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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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SCHEDULE 14D-9
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SOLICITATION/RECOMMENDATION STATEMENT PURSUANT TO SECTION 14(D)(4)
OF THE SECURITIES EXCHANGE ACT OF 1934
DREXEL BURNHAM LAMBERT REAL ESTATE ASSOCIATES III,
A NEW YORK LIMITED PARTNERSHIP
(Name of Subject Company)
DREXEL BURNHAM LAMBERT REAL ESTATE ASSOCIATES III,
A NEW YORK LIMITED PARTNERSHIP
(Name of Person(s) Filing Statement)
UNITS OF LIMITED PARTNERSHIP INTEREST
(Title of Class of Securities)
N/A
(Cusip Number of Class of Securities)
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WILLIAM H. JARRARD, JR.
PRESIDENT
DBL PROPERTIES CORPORATION
ONE INSIGNIA FINANCIAL PLAZA
GREENVILLE, SOUTH CAROLINA 29602
(864) 239-2747
(Name, Address and Telephone Number of Person
Authorized to Receive Notice and Communications on Behalf of
the person(s) filing statement)
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ITEM 1. SECURITY AND SUBJECT COMPANY.
The name of the subject company is Drexel Burnham Lambert Real
Estate Associates III, a New York limited partnership (the "Partnership"), and
the address of the principal executive offices of the Partnership is One
Insignia Financial Plaza, Greenville, South Carolina 29602. The title of the
class of equity securities to which this statement relates is the units of
limited partnership interest ("Units") of the Partnership.
ITEM 2. TENDER OFFER OF THE BIDDER.
This statement relates to an offer by Cooper River Properties,
L.L.C., a Delaware limited liability company (the "Purchaser"), to purchase up
to 20,000 of the outstanding Units at a purchase price of $75 per Unit, net to
the seller in cash, without interest, upon the terms and subject to the
conditions set forth in an Offer to Purchase dated September 29, 1998 (the
"Offer to Purchase") and related Assignment of Partnership Interest (which
collectively constitute the "Offer"). A Tender Offer Statement on Schedule
14D-1 with respect to the Offer has been filed by the Purchaser, Insignia
Properties, L.P., a Delaware limited partnership ("IPLP"), Insignia Properties
Trust, a Maryland real estate investment trust ("IPT") and Insignia Financial
Group, Inc., a Delaware corporation ("Insignia") (collectively, the "Bidders").
The address of the Purchaser's principal executive offices is One
Insignia Financial Plaza, Greenville, South Carolina 29602.
ITEM 3. IDENTITY AND BACKGROUND.
(a) The name and business address of the Partnership, which is the
person filing this statement, are set forth in Item 1 above.
(b)(1) Since June 24, 1997, DBL Properties Corporation, which is the
general partner of the Partnership (the "General Partner"), has been a direct
wholly-owned subsidiary of Insignia. Prior to that time, the General Partner
was unaffiliated with IPT or Insignia. The Purchaser is a recently formed,
wholly-owned subsidiary of IPLP, which is the operating partnership of IPT. IPT
is the sole general partner of IPLP (owning approximately 70% of the total
equity interests in IPLP), and Insignia is the sole limited partner of IPLP
(owning approximately 30% of the total equity interests in IPLP). Insignia and
its affiliates also own approximately 57% of the outstanding common shares of
IPT.
Since June 1997, Insignia Residential Group, L.P. ("IRG") and
Insignia/ESG, Inc. (formerly known as Insignia Commercial Group, Inc.)
("I/ESG"), which are affiliates of IPT and the Purchaser, have provided asset
management and property management services to the Partnership, and for more
than the past three years, Insignia (directly or through affiliates) has
performed 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 Partnership and the General Partner were not affiliates of
Insignia prior to June 1997. Accordingly, this section only discusses
transactions between the Partnership, on the one hand, and Insignia and its
affiliates (including the General Partner, IRG and I/ESG), on the other hand,
which have occurred since June 1997.
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The Partnership paid IRG and I/ESG fees for property management
services in the amount of approximately $368,000 for the year ended December
31, 1997 and has paid IRG and I/ESG property management fees equal to
approximately $234,000 during the first six months of 1998. 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 for the year
ended December 31, 1997 in the amount of approximately $29,000 and has
reimbursed them for such services in the amount of approximately $45,000
through June 30, 1998.
As described above, the Purchaser and the General Partner are
affiliates of and controlled by IPT, which is controlled by Insignia. The
General Partner has conflicts of interest in considering the Offer, including
(i) as a result of the fact that a sale or liquidation of the Partnership's
assets would result in a decrease or elimination of the fees paid to the
General Partner and/or its affiliates and (ii) the fact that as a consequence
of the Purchaser's ownership of Units, the Purchaser (which is an affiliate of
the General Partner) may have incentives to seek to maximize the value of its
ownership of Units, which in turn may result in a conflict for the General
Partner in attempting to reconcile the interests of the Purchaser (which is an
affiliate of the General Partner) with the interests of the other Limited
Partners. 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.
As described in the Offer to Purchase, the Purchaser (which is an
affiliate of the General Partner) expects to pay for the Units it purchases
pursuant to the Offer with funds provided by IPLP as capital contributions.
IPLP in turn intends to use its cash on hand and, if necessary, funds available
to it under its credit facility to make such contributions. It is possible,
however, that in connection with its future financing activities, IPT or IPLP
may cause or request the Purchaser (which is an affiliate of the General
Partner) to pledge the Units as collateral for loans, or otherwise agree to
terms which provide IPT, IPLP and the Purchaser with incentives to generate
substantial near-term cash flow from the Purchaser's investment in the Units.
This could be the case, for example, if a loan has a "balloon" maturity after a
relatively short time or bears a high or increasing interest rate. In such a
situation, the General Partner may experience a conflict of interest in seeking
to reconcile the best interests of the Partnership with the need of its
affiliates for cash flow from the Partnership's activities.
If the Purchaser is successful in acquiring a significant number of
Units pursuant to the Offer, the Purchaser (which is an affiliate of the
General Partner) will have the right to vote those Units and thereby
significantly influence all voting decisions with respect to the Partnership,
including decisions concerning liquidation, amendments to the 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.
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, 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
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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. 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 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 the General Partner
and in certain circumstances election of a new or successor general partner;
dissolution of the Partnership; sale of all or substantially all of the assets
of the Partnership; and most types of amendments to the Limited Partnership
Agreement.
To the best knowledge of the General Partner, except as described in
this Schedule 14D- 9, there are no other material agreements, arrangements,
understandings or any actual or potential conflicts of interest between the
Partnership, the General Partner and their affiliates and the Bidders, their
executive officers, directors or affiliates.
ITEM 4. THE SOLICITATION OR RECOMMENDATION.
Because of the existing and potential future conflicts of interest
described in Item 3 above, the Partnership and the General Partner are
remaining neutral and making no recommendation as to whether Limited Partners
should tender their Units in response to the Offer.
ITEM 5. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED.
Neither the Partnership nor any person acting on its behalf has
employed, retained or compensated, or intends to employ, retain or compensate,
any person or class of person to make solicitations or recommendation to
Limited Partners on its behalf concerning the Offer.
ITEM 6. RECENT TRANSACTIONS AND INTEREST WITH RESPECT TO SECURITIES.
None.
ITEM 7. CERTAIN NEGOTIATIONS AND TRANSACTIONS BY THE SUBJECT COMPANY.
None.
ITEM 8. ADDITIONAL INFORMATION TO BE FURNISHED.
None.
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ITEM 9. MATERIAL TO BE FILED AS EXHIBITS.
(a) Form of cover letter to Limited Partners of the Partnership
dated September 29, 1998.
(b) None.
(c) None.
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SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief,
I certify that the information set forth in this statement is true, complete
and correct.
Dated: September 29, 1998
Drexel Burnham Lambert Real Estate Associates III,
a New York limited partnership
By: DBL Properties Corporation,
its General Partner
By: /s/ William H. Jarrard, Jr.
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William H. Jarrard, Jr.
President
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EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION
(a) Form of cover letter to Limited Partners from
the Partnership dated September 29, 1998.
(b) None.
(c) None.
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Exhibit (a)
Drexel Burnham Lambert Real Estate Associates III
September 29, 1998
Dear Limited Partner:
Enclosed is the Schedule 14D-9 which was filed by Drexel Burnham
Lambert Real Estate Associates III (the "Partnership") with the Securities and
Exchange Commission in connection with an offer (the "Offer") by Cooper River
Properties, L.L.C., a Delaware limited liability company (the "Purchaser"),
Insignia Properties, L.P., a Delaware limited partnership ("IPLP"), Insignia
Properties Trust, a Maryland real estate investment trust ("IPT"), and Insignia
Financial Group, Inc., a Delaware corporation ("Insignia," and together with
IPLP, IPT and the Purchaser, the "Bidders"), to purchase units of limited
partnership interest ("Units") in the Partnership.
The Partnership's general partner is DBL Properties Corporation (the
"General Partner"), which is an affiliate of the Bidders. Due to the
affiliation between the General Partner of the Partnership and the Bidders, the
General Partner is subject to certain conflicts of interest in connection with
the response to the Offer.
AS A RESULT OF THE EXISTING AND POTENTIAL CONFLICTS OF INTEREST,
NEITHER THE PARTNERSHIP NOR THE GENERAL PARTNER EXPRESSES ANY OPINION AS TO THE
OFFER AND EACH IS REMAINING NEUTRAL AND MAKING NO RECOMMENDATION AS TO WHETHER
LIMITED PARTNERS SHOULD TENDER THEIR UNITS IN RESPONSE TO THE OFFER.
Limited Partners are advised to carefully read the enclosed Schedule
14D-9.
Drexel Burnham Lambert Real Estate Associates III
