------- ---------------------- -------------
<S> <C> <C>
Hickory Ridge Apartments $ 109,000 3.16%
Governor's Park Apartments $ 63,000 8.97%
</TABLE>
Other Information. The Partnership is subject to the information
reporting requirements of the Exchange Act and accordingly is required to file
reports and other information with the Commission relating to its business,
financial results and other matters. Such reports and other documents may be
inspected at the Commission's Public Reference Section, Room 1024, 450 Fifth
Street, N.W., Washington, D.C. 20549, where copies may be obtained at
prescribed rates, and at the regional offices of the Commission located in the
Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661,
and 7 World Trade Center, New York, New York 10048. Copies should be available
by mail upon payment of the Commission's customary charges by writing to the
Commission's principal offices at 450 Fifth Street, N.W., Washington, D.C.
20549. The Commission also maintains a web site that contains reports, proxy
and other information filed electronically with the Commission, the address of
which is http://www.sec.gov.
Cash Distributions History. The Partnership made a cash distribution to
Limited Partners of $17.53 per Unit in 1997 (through December 17). Prior to
the 1997 distribution, the only other distribution made by the Partnership was
in 1985 ($11.19 per Unit). In total, original investors in the Partnership
have received distributions of only $28.72 in respect of their original $1,000
investment made in 1985.
16
<PAGE>
Operating Budgets of the Partnership. A summary of the fiscal 1996 and
1997 operating budgets and the audited results of operations for fiscal 1996
of the Partnership are set forth in the table below. The budgeted amounts
provided below are figures that were not computed in accordance with generally
accepted accounting principles ("GAAP"). Historically, budgeted operating
results of operations for a particular fiscal year have differed significantly
in certain respects from the audited operating results for that year. In
particular, items that are categorized as capital expenditures for purposes of
preparing the operating budgets are often re-categorized as expenses when the
financial statements are audited and presented in accordance with GAAP.
Therefore, the summary operating budgets presented for fiscal 1997 should not
necessarily be considered as indicative of what the audited operating results
for fiscal 1997 will be. Furthermore, any estimate of the future performance
of a business, such as the Partnership's business, is forward-looking and
based on numerous assumptions, some of which inevitably will prove to be
incorrect. For this reason, it is probable that the Partnership's future
operating results will differ from those projected in the operating budget,
and those differences may be material. Therefore, such information should not
be relied on by Limited Partners.
<TABLE>
<CAPTION>
FISCAL 1996 FISCAL 1996 FISCAL 1997
BUDGETED AUDITED BUDGETED
---------------- --------------- ---------------
<S> <C> <C> <C>
Total Revenues from Property Operations........................... $ 3,580,254 $ 3,517,000 $ 3,850,877
Total Operating Expenses ......................................... $ 1,531,851 $ 1,665,000 $ 1,600,964
Net Operating Income.............................................. $ 2,048,403 $ 1,852,000 $ 2,249,913
Capital Expenditures.............................................. $ 648,906 $ 512,000 $ 691,859
</TABLE>
SECTION 10. CONFLICTS OF INTEREST AND TRANSACTIONS WITH AFFILIATES.
The General Partner and its affiliates have conflicts of interest with respect
to the Offer as set forth below.
Conflicts of Interest with Respect to the Offer. The General Partner
has conflicts of interest with respect to the Offer, including conflicts
resulting from its affiliation with IPT and the Purchaser. The General Partner
also would have a conflict of interest (i) as a result of the fact that a sale
or liquidation of the Partnership's assets would result in a decrease or
elimination of the fees paid to the General Partner and/or its affiliates and
(ii) as a consequence of the Purchaser's ownership of Units, because the
Purchaser (which is an affiliate of the General Partner) may have incentives
to seek to maximize the value of its ownership of Units, which in turn may
result in a conflict for the General Partner in attempting to reconcile the
interests of the Purchaser (which is an affiliate of the General Partner) with
the interests of the other Limited Partners. In addition, the Purchaser (which
is an affiliate of the General Partner) is making the Offer with a view to
making a profit. Accordingly, there is a conflict between the desire of the
Purchaser (which is an affiliate of the General Partner) to purchase Units at
a low price and the desire of the Limited Partners to sell their Units at a
high price. The General Partner has indicated in the Schedule 14D-9 that it is
remaining neutral and making no recommendation as to whether Limited Partners
should tender their Units pursuant to the Offer. LIMITED PARTNERS ARE URGED TO
READ THIS OFFER TO PURCHASE AND THE SCHEDULE 14D-9 AND THE RELATED MATERIALS
CAREFULLY AND IN THEIR ENTIRETY BEFORE DECIDING WHETHER TO TENDER THEIR UNITS.
Voting by the Purchaser. The Purchaser (which is an affiliate of the
General Partner) will seek to be admitted to the Partnership as a substituted
Limited Partner upon consummation of the Offer and, when admitted, will have
the right to vote each Unit purchased pursuant to the Offer. Even if the
Purchaser (which is an affiliate of the General Partner) is not admitted to
the Partnership as a substituted Limited Partner, however, the Purchaser
nonetheless will have the right to vote each Unit purchased in the Offer
pursuant to the irrevocable appointment by tendering Limited Partners of the
Purchaser (which is an affiliate of the General Partner) and its managers and
designees as proxies with respect to the Units tendered by such Limited
Partners and accepted for payment by the Purchaser. See Section 3. As a
result, if the Purchaser (which is an affiliate of the General Partner) is
successful in acquiring a significant number of Units pursuant to the Offer,
the Purchaser will have the right to vote those Units and thereby
significantly influence all voting decisions with respect to the Partnership.
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 IPT's best interests, which, because of their relationship with the General
Partner, also may be in the interest of the General Partner, but may not be in
the interest of other Limited Partners. This could (i) prevent non-tendering
Limited Partners from taking action they desire but that IPT opposes and (ii)
enable IPT
17
<PAGE>
to take action desired by IPT but opposed by non-tendering Limited Partners.
Under the Limited Partnership Agreement, Limited Partners holding a majority
of the Units are entitled to take action with respect to a variety of matters,
including: removal of a general partner and in certain circumstances election
of new or successor general partners; dissolution of the Partnership; the sale
of all or substantially all of the assets of the Partnership; and most types
of amendments to the Limited Partnership Agreement. See Section 7.
Financing Arrangements. The Purchaser (which is an affiliate of the
General Partner) expects to pay for the Units it purchases pursuant to the
Offer with funds provided by IPLP as capital contributions. IPLP in turn
intends to use its cash on hand to make such contributions. See Section 12. It
is possible, however, that in connection with its future financing activities,
IPT or IPLP may cause or request the Purchaser (which is an affiliate of the
General Partner) to pledge the Units as collateral for loans, or otherwise
agree to terms which provide IPT, IPLP and the Purchaser with incentives to
generate substantial near-term cash flow from the Purchaser's investment in
the Units. This could be the case, for example, if a loan has a "balloon"
maturity after a relatively short time or bears a high or increasing interest
rate. In such a situation, the General Partner may experience a conflict of
interest in seeking to reconcile the best interests of the Partnership with
the need of its affiliates for cash flow from the Partnership's activities.
Transactions with Affiliates. 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.
SECTION 11. CERTAIN INFORMATION CONCERNING THE PURCHASER, IPLP, IPT
AND INSIGNIA.
The Purchaser. The Purchaser (which is an affiliate of the General
Partner) is a newly formed entity controlled by IPT and organized for the
purpose of making the Offer. The Purchaser is a wholly-owned subsidiary of
IPLP. The Purchaser (which is an affiliate of the General Partner) has not
engaged in any business activity other than in connection with the Offer and
certain other tender offers for units of limited partnership interests in
other IPT Partnerships (as defined below) being made contemporaneously with
the Offer, and has no significant assets or liabilities at the present time.
Upon consummation of the Offer and such other offers, the Purchaser's only
significant assets will be the Units it acquires pursuant to the Offer and the
other limited partnership units it acquires pursuant to such other offers.
The principal executive offices of the Purchaser (which is an
affiliate of the General Partner) are located at One Insignia Financial Plaza,
P.O. Box 19059, Greenville, South Carolina 29602, and its telephone number is
(864) 239-1300. For certain information concerning the managers of the
Purchaser (which is an affiliate of the General Partner), see Schedule I to
this Offer to Purchase.
IPT and IPLP. IPT was formed by Insignia in May 1996, for the purpose
of acquiring and owning interests in multifamily residential properties,
principally through ownership of limited and general partner interests in real
estate limited partnerships (including the Partnership). IPT has been
organized and operates in a manner
18
<PAGE>
that will qualify it to be taxed as a real estate investment trust ("REIT")
under the Code. Substantially all of IPT's investments are held through IPLP,
which is the operating partnership of IPT. IPT is presently the sole general
partner and Insignia is presently the sole limited partner of IPLP.
In forming IPT, Insignia and its affiliates (i) transferred to IPT
equity interests in entities comprising or controlling the general partners of
36 public real estate limited partnerships (including the Partnership) (the
"IPT Partnerships") in exchange for common shares of beneficial interest of
IPT and (ii) transferred to IPLP limited partner interests in the IPT
Partnerships (or equity interests in entities owning limited partner interests
in the IPT Partnerships) in exchange for units of limited partner interest in
IPLP. The IPT Partnerships own, in the aggregate, 184 properties containing
approximately 42,000 residential apartment units and approximately 4.2 million
square feet of commercial space. See Schedule IV for a list of the IPT
Partnerships.
IPT does not currently operate as a self-administered and
self-managed REIT, but rather has engaged Insignia to act as advisor to IPT
and IPLP. In such capacity, Insignia and its affiliates provide a broad range
of services to IPT and IPLP, including executive advisory, investment
advisory, acquisition, administrative, financial and accounting services,
including in connection with the Offer.
On July 18, 1997, IPT, Insignia, MAE GP Corporation (which is an
affiliate of Insignia) and Angeles Mortgage Investment Trust, an
unincorporated California business trust ("AMIT"), entered into a definitive
merger agreement (the "AMIT Merger Agreement"), pursuant to which AMIT is to
be merged with and into IPT, with IPT being the surviving entity, in a stock
for stock transaction (the "AMIT Merger"). AMIT is a public company whose
Class A shares trade on the American Stock Exchange under the symbol ANM.
Insignia and its affiliates currently own 96,800 (or approximately 3.7%) of
the 2,617,000 outstanding AMIT Class A shares and all of the 1,675,113
outstanding AMIT Class B shares. If the AMIT Merger is consummated, IPT will
become a publicly traded company (IPT presently intends to apply for listing
of its shares on the New York Stock Exchange, which listing would be subject
to completion of the AMIT Merger), and it is anticipated that Insignia and its
affiliates will own approximately 56% of post-merger IPT, the former AMIT
shareholders (other than Insignia and its affiliates) will own approximately
17% of post-merger IPT, and the current unaffiliated shareholders of IPT will
own the remaining 27% of post-merger IPT.
The AMIT Merger is expected to be completed in the first quarter of
1998. Consummation of the AMIT Merger is subject to several conditions,
including approval of the AMIT Merger Agreement and the AMIT Merger by the
respective shareholders of IPT and AMIT and the receipt by AMIT of a fairness
opinion from its financial advisor to the effect that the AMIT Merger is fair
to AMIT's shareholders from a financial point of view. Accordingly, there can
be no assurance as to when the AMIT Merger will occur, or that it will occur
at all.
IPT's principal executive offices are located at One Insignia
Financial Plaza, P.O. Box 19059, Greenville, South Carolina 29602, and its
telephone number is (864) 239-1300. For certain information concerning the
trustees and executive officers of IPT, see Schedule II to this Offer to
Purchase. IPLP does not have any officers or employees.
Set forth below is certain consolidated financial information with
respect to IPT and IPLP.
19
<PAGE>
INSIGNIA PROPERTIES TRUST
SELECTED CONSOLIDATED FINANCIAL
INFORMATION (in thousands, except share and unit data)
<TABLE>
<CAPTION>
NINE MONTHS ENDED YEAR ENDED
SEPTEMBER 30, DECEMBER 31,
1997 1996
------------------- --------------
(unaudited) (audited)
<S> <C> <C>
Statements of Operations Data:
Revenues.................................................................. $ 11,144 $ 9,705
Income Before Extraordinary Item.......................................... $ 2,930 $ 3,557
Net Income................................................................ $ 2,930 $ 2,425
Supplemental Data:
Funds From Operations(1).................................................. $ 14,324 $ 12,563
IPT Common Shares Outstanding............................................. 13,449,712 11,168,036
IPLP Units Outstanding.................................................... 8,399,499 8,399,499
---------- ----------
IPT Common Shares and IPLP Units Outstanding(2)........................... 21,849,211 19,567,535
========== ==========
Balance Sheets Data:
Cash...................................................................... $ 53,897 $ 4,928
Investments in IPT Partnerships(3)........................................ $ 126,505 $ 118,741
Long-Term Debt............................................................ $ 19,300 $ 19,730
Shareholders' Equity(4)................................................... $ 138,710 $ 121,068
</TABLE>
(1) Funds from Operations represent income or loss from real estate
operations, which is net income or loss in accordance with GAAP, excluding
gains or losses from debt restructuring or sales of property, plus
depreciation and provision for impairment.
(2) Assumes all outstanding IPLP units are exchanged for IPT Common Shares.
(3) Represents IPT's investment in 26 of the 36 IPT Partnerships which IPT
accounts for using the equity method. Of the remaining ten IPT
Partnerships, IPT accounts for nine using the cost method and one using
the consolidation method.
(4) Includes Insignia's investments in predecessor entities.
Insignia. Insignia is a fully integrated real estate services
organization. Insignia is the largest manager of multi-family residential
properties in the United States and is among the largest managers of
commercial properties. Insignia's real estate services include property
management, providing all of the day-to-day services necessary to operate a
property, whether residential or commercial; asset management, including
long-term financial planning, monitoring and implementing capital improvement
plans, and development and execution of refinancings and dispositions; real
estate leasing and brokerage; maintenance and construction services; marketing
and advertising; investor reporting and accounting; and investment banking,
including assistance in workouts and restructurings, mergers and acquisitions,
and debt and equity securitizations.
Insignia provides property and/or asset management services for
approximately 2,600 properties, which include approximately 290,000
residential units (including cooperative and condominium units), and in excess
of 150 million square feet of retail, commercial and industrial space, located
in over 500 cities in 48 states. Insignia currently provides partnership
administration services to approximately 900 limited partnerships having
approximately 330,000 limited partners. Insignia is a public company whose
stock is traded on the New York Stock Exchange under the symbol IFS.
Insignia is subject to the information and reporting requirements of
the Exchange Act and in accordance therewith is required to file periodic
reports, proxy statements and other information with the Commission relating
to its business, financial condition and other matters. Certain information,
as of particular dates, concerning Insignia's business, principal properties,
capital structure, material pending legal proceedings, operating results,
financial condition, directors and officers (including their remuneration and
stock options granted to them), the principal holders of Insignia's
securities, any material interests of such persons in transactions with
Insignia and certain other matters is required to be disclosed in proxy
statements and annual reports distributed to Insignia's shareholders and filed
with the Commission. Such reports, proxy statements and other information may
be inspected
20
<PAGE>
and copied at the Commission's public reference facilities and should also be
available for inspection in the same manner as set forth with respect to the
Partnership in Section 9.
Insignia's principal executive offices are located at One Insignia
Financial Plaza, Greenville, South Carolina 29602, and its telephone number is
(864) 239-1000. For certain information concerning the directors and executive
officers of Insignia, see Schedule III to this Offer to Purchase.
Set forth below is certain consolidated financial information with
respect to Insignia and its consolidated subsidiaries for its fiscal years
ended December 31, 1996, 1995 and 1994 and the nine-month periods ended
September 30, 1997 and 1996. More comprehensive financial and other
information is included in Insignia's Annual Report on Form 10-K for the year
ended December 31, 1996 (including management's discussion and analysis of
financial condition and results of operations) and in other reports and
documents filed by Insignia with the Commission. The financial information set
forth below is qualified in its entirety by reference to such reports and
documents filed with the Commission and the financial statements and related
notes contained therein. These reports and other documents may be examined and
copies thereof may be obtained in the manner set forth above.
INSIGNIA FINANCIAL GROUP, INC.
SELECTED CONSOLIDATED FINANCIAL INFORMATION
(in thousands, except per share data)
<TABLE>
<CAPTION>
NINE MONTHS ENDED YEAR ENDED
SEPTEMBER 30, DECEMBER 31,
----------------------- -------------------------------------
1997 1996 1996 1995 1994
-------- --------- ---------- ---------- ----------
(unaudited)
<S> <C> <C> <C> <C> <C>
Statements of Operations Data:
Total Revenues.................................. $ 254,630 $ 149,204 $ 227,074 $ 123,032 $ 75,453
Income Before Taxes and Extraordinary Item...... $ 7,879 $ 8,097 $ 14,946 $ 10,093 $ 12,101
Net Income...................................... $ 4,727 $ 5,020 $ 8,564 $ 5,806 $ 7,261
Earnings Per Share.............................. $ 0.15 $ 0.15 $ 0.27 $ 0.20 $ 0.35
</TABLE>
<TABLE>
<CAPTION>
AS OF AS OF
SEPTEMBER 30, DECEMBER 31,
----------------------- ------------------------------------
1997 1996 1996 1995 1994
-------- --------- --------- -------- ---------
(unaudited)
<S> <C> <C> <C> <C> <C>
Balance Sheets Data:
Cash and Cash Equivalents....................... $ 89,427 $ 60,131 $ 54,614 $ 49,846 $ 36,596
Receivables..................................... $ 73,657 $ 14,292 $ 46,040 $ 26,445 $ 13,572
Total Assets................................ $ 568,768 $ 471,889 $ 492,402 $ 245,409 $ 174,272
Accounts Payable................................ $ 8,767 $ 2,602 $ 1,711 $ 1,497 $ 3,478
Commissions Payable............................. $ 30,841 $ 9,257 $ 18,736 $ 602 --
Accrued and Sundry Liabilities.................. $ 50,893 $ 24,604 $ 40,741 $ 25,619 $ 18,790
Long-Term Debt.................................. $ 58,417 $ 205,590 $ 69,140 $ 42,996 $ 73,198
Total Liabilities........................... $ 148,918 $ 255,714 $ 130,328 $ 70,714 $ 95,466
Redeemable Convertible Preferred Stock.......... -- -- -- $ 15,000 --
Redeemable Convertible Preferred Securities
of Subsidiary Trust........................... $ 143,993 -- $ 144,169 -- --
Minority Interest in Consolidated Subsidiaries.. $ 52,778 $ 2,762 -- $ 2,682 --
Shareholders' Equity........................ $ 223,079 $ 213,413 $ 217,905 $ 157,013 $ 78,806
</TABLE>
Except as otherwise set forth herein, none of the Purchaser (which is
an affiliate of the General Partner), IPLP, IPT, Insignia or, to the best of
the Purchaser's knowledge, any of the persons listed on Schedules I, II or III
hereto, or any affiliate of the foregoing, (i) beneficially owns or has a
right to acquire any Units, (ii) has effected any transaction in the Units in
the last 60 days, or (iii) has any contract, arrangement, understanding or
relationship with any other person with respect to any securities of the
Partnership, including, but not limited to, contracts, arrangements,
understandings or relationships concerning the transfer or voting thereof,
joint ventures, loan or
21
<PAGE>
option arrangements, puts or calls, guarantees of loans, guarantees against
loss or the giving or withholding of proxies. Andrew L. Farkas, who is the
Chairman of the Board, Chief Executive Officer and President of Insignia and a
trustee of IPT, beneficially owns approximately 28% of Insignia's outstanding
common stock and, as a result, may be deemed to beneficially own the Units
owned by IPLP.
SECTION 12. SOURCE OF FUNDS. The Purchaser (which is an affiliate of
the General Partner) expects that approximately $2,650,000 will be required to
purchase 7,000 Units, if tendered, and to pay related fees and expenses. The
Purchaser (which is an affiliate of the General Partner) expects to obtain all
of those funds from IPLP, which in turn intends to use its cash on hand.
SECTION 13. BACKGROUND OF THE OFFER.
The Purchaser; Affiliation With the General Partner. 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 individual general partner of the
Partnership, N. Barton Tuck, Jr., effectively is prohibited by the Limited
Partnership Agreement from participating in the management or conduct of the
Partnership's business and affairs, because those functions are reserved
exclusively to the General Partner.
Determination of Purchase Price. In establishing the Purchase Price,
the Purchaser (which is an affiliate of the General Partner) reviewed certain
publicly available information and certain information made available to it by
the General Partner and its other affiliates, including among other things:
(i) the Limited Partnership Agreement, as amended to date; (ii) the
Partnership's Annual Report on Form 10-KSB for the year ended December 31,
1996 and the Partnership's Quarterly Report on Form 10-QSB for the period
ended September 30, 1997; (iii) unaudited results of operations of the
Partnership's properties for the period since the beginning of the
Partnership's current fiscal year; (iv) the operating budgets prepared by IRG
with respect to the Partnership's properties for the year ending December 31,
1997; (v) independent appraisals of the Partnership's properties; and (vi)
other information obtained by IRG, Insignia and other affiliates in their
capacities as providers of property management, asset management and
partnership administration services to the Partnership. Based on that
information, the Purchaser (which is an affiliate of the General Partner)
considered several factors, as discussed below.
Trading History of Units. Secondary market sales activity for the
Units, including privately negotiated sales, has been limited and sporadic.
According to information obtained from the General Partner, from October 1,
1995 to September 30, 1997 an aggregate of 563 Units (representing less than
3.3% of the total outstanding Units) were transferred in sale transactions.
Set forth in the table below are the high and low sales prices of Units for
the quarterly periods from October 1, 1995 to September 30, 1997, as reported
by the General Partner and by The Partnership Spectrum, which is an
independent, third-party source. The gross sales prices reported by The
Partnership Spectrum do not necessarily reflect the net sales proceeds
received by sellers of Units, which typically are reduced by commissions and
other secondary market transaction costs to amounts less than the reported
prices; thus the Purchaser does not know whether the information compiled by
The Partnership Spectrum is accurate or complete. The transfer paperwork
submitted to the General Partner often does not include the requested price
information or contains conflicting information as to the actual sales price;
accordingly, Limited Partners should not rely upon this information as being
completely accurate.
22
<PAGE>
SHELTER PROPERTIES VII LIMITED PARTNERSHIP
REPORTED SALES PRICES OF PARTNERSHIP UNITS
<TABLE>
<CAPTION>
AS REPORTED BY AS REPORTED BY
THE GENERAL PARTNER(A) THE PARTNERSHIP SPECTRUM(B)
--------------------------- -----------------------------
LOW SALES HIGH SALES LOW SALES HIGH SALES
PRICE PRICE PRICE PRICE
PER UNIT PER UNIT PER UNIT PER UNIT
----------- ----------- ----------- -------------
<S> <C> <C> <C> <C>
Fiscal Year Ended December 31, 1997:
Third Quarter ................................... $210 $230 $245 $245
Second Quarter.................................... 137 280 200 271
First Quarter .................................... 154 250 185 280
Fiscal Year Ended December 31, 1996:
Fourth Quarter ................................... 100 162 170 242
Third Quarter..................................... 78 254 142 254
Second Quarter.................................... 118 118 (c) (c)
First Quarter..................................... 78 165 118 165
Fiscal Year Ended December 31, 1995:
Fourth Quarter.................................... 20 135 118 125
</TABLE>
(a) Although the General Partner requests and records information on the
prices at which Units are sold, it does not regularly receive or maintain
information regarding the bid or asked quotations of secondary market
makers, if any. The General Partner processes transfers of Units only 4
times per year - on the first day of each quarter. The prices in the
table are based solely on information provided to the General Partner by
sellers and buyers of Units transferred in sale transactions (i.e.,
excluding transactions believed to result from the death of a Limited
Partner, rollover to an IRA account, establishment of a trust, trustee to
trustee transfers, termination of a benefit plan, distributions from a
qualified or non-qualified plan, uniform gifts, abandonment of Units or
similar nonsale transactions).
(b) The gross sales prices reported by The Partnership Spectrum do not
necessarily reflect the net sales proceeds received by sellers of Units,
which typically are reduced by commissions and other secondary market
transaction costs to amounts less than the reported prices. The Purchaser
(which is an affiliate of the General Partner) does not know whether the
information compiled by The Partnership Spectrum is accurate or complete.
(c) No Units were reported by the Partnership Spectrum as having been sold
during the quarter.
The Purchaser (which is an affiliate of the General Partner) believes
that, although secondary market sales information probably is not a reliable
measure of value because of the limited and inefficient nature of the market
for Units, this information may be relevant to a Limited Partner's decision as
to whether to tender its Units pursuant to the Offer. At present, privately
negotiated sales and sales through intermediaries (e.g., through the trading
system operated by American Partnership Board, Inc., which publishes sell
offers by holders of Units) are the only means available to a Limited Partner
to liquidate an investment in Units (other than the Offer) because the Units
are not listed or traded on any exchange or quoted on NASDAQ.
Appraisals. Each of the Partnership's properties have been appraised
annually by independent, third party appraisers (Koeppel Tener Real Estate
Services, Inc., in the case of the 1996 appraisal) in connection with the
requirement contained in the Limited Partnership Agreement that the General
Partner prepare an annual estimate of the net asset value of a Unit. According
to the appraisal reports, the scope of the appraisals included an inspection
of each property and an analysis of the respective surrounding markets. In
each case, the applicable independent, third party appraiser relied
principally on the income capitalization approach to valuation and secondarily
on the sales comparison approach, and represented that its report was prepared
in accordance with the Code of Professional Ethics and Standards of
Professional Appraisal Practice of the Appraisal Institute and the Uniform
Standards of Professional Appraisal Practice, and in compliance with the
Appraisal Standards set forth in the Financial Institutions Reform, Recovery
and Enforcement Act of 1989 (known as "FIRREA"). The estimated market values
of the fee simple estate of each of the Partnership's properties specified in
the most recent appraisal reports for the Partnership's properties are set
forth in the table below, and copies of the summaries of the appraisals have
been filed as exhibits to the Purchaser's Tender Offer Statement on Schedule
14D-1 filed with the Commission.
23
<PAGE>
APPRAISED DATE OF
PROPERTY NAME VALUE APPRAISAL
- -------------------------- ----------- ----------
Hickory Ridge Apartments $12,850,000 12/23/96
Governor's Park Apartments $ 9,150,000 10/15/96
General Partner's Annual Estimates of Net Asset Value. The Limited
Partnership Agreement requires that the General Partner prepare an annual
estimate of the Partnership's net asset value per Unit based on the annual
third-party appraisals of the Partnership's properties described above. The
General Partner's three most recent estimates of the Partnership's net asset
value per Unit, based on such appraisals, were $634, $437 and $403 per Unit,
respectively, as of December 31, 1996, 1995 and 1994. The General Partner
estimates net asset value based on a hypothetical sale (without taking into
account any transaction costs) of all of the Partnership's properties at their
appraised values 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 Partnership's cash, proceeds from temporary investments, and
all other assets that are believed to have liquidation value, after provision
in full for all of the Partnership's other known liabilities. The net asset
value estimates prepared by the General Partner do not take into account (i)
real estate transactional costs that would be incurred on a sale of the
Partnership's properties, such as brokerage commissions and other selling and
closing expenses, (ii) timing considerations or (iii) costs associated with
winding up the Partnership. Therefore, the Purchaser believes that the General
Partner's estimates of net asset value per Unit do 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, the Purchaser considered
the General Partner's net asset value estimates to be less meaningful in
determining the Purchase Price than the pro forma liquidation analysis
described below.
Purchaser's Estimate of Gross Real Estate Value. In estimating the
gross real estate value of the Partnership's properties, the Purchaser
utilized the capitalization of income approach. The estimate of the gross real
estate value of the Partnership's properties prepared by the Purchaser does
not purport to be an estimate of the aggregate fair market value of the Units
themselves, nor should it be viewed as such by Limited Partners. Neither the
Purchaser nor any of its affiliates prepared any estimates of the values of
the Partnership's properties based upon any other valuation method.
The following is a description of the methodology employed by the
Purchaser in preparing such estimates (as used below, "net operating income"
is calculated before depreciation, amortization, debt service payments and
certain capital expenditure items):
HICKORY RIDGE APARTMENTS. In estimating the value of this property,
the Purchaser reviewed the income ($1,844,024) generated by the property for
the ten months ended October 31, 1997 (comprised of $1,777,062 of gross rental
income and $66,962 of other income), and then deducted from this amount the
total operating expenses of the property for the first ten months of 1997
($863,879), resulting in the Purchaser's estimate of net operating income for
the first ten months of 1997 ($980,145). The Purchaser then annualized this
amount, resulting in estimated annual net operating income of $1,176,174 and
then reduced that annualized net operating income amount by $100 per apartment
unit, representing the Purchaser's estimate of the adjustment that would be
imputed by a third party purchaser in underwriting the operating expenses,
including normal replacement reserves, of the property for valuation purposes.
Finally, the Purchaser capitalized its estimated adjusted net operating income
amount ($1,138,374) at a 9.5% capitalization rate, resulting in an estimated
gross property value of $11,982,884.
GOVERNOR'S PARK APARTMENTS. In estimating the value of this property,
the Purchaser reviewed the income ($1,208,780) generated by the property for
the ten months ended October 31, 1997 (comprised of $1,168,915 of gross rental
income and $39,865 of other income), and then deducted from this amount the
total operating expenses of the property for the first ten months of 1997
($447,160), resulting in the Purchaser's estimate of net operating income for
the first ten months of 1997 ($761,620). The Purchaser then annualized this
amount, resulting in estimated annual net operating income of $913,944.
Finally, the Purchaser capitalized its estimated
24
<PAGE>
annual net operating income amount at a 9.75% capitalization rate, resulting
in an estimated gross property value of $9,373,785.
Based on the individual estimates of the gross values of the
Partnership's properties described above, the Purchaser estimated that the
current aggregate gross real estate value of the Partnership's properties is
$21,356,669 (the "Gross Real Estate Value Estimate"). The property-specific
capitalization rates used by the Purchaser in the valuation estimates
described above were based upon the Purchaser's, IPT's and Insignia's general
knowledge of the revenues and expenses associated with operating multi-family
properties in the markets in which the Partnership's properties are located,
their general knowledge of property values in those markets and their
experience in the real estate market in general.
Although there are several other methods of estimating the value of
real estate of this type, the Purchaser believes that this approach represents
a reasonable method of estimating the aggregate gross value of the
Partnership's properties (without taking into account the costs of disposing
of the properties), subject to the substantial uncertainties inherent in any
estimate of value. The use of other assumptions, however, particularly as to
the applicable capitalization rate, could produce substantially different
results. None of the Purchaser, IPT or Insignia solicited any offers or
inquiries from prospective buyers of the Partnership's properties in
connection with preparing the Purchaser's estimates of the fair market values
of those properties, and the actual amounts for which the Partnership's
properties might be sold could be significantly higher or significantly lower
than the Purchaser's estimates.
The Gross Real Estate Value Estimate does not take into account (i)
the debt encumbering the Partnership's properties or the other liabilities of
the Partnership, (ii) cash and other assets held by the Partnership, (iii)
real estate transaction costs that would be incurred on a sale of the
Partnership's properties, such as brokerage commissions and other selling and
closing expenses, (iv) timing considerations or (v) costs associated with
winding up the Partnership. For this reason, the Purchaser considers the Gross
Real Estate Value Estimate to be less meaningful in evaluating the Purchase
Price offered by the Purchaser than its pro forma estimate of the net
liquidation value per Unit described below.
Purchaser's Pro Forma Estimate of Net Liquidation Value per Unit. The
Purchaser is offering to purchase Units, which are a relatively illiquid
investment, and is not offering to purchase the Partnership's underlying
assets or assume any of its liabilities. Consequently, the Purchaser does not
believe that the per-Unit amount which might be distributed to Limited
Partners following a future sale of all the Partnership's properties
necessarily reflects the present fair value of a Unit. Conversely, the
realizable value of the Partnership's assets clearly is a relevant factor in
determining the price a prudent purchaser would offer for Units. In
considering this factor, the Purchaser made a pro forma calculation of the
amount each Limited Partner might receive in a theoretical orderly liquidation
of the Partnership (which may not be realistically possible, particularly in
the near term, due to real estate market conditions, the general difficulty of
disposing of real estate in a short period of time, and other general economic
factors), based on the Gross Real Estate Value Estimate described above and
the other considerations described below. The Purchaser based its pro forma
liquidation analysis on the Gross Real Estate Value Estimate (and thus on the
Purchaser's estimates of the values of the Partnership's properties described
above), as opposed to the appraised values of the Partnership's properties or
the values estimated in connection with the formation of IPT (as described
above), because the Purchaser believes that the Gross Real Estate Value
Estimate represents the best estimate, based on currently available
information, of the values of the Partnership's properties.
In estimating the pro forma net liquidation value per Unit, the
Purchaser adjusted its Gross Real Estate Value Estimate of $21,356,669 to
reflect the Partnership's other assets and liabilities (excluding prepaid and
deferred expenses and security deposits). Specifically, the Purchaser added
the amounts of cash, accounts receivable and escrow deposits shown on the
Partnership's unaudited balance sheet at September 30, 1997 ($938,000), and
subtracted the mortgage debt encumbering the Partnership's properties
($11,159,000) and all other liabilities shown on that balance sheet
($272,000). The Purchaser then deducted from that amount $854,267,
representing a reserve equal to 4% of the Gross Real Estate Value Estimate
(which represents the Purchaser's estimate of the probable costs of brokerage
commissions, real estate transfer taxes and other disposition expenses). The
result, $10,009,402,
25
<PAGE>
represents the Purchaser's pro forma estimate of the aggregate net liquidation
proceeds (before provision for the costs described in the following sentence)
which could be realized on an orderly liquidation of the Partnership, based on
the assumptions implicit in the calculations described above. The Purchaser
did not, however, deduct any amounts in respect of the legal and other costs
which the Purchaser expects would be incurred in a liquidation, including
costs of negotiating purchase and sale contracts, possibly conducting a
consent solicitation in order to obtain the Limited Partners' approvals for
the sales as may be required by the Limited Partnership Agreement, and winding
up the Partnership, because of the difficulty of estimating those amounts.
To complete its pro forma estimate of the amount of the theoretical
liquidation proceeds that would be distributable per Unit, the Purchaser
divided the estimated aggregate net liquidation proceeds of $10,009,402 by the
17,343 Units reported as outstanding by the General Partner as of December 1,
1997. The resulting estimated pro forma liquidation value was $577.14 per Unit
(the "Estimated Liquidation Value"), before provision for the legal and other
costs of liquidating the Partnership described in the last sentence of the
preceding paragraph.
The Purchaser's pro forma liquidation analysis described above is
merely theoretical and does not itself reflect the value of the Units because
(i) there is no assurance that any such liquidation in fact will occur in the
foreseeable future and (ii) any liquidation in which the estimated fair market
values described above might be realized would take an extended period of time
(at least a year, and quite possibly significantly longer), during which time
the Partnership and its partners would continue to be exposed to the risk of
fluctuations in asset values because of changing market conditions and other
factors. For any property sales in which the Partnership is required to
indemnify the buyer for matters arising after the closing, a portion of the
sales proceeds could be held by the Partnership until all possible claims were
satisfied, further extending the delay in the receipt by the Limited Partners
of liquidation proceeds. In light of these factors, the Purchaser (which is an
affiliate of the General Partner) believes the actual current value of the
Units is substantially less than its estimate of the Estimated Liquidation
Value. Conversely, there is a substantial possibility that the per-Unit value
realized in an orderly liquidation could be greater than the Estimated
Liquidation Value. A reduction in either operating expenses or capital
expenditures from the levels reflected in the property operating statements
for the ten months ending October 31, 1997 would result in a higher
liquidation value under the method described above. Similarly, a higher
liquidation value would result if a buyer applied lower capitalization rates
(reflecting a willingness to accept a lower rate of return on its investment)
to the applicable net operating income generated by the Partnership's
properties than the capitalization rates applied by the Purchaser. For
example, a 5% increase or decrease in the value of the Partnership's
properties would produce a corresponding increase or decrease in the Estimated
Liquidation Value of approximately $59 per Unit. Furthermore, the analysis
described above is based on a series of assumptions, some of which may not be
correct. Accordingly, this analysis should be viewed merely as indicative of
the Purchaser's approach to valuing Units and not as any way predictive of the
likely result of any future transactions.
SECTION 14. CONDITIONS OF THE OFFER. Notwithstanding any other term
of the Offer, the Purchaser (which is an affiliate of the General Partner)
will not be required to accept for payment or to pay for any Units tendered if
all authorizations, consents, orders or approvals of, or declarations or
filings with, or expirations of waiting periods imposed by, any court,
administrative agency or commission or other governmental authority or
instrumentality, domestic or foreign, necessary for the consummation of the
transactions contemplated by the Offer shall not have been filed, occurred or
been obtained prior to the Expiration Date. Furthermore, notwithstanding any
other term of the Offer and in addition to the Purchaser's right to withdraw
the Offer at any time before the Expiration Date, the Purchaser (which is an
affiliate of the General Partner) will not be required to accept for payment
or pay for any Units not theretofore accepted for payment or paid for and may
terminate or amend the Offer as to such Units if, at any time on or after the
date of the Offer and before the Expiration Date, any of the following
conditions exists:
(a) a preliminary or permanent injunction or other order of any
federal or state court, government or governmental authority or agency shall
have been issued and shall remain in effect which (i) makes illegal, delays or
otherwise directly or indirectly restrains or prohibits the making of the
Offer or the acceptance for payment, purchase of or payment for any Units by
the Purchaser (which is an affiliate of the General Partner), (ii) imposes or
confirms limitations on the ability of the Purchaser effectively to exercise
full rights of ownership of any Units,
26
<PAGE>
including without limitation the right to vote any Units acquired by the
Purchaser pursuant to the Offer or otherwise on all matters properly presented
to the Partnership's Limited Partners, (iii) requires divestiture by the
Purchaser of any Units, (iv) causes any material diminution of the benefits to
be derived by the Purchaser as a result of the transactions contemplated by
the Offer, or (v) might materially adversely affect the business, properties,
assets, liabilities, financial condition, operations, results of operations or
prospects of the Purchaser or the Partnership;
(b) there shall be any action taken, or any statute, rule, regulation
or order proposed, enacted, enforced, promulgated, issued or deemed applicable
to the Offer by any federal or state court, government or governmental
authority or agency, which might, directly or indirectly, result in any of the
consequences referred to in clauses (i) through (v) of paragraph (a) above;
(c) any change or development shall have occurred or been threatened
since the date of the Offer to Purchase, in the business, properties, assets,
liabilities, financial condition, operations, results of operations or
prospects of the Partnership, which is or may be materially adverse to the
Partnership, or the Purchaser (which is an affiliate of the General Partner)
shall have become aware of any fact that does or may have a material adverse
effect on the value of the Units;
(d) there shall have occurred (i) any general suspension of trading
in, or limitation on prices for, securities on any national securities
exchange or in the over-the-counter market in the United States, (ii) a
declaration of a banking moratorium or any suspension of payments in respect
of banks in the United States, (iii) any limitation by any governmental
authority on, or other event which might affect, the extension of credit by
lending institutions or result in any imposition of currency controls in the
United States, (iv) a commencement of a war or armed hostilities or other
national or international calamity directly or indirectly involving the United
States, (v) a material change in United States or other currency exchange
rates or a suspension of, or imposition of a limitation on, the markets
thereof, or (vi) in the case of any of the foregoing existing at the time of
the commencement of the Offer, a material acceleration or worsening thereof;
or
(e) it shall have been publicly disclosed or the Purchaser (which is
an affiliate of the General Partner) shall have otherwise learned that (i)
more than ten percent of the outstanding Units have been or are proposed to be
acquired by another person (including a "group" within the meaning of Section
13(d)(3) of the Exchange Act), or (ii) any person or group that prior to such
date had filed a Statement with the Commission pursuant to Section 13(d) or
(g) of the Exchange Act has increased or proposes to increase the number of
Units beneficially owned by such person or group as disclosed in such
Statement by two percent or more of the outstanding Units.
The foregoing conditions are for the sole benefit of the Purchaser
(which is an affiliate of the General Partner) and may be asserted by the
Purchaser regardless of the circumstances giving rise to such conditions or
may be waived by the Purchaser in whole or in part at any time and from time
to time in its sole discretion. Any determination by the Purchaser (which is
an affiliate of the General Partner) concerning the events described above
will be final and binding upon all parties.
SECTION 15. CERTAIN LEGAL MATTERS.
General. The Purchaser (which is an affiliate of the General Partner)
is not aware of any filings, approvals or other actions by any domestic or
foreign governmental or administrative agency that would be required prior to
the acquisition of Units by the Purchaser (which is an affiliate of the
General Partner) pursuant to the Offer, other than the filing of a Tender
Offer Statement on Schedule 14D-1 with the Commission (which has already been
filed) and any required amendments thereto. Should any such approval or other
action be required, it is the Purchaser's present intention that such
additional approval or action would be sought. Although there is no present
intent to delay the purchase of Units tendered pursuant to the Offer pending
receipt of any such additional approval or the taking of any such action,
there can be no assurance that any such additional approval or action, if
needed, would be obtained without substantial conditions or that adverse
consequences might not result to the Partnership's business, or that certain
parts of the Partnership's business might not have to be disposed of or other
substantial
27
<PAGE>
conditions complied with in order to obtain such approval or action, any of
which could cause the Purchaser (which is an affiliate of the General Partner)
to elect to terminate the Offer without purchasing Units thereunder.
Antitrust. The Purchaser (which is an affiliate of the General
Partner) does not believe that the Hart-ScottRodino Antitrust Improvements Act
of 1976, as amended, is applicable to the acquisition of Units contemplated by
the Offer.
Margin Requirements. The Units are not "margin securities" under the
regulations of the Board of Governors of the Federal Reserve System and,
accordingly, those regulations generally are not applicable to the Offer.
SECTION 16. FEES AND EXPENSES. Except as set forth in this Section
16, the Purchaser (which is an affiliate of the General Partner) will not pay
any fees or commissions to any broker, dealer or other person for soliciting
tenders of Units pursuant to the Offer. The Purchaser (which is an affiliate
of the General Partner) has retained Beacon Hill Partners, Inc. to act as
Information Agent and Harris Trust Company of New York to act as Depositary in
connection with the Offer. The Purchaser (which is an affiliate of the General
Partner) will pay the Information Agent and the Depositary reasonable and
customary compensation for their respective services in connection with the
Offer, plus reimbursement for out-of-pocket expenses, and has agreed to
indemnify the Information Agent and the Depositary against certain liabilities
and expenses in connection therewith, including liabilities under the federal
securities laws. The Purchaser (which is an affiliate of the General Partner)
will also pay all costs and expenses of printing and mailing the Offer and its
legal fees and expenses.
SECTION 17. MISCELLANEOUS. The Purchaser (which is an affiliate of
the General Partner) is not aware of any jurisdiction in which the making of
the Offer is not in compliance with applicable law. If the Purchaser (which is
an affiliate of the General Partner) becomes aware of any jurisdiction in
which the making of the Offer would not be in compliance with applicable law,
the Purchaser will make a good faith effort to comply with any such law. If,
after such good faith effort, the Purchaser (which is an affiliate of the
General Partner) cannot comply with any such law, the Offer will not be made
to (nor will tenders be accepted from or on behalf of) Limited Partners
residing in such jurisdiction. In those jurisdictions whose securities or blue
sky laws require the Offer to be made by a licensed broker or dealer, the
Offer will be deemed to be made on behalf of the Purchaser (which is an
affiliate of the General Partner) by one or more registered brokers or dealers
licensed under the laws of that jurisdiction.
No person has been authorized to give any information or to make any
representation on behalf of the Purchaser (which is an affiliate of the
General Partner) not contained in this Offer to Purchase or in the Assignment
of Partnership Interest and, if given or made, such information or
representation must not be relied upon as having been authorized.
The Purchaser (which is an affiliate of the General Partner), IPLP,
IPT and Insignia have filed with the Commission a Tender Offer Statement on
Schedule 14D-1, pursuant to Rule 14d-3 under the Exchange Act, furnishing
certain additional information with respect to the Offer, and may file
amendments thereto. The Schedule 14D-1 and any amendments thereto, including
exhibits, may be inspected and copies may be obtained at the same places and
in the same manner as set forth in Section 9 (except that they will not be
available at the regional offices of the Commission).
MADISON RIVER PROPERTIES, L.L.C.
DECEMBER 17, 1997
28
<PAGE>
SCHEDULE I
INFORMATION REGARDING THE MANAGERS OF THE PURCHASER
Set forth in the table below are the name and the present principal
occupations or employment and the name, principal business and address of any
corporation or other organization in which such occupation or employment is
conducted, and the five-year employment history of each of the managers of the
Purchaser. Each person identified below is employed by Insignia and is a
United States citizen. The principal business address of the Purchaser and,
unless otherwise indicated, the business address of each person identified
below, is One Insignia Financial Plaza, Greenville, South Carolina 29602.
<TABLE>
<CAPTION>
<S> <C>
PRESENT PRINCIPAL OCCUPATION
OR EMPLOYMENT AND
NAME FIVE-YEAR EMPLOYMENT HISTORY
- ---- ----------------------------
Jeffrey P. Cohen Jeffrey P. Cohen has been a Manager of the Purchaser since its inception in
375 Park Avenue December 1997. For additional information regarding Mr. Cohen, see
Suite 3401 Schedule II.
New York, NY 10152
John K. Lines John K. Lines has been a Manager of the Purchaser since its inception in
December 1997. For additional information regarding Mr. Lines, see
Schedules II and III.
Ronald Uretta Ronald Uretta has been a Manager of the Purchaser since its inception in
December 1997. For additional information regarding Mr. Uretta, see
Schedules II and III.
</TABLE>
S-1
<PAGE>
SCHEDULE II
INFORMATION REGARDING THE
TRUSTEES AND EXECUTIVE OFFICERS OF IPT
Set forth in the table below are the name and the present principal
occupations or employment and the name, principal business and address of any
corporation or other organization in which such occupation or employment is
conducted, and the five-year employment history of each of the trustees and
executive officers of IPT. Each person identified below is employed by
Insignia and is a United States citizen. The principal business address of IPT
and, unless otherwise indicated, the business address of each person
identified below, is One Insignia Financial Plaza, Greenville, South Carolina
29602. Trustees are identified by an asterisk.
<TABLE>
<CAPTION>
<S> <C>
PRESENT PRINCIPAL OCCUPATION
OR EMPLOYMENT AND
NAME FIVE-YEAR EMPLOYMENT HISTORY
- ---- ----------------------------
Andrew L. Farkas* Andrew L. Farkas has served as a Trustee of IPT since December 1996,
and has served as Chairman of the Board of Trustees and Chief
Executive Officer of IPT since January 1997. For additional
information regarding Mr. Farkas, see Schedule III.
James A. Aston* James A. Aston has served as a Trustee and President of IPT since
its inception in May 1996. For additional information regarding
Mr. Aston, see Schedule III.
Frank M. Garrison* Frank M. Garrison has served as a Trustee of IPT since December
102 Woodmont Boulevard 1996. Mr. Garrison also served as an Executive Managing
Suite 400 Director of IPT from January 1997 to April 1997. For additional
Nashville, TN 37205 information regarding Mr. Garrison, see Schedule III.
Jeffrey P. Cohen Jeffrey P. Cohen has served as a Senior Vice President of IPT
375 Park Avenue since August 1997, and served as a Vice President of IPT from
Suite 3401 June 1997 until August 1997. Since April 1997, Mr. Cohen's
New York, NY 10152 principal occupation has been to serve as a Senior Vice President
-- Investment Banking of Insignia. Prior to April 1997, Mr.
Cohen's principal occupation was as an attorney with the law firm
of Rogers & Wells, New York, New York.
William D. Falls William D. Falls has served as the Controller of IPT since August
1997. Since April 1995, Mr. Falls' principal occupation has been
to serve as an accountant with Insignia. Prior to April 1995, Mr.
Falls' principal occupation was as a senior auditor with the
accounting firm of Ernst & Young LLP.
William H. Jarrard, Jr. William H. Jarrard, Jr. has served as a Senior Vice President of
IPT since August 1997, and served as Vice President and Director
of Operations of IPT from December 1996 until August 1997.
Mr. Jarrard's principal employment has been with Insignia for
more than the past five years. From January 1994 to September
1997, Mr. Jarrard served as Managing Director-- Partnership
Administration of Insignia.
S-2
<PAGE>
PRESENT PRINCIPAL OCCUPATION
OR EMPLOYMENT AND
NAME FIVE-YEAR EMPLOYMENT HISTORY
- ---- ----------------------------
John K. Lines John K. Lines has served as Secretary of IPT since December
1996, and has served as a Senior Vice President of IPT since
August 1997. Mr. Lines served as a Vice President IPT from May
1996 until August 1997. For additional information regarding Mr.
Lines, see Schedule III.
Ronald Uretta Ronald Uretta has served as Treasurer of IPT since December
1996, and has served as a Senior Vice President of IPT since
August 1997. Mr. Uretta served as a Vice President of IPT from
December 1996 until August 1997 and as Chief Financial Officer
of IPT from May 1996 until December 1996. For additional
information regarding Mr. Uretta, see Schedule III.
Carroll D. Vinson Carroll D. Vinson has served as Chief Operating Officer of IPT
since May 1997. Since August 1994, Mr. Vinson's principal
occupation has been to serve as President of the various
corporate general partners of partnerships controlled by
Metropolitan Asset Enhancement, L.P., which is an affiliate of
Insignia.
</TABLE>
S-3
<PAGE>
SCHEDULE III
INFORMATION REGARDING THE
DIRECTORS AND EXECUTIVE OFFICERS OF INSIGNIA
Set forth in the table below are the name and the present principal
occupations or employment and the name, principal business and address of any
corporation or other organization in which such occupation or employment is
conducted, and the five-year employment history of each of the directors and
executive officers of Insignia. Unless otherwise indicated, each person
identified below is employed by Insignia and is a United States citizen. The
principal business address of Insignia and, unless otherwise indicated, the
business address of each person identified below, is One Insignia Financial
Plaza, Greenville, South Carolina 29602. Directors are identified by an
asterisk.
<TABLE>
<CAPTION>
<S> <C>
PRESENT PRINCIPAL OCCUPATION
OR EMPLOYMENT AND
NAME FIVE-YEAR EMPLOYMENT HISTORY
- ---- ----------------------------
Andrew L. Farkas* Andrew L. Farkas has been a Director and Chairman, President and Chief
Executive Officer of Insignia since its inception in January 1991. Mr. Farkas
has also been President of Metropolitan Asset Group, Ltd. ("MAG"), a real
estate investment banking firm, since 1983.
Robert J. Denison* Robert J. Denison has been a Director of Insignia since May 1996. For more
1212 North Summit Drive than the past five years, Mr. Denison's principal occupation has been as a
Santa Fe, NM 87501 General Partner of First Security Company II, L.P., an investment advisory
firm.
Robin L. Farkas* Robin L. Farkas has been a Director of Insignia since August 1993. Mr.
730 Park Avenue Farkas is the retired Chairman of the Board and Chief Executive Officer of
New York, NY 10021 Alexander's Inc., a real estate company. He also serves as a director of Refac
Technology Development Corporation, Noodle Kiddoodle, and Containerways
International Ltd.
Merril M. Halpern* Merril M. Halpern has been a Director of Insignia since August 1993. For
535 Madison Avenue more than the past five years, Mr. Halpern's principal occupation has been as
New York, NY 10022 Chairman of the Board of Directors and Co-Chief Executive Officer of
Charterhouse Group International, Inc., a privately-owned investment firm which,
among other things, actively engages in making private equity investments in a
broad range of industrial and service companies located primarily in the United
States. Mr. Halpern is also a director of American Disposal Services, Inc.,
Designer Holdings Ltd. and Microwave Power Devices, Inc.
Robert G. Koen* Robert G. Koen has been a Director of Insignia since August 1993. Since
125 West 55th Street February 1996, Mr. Koen has been a partner in the law firm of Akin, Gump,
New York, NY 10019 Strauss, Hauer & Feld, which represents Insignia and certain of its affiliates
from time to time. From January 1991 to February 1996, Mr. Koen was a
partner in the law firm LeBoeuf, Lamb, Greene & MacRae.
Michael I. Lipstein* Michael I. Lipstein has been a Director of Insignia since August 1993. For
110 East 59th Street more than the past five years, Mr. Lipstein's principal occupation has been as
New York, NY 10022 a self-employed consultant in the real estate business, including ownership,
management and lending.
S-4
<PAGE>
PRESENT PRINCIPAL OCCUPATION
OR EMPLOYMENT AND
NAME FIVE-YEAR EMPLOYMENT HISTORY
- ---- ----------------------------
Buck Mickel* Buck Mickel has been a Director of Insignia since August 1993. For more
301 N. Main Street than the past five years, Mr. Mickel's principal occupation has been to serve
Greenville, SC 29601 as Chairman of the Board and Chief Executive Officer of RSI Holdings, a
company which distributes outdoor equipment. Mr. Mickel is also a director
of Fluor Corporation, The Liberty Corporation, NationsBank Corporation,
Emergent Group, Inc., Delta Woodside Industries, Inc., Duke Power
Company, and Textile Hall Corporation.
James A. Aston James A. Aston's principal employment has been with Insignia for more than
the past five years. Mr. Aston currently serves as Chief Financial Officer of
Insignia (since August 1996) and with the Office of the Chairman (since July
1994).
Albert J. Frazia Albert Frazia has been a Senior Vice President -- Human Resources of
Insignia since August 1997. Prior to August 1997, Mr. Frazia's principal
employment for more than the prior five years was as Director -- Human
Resources of E&Y Kenneth Leventhal Real Estate Group, New York, New York.
Frank M. Garrison Frank M. Garrison's principal employment has been with Insignia for more
102 Woodmont Boulevard than the past five years. Mr. Garrison currently serves as an Executive
Suite 400 Managing Director of Insignia (since July 1994) and as President of Insignia
Nashville, TN 37205 Financial Services, a division of Insignia (since July 1994).
Jeffrey L. Goldberg Jeffrey L. Goldberg's principal employment has been with Insignia for more
375 Park Avenue than the past five years. Mr. Goldberg currently serves as a Managing
Suite 3401 Director -- Investment Banking of Insignia (since July 1994).
New York, NY 10152
Edward S. Gordon Edward S. Gordon has been with the Office of the Chairman of Insignia since
200 Park Avenue July 1996. Prior to July 1996, Mr. Gordon's principal employment for more
New York, NY 10166 than the prior five years was as a founder and Chairman of Edward S. Gordon
Company, Incorporated ("ESG"), a commercial property management and brokerage
firm located in New York, New York that was acquired by Insignia in June
1996.
Albert H. Gossett Albert H. Gossett's principal employment has been with Insignia for more than
the past five years. Mr. Gossett currently serves as a Senior Vice President
of Insignia (since July 1994) and as Chief Information Officer of Insignia
(since January 1991).
Henry Horowitz Henry Horowitz's principal employment has been with Insignia since January
1993. Mr. Horowitz currently serves as an Executive Managing Director of
Insignia (since June 1994) and Chief Operating Officer of Insignia Commercial
Group (since January 1997). From January 1987 to January 1993, Mr. Horowitz's
principal employment was as Chief Executive Officer of First Resource Realty,
Inc., a commercial property management organization located in Oklahoma that
Insignia acquired in January 1993.
S-5
<PAGE>
PRESENT PRINCIPAL OCCUPATION
OR EMPLOYMENT AND
NAME FIVE-YEAR EMPLOYMENT HISTORY
- ---- ----------------------------
Martha Long Martha Long has been a Senior Vice President -- Finance of Insignia since
January 1997 and Controller of Insignia since June 1994. Prior to June
1994, Ms. Long was Senior Vice President and Controller of The First
Savings Bank located in Greenville, South Carolina.
Mauro Keller Sarmiento Mauro Keller Sarmiento has been Managing Director and Chief Strategic
375 Park Avenue Officer for European Operations of Insignia since June 1997. From November
New York, NY 10152 1993 until June 1997, Mr. Sarmiento's principal employment was as Manager
of YPF, a petroleum company located in Buenos Aires, Argentina. From May
1991 until October 1993, Mr. Sarmiento's principal employment was as a
partner of MCA, an advisory company in Madrid, Spain.
Thomas R. Shuler Thomas R. Shuler's principal employment has been with Insignia for more
than the past five years. Mr. Shuler currently serves as Chief Operating
Officer of Insignia Residential Group (since January 1997).
Stephen B. Siegel Stephen B. Siegel has been an Executive Managing Director of Insignia since
200 Park Avenue July 1996 and President of Insignia Commercial Group since January 1997.
New York, NY 10166 From February 1992 until July 1996, Mr. Siegel's principal employment was
as President of ESG.
Ronald Uretta Ronald Uretta's principal employment has been with Insignia for more than the
past five years. Mr. Uretta currently serves as Chief Operating Officer
(since August 1996) and Treasurer (since January 1992) of Insignia.
Joseph T. Aveni Joseph T. Aveni's principal employment has been with Realty One, Inc., a
6000 Rockside Woods wholly-owned subsidiary of Insignia ("Realty One"), for more than the past
Blvd. five years. Mr. Aveni currently serves as a Director and Chief Executive
Cleveland, OH 44131 Officer of Realty One (since October 1997).
Anthony M. Ciepiel Anthony M. Ciepiel's principal employment has been with Realty One for
6000 Rockside Woods more than the past five years. Mr. Ciepiel currently serves as Director,
Blvd. President, Chief Operating Officer and Treasurer of Realty One (since October
Cleveland, OH 44131 1997).
</TABLE>
S-6
<PAGE>
SCHEDULE IV
IPT PARTNERSHIPS
Consolidated Capital Growth Fund
Consolidated Capital Institutional Properties
Consolidated Capital Institutional Properties/2
Consolidated Capital Institutional Properties/3
Consolidated Capital Properties III
Consolidated Capital Properties IV
Consolidated Capital Properties V
Consolidated Capital Properties VI
Shelter Properties I Limited Partnership
Shelter Properties II Limited Partnership
Shelter Properties III Limited Partnership
Shelter Properties IV Limited Partnership
Shelter Properties V Limited Partnership
Shelter Properties VI Limited Partnership
Shelter Properties VII Limited Partnership
National Property Investors III
National Property Investors 4
National Property Investors 5
National Property Investors 6
National Property Investors 7
National Property Investors 8
Century Properties Fund XIV
Century Properties Fund XV
Century Properties Fund XVI
Century Properties Fund XVII
Century Properties Fund XVIII
Century Properties Fund XIX
Century Properties Fund XX
Century Properties Growth Fund XXII
Century Pension Income Fund XXIII
Century Pension Income Fund XXIV
Johnstown/Consolidated Income Partners
Davidson Growth Plus, L.P.
Multi-Benefit Realty Fund `87-1
U.S. Realty Partners, L.P.
Fox Strategic Housing Income Partners
S-7
<PAGE>
Manually signed facsimile copies of the Assignment of Partnership
Interest will be accepted. The Assignment of Partnership Interest and any
other required documents should be sent or delivered by each Limited Partner
or such Limited Partner's broker, dealer, bank, trust company or other nominee
to the Depositary as set forth below.
The Depositary for the Offer is:
HARRIS TRUST COMPANY OF NEW YORK
<TABLE>
<CAPTION>
<S> <C> <C> <C>
By Mail: By Facsimile: To Confirm: By Hand/Overnight Delivery:
Wall Street Station (212) 701-7636 (212) 701-7624 Wall Street Plaza
P.O. Box 1023 88 Pine Street, 19th Floor
New York, New York 10268-1023 New York, New York 10005
</TABLE>
Questions and requests for assistance or for additional copies of
this Offer to Purchase and the Assignment of Partnership Interest may be
directed to the Information Agent at its telephone number and address listed
below. You may also contact your broker, dealer, bank, trust company or other
nominee for assistance concerning the Offer.
The Information Agent for the Offer is:
BEACON HILL PARTNERS, INC.
90 Broad Street
20th Floor
New York, New York 10004
(800) 854-9486
(Toll Free)
(212) 843-8500
(Call Collect)
<PAGE>
ASSIGNMENT OF PARTNERSHIP INTEREST
FOR THE TENDER OF UNITS OF LIMITED PARTNERSHIP INTEREST IN
SHELTER PROPERTIES VII LIMITED PARTNERSHIP
PURSUANT TO THE OFFER TO PURCHASE DATED DECEMBER 17, 1997
- -------------------------------------------------------------------------------
THE OFFER, WITHDRAWAL RIGHTS AND PRORATION PERIOD WILL EXPIRE AT
12:00 MIDNIGHT, NEW YORK TIME, ON JANUARY 15, 1998 UNLESS THE OFFER IS EXTENDED
- -------------------------------------------------------------------------------
The Depositary for the Offer is:
HARRIS TRUST COMPANY OF NEW YORK
<TABLE>
<CAPTION>
<S> <C> <C> <C>
By Mail: By Facsimile: To Confirm: By Hand/Overnight Delivery:
Wall Street Station (212) 701-7636 (212) 701-7624 Receive Window
P.O. Box 1023 Wall Street Plaza
New York, New York 10268-1023 88 Pine Street, 19th Floor
New York, New York 10005
</TABLE>
IF YOU HAVE ANY QUESTIONS OR NEED ASSISTANCE IN COMPLETING THIS ASSIGNMENT
OF PARTNERSHIP INTEREST, PLEASE CALL OUR INFORMATION AGENT, BEACON HILL
PARTNERS, TOLL FREE AT (800) 854-9486.
DELIVERY OF THIS ASSIGNMENT OF PARTNERSHIP INTEREST (OR A FACSIMILE COPY)
OR ANY OTHER REQUIRED DOCUMENTS TO AN ADDRESS OR FACSIMILE NUMBER OTHER THAN
AS SET FORTH ABOVE DOES NOT CONSTITUTE VALID DELIVERY.
PLEASE CAREFULLY READ THE ACCOMPANYING INSTRUCTIONS
Ladies and Gentlemen:
The undersigned hereby tenders to Madison River Properties, L.L.C., a
Delaware limited liability company (the "Purchaser"), the number of the
undersigned's units of limited partnership interest ("Units") in Shelter
Properties VII Limited Partnership, a South Carolina limited partnership (the
"Partnership"), specified below, at a price of $350 per Unit (the "Purchase
Price"), net to the seller in cash, upon the terms and subject to the
conditions set forth in the offer to purchase dated December 17, 1997 (the
"Offer to Purchase"), receipt of which is hereby acknowledged, and in this
Assignment of Partnership Interest (which, together with any supplements or
amendments, collectively constitute the "Offer"). The undersigned understands
and agrees that the Purchase Price will automatically be reduced by the
aggregate amount of distributions per Unit, if any, made by the Partnership on
or after December 17, 1997 and prior to the date on which the Purchaser pays
for the Units purchased pursuant to the Offer. Holders of Units ("Limited
Partners") who tender their Units will not be obligated to pay any commissions
or Partnership transfer fees, which commissions and Partnership transfer fees,
if any, will be borne by the Purchaser. The Purchaser reserves the right to
transfer or assign, in whole or from time to time in part, to one or more of
its affiliates, the right to purchase Units tendered pursuant to the Offer.
Subject to and effective upon acceptance for payment of and payment for
the Units tendered hereby, the undersigned hereby sells, assigns and transfers
to or upon the order of the Purchaser all right, title and interest in and to
all of the Units tendered hereby. The undersigned understands that upon
acceptance for payment of and payment for the tendered Units, the Purchaser
will be entitled to seek admission to the Partnership as a substituted Limited
Partner in substitution for the undersigned as to all the tendered Units.
The undersigned irrevocably appoints the Purchaser and its managers and
designees as the attorneys-in-fact and proxies of the undersigned, each with
full power of substitution, to exercise all voting and other rights with
respect to the Units tendered by the undersigned and purchased by the
Purchaser. Such power of attorney and proxy shall be considered coupled with
an interest in the tendered Units and is irrevocable. When the Units tendered
hereby are accepted for payment pursuant to the Offer, all prior proxies and
powers given by the undersigned with respect to the Units will, without
further action, be revoked, and no subsequent proxies or powers may be given
(and if given will not be effective). The Purchaser and its managers and
designees will, with respect to the Units, be empowered to exercise all voting
and other rights of the undersigned as they in their sole discretion may deem
proper, whether at any meeting of the Partnership's Limited Partners, by
written consent or otherwise, subject to the restrictions in the Limited
Partnership Agreement of the Partnership. The foregoing proxy and power may be
exercised by the Purchaser or any of the other persons referred to above
acting alone.
In addition to and without limiting the generality of the foregoing, the
undersigned hereby irrevocably (a) appoints the Purchaser and its managers and
designees (each an "Agent") as the undersigned's attorneys-in-fact, each with
full power of substitution, with an irrevocable instruction to each Agent to
execute all or any instrument of transfer and/or other documents in the
Agent's discretion in relation to the Units tendered hereby and accepted for
payment by the Purchaser, and to do all such other acts and things as may in
the opinion of the Agent be necessary or expedient for the purpose of, or in
connection with, the undersigned's acceptance of the Offer and to vest in the
Purchaser, or as it may direct, those Units, effective when, and only to the
extent that, the Purchaser accepts the tendered Units for payment; (b)
authorizes and requests the Partnership and general partners (collectively,
the "General Partner") to take any and all acts as may be required to effect
the transfer of the undersigned's Units to the Purchaser (or its designee) and
admit the Purchaser (or its designee) as a substituted Limited Partner in the
Partnership; (c) assigns to the Purchaser and its assigns all of the right,
title and interest of the undersigned in and to any and all distributions made
by the Partnership from and after the expiration of the Offer in respect of
the Units tendered by the undersigned; (d) grants to the Purchaser and its
assigns the right to receive any and all distributions made by the Partnership
on or after the date on which the Purchaser pays for the Units tendered by the
undersigned (regardless of the record date for any such distribution), and to
receive all benefits and otherwise exercise all rights of beneficial ownership
of such Units; (e) empowers the Purchaser and the Agent to execute and deliver
to the General Partner a change of address form instructing the General
Partner to send any and all future distributions to the address specified in
the form, and to endorse any check payable to or upon the order of such
Limited Partner representing a distribution to which the Purchaser is entitled
pursuant to the terms of the Offer, in each case in the name and on behalf of
the tendering Limited Partner; and (f) agrees not to exercise any rights
pertaining to the Units without the prior consent of the Purchaser.
The undersigned hereby represents and warrants that the undersigned owns
the Units tendered hereby and has full power and authority to validly tender,
sell, assign and transfer the Units tendered hereby and that when the same are
purchased by the Purchaser, the Purchaser will acquire good, marketable and
unencumbered title thereto, free and clear of all liens, restrictions,
charges, encumbrances, conditional sales agreements or other obligations
relating to the sale or transfer thereof, and such Units will not be subject
to any adverse claims. The undersigned will, upon request, execute and deliver
any additional documents deemed by the Purchaser to be necessary or desirable
to complete the sale, assignment and transfer of the Units tendered hereby.
The undersigned understands that a tender of Units pursuant to the
procedures described in the Offer to Purchase and in the Instructions to this
Assignment of Partnership Interest will constitute a binding agreement between
the undersigned and the Purchaser upon the terms and subject to the conditions
of the Offer. All authority herein conferred or agreed to be conferred shall
survive the death or incapacity of the undersigned, and any obligation of the
undersigned hereunder shall be binding upon the heirs, personal
representatives, successors and assigns of the undersigned.
THIS TENDER IS IRREVOCABLE, EXCEPT THAT UNITS TENDERED PURSUANT TO THE
OFFER MAY BE WITHDRAWN AS DESCRIBED IN SECTION 4 OF THE OFFER TO PURCHASE.
<PAGE>
PLEASE COMPLETE ALL LETTERED AREAS
SIGN HERE TO TENDER YOUR UNITS
B
O
X
A
- -------------------------------------------------------------------------------
The undersigned hereby tenders the number of Units specified below
pursuant to the terms of the Offer. The undersigned hereby certifies, under
penalties of perjury, that the information and representations provided in
Boxes A, B and C of this Assignment of Partnership Interest, which have been
duly completed by the undersigned, are true and correct as of the date hereof.
X
- ---------------------------------------
X
- ---------------------------------------
SIGNATURE(S) OF LIMITED PARTNER (A)
DATE (B):
-------------------------------
(MUST BE SIGNED BY REGISTERED LIMITED PARTNER EXACTLY AS NAME(S)
APPEAR(S) IN THE PARTNERSHIP'S RECORDS. IF SIGNATURE IS BY AN OFFICER OF A
CORPORATION, ATTORNEY-IN-FACT, AGENT, EXECUTOR, ADMINISTRATOR, TRUSTEE,
GUARDIAN OR OTHER PERSON(S) ACTING IN FIDUCIARY OR REPRESENTATIVE CAPACITY,
PLEASE COMPLETE THE LINE CAPTIONED "CAPACITY (FULL TITLE)" AND SEE INSTRUCTION
5.)
PRINT NAME(S) (H):
---------------------------------------
CAPACITY (FULL TITLE) (I):
--------------------------------
ADDRESS (C):
----------------------------------------------
- ------------------------------------------------------------------------------
(INCLUDE ZIP CODE)
(THE ADDRESS PROVIDED ABOVE MUST BE THE REGISTERED ADDRESS OF THE LIMITED
PARTNER)
- ------------------------------- ------------------------------------
AREA CODE AND SOCIAL SECURITY NUMBER
TELEPHONE NUMBER (D) OR TAXPAYER IDENTIFICATION (E)
NUMBER OF NUMBER OF
UNITS TENDERED (F): UNITS OWNED (G):
------------ -----------------
(If no indication is given, all Units owned of record by the Limited Partner
will be deemed tendered.)
- -------------------------------------------------------------------------------
GUARANTEE OF SIGNATURE(S)
(SEE INSTRUCTIONS - SECTION 1)
AUTHORIZED SIGNATURE: NAME OF FIRM:
--------------- ---------------------------
NAME: ADDRESS:
------------------------------ --------------------------------
DATE: AREA CODE AND TEL. NO.:
------------------------------- ----------------
- -------------------------------------------------------------------------------
IMPORTANT!
LIMITED PARTNERS MUST ALSO COMPLETE LINES A THROUGH F BELOW.
B
O
X
B
<TABLE>
<CAPTION>
<S> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------------------
SUBSTITUTE PART 1-- PLEASE PROVIDE YOUR TIN IN THE BOX AT RIGHT AND ----------------------------------
Form W-9 CERTIFY BY SIGNING AND DATING BELOW Social Security Number(s) or
Department of Employer Identification Number (A)
the Treasury
Internal Revenue
Service
----------------------------------------------------------------------------------------------------------------
PAYER'S PART 2-- Certification-- Under penalties of perjury, I certify that: (1) The number shown on this form is my
REQUEST FOR correct a result of Identification Number (or I am waiting for a number to be issued to me) and (2) I am not
TAXPAYER subject to back-up withholdilding. because I have not been notified by the Internal Revenue Service ("IRS")
IDENTIFICATION that I am subject to back-up withholding as failure to report all interest or dividends, or the IRS has
NUMBER (TIN) notified me that I am no longer subject to back-up withholding.
----------------------------------------------------------------------------------------------------------------
Certification Instructions -- You must cross out item (2) above if you have been notified by PART 3 --
the IRS that you are subject to back-up withholding because of underreporting interest or AWAITING TIN [ ]
dividends on your tax return. However, if after being notified by the IRS that you were
subject to back-up withholding you received another notification from the IRS that you are no
longer subject to back-up withholding, do not cross out item (2).
SIGNATURE (B): DATE (C):
---------------------------- ----------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER
*(TO BE COMPLETED ONLY IF THE BOX IN PART 3 ABOVE IS CHECKED)
I certify under penalties of perjury that a taxpayer identification number
has not been issued to me, and either (a) I have mailed or delivered an
application to receive a taxpayer identification number to the appropriate
Internal Revenue Service Center or Social Security Administration Office, or
(b) I intend to mail or deliver an application in the near future. I
understand that if I do not provide a taxpayer identification number within
sixty days, 31 percent of all reportable payments made to me thereafter will
be withheld until I provide a number.
- ----------------------------- --------------------------------
SIGNATURE SIGNATURE
B
O
X
C
- -------------------------------------------------------------------------------
FIRPTA AFFIDAVIT -- CERTIFICATE OF NON-FOREIGN STATUS
Section 1445 of the Internal Revenue Code provides that a transferee of
a U.S. real property interest must withhold tax if the transferor is a foreign
person. To inform the Purchaser that withholding of tax is not required upon
this disposition of a U.S. real property interest, the undersigned hereby
certifies the following on behalf of the tendering Limited Partner named
above:
1. The Limited Partner, if an individual, is not a nonresident alien for
purposes of U.S. income taxation, and if not an individual, is not a
foreign corporation, foreign partnership, foreign trust, or foreign
estate (as those terms are defined in the Internal Revenue Code and
Income Tax Regulations);
2. The Limited Partner's Social Security Number (for individuals) or
Employer Identification Number (for non-individuals) is (D): ; and
3. The Limited Partner's address is (E): .
--------------------------------
I understand that this certification may be disclosed to the Internal
Revenue Service by the transferee and that any false statement I have made
here could be punished by fine, imprisonment, or both.
Under penalties of perjury I declare that I have examined this
certification and to the best of my knowledge and belief it is true, correct
and complete.
- ---------------------------------------- ------------------------------------
Signature (F) Signature
Title: Title:
------------------------------- --------------------------------
- -------------------------------------------------------------------------------
<PAGE>
INSTRUCTIONS
TO
ASSIGNMENT OF PARTNERSHIP INTEREST
FOR
SHELTER PROPERTIES VII LIMITED PARTNERSHIP
FORMING PART OF TERMS AND CONDITIONS OF THE OFFER
- -------------------------------------------------------------------------------
IF YOU HAVE ANY QUESTIONS OR NEED ASSISTANCE COMPLETING THE ASSIGNMENT OF
PARTNERSHIP INTEREST, PLEASE CALL BEACON HILL PARTNERS TOLL FREE AT
(800) 854-9486 OR COLLECT AT (212) 843-8500
- -------------------------------------------------------------------------------
1. GUARANTEE OF SIGNATURES. If the Assignment of Partnership Interest
is signed by the registered holder of the Units and payment is to be made
directly to that holder, then no signature guarantee is required on the
Assignment of Partnership Interest. Similarly, if the Units are tendered for
the account of a member firm of a registered national securities exchange, a
member of the National Association of Securities Dealers, Inc. or a commercial
bank, savings bank, credit union, savings and loan association or trust
company having an office, branch or agency in the United States (each an
"Eligible Institution"), no signature guarantee is required on the Assignment
of Partnership Interest. HOWEVER, IN ALL OTHER CASES, ALL SIGNATURES ON THE
ASSIGNMENT OF PARTNERSHIP INTEREST MUST BE GUARANTEED BY AN ELIGIBLE
INSTITUTION. A notarization is not the same thing as a signature guarantee,
and a notarization of the Assignment of Partnership Interest will not be
sufficient. IN THE MAJORITY OF CASES, THE LOCAL BANK AT WHICH YOU DO YOUR DAY
TO DAY BANKING IS AN ELIGIBLE INSTITUTION AND WILL BE ABLE TO PROVIDE YOU WITH
THE REQUIRED MEDALLION GUARANTEE.
2. DELIVERY OF ASSIGNMENT OF PARTNERSHIP INTEREST. The Assignment of
Partnership Interest is to be completed by all Limited Partners who wish to
tender Units in response to the Offer. For a Limited Partner validly to tender
Units, a properly completed and duly executed Assignment of Partnership
Interest (or a facsimile copy), along with the required signature guarantees
by an Eligible Institution and any other required documents, must be received
by the Depositary at one of its addresses set forth on the Assignment of
Partnership Interest on or prior to the Expiration Date (as defined in the
Offer to Purchase).
THE METHOD OF DELIVERY OF THE ASSIGNMENT OF PARTNERSHIP INTEREST AND
ALL OTHER REQUIRED DOCUMENTS IS AT THE OPTION AND RISK OF THE TENDERING
LIMITED PARTNER AND DELIVERY WILL BE DEEMED MADE ONLY WHEN ACTUALLY RECEIVED
BY THE DEPOSITARY. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ASSURE
TIMELY DELIVERY.
No alternative, conditional or contingent tenders will be accepted,
and no fractional Units will be purchased (except from a Limited Partner who
is tendering all of the Units owned by that Limited Partner). All tendering
Limited Partners, by execution of the Assignment of Partnership Interest,
waive any right to receive any notice of the acceptance of their Units for
payment.
3. INADEQUATE SPACE. If the space provided herein is inadequate,
additional information may be provided on a separate signed schedule attached
hereto.
4. MINIMUM TENDERS. A Limited Partner may tender any or all of his or
her Units; provided, however, that because of restrictions in the
Partnership's Limited Partnership Agreement, in order for a partial tender of
Units to be valid, after the sale of Units pursuant to the Offer, the Limited
Partner must continue to hold a minimum of three Units (or, in the case of
Limited Partners who hold Units in an Individual Retirement Account, at least
two Units). Tenders of fractional Units will be permitted only by a Limited
Partner who is tendering all Units owned by that Limited Partner.
5. SIGNATURES ON ASSIGNMENT OF PARTNERSHIP INTEREST. If the
Assignment of Partnership Interest is signed by the registered Limited
Partner(s), the signature(s) must correspond exactly with the name(s) as shown
on the records of the Partnership, without alteration, enlargement or any
change whatsoever.
If any of the Units tendered hereby are held of record by two or more
joint Limited Partners, each such Limited Partner must sign the Assignment of
Partnership Interest.
If the Assignment of Partnership Interest is signed by trustees,
executors, administrators, guardians, attorneys-in-fact, agents, officers of
corporations or others acting in a fiduciary or representative capacity, such
persons should so indicate when signing, and proper evidence satisfactory to
the Depositary of their authority to so act must be submitted.
6. WAIVER OF CONDITIONS. The Purchaser expressly reserves the
absolute right, in its sole discretion, to waive any of the specified
conditions of the Offer, in whole or in part, in the case of any Units
tendered.
7. REQUESTS FOR ASSISTANCE AND ADDITIONAL COPIES. Questions or
requests for assistance may be directed to Beacon Hill Partners, the
Information Agent, at its address and telephone number set forth on the back
cover of the Offer to Purchase. Copies of the Offer to Purchase and the
Assignment of Partnership Interest may be obtained from the Information Agent.
(Continued on Reverse Side)
<PAGE>
8. SUBSTITUTE FORM W-9. Each tendering Limited Partner is required to
provide the Depositary with a correct taxpayer identification number ("TIN"),
generally the Limited Partner's social security or federal employer's
identification number, on Substitute Form W-9, which is provided under
"Important Tax Information" below. You must cross out item (2) in the
Certification box on Substitute Form W-9 if you are subject to back-up
withholding. Failure to provide the information on the form may subject the
tendering Limited Partner to 31% federal income tax withholding on the
payments made to the Limited Partner with respect to Units purchased pursuant
to the Offer. The box in Part 3 of the form may be checked if the tendering
Limited Partner has not been issued a TIN and has applied for a TIN or intends
to apply for a TIN in the near future. If the box in Part 3 is checked and the
Depositary is not provided with a TIN within sixty (60) days, thereafter the
Depositary will withhold 31% on all such payments of the Purchase Price until
a TIN is provided to the Depositary.
9. FIRPTA AFFIDAVIT. To avoid potential withholding of tax pursuant
to Section 1445 of the Internal Revenue Code in an amount equal to 10% of the
purchase price for Units purchased pursuant to the Offer, plus the amount of
any liabilities of the Partnership allocable to such Units, each Limited
Partner who or which is a United States person must complete the FIRPTA
Affidavit contained in the Assignment of Partnership Interest stating, under
penalties of perjury, such Limited Partner's TIN and address, and that such
Limited Partner is not a foreign person. Tax withheld under Section 1445 of
the Internal Revenue Code is not an additional tax. If withholding results in
an overpayment of tax, a refund may be obtained from the IRS.
IMPORTANT: THE ASSIGNMENT OF PARTNERSHIP INTEREST (OR A FACSIMILE
COPY) (TOGETHER WITH ALL OTHER REQUIRED DOCUMENTS) MUST BE RECEIVED BY THE
DEPOSITARY ON OR PRIOR TO THE EXPIRATION DATE.
---------------------------
IMPORTANT TAX INFORMATION
To prevent backup withholding on payments made to a Limited Partner
or other payee with respect to Units purchased pursuant to the Offer, the
Limited Partner is required to notify the Depositary of the Units of the
Limited Partner's correct TIN by completing the form below, certifying that
the TIN provided on Substitute Form W-9 is correct (or that such Limited
Partner is awaiting a TIN) and that (1) the Limited Partner has not been
notified by the Internal Revenue Service that the Limited Partner is subject
to backup withholding as a result of failure to report all interest or
dividends or (2) the Internal Revenue Service has notified the Limited Partner
that the Limited Partner is no longer subject to backup withholding. If backup
withholding applies, the Depositary is required to withhold 31% of any
payments made to the Limited Partner. Backup withholding is not an additional
tax. Rather, the federal income tax liability of persons subject to backup
withholding will be reduced by the amount of tax withheld. If withholding
results in an overpayment of taxes, a refund may be obtained from the Internal
Revenue Service.
The Limited Partner is required to give the Depositary the TIN (e.g.,
social security number or employer identification number) of the record owner
of the Units. If the Units are in more than one name or are not in the name of
the actual owner, consult the enclosed "Guidelines for Certification of
Taxpayer Identification Number on Substitute Form W-9" for additional guidance
on which number to report.
Certain Limited Partners (including, among others, all corporations
and certain foreign individuals) are not subject to these backup withholding
and reporting requirements. In order for a foreign individual to qualify as an
exempt recipient, that Limited Partner must submit to the Depositary a
properly completed Internal Revenue Service Form W-8, signed under penalties
of perjury, attesting to that Limited Partner's exempt status. A Form W-8 can
be obtained from the Depositary. See the enclosed "Guidelines for
Certification of Taxpayer Identification Number on Substitute Form W-9" for
additional institutions.
----------------
INDIVIDUAL RETIREMENT ACCOUNT (IRAS)
PLEASE NOTE THAT A TENDERING BENEFICIAL OWNER OF UNITS WHOSE UNITS
ARE OWNED OF RECORD BY AN INDIVIDUAL RETIREMENT ACCOUNT (IRA) OR OTHER
QUALIFIED PLAN WILL NOT RECEIVE DIRECT PAYMENT OF THE PURCHASE PRICE, RATHER,
PAYMENT WILL BE MADE TO THE CUSTODIAN OF SUCH ACCOUNT OR PLAN. IF THE UNITS
ARE HELD IN AN IRA ACCOUNT, THE CUSTODIAN OF THE ACCOUNT MUST SIGN THE
ASSIGNMENT OF PARTNERSHIP INTEREST.
<PAGE>
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
GUIDELINES FOR DETERMINING THE PROPER IDENTIFICATION NUMBER TO GIVE THE
PAYER--Social Security numbers have nine digits separated by two hyphens:
i.e. 000-00-0000. Employer identification numbers have nine digits separated
by only one hyphen: i.e., 00-0000000. The table below will help determine the
number to give the payer.
<TABLE>
<CAPTION>
GIVE THE
TAXPAYER
FOR THIS TYPE OF ACCOUNT: IDENTIFICATION
NUMBER OF--
- --------------------------------------- ------------------------------
<S> <C>
1.An individual's account The individual
2.Two or more individuals The actual owner of
(joint account) the account or, if
combined funds, the first
individual on the account(1)
3.Husband and wife The actual owner of
(joint account) the account or, if joint
funds, either person(1)
4.Custodian account of a minor The minor(2)
(Uniform Gift to Minors Act)
5.Adult and minor (joint account) The adult or, if the
minor is the only
contributor, the
minor(1)
6.Account in the name of guardian or The ward, minor, or
committee for a designated ward, incompetent(3)
minor, or incompetent person(3)
7.a.The usual revocable savings trust The grantor-trustee(1)
account (grantor is also trustee)
b.So-called trust account that is not The actual owner(1)
a legal or valid trust under State
law
8.Sole proprietorship account The owner(4)
- --------------------------------------- ------------------------------
</TABLE>
<TABLE>
<CAPTION>
GIVE THE
TAXPAYER
FOR THIS TYPE OF ACCOUNT: IDENTIFICATION
NUMBER OF--
- -------------------------------------- ----------------------------------
<S> <C>
9.A valid trust, estate or pension The legal entity (Do not furnish
trust the identifying number of the
personal representative or trustee
unless the legal entity itself is
not designated in the account
title.)(5)
10.Corporate account The corporation
11.Religious, charitable, or The organization
educational organization account
12.Partnership account held in the The partnership
name of the business
13.Association, club, or other The organization
tax-exempt organization
14.A broker or registered nominee The broker or nominee
15.Account with the Department of The public entity
Agriculture in the name of a public
entity (such as a State or local
government, school district, or
prison) that receives agricultural
program payments
- -------------------------------------- ----------------------------------
</TABLE>
(1) List first and circle the name of the person whose number you furnish.
(2) Circle the minor's name and furnish the minor's social security number.
(3) Circle the ward's, minor's or incompetent person's name and furnish such
person's social security number or employer identification number.
(4) Show your individual name. You may also enter your business name. You
may use your social security number or employer identification number.
(5) List first and circle the name of the legal trust, estate, or pension
trust.
NOTE: If no name is circled when there is more than one name, the number will
be considered to be that of the first name listed.
<PAGE>
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
PAGE 2
OBTAINING A NUMBER
If you do not have a taxpayer identification number or you do not know your
number, obtain Form SS-5, Application for a Social Security Number Card (for
individuals), or Form SS-4, Application for Employer Identification Number
(for businesses and all other entities), at the local office of the Social
Security Administration or the Internal Revenue Service and apply for a
number.
PAYEES EXEMPT FROM BACKUP WITHHOLDING
Payees specifically exempted from backup withholding on ALL payments include
the following:
o A corporation.
o A financial institution.
o An organization exempt from tax under section 501(a) of the Internal
Revenue Code of 1986, as amended (the "Code"), or an individual
retirement plan.
o The United States or any agency or instrumentality thereof.
o A State, the District of Columbia, a possession of the United States, or
any subdivision or instrumentality thereof.
o A foreign government, a political subdivision of a foreign government,
or any agency or instrumentality thereof.
o An international organization or any agency or instrumentality thereof.
o A registered dealer in securities or commodities registered in the U.S.
or a possession of the U.S.
o A real estate investment trust.
o A common trust fund operated by a bank under section 584(a) of the Code.
o An exempt charitable remainder trust, or a non-exempt trust described in
section 4947(a)(1).
o An entity registered at all times under the Investment Company Act of
1940.
o A foreign central bank of issue.
o A futures commission merchant registered with the Commodity Futures
Trading Commission.
Payments of dividends and patronage dividends not generally subject to backup
withholding include the following:
o Payments to nonresident aliens subject to withholding under section 1441
of the Code.
o Payments to partnerships not engaged in a trade or business in the U.S.
and which have at least one nonresident partner.
o Payments of patronage dividends where the amount received is not paid in
money.
o Payments made by certain foreign organizations.
o Payments made to an appropriate nominee.
o Section 404(k) payments made by an ESOP.
Payments of interest not generally subject to backup withholding include the
following:
o Payments of interest on obligations issued by individuals.
NOTE: You may be subject to backup withholding if this interest is $600
or more and is paid in the course of the payer's trade or business and
you have not provided your correct taxpayer identification number to the
payer.
o Payments of tax-exempt interest (including exempt-interest dividends
under section 852 of the Code).
o Payments described in section 6049(b)(5) of the Code to nonresident
aliens.
o Payments on tax-free covenant bonds under section 1451 of the Code.
o Payments made by certain foreign organizations.
o Payments of mortgage interest to you.
o Payments made to an appropriate nominee.
Exempt payees described above should file substitute Form W-9 to avoid
possible erroneous backup withholding. FILE THIS FORM WITH THE PAYER. FURNISH
YOUR TAXPAYER IDENTIFICATION NUMBER, WRITE "EXEMPT" ON THE FACE OF THE FORM,
AND RETURN IT TO THE PAYER. IF THE PAYMENTS ARE INTEREST, DIVIDENDS, OR
PATRONAGE DIVIDENDS, ALSO SIGN AND DATE THE FORM. IF YOU ARE A NONRESIDENT
ALIEN OR A FOREIGN ENTITY NOT SUBJECT TO BACKUP WITHHOLDING, FILE WITH PAYER
A COMPLETED INTERNAL REVENUE FORM W-8 (CERTIFICATE OF FOREIGN STATUS).
Certain payments other than interest, dividends, and patronage dividends,
that are not subject to information reporting are also not subject to backup
withholding. For details, see the regulations under sections 6041, 6041A(a),
6045, and 6050A.
PRIVACY ACT NOTICE--Section 6109 requires most recipients of dividend,
interest, or other payments to give correct taxpayer identification numbers
to payers who must report the payments to the IRS. The IRS uses the numbers
for identification purposes. Payers must be given the numbers whether or not
recipients are required to file a tax return. Payers must generally withhold
31% of taxable interest, dividend, and certain other payments to a payee who
does not furnish a correct taxpayer identification number to a payer. Certain
penalties may also apply.
PENALTIES
(1) PENALTY FOR FAILURE TO FURNISH TAXPAYER IDENTIFICATION NUMBER--If you
fail to furnish your correct taxpayer identification number to a payer, you
are subject to a penalty of $50 for each such failure unless your failure is
due to reasonable cause and not to willful neglect.
(2) FAILURE TO REPORT CERTAIN DIVIDEND AND INTEREST PAYMENTS--If you fail to
include any portion of an includible payment for interest, dividends, or
patronage dividends in gross income, such failure will be treated as being
due to negligence and will be subject to a penalty of 20% on any portion of
an underpayment attributable to that failure unless there is clear and
convincing evidence to the contrary.
(3) CIVIL PENALTY FOR FALSE INFORMATION WITH RESPECT TO WITHHOLDING--If you
make a false statement with no reasonable basis that results in no imposition
of backup withholding, you are subject to a penalty of $500.
(4) CRIMINAL PENALTY FOR FALSIFYING INFORMATION--Willfully falsifying
certifications or affirmations may subject you to criminal penalties
including fines and/or imprisonment.
FOR ADDITIONAL INFORMATION CONTACT YOUR TAX CONSULTANT OR THE INTERNAL
REVENUE SERVICE
<PAGE>
EXHIBIT 99(a)(4)
MADISON RIVER PROPERTIES, L.L.C.
One Insignia Financial Plaza
Greenville, South Carolina 29602
December 17, 1997
To: The Limited Partners of
Shelter Properties VII Limited Partnership
Enclosed for your review and consideration are documents relating to
an offer by Madison River Properties, L.L.C. ("Madison River") to purchase
your units of limited partnership interest in Shelter Properties VII Limited
Partnership for $350 in cash per unit. This offer will expire midnight,
New York City time on January 15, 1998 (unless extended by Madison River).
Madison River is an affiliate of the General Partner of the
Partnership.
THE ENCLOSED DOCUMENTS CONTAIN IMPORTANT INFORMATION AND SHOULD BE
READ CAREFULLY AND IN THEIR ENTIRETY BEFORE YOU DECIDE WHETHER TO SELL YOUR
UNITS TO MADISON RIVER PURSUANT TO THIS OFFER.
If you have any questions concerning the terms of the offer, or need
assistance in completing the forms necessary to tender your units, please
contact our Information Agent, Beacon Hill Partners, at (800) 854-9486.
Thank you.
Sincerely,
Madison River Properties, L.L.C.
<PAGE>
Shelter Properties VII Limited Partnership
Summary of Appraisals
<PAGE>
(a)
Hickory Ridge Apartments
Omaha, Nebraska
<PAGE>
APPRAISAL REPORT OF THE
HICKORY RIDGE APARTMENTS
1996
Located at 6101 Hickory Ridge Trail
Shelby County, Tennessee (Memphis Area)
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SUBMITTED TO: Mr. J. L. Snedigar
Senior Asset Manager
Insignia Financial Group, Inc.
One Shelter Place
P.O. Box 1089
Greenville, South Carolina 29602
EFFECTIVE DATE OF APPRAISAL: November 22, 1996
DATE OF REPORT: December 23, 1996
PREPARED BY: KOEPPEL TENER REAL ESTATE SERVICES, INC.
5477 Glen Lakes Drive, Suite 202
Dallas, Texas 75231
Tax I.D. #13-3489544
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[KTR LETTERHEAD]
Mr. J. L. Snedigar
Senior Asset Manager
Insignia Financial Group, Inc. December 23, 1996
One Shelter Place
P.O. Box 1089
Greenville, South Carolina 29602
Re: Hickory Ridge Apartments
6101 Hickory Ridge Trail
Memphis (unincorporated), Tennessee
Dear Mr. Snedigar:
In compliance with your request, we have inspected and appraised the above
captioned property as of November 22, 1996. This appraisal and final estimate
of value have been based upon a careful and personal inspection of the
property and upon research into various factors that influence value.
Briefly described, the subject property consists of approximately 36.37 acres
of land zoned R-ML, multifamily district. The site is improved with 56 garden
style apartment buildings containing 378 apartment units. The structural
improvements which were constructed in 1975, contain 358,392 net rentable
square feet. Additional improvements include a management office/clubhouse,
two swimming pools, four tennis courts, a stocked lake with paddle boats and
canoes, fitness room, asphalt paved surface parking, concrete walkways and
landscaping.
The purpose of this report is to estimate the market value of the fee simple
estate of the subject property. The results of our analysis are contained
within the attached Summary Appraisal Report which has been prepared in
compliance with the reporting requirements set forth under Standards Rule
2-2(b) of the Uniform Standards of Professional Appraisal Practice (USPAP).
This report presents only summary discussions of the data, reasoning, and
analyses that were used in the appraisal process to develop the appraisers'
opinion of value. This Summary Appraisal Report updates a fully documented
self-contained appraisal report previously prepared on the subject property by
this firm. The aforementioned appraisal report is dated November 30, 1995 and
has an effective date of value of November 16, 1995 (referred to hereafter as
the "November 1995"). Detailed information not contained within this report
may be available within the aforementioned appraisal or has been retained
within the appraisers' file.
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[KTR LETTERHEAD]
Insignia Financial Group, Inc. December 23, 1996
Mr. J. L. Snedigar Page 2
The depth of discussion contained in this report is specific to the needs of
the client. The intended use of the report is to provide an independent
opinion of Market Value to be utilized by the client for their internal
purposes.
Attached is our Summary Appraisal Report, together with the Certification and
Basic Assumptions and Limiting Conditions, upon which we have based our
opinion that the Market Value of the Fee Simple Estate of the subject
property, as of November 22, 1996 is:
TWELVE MILLION EIGHT HUNDRED FIFTY THOUSAND DOLLARS
($12,850,000)
It has been a pleasure to be of service to you. Please do not hesitate to
call with any questions you may have regarding our assumptions, observations
or conclusion.
Sincerely,
KOEPPEL TENER REAL ESTATE SERVICES, INC.
/s/ Steven J. Goldberg /s/ Jackson L. Aills
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By: Steven J. Goldberg, MAI By: Jackson L. Aills
Senior Vice President Appraiser
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(b)
Governor's Park Apartments
Fort Collins, Colorado
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SUMMARY APPRAISAL REPORT
GOVERNOR'S PARK APARTMENTS
1996
Located at 700 East Drake Road
City of Fort Collins, Larimer County, Colorado
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SUBMITTED TO: Mr. J. L. Snedigar
Senior Asset Manager
Insignia Financial Group, Inc.
One Shelter Place
P.O. Box 1089
Greenville, South Carolina 29602
EFFECTIVE DATE OF APPRAISAL: September 25, 1996
DATE OF REPORT: October 15, 1996
PREPARED BY: KOEPPEL TENER REAL ESTATE SERVICES, INC.
5477 Glen Lakes Drive, Ste. 202
Dallas, Texas 75231
Tax I.D. #13-3489544
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[KTR LETTERHEAD]
Mr. J. L. Snedigar
Senior Asset Manager
Insignia Financial Group, Inc. October 15, 1996
One Shelter Place
P.O. Box 1089
Greenville, South Carolina 29602
Reference: Governor's Park Apartments
700 East Drake Road
City of Fort Collins, Larimer County, Colorado
Dear Mr. Snedigar:
In compliance with your request, we have inspected and appraised the above
captioned property as of September 25, 1996. This appraisal and final
estimate of value have been based upon a careful and personal inspection of
the property and upon research into various factors that influence value.
Briefly described, the subject consists of approximately 10.903 acres of land
improved with 17 garden style apartment buildings containing 188 units.
The structural improvements, constructed in 1982-1984, contain 166,280 net
rentable square feet. Additional improvements include 824 square foot
bathhouse, one swimming pool, one tennis court, asphalt paved surface
parking, and landscaping.
The purpose of this report is to estimate the market value of the fee simple
estate of the subject property. The results of our analysis are contained
within the attached Summary Appraisal Report which has been prepared in
compliance with the reporting requirements set forth under Standards Rule
2-2(b) of the Uniform Standards of Professional Appraisal Practice (USPAP).
This report presents only summary discussions of the data, reasoning, and
analyses that were used in the appraisal process to develop the appraisers'
opinion of value. This Summary Appraisal Report updates a fully documented
self-contained appraisal report previously prepared on the subject property by
this firm. The aforementioned appraisal report is dated November 28, 1995 and
has an effective date of value of September 5, 1995 (referred to hereafter as
the "November 28 Report"). Detailed information not contained within this
report may be available within the aforementioned appraisal or has been
retained within the appraisers' file.
<PAGE>
[KTR LETTERHEAD]
Mr. J. L. Snediger October 15, 1996
Insignia Financial Group, Inc. Page 2
The depth of discussion contained in this report is specific to the needs of
the client. The intended use of the report is to provide an independent
opinion of Market Value to be utilized by the client for their internal
purposes.
Attached is our Summary Appraisal Report, together with the Certification and
Basic Assumptions and Limiting Conditions, upon which we have based our
opinion that the Market Value of the Fee Simple Estate of the subject
property, as of September 25, 1996 is:
NINE MILLION ONE HUNDRED FIFTY THOUSAND DOLLARS
($9,150,000)
It has been a pleasure to be of service to you. Please do not hesitate to
call with any questions you may have regarding our assumptions, observations
or conclusion.
Sincerely,
KOEPPEL TENER REAL ESTATE SERVICES, INC.
/s/ Steven J. Goldberg /s/ Jerry L. Fulwiler
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By: Steven J. Goldberg, MAI By: Jerry L. Fulwiler
Senior Vice President Senior Appraiser
