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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 13E-3
RULE 13E-3 TRANSACTION STATEMENT
(Pursuant to Section 13(e) of the
Securities Exchange Act of 1934)
(AMENDMENT NO. 3)
SPRINGHILL LAKE INVESTORS LIMITED PARTNERSHIP
(Name of the Issuer)
AQUARIUS ACQUISITION, L.P.
NOMURA ASSET CAPITAL CORPORATION
WINTHROP FINANCIAL ASSOCIATES, A LIMITED PARTNERSHIP
THREE WINTHROP PROPERTIES, INC.
LINNAEUS-LEXINGTON ASSOCIATES LIMITED PARTNERSHIP
(Name of Person(s) Filing Statement)
UNITS OF LIMITED PARTNERSHIP INTEREST
(Title of Class of Securities)
NONE
(CUSIP Number of Class of Securities)
AQUARIUS ACQUISITION, L.P.
C/O NOMURA ASSET CAPITAL CORPORATION
TWO WORLD FINANCIAL CENTER
NEW YORK, NEW YORK 10005
(212) 667-2250
(Name, Address, and Telephone Numbers of Person Authorized to Receive
Notices and Communications on Behalf of Person(s) Filing Statement)
COPIES TO:
Richard J. Sabella, Esq. Richard J. McCready, Esq. Three
Cahill Gordon & Reindel 80 Winthrop Properties, Inc. One
Pine Street New York, New International Place Boston, MA
York 10005 (212) 701-3000 02110 (617) 330-8600
This statement is filed in connection with (check the appropriate box):
a. [ ] The filing of solicitation materials or an information statement
subject to Regulation 14A, Regulation 14C or Rule 13e-3(c) under the
Securities Exchange Act of 1934.
b. [ ] The filing of a registration statement under the Securities Act of
1933.
c. [X] A tender offer.
d. [ ] None of the above.
Check the following box if the soliciting materials or information
statement referred to in checking box (a) are preliminary copies: [ ]
CALCULATION OF FILING FEE
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TRANSACTION AMOUNT OF
VALUATION* FILING FEE
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$23,623,600 $4,725
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* The maximum number of limited partnership Units which may be purchased
pursuant to the Offer is 328. Any remaining tendered Units would remain
owned by the tendering limited partner but be pledged to secure a loan from
the Purchaser. The maximum aggregate consideration to be paid upon
consummation of the Offer would equal 328 (the maximum number of Units which
may be purchased upon consummation of the Offer) multiplied by the $36,400
purchase price per Unit. The remainder of the transaction value represents
the maximum amount to be paid out in the form of loans in respect of the
remaining 321 Units which may be transferred to the bidder one year and one
day from the date of consummation of the Offer and repayment of such loans.
[X] 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.
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<S> <C> <C>
Amount Previously Paid: $4,725 Filing Party: AQUARIUS ACQUISITION, L.P.
Form or Registration No.: SCHEDULE 14D-1 AND AMENDMENT NO. 3 Date Filed: FEBRUARY 1, 1995 AND
TO SCHEDULE 14D-1 MARCH 3, 1995
</TABLE>
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This Amendment No. 3 ("Amendment No. 3") amends and supplements the Rule
13e-3 Transaction Statement on Schedule 13E-3 dated February 1, 1995, as
amended (the "Statement"), which relates to a tender offer by Aquarius
Acquisition, L.P., a Delaware limited partnership (the "Purchaser"), to
purchase outstanding units of limited partnership interests (the "Units") in
Springhill Lake Investors Limited Partnership, a Maryland limited partnership
(the "Partnership"), upon the terms and subject to the conditions set forth
in the Offer to Purchase, dated February 1, 1995 (including the annexes
thereto, the "Offer to Purchase") as amended and supplemented by the
Supplement to the Offer to Purchase, dated March 3, 1995 (the "Supplement"),
and in the related Letter of Transmittal (which together constitute the
"Offer"), copies of such Supplement and revised Letter of Transmittal are
filed as Exhibits (d)(7) and (d)(8) hereto, respectively. This Amendment No.
3 is being filed by the Purchaser, Nomura Asset Capital Corporation, Three
Winthrop Properties, Inc. and Linnaeus-Lexington Associates Limited
Partnership. Capitalized terms used in this Amendment No. 3 and not defined
herein shall have the meanings set forth in the Offer to Purchase as amended
and supplemented.
The following cross-reference sheet is being supplied pursuant to General
Instruction F to Schedule 13e-3 and shows the location in the Tender Offer
Statement on Schedule 14D-1 as amended (the "Schedule 14D-1") filed by the
Purchaser with the Securities and Exchange Commission in respect of the Offer
of the information required to be included in response to the items of this
Statement. The information in the Schedule 14D-1 is hereby expressly
incorporated herein by reference and the responses to each item in this
Statement are qualified in their entirety by the provisions of the Schedule
14D-1.
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CROSS-REFERENCE SHEET
<TABLE>
<CAPTION>
ITEM IN WHERE LOCATED IN
SCHEDULE 13E-3 SCHEDULE 14D-1
- ------------------ --------------------
<S> <C>
Item 1(a) ......... Item 1(a)
Item 1(b) ......... Item 1(b)
Item 1(c) ......... Item 1(c)
Item 1(d) ......... *
Item 1(e) ......... *
Item 1(f) ......... *
Item 2(a) ......... Item 2(a)
Item 2(b) ......... Item 2(b)
Item 2(c) ......... Item 2(c)
Item 2(d) ......... Item 2(d)
Item 2(e) ......... Item 2(e)
Item 2(f) ......... Item 2(f)
Item 2(g) ......... Item 2(g)
Item 3(a)(1) ...... Item 3(a)
Item 3(a)(2) ...... Item 3(b)
Item 3(b) ......... *
Item 4 ............ *
Item 5 ............ Item 5
Item 6(a) ......... Item 4(a)
Item 6(b) ......... *
Item 6(c) ......... Item 4(b)
Item 6(d) ......... Item 4(c)
Item 7(a) ......... Item 5
Item 7(b) ......... *
Item 7(c) ......... *
Item 7(d) ......... *
Item 8 ............ *
Item 9 ............ *
Item 10(a) ........ Item 6(a)
Item 10(b) ........ Item 6(b)
Item 11 ........... Item 7
Item 12(a) ........ *
Item 12(b) ........ *
Item 13 ........... *
Item 14(a) ........ *
Item 14(b) ........ *
Item 15(a) ........ *
Item 15(b) ........ Item 8
Item 16 ........... Item 10(f)
Item 17 ........... Item 11
<FN>
* The item is located in the Schedule 13E-3 only.
</TABLE>
2
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ITEM 2. IDENTITY AND BACKGROUND.
Item 2 is hereby amended and supplemented as follows:
NACC, a Delaware corporation is principally engaged in the business of
originating, purchasing, financing and selling commercial and residential
mortgage loans and has its principal executive office at Two World Financial
Center, Building B, New York, New York 10281-1198. Winthrop Financial
Associates, A Limited Partnership, a Maryland limited partnership, is
principally engaged in the business of property management and holding
controlling interests in syndicated limited partnerships holding real estate and
has its principal executive office at One International Place, Boston,
Massachusetts 02110. Three Winthrop, a Massachusetts corporation, is the
managing general partner of the Partnership and has its principal executive
office at One International Place, Boston, Massachusetts 02110. Linnaeus-
Lexington, a Massachusetts limited partnership, is a general partner of the
Partnership and has its principal executive office at One International Place,
Boston, Massachusetts 02110.
(e) and (f) During the last five years, neither Three Winthrop nor
Linnaeus-Lexington (i) has been convicted in a criminal proceeding 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 future violations of, or
prohibiting activities subject to, Federal or state securities laws or
finding any violation of such laws.
ITEM 3. PAST CONTRACTS, TRANSACTIONS OR NEGOTIATIONS.
Item 3 is hereby amended and supplemented as follows:
(a) and (b) The information set forth in "SPECIAL FACTORS--Background of
this Offer" of the Supplement is incorporated herein by reference.
ITEM 4. TERMS OF THE TRANSACTION.
Item 4 is hereby amended and supplemented as follows:
(a) The information set forth in "INTRODUCTION" and "THE OFFER--Terms of
the Offer" of the Supplement is incorporated herein by reference.
The Expiration Date has been extended to 5:00 p.m., New York Time, on
March 17, 1995, and as of March 2, 1995, 44 Units have been tendered pursuant
to the Offer.
ITEM 6. SOURCE AND AMOUNTS OF FUNDS OR OTHER CONSIDERATION.
Item 6 is hereby amended and supplemented as follows:
(b) The Purchaser estimates the expenses it will incur in connection with
the Offer as follows:
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Filing Fee .. $ 4,725
Legal ........ 200,000
Printing ..... 60,000
Other ........ 35,327
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Total ........ $300,052
</TABLE>
ITEM 8. FAIRNESS OF THE TRANSACTION.
Item 8 is hereby amended and supplemented as follows:
(a)-(f) The information set forth in "INTRODUCTION" and "SPECIAL
FACTORS--Determination of the Cash Consideration" of the Supplement is
incorporated herein by reference.
ITEM 9. REPORTS, OPINIONS, APPRAISALS AND CERTAIN NEGOTIATIONS.
Item 9 is hereby amended and supplemented as follows:
(a) The information set forth in "SPECIAL FACTORS--Determination of the
Consideration" of the Supplement is incorporated herein by reference.
3
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ITEM 11. CONTRACTS, ARRANGEMENTS OR UNDERSTANDINGS WITH RESPECT TO THE
ISSUER'S SECURITIES.
Item 11 is hereby amended and supplemented as follows:
The information set forth in "SPECIAL FACTORS--Background of this Offer"
of the Supplement is incorporated herein by reference.
ITEM 16. ADDITIONAL INFORMATION.
Item 16 is hereby amended and supplemented as follows:
Additional information concerning the Offer is set forth in the Supplement
and the related Revised Letter of Transmittal, copies of which are attached
hereto as Exhibits (d)(7) and (d)(8), respectively, and each of which is
incorporated herein in its entirety, by reference.
4
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ITEM 17. MATERIAL TO BE FILED AS EXHIBITS.
Item 17 is hereby amended and supplemented as follows:
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<CAPTION>
<S> <C>
(c)(9) Letter from Greenbelt Residential Limited Partners to the Limited Partners dated
February 13, 1995.
(c)(10) Letter from Greenbelt Residential Limited Partners to the Limited Partners dated
February 24, 1995.
(d)(7) Supplement to the Offer to Purchase dated March 3, 1995.
(d)(8) Revised Letter of Transmittal.
(d)(9) Letter to Limited Partners dated March 3, 1995.
(d)(10) Press Release dated March 3, 1995.
</TABLE>
5
<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: March 3, 1995
AQUARIUS ACQUISITION, L.P.
By: Partnership Acquisition Trust I, its
General Partner
By: WILMINGTON TRUST COMPANY,
as Trustee and not in its individual capacity
By: /s/ David A. Vanaskey, Jr.
Name: David A. Vanaskey, Jr.
Title: Senior Financial Services Officer
NOMURA ASSET CAPITAL CORPORATION
By: /s/ Daniel S. Abrams
Name: Daniel S. Abrams
Title: Vice President
WINTHROP FINANCIAL ASSOCIATES,
A LIMITED PARTNERSHIP
By: Linnaeus Associated Limited
Partnership, its General Partner
By: WL Realty Company, L.P.,
its General Partner
By: A.I. Realty Co., LCC,
its General Partner
By: /s/ Daniel S. Abrams
Name: Daniel S. Abrams
Title: Principal
THREE WINTHROP PROPERTIES, INC.
By: /s/ Philip J. Brannigan, Jr.
Name: Philip J. Brannigan, Jr.
Title: Vice President
LINNAEUS-LEXINGTON ASSOCIATES
LIMITED PARTNERSHIP
By: Winthrop Financial Associates, its
authorized signatory
By: Linnaeus Associated
Limited Partnership,
its General Partner
By: WL Realty Company, L.P.,
its General Partner
By: A.I. Realty Co., LCC,
its General Partner
By: /s/ Daniel S. Abrams
Name: Daniel S. Abrams
Title: Principal
6
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EXHIBIT INDEX
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<CAPTION>
PAGE
EXHIBIT DESCRIPTION NUMBER
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* (a)(1) FORM OF ACQUISITION LOAN AGREEMENT BETWEEN NOMURA ASSET CAPITAL CORPORATION AND THE
Purchaser
* (a)(2) Form of Pledge and Security Agreement between Nomura Asset Capital Corporation and
the Purchaser
* (b)(1) Selected pages from Price Waterhouse LLP Appraisal
* (b)(2) Selected pages from Lipman Frizzell & Mitchell LLC Appraisal
* (b)(3) Arthur Andersen Appraisal dated August 13, 1992
* (c)(1) Greenbelt Residential Limited Partnership Consent Solicitation Statement dated
January 19, 1995
* (c)(2) Complaint to Enforce Contract in the case styled, Three Winthrop Properties, Inc. v.
Lerner Corporation, Case No. 129192-V (Cir. Ct. Montgomery Cty., Md.), dated Nov.
17, 1994
* (c)(3) Motion for Partial Summary Judgment in the case styled, Three Winthrop Properties,
Inc. v. Lerner Corporation, Case No. 129192-V (Cir. Ct. Montgomery Cty., Md.)
* (c)(4) Complaint For Money Damages, An Accounting And Other Relief in the case styled,
Theodore N. Lerner v. Three Winthrop Properties, Inc. (D. Md. 1994), filed Dec. 27,
1994
* (c)(5) Order Granting Motion for Partial Summary Judgment in the case styled Three Winthrop
Properties, Inc. v. Lerner Corporation, Case No. 129192-V (Cir. Ct. Montgomery Cty.,
Md.)
* (c)(6) Complaint for Breach of Fiduciary Duty in the case styled Montgomery, et al. v.
Three Winthrop Properties, Inc., Case No. 132222 (Cir. Ct. Montgomery Cty., Md.)
* (c)(7) Complaint for Failure to Disclose under Rule 13e-3 and Breach of Fiduciary Duty in
the case styled LER 8, et al. v. Three Winthrop Properties, Inc., et al., Case No.
DKC 95-555 (D. Md.).
* (c)(8) Motion of Greenbelt Residential Limited Partnership to Intervene in the case styled
LER 8, et al. vs. Three Winthrop Properties, Inc., et al., Case No. DKC 95-555 (D.
Md.).
(c)(9) Letter from Greenbelt Residential Limited Partners to the Limited Partners dated
February 13, 1995.
(c)(10) Letter from Greenbelt Residential Limited Partners to the Limited Partners dated
February 24, 1995.
* (d)(1) Offer to Purchase dated February 1, 1995
* (d)(2) Letter of Transmittal
* (d)(3) Letter to Limited Partners dated February 1, 1995
* (d)(4) Press Release dated February 1, 1995
*(d)(5) Letter to Limited Partners dated February 27, 1995.
*(d)(6) Press Release dated February 27, 1995.
(d)(7) Supplement to the Offer to Purchase dated March 3, 1995
(d)(8) Revised Letter of Transmittal
(d)(9) Letter to Limited Partners dated March 3, 1995
(d)(10) Press Release dated March 3, 1995
<FN>
* Previously filed.
5
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EXHIBIT (C)(9)
GREENBELT RESIDENTIAL LIMITED PARTNERSHIP
February 13, 1995
Dear Springhill Lake Investors Limited Partner:
We warned you not to sell your units in response to the Winthrop/Aquarius
Offer. By now you know why--Winthrop is using cash reserves that already
belong to you to force you either to sell your units at a price fixed by
Winthrop or remain as a minority limited partner in a partnership in which
you will have few rights. DON'T ACCEPT WINTHROP'S "TAKE IT OR LEAVE IT" OFFER
WHEN WE ARE OFFERING YOU A BETTER ALTERNATIVE.
Now that Winthrop finally has provided the financial information that we
have been seeking for over two months, WE HAVE REVISED OUR OFFER TO MAKE
AVAILABLE TO YOU AT LEAST $36,400 -- more than Aquarius is offering to pay
you. EVEN MORE IMPORTANTLY, IF YOU JOIN WITH US AND VOTE TO CAUSE A SALE OF
THE PROJECT, YOU COULD RECEIVE MORE. Our offer establishes the minimum amount
you will receive if you vote with us. UNDER THE WINTHROP/AQUARIUS OFFER, YOU
WILL NOT RECEIVE MORE THAN $36,000. UNDER OUR OFFER, YOU WILL NOT RECEIVE
LESS THAN $36,400. In addition, if you vote to dissolve the Partnership and
to have the Project sold, we would demand that Winthrop, as a fiduciary,
cooperate in structuring the transfer in a manner that would allow limited
partners who wish to remain in the Partnership to do so. As the successful
purchaser, we would welcome the opportunity to have any of you remain as our
partners.
BECAUSE OUR PROPOSAL GIVES YOU AN OPPORTUNITY TO MAXIMIZE THE RETURN ON
YOUR INVESTMENT, WE URGE YOU TO SIGN AND RETURN THE GREEN CONSENT CARD NOW.
THAT STEP WILL TELL WINTHROP YOU WANT THE PROJECT SOLD NOW AT THE BEST
AVAILABLE PRICE.
Please carefully consider the following:
OUR OFFER PROVIDES YOU WITH MORE CASH
Here is how our revised offer works:
With the cash reserves of approximately $3.2 million (we just learned
about the size of those reserves from the Winthrop/Aquarius Offer), our original
offer totaled approximately $35,100 per unit. CONTRARY TO WHAT WINTHROP IS
TELLING YOU, THOSE CASH RESERVES BELONG TO YOU AND
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2
UNDER OUR OFFER WILL BE DISTRIBUTED IN CONNECTION WITH THE DISSOLUTION.
We are willing to add another $843,700 (approximately $1,300 per
investor unit) to our offer--making it worth at least $36,400 per unit to you.
UNLOCK THE MOST VALUE POSSIBLE FROM YOUR INVESTMENT
The increase in our offer is not the only reason you should vote with
us--a sale of the Project will unlock the most value possible from your
investment.
Consider these facts:
OUR RESOLUTION PLACES NO CAP ON YOUR RETURN. We have offered what we
believe to be a fair price for the Project. Your vote gives you the
opportunity to receive even more.
OUR RESOLUTION CALLS ON WINTHROP TO DETERMINE WHAT VALUE THE MARKET
PLACES ON THE PROJECT. If a majority of you want the Project to be sold now,
Winthrop, as the general partner, will have a duty to assist in that process
and find the highest bidder for the Project.
THE WINTHROP/AQUARIUS OFFER LIMITS THE CASH YOU CAN RECEIVE. The
Winthrop/Aquarius offer caps the amount that you can receive at $36,000 per
unit.
WINTHROP'S CONFLICT OF INTEREST
Ever since we first told you about our offer, we have expressed serious
misgivings about the conflict of interest that Winthrop has in evaluating any
transaction in which Winthrop would lose its rich fees, despite the value to
you.
Consider what has happened in the more than two months since we submitted
our offer:
We asked Winthrop to consider our offer and negotiate in good faith.
WINTHROP HAS NOT.
We asked Winthrop to seek other third party offers and test the value
of the Project in the open market. WINTHROP HAS NOT.
We asked Winthrop to obtain the consent of the Project's lender to our
assumption of the mortgage. WINTHROP HAS NOT.
Instead, an affiliate of Winthrop has offered to purchase your interests,
without negotiating, without competitive bidding, and without any attempt to
find the real value of your investment. WINTHROP WILL NOT EVEN TELL YOU
WHETHER IT BELIEVES THAT THE PRICE BEING OFFERED IS FAIR. What we believe is
clearly unfair is for Winthrop to be allowed to take control of the
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3
Partnership and award itself annual fees of $1,000,000 in addition to the
more than $15,000,000 in fees it has already taken.
THE WINTHROP/AQUARIUS OFFER--SERIOUS SHORT-COMINGS
Compare our proposal to some of the serious short-comings of the
Winthrop/Aquarius Offer:
IT FAILS TO REQUIRE THREE WINTHROP TO SEEK THE BEST PRICE AVAILABLE. We
have proposed only that you vote to dissolve the Partnership and allow the
market to determine the value of the Project.
IT SUGGESTS A FLEXIBILITY THAT DOES NOT REALLY EXIST. The
Winthrop/Aquarius Offer suggests that you may choose to sell your interest or
remain as a limited partner. The Winthrop/Aquarius Offer does not highlight that
upon obtaining control, Aquarius will be able to veto all decisions that you are
currently entitled to make. In effect, Winthrop is making a "take it or leave
it" offer.
IT PERMITS WINTHROP AND ITS RELATED PARTIES TO INCREASE THEIR ALREADY
RICH FEES. A Winthrop affiliate will take over as managing agent for the Project
at a 3% fee, plus an unspecified "expense" reimbursement. Combined with the
"oversight" and other fees already received from the Project, Winthrop will
siphon off $1,000,000 each year in fees--approximately $1,540 per unit. This
is in addition to the more than $24,000 per unit of fees that Winthrop has
already pocketed from the Project. Winthrop's statement of its intent to
appoint itself as managing agent resulted in two limited partners of the
Partnership, together with Mr. Lerner, filing a lawsuit against Three
Winthrop in Maryland state court on February 7, 1995. The lawsuit alleges
that Three Winthrop's actions in this regard constitute a breach of its
fiduciary duty to you and to Mr. Lerner.
IT ANTICIPATES ENDING WITH A PRIVATE PARTNERSHIP. While not highlighted
in the Winthrop/Aquarius Offer, its success would result in the Partnership's
not having to be regulated by the Securities and Exchange Commission. As a
result, limited partners who elected to stay in the Partnership would have
only limited access to information and would not continue to receive even the
reports currently being received.
We believe Winthrop's message to you is clear. ACCEPT ITS MAXIMUM PER UNIT
OFFER OR FACE AN UNCERTAIN FUTURE IN A PARTNERSHIP IN WHICH YOU HAVE FEW
RIGHTS AND LITTLE INFORMATION. MEANWHILE, WINTHROP WILL CONTINUE INDEFINITELY
TO TAKE ITS RICH FEES.
LEVEL THE PLAYING FIELD
We recognize that this flurry of information from us and Winthrop might be
confusing. The cause of this confusion is that Winthrop is taking advantage
of the fact that the playing field is not level. Winthrop has all of the
information--we do not. In addition, we were forced to
<PAGE>
4
structure our offer as a purchase of Partnership assets rather than of your
interest because the Partnership agreement precludes us from purchasing your
interest. OUR GOAL IS TO PROVIDE YOU WITH THE MAXIMUM RETURN AND AFFORD YOU
THE FLEXIBILITY YOU DESIRE --WINTHROP'S GOAL IS TO MAXIMIZE ITS OWN RETURN
AND TO FORCE YOU OUT OF THE PARTNERSHIP WITH A "TAKE IT OR LEAVE IT" OFFER.
- -----------------------------------------------------------------------------
IMPORTANT
CONTRARY TO WHAT WINTHROP HAS TOLD YOU, YOU DO NOT HAVE TO WAIT UNTIL MARCH
7TH TO GIVE US YOUR VOTE. IF A MAJORITY OF YOU APPROVE OUR RESOLUTION PRIOR
TO THAT DATE, SUBJECT TO WORKING OUT MATTERS WITH THE LENDER, THE RESOLUTION
WILL BE ADOPTED. WE URGE YOU NOT TO TENDER ANY UNITS TO WINTHROP IN RESPONSE
TO THE WINTHROP/AQUARIUS OFFER. WE URGE YOU TO SIGN AND RETURN THE GREEN
CONSENT CARD NOW.
- -----------------------------------------------------------------------------
We urge you to read this letter together with our Consent Solicitation
Statement dated January 19, 1995. If you have any questions regarding this
information, or would like to discuss our revised offer or the
Winthrop/Aquarius Offer, please contact either Ted Lerner, Ed Cohen or Bob
Tanenbaum at (301) 984-1500 or, toll free, at 1-800-953-7637.
Very truly yours,
GREENBELT RESIDENTIAL LIMITED
PARTNERSHIP
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NON-IMPUTATION ENDORSEMENT. ALTA Form Non-Imputation Endorsement to the
Title Insurance Policies to be issued at closing under this Agreement
insuring that coverage under the Title Insurance Policies will not be denied
on the ground that the knowledge of Seller prior to the Closing Date is
imputed to Purchaser.
OPERATING PARTNERSHIP(S). The Maryland limited partnerships known as First
Springhill Lake Limited Partnership, Second Springhill Lake Limited
Partnership, Third Springhill Lake Limited Partnership, Fourth Springhill
Lake Limited Partnership, Fifth Springhill Lake Limited Partnership, Sixth
Springhill Lake Limited Partnership, Seventh Springhill Lake Limited
Partnership, Eighth Springhill Lake Limited Partnership, Ninth Springhill
Lake Limited Partnership and Springhill Commercial Limited Partnership, or
any one of them, as the context may require.
PARTNERSHIP AGREEMENT(S). Collectively, the limited partnership agreements
of the Operating Partnerships, as amended (or amended and restated) through
the date of this Agreement, or any one of them, as the context may require.
PARTNERSHIP AMENDMENT(S). Those amendments to the Partnership Agreements
described in Section 5.b. hereof.
PARTNERSHIP INTEREST. Collectively, the general partner interest in each
of the Operating Partnerships, representing in each a ninety percent (90%)
ownership interest therein.
PERMITS. Those permits and licenses issued with respect to the Project
described on Exhibit C attached hereto and made a part hereof.
PERMITTED ENCUMBRANCES. Those matters affecting title to the Project
described on Exhibit D attached hereto and made a part hereof.
PROJECT. Together, that certain 96-building, 2,899-unit garden apartment
complex known as Springhill Lake Apartments and a commercial facility owned
by Springhill Commercial Limited Partnership, located on approximately 154.1
acres of land in Greenbelt, Prince George's County, Maryland and owned by the
Operating Partnerships.
PURCHASE PRICE. The purchase price for the Partnership Interest payable by
Purchaser to Seller pursuant to Section 3 of this Agreement.
PURCHASER. Greenbelt Residential Limited Partnership, a Maryland limited
partnership.
TITLE INSURANCE POLICIES. Those owner's policies of title insurance issued
by Lawyers' Title Insurance Corporation, or such other reputable title
insurance company which may be retained in connection with the transactions
contemplated herein, insuring the Operating Partnerships' title to the
Project.
2. AGREEMENT TO SELL AND PURCHASE. Seller agrees to sell to Purchaser, and
Purchaser agrees to purchase from Seller, the Partnership Interest on the
terms and conditions hereinafter set forth.
3. PURCHASE PRICE AND TERMS. The aggregate Purchase Price for the
Partnership Interest shall be equal to the sum of (i) Twenty Million Six
Hundred Forty-One Thousand Four Hundred Seventy-Eight
<PAGE>
-4-
Dollars ($20,641,478) and (ii) the amount of the Loan Transfer Fee. The Purchase
Price shall be payable as follows:
a. DEPOSIT.
(1) AMOUNT. Within three (3) business days after full execution of
this Agreement, Purchaser shall deposit in escrow with the Escrow Agent
the Deposit in the amount of Five Hundred Thousand Dollars ($500,000) by
cash, certified or cashier's check or wire transfer of federal funds.
Escrow Agent shall invest the Deposit in such accounts insured by the
Federal Deposit Insurance Corporation or the Federal Savings and Loan
Insurance Corporation in the Washington, D.C. metropolitan area, or in
such obligations issued or insured by the United States government, as
Purchaser may select and Seller may approve, such approval not to be
unreasonably withheld, conditioned or delayed. All interest earned on the
Deposit shall be and become part of the Deposit.
(2) RELEASE OF DEPOSIT. Escrow Agent shall release the Deposit to the
Seller upon the earlier to occur of (i) full settlement of the purchase
and sale of the Partnership Interest pursuant to this Agreement, or (ii)
receipt from Seller of written notice ("Default Notice") that Purchaser
has defaulted under this Agreement beyond expiration of any cure period
expressly permitted under this Agreement, unless Purchaser, within five
(5) days of receipt of written notice of Seller's Default Notice, objects.
Until its actual receipt by the Seller, Seller shall bear no risk for the
loss of all or any part of the Deposit.
b. CASH AT CLOSING. At closing hereunder, Purchaser shall pay in cash,
certified or cashier's check or wire transfer of federal funds to the
Seller the balance of the Purchase Price as adjusted pursuant to the terms
hereof, of which sum the Deposit shall be a part.
c. ASSUMPTION OF MORTGAGE LOAN. Upon payment of the Loan Transfer Fee,
and subject to obtaining the consent of the Lender, Purchaser shall assume
the obligations of Seller under the Mortgage Loan and shall be fully
substituted for Seller thereunder.
4. TITLE.
a. TO PARTNERSHIP INTEREST. At closing hereunder, the Partnership
Interest shall be free and clear of any and all liens, defects,
encumbrances and pledges, subject only to the terms and conditions of this
Agreement and the Partnership Agreement.
b. TO PROJECT. At closing hereunder, the Operating Partnerships' title
to the Project shall be good and marketable and insurable as such in an
amount not less than the sum of (i) the Purchase Price, as adjusted upward
to reflect the partnership interest in Seller owned by Lerner, plus (ii)
the principal amount of the Mortgage Loan, free and clear of any and all
liens, defects, encumbrances, pledges and subleases, easements, covenants,
restrictions or other matters whatsoever, whether recorded or unrecorded,
except for (i) the lien of real estate taxes, water rents and sewer
charges not yet due and payable, (ii) the Leases, and (iii) the Permitted
Encumbrances.
5. CLOSING.
a. TIME AND PLACE. Closing under this Agreement shall be held on the
date which is fifteen (15) days after the Investment Approval Date, or on
such earlier date as Purchaser may designate by at least ten (10) days
prior written notice to Seller. Closing shall be held at the offices of
Arnold & Porter, 1200
<PAGE>
EXHIBIT (C)(10)
GREENBELT RESIDENTIAL LIMITED PARTNERSHIP
February 24, 1995
Dear Springhill Lake Investors Limited Partner:
Over the past several weeks we have spoken to many of you and have also
had the opportunity to meet with some of you. We would like to thank you for
your patience throughout this process. We believe that this process will
unlock the maximum value for you and for us. Between us, we own virtually 100
percent of the equity in the Project.
We have provoked a bidding war and Greenbelt has made the best offer. To
ensure that the best possible offer and structure is obtained for you and for
us, the Partnership must be dissolved. If, as may happen, a third party makes
a significantly better offer, Mr. Lerner may sell his interest, and you and
he will reap the benefit. Thus, we want the Partnership to see what the
market will bring for this Project.
While we understand that some of you may view your investment in
Springhill Lake with some frustration, THIS IS NOT THE TIME TO THROW IN THE
TOWEL AND TENDER YOUR UNITS TO WINTHROP. We now have the opportunity to take
positive action after 10 years of bad returns.
We urge you to read this letter. In it, we try to answer some of the most
frequently asked questions by the cross-section of limited partners to whom
we have spoken.
WE URGE YOU TO SIGN AND SEND US THE GREEN CONSENT CARD IN THE ENCLOSED
RETURN ENVELOPE. The address for the Green Consent Card is:
Proxyco
Wall Street Station
P.O. Box 1006
New York, New York 10269-0224
If you wish to send the Green Consent Card by express mail or Federal
Express, please use the following address:
Georgeson & Co., Inc.
Wall Street Plaza, 29th Floor
88 Pine Street
New York, New York 10005
<PAGE>
2
If you have tendered your unit to Winthrop/Aquarius, we request that you
fill out the enclosed yellow Notice of Withdrawal form and return it as
indicated on that form. If you have any questions, please call 1-800-953-7637
or 1-301-984-1500. If you have already sent in your Green Consent Card, you
do not have to send the Green Consent Card enclosed with this letter.
1. We have asked you essentially to vote for a sale of the property. We
have backed up that request with our offer to buy the project so that each of
you would receive $36,400 per unit. We have also agreed to allow some
reasonable period of time, perhaps 30 to 60 days, for third parties to submit
offers for the property. During that time, a third party could offer a better
price or could offer a tax-free transaction. (A tax-free transaction through
a real estate investment trust or REIT could be worth many thousands of
dollars to each of you and to Mr. Lerner.) If either event occurs, you would
receive the benefit of that better deal. If neither occurs, we are prepared
to settle on our offer as soon as possible, and you each would still get more
than Winthrop has offered. A vote for our proposal ensures that the best
price is sought for the property and this approach obviously benefits you and
us but not Winthrop. That is the reason Winthrop refuses to give you these
options. Rather than help you get the best deal, Winthrop simply wants to buy
your unit for below the minimum price that you have already been offered.
Winthrop has not pursued these or other options because it simply wants to
retain its lucrative fee position. IF YOU HAVE ALREADY WAITED 10 YEARS
WITHOUT A RETURN ON YOUR INVESTMENT, WHY NOT WAIT JUST A FEW MORE MONTHS TO
GET THE BEST DEAL YOU CAN? If you tender your units to Aquarius, Winthrop,
not you, will benefit from any higher offer.
2. We are aware that some limited partners would like the opportunity to
maintain their investment in the Project. Our goal is to allow limited
partners the full range of flexibility if we are the successful bidder for
the Project. We plan to modify our offer to request that investor limited
partners either receive cash or remain as limited partners in the Project at
their election. However, Three Winthrop, as general partner, has broad
discretion under the partnership agreement and, to date, has refused to
assist in developing a more favorable structuring of the transaction for
limited partners. We believe that Three Winthrop has this fiduciary duty. We
also believe, however, that Three Winthrop has a conflict of interest which
is why, to date, it has blocked our efforts to craft such a solution. Once
the partnership is dissolved, Winthrop will have no reason to be
uncooperative.
3. We have been told that certain limited partners have written to
Winthrop to demand that Winthrop provide a method for an independent analysis
of the offers being made, and, if Winthrop fails to do so, those limited
partners intend to file a lawsuit seeking to stop the Aquarius/Winthrop Offer
and alleging a breach of fiduciary duty by Three Winthrop. We are assisting
and cooperating with their efforts. We believe that such an action, if
successful, might stop the Winthrop/Aquarius tender offer in its tracks.
4. While our current proposal to purchase all of the Partnership's assets
would result in cash of at least $36,400 per Unit to you, we have not offered
to purchase your interest on the same basis as Winthrop/Aquarius because we
are precluded from doing so by the partnership agreement. We have requested
Winthrop to initiate a process which, if agreed to by you, would
<PAGE>
3
allow us to make offers for your Units directly. Instead, Winthrop while
professing to be neutral in this process, has suggested we make a new
securities filing to do this. Why? Because, again, Winthrop is seeking to
delay us and to coerce you into tendering your Unit without the benefit of a
competing offer on the same basis. DON'T LET WINTHROP FORCE YOU OUT ON ITS
TERMS --REQUIRE WINTHROP TO UPHOLD ITS FIDUCIARY DUTY AND ALLOW FOR A
COMPETITIVE PROCESS. By tendering to Winthrop, you would be entrenching in
control the same group that has received enormous fees at the expense of
limited partners and would further be empowering them to receive any future
appreciation realized by the Project.
5. Since we made our initial offer, Winthrop has blocked us and has failed
to deal with us in good faith. Among other things, Winthrop has suggested
that our ability to obtain the consent of the lender for an assumption of the
$62 million loan is uncertain when, in fact, if Winthrop simply called the
lender as we have repeatedly requested, we believe there is no reason the
lender would not be willing to consent to an assumption of the loan by us or
by any third party interested in acquiring the Project.
IN SUMMARY, TENDERING YOUR UNIT TO WINTHROP/AQUARIUS IS TANTAMOUNT TO
REWARDING WINTHROP FOR TAKING ADVANTAGE OF ITS CONFLICT OF INTEREST POSITION.
- -----------------------------------------------------------------------------
IMPORTANT
WE URGE YOU NOT TO TENDER ANY UNITS TO WINTHROP IN RESPONSE TO THE
WINTHROP/AQUARIUS OFFER. WE URGE YOU TO SIGN AND RETURN THE GREEN CONSENT
CARD NOW. THERE IS NO NEED TO WAIT. IF YOUR RETURN ENVELOPE IS MISSING, GREEN
CONSENT CARDS SHOULD BE SENT TO PROXYCO, WALL STREET STATION, P.O. BOX 1006,
NEW YORK, NEW YORK 10269-0224. TELL WINTHROP THAT YOU WANT WINTHROP TO SEEK
THE BEST POSSIBLE OFFER FOR THE PROJECT.
- -----------------------------------------------------------------------------
If you have any questions regarding the enclosed information, or would
like to discuss our offer or the Winthrop/Aquarius Offer (or how to withdraw
your tender), please contact either Ted Lerner, Ed Cohen or Bob Tanenbaum at
(301) 984-1500 or, toll free, at 1-800-953-7637.
Very truly yours,
GREENBELT RESIDENTIAL LIMITED
PARTNERSHIP
<PAGE>
SUPPLEMENT TO OFFER TO PURCHASE
LIMITED PARTNERSHIP INTERESTS
IN
SPRINGHILL LAKE INVESTORS
LIMITED PARTNERSHIP
FOR CASH CONSIDERATION AGGREGATING
$36,400 PER UNIT
(INCLUDING, IN CERTAIN CIRCUMSTANCES, THE PROCEEDS OF A NON-RECOURSE
SECURED LOAN FROM THE PURCHASER)
BY
AQUARIUS ACQUISITION, L.P.
- -------------------------------------------------------------------------------
THE OFFER HAS BEEN EXTENDED.
THIS OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE
AT 5:00 P.M., NEW YORK TIME, ON MARCH 17, 1995, UNLESS FURTHER EXTENDED.
- -------------------------------------------------------------------------------
The Purchaser hereby amends its Offer by increasing the Cash Consideration
to $36,400 per Unit and extending the Expiration Date to 5:00 p.m. New York
time on March 17, 1995. As of March 2, 1995, 44 Units have been tendered
pursuant to the Offer. This Offer is made to all Limited Partners. Limited
Partners who validly tender Units prior to the Expiration Date, including
Units tendered prior to the date of this Supplement, will receive the
increased Cash Consideration, upon the terms and subject to the conditions
set forth in the Offer to Purchase dated February 1, 1995, including the
annexes thereto, and this Supplement to the Offer to Purchase (the
"Supplement") and the revised Letter of Transmittal included herewith (as
revised, the "Letter of Transmittal"). Capitalized terms used herein and not
defined herein shall have the meanings ascribed thereto in the Offer to
Purchase.
Those Limited Partners who have already validly tendered their Units
pursuant to the Offer to Purchase need not do anything further. You will
receive the increased Cash Consideration of $36,400 per Unit for each Unit so
tendered. Other Limited Partners wishing to validly tender Units in this
Offer must complete and sign the Letter of Transmittal or a facsimile copy
thereof in accordance with the instructions in the Letter of Transmittal.
Such Letter of Transmittal and a duly executed signature page for the Note
and Security Agreement and any other documents required by the Letter of
Transmittal must be received by the Depository on or prior to the Expiration
Date at the address set forth on the back cover of this Supplement.
By virtue of the fact that the general partners of the Partnership are
controlled by the same person as the Purchaser, the general partners have
certain conflicts of interest. For a more complete discussion of
considerations relevant to the conflict of interest inherent in the
affiliation between the Purchaser and the general partners of the
Partnership, please see "Special Factors--Future Plans," "The Offer--Purpose
and Effects of this Offer" and "The Offer--Interests of Certain Persons and
Certain Transactions" in the Offer to Purchase.
For Limited Partners who hold Units that are not tendered, there is a risk
that, if more than 50.5% of the Units are validly tendered and not withdrawn,
non-tendering Limited Partners may suffer certain adverse tax effects, which
effects may result from actions taken by the Purchaser. See
"Introduction--Certain Tax Considerations" and "The Offer--Certain Federal
and State Income Tax Consequences" of this Supplement to the Offer to
Purchase.
Questions and requests for assistance may be directed to the Information
Agent at the address and telephone numbers set forth on the back cover of
this Supplement.
THIS TRANSACTION HAS NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE FAIRNESS OR
MERITS OF SUCH TRANSACTION NOR UPON THE ACCURACY OR ADEQUACY OF THE
INFORMATION CONTAINED IN THIS DOCUMENT. ANY REPRESENTATION TO THE CONTRARY IS
UNLAWFUL.
The Purchaser 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
this Offer is open and thereby delay acceptance for payment of, and the
payment for, any Units; (ii) to terminate this Offer and not accept for
payment any Units not theretofore accepted for payment or paid for; (iii)
upon the occurrence of any of the conditions specified in Section 11, to
delay the acceptance for payment of, or payment for, any Units not
theretofore accepted for payment or paid for; and (iv) to amend this Offer in
any respect (including, without limitation, by increasing or changing the
terms of the consideration offered, decreasing the percentage of Units being
sought, or both). Notice of any such extension, termination or amendment will
promptly be disseminated to Limited Partners in a manner reasonably designed
to inform Limited Partners of such change in compliance with Rule 14d-4(c)
under the Securities Exchange Act of 1934 (the "Exchange Act"). In the case
of an extension of this Offer, such extension will be followed by a press
release or public announcement which will be issued no later than 9:00 a.m.,
New York time, on the next business day after the scheduled Expiration Date,
in accordance with Rule 14e-1(d) under the Exchange Act.
EACH LIMITED PARTNER IS URGED TO READ CAREFULLY THE ENTIRE OFFER TO
PURCHASE, THIS SUPPLEMENT, THE LETTER OF TRANSMITTAL AND RELATED DOCUMENTS.
March 3, 1995
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
--------
<S> <C>
INTRODUCTION ........................................................... 1
SPECIAL FACTORS ........................................................ 5
Background of this Offer ............................................ 5
Determination of the Cash Consideration ............................. 6
THE OFFER .............................................................. 8
Section 1. Terms of this Offer ................................... 8
Section 6. Certain Federal and State Income Tax Consequences .... 8
Section 8. Certain Information Concerning the Purchaser ......... 12
Section 14. Other Matters ......................................... 12
</TABLE>
<PAGE>
TO THE LIMITED PARTNERS OF
SPRINGHILL LAKE INVESTORS LIMITED PARTNERSHIP
INTRODUCTION
The Purchaser hereby offers to purchase outstanding Units for Cash
Consideration of $36,400 per Unit (pro rated in respect of fractional Units)
(including, in certain circumstances described in the Offer to Purchase, the
proceeds of a non-recourse secured loan from the Purchaser), upon the terms
and subject to the conditions set forth in the Offer to Purchase, this
Supplement and the Letter of Transmittal, as each may be further supplemented
or amended from time to time.
Each of the Purchaser, NACC, WFA, Three Winthrop and Linnaeus-Lexington
adopts the analyses set forth in "Special Factors--Determination of the Cash
Consideration" in the Offer to Purchase and the Supplement and, based
thereon, believes the Offer, including the Cash Consideration to be paid
pursuant to the Offer, is fair to the Limited Partners. The Purchaser, NACC,
WFA, Three Winthrop and Linnaeus-Lexington did not assign any specific weight
to the particular factors discussed therein and each factor was considered as
part of the whole in reaching a conclusion as to the fairness of the Offer.
Because of the conflict of interest inherent in the fact that Three Winthrop
and Linnaeus-Lexington are affiliates of the Purchaser, the Partnership is
making no recommendation and is remaining neutral as to whether Limited
Partners should tender their Units pursuant to this Offer.
ISSUES TO BE CONSIDERED BY LIMITED PARTNERS. The Purchaser believes that
the following are the most important issues that each Limited Partner should
consider in connection with its decision to tender Units in this Offer:
o how much cash Limited Partners can expect to receive from this Offer or
from a liquidation of their investment in the Partnership pursuant to the
Lerner Proposal
o how quickly Limited Partners can expect to receive cash from this Offer
or a liquidation pursuant to the Lerner Proposal
o the contingencies that need to be resolved for Limited Partners to
receive cash from this Offer or a liquidation pursuant to the Lerner Proposal
o whether Limited Partners are being offered the option to retain their
economic investment in the Partnership
o whether Limited Partners are able to make their own investment decision
regarding the sale or retention of their Units, or are forced to accept the
decision favored by the majority.
For the reasons set forth below, the Purchaser believes that, with respect
to each of these issues, this Offer presents a superior alternative to the
Lerner Proposal.
Amount of Cash. This Offer will provide Cash Consideration of $36,400 per
Unit validly tendered and accepted pursuant to the Offer, which is currently
scheduled to expire on March 17, 1995.
The Lerner Proposal may result in Limited Partners receiving less than
$36,400 per Unit. The Lerner Proposal is structured to compel a sale of the
Project to Lerner on his terms. Lerner has retained a right of first refusal
on any offers to purchase the Project, which means that he can always be the
winning bidder by simply matching the highest offer. Such a right generally
discourages third parties from making a bona fide purchase offer, because
they perceive little opportunity for success. Lerner has not indicated a
willingness to waive his right of first refusal in connection with the
possible marketing of the Project to third parties. In addition, Lerner has
reserved the right to lower his offer below $36,400 per Unit if the
Partnership decides to market the Project to third parties and obtains lower
offers. This could occur since Lerner's offer of $36,400 per Unit may be kept
open for only 30 days after he delivers a dissolution notice to the
Partnership and the Purchaser believes it would take more than thirty days to
effectively market the Project, obtain offers from third parties and seek the
approval of a majority in interest of Limited Partners in a consent
solicitation. Finally, Lerner has reserved the right to lower his offer below
$36,400
1
<PAGE>
per Unit if the Lender does not approve his assumption of the Project's
existing mortgage loans. It is unclear whether the Lender would approve such
assumption. Since Lerner has reserved the right to lower his offer below
$36,400 per Unit in each of the above situations, the Lerner Proposal does
not establish any minimum liquidation value for Units.
In addition, the Lerner Proposal and Lerner's right of first refusal make
it difficult and potentially counterproductive to market the Project to third
parties in hopes of generating a value greater than $36,400 per Unit. In
order for liquidation pursuant to the Lerner Proposal to generate more than
$36,400 per Unit, each of the following events must occur: (i) the
Partnership would have to decide to market the Project to third parties; (ii)
the Partnership would have to convince third parties to undertake expensive
due diligence and secure financing commitments despite the fact that Lerner
retains a right of first refusal on any proposed sale of the Project; (iii)
at least one third party would have to make a bona fide purchase offer at a
price higher than that offered by Lerner; (iv) the third party would have to
demonstrate that it had the financial capacity to deliver in excess of $27
million in equity financing if it desired to assume the existing mortgage
loans or in excess of $90 million in total financing if it wanted to prepay
the mortgage loans; (v) the third party and the Partnership would have to
negotiate and agree to a binding purchase and sale contract; (vi) the Lender
would have to grant its approval for the assumption of the existing mortgage
loans by Lerner, if he exercises his right of first refusal, or by the third
party if Lerner waives his right of first refusal and the third party desires
to assume the mortgage loans; and (vii) Limited Partners holding more than
50% of the Units would have to approve the sale of the Project.
Timing. This Offer is currently scheduled to expire on March 17, 1995,
unless otherwise extended, with the Cash Consideration to be sent to
tendering Limited Partners promptly following consummation of the Offer.
The Purchaser believes that the earliest date that any liquidating cash
distribution could be made to Limited Partners pursuant to the Lerner
Proposal, assuming immediate acceptance by the Partnership, would be June
1995, given the need to obtain lender approval and complete the consent
solicitation process with respect to a sale of the Project to Lerner. A sale
to a third party would take a substantially longer period. The Purchaser
believes that it would take several additional months to market the Project,
provide each prospective purchaser adequate opportunity to conduct a due
diligence review and investigation of the Project, negotiate sale
documentation for the Project with a person who is initially unfamiliar with
the Project, permit the person to secure the necessary financing commitments
to purchase the Project and provide Lerner with an opportunity to match the
terms of such sale pursuant to his existing right of first refusal
arrangement.
Contingencies. A sale of the Project to Lerner is subject to two major
contingencies. First, approval of the Lender for the assumption of the
existing mortgage loans is required. Based on the provisions of the existing
mortgage loans relating to assumption requests, the Purchaser does not know
if the Lender will approve an assumption request from Lerner, require a
partial prepayment of the mortgage loans or require a full prepayment of the
mortgage loans. Any prepayment of the mortgage loans would give rise to a
penalty, which, based on interest rates as of January 26, 1995, could be as
large as $5,000,000. Second, approval of Limited Partners holding more than
50% of the Units is required. Currently there is no basis for determining if
a majority of Limited Partners want to liquidate their investment in the
Project on the terms of the Lerner Proposal.
Furthermore, a sale of the Project to a third party would require (i) the
approval of a majority in interest of Limited Partners in a new consent
solicitation, (ii) if such buyer wishes to assume the existing mortgage
loans, the approval of the Lender and (iii) the satisfaction of other
contingencies, including completion of due diligence and negotiation of a
purchase and sale contract, along with any required financing commitments.
This Offer is not subject to obtaining the approval of the Lender or
Limited Partners nor is the Offer subject to any minimum participation by
Limited Partners.
Flexibility. This Offer permits Limited Partners to retain all or a
portion of their investment in the Partnership, without changing their
economic interests. Limited Partners who retain Units would own
2
<PAGE>
Units on a pari passu basis with the Purchaser, and would experience the same
change in value which the Purchaser experiences. The Lerner Proposal does not
offer Limited Partners the option to continue to hold their investment in the
Partnership. Lerner could seek to provide such an option by soliciting and
obtaining consents to an amendment to the Partnership Agreement, which
requires the approval of Limited Partners holding more than 50% of the Units,
and then restructuring his Proposal to be an offer to purchase Units, but to
date he has not done this.
Individual Investment Decision. This Offer permits each Limited Partner to
make its own decision whether to: (i) liquidate its entire investment in the
Partnership; (ii) liquidate a portion of its investment in the Partnership
and retain a portion; or (iii) retain its entire investment in the
Partnership. Under the Lerner Proposal, the decision of Limited Partners
owning more than 50% of the Units determines whether all Limited Partners
liquidate their investment in the Partnership or retain their investment in
the Partnership. Accordingly, Limited Partners who do not agree with the
decision of a majority of the Limited Partners would be forced to accept an
investment decision with which they do not agree.
LERNER'S COMMUNICATIONS. In connection with the Lerner Proposal, Lerner
has sent communications to the Limited Partners which contain certain
self-serving misrepresentations, the impact of which is to distort the issues
relating to each Limited Partner's investment decision. These
misrepresentations include inadequate description of the terms of the Lerner
Proposal, misleading characterizations of the Offer and inaccurate statements
that portray the Purchaser and its affiliates in a negative light. Lerner has
also initiated several lawsuits with Three Winthrop, more information on
which is provided below under "Special Factors--Background of This
Offer--Litigation Between Lerner and Three Winthrop."
The Purchaser believes that the following discussion of statements made by
Lerner in his letters to Limited Partners dated February 13, 1995 (the
"February 13 Letter") and February 24, 1995 (the "February 24 Letter"),
should be helpful to Limited Partners in reaching their decision whether to
tender their Units in this Offer.
Inadequate Description of Lerner Offer. In the February 13 Letter, Lerner
stated that "under the [Lerner Proposal], you will receive not less than
$36,400" and, in the February 24 Letter, Lerner stated that the Lerner
Proposal "would result in cash of at least $36,400 per Unit to you." As
discussed above under "--Amount of Cash," the Lerner Proposal could result in
a liquidating distribution of less than $36,400 per Unit if the Lender does
not approve Lerner's assumption of the existing mortgage loans, or if the
Partnership does not accept Lerner's offer to purchase the Project within 30
days of receiving a dissolution notice and subsequently determines that the
highest third party offer is less than $36,400 per Unit. In fact, the Lerner
Proposal (dated January 19, 1995) states that its offer could be reduced.
In each of the February 13 Letter and the February 24 Letter, Lerner
stated that the Lerner Proposal would give Limited Partners the opportunity
to maximize the return on their investment. As discussed above under
"--Amount of Cash," the Lerner Proposal makes it difficult, and perhaps
counterproductive, for the Partnership to market the Project in hopes of
generating a value greater than $36,400 per Unit. Lerner retains a right of
first refusal on any proposed sale of the Project, which means that he can
always be the winning bidder by simply matching the highest offer. Such a
right generally discourages third parties from making a bona fide purchase
offer, which require expensive due diligence and financing commitments,
because third parties would perceive little opportunity for success. Lerner
has not indicated any willingness to waive his right of first refusal in
connection with any possible marketing of the Project to third parties. Also,
Lerner has reserved the right to lower his offer if the Partnership decides
to market the Project to third parties and obtains lower offers. This could
occur since the Lerner Proposal states that Lerner's offer for $36,400 per
Unit may be kept open for only 30 days after he delivers a dissolution notice
to the Partnership; the Purchaser believes that a thirty day time period is
too short to permit both a proper solicitation of third party offers and a
new consent solicitation to obtain the approval of a majority in interest of
Limited Partners. Finally, Lerner has retained the right to block a sale of
the Project to the general partners or any of their affiliates, even if they
were willing to pay more than Lerner or any third party. Accordingly, the
structure of the Lerner Proposal is designed to compel a sale to Lerner at
the price that he is willing to offer and not to give Limited Partners the
ability to participate in the proceeds from a sale at a higher price.
3
<PAGE>
Misleading Characterizations of this Offer. In the February 13 Letter,
Lerner stated that this Offer "suggests a flexibility that does not exist."
As set forth above under "--Flexibility," this Offer gives flexibility to
each Limited Partner to make its own decision whether to liquidate or retain
its interests in the Partnership and, unlike the Lerner Proposal, does not
impose the will of the majority on the minority.
In the February 13 Letter, Lerner stated that Three Winthrop was using the
Partnership's reserves for the benefit of the Purchaser. In fact, all costs
associated with the Offer will be paid by the Purchaser, and thus will not
reduce the Partnership's reserves or cash distributions to Limited Partners.
In addition, the Purchaser gave Limited Partners credit for all of the
Partnership's reserves in arriving at the price of $36,000 per Unit
originally offered to Limited Partners. In contrast, Lerner understated the
Partnership's reserves in his Consent Solicitation dated January 19, 1995.
In the February 13 Letter, Lerner stated that this Offer would result in
those Limited Partners electing to retain their Units having only limited
access to information about the Partnership and not receiving the reports
currently being received. After consummation of this Offer, remaining Limited
Partners will continue to receive the same tax information, audited financial
statements and annual updates that they are currently receiving.
Negative Portrayal of Aquarius and Three Winthrop. In the February 13
Letter, Lerner stated that he had asked Three Winthrop to seek third party
offers and test the value of the Project in the open market. Three Winthrop
has responded to Lerner in a letter dated February 22, 1995 that Lerner never
made such a request until February 20, 1995, when Three Winthrop received a
letter from Lerner dated February 17, 1995, one week after Lerner sent the
February 13 Letter to Limited Partners. Three Winthrop also wrote to Lerner
that, prior to February 20, Lerner had attempted to convince the Partnership
to accept Lerner's offer without marketing the Project to third parties.
In the February 13 Letter, Lerner stated that Three Winthrop had
deliberately withheld financial information on the Project from Lerner. Three
Winthrop has responded to Lerner in a letter dated February 22, 1995 that
Lerner did not request any information on the Partnership's reserves until
February 20, 1995, when Three Winthrop received a letter from Lerner dated
February 17, 1995. Three Winthrop received Lerner's request one week after
Lerner sent the February 13 Letter to Limited Partners. Three Winthrop has
advised the Purchaser that Lerner has not requested any other financial
information from Three Winthrop in the last twelve months except for a
confirmation of the outstanding principal balance of the existing mortgage
loans, which Lerner could have determined independently based on information
in his possession. Finally, Lerner maintains all financial information on the
Project as property management agent, and Three Winthrop regularly provides
Lerner with access to Partnership financial information through a monthly
report and quarterly filings with the SEC.
In the February 13 Letter, Lerner stated that this Offer will permit
"Three Winthrop and its related parties to increase their already rich fees."
As set forth in the Offer to Purchase, Three Winthrop plans to terminate the
Partnership's property management agreement with the Lerner Corporation
pursuant to which the Lerner Corporation collected approximately $8.6 million
in property management fees over the past ten years, based on 4% of gross
collections. The management agreement with an affiliate of Three Winthrop
will reduce the property management fee to 3% of gross collections and create
a cost savings to the Partnership of approximately $230,000 per year. The
proposed management agreement with Three Winthrop has already been approved
by the Lender.
CERTAIN TAX CONSIDERATIONS. For Limited Partners who hold Units that are
not tendered pursuant to the Offer, there is a risk that, if more than 50.5%
of the Units are validly tendered and not withdrawn, a taxing authority may
assert that a tax termination of the Partnership will have occurred based on
recharacterization of the Loans as sales. While the Purchaser intends to
treat the Loans as loans, there can be no assurance that a contrary assertion
by a taxing authority would not be sustained. The most important effect of a
tax termination of the Partnership should be a lengthening of the periods
over which depreciation deductions are taken for assets held indirectly by
the Partnership, largely from the remaining eight years of 18-year recovery
periods to new 27.5-year recovery periods for residential real property. A
tax termination in 1995 would cause reductions in such deductions by up to
$4,300 per Unit for 1995, approximately $4,200 per Unit for 1996, and an
average of approximately $3,100 per Unit per year for the years 1997 through
2002, but increased depreciation deductions thereafter. See "THE
OFFER--Certain Federal and State Income Tax Consequences."
4
<PAGE>
SPECIAL FACTORS
BACKGROUND OF THIS OFFER
The following information was disclosed in an amendment to the Schedule
14D-9 filed by the Partnership:
Communications between the Purchaser, Three Winthrop and Lerner since
February 1, 1995. On February 13, 1995 representatives of the Purchaser and
Three Winthrop met with representatives of Lerner. The parties discussed the
current status of their respective offers to Limited Partners and possible
different outcomes. The Purchaser and Three Winthrop indicated a willingness
to listen to any suggestions which Lerner may have concerning the Partnership
and the offers made to date by Lerner and the Purchaser, but did not make any
specific proposals. Lerner's representatives indicated that Lerner intended
to continue with the consent solicitation process initiated by Lerner on
January 19, 1995. In addition, Lerner's representatives requested answers to
four specific questions: (i) what expense reimbursements Winthrop Management
intended to collect under its new management contract; (ii) whether Three
Winthrop would immediately seek the approval of the Partnership's mortgage
lender for Lerner's assumption of the existing mortgage loans; (iii) whether
Three Winthrop would permit Lerner to make a proposal to Limited Partners
consisting of an offer to purchase Units with an option to retain all or a
portion of their investment in the Project; and (iv) what was the highest
price that the Purchaser was willing to offer Limited Partners for their
Units. The Purchaser indicated that it was unwilling to answer question (iv).
With respect to the other three questions, Three Winthrop indicated that it
would provide a response the next day.
On February 14, 1995 a representative of Three Winthrop had a phone
conversation with a representative of Lerner. With respect to question (i),
Three Winthrop indicated that it would send a copy of the proposed form of
new management agreement to Lerner. A copy of that form is annexed to the
Partnership's Schedule 14D-9. With respect to question (ii), Three Winthrop
indicated that it would defer making a decision on assisting Lerner in
seeking the approval of the Lender until after reviewing Lerner's revised
proposal, particularly since making an assumption request required the
Partnership to deposit $100,000 with the Lender. With respect to question
(iii), Three Winthrop asked for additional information as to what Lerner
wanted Three Winthrop to do.
On February 20, 1995, Three Winthrop received a letter from Greenbelt
dated February 17, 1995 as a follow-up to the February 13th meeting and the
February 14th phone conversation. Three Winthrop responded to such letter
with a letter dated February 22, 1995. Such letters are attached as exhibits
to the Partnership's Schedule 14D-9.
Litigation between Lerner and Three Winthrop. On February 7, 1995,
Lerner, on his own behalf and on behalf of the Operating Partnerships, and
two Limited Partners, on their behalf and on behalf of the Partnership, filed
a lawsuit in the Circuit Court for Montgomery County, Maryland, alleging that
Three Winthrop breached its fiduciary obligations by taking action to
terminate the Lerner Agreement and to appoint Winthrop Management as the new
managing agent of the Project. Three Winthrop has not yet responded to this
lawsuit. On February 28, 1995, Lerner moved for preliminary injunction
seeking to enjoin Three Winthrop from replacing Lerner as managing agent of
the Project with an affiliate.
On February 14, 1995, the Circuit Court for Montgomery County, Maryland
issued an order ruling in favor of Three Winthrop, as managing general
partner of the Partnership and as general partner of the Operating
Partnerships, in its request to declare the Lerner Agreement terminable by
its terms as of January 31, 1995. On February 22, 1995, Three Winthrop made a
motion to make explicit the consequences of such order.
On February 27, 1995, a Limited Partner filed a lawsuit against Three
Winthrop, NACC and the Purchaser in the United States District Court for the
District of Maryland, on its behalf and derivatively on behalf of the
Partnership, alleging that Three Winthrop is in violation of Rule 13e-3
promulgated under the Securities Exchange Act of 1934 and that Three Winthrop
has breached its fiduciary duty to the
5
<PAGE>
Limited Partners. A hearing has been scheduled for March 7, 1995. On February
27, 1995, Greenbelt made a motion in the United States District Court for the
District of Maryland to intervene as plaintiff in the above action. Three
Winthrop, NACC and the Purchaser have not yet responded to these lawsuits.
On February 28, 1995, Three Winthrop filed an answer to Lerner's complaint
for money damages of $50,000 denying the substance of the allegations.
Inquiries from Third Parties Regarding a Possible Sale of the Project. On
February 14, 1995 a representative of Three Winthrop responded to an inquiry
from a real estate broker who claimed that he had a client interested in
making an offer for the Project. On February 15, 1995 Three Winthrop sent the
broker a letter requesting information on the broker's client, to determine
if the client represented a qualified buyer for the Project. On February 28,
1995, the broker responded by phone call to Three Winthrop that its client
was no longer interested in making an offer.
On February 21, 1995, a representative of Three Winthrop received a phone
call from a third party which claimed that it was interested in making an
offer to purchase the Project. Three Winthrop asked the third party to send a
letter of interest and, to date, Three Winthrop has not yet received such a
letter.
DETERMINATION OF THE CASH CONSIDERATION
Liquidation Analysis. The Purchaser's pro forma liquidation analysis set
forth in the Offer to Purchase estimated that a hypothetical sale of the
Project at a price based on a capitalization of operating cash flow (prior to
debt service) at an assumed rate of 9.75% followed by an orderly liquidation
of the Partnership could result in a cash distribution of $39,640 per Unit.
Although such amount per Unit is greater than the per Unit amount of the
Offer, the Purchaser nevertheless believes that the Offer is fair to the
Limited Partners because such liquidation analysis does not take account of
the negative impact of Lerner's right of first refusal and other factors
which would result in a reduced liquidation distribution to the Limited
Partners in the case of any actual liquidation and sale of the Project. The
Purchaser believes that Lerner's existing right of first refusal acts as an
encumbrance that depresses the value of the Project because prospective
purchasers of the Project will be reluctant to commit significant amounts of
time and money to pursue a possible acquisition of the Project under
circumstances where Lerner has the right simply to match the highest offer
made and acquire the Project. Another factor which the Purchaser believes
could have the effect of lowering the amount of liquidating distributions in
an actual liquidation is that the significant amount of time required to
consummate a sale of the Project to a third party would result in a risk of
fluctuation in the Project's value because of changing market conditions and
other factors.
The Purchaser also believes that any third party offer to purchase the
Project--as is true of the Lerner Proposal--will involve contingencies and
conditions, such as the consent of the Lender to assumption of the Existing
Mortgage, that will raise questions as to the time of receipt, and amount, of
cash that Limited Partners would receive were the Partnership actually to be
liquidated. Finally, a sale of the Project would require the Partnership to
make certain representations and warranties and to provide certain
indemnities, which may require the Partnership to delay, or possibly reduce,
the distribution of cash to Limited Partners in a liquidation. In contrast to
the foregoing, the Offer does not involve any encumbrances such as the Lerner
right of first refusal or any conditions or indemnities relating to the sale
or financing of the Project or of financing debt.
Arthur Andersen Appraisal. The Partnership obtained an appraisal of the
Project in 1992 for the purpose of refinancing the existing first mortgage
loan. This appraisal was performed by Arthur Andersen & Co. and estimated the
value of the Project at $97,000,000 as of August 5, 1992 (the "AA
Appraisal"). The AA Appraisal is attached to Amendment No. 1 to the Tender
Offer Statement on Schedule 14D-1 filed by the Purchaser with the SEC, and
copies of the AA Appraisal are available upon request made to the Information
Agent. The Purchaser believes that the AA Appraisal does not provide a
reasonable estimate of the current fair market value of the Project because,
most significantly, the AA Appraisal assumed that the Project's future
operating cash flow (prior to debt service payments) would be higher than it
has actually turned out to be. By overestimating the Project's projected
operating cash flow, the Purchaser believes that the AA Appraisal
overestimates the amount which prospective purchasers would be willing to pay
for the Project today.
6
<PAGE>
Operating cash flow (prior to debt service payments) represents the net
amount of cash generated by an asset prior to debt service. For real estate
assets, such as the Property, operating cash flow, in combination with the
investment return demanded by prospective purchasers, is utilized by
appraisers to determine the fair market value of the assets.
The AA Appraisal assumed that the Project's operating cash flow for the
twelve month period ending July 1993 would be approximately $9,474,000 and
for the twelve month period ending July 1994 would be approximately
$9,240,000. The Project actually generated operating cash flow for calendar
years 1993 and 1994 of $8,726,000 and $8,404,000 respectively (excluding
asset management and partnership administration fees of $323,000 and
$327,000, respectively, which are not included in the AA Appraisal). The
Project's actual operating cash flow was less than that projected by the AA
Appraisal by approximately $748,000 in 1993 and $836,000 in 1994 principally
because of lower net rental income (apartment revenue net of vacancy,
concessions and collection loss) in both 1993 and 1994, higher operating
expenses in 1993 and higher capital expenditures in 1994. Actual net rental
income was approximately $335,000 lower than AA Appraisal's estimate for 1993
and approximately $784,000 lower than the 1994 estimate.
The difference in operating cash flow of approximately $836,000 in 1994
accounts for a significant portion of the difference between the Project's
value as estimated by the AA Appraisal ($97,000,000 as of August 5, 1992) and
by the Purchaser ($87,890,000 as of January 1, 1995). If $836,000 is
capitalized at 9.75%, which is the rate of capitalization used by the
Purchaser in performing its pro forma liquidation analysis of the Project,
the result is a $8,600,000 lower value for the Project. This represents
approximately 94% of the $9,100,000 difference between the AA Appraisal and
the Purchaser's estimate of the value of the Project.
7
<PAGE>
THE OFFER
SECTION 1. TERMS OF THIS OFFER. Under the terms of this Offer, the
Purchaser will pay for Units validly tendered on or prior to the Expiration
Date and not withdrawn in accordance with Section 4 of the Offer to Purchase.
The Expiration Date has been extended. The term "Expiration Date" shall mean
5:00 p.m., New York time, on March 17, 1995, unless the Purchaser shall have
further extended this Offer and, in such event, the term "Expiration Date"
shall mean the latest time and date on which this Offer, as so extended,
shall expire.
The Purchaser has increased the Cash Consideration to $36,400 per Unit.
Such increased Cash Consideration will be delivered in respect of all Units
accepted pursuant to this Offer, whether or not they were tendered prior to
such increase.
This Supplement and the Letter of Transmittal are being mailed by the
Purchaser to all of the Limited Partners or beneficial owners (in the case of
Individual Retirement Accounts and qualified plans) of Units.
If 50.5% or less of the outstanding Units are validly tendered and not
withdrawn, each tendering Limited Partner will receive, upon consummation of
this Offer, $36,400 per Unit in Cash Consideration for each Unit (or a pro
rata portion thereof for each fractional Unit) so tendered. If more than
50.5% of the outstanding Units are validly tendered and not withdrawn, each
tendering Limited Partner will receive the same amount of Cash Consideration
with respect to each Unit or fractional Unit so tendered, but will receive a
portion of the Cash Consideration in Purchase Proceeds and the balance of the
Cash Consideration as Loan Proceeds.
The portion of the Cash Consideration payable at the consummation of this
Offer to each tendering Limited Partner which will constitute Purchase
Proceeds will be $36,400 multiplied by the quotient of (A) 50.5% divided by
(B) a fraction, the numerator of which is the number of Units validly
tendered and not withdrawn and the denominator of which is the number of
outstanding Units on the date of consummation of this Offer. The balance of
the Cash Consideration payable to each tendering Limited Partner at the
consummation of this Offer will constitute the Loan Proceeds payable to such
tendering Limited Partner.
SECTION 6. CERTAIN FEDERAL AND STATE INCOME TAX CONSEQUENCES. The
following summary is a general discussion of certain federal income tax
consequences of a sale of Units and receipt of a Loan pursuant to this Offer.
This summary is based on the Internal Revenue Code of 1986, as amended (the
"Code"), applicable Treasury regulations thereunder, administrative rulings,
practice and procedures and judicial authority as of the date of this 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, and insurance companies), nor does it discuss any state, local,
foreign or other tax laws (except Maryland income tax on nonresidents). Sales
of Units and/or fractional Units pursuant to this Offer will be taxable
transactions for federal income tax purposes and may also be taxable
transactions under applicable state, local, foreign and other tax laws. EACH
LIMITED PARTNER SHOULD CONSULT ITS TAX ADVISOR AS TO THE PARTICULAR TAX
CONSEQUENCES TO SUCH LIMITED PARTNER OF SELLING UNITS AND/OR FRACTIONAL UNITS
AND RECEIVING A LOAN PURSUANT TO THIS OFFER.
Sales of Units and/or Fractional Units. In general, a taxable Limited
Partner will recognize gain or loss on a sale of Units and/or fractional
Units pursuant to this 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. The amount of a Limited Partner's
adjusted tax basis will vary depending upon such Limited Partner's particular
circumstances. The "amount realized" with respect to a Unit sold will be a
sum equal to the amount of cash received by the Limited Partner for such Unit
pursuant to this Offer plus the amount of Partnership liabilities allocable
to such Unit (as determined under Code Section 752).
8
<PAGE>
In addition to the allocation of the Partnership's taxable income or loss
for 1994, 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 Partnership Agreement
concerning transfers of Units. Such allocation, the allocation for 1994 and
any cash distributed by the Partnership to or for the benefit of such Limited
Partner for such years will affect the Limited Partner's adjusted tax basis
in its Units and, therefore, the amount of such Limited Partner's taxable
gain or loss upon a sale of Units pursuant to this Offer. In the case of a
Limited Partner that sells less than 100% of its interest in the Partnership
pursuant to the Offer, it is unclear whether the allocation of Partnership
income or loss for 1995 will affect the basis of the portion sold or instead
only the basis in the retained portion.
The gain or loss recognized by a Limited Partner on a sale of a Unit sold
pursuant to this Offer generally will be treated as a capital gain or loss.
Such capital gain or loss will be treated as long-term capital gain or loss
if the tendering Limited Partner's holding period for such Unit exceeds one
year. Under current law, long-term capital gains of individuals and other
noncorporate taxpayers are taxed at a maximum marginal federal income tax
rate of 28%, whereas the maximum marginal federal income tax rate for other
income of such persons is 39.6%. Capital losses are deductible only to the
extent of capital gains, except that 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 noncorporate taxpayer can carry forward such losses
indefinitely); in addition, corporations are allowed to carry back excess
capital losses to the three preceding taxable years, provided such carryback
does not increase or produce a net operating loss for any such year.
If any portion of the amount realized by a Limited Partner on a sale of
Units pursuant to this Offer is attributable to "unrealized receivables"
(which term 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. Based on the
results of Partnership operations through December 31, 1994, it is estimated
that the portion of the amount realized attributable to such Section 751
items will be approximately $5,254 per Unit. The actual amount of such
Section 751 items will be identified in a statement provided by the
Partnership to the Limited Partner on or before January 31, 1996. It is
possible that the basis allocation rules of Code Section 751 may result in a
Limited Partner's recognizing ordinary income with respect to such items
while recognizing a larger capital loss with respect to the remainder of the
Units sold, even though such Limited Partner has an overall loss on the sale.
Under Code Section 469, a noncorporate taxpayer or personal service
corporation can deduct passive activity losses in any year only to the extent
of such person's passive activity income for such year, and closely held
corporations may not offset such losses against so-called "portfolio" income.
A loss recognized by a Limited Partner upon a sale of less than 100% of its
Units pursuant to this Offer can be currently deducted (subject to other
applicable limitations) to the extent of such Limited Partner's passive
income from the Partnership for that year or to the extent of any other
passive activity income from that year, and a gain recognized by a Limited
Partner upon such sale can be offset by such Limited Partner's current or
carryover passive activity losses (if any) from the Partnership or from other
sources. If a Limited Partner disposes of 100% of its Units pursuant to this
Offer, such Limited Partner generally will be able to deduct its remaining
passive activity losses (if any) from the Partnership that could not
previously be deducted by such Limited Partner due to the foregoing
limitation.
Based on the estimated results of Partnership operations through December
31, 1994, it is estimated that a Limited Partner who tenders Units that were
acquired by such Limited Partner on February 15, 1985, utilized the deferred
payment method for making capital contributions to the Partnership, and is
subject to federal income tax at the rate of 28% on long-term capital gains
and 39.6% on other income, will recognize income and gain per Unit sold, and
incur federal income tax per Unit sold, as indicated in the following chart.
Separate figures are provided assuming that the Limited Partner has no
"suspended" passive activity losses from the Partnership (i.e., post-1986 net
taxable losses in excess of statutorily provided "phase-in" amounts) and
assuming that the Limited Partner has the maximum amount of "suspended"
passive activity losses from the Partnership. The figures in the chart are
shown on a per Unit basis and are based on the assumption that the Limited
Partner sells 100% of its Units, so that its remaining "suspended" passive
activity losses should be deductible from other income subject to any other
applicable limitations.
9
<PAGE>
<TABLE>
<CAPTION>
TAX
TAX LIABILITY
AMOUNT RATE (BENEFIT)
---------- ------- -----------
<S> <C> <C> <C>
Passive Ordinary Income .................. $ 5,254 39.6% $ 2,081
Net Passive Long Term Capital Gain ...... 43,421 28.0% 12,158
Taxes Due upon Sale Assuming No Passive
Losses .................................. $ 14,239
Deduction of Maximum Potential Passive
Activity Carryforward Losses from the
Partnership ............................. (41,522) 39.6% (16,443)
-----------
Net Taxes Due (Benefit) Assuming Maximum
Passive Activity Carryforward Losses ... $ (2,204)
</TABLE>
A taxable Limited Partner (other than corporations and certain foreign
individuals) who tenders Units may be subject to 31% backup withholding
unless the Limited Partner provides a taxpayer identification number ("TIN")
and certifies that the TIN is correct or properly certifies that he is
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 Letter
of Transmittal. If a Limited Partner who is subject to backup withholding
does not properly complete and sign the Substitute Form W-9, the Purchaser
will withhold 31% from payments to such Limited Partner.
Gain realized by a foreign Limited Partner on a sale of Units pursuant to
this Offer will be subject to federal income tax. Under Section 1445 of the
Code, the transferee of a partnership interest held by a foreign person is
generally required to deduct and withhold a tax equal to 10% of the amount
realized on the disposition. 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 Letter of
Transmittal certifying the Limited Partner's TIN, that such Limited Partner
is not a foreign person, and the Limited Partner's address. 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.
Loans and Retained Portions. If the percentage of Units validly tendered
and not withdrawn exceeds 50.5% of the outstanding Units, only a pro rata
portion of each tendered Unit will be treated by the Purchaser as purchased
pursuant to this Offer. The excess of the Purchaser's payments to each
tendering Limited Partner over the amounts attributable to the purchased
portions of the Units shall be received as the proceeds of nonrecourse Loans
secured by a pledge of the Retained Portion. The Purchaser intends to treat
the Loans as debt instruments for federal income tax purposes. Nevertheless,
a taxing authority may assert that 100% of the tendered Units must be treated
as sold pursuant to this Offer. If such an assertion were to prevail, the
foregoing discussion of the income tax consequences of sales of Units would
be applicable to all Units tendered in their entirety. The remainder of this
discussion of the income tax consequences of the Loans assumes that they will
be respected as loans.
A tendering Limited Partner who recieves a Loan will be allocated pro rata
shares of the Partnership's taxable income or loss for the periods in 1995
before and after the date on which the purchase of Units under this Offer
occurs. It is unclear whether a portion of such allocation for the period
before such date will affect the Limited Partner's basis in the portions of
the Units sold or instead only the basis in the Retained Portion. LIMITED
PARTNERS WHO RECEIVE LOANS WILL BE ALLOCATED PRO RATA SHARES OF THE
PARTNERSHIP'S TAXABLE INCOME OR LOSS AS OWNERS OF THE RETAINED PORTIONS
ALTHOUGH THEY MAY NEVER RECEIVE CASH PAYMENTS RELATED TO ANY SUCH TAXABLE
INCOME. SUCH TAXABLE INCOME MAY NOT BE OFFSET BY DECREASED GAIN ON SALE OF
THE RETAINED PORTIONS OR BY INTEREST DEDUCTIONS IF CASH DISTRIBUTIONS ARE
MADE AND APPLIED TO PAY INTEREST THAT MAY BE NONDEDUCTIBLE.
The extent to which Limited Partners may be entitled to deductions for
interest payable on the Loans is unclear. Personal interest is generally
nondeductible, and there are limitations on the deductibility of
10
<PAGE>
investment interest. Further, the Loans may be treated as contingent payment
instruments. There are no currently effective regulations governing
computation of interest or original issue discount on contingent payment debt
instruments, and the recently proposed regulations provide that they will
apply only to debt instruments issued at least 60 days after adoption of
final regulations. Limited Partners should consult their tax advisors with
respect to the potential deductibility of interest or original issue discount
on the Loans.
If a Loan is treated as indebtedness incurred by a tax-exempt Limited
Partner in acquisition or improvement of property, income from such property
may be taxed to the tax-exempt Limited Partner as unrelated debt-financed
income within the meaning of Code Section 514. Tax-exempt Limited Partners
should consult their tax advisors with respect to the tax consequences of
tendering Units pursuant to this Offer.
A Limited Partner who continues to own a Retained Portion will not be able
to deduct such Limited Partner's "suspended" passive activity losses from the
Partnership until the Retained Portion is transferred to the Purchaser upon
maturity of its Loan or otherwise sold.
A taxable Limited Partner who repays Loans by surrender of its Retained
Portion will recognize gain or loss with respect to such Retained Portion
under the rules discussed above. The unpaid balance (including interest) of
the Loans so repaid would be treated as an amount realized for this purpose.
A taxable Limited Partner who repays a Loan in cash and retains such
Limited Partner's Retained Portion will not recognize gain or loss with
respect to the Retained Portion upon repayment of the Loan.
Certain State Income Tax Consequences. Under Maryland law, nonresident
individuals are taxable in Maryland on that portion of their federal adjusted
gross income that is derived from tangible property, real or personal,
permanently located in Maryland and on income from a business, trade,
profession or occupation carried on in Maryland. Nonresident partners of a
partnership with the above described income must report their distributive or
pro rata share of income from the partnership on a nonresident Maryland
return. The partnership is required to withhold Maryland tax based on 5% of
the total distributive or pro rata shares of its nonresident individual
partners attributable to income from Maryland sources. Any withholding by the
partnership is a credit against the balance due on the individual nonresident
return.
The Lerner Proposal would require the Partnership to withhold tax in the
amount of approximately, $3,040 per Unit for the Limited Partners who are
non-residents of Maryland. Sales of Units pursuant to this Offer will not
give rise to a Maryland income tax withholding requirement by the
Partnership. However, gain from the disposition may be considered "derived
from" Maryland sources for purposes of determining nonresident taxable
income. The Purchaser advises Limited Partners to consult their tax advisors
concerning the tax effects of participation in this Offer.
Certain Tax Consequences of a Tax Termination. If Section 7.2(D) of the
Partnership Agreement were amended to eliminate the prohibition on a transfer
that would cause a tax termination, such a transfer and termination might
occur. It is also possible that a taxing authority might assert that the
Loans must be recharacterized as sales and that the Partnership therefore is
terminated for income tax purposes on the date of the Loans. While the
Purchaser intends to treat the Loans as loans, there can be no assurance that
a contrary assertion by a taxing authority would not be sustained. The most
important effect of a tax termination on non-tendering Limited Partners and
other persons treated as continuing to hold interests in the Partnership
should be a lengthening of the periods of time over which the Partnership
recognizes depreciation deductions for tax purposes, largely from the
remaining eight years of 18-year recovery periods to new 27.5-year recovery
periods for residential real property. A tax termination in 1995 would cause
reductions in such deductions by up to $4,300 per Unit for 1995,
approximately $4,200 per Unit for 1996, and an average of approximately
$3,100 per Unit per year for the years 1997 through 2002, but increased
deductions for approximately 30 years thereafter. During the years 2003
through 2022, the increased deductions would average approximately $1,300 per
Unit per year. A termination of the Partnership for income tax purposes could
have the adverse effect on Limited Partners who continue to own Units after
such termination and whose tax year differs from that of the Partnership of
the inclusion of more than one year of the Partnership's tax items in one tax
return of the Limited Partner.
11
<PAGE>
SECTION 8. CERTAIN INFORMATION CONCERNING THE PURCHASER. WFA holds a 25%
limited partner interest in the Partnership.
SECTION 14. OTHER MATTERS. The Purchaser has filed with the SEC a Tender
Offer Statement on Schedule 14D-1 (including exhibits thereto), pursuant to
Rule 14d-3 under the Exchange Act, and the Purchaser, Three Winthrop,
Linnaeus-Lexington and NACC have filed a Rule 13e-3 Transaction Statement on
Schedule 13E-3 (including exhibits thereto) furnishing certain additional
information with respect to this Offer, and amendments thereto. The Schedules
14D-1 and 13E-3 and any amendments thereto, including exhibits, may be
inspected and copies may be obtained at prescribed rates from the main office
of the SEC at 450 Fifth Street, N.W. Washington, D.C. 20549.
Any questions or requests for assistance or for additional copies of this
Supplement, the Offer to Purchase, the Letter of Transmittal and other tender
offer materials may be directed to the Information Agent at the telephone
number and address below. You may also contact the Information Agent or your
broker for assistance concerning this Offer. To confirm delivery of your
Letter of Transmittal, please contact the Depository.
12
<PAGE>
The Information Agent for this Offer is:
D.F. KING & CO., INC.
77 Water Street
New York, New York 10005
(212) 269-5550
(Call Collect)
or Call Toll-Free (800) 659-5550
The Depository is:
IBJ SCHRODER BANK & TRUST COMPANY
1 State Street
New York, New York 10004
(212) 858-2103
March 3, 1995
<PAGE>
THE OFFER TO PURCHASE DATED FEBRUARY 1, 1995 (THE "OFFER TO PURCHASE") OF
AQUARIUS ACQUISITION, L.P., A DELAWARE LIMITED PARTNERSHIP (THE "PURCHASER"),
HAS BEEN AMENDED AND SUPPLEMENTED BY THE SUPPLEMENT TO THE OFFER TO PURCHASE
DATED MARCH 3, 1995 AND THE PURCHASER IS NOW OFFERING TO PURCHASE UNITS OF
LIMITED PARTNERSHIP INTEREST IN SPRINGHILL LAKE INVESTORS LIMITED PARTNERSHIP
FOR CASH CONSIDERATION (AS DEFINED IN THE OFFER TO PURCHASE) OF $36,400 PER
UNIT. TENDERING LIMITED PARTNERS MAY ALSO USE THE BLUE LETTER OF TRANSMITTAL
THAT WAS MAILED TO LIMITED PARTNERS WITH THE OFFER TO PURCHASE. LIMITED
PARTNERS USING THE ORIGINAL BLUE LETTER OF TRANSMITTAL WILL NEVERTHELESS
RECEIVE THE INCREASED CASH CONSIDERATION FOR EACH VALIDLY TENDERED UNIT,
SUBJECT TO THE TERMS AND CONDITIONS OF THE OFFER (AS HEREINAFTER DEFINED).
LETTER OF TRANSMITTAL
FOR LIMITED PARTNERSHIP INTERESTS
IN
SPRINGHILL LAKE INVESTORS
LIMITED PARTNERSHIP
TENDERED PURSUANT TO OFFER TO PURCHASE DATED FEBRUARY 1, 1995
AND SUPPLEMENT TO THE OFFER TO PURCHASE DATED MARCH 3, 1995
- -------------------------------------------------------------------------------
THE OFFER HAS BEEN EXTENDED.
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE
AT 5:00 P.M., NEW YORK TIME ON
FRIDAY, MARCH 17, 1995, UNLESS EXTENDED.
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The Depository for the Offer is:
IBJ SCHRODER BANK & TRUST COMPANY
Facsimile:
(212) 858-2611
Confirm by telephone:
(212) 858-2103
By Mail: By Hand or Overnight Delivery:
P.O. Box 84 1 State Street
Bowling Green Station New York, New York 10004
New York, New York 10274-0084 Attn: Securities Processing
Attn: Reorganization Operations Window SC-1
Department
----------------
DELIVERY OF THIS LETTER OF TRANSMITTAL, NOTE AND SECURITY AGREEMENT
SIGNATURE PAGES OR ANY OTHER REQUIRED DOCUMENTS TO AN ADDRESS OTHER THAN THE
ONE SET FORTH ABOVE OR TRANSMISSION OF INSTRUCTIONS VIA FACSIMILE OTHER THAN
AS SET FORTH ABOVE DOES NOT CONSTITUTE VALID DELIVERY.
This Letter of Transmittal is to be completed by Limited Partners of
Springhill Lake Investors Limited Partnership, a Maryland limited partnership
(the "Partnership"), pursuant to the procedures set forth in the Offer to
Purchase (as defined below).
PLEASE CAREFULLY READ THE ACCOMPANYING INSTRUCTIONS.
<PAGE>
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DESCRIPTION OF UNITS TENDERED
The number of Units owned by the undersigned is set forth on the label
above. Please indicate below the percentage of such Units you wish to tender
in the Offer.
25%_____ 50%_____ 75%_____ 100%_____ Other _____
If no other indication is made above, all of the Units owned by the
undersigned will be deemed to be tendered.
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Ladies and Gentlemen:
The undersigned hereby tenders to Aquarius Acquisition, L.P., a Delaware
limited partnership (the "Purchaser"), the percentage of the Units (as
defined below) set forth above in return for cash consideration per Unit of
$36,400 in cash (including, in certain circumstances as described below, the
proceeds of a non-recourse secured loan (each, a "Loan") by the Purchaser),
upon the terms and subject to the conditions set forth in the Offer to
Purchase dated February 1, 1995 (including the annexes thereto, the "Offer to
Purchase"), and the Supplement to the Offer to Purchase dated March 3, 1995,
receipt of which is hereby acknowledged, and this revised Letter of
Transmittal (which together constitute the "Offer"). As used in this Letter
of Transmittal, "Unit" and "Units" have the same meaning as is ascribed to
such terms in the Partnership Agreement of Springhill Lake Investors Limited
Partnership (the "Partnership") as in effect on the date hereof and includes
any fractional Units.
The undersigned agrees that (a) if 50.5% or less of the outstanding Units
are validly tendered and not withdrawn, the undersigned will receive, upon
consummation of the Offer, purchase proceeds computed at the rate of $36,400
for each Unit so tendered and not withdrawn by the undersigned, (to be pro
rated in respect of tenders of fractional Units) and (b) if more than 50.5%
of the outstanding Units are validly tendered and not withdrawn, the
undersigned will receive the same amount of cash with respect to the amount
of Units so tendered and not withdrawn, but will receive part of such cash in
purchase proceeds and the rest as proceeds of a Loan, all as described in the
Offer to Purchase.
Subject to and effective upon acceptance for payment of any Units tendered
hereby in accordance with the terms of the Offer, the undersigned hereby
sells, assigns and transfers to, or upon the order of, the Purchaser all
right, title and interest in and to such Units purchased and requests,
authorizes and directs Three Winthrop to substitute the Purchaser as a
limited partner of the Partnership in place of the undersigned with respect
to such Units. The undersigned hereby irrevocably constitutes and appoints
the Purchaser as the true and lawful agent and attorney-in-fact of the
undersigned with respect to such Units, with full power of substitution (such
power of attorney being deemed to be an irrevocable power coupled with an
interest) to deliver such Units and transfer ownership thereof on the
Partnership books maintained by Three Winthrop, together with all
accompanying evidences of transfer and authenticity, to or upon the order of
the Purchaser and upon receipt by the Depository, as the undersigned's agent,
of the purchase price in respect of such Units, to receive all benefits and
otherwise exercise all rights of beneficial ownership of such Units, all in
accordance with the terms of the Offer. Upon the purchase of such Units
pursuant to the Offer, all prior proxies and consents given by the
undersigned with respect thereto will be revoked and no subsequent proxies or
consents may be given (and if given will not be deemed effective).
By validly tendering Units hereby (including the execution of the
signature page to the Note and Security Agreement; the yellow page included
herewith), the undersigned agrees to receive the proceeds of the Loan
described in the Offer to Purchase if more than 50.5% of the outstanding
Units are validly tendered prior to the Expiration Date and not properly
withdrawn and the Offer is consummated. The undersigned agrees to be bound by
the terms of any such Loan, including the terms of repayment and the pledge
of the Units tendered hereby and not purchased (the "Retained Portion") to
secure repayment of the Loan. The complete terms of the Note and Security
Agreement are set forth as Annex III to the Offer to Purchase. The
undersigned directs the Partnership to deliver any and all distributions
payable on the
<PAGE>
Retained Portion to the Purchaser for credit against amounts outstanding in
respect of the Loan and the Purchaser may, in the name and on behalf of the
undersigned, execute and deliver to the Partnership a written confirmation of
such direction.
In addition, by executing a Letter of Transmittal, the undersigned
appoints the designees of the Purchaser as its attorneys-in-fact (such
appointment being coupled with an interest and irrevocable) to execute and
cause to be filed or recorded any and all documents on behalf of the
undersigned, and to take any and all other actions reasonably deemed
necessary by the Purchaser to perfect or continue the perfection of the
security interest in the Retained Portion that secures any Loan of the
undersigned.
The undersigned hereby represents and warrants that the undersigned owns,
and has full power and authority to validly tender, sell, assign and
transfer, the Units tendered hereby, and that when any such Units or any
portion thereof are accepted for payment of purchase proceeds 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 or any portion thereof will not be subject
to any adverse claim. The undersigned represents and warrants that any Units
not purchased but pledged to secure the Loan in accordance with the terms of
the Offer will, when so pledged, be free and clear of all liens,
restrictions, charges, encumbrances, conditional sales agreements or other
obligations relating to the sale or transfer thereof, and such Retained
Portion will not be subject to any adverse claim, other than the pledge to
secure the Loan.
The undersigned further represents and warrants that, unless the
Substitute Form W-8 (Box C) is completed, the undersigned is a "United States
Person," as defined in Section 7701(a)(30) of the Internal Revenue Code of
1986, as amended. Upon request, the undersigned will execute and deliver any
additional documents deemed by the Depository or the Purchaser to be
necessary or desirable to complete the assignment, transfer, purchase or
pledge of the Units tendered hereby.
The undersigned understands that a valid tender of Units to the Purchaser
pursuant to the procedures described in the Offer to Purchase and in the
Instructions hereto and the acceptance of all or any portion thereof will
constitute a binding agreement between the undersigned and the Purchaser upon
the terms and subject to the conditions of the Offer.
The undersigned recognizes that under certain circumstances set forth in
the Offer to Purchase, the Purchaser may not accept for payment any Units
tendered hereby. In such event, the undersigned understands that this Letter
of Transmittal will be of no force or effect.
All authority herein conferred or agreed to be conferred shall survive the
death or incapacity of the undersigned and any obligations of the undersigned
shall be binding upon the heirs, personal representatives, administrators,
executors, successors, assigns and trustees in bankruptcy and other legal
representatives of the undersigned. Except as stated in the Offer to
Purchase, this tender is irrevocable.
<PAGE>
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SIGN HERE TO TENDER
Certification --Under penalties of perjury, the undersigned hereby certifies
the following:
(1) The TIN shown in Part 1 of the Substitute Form W-9 above is the correct
TIN of the person who is submitting this Letter of Transmittal (and who is
required by law to provide such TIN), or such person is waiting for a TIN to
be issued and such person either (a) has mailed or delivered an application
to receive a TIN to the appropriate IRS Center or Social Security
Administration Office or (b) intends to mail or deliver an application in the
near future (it being understood that if such person does not provide a TIN
within sixty (60) days, 31% of all reportable payments made to such person
thereafter will be withheld until such person provides a number), and
(2) The person who is submitting this Letter of Transmittal and who is
required by law to provide such TIN is not subject to backup withholding
either because such person has not been notified by the IRS that such person
is subject to backup withholding as a result of a failure to report all
interest or dividends or because the IRS has notified such person that he or
she is no longer subject to backup withholding.
If the undersigned is unable to certify that such person is not subject to
backup withholding, such person should so indicate by striking through
certification (2) above.
(3) If the FIRPTA Affidavit or the Substitute Form W-8 have been completed,
the information provided by the undersigned therein is true and accurate.
SIGNATURE(S) OF LIMITED PARTNER(S).
All registered Limited Partners must sign exactly as name(s) appear(s) on the
register of the Partnership (see label above).
(Signature) ..................................
(Signature) ............. .................. Date .................. , 1995
If signing as a trustee, executor, administrator, guardian,
attorney-in-fact, officer of a corporation or other person acting in a
fiduciary or representative capacity, please provide the following
information and see Instructions 1 and 3.
Name(s) and Capacity: ..................................................
(Please Print)
Address:................................................................
City, State: .................. Zip Code: ............................
Area Code and Telephone No.: ...........................................
SIGNATURE GUARANTEE
(see Instruction 1)
........................................................................
Name of Eligible Institution
........................................................................
Address and Telephone No. of Eligible Institution
Signature...................Name.....................Title...............
IF YOU DO NOT WISH TO TENDER, BUT WISH TO PROVIDE THE PURCHASER WITH YOUR
NAME AND ADDRESS FOR PURPOSES OF FUTURE COMMUNICATIONS, PLEASE COMPLETE THE
FOLLOWING INFORMATION AND RETURN IT TO THE DEPOSITORY.
Name(s) and Capacity:....................................................
(Please Print)
Address:.................................................................
City, State: ............... Zip Code: ................................
Area Code and Telephone No.: ...........................................
<PAGE>
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS OF THE OFFER
1. GUARANTEE OF SIGNATURES. No signature guarantee on this Letter of
Transmittal is required if this Letter of Transmittal is signed by the
registered Limited Partner(s). In all other cases, all signatures on this
Letter of Transmittal and any other documents required hereby must be
guaranteed by a member of a registered national securities exchange or of the
National Association of Securities Dealers, Inc. or by a commercial bank or
trust company having an office or correspondent in the United States
(collectively, called the "Eligible Institutions"). See Instruction 3.
2. DELIVERY OF LETTER OF TRANSMITTAL AND OTHER DOCUMENTS. For Units to be
validly tendered pursuant to the Offer, a properly completed and duly
executed Letter of Transmittal (or facsimile thereof), and any required
signature guarantees, the signature page to the Note and Security Agreement
(the yellow page included herewith) and any other documents required by this
Letter of Transmittal, must be received by the Depository prior to the
Expiration Date (as defined in the Offer to Purchase) at its address set
forth herein. A return self-addressed postage prepaid envelope is enclosed
for your convenience.
The method of delivery of all documents is at the election and risk of the
tendering Limited Partner. It is suggested that an overnight courier service
be used. However, a Limited Partner may use the postage-paid envelope
provided.
No alternative, conditional or contingent tenders will be accepted. All
tendering Limited Partners, by execution of this Letter of Transmittal (or
facsimile thereof), waive any right to receive any notice of the acceptance
of their tender.
3. SIGNATURES ON LETTER OF TRANSMITTAL AND SIGNATURE PAGE TO NOTE AND
SECURITY AGREEMENT. This Letter of Transmittal and the signature page to the
Note and Security Agreement (the yellow page included herewith) must be
signed by the Limited Partner(s) and the signature(s) must correspond exactly
with the name(s) as they appear on the register of the Partnership (which
name(s) corresponds to the label on the front of this Letter of Transmittal)
without alteration, enlargement or any change whatsoever. If any tendered
Units are registered in the names of two or more joint administrators,
guardians, attorneys-in-fact, officers of corporations, or others acting in a
fiduciary or representative capacity, such persons should so indicate when
signing and must submit, along with this Letter of Transmittal, proper
evidence satisfactory to the Depository of their authority to so act.
4. TRANSFER TAXES. The Purchaser will pay or cause to be paid all transfer
taxes, if any, payable on the transfer to it of Units accepted for payment
pursuant to the Offer.
5. PARTIAL TENDERS. A Limited Partner may tender all Units owned by it, or
any percentage thereof. If fewer than all of the Units owned by a Limited
Partner are to be tendered, the Limited Partner must indicate the percentage
of Units owned by such Limited Partner which such Limited Partner is
tendering by completing the chart on the front of this Letter of Transmittal
entitled "Description of Units Tendered." The remainder of the Units not
tendered will continue to be owned by the person(s) signing this Letter of
Transmittal. All Units owned by the Limited Partner signing this Letter of
Transmittal will be deemed to have been tendered unless otherwise indicated.
6. SUBSTITUTE FORM W-9. In order to avoid 31% federal income tax backup
withholding on the payment of the purchase price pursuant to the Offer, each
tendering Limited Partner should verify to the Depository its correct TIN or
Social Security number (Box A). Failure to provide the information on the
form may subject the Limited Partner to 31% federal income tax withholding on
the payments made to the Limited Partner or other payee with respect to Units
tendered.
7. FIRPTA. To avoid special withholding requirements applicable to certain
foreign persons, the FIRPTA Affidavit (Box B) must be completed.
8. SUBSTITUTE FORM W-8. Exempt foreign persons not subject to tax backup
withholding should complete the Substitute Form W-8 (Box C).
<PAGE>
9. DELIVERY OF PAYMENTS. All payments to be made in respect of tendered
Units will be made to the registered holder at the address specified on the
label on the front of this Letter of Transmittal.
Failure to provide the information on these forms may subject the Limited
Partner to federal income tax withholding on payments made to the Limited
Partners or other payee with respect to Units tendered.
IMPORTANT: IN ORDER VALIDLY TO TENDER UNITS IN THE OFFER, THIS LETTER OF
TRANSMITTAL (OR FACSIMILE THEREOF) AND A DULY EXECUTED SIGNATURE PAGE TO THE
NOTE AND SECURITY AGREEMENT MUST BE RECEIVED BY IBJ SCHRODER BANK & TRUST
COMPANY, THE DEPOSITORY, PRIOR TO 5:00 P.M., NEW YORK TIME ON MARCH 17, 1995,
UNLESS THE OFFER IS EXTENDED. IF YOU HAVE ANY QUESTIONS OR NEED ASSISTANCE
COMPLETING THIS LETTER OF TRANSMITTAL, PLEASE CALL D.F. KING & CO., INC., THE
INFORMATION AGENT, AT (212) 269-5550 OR AT (800) 659-5550.
<PAGE>
IMPORTANT TAX INFORMATION
Under federal income tax law, a Limited Partner whose tendered Units or
any portion thereof is accepted for payment is required to verify to the
Depository such Limited Partner's correct Taxpayer Identification Number
("TIN") (Box A). If the tendering Limited Partner has not been issued a TIN
and has applied for a number or intends to apply for a number in the near
future the tendering Limited Partner should so certify. If the Depository is
not provided with the correct TIN, the tendering Limited Partner may be
subject to a $50 penalty imposed by the Internal Revenue Service ("IRS"). In
addition, payments that are made to such Limited Partner with respect to
Units purchased pursuant to the Offer may be subject to backup withholding.
See Instruction 6 and the enclosed Guidelines for Certification of Taxpayer
Identification Number on Substitute Form W-9. Certain foreign Limited
Partners may be subject to special withholding requirements. A Limited
Partner must complete the FIRPTA Affidavit (Box B) to avoid such
withholdings. See Instruction 7. Certain Limited Partners (including, among
others, all corporations and certain foreign individuals) are not subject to
these backup withholding and reporting requirements. To advise the Purchaser
of such status a Limited Partner who is an "exempt foreign person" must
complete the Substitute Form W-8 (Box C). See Instruction 8.
If backup withholding applies, the Depository is required to withhold 31%
of any payment made to the tendering Limited Partner. Backup withholding is
not an additional tax. If withholding results in an overpayment of taxes, a
refund may be obtained.
PURPOSE OF SUBSTITUTE FORM W-9
To prevent backup federal income tax withholding with respect to payment
of the purchase price for Units purchased pursuant to the Offer, a tendering
Limited Partner must verify to the Depository its correct TIN. If the Units
are held in more than one name or are not held 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. Failure to provide the information on the form may
subject the Limited Partner to 31% federal income tax withholding on the
payments made to the Limited Partner or other payee with respect to Units
tendered in the Offer.
<PAGE>
<TABLE>
<CAPTION>
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BOX A
- -------------------------------------------------------------------------------------------------------------
<S> <C>
SUBSTITUTE Please provide the TIN of the person submitting this Letter of Transmittal on the line
FORM W-9 below or, if such person is awaiting TIN, check the box. Social Security Number or
TAXPAYER Employer Identification Number
IDENTIFICATION ------------------------------------------------------------------------------------------
NUMBER Awaiting TIN[]
-----------------------------------------------------------------------------------------
</TABLE>
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BOX B
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(ATTACH ADDITIONAL COPIES FOR JOINT LIMITED PARTNERS)
FIRPTA AFFIDAVIT
(SEE INSTRUCTION 7)
Under Section 1445(e)(5) of the Internal Revenue Code and Treas. Reg.
1.1445-11T(d), a transferee must withhold tax equal to 10% of the amount
realized with respect to certain transfers of an interest in a partnership in
which 50 percent or more of the value of the gross assets consists of U.S.
real property interest and 90 percent or more of the value of the gross
assets consist of U.S. real property interests plus cash or cash equivalents,
if the holder of the partnership interest is a foreign person. To inform the
Purchaser that no withholding is required with respect to the Units tendered
in the Offer, the Limited Partner hereby certifies the following under
penalties of perjury:
(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 U.S. social security number (for individuals) or
employer identification number (for non-individuals) is ;
(3) The Limited Partner's home address (for individuals), or office address
and (if applicable) place of incorporation (for non-individuals) is
- --------------------------------------------------------------------------.
The Limited Partner understands that this certification may be disclosed to
the IRS by the Purchaser and that any false statements contained herein could
be punished by fine, imprisonment, or both.
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BOX C
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(ATTACH ADDITIONAL COPIES FOR JOINT LIMITED PARTNERS)
SUBSTITUTE FORM W-8
(SEE INSTRUCTION 8)
By checking this box [ ], the Limited Partner certifies that it is an
"exempt foreign person" for purposes of the backup withholding rules under
the U.S. federal income tax laws, because the Limited Partner:
(1) is a nonresident alien individual or a foreign corporation,
partnership, estate or trust;
(2) if an individual, has not been and plans not to be present in the U.S.
for a total of 183 days or more during the calendar year; and
(3) neither engages, nor plans to engage, in a U.S. trade or business that
has effectively connected gains from transactions with a broker or barter
exchange.
<PAGE>
The Depository for the Offer is:
IBJ SCHRODER BANK & TRUST COMPANY
Facsimile:
(212) 858-2611
Confirm by telephone:
(212) 858-2103
By Mail: By Hand or Overnight Delivery:
P.O. Box 84 1 State Street
Bowling Green Station New York, New York 10004
New York, New York 10274-0084 Attn: Securities Processing
Attn: Reorganization Operations Window SC-1
Department
The Information Agent for this Offer is:
D.F. KING & CO., INC.
77 Water Street
New York, New York 10005
(212) 269-5550
(Call Collect)
or Call Toll-Free (800) 659-5550
<PAGE>
AQUARIUS ACQUISITION, L.P.
C/O NOMURA ASSET CAPITAL CORPORATION
TWO WORLD FINANCIAL CENTER
NEW YORK, NEW YORK 10281
March 3, 1995
To: The Limited Partners of Springhill
Lake Investors Limited Partnership
(the "Partnership")
Re: Supplement to Offer to Purchase
Units of Springhill Lake Investors
Limited Partnership
Dear Limited Partner:
On February 1, 1995 Aquarius Acquisition, L.P. ("Aquarius") made an offer
to purchase (the "Aquarius Offer" or the "Offer") outstanding limited
partnership interests ("Units") in the Partnership. The purpose of this
letter and the accompanying Supplement to the Offer to Purchase is to inform
Limited Partners that:
o Aquarius has increased the per Unit cash consideration being offered to
Limited Partners from $36,000 to $36,400 and extended the expiration date of
the Offer to 5:00 p.m. on FRIDAY, MARCH 17, 1995;
o Aquarius believes its Offer is MORE ATTRACTIVE to Limited Partners than
the proposal made by an affiliate of Theodore N. Lerner (the "Lerner
Proposal"); and
o Lerner is making SELF-SERVING MISREPRESENTATIONS in his letters to
Limited Partners, the impact of which is to distort the issues relating to
each Limited Partner's investment decision.
THE AQUARIUS OFFER PROVIDES A CERTAIN
AND IMMEDIATE CASH DISTRIBUTION;
THE LERNER PROPOSAL DOES NOT
For those Limited Partners interested in liquidating their investment in
the Partnership, the Aquarius Offer provides a certain and immediate cash
distribution. ALL LIMITED PARTNERS WHO CHOOSE TO TENDER THEIR UNITS PURSUANT
TO THE OFFER WILL RECEIVE $36,400 PER UNIT PROMPTLY AFTER THE CONSUMMATION OF
THE OFFER (CURRENTLY SCHEDULED TO BE MARCH 17, 1995).
In contrast to the Aquarius Offer, the Lerner Proposal has the following
shortcomings:
o It will not provide Limited Partners with a liquidating cash
distribution for at least three months, even if Lerner's offer to purchase
Springhill Lake Apartments (the "Project") is immediately accepted, and any
liquidating distribution will be delayed for at least several additional
months if the Project is marketed to third parties;
o Under various circumstances, the Lerner Proposal may result in Limited
Partners receiving LESS than $36,400 per Unit; and
<PAGE>
o The Lerner Proposal and Lerners' right of first refusal make it
difficult and potentially counter-productive to market the Project to third
parties.
THE LERNER PROPOSAL IS STRUCTURED TO COMPEL A SALE OF THE PROJECT TO
LERNER ON HIS TERMS AND DOES NOT SET A MINIMUM PURCHASE PRICE. Lerner has
retained a right of first refusal on any offers to purchase the Project,
which means that he can always be the winning bidder by simply matching the
highest offer. However, such a right generally discourages third parties from
making a bona fide purchase offer because they perceive little opportunity
for success. Lerner has not indicated any willingness to waive his right of
first refusal in connection with the possible marketing of the Project to
third parties. In addition, Lerner has reserved the right to lower his offer
below $36,400 per Unit if the Partnership decides to market the Project to
third parties and obtains lower offers. This could occur since Lerner's offer
of $36,400 per Unit may, by its terms, be kept open for only 30 days after he
delivers a dissolution notice to the Partnership. Aquarius believes that it
would take more than thirty days to market the Project, obtain offers from
third parties and solicit the approval of the Limited Partners. Lerner has
not indicated a willingness to keep his offer open long enough to allow this
process to occur. Finally, Lerner has reserved the right to lower his offer
below $36,400 per Unit if the lender does not approve his assumption of the
Project's existing mortgage loans. It is unclear whether the lender would
approve such an assumption.
THE AQUARIUS OFFER PERMITS LIMITED
PARTNERS TO RETAIN THEIR INVESTMENT;
THE LERNER PROPOSAL DOES NOT
For those Limited Partners interested in retaining all or a portion of
their investment in the Partnership, the Aquarius Offer enables them to
continue to hold their Units without changing their economic interests. The
terms of the Aquarius Offer allow each Limited Partner to make its own
investment decision whether to liquidate or retain his interest in the
Partnership and, unlike the Lerner Proposal, does not impose the will of the
majority on the minority. LIMITED PARTNERS WHO RETAIN UNITS WOULD OWN THOSE
UNITS ON A PARI PASSU BASIS WITH AQUARIUS, AND WOULD EXPERIENCE THE SAME
CHANGES IN VALUE WHICH AQUARIUS EXPERIENCES. In contrast, the Lerner Proposal
does not provide Limited Partners this option. Lerner could seek to offer
this option by soliciting consents from Limited Partners holding more than
50% of the Units, but to date he has not done this.
LERNER'S COMMUNICATIONS TO LIMITED PARTNERS HAVE
DISTORTED THE ISSUES
Recent communications from Lerner to the Limited Partners have contained a
number of self-serving misrepresentations, the impact of which has been to
distort the issues relating to each Limited Partner's investment decision.
THESE MISREPRESENTATIONS INCLUDE INADEQUATE DESCRIPTION OF THE TERMS OF THE
LERNER PROPOSAL, MISLEADING CHARACTERIZATIONS OF THE AQUARIUS OFFER AND
INACCURATE STATEMENTS THAT PORTRAY AQUARIUS AND ITS AFFILIATES IN A NEGATIVE
LIGHT. For example, Lerner stated in his letter dated February 13, 1995 that:
o "Under [the Lerner Proposal], you will receive not less than $36,400."
As described above, the Lerner Proposal does not set a minimum payment to
<PAGE>
Limited Partners. Contrary to Lerner's assertions, the Lerner Proposal is
designed to compel a sale to Lerner at the price he is willing to offer and
not to give Limited Partners the ability to participate in the proceeds of a
sale to a third party at a higher price.
o "[Lerner] asked Winthrop to seek other third party offers and test the
value of the Project in the open market". Lerner never made such a request
until February 20, 1995, one week after Lerner sent his February 13, 1995
letter to Limited Partners. Also, as described above, Lerner has retained a
right of first refusal on any offers to purchase the Project, making the
marketing of the Project to third parties difficult at best.
The misrepresentations contained in Lerner's February 13th letter, as well as
his February 24th letter, are discussed in detail in the Introduction to the
enclosed Supplement to the Offer to Purchase, which you are encouraged to
read.
In addition, Lerner has instigated several lawsuits with Three Winthrop
Properties, Inc., the managing general partner of the Partnership ("Three
Winthrop"). The FIRST LAWSUIT, involving the date upon which Three Winthrop
can terminate the Partnership's management contract with the Lerner
Corporation, WAS DECIDED IN FAVOR OF THREE WINTHROP on February 14, 1995 by
the Maryland State Court in partial summary judgement. In the SECOND LAWSUIT,
filed on December 27, 1994, Lerner is contesting the cash distribution policy
that the Partnership consistently applied from 1987 through 1992. Such policy
was in place since 1987 with the complete knowledge of Lerner and Lerner
first initiated this lawsuit in December, 1994. In the THIRD LAWSUIT, filed
on February 7, 1995, Lerner is challenging the hiring by Three Winthrop of an
affiliate, Winthrop Management, to replace the Lerner Corporation as property
management agent. Lerner is making such claim despite the fact that Winthrop
Management is charging a lower management fee than Lerner did and that the
lender has approved Winthrop Management as property manager. (The Lerner
Corporation served as management agent for the last 10 years and received
approximately $8.6 MILLION in fees for such services.) In the FOURTH LAWSUIT,
filed on February 27, 1995, Lerner has sought to intervene in a lawsuit
brought by a Limited Partner alleging, among other things, that Three
Winthrop has violated securities laws and breached its fiduciary duty to
Limited Partners. Aquarius believes that the second, third and fourth
lawsuits will also be decided in favor of Three Winthrop.
ISSUES WHICH AQUARIUS BELIEVES ARE CRUCIAL TO EACH
LIMITED PARTNER'S INVESTMENT DECISION
Aquarius believes that the following are crucial issues that each Limited
Partner should consider in connection with its decision to tender Units into
the Aquarius Offer:
(i) how much cash Limited Partners can expect to receive from the Aquarius
Offer or from a liquidation of their investment in the Partnership
pursuant to the Lerner Proposal;
(ii) how quickly Limited Partners can expect to receive cash from the
Aquarius Offer or a liquidation pursuant to the Lerner Proposal;
(iii) the contingencies that need to be resolved for Limited Partners to
receive cash from the Aquarius Offer or a liquidation pursuant to the
Lerner Proposal; and
<PAGE>
(iv) whether Limited Partners are being offered the option to retain any
portion of their investment in the Project.
WITH RESPECT TO EACH OF THESE ISSUES, AQUARIUS BELIEVES THAT ITS OFFER
PRESENTS A SUPERIOR ALTERNATIVE TO THE LERNER PROPOSAL.
HOW TO TENDER UNITS TO AQUARIUS
Those Limited Partners who have already validly tendered their Units
pursuant to the original Offer dated February 1, 1995 need NOT do anything
further. You will receive the increased Cash Consideration price of $36,400
per Unit upon consummation of the Offer.
Other Limited Partners who desire to tender their Units need to complete
the Letter of Transmittal and the ancillary documents enclosed herewith.
These documents MUST be returned to the Depository, IBJ Schroder Bank & Trust
Company, prior to 5:00 P.M. New York Time, on the expiration date, March 17,
1995. Any limited partner who has delivered its consent to the Lerner
Proposal does not need to withdraw such consent in order to tender Units
pursuant to the Aquarius Offer.
If you have any questions or if you decide to tender all or a portion of
your Units pursuant to the Aquarius Offer and need help in filling out the
enclosed documents, please contact Aquarius' information agent, D.F. King &
Co., Inc., at (800) 659-5550.
EACH LIMITED PARTNER IS URGED TO READ CAREFULLY THE ENCLOSED SUPPLEMENT TO
OFFER TO PURCHASE AND LETTER OF TRANSMITTAL IN THEIR ENTIRETY.
Very truly yours,
AQUARIUS ACQUISITION, L.P.
D. F. King & Co., Inc.
77 Water Street, New York, N.Y. 10005
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PRESS RELEASE
CONTACT:
Kevin Schwicardi
D.F. King & Co., Inc.
(212) 269-5550
FOR IMMEDIATE RELEASE
AQUARIUS ACQUISITION, L.P. RAISES OFFER TO PURCHASE
SPRINGHILL LAKE INVESTORS LIMITED PARTNERSHIP INTERESTS
NEW YORK, NEW YORK, March 3, 1995 -- Aquarius Acquisition, L.P., a Delaware
limited partnership, announced today that it has amended its offer to purchase
outstanding limited partnership interests in Springhill Lake Investors Limited
Partnership, a Maryland limited partnership, and raised the cash payment to
$36,400 from $36,000 per partnership unit, subject to the terms and conditions
set forth in the supplement to the Offer to Purchase and its related transmittal
letter.
The new offer will expire at 5:00 P.M., New York Time, on March 17, 1995,
unless extended. As of March 2, 1995, 44 units had been tendered pursuant to the
Offer.
The Offer is being made only by an Offer to Purchase dated February 1, 1995,
Supplement to Offer to Purchase dated March 3, 1995 and related Letter of
Transmittal, copies of which can be obtained from the Information Agent, D.F.
King & Co., Inc., by calling 1-800-659-5550.
