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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
CONSENT SOLICITATION STATEMENT PURSUANT TO SECTION 14(a)
OF THE SECURITIES EXCHANGE ACT OF 1934
Filed by the registrant [_]
Filed by a party other than the registrant [X]
Check the appropriate box:
[_] Preliminary consent solicitation [_] Confidential, for Use of the
statement Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive consent solicitation statement
[_] Definitive additional materials
[_] Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
RIVERCHASE INVESTORS I, LTD.
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(Name of Registrant as Specified in Its Charter)
Colonial Realty Limited Partnership
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John H. McClintock, Jr., James H. Pugh, Jr., Battery Park Capital Corp.,
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Thomas H. Lowder, James K. Lowder, and Robert E. Lowder
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(Name of Person(s) Filing Consent Solicitation Statement, if other than the
Registrant)
Payment of filing fee (Check the appropriate box):
[_] No fee required.
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
n/a
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(2) Aggregate number of securities to which transaction applies:
n/a
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which
the filing fee is calculated and state how it was determined):
The registrant proposes to sell substantially all of its assets to
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Colonial Realty Limited Partnership, a subsidiary of Colonial
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Properties Trust, for an aggregate amount set forth in (4)
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(4) Proposed maximum aggregate value of transaction:
$8,480,000
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(5) Total fee paid:
$1,696
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[X] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the form or schedule and the date of its filing.
(1) Amount previously paid:
--------------------------------------
(2) Form, schedule or registration statement no.:
--------------------------------------
(3) Filing party:
--------------------------------------
(4) Date filed:
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RIVERCHASE INVESTORS I, LTD.
2101 6th Avenue North
Suite 750, P.O. Box 11687
Birmingham, Alabama 35202-1687
205/250-8700
NOTICE TO UNITHOLDERS
On September 2, 1997, Riverchase Investors I, Ltd. (the "Partnership")
entered into a Real Estate Sales Contract (the "Sales Contract") with Colonial
Realty Limited Partnership, a Delaware limited partnership (the "Purchaser" or
"Operating Partnership") and an indirect subsidiary of Colonial Properties
Trust, an Alabama real estate investment trust ("Colonial"), to sell Riverchase
Apartments (also known as Colonial Village at River Hills) -- Phase I,
consisting of 248 apartment units, related improvements and the land on which
the apartment units and improvements are located in Temple Terrace, Florida (the
"Project"), to the Purchaser at a price of $8,480,000 in cash (the "Purchase
Price"). The consummation of the sale of the Project pursuant to the Sales
Contract is subject to and conditioned upon, among other things, the approval by
the limited partners of the Partnership (the "Limited Partners") holding a
majority in interest of the outstanding units of limited partnership of the
Partnership (the "Units") of (i) an amendment to the Partnership's Amended and
Restated Certificate and Agreement of Limited Partnership (the "Partnership
Agreement") and (ii) the sale of the Project.
John H. McClintock, Jr., James H. Pugh, Jr., Battery Park Capital Corp.,
Thomas H. Lowder, James K. Lowder, and Robert E. Lowder, collectively, the
general partners of the partnership (the "General Partners"), at the request of
the Purchaser, are soliciting the consent of the Limited Partners to:
1. Approve an amendment of the Partnership Agreement (the "Amendment") to
waive the restriction against selling the Project to an affiliate of any of the
General Partners to permit the sale pursuant to the Sales Contract (See, "The
Amendment Proposal"); and
2. Approve the sale of the Project to the Purchaser pursuant to the Sales
Contract (the "Sale") (See, "The Sale Proposal").
The consummation of the Sale will constitute the sale of substantially all
of the assets of the Partnership. The Partnership Agreement provides that the
Partnership shall be dissolved upon a sale of all interests in the Project and
any other assets of the Partnership. Accordingly, the consummation of the Sale
will result in the dissolution of the Partnership and the distribution of
proceeds in liquidation as provided in the Partnership Agreement. The General
Partners estimate that liquidation will result in a distribution to the Limited
Partners of approximately $767 per Unit.
The close of business on May 1, 1998 has been set by the General Partners
as the record date for determining the holders of the Units entitled to vote
upon the Amendment Proposal and the Sale Proposal (the "Proposals"). The time
period for approval of the Proposals will expire at 5:00 p.m. on Monday, June
22, 1998. A Consent Solicitation Statement and Consent Form are enclosed with
this notice. The Consent Solicitation Statement contains a detailed description
of the Proposals.
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Certain of the General Partners are affiliates of the Purchaser and
Colonial and, therefore, may have substantial conflicts of interest with respect
to the Proposals. Accordingly, the General Partners make no recommendation to
any Limited Partner as to whether to vote for or against the Proposals. Each
Limited Partner must make his or her own decision whether or not to vote for or
against the Proposals.
The General Partners believe that the proposed Sale is fair to the Limited
Partners. The General Partners have obtained an opinion of Robert A. Stanger &
Co., Inc., an independent research, investment banking and consulting services
firm, that, subject to the assumptions, limitations and qualifications set forth
therein, the Purchase Price is fair from a financial point of view to the
Limited Partners.
Approval of the Proposals will require the affirmative consent of Limited
Partners holding a majority of the issued and outstanding Units. Your vote on
these matters is very important. Abstentions or failure to return the enclosed
Consent Form will have the same effect as voting AGAINST the Amendment and the
Sale. Therefore, you are requested to complete, sign and return the Consent Form
in the enclosed pre-paid envelope at your earliest convenience and, in any
event, by 5:00 p.m., New York City time, on Monday, June 22, 1998 to GEMISYS,
Inc. (the "Ballot Agent"), attention Proxy Department, 7103 South Revere
Parkway, Englewood Colorado 80112. Consent Forms that are executed but contain
no voting instructions will be deemed to have consented to each of the
Proposals.
John H. McClintock, Jr.
James H. Pugh, Jr.
Battery Park Capital Corp.
Thomas H. Lowder
James K. Lowder
Robert E. Lowder
General Partners
Date: May 14, 1998
Birmingham, Alabama
ii
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RIVERCHASE INVESTORS I, LTD.
CONSENT SOLICITATION STATEMENT
This Consent Solicitation Statement is being furnished to all holders of
units of limited partnership interest in Riverchase Investors I, Ltd., a Florida
limited partnership (the "Partnership"), in connection with the solicitation by
the general partners of the Partnership of consents of limited partners of the
Partnership to (i) an amendment to the Partnership's Amended and Restated
Certificate and Agreement of Limited Partnership and (ii) the sale of the
Riverchase Apartments (also known as Colonial Village at River Hills)--Phase I,
consisting of 248 apartment units and related improvements located in Temple
Terrace, Florida, and the land on which such apartment units and improvements
are located, and the resulting distribution of the net proceeds of such sale in
liquidation of the Partnership.
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 date of this Consent Solicitation Statement is May 14, 1998.
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SUMMARY
The following is a summary of certain information contained in this Consent
Solicitation Statement regarding the proposed sale of Riverchase Apartments
(also known as Colonial Village at River Hills) -- Phase I, consisting of 248
apartment units and related improvements located in Temple Terrace, Florida, and
the land on which such apartment units and improvements are located (the
"Project"), owned by Riverchase Investors I, Ltd., a Florida limited partnership
(the "Partnership"), to Colonial Realty Limited Partnership, a Delaware limited
partnership (the "Purchaser" or "Operating Partnership") and an indirect
subsidiary of Colonial Properties Trust, an Alabama real estate investment trust
("Colonial"), and the resulting dissolution and liquidation of the Partnership.
This Summary is qualified in its entirety by the more detailed information that
follows it, and limited partners are urged to review carefully the entire
Consent Solicitation Statement, including the Appendices, before voting.
Persons Making This Consent Solicitation Statement is being furnished to
Solicitation the limited partners of the Partnership (the "Limited
Partners") by John H. McClintock, Jr. ("McClintock"),
James H. Pugh, Jr. ("Pugh"), Battery Park Capital Corp.,
a New York corporation ("Battery Park"), Thomas H.
Lowder, James K. Lowder, and Robert E. Lowder (the
"Lowders"), each of which is a general partner of the
Partnership (collectively, the "General Partners"). The
Limited Partners and the General Partners are referred to
collectively as the "Partners."
The Partnership The Partnership was formed in 1985 for the purpose of
constructing, owning and operating the Project. The
Partnership sold 11,052 Units in 1985 in a registered
public offering for $1,000 per Unit. The objective of the
Partnership was to operate the Project to produce revenue
from the rental of apartment units.
The Project and the The Project was completed in 1987 and was the first phase
Complex of a three phase development of the Riverchase garden
apartment complex (the "Complex"). The second and third
phases of the Complex are owned by the Purchaser. The
Complex is operated as a single integrated property by
the Purchaser.
Summary of Sale The Limited Partners are being asked to approve a
transaction involving the sale of the Project to the
Purchaser, an affiliate of certain of the General
Partners, in exchange for $8,480,000 in cash (the
"Purchase Price") pursuant to a Real Estate Sales
Contract dated September 2, 1997, between the Partnership
and the Purchaser (the "Sales Contract").
The Purchaser The Purchaser is the "operating partnership" of Colonial.
Colonial, through the Operating Partnership, is involved
in the ownership of multifamily, retail and office
properties
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located in Alabama, Florida, Georgia, Mississippi,
North Carolina, South Carolina, Tennessee and Virginia
development of new properties, acquisition of existing
properties and build-to-suit development.
Purchase Price The Purchase Price under the Sales Contract is $8,480,000
(approximately $34,194 per apartment unit), all of which
will be paid in cash, as described further below,
resulting in an estimated distribution of approximately
$767 per unit of limited partnership interest in the
Partnership (the "Units") to the Limited Partners. The
Purchaser will obtain the funds for payment of the
Purchase Price from its existing line of credit.
Matters to Be Voted The General Partners are soliciting the approval of:
Upon
(1) an amendment to the Partnership's Amended and
Restated Certificate and Agreement of Limited Partnership
(the "Partnership Agreement") necessary to permit the
Sale to the Purchaser; and
(2) the sale of the Project, pursuant to the Sales
Contract.
Vote Required Approval of the proposed amendment to the Partnership
Agreement (the "Amendment") and the proposed sale of the
Project (the "Sale," and together with the Amendment, the
"Proposals") each will require the approval of Limited
Partners holding a majority in interest of the issued and
outstanding Units on the record date. As of the record
date, there were outstanding 11,052 Units held of record
by 1,135 holders.
Thomas Lowder, one of the General Partners of the
Partnership, owns 33 Units, which he intends to vote FOR
approval of the Proposals. Because Thomas Lowder will be
eligible to vote, approval of the Proposals has not been
structured to, and will not, require the approval by a
majority of unaffiliated Limited Partners.
The Sales Contract The Sales Contract establishes the terms of the proposed
Sale, the conditions to closing, and the rights and
obligations of the Partnership and the Operating
Partnership. As is customary in commercial real estate
transactions, the Sales Contract contains certain
representations, warranties and indemnities of the
Partnership. A copy of the Sales Contract is set forth as
Appendix A.
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Determination of The Purchaser established the Purchase Price of
Purchase Price $8,480,000 ($34,194 per apartment unit) and
communicated an offer in April 1997 to Thomas
Lowder, as representative of the General Partners,
to purchase the Project. The offer was promptly
forwarded to the other General Partners and in
April 1997 each of the General Partners agreed to
accept the Purchase Price based on his or its
belief that the Purchase Price exceeded the net
amount the Partnership could obtain otherwise from
a sale of the Project. At a meeting held on
September 2, 1997, each of the General Partners
approved the terms and provisions of the Sales
Contract. Neither the Partnership nor the
Unaffiliated General Partners (as defined below)
retained any unaffiliated representatives to act
solely on behalf of the Limited Partners to
negotiate the terms of the Sales Contract.
In establishing the Purchase Price, the Purchaser
considered the present value of net operating
income that the Purchaser believes the Project
could generate in the future. In addition, the
Purchaser considered the effect Florida transfer
taxes would have on the value the Partnership could
be expected to receive upon the consummation of a
sale of the Project.
The General Partners believe that the proposed Sale
is fair to the Limited Partners. The General
Partners considered, among other things, the most
recent annual appraisal of the Project.
Furthermore, the General Partners have received an
opinion from Robert A. Stanger & Co., Inc.
("Stanger") to the effect that, subject to the
assumptions, limitations and qualifications set
forth therein, the Purchase Price is fair to the
Limited Partners from a financial point of view. A
copy of the Stanger opinion is set forth as
Appendix B.
Special Considerations Limited Partners should review carefully the
and Conflicts of Interest information set forth under the caption "Special
Factors" below in evaluating the Proposals. As
described therein under the sub-caption
"--Background of the Sale," the General Partners,
together with the Operating Partnership, have
participated in efforts to sell the Complex,
including the Project, for approximately three
years, but received no bids deemed acceptable.
In considering how to vote on the Proposals,
Limited Partners should also consider the
following:
. The Sales Contract was not negotiated at arms
length. Thomas Lowder (who is an equity owner of
the Purchaser and Colonial) was authorized by the
other General Partners to negotiate the terms and
provisions of the Sales Contract with the Purchaser
on terms customary for sales of similar properties.
However, each of the General Partners has reviewed
the terms and provisions of the Sales Contract and
the General Partners have unanimously approved the
execution of the Sales Contract.
. Certain of the General Partners have conflicts
of interest with respect to the Proposals. In
addition to being general partners of the
Partnership, the Lowders are equity owners in the
Purchaser and Colonial. Thomas Lowder and James
Lowder are trustees of Colonial, and Thomas Lowder
is the Chief Executive Officer of Colonial.
Accordingly, the Lowders have a conflict of
interest with regard to the Proposals because of
the desire of the Purchaser to purchase the Project
at the lowest possible price and the desire of the
Limited Partners to sell the Project for the
highest possible price. In connection with the
action by the Board of Trustees of Colonial to
approve the purchase of the Project by the
Purchaser, Thomas Lowder and James Lowder abstained
due to this conflict of interest.
. The Sale will be a taxable transaction for the
Partnership and the Limited Partners. See, "Federal
Income Tax Consequences."
. Upon consummation of the sale, Limited Partners
will no longer have the opportunity to benefit from
potential future appreciation in the value of the
Project.
. In connection with efforts by Bear Stearns Real
Estate Group, Inc. ("Bear Stearns") to arrange a
sale of the Complex, Colonial has agreed to pay
Bear Stearns a marketing fee of $100,000 for its
efforts regarding the proposed sale of Phase II and
Phase III of the Complex (both of which are owned
by the Purchaser). This fee will be paid by
Colonial and is unrelated to the proposed Sale.
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Federal Income Tax The Sale to the Purchaser for cash will be a
Consequences taxable transaction for the Partnership and the
Limited Partners. The Partnership will recognize
gain on the sale to the extent that the cash
proceeds received exceed the Partnership's adjusted
basis in the Project. Such gain will be allocated
to the Limited Partners in accordance with the
applicable provisions of the Partnership Agreement.
If a Limited Partner has any unused suspended
"passive" losses from the Partnership or other
passive investments, such losses may be used to the
extent thereof to offset any gain recognized. EACH
LIMITED PARTNER SHOULD CONSULT ITS OWN TAX ADVISOR
WITH RESPECT TO THE TAX CONSEQUENCES OF A SALE OF
THE PROJECT TO THE PURCHASER FOR CASH AND THE
CONSEQUENT LIQUIDATION OF THE PARTNERSHIP.
For a detailed discussion of the procedures and requirements for voting,
see "Voting Rights and Information."
CERTAIN OF THE GENERAL PARTNERS ARE AFFILIATES OF COLONIAL AND THE
PURCHASER AND, THEREFORE, HAVE CONFLICTS OF INTEREST WITH RESPECT TO THE
AMENDMENT AND THE SALE. ACCORDINGLY, THE GENERAL PARTNERS MAKE NO RECOMMENDATION
AS TO WHETHER LIMITED PARTNERS SHOULD VOTE FOR OR AGAINST THE PROPOSALS. EACH
LIMITED PARTNER MUST MAKE HIS OR HER OWN DECISION WHETHER OR NOT TO VOTE FOR OR
AGAINST THE PROPOSALS.
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SPECIAL FACTORS
Background of the Sale
The Partnership. The Partnership was formed in 1985 for the purpose of
constructing, owning and operating Project. The Partnership sold 11,052 Units in
1985 in a registered public offering for $1,000 per Unit. There is no
established trading market for the Units. The objective of the Partnership was
to develop and operate the Project to produce revenue from the rental of
apartment units. The Project constitutes substantially all of the Partnership's
assets. The Partnership's executive offices (and the business address of each of
the General Partners) are located at 2101 Sixth Avenue North, Suite 750,
Birmingham, Alabama 35203.
The Project and the Complex. The Project consists of 31 buildings
containing 248 apartment units and the approximately 30 acres of land upon which
such apartment units are located in the Riverchase garden apartment complex
located in Temple Terrace, Hillsborough County, Florida. Temple Terrace is a
suburban community located approximately seven miles northeast of downtown
Tampa, Florida. The project was completed in 1987 and was the first phase of a
three phase development of the Complex.
The Complex consists of a total of 79 buildings containing a total of 776
apartment units situated on approximately 66 acres of land. The Project (Phase I
of the Complex) is owned by the Partnership. Phase II and Phase III of the
Complex are owned by the Purchaser. The Complex is operated as a single
integrated property by the Purchaser.
The Purchaser. The Purchaser is the "operating partnership" of Colonial.
Colonial, indirectly through a wholly owned subsidiary, is the sole general
partner of, and as of December 31, 1997, holds approximately 67.9% of the
interests in the Purchaser. The Purchaser's executive offices are located at
2101 Sixth Avenue North, Suite 750, Birmingham, Alabama 35203 and its telephone
number is (205) 250-8700. The Purchaser was formed in 1993 as a Delaware limited
partnership.
Colonial. Colonial, through the Operating Partnership, is one of the
largest developers, owners and operators of multifamily, retail and office
properties in the southeastern United States. Colonial's common shares of
beneficial interest (the "Common Shares") are traded on the New York Stock
Exchange under the symbol "CLP." Colonial, through its various subsidiaries
including the Operating Partnership, is a fully integrated real estate company
whose activities include, as of December 31, 1997, ownership of a diversified
portfolio of 83 properties located in Alabama, Florida, Georgia, Mississippi,
North Carolina, South Carolina, Tennessee and Virginia, development of new
properties, acquisition of existing properties and build to suit development.
Colonial is a self-administered equity real estate investment trust ("REIT")
whose real estate holdings presently include more than 15,000 apartment units,
7.1 million square feet of retail shopping space, and approximately 1.9 million
square feet of leasable office space. The principal executive offices of
Colonial and the Operating Partnership are located at 2101 Sixth Avenue North,
Suite 750, Birmingham, Alabama 35202-1687, and its telephone number is (205)
250-8700.
Previous Efforts to Sell the Project. The General Partners have engaged in
several attempts to sell the Project as part of a sale of the Complex.
Beginning in the second quarter of 1994, the Operating Partnership, on
behalf of the General Partners, solicited bids to purchase the Complex, which at
that time included
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only the Project and Phase II of the Complex. This effort resulted in two bids
during April 1995: one for $17,894,736 for the Complex ($35,729 per apartment
unit or an implied price of approximately $8.86 million for the Project) and one
for $17,800,000 for the Complex (allocating $8.65 million, or approximately
$34,879 per apartment unit, for the Project and $9.15 million, or approximately
$36,309 per apartment unit, for Phase II). Thomas Lowder, as the representative
of the General Partners, reviewed the bids and determined that neither bid was
acceptable due to the purchase price that was proposed and/or the closing
conditions that would have been imposed. Specifically, the purchase price in
each case was below the amount invested in the Complex by the Limited Partners
and the bids were contingent upon the completion of the customary due diligence
review of the Complex. Based upon their knowledge and experience with regard to
sales of multi-family properties, the General Partners believed the due
diligence review would have resulted in a reduction of the amount realized by
the Partnership, as each bid would be reduced to offset certain capital
expenditures to be incurred by the potential purchaser. While the General
Partners cannot predict the amount that would have been realized by the
Partnership after completion of the due diligence review, based upon the factors
considered by the Purchaser in arriving at the Purchase Price, the General
Partners believe that these bids would have been reduced by approximately
$300,000 for capital expenditures and that the amount realized by the
Partnership would have been further reduced by approximately $15,000 for legal,
audit and engineering fees. If these estimates were accurate, the amount the
Partnership could have expected to realize if the foregoing bids were accepted
would be approximately $8,545,000 for the first bid and $8,335,000 for the
second bid. Furthermore, each of the bids was conditioned upon a sale of Phase
II of the Complex (which is not owned by the Partnership), the first of these
two bids was based upon an assumed net operating income for the Complex that was
not consistent with actual results of operations and the second of these two
bids was conditioned upon a sale of the land on which Phase III of the Complex
would be developed (which is not owned by the Partnership).
Beginning in May 1995, the Operating Partnership, on behalf of itself and
the General Partners, listed the Complex, including the Project, for sale
through Perlman Baird (a real estate firm) as broker. Perlman Baird received
only one written offer, which related only to the Project and Phase II of the
Complex. This written offer proposed a purchase price of $15,200,000 ($30,400
per apartment unit or an implied price of approximately $7.54 million for the
Project). Thomas Lowder, as the representative of the General Partners, reviewed
the bid and determined that the bid was not acceptable due to the purchase price
that was proposed and the closing conditions that would have been imposed.
Specifically, the bid was contingent upon the completion of the customary due
diligence review of the Complex. Based upon their knowledge and experience, the
General Partners believed the due diligence review would have resulted in a
reduction of the amount realized by the Partnership, as the bid would be reduced
to offset certain capital expenditures to be incurred by the potential
purchaser. Furthermore, this bid was contingent upon the sale of Phase II of the
Complex (which is not owned by the Partnership) and upon the Partnership and the
Purchaser arranging (at their own cost) mortgage financing for the Complex on
certain terms which the party making the bid would then assume upon completion
of its purchase.
In March 1996, the General Partners, on behalf of the Partnership, retained
Bear Stearns, an affiliate of Battery Park, as its exclusive sales agent to
attempt to find a purchaser for the Project. At the same time the Operating
Partnership retained Bear Stearns as its sales agent to attempt to find a
purchaser for each of Phase II and Phase III of the Complex. Bear Stearns
prepared solicitation materials that were distributed to approximately 40
potential buyers that Bear Stearns believed to be qualified to purchase the
Complex. These solicitation materials set an asking price for the Complex of
$18.3 million for Phases I and II ($36,600 per apartment unit) plus the greater
of (i) $15.2 million or (ii) an amount equal to the net operating income
produced by Phase III during the month prior to closing multiplied by 12 with
the result being divided by 9.00%, for Phase III. Bear Stearns received five
written offers to purchase the Complex, one of which was subsequently withdrawn.
These offers provided for purchase prices for the Complex of $30.9 million
($31,960 per apartment unit in the Project and Phase II and $54,130 per
apartment unit in Phase III (or an implied price of approximately $7.93 million
for the Project)), $28.8 million ($32,600 per apartment unit in the Project and
Phase II and $45,290 per apartment unit in Phase III (or an implied price of
approximately $8.08 million for the Project)), $26 million ($33,505 per
apartment unit or an implied price of approximately $8.3 million for the
Project), and $25.7 million ($33,183 per apartment unit or an implied price of
approximately $8.23 million for the Project), respectively. Thomas Lowder, as
the representative of the General Partners, reviewed the various bids and after
consultation with the other General Partners determined that due to the purchase
price that was proposed and/or the closing conditions that would have been
imposed, each of such bids were not acceptable. Specifically, the bids were
contingent upon the completion of the customary due diligence review of the
Complex. Based upon their knowledge and experience, the General Partners
believed the due diligence review would have resulted in a reduction of the
amount realized by the Partnership, as the bid would be reduced to offset
certain capital expenditures to be incurred by the potential purchaser.
Furthermore, the highest of these bids was contingent upon a condition that
Phase III of the Complex achieve a certain level of monthly net operating income
and in each case the sale of the Project was contingent upon the sale of Phase
II and Phase III of the Complex (which are not owned by the Partnership). As a
result, the sale of the Project would be contingent upon the ability of a
property not owned by the Partnership to achieve certain results.
In considering each of the foregoing bids (and as discussed above), the
General Partners noted each bid was submitted prior to completion of the
customary due diligence review of the Project and the General Partners believed
the due diligence review would result in a reduction of the amount realized by
the Partnership, as the bid would be reduced to offset certain capital
expenditures to be incurred by the potential purchaser. For example, the General
Partners estimate that the Purchaser will incur approximately $300,000 to fund
capital expenditures for the Project. The Purchase Price already takes such
capital expenditures into account, however, the foregoing bids do not. The
General Partners also noted that the foregoing bids would be reduced by any real
estate sales commissions; however, the amount realized from the Purchase Price
will not be reduced by any real estate sales commissions.
Purpose of the Sale
The General Partners anticipated at the time the Units were offered and
sold that, as with most real estate ventures, the Partnership would not continue
indefinitely, but would sell the Project (or the Complex) and be liquidated at
such time as a sale were determined to be in the best interests of the Limited
Partners. In this regard, the prospectus for the initial offering by the
Partnership stated that one of the principal investment objectives of the
Partnership was, subject to market conditions at the particular time, to sell
the Project at an appreciated price five to seven years after completion and,
immediately following such sale, to make cash distributions to the Partners. As
set forth above in "Special Factor--Background of the Sale--Previous Efforts to
Sell the Project," the General Partners commenced efforts to sell the Project in
1994, seven years after completion of the Project. In a letter to the Limited
Partners dated March 12, 1996, the General Partners advised the Limited Partners
that the General Partners had entered into a sales agreement with Bear Stearns
to market the Partnership's assets. Consistent with the original expectation,
the General Partners now seek to sell the Project.
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The purpose of the Sale is to allow the Partnership to liquidate its
investment in the Project at a price which the General Partners believe is fair
to the Partnership and the Limited Partners.
The General Partners believe that the following are the principal potential
benefits and potential detriments to the Limited Partners of consummation of the
Sale.
Opportunity to Liquidate Investment
The Sale will provide the Limited Partners with an opportunity to liquidate
their investment in the Partnership. Upon consummation of the Sale, the net
proceeds from the Sale will be distributed in accordance with the terms of the
Partnership Agreement. Because there is no public market for them, the Units are
not readily convertible to cash. In the absence of a sale of the Project, the
Units are a relatively illiquid investment.
Opportunity to Obtain Value for the Project
The Sale provides the Partnership with an opportunity to sell the Project
for a price that the General Partners believe to be fair to the Partnership and
the Limited Partners. Furthermore, an independent third-party (Stanger) has
rendered an opinion that the Purchase Price is fair to the Limited Partners from
a financial point of view. In addition, under the terms of the Sales Contract
the entire net proceeds of the Sale will be released to the Partnership upon
consummation of the Sale, without retention of a portion of the proceeds in an
escrow account pending satisfaction of post-closing conditions.
Opportunity to Sell the Project without the Payment of Real Estate Sales
Commissions
The Sale provides the Partnership with an opportunity to sell the Project
without incurring the obligation to pay any real estate sales commissions. Based
upon their experience with similar real estate projects, the General Partners
believe that such commissions generally reduce the amount of proceeds to a
seller of real estate by approximately 3.5%.
Elimination of Risk of Real Estate Ownership
Ownership of Units is subject to the risks inherent in the ownership of
real estate, which include changes in general or local economic conditions,
changes in the supply of or demand for competing property in the area of the
Project, changes in interest rates, the need to maintain the Project and to
provide for substantial costs of major repairs, replacements, improvements, and
other capital expenditures, and the inability to collect rent from tenants due
to bankruptcy or insolvency of tenants or otherwise which may render difficult
the sale of the Project. The Sale would enable the Limited Partners to
terminate their investment in the Partnership and thereby eliminate these risks.
Detriments
The consummation of the Sale would result in the dissolution of the
Partnership and Limited Partners would no longer be equity owners of the
Partnership. As a result, Limited Partners would not participate in future
appreciation, if any, of the value of the Project.
7
<PAGE>
No unaffiliated representative was retained to act on behalf of the Limited
Partners for the purpose of negotiating the terms of the proposed sale of the
Project to the Purchaser. If an unaffiliated representative had been retained,
the terms of the Sales Contract may have been different, and possibly more
favorable to the Limited Partners. Moreover, the real estate market is
inherently unpredictable, and there can be no assurance that the real estate
and/or financing markets in general will not improve following the Sale,
creating an environment for a more favorable sale of the Project in the future.
Alternatives Considered
In considering whether or not to enter into the Sales Contract, the General
Partners considered several alternatives.
As noted above in "--Background of the Sale--Previous Efforts to Sell
the Project," beginning in the third quarter of 1994, the General Partners have
engaged in several attempts to sell the Project as part of a sale of the Complex
to an unaffiliated third party on an all cash basis. For the reasons set forth
in "--Background of the Sale--Previous Efforts to Sell the Project," the General
Partners did not believe that any of the bids received as part of this process
were acceptable.
The General Partners also considered continuing to hold the Project for a
longer period of time in the hope of achieving capital appreciation. In
rejecting this alternative, the General Partners considered the age of the
Project and the need for additional capital expenditures to refurbish the
Project in order to compete with newer Class A apartment facilities and
concluded that (i) the Limited Partners would be more interested in an
opportunity to liquidate their investment in Units at this time, and (ii) there
was no assurance that the value of the Project would increase substantially in
the near future. The General Partners believe that now is the time to sell the
Project because property values are currently high due to the availability of
capital for real estate investment and competition for available properties by a
large number of well capitalized real estate companies, including REITs. In any
event, the Limited Partners have the opportunity to determine by vote whether to
approve the Sale, in which event the Project will be sold, or to disapprove the
Sale, in which event the Project will continue to be owned and operated by the
Partnership.
Determination of the Purchase Price
The Purchaser established the Purchase Price of $8,480,000 ($34,194 per
apartment unit), and communicated an offer in April 1997 to Thomas Lowder, as
representative of the General Partners, to purchase the Project. Mr. Lowder
acted as representative of the General Partners because (i) he was extremely
knowledgeable about the operations of the Partnership and the real estate market
in general, (ii) he was located in the same city as the Purchaser and (iii) he
was the logical point of contact with the Purchaser. The offer was promptly
forwarded to the other General Partners and in April 1997 each of the General
Partners, including the General Partners who are not affiliated with the
Purchaser (McClintock, Pugh and Battery Park (the "Unaffiliated General
Partners")), agreed to accept the Purchase Price based on his or its belief that
the Purchase Price exceeded the net amount the Partnership could obtain
otherwise from a sale of the Project. Thomas Lowder was authorized by the five
other General Partners, including the three Unaffiliated General Partners to
negotiate the terms and conditions (other than the Purchase Price) of the Sales
Contract with the Purchaser, which manages the Project, on terms customary for
sales of similar properties. Due to Thomas Lowder's affiliation with both the
Partnership and the Purchaser, the terms and conditions of the Sales Contract
may not be deemed to be the result of arm's length negotiations between the
Purchaser and the Partnership. However, the Unaffiliated General Partners have
reviewed the terms and provisions of the Sales Contract. At a meeting held on
September 2, 1997, each of the General Partners approved the Sales Contract.
Neither the Partnership nor the Unaffiliated General Partners retained an
unaffiliated representative to act solely on behalf of the Limited Partners to
negotiate the terms of the Sales Contract. If an unaffiliated person had been
engaged, the terms and conditions of the Sales Contract might have been
different, and possibly more favorable, to the Partnership. The Partnership has
retained Stanger to render an opinion concerning the fairness from a financial
point of view to Limited Partners of the Purchase Price.
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<PAGE>
The Purchase Price was established by the Purchaser at an amount that would
equal the Purchaser's projected present value of future net operating income
that the Purchaser believes the Project may generate less capital improvements
necessary for the future net operating income to be realized. In making this
calculation, the Purchaser made certain projections of the financial results of
the Project for the eighteen months following consummation of the Sale, based in
part upon the year to date results of the Project as of June 30, 1997. The
Purchaser then applied a capitalization rate it believed to be appropriate for
an investment in multi-family properties of the age and quality of the Project
to the projected net operating income for 1998 to determine the value of the
total investment the Purchaser proposes to make in the Project. The Purchaser
then deducted the costs associated with capital improvements that it would fund
and it believed would be necessary in order for its projections to be realized
and certain expenses that would normally be borne by the sellers in such
transactions, to arrive at the Purchase Price. The following table sets forth
the projections prepared by the Purchaser in determining the value of the total
investment the Purchaser proposes to make in the Project.
<TABLE>
<CAPTION>
Budget to June 1997 Purchaser's Stabilized Projection*
(annualized) (annualized)
<S> <C> <C>
Gross Potential Rent $1,667,102 $1,702,253
Other Income 69,714 64,584
Rent Concessions (73,562) (34,211)
Vacancy (231,238) (136,180)
---------- ----------
Total Revenue $1,432,016 $1,596,446
Management Fees $71,236 $63,858
Insurance 25,994 24,840
Operating Expenses 461,478 491,880
Taxes 171,432 171,432
---------- ----------
Total Expenses $730,140 $752,010
Net Operating Income $701,876 $844,436
Projected Net Operating Income $844,436
divided by capitalization rate /9.54%
equals Purchaser's estimated Project value $8,854,360
----------
Less: Capital Improvements to be funded by Purchaser $300,000
Document stamps 59,360
Engineering, Legal, Audit, Miscellaneous 15,000
--------
Purchase Price $8,480,000
==========
</TABLE>
- --------------------------
* Represents the Purchaser's estimate of amounts that would be realized
approximately eighteen months after consummation of the Sale.
9
<PAGE>
Neither the Partnership nor the General Partners participated in the
preparation of this projected data. The foregoing projections were not prepared
with a view to public disclosure or compliance with the published guidelines of
the Securities and Exchange Commission or the guidelines established by the
American Institute of Certified Public Accountants regarding projections and
forecasts and are included in this Consent Solicitation Statement only for
informational purposes. The Partnership's independent auditors have not
examined, compiled or applied any procedures with respect to this data and
express no opinion or any kind of assurance thereon. While presented with
numerical specificity, this projected data is based upon a variety of
assumptions relating to the business of the Partnership which may not be
realized and is subject to significant uncertainties and contingencies, many of
which are beyond the control of the Partnership and, therefore, this projected
data is inherently imprecise, and there can be no assurance that projected
financial results or any valuation assumed therein will be realized. It is
expected that there will be differences between actual and estimated or
projected information set forth above and actual results may vary materially
from those shown.
In determining the value it was willing to pay for the Project, the
Purchaser noted the effect Florida transfer taxes would have on the value the
Partnership could be expected to receive upon the consummation of a sale of the
Project. The Purchaser estimates that these transaction costs would reduce the
value received for the Project by approximately $59,360 (0.7%). The Purchaser
will pay the Florida transfer taxes in connection with the Sale and the Purchase
Price will not be reduced by the amount of such costs. The Purchaser also
considered certain other expenses comprised of engineering, legal and audit fees
that it will pay, which expenses would normally be borne by the seller in such
transactions, to arrive at the Purchase Price.
Neither Stanger nor Consortium Appraisal Services, Inc. (the "Appraiser")
participated in establishing any terms of the Sales Contract. Stanger was
retained solely to render its opinion as to whether the Purchase Price to be
received by the Partnership pursuant to the Sales Contract, is fair, from a
financial point of view, to the Limited Partners. The Appraiser was retained
solely to estimate the market value of the fee simple interest in the Project,
including chattels, under market conditions prevailing on the date of the
Appraisal Report (January 22, 1998).
10
<PAGE>
The Purchaser will obtain the funds for payment of the Purchase Price from
its existing line of credit with a group of banks led by South Trust Bank, N.A.
and including AmSouth Bank, Wells Fargo Bank, N.A., PNC bank, Ohio, N.A., and
First National Bank of Commerce, N.A. This unsecured line of credit is used by
Colonial primarily to finance additional property investments and bears interest
at a floating rate at 110 points over LIBOR. This line of credit is renewable
annually and provides for a two-year amortization in the case of non-renewal.
The agreement evidencing this line of credit includes a competitive bid feature
that will allow Colonial to convert up to $100 million of outstanding
indebtedness under the line of credit to a fixed rate, for a fixed term not to
exceed 90 days.
Position of the General Partners; Fairness of the Proposed Sale
Since certain of the General Partners are affiliates of the Purchaser and
Colonial, these General Partners have substantial conflicts of interest with
respect to the Sale. See "Special Factors--Interests of Certain Persons;
Potential Conflicts of Interest." Accordingly, in recognition of these conflicts
of interest, the General Partners make no recommendation to any Limited Partner
as to whether to vote for or against the Proposals. EACH LIMITED PARTNER MUST
MAKE HIS OR HER OWN DECISION WHETHER TO VOTE FOR OR AGAINST THE PROPOSALS BASED
UPON A NUMBER OF FACTORS, INCLUDING THE LIMITED PARTNER'S FINANCIAL POSITION,
NEED OR DESIRE FOR LIQUIDITY, OTHER FINANCIAL OPPORTUNITIES, WILLINGNESS AND
ABILITY TO BEAR THE ECONOMIC RISKS OF THE INVESTMENT AND TAX POSITION.
The General Partners (including the Unaffiliated General Partners) each
reviewed and approved the Sales Contract and the General Partners unanimously
believe that the proposed Sale is fair to the Limited Partners. The General
Partners base this belief on the following factors:
(i) the determination by the General Partners and the Operating
Partnership in the second quarter of 1994 to attempt to sell the Project as part
of a sale of the Complex;
(ii) the unsuccessful attempts by the General Partners and the Operating
Partnership to find a buyer for the Complex, including the Project, as described
above in "--Background of the Sale";
(iii) the most recent annual Appraisal Report, which states that the
estimated market value of the fee simple interest in the Project is $8,450,000,
under market conditions prevailing as of January 22, 1998;
(iv) information with respect to the financial condition, results of
operations and prospects of the Project, as well as the current conditions and
risks involved with its business;
(v) the general illiquidity of the Units, and the fact that a sale of
the Project would enable the Limited Partners to liquidate their investment by
converting the value of the Project to cash;
(vi) the written opinion from Stanger described below in "Opinion of
Stanger" to the effect that the Purchase Price is fair to the Limited Partners
from a financial point of view, as well as the judgment of the General Partners
that the review performed by Stanger in arriving at its opinion was reasonable
and analytically sound;
(vii) the fact that, based upon the General Partners' experience in the
real estate industry and considering the time and risk involved in attaining the
Purchaser's projected stabilized net operating income for the Project, the
General Partners believe the capitalization rate applied to the projected net
operating income of the Project by the Purchaser is consistent with prevailing
capitalization rates for other multi-family property acquisitions;
11
<PAGE>
(viii) the determination of the General Partners that the Purchase Price
exceeds the going concern value of the Project;
(ix) the General Partners' belief that the Limited Partners anticipated
that the Project would be sold and the Partnership liquidated before this time,
and that the Sale would accomplish those objectives relatively quickly; and
(x) the fact that the Sales Contract would avoid the payment by the
Partnership of sales commissions or Florida transfer taxes in connection with
the sale of the Project.
(xi) the fact that the Sale is subject to approval of a majority in
interest of the outstanding Units.
In making the determination that the Sale is fair to the Limited Partners,
the Unaffiliated General Partners considered each of the factors listed above in
light of the knowledge of the business and operations of the Partnership and
their business judgment. In reviewing the above factors, the Unaffiliated
General Partners believe that the factors described were favorable to the
determination regarding the fairness of the Sale.
No other factors were considered by the Unaffiliated General Partners. The
General Partners (including the Unaffiliated General Partners, each of whom has
extensive experience in the real estate industry) did not consider historical
market prices or net book value of the Units in their fairness determination
because there is no established trading market for the Units and they did not
believe that historical market prices or net book value are relevant to a sale
of real estate, such as the Project. In making their determination as to the
fairness of the Sale, the General Partners (including the Unaffiliated General
Partners) were aware that (i) no independent committee of Unaffiliated General
Partners was established to review and approve the transaction, (ii) because
Thomas Lowder will be eligible to vote his 33 Units representing 0.4% of the
Units eligible to vote the Proposals were not structured to, and will not
require approval by a majority of unaffiliated Limited Partners, and (iii)
Thomas Lowder was authorized to negotiate the terms of the Sales Contract with
the Purchaser on terms customary for sales of similar properties. Despite the
absence of a separate independent committee of Unaffiliated General Partners,
the fact that the Proposals can be approved by less than a majority of
unaffiliated Limited Partners and the role of Thomas Lowder in negotiating the
terms of the Sales Contract, the General Partners (including the Unaffiliated
General Partners) believe the Sale is fair to the Limited Partners. This
determination is based upon the factors described in paragraphs (i) through (xi)
above and because each of the General Partners (including the Unaffiliated
General Partners, each of whom has extensive experience in the real estate
industry) reviewed the specific terms and provisions of the Sales Contract and
the General Partners (including the Unaffiliated General Partners) unanimously
concluded that the Sales Contract should be entered into.
In view of the wide variety of factors considered in connection with the
evaluation of the Sale, the Unaffiliated General Partners did not find it
practical to, nor did they, quantify or otherwise attempt to assign relative
weights to the specific factors considered in reaching their belief that the
Sale is fair to the Limited Partners.
Opinion of Stanger
On July 31, 1997, the Partnership engaged Stanger, an independent financial
advisory firm with substantial real estate and partnership experience, to
deliver a written summary of its determination as to the fairness to the Limited
Partners, from a financial point of view, of the Purchase Price to be paid for
the Project in the Sale. The full text of the Stanger Fairness Opinion, which
contains a description of the assumptions made, matters considered and
limitations on the review and analysis, is attached as Appendix B to this
Consent Solicitation Statement and should be read in its entirety. Certain of
the material assumptions and limitations to the Stanger Fairness Opinion are
described below. The summary set forth below does not purport to be a complete
description of the analyses used by Stanger in rendering the Stanger Fairness
Opinion. Arriving at a fairness opinion is a complex analytical process not
necessarily susceptible to partial analysis or amenable to summary description.
Except for certain assumptions described more fully below which the
Partnership advised Stanger that it would be reasonable to make, the Partnership
imposed no conditions or limitations on the scope of Stanger's investigation or
the methods and procedures to be followed in rendering the Stanger Fairness
Opinion. The Partnership has agreed to indemnify Stanger against certain
liabilities arising out of Stanger's engagement to prepare and deliver the
Stanger Fairness Opinion.
Experience of Stanger. Since its founding in 1978, Stanger has provided
information, research, appraisal, investment banking and consulting services to
clients throughout the United States, including major New York Stock Exchange
firms and insurance companies and over seventy companies engaged in the
management and operation of partnerships and real estate investment trusts. The
investment banking activities of Stanger include financial advisory and fairness
opinion services, asset and
12
<PAGE>
securities valuations, industry and company research and analysis, litigation
support and expert witness services, and due diligence investigations in
connection with both publicly registered and privately placed securities
transactions.
Stanger, as part of its investment banking business, is regularly engaged
in the valuation of businesses and their securities in connection with mergers,
acquisitions, reorganizations and for estate, tax, corporate and other purposes.
Stanger's valuation practice principally involves partnerships, partnership
securities and the assets typically held through partnerships, such as real
estate, oil and gas reserves, cable television systems and equipment leasing
assets. The Partnership selected Stanger to provide fairness opinion services
because of its experience and reputation in connection with real estate
partnerships, real estate assets, and mergers and acquisitions.
Summary of Materials Considered. In the course of Stanger's analysis to
render its opinion, Stanger: reviewed a draft of the Consent Solicitation
Statement related to the Sale in substantially the form which will be filed with
the Securities and Exchange Commission ("SEC"); reviewed a draft of the Sales
Contract between the Partnership and the Purchaser, in substantially the form
which will be used to consummate the transaction; reviewed the Partnership's
annual reports filed with the SEC on Form 10-K for the four fiscal years ending
December 31, 1994, 1995, 1996 and 1997, which reports the Partnership's
management has indicated to be the most current publicly available financial
statements; reviewed summary historical operating statements for the Project for
1994, 1995, 1996 and 1997, and the operating budget for 1998; performed a site
inspection of the Project and reviewed local real estate market conditions;
reviewed information regarding purchases and sales of apartment properties in
the general market area of the Project and other information relating to
acquisition criteria for apartment properties; reviewed the most recent annual
appraisal of the Project, dated January 22, 1998; discussed with management of
the Partnership and the Purchaser (which manages the Project) conditions in the
Project's local market for apartment properties, conditions in the Project's
market for sales/acquisitions of properties similar to the Project, current and
projected operations and performance of the Project, the physical condition of
the Project, and the financial condition of the Partnership; reviewed purchases
of multi-family properties performed by the Purchaser or its affiliates during
the 18 months ended August 31, 1997; interviewed representatives of Bear Stearns
regarding the process utilized in soliciting, receiving and evaluating prior
bids to purchase the Complex; reviewed the offering materials provided to
prospective purchasers of the Complex and a summary of the bids which were
received as a result of the bidding process; and conducted other studies,
analyses, inquires and investigations as Stanger deemed appropriate.
Summary of Reviews. The following is a summary of certain reviews conducted
by Stanger in connection with and in support of its fairness opinion. The
summary of the opinion and reviews of Stanger set forth in this Consent
Solicitation Statement is qualified in its entirety by reference to the full
text of such opinion.
In preparing its opinion, Stanger performed a site inspection of the
Project on August 14, 1997. In the course of this site visit, the physical
facilities of the Project were inspected, current rental and occupancy
information for the Project were obtained, current
13
<PAGE>
local market conditions were reviewed, a sample of primary competing properties
were identified and visited, and local property management personnel were
interviewed concerning the Project and local market conditions. In conducting
the reviews, Stanger also reviewed and relied upon information provided by the
Partnership and its General Partners, including, but not limited to: financial
schedules of historical and current lease rates, occupancies, income, expenses,
reserve requirements, cash flow and related financial information; property
descriptive information, including unit mix and rentable square footage; and
information relating to any required capital expenditures and deferred
maintenance.
Stanger also reviewed historical operating statements for the Project for
1994, 1995, 1996 and 1997, and the operating budget for 1998, and discussed with
management the current and anticipated operating results of the Project.
In addition, Stanger interviewed key management personnel of the
Partnership and the Purchaser (which manages the Project). Such interviews
included discussions of competitive conditions in the Project's local market,
area economic and development trends affecting the Project, historical and
budgeted operating revenues and expenses and occupancies and the physical
condition of the Project (including any deferred maintenance, renovations,
reconfigurations and other factors affecting the physical condition of the
improvements), and projected capital expenditures and building improvements.
Stanger also reviewed the acquisition criteria used by owners, operators
and investors in the type of real estate owned by the Partnership, utilizing
published information and information derived from interviews conducted by
Stanger with various sources in the local property market, such as real estate
brokers, appraisers, and apartment property investors. In addition, Stanger
interviewed various sources in the Project's local market to identify recent
sales of similar properties. Sources for such information included local
appraisers and real estate brokers. Stanger also reviewed information regarding
nine purchases involving multi-family properties performed by the Purchaser or
its affiliates during the 18 months ended August 31, 1997. These acquisitions
involved properties located in Georgia, Florida, Mississippi and Alabama, and
ranged in size from 104 apartment units to 392 apartment units. Stanger observed
that none of these properties were located in the Project's local market.
Stanger also observed that the purchase price of these properties had an implied
acquisition capitalization rate ranging from approximately 9.25% to 9.5%.
Stanger also reviewed the January 22, 1998 appraisal of the Project and
discussed the appraisal process, methodology, analysis and conclusions with the
Appraiser. Stanger observed that the Appraisal Report was certified by a member
of the Appraisal Institute.
Stanger also considered that the Complex, which includes the Project
together with two adjacent projects owned by affiliates of the General Partners,
was offered for sale pursuant to a competitive bidding process, conducted by
Bear Stearns described above under "--Background of the Sale--Previous Efforts
to Sell the Project." The prices offered as a result of the bidding process were
reviewed on a per apartment unit and implied capitalization rate basis.
In preparing the Stanger Fairness Opinion. Stanger did not note any factors
other than the foregoing factors and its analysis of such factors as set forth
in the Stanger Fairness Opinion.
Conclusions. Based upon the foregoing and its analysis and the assumptions,
qualifications, and limitations stated below, it is Stanger's opinion that as
of the date of the Stanger Fairness Opinion, the Purchase Price to be paid for
the Project in the Sale is fair to the Limited Partners from a financial point
of view.
Assumptions. In rendering the Stanger Fairness Opinion, Stanger relied,
without independent verification, on the accuracy and completeness of all
financial and other information contained in the Consent Solicitation Statement
or that was otherwise made available, furnished or otherwise communicated to
Stanger by the Partnership, the General Partners of the Partnership, the
Purchaser, the on-site management of the Project, Bear Stearns, the Appraiser,
or third party sources. Stanger was not engaged to and has not performed an
independent
14
<PAGE>
appraisal, engineering study or environmental study of the assets and
liabilities of the Partnership. Stanger relied upon the representations of the
General Partners of the Partnership and management of the Project concerning any
environmental liabilities, deferred maintenance and estimated capital
expenditure requirements. Stanger also relied upon the assurance of the
Partnership, the General Partners of the Partnership, the Purchaser and the on-
site management of the Project that any financial statements, projections,
forecasts, or capital expenditure estimates and other information provided to
Stanger were reasonably prepared and adjusted on bases consistent with actual
historical experience and reflect the best currently available estimates and
good faith judgments; that no material changes have occurred in the value of the
Project or other information reviewed between the date of such information
provided and the date of the Stanger Fairness Opinion, and that the Partnership,
the General Partners of the Partnership, the Purchaser and the on-site
management of the Project are not aware of any information or facts that would
cause the information supplied to Stanger to be incomplete or misleading in any
material respect.
Limitations and Qualifications of Fairness Opinion. Stanger was not asked
to and therefore did not: (i) appraise the Project; (ii) select the method of
determining the Purchase Price offered in the Sale; (iii) make any
recommendations to the partners of the Partnership with respect to whether to
approve or reject the Sale; or (iv) express any opinion as to the business
decision to effect the Sale, alternatives to the Sale, or tax factors resulting
from the Sale. The Stanger Fairness Opinion is based on business, economic,
real estate and securities markets, and other conditions as they existed and
could be evaluated as of the date of Stanger's analysis, and does not reflect
any changes in those conditions that may have occurred since that date.
In connection with preparing the Stanger Fairness Opinion, Stanger was not
engaged to, and consequently did not, prepare any written report or compendium
of its analysis for internal or external use beyond the analysis set forth in
Appendix B. Stanger will not deliver any additional written summary of the
analysis.
Compensation and Material Relationships. Stanger has been paid a fee by
the Partnership of $60,000 for preparing the Stanger Fairness Opinion relating
to the Sale. In addition, Stanger will be reimbursed for all reasonable out-of-
pocket expenses, including legal fees, up to a maximum of $5,000 and indemnified
against certain liabilities, including certain liabilities under the federal
securities laws. The fee was negotiated between the Partnership and Stanger.
Payment of the fee to Stanger is not dependent upon completion of the Sale.
The Partnership has not retained Stanger to render any other services
during the past two years. Likewise, the Purchaser has not retained Stanger to
render any services during the past two years. However, in connection with the
formation of Colonial in 1993, Stanger was retained by each of the partnerships
included in the formation of Colonial and the general partners thereof to render
an opinion on behalf of the limited partners of those partnerships as to the
fair market value of the real estate owned by each partnership and the fairness
of the consideration received by each partnership.
15
<PAGE>
Appraisal Report
Each year the Partnership engages an appraiser to perform an appraisal of
the Project. In January 1998, the Partnership engaged the Appraiser, an
independent MAI real estate appraisal firm to perform an appraisal of the
Project. The Appraiser was chosen because of its substantial experience and
expertise in real estate appraising and the fact that it had appraised the
Project in the past. During the past three years, the Partnership has paid the
Appraiser approximately $13,000 ($4,000 in 1996, $4,000 in 1997 and $5,000 in
1998) for appraisal services. The purpose of the appraisal was to estimate the
market value of the fee simple interest in the subject real estate, including
chattels, under market conditions prevailing on January 22, 1998.
The scope of the appraisal assignment included a physical inspection of the
Project's site and improvements; a review of site and building plans for the
Project; discussions with county planning, zoning and tax officials regarding
the current zoning, future land use designation and real estate assessments
applicable to the Project; a review of the preceding five-year sales history of
the Project; an analysis of the Tampa area; an analysis of the Project's
neighborhood and market area relative to past and present development trends and
current market conditions; a search for past sales and current listings
involving similar sites and improved properties; an analysis of rental rates and
terms for similar improved properties located in the Project's general market
area; an analysis of operating expenses relative to similar properties in the
Project's general market area; and an analysis of the Project's historic
operations. In developing value estimates for the Project, the Appraisers
employed all three of the traditional valuation methods, which include the Cost,
Income and Market Data Approaches.
The appraisal process is a process in which the data used to estimate the
value of the Project are acquired, classified, analyzed and presented. The first
step is defining the appraisal problem (i.e., identification of the real estate,
the effective date of the value estimate, the property rights being appraised,
and the type of value sought). Once this has been accomplished, the Appraiser
collects and analyzes the factors that affect the market value of the Project.
These factors include area and neighborhood analysis, site and improvement
analysis, highest and best use analysis, and the application of the three
approaches generally used by appraisers to estimate the value of income
producing property: the Cost Approached; Direct Sales Comparison Approach (also
known as the Market Data Approach); and the Income Approach.
The first approach available to the Appraiser is the Cost Approach to
value. Accrued depreciation is calculated and deducted from the estimated
construction cost of the improvements. The resulting depreciation cost is then
added to the land value. The resultant figure indicates the value of the whole
property. Generally, the land value is obtained through the analysis of
comparable land sales utilizing the Direct Sales Comparison Approach.
Reproduction or replacement cost new of the improvements is estimated on the
basis of current prices for the component parts of the building less
depreciation, computed after analyzing the disadvantages or deficiencies of the
existing building as compared to a new building.
The Income Approach is predicated on the assumption that there is a
relationship between the amount of income a property will earn and its value.
This approach is based on the principle that value is created by the expectation
of benefits derived in the future. The anticipated annual net income of the
subject property is processed to produce an indication of value. Net income is
the income generated before payment of any debt service. The process of
converting it into value is called capitalization, which involves dividing the
net income by a capitalization rate. Factors such as risk, time, interest on the
capital investment, and recapture of the depreciation asset are considered in
the rate. The appropriateness of this rate is critical, and there are a number
of techniques by which it may be developed.
The Direct Sales Comparison Approach is used to estimate the value of the
land as if vacant and/or the whole property as improved. The Appraiser gathers
data on sales of comparable properties and analyzes the nature and condition of
each sale, making logical adjustments for dissimilar characterstics. Typically,
a common denominator is found. For land value, this is usually either a price
per acre or a price per square foot; for improved properties, the common
denominator may be price per square foot or price per unit, or a gross rent
multiplier.
A final step in the appraisal process is the reconciliation or correlation
of the value indications. In the reconciliation, or correlation, the Appraiser
considers the relative applicability of each of the three approaches used,
examines the range between the value indications, and places major emphasis on
the approach that appears to produce the most reliable solution to the specific
appraisal problem. The purpose of the appraisal, the type of property, and the
adequacy and reliability of the data are analyzed; these considerations
influence the weight given to each of the approaches to value. In analyzing the
three approaches to value, it can be readily observed that most of the
information pertaining to the fair market value of the subject property must be
derived from the marketplace because the Appraiser anticipates the actions of
buyers and sellers in the market.
In the Appraisal Report, the Cost, Income and Market Data Approaches to
value have been developed into an indicated market value estimate. The indicated
market values reflected by the applicable approaches have been correlated into a
final value estimate.
The three approaches to value, as utilized in the appraisal report, reflect
a relatively narrow range of values for the Project. Summary comments pertaining
to each value indication are provided as follows:
Cost Approach: The Cost Approach to value, as developed in the
Appraisal Report, was based upon cost data available from published national
sources relating to multi-family construction projects in the Florida market
place, coupled with comparable land sales data. The Project was significantly
impacted by external obsolescence and limited recent land sales data was
available within the subject market area. In correlating the value estimated for
the Project, the Appraisal Report gave little consideration to the Cost
Approach. As cited in the Appraisal Report, this is due to the significant
amounts of external obsolescence affecting the Project, as well as the lack of
recent comparable land sales within the Project's immediate market. As a result,
the Appraisal Report stated that the value indication of $8,449,000 reflected by
the Cost Approach was given little consideration.
Income Approach: The Income Approach to value produced a value
indication for the Project of $8,250,000. The Appraisal Report stated that the
Income Approach to value appeared to be supported with each of its primary
components being documented by market activity. Rent comparables were obtained
on rental apartment properties within the Project's market area. Market data
pertaining to occupancy rates and rent concessions were also derived from the
comparable properties. Operating expenses were estimated by giving consideration
to a number of sources including the Project's actual expenses, published
expense data, independent estimates prepared by the Appraiser and comparables
from the market place. The resulting net operating income was capitalized into
an indication of value based upon a review of overall capitalization rates
obtained from the market.
The Income Approach to value was considered by the Appraiser to be a well
documented analysis of the Project which provided a strong indication of value
that was based on the Project's income producing characteristics. The Appraisal
Report stated that the Income Approach to value was very important as a tool to
estimate the value of the Project, since buyers and sellers in the market for
similar properties employ a similar analytical technique in establishing
purchase prices and values.
Market Data Approach: Sales data was obtained involving comparable
properties within the Project's market. Specifically, seven sales of similar
apartment developments within the Tampa/St. Petersburg Metropolitan Area were
reviewed. Based upon such review, a value indication of $8,630,000 was developed
for the Project. Based upon the comparability of the market data which was
available for utilization within the Market Approach, this approach to value was
heavily weighted when estimating a correlated value for the Project.
Summary Comments and Conclusions: The Appraisal Report stated that the
Cost Approach to value was generally supported with adequate data being
available to develop replacement cost and depreciation estimates. However, the
Project was significantly effected by external obsolescence and limited land
sales data was available upon which to estimate the land value of the subject
site. The Cost Approach to value produced a value indication at the middle of
the range reflected by the three approaches reviewed in the appraisal report,
but was ultimately given little consideration when correlating a value estimate
for the Project.
The Appraisal Report stated that both the Income and Market Data Approaches
to value appeared well supported and market data was available for utilization
when developing these approaches to value. In addition, the Appraiser stated
that both of these approaches are currently considered by most buyers and
sellers to be most relevant when analyzing or valuing income producing
properties like the Project. Therefore, these approaches to value were given
equal weight and consideration when estimating a correlated market value for the
Project.
Based upon this data, it was the Appraiser's opinion that the market value
of the fee simple interest in the Project, based upon market conditions existing
on January 22, 1998, and subject to the limiting conditions and contingencies
set out in the Appraisal Report, was $8,450,000.
In considering the Appraisal Report, the General Partners observed that the
Appraisal Report did not consider the effect that any real estate sales
commissions or Florida transfer taxes would have on the value that the
Partnership could expect to receive upon a sale of the Project.
A copy of the appraisal report is available for inspection and copying at
the offices of the Partnership at 2101 Sixth Avenue North, Suite 750,
Birmingham, Alabama 35203 during regular business hours by any interested
Limited Partner or his or her representative who has been so designated in
writing. The appraisal report has also been filed as an exhibit to the Schedule
13E-3 that has been filed with the SEC as discussed in "Other Matters." A copy
of the appraisal report will be sent to any interest Limited Partner or his or
her representative who has been so designated in writing upon written request to
the Partnership at the address listed above.
Position of Colonial and the Operating Partnership Regarding Fairness of the
Proposed Sale
Colonial and the Purchaser believe that, based upon their experience in
purchasing, operating, and managing properties, the Sale is fair to the Limited
Partners. In reaching this determination, Colonial and the Purchaser considered
the following factors:
(i) the unsuccessful attempts by the General Partners and the Operating
Partnership to find a buyer for the Complex, including the Project, as described
above in "--Background of the Sale";
(ii) the most recent Appraisal Report, which states that the estimated
market value of the fee simple interest in the Project is $8,450,000 based upon
market conditions prevailing on January 22, 1998;
(iii) the fact that Limited Partners anticipated that the Project would be
sold and the Partnership liquidated before this time, and the Sale would
accomplish those objectives relatively quickly;
(iv) information with respect to the financial condition, results of
operations and prospects of the Project, as well as current conditions and risks
involved with its business;
(v) the general illiquidity of the Units, and the fact that a sale of
the Project would enable the Limited Partners to liquidate their investment by
converting the value of the Project to cash;
(vi) the fact that the consummation of the Sale is conditioned upon
approval by holders of a majority in interest of the Units, thereby allowing the
Limited Partners collectively to determine whether the Sale of the Project is
consummated;
(vii) the Purchaser's belief that the Sale represents an opportunity for
Limited Partners to obtain fair value for the Project in a market and at a time
when the prospects for a future sale on significantly better terms is uncertain;
(viii) the possibility of future increases of the value of the Project;
and
(ix) while Colonial and the Purchaser have not relied upon, they have
considered the written opinion from Stanger described above in "--Opinion of
Stanger" to the effect that the Purchase Price to be received by the Partnership
pursuant to the Sales Contract is fair to the Limited Partners from a financial
point of view.
In view of the wide variety of factors considered in connection with the
evaluation of the Sale, Colonial and the Purchaser did not find it practical to,
nor did they, quantify or otherwise attempt to assign relative weights to the
specific factors considered in reaching their opinion. Colonial and the
Purchaser considered each of the factors listed above in light of the knowledge
of the business and operations of the Partnership and their business judgment.
In reviewing the above factors, Colonial and the Purchaser believe that the
factors described in paragraphs (i) - (v), (vii) and (ix) were favorable to the
determination
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regarding the fairness of the Sale, since the Project may increase in value in
the future (although there can be no assurance that this will occur) the factor
described in paragraph (viii) may be deemed unfavorable to the determination of
the fairness of the Sale, and that the factor described in paragraph (vi) was
neither favorable nor unfavorable.
No other factors were considered by Colonial and the Purchaser. Colonial
and the Purchaser did not consider historical market prices or net book value of
the Units in their fairness determination because there is no established
trading market for the Units and they did not believe that historical market
prices or net book value are relevant to a sale of real estate, such as the
Project. In making their determination as to fairness, Colonial and the
Purchaser were aware that (i) no independent committee of Unaffiliated General
Partners was established, nor unaffiliated representative retained, to review
and approve the transaction, (ii) because Thomas Lowder will be eligible to vote
his 33 Units representing 0.4% of the Units eligible to vote, the approval of
the Proposals has not been structured to, and will not, require approval by a
majority of Unaffiliated Limited Partners, and (iii) Thomas Lowder was appointed
by the other General Partners to negotiate the Sales Contract with the Purchaser
on terms customary for sales of similar properties. Despite the absence of an
independent committee, the fact that the Proposals can be approved by less than
a majority of unaffiliated Limited Partners and the role of Thomas Lowder in
negotiating the terms of the Sales Contract, Colonial and the Purchaser believe
that the Sale is fair to Limited Partners because of the factors described in
paragraphs (i) - (v), (vii) and (ix) above and because each of the General
Partners (including the Unaffiliated General Partners) have reviewed the
specific terms and provisions of the Sales Contract and the General Partners
(including the Unaffiliated General Partners) unanimously approved the Sales
Contract. In connection with the action by the Board of Trustees of Colonial to
approve the purchase of the Project by the Purchaser, Thomas Lowder and James
Lowder abstained due to the conflict of interest of being both trustees of
Colonial and General Partners of the Partnership.
Plans for the Partnership; Certain Effects of the Sale
The consummation of the Sale will constitute a sale of substantially all of
the assets of the Partnership. The Partnership Agreement provides that the
Partnership shall be dissolved upon a sale of all interests in the Project and
any other assets of the Partnership. Accordingly, the consummation of the Sale
will result in the dissolution of the Partnership and the distribution of
proceeds in liquidation as provided in the Partnership Agreement. The General
Partners estimate that liquidation will result in a distribution to the Limited
Partners of approximately $767 per Unit (approximately $434 per Unit
representing a return of capital and approximately $333 per Unit representing
income and gain).
As a result of the Sale, the Purchaser will own the Project and be entitled
to all net income, if any, derived from the Project in the future. Following the
Sale, the Purchaser will be entitled to all the benefits from any future
increase in the value of the Project, but also will bear the risk of any
decrease in the value of the Project.
Interests of Certain Persons; Conflicts of Interest
In considering whether to vote for or against the Proposals, Limited
Partners should be aware that certain of the General Partners and the Purchaser
are affiliated parties and, therefore, may have substantial conflicts of
interest with respect to the Amendment and Sale. The Lowders, who are general
partners of the Partnership, as of December 31, 1997, beneficially own
approximately 13.2% of the equity of the Purchaser. Thomas Lowder and James
Lowder also serve on the Board of Trustees of Colonial, and Thomas Lowder serves
as Colonial's President and Chief Executive Officer. See, "Special
Considerations--Conflicts of Interest of the General Partners." In addition, as
described above, Thomas Lowder was authorized by the other General Partners to
negotiate the terms and provisions (other than the Purchase Price) of the Sales
Contract with the Purchaser on terms customary for sales of similar properties.
See, "Special Considerations--Sales Contract Not Negotiated at Arms Length."
In connection with efforts by Bear Stearns to arrange a sale of the
Complex, Colonial has agreed to pay Bear Stearns a marketing fee of $100,000 for
its efforts regarding a proposed sale of Phase II and Phase III of the
Complex. This fee will be paid by Colonial and is unrelated to the proposed
Sale.
In connection with the completion of the construction of the Complex,
Lowder Construction Company, an Alabama corporation of which the Lowders own a
majority of the equity interests, developed Phase III of the Complex and was
paid a fee of $552,000. This fee was paid by Colonial and was unrelated to the
Project and the Partnership.
In their evaluation of the Proposals, Limited Partners should carefully
consider the information set forth in the "Special Considerations" section.
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SPECIAL CONSIDERATIONS
Limited Partners should consider certain special factors in
determining whether to approve or disapprove the Sale.
The Sale will be a taxable transaction for the Partnership and the Limited
Partners. However, the tax consequences to a particular Limited Partner will
depend on such Limited Partner's particular circumstances. Accordingly, each
Limited Partner should consult its own tax advisor to determine the federal
income tax consequences of the Sale. See "Federal Income Tax Consequences."
Loss of Opportunity to Benefit from Potential Future Appreciation of Project
The determination of the Purchase Price has been based in part on current
market conditions for multifamily residential real estate property in the
Florida market. There can be no assurance that the real estate market in general
or the market for multifamily residential properties in particular will not
improve following the Sale, creating an environment for a more favorable sale of
the Project in the future.
Sales of Contract Not Negotiated at Arms Length
The Operating Partnership is an affiliate of certain of the General
Partners, and the General Partners have certain conflicts of interest in
connection with the Sale. The Purchaser established the Purchase Price of
$8,480,000, and communicated an offer in April 1997 to Thomas Lowder, as
representative of the General Partners, to purchase the Project. The offer was
promptly forwarded to the other General Partners and in April 1997, each of the
General Partners, including the Unaffiliated General Partners, agreed to accept
the Purchase Price based on his or its belief that the Purchase Price exceeded
the net amount the Partnership could obtain otherwise from a sale of the
Project. Thomas Lowder was authorized by the five other General Partners,
including the three Unaffiliated General Partners, to negotiate the terms and
conditions (other than the Purchase Price) of the Sales Contract with the
Purchaser, which manages the Project, on terms customary for sales of similar
properties. However, the Unaffiliated General Partners have reviewed the terms
and provisions of the Sales Contract. At a meeting held on September 2, 1997,
each of the General Partners approved the terms of the Sales Contract.
Furthermore, the Purchase Price is supported by the estimated market value of
the fee simple interest of the Project as set forth in the Appraisal Report and
the written opinion from Stanger to the effect that the Purchase Price to be
received by the Partnership in exchange for the Project is fair to the Limited
Partners from a financial point of view.
No Acceptable Third-Party Bids Received
Notwithstanding the prior efforts to sell the Complex (including the
Project), discussed above under "Special Factors--Background of the Sale--
Previous Efforts to Sell the Project," the General Partners did not receive from
third-parties any offer to acquire the Project that was deemed acceptable by the
General Partners.
Conflicts of Interest of the General Partners
Affiliated Nature of Sale. The Lowders are General Partners of the
Partnership and are also affiliates of the Operating Partnership by virtue of
the fact that Lowders in the aggregate own, indirectly, approximately 13.2% of
the equity securities of the Purchaser, as of December 31, 1997. Thomas Lowder
and James Lowder also are members of the Board of Trustees of Colonial, and
Thomas Lowder serves as its President and Chief Executive Officer. Colonial
Properties Holding Company, Inc., an Alabama corporation and wholly owned
subsidiary of Colonial, in turn, serves as general partner of the Purchaser and
owns approximately 67.9% of the outstanding partnership interests of the
Purchaser, as of December 31, 1997.
As a result of this affiliation, a conflict arises between the Lowders'
desire to purchase the Project at the lowest possible price and the desire of
the Limited Partners to maximize the sale price of the Project. In this regard,
each of the General Partners, other than Thomas Lowder (who abstained due to the
conflict of interest between his position in the Partnership and the Purchaser),
agreed to accept the Purchase Price. Additionally, the Unaffiliated General
Partners have reviewed and approved the terms of the Sales Contract.
Because the Purchaser owns Phase II and Phase III of the Complex, and
manages the entire Complex as a single entity, the interests of Colonial and the
Purchaser may conflict with the interests of the Partnership and the Limited
Partners. With respect to these potential conflicts of interest, Colonial and
the Operating Partnership retain a free right to compete with the Partnership's
Project, including the right to develop apartment complexes now and in the
future, in addition to those existing apartments in the Complex.
Elimination of Personal Liability. The liability of the Limited Partners is
limited to capital contributions (which have already been made), and the Limited
Partners are not bound by, or personally liable for, any expenses, liabilities
or obligations of the Partnership. In contrast, the General Partners have
unlimited liability for liabilities of the Partnership to the extent the
Partnership's assets are insufficient to discharge all such liabilities or to
the extent recourse for such liabilities is not limited to the Partnership's
assets. Following consummation of the Sale, the General Partners (and thus the
Lowders) will be relieved of future general partner liability with respect to
the Partnership and the Project.
Fiduciary Responsibility of General Partners. Despite the existence of the
conflicts of interest described above, the General Partners are under a
fiduciary duty to the Partnership and consequently must exercise good faith and
fair dealing toward the Partnership and the Limited Partners. The Partnership
Agreement provides that the General Partners have no liability to the
Partnership or to the Limited Partners for any loss or damage incurred by reason
of any act performed or omitted in connection with the activities of the
Partnership, if a General Partner determines, in good faith, that such course of
conduct is in the best interests of the Partnership and provided that such
course of conduct does not constitute fraud, negligence (gross or ordinary) or
breach of fiduciary duty. The Partnership Agreement further provides that the
Partnership shall indemnify and hold harmless the General Partners (and each of
them), their officers, directors, employees and partners, from any liability,
loss, or damage incurred by them or by the Partnership by reason of any act
performed or omitted to be performed by them in connection with the activities
of the Partnership or in dealing with third parties on behalf of the
Partnership, with respect to which they are protected under the Partnership
Agreement. As a result of these exculpation and indemnification provisions, a
Limited Partner's remedy with respect to claims against the General Partners
arising from the Sale may be more limited than otherwise would be the case.
No Appraisal Rights
Neither the Partnership Agreement nor Florida law provides any right to
Unitholders to have their respective Units appraised or redeemed in connection
with, or as a result of, the proposed Sale. Under the Partnership Agreement,
each Unitholder is entitled, upon prior written notice to the General Partner,
at reasonable times and at such Unitholder's own expense, (i) to obtain a copy
of a list of names and addresses of the Limited Partners and the number of Units
owned by each of them, and (ii) to inspect the books and records of account of
the Partnership.
In lieu of appraisal rights, Unitholders may have other rights and remedies
available to them in connection with the Sale, "--Conflicts of Interest of the
General Partners--Fiduciary Responsibility of General Partners" above. Likewise,
under Florida law, the General Partners have a fiduciary duty to exercise good
faith, fairness and loyalty in all of their dealings with respect to Partnership
affairs, and Limited Partners, therefore, may have certain legal remedies
available under Florida state law.
VOTING RIGHTS AND INFORMATION
Record Date
The General Partners have set the close of business on May 1, 1998 as
the record date (the "Record Date") for the determination of Limited Partners
entitled to notice of and to vote upon the Proposals. Only Unitholders of
record as of the Record Date who have been admitted to the Partnership as
Limited Partners will be entitled to vote upon the Proposals. On the Record
Date, there were 11,052 Units issued and outstanding, held of record by 1,135
Unitholders. Thomas Lowder, a General Partner, owns of record 33 Units which he
intends to vote for the Amendment and the Sale. The Partnership has no other
class of securities.
Required Vote
Under the Partnership Agreement, Limited Partner approval of the Proposals
requires the affirmative consent of Limited Partners holding a majority in
interest of the issued and outstanding Units. Accordingly, an abstention or
failure to return the enclosed Consent Form will have the same effect as a vote
AGAINST the Amendment and the Sale.
Because Thomas Lowder owns 33 Units which he intends to vote FOR the
Amendment and the Sale, approval of the Proposals requires the affirmative
consent of Limited Partners holding 5,494 Units (49.7%). Accordingly, approval
of the Proposals has not been structured to, and will not, require approval by a
majority (50.1%) of unaffiliated Limited Partners.
Solicitation Period
The Solicitation Period is the time during which Limited Partners may vote
for or against the Proposals. The Solicitation Period will commence upon
delivery of this Consent Solicitation Statement and the Consent Form and will
continue until the later of 5:00 p.m., New York City time, on Monday, June 22,
1998, or such later date chosen by the General Partners and as to which notice
is given to Unitholders. The General Partners, in their sole discretion, may
elect to extend the Solicitation Period. Notice to Unitholders of such an
extension will be by written notice mailed to Unitholders. The consents
solicited pursuant to this Consent Solicitation Statement will not expire, and
will continue to be valid, until the termination of the Solicitation Period.
Execution and Revocation of Consents
A Consent Form is included with this Consent Solicitation Statement. All
Consent Forms that are properly executed and returned to GEMISYS prior to the
expiration of the Solicitation Period will be voted in accordance with the
instructions contained therein. All properly executed Consent Forms that contain
no voting instructions will be deemed to have consented to the Amendment
Proposal and the Sale Proposal. Consent Forms will be effective only when
actually received by GEMISYS at the address or facsimile number set forth below.
Consent Forms may be withdrawn at any time prior to the expiration of the
Solicitation Period. In addition, subsequent to the submission of a Consent
Form, but prior to the expiration of the Solicitation Period, Limited Partners
may change their votes. For a withdrawal or change of vote to be effective,
Limited Partners must execute and deliver, prior to the expiration of the
Solicitation Period, a subsequently dated Consent Form or a written notice
stating that the consent is withdrawn to GEMSIS, Attention: Proxy Department,
7103 South Revere Parkway, Englewood, Colorado 80112, facsimile number
(800) 387-7365. Consent Forms and notices of withdrawal or change of vote dated
or received after the expiration of the Solicitation Period will not be valid.
Questions concerning (i) how to complete the Consent Form, (ii) where to return
the Consent Form and (iii) obtaining additional Consent Forms should be directed
to Trust Company of America (the "Information Agent"), 7103 South Revere
Parkway, Englewood, Colorado 80112, (800) 955-9033. Substantive
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questions concerning the Consent Form should be directed to Investor Relations
at Colonial, at (800) 645-3917.
Effective Date of the Amendment
If approved by the Limited Partners, the Amendment will become effective
when the General Partners execute a Second Amended and Restated Certificate and
Agreement of Limited Partnership incorporating the Amendment, which will occur
following the expiration of the Solicitation Period and immediately prior to the
consummation of the Sale. If the Sale Proposal is not approved or if for any
reason the Sale is not consummated, the Amendment to the Partnership Agreement
will not be implemented, even if it receives Limited Partner approval.
Consummation of the Sale
If the Sale Proposal and the Amendment Proposal are approved by the Limited
Partners, the Partnership and the Purchaser will consummate the Sale as soon as
practicable following the expiration of the Solicitation Period.
No Special Meeting
The Partnership Agreement does not require a special meeting of Limited
Partners to consider the Proposals. Accordingly, no such meeting will be held.
Cost of Solicitation
The Purchaser has retained the Information Agent at an estimated cost of
$4,600 plus reimbursement of expenses to assist in the solicitation of consents.
The total cost of the solicitation will be approximately $8,500. All expenses of
this solicitation, including the cost of preparing and mailing this Consent
Solicitation Statement, will be borne by the Partnership. In addition, consents
may be solicited by directors, officers and employees of the Purchaser in person
or by mail, telephone, telegram or other means of communication. These
directors, officers and employees will not be additionally compensated, but may
be reimbursed for out-of-pocket expenses incurred in connection with the
solicitation. Arrangements also will be made to furnish copies of solicitation
materials to custodians, nominees, fiduciaries and brokerage houses for
forwarding to beneficial owners of Units. Such persons will be paid for
reasonable expenses incurred in connection therewith.
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THE AMENDMENT PROPOSAL
(PROPOSAL NO. 1)
The Proposed Amendment
The Partnership Agreement presently contains a provision which limits the
authority of the General Partners to permit the Partnership to sell or lease the
Project to a General Partner or any affiliate of a General Partner. Because the
Purchaser is an affiliate of the Lowders, the Sales Contract could not be
consummated unless that provision of the Partnership Agreement is amended. The
General Partners are soliciting the consent of the Limited Partners to approve
an amendment to the Partnership Agreement that would provide a specific
exception for the Sales Contract.
The Amendment would amend the limitation set forth in Section 13(d)(x) of
the Partnership Agreement to provide an exception for the Sale of the Project
pursuant to the Sales Contract. The Amendment would not permit any other sale or
lease of the Project or otherwise modify the limitations on the authority of the
General Partners set forth in this section of the Partnership Agreement.
Consequently, in the event the Amendment is approved but the Sales Contract is
not consummated, the limitations set forth in this section of the Partnership
Agreement would continue to be operative notwithstanding Limited Partner
approval of the Amendment.
Text of the Amendment
Section 13(d)(x) of the Partnership Agreement is proposed to be amended to
add the underlined language set forth below:
Except with regard to the Site acquisition as described in the
Prospectus, permit the Partnership to purchase or lease property in which a
General Partner or any Affiliate has an interest or, except pursuant to the
----------------------
terms of that certain Real Estate Sales Contract dated September 2, 1997
------------------------------------------------------------------------
between the Partnership and Colonial Realty Limited Partnership, sell or
----------------------------------------------------------------
lease the Project to a General Partner or any Affiliate.
No other amendments to the Partnership Agreement are being proposed.
20
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THE SALE PROPOSAL
(PROPOSAL NO. 2)
The General Partners also are soliciting consents from Limited Partners to
approve the Sale of the Project to the Operating Partnership for an aggregate
purchase price of $8,480,000. The terms of the Sale are set forth in the Sales
Contract, a copy of which is attached to this Solicitation Statement as Appendix
A. The discussion below is a summary of the Sales Contract and is qualified in
its entirety by reference to the Sales Contract.
Assets to be Sold
The assets to be acquired by the Purchaser are substantially all of the
assets of the Partnership and consist of the Project including all improvements,
easements, appurtenances, rights-of-way, privileges, adjacent strips, gores of
land and other matters belonging to or pertaining to the Project, personal
property, tradename, furniture, fixtures, and equipment located on or used in
connection with the Project, and all intangible property, including, without
limitation, all leases and contracts in effect as of the closing of the Sale.
The assets to be acquired do not include cash or cash items, such as the working
capital reserves of the Partnership.
Purchase Price
The Purchase Price to be paid by the Purchaser for the Project is
$8,480,000. The Purchase Price is payable at the closing of the sale of the
Project in cash. The Sales Contract does not require retention of a portion of
the Purchase Price to provide funds for indemnification of the Purchaser.
Accordingly, the full amount of the Purchase Price will be released to the
Partnership at the closing of the Sale. The Sales Contract provides for
customary prorations of rents, taxes, utilities and other items, and provides
for the payment of various closing costs and expenses by the Partnership,
including the Partnership's attorney's fees.
Conditions to Consummation of the Sale
Consummation of the Sale is subject to the satisfaction or waiver of
certain conditions, including (i) approval of the Sale by a majority in interest
of the Limited Partners of the Partnership, (ii) approval of the Amendment,
(iii) the conveyance of good, marketable and insurable title by the Partnership,
(iv) the continued accuracy of the representations and warranties of the parties
to the Sales Contract, and (v) various other customary provisions.
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DISTRIBUTION OF SALE PROCEEDS AND DISSOLUTION OF PARTNERSHIP
The consummation of the proposed Sale will result in the dissolution and
liquidation of the Partnership and the distribution to the Partners upon such
liquidation of the net proceeds of the Sale in accordance with the terms of the
Partnership Agreement.
Under the Partnership Agreement, the net proceeds of a disposition of the
Project will be distributed as follows: first, pro rata to all Partners with
positive capital accounts until each such partner has received an amount equal
to this capital account; second, 100% to the Limited Partners until each such
Partner has received an amount equal to his "adjusted capital value"/1/, less
any amounts distributed with regard to positive capital accounts described
above; third, 100% to the Limited Partners until each Limited Partner has
received an amount equal to the excess of (i) a 10% cumulative annual return
(calculated from the fiscal quarter ending September 30, 1987) with respect to
his adjusted capital value, over (ii) any net cash from operations actually
distributed to such Limited Partner (or a predecessor in interest); and the
balance, 75% to the Limited Partners and 25% to the General Partners (5% to each
of McClintock, Pugh and Battery Park and 10% to the Lowders).
The General Partners estimate that the liquidation of the Partnership will
result in distributions of cash to Limited Partners in the amount of
approximately $767 per Unit, of which $434 per Unit would represent return of
capital and $333 per Unit would represent income and gain. The General
Partners estimate that the liquidation of the Partnership will result in no
distributions of cash to the General Partners. However, McClintock, Pugh and
Battery Park are each special limited partners of the Partnership and as such
will receive a distribution of $100 upon dissolution of the Partnership. The
General Partners will distribute the net sale proceeds after the sale of the
Project and the winding up of the Partnership's affairs. Consummation of the
Sale will be accounted for as a sale.
If the sale of the Project is consummated, the Limited Partners will have
no interest in the future operations of the Partnership or the Project.
- ---------------------------
/1/ "adjusted capital value" means the aggregate amount of cash contributed by
a Limited Partner (or predecessor in interest) to the Partnership, reduced by
the aggregate amount of distributions made to such Limited Partner (or
predecessor in interest) of net proceeds from sales occurring prior to the
current distribution of net proceeds from sales.
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SELECTED FINANCIAL INFORMATION
Set forth below is a summary of certain historical financial
information of the Partnership as of and for the each of the years ended
December 31, 1993, 1994, 1995, 1996 and 1997. The summary financial information
for each of the years ended December 31, 1993, 1994, 1995, 1996 and 1997 is
derived from the financial statements of the Partnership that have been audited
by Coopers & Lybrand, independent auditors, which are contained elsewhere in
this Consent Solicitation Statement. The selected financial information should
be read in conjunction with and is qualified by reference to "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
the audited financial statements of the Partnership. Pro forma financial
information is not included in the Consent Solicitation Statement because the
Partnership will be dissolved and cease to exist upon the consummation of the
sale of the Project pursuant to the Sale Contract, therefore any pro forma
financial statements would not be meaningful.
RIVERCHASE INVESTORS I, LTD.
(A Limited Partnership)
Selected Financial Data
<TABLE>
<CAPTION>
Year Ended
December 31,
1997 1996 1995 1994 1993
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Rental Revenue ......................... $1,301,007 $1,433,043 $1,454,909 $1,431,176 $1,325,567
Interest Income ........................ 10,172 9,385 11,520 8,317 7,872
Other Income ........................... 79,974 45,913 45,498 45,328 48,377
Net Income ............................. 444,012 486,614 531,690 404,872 367,291
Net Income per Unit .................... 39.77 43.59 47.63 36.27 32.90
Total Assets ........................... 7,418,546 7,452,392 7,526,646 7,677,947 7,938,892
Partners' Capital ...................... 7,339,953 7,385,913 7,457,235 7,617,691 7,882,635
Book Value per Unit .................... 664.13 642.14 648.34 662.29 713.23
Cash Distributions per Unit............. $ 44.00 $ 50.00 $ 62.00 $ 60.00 $ 55.00
</TABLE>
23
<PAGE>
FEDERAL INCOME TAX CONSEQUENCES
General
The following discussion summarizes certain federal income tax
consequences relevant to the Limited Partners in connection with the Sale by
the Partnership of the Project to the Operating Partnership. This discussion is
intended to be a general summary discussing only certain of those federal income
tax consequences that are generally applicable to all Limited Partners in
connection with the Sale. The specific tax consequences of the Sale may vary
for the Limited Partners depending upon their individual circumstances.
The information in this section is based on the Internal Revenue Code of
1986, as amended (the "Code"), existing and proposed Treasury Regulations
thereunder, and current administrative interpretations and court decisions. No
assurance can be given that future legislation, Treasury Regulations,
administrative interpretations and court decisions will not significantly change
the current law or adversely affect existing interpretations of current law.
Any such change could apply retroactively to transactions preceding the date of
change. The information in this section does not constitute tax advice.
The following description is not intended to be exhaustive of all possible
tax consequences. For example, it does not discuss any state, local or foreign
tax consequences. Nor does it discuss all of the aspects of a Limited Partner's
particular circumstances. Except where indicated, the discussion below describes
federal income tax consequences generally applicable to individuals who are
citizens or residents of the United States. Accordingly, the following
discussion has limited application to domestic corporations and persons subject
to specialized federal income tax treatment, such as foreign tax persons, tax-
exempt entities, regulated investment companies and insurance companies.
LIMITED PARTNERS SHOULD CONSULT WITH THEIR OWN TAX ADVISORS TO DETERMINE
THE TAX CONSEQUENCES TO THEM OF THE TRANSACTION.
Taxation of Limited Partners Resulting from the Sale of the Project
Tax Effect of Sale of the Project for Cash. The sale of the Project for
cash to the Operating Partnership will be a taxable transaction for the
Partnership for federal income tax purposes. The Partnership will recognize gain
on the sale of the Project in an amount equal to the excess of (1) the cash
proceeds from the sale of the Project (net of sales expenses) over (2) the
Partnership's adjusted tax basis in the Project. Such gain will be allocated to
the Limited Partners in accordance with the applicable provisions of the
Partnership Agreement. The estimated gain per Unit expected from the sale of the
Project for cash is approximately $333 per Unit.
The character of such gain is dependent on the allocation of the Purchase
Price between the real property components and the personal property components
of the Project Gain attributable to the real property components will be treated
as "Section 1231 gain." A Limited Partner will net this "Section 1231 gain"
against its other "Section 1231 gains and losses" recognized during the taxable
year of the Limited Partner in which the sale occurs.
24
<PAGE>
If the aggregate of such gains exceeds the aggregate of such losses for such
year (i.e., there is a "net Section 1231 gain"), such gains and losses will
generally constitute capital gains and losses and if the aggregate of such
losses exceeds the aggregate of such gains for such year (i.e., there is a "net
Section 1231 loss"), such gains and losses ordinarily will constitute ordinary
gains and losses. Notwithstanding the preceding sentence, the net Section 1231
gain of a Limited Partner will be treated as ordinary income to the extent that
it does not exceed the limited partner's "non-recaptured net Section 1231
losses." Non-recaptured net Section 1231 losses are net Section 1231 losses
recognized during the five preceding taxable years to the extent that such
losses have not previously been "recaptured" as described in the preceding
sentence. Gain attributable to the personal property components will be treated
as ordinary income to the extent of prior depreciation deductions claimed with
respect to those components, with any additional gain being treated as "Section
1231 gain."
Based upon the allocation agreed to between the Partnership and the
Operating Partnership, substantially all of the gain recognized will be
attributable to the real property components, and therefore will be "Section
1231 gain." There can be no assurance, however, that the IRS will not seek to
allocate more of the Purchase Price (and therefore some of the gain) to the
personal property components.
Any gain recognized by the Limited Partners in connection with the Sale
will constitute "passive activity income" for purposes of the "passive activity
loss" rules. Accordingly, such income generally may be offset by losses from
all sources, including suspended "passive activity losses" with respect to the
Partnership and "passive" or active losses from other activities. Each Limited
Partner should consult with his or her own tax advisor concerning whether, and
the extent to which, he or she has available suspended "passive" losses from
either the Partnership or other investments that may be used to offset gain from
the Sale.
Tax Effect of Distributions and Liquidation. The gain allocable to a
Limited Partner from the sale of the Project will increase such Limited
Partner's adjusted tax basis in his or her Units. If the distribution of Sale
proceeds exceeds the Limited Partner's adjusted basis in his or her Units (as
increased to reflect the gain from the Sale), such excess will be treated as
gain from the sale or exchange of a capital asset. If the amount distributed is
less than such Limited Partner's adjusted basis in the Units, such difference
generally will be treated as a capital loss.
Generally, for an individual or an estate or trust, the maximum tax rate
applicable to mid-term capital gains (gains from the sale of capital assets held
for more than one year but not more than 18 months) is 28% and the maximum tax
rate applicable to long-term capital gains (gains from the sale of capital
assets held for more than 18 months) is 20%. However, for such taxpayers long-
term capital gains resulting from sales of depreciable real property are taxed
at a rate of 25% to the extent of the depreciation deductions taken with respect
to such property.
Hypothetical Illustration of Tax Liability. A hypothetical taxable Limited
Partner in the Partnership who bought one Unit (original cost $1,000) in the
initial offering of Units would realize (assuming the sale of the Project for
cash and the liquidation of the Partnership on June 30, 1998) (1) an estimated
Section 1231 gain of $333 from the sale of the Project (all or substantially all
of which the Partnership believes will qualify as 25% capital gain), and (2) an
estimated capital
25
<PAGE>
gain of $11 attributable to his or her investment in the Partnership (assuming
the Unit was purchased in the original Partnership offering). The Section 1231
gain and the capital gain will result in an estimated aggregate capital gain of
$344 per Unit, assuming the Unit is the only investment being disposed of by the
Limited Partner in 1998. The resulting net federal income tax (assuming (i) an
effective tax on ordinary income of 31% and (ii) the capital gains are 20% long-
term capital gains and taking into account the rules described above) would be
$85 per Unit, as rounded (of which, $82 per Unit would be imposed at the 25%
rate). The Limited Partner would have received a cash distribution of $767 per
Unit, as rounded, as a result of the Sale, resulting in net after-tax cash
proceeds of $682 per Unit, as rounded. (This illustration does not take into
account any state taxes payable by a Limited Partner.)
Because the specific circumstances of a Limited Partner will affect the
determination both of the amount of income or loss recognized in the Sale and
the consequences of the recognition of such income or loss, it is important that
each Limited Partner consult with his tax advisor regarding the consequences of
the Sale.
LIMITED PARTNERS SHOULD CONSULT THEIR TAX ADVISORS WITH RESPECT TO THE
TAX CONSEQUENCES TO THEM OF A SALE OF THE PROPERTY BY THE PARTNERSHIP TO THE
OPERATING PARTNERSHIP.
OTHER MATTERS
Certain Legal Matters
The General Partners are not aware of any filings, approvals or other
action by any federal or state governmental administrative or regulatory
authority that would be required for the acquisition of the Project by the
Purchaser as contemplated by the Sales Contract. Should any such other approval
or action be required, it is currently contemplated that such approval or other
action would be sought. There can be no assurance that any such additional
approval or other action, if needed, would be obtained without substantial
conditions or that adverse consequences might not result in the event that such
other approvals were not obtained or such other actions were not taken. The
Purchaser's obligations under the Sales Contract are subject to certain
conditions, including conditions relating to the legal matters discussed in this
subsection. See "The Sale Proposal--Conditions to Consummation of the
Sale."
Miscellaneous
The Partnership is subject to the information and reporting requirements of
the Securities Exchange Act of 1934, as amended, (the "Exchange Act") and as a
result are required to file reports and other information with the SEC relating
to its business, financial condition and other matters.
Pursuant to Rule 13e-3 of the General Rules and Regulations under the
Exchange Act, the Purchaser, the Partnership and the General Partners of the
Partnership have filed with the SEC a Transaction Statement on Schedule 13E-3,
together with exhibits, furnishing certain additional information with respect
to the proposed Sale. Such Statement and any amendments thereto, including
exhibits, may be inspected at the public reference facilities of the SEC at Room
1024, 450 5th Street, N.W., Washington, D.C. 20549. Copies may be obtained by
mail, at prescribed rates, from the SEC's principal office at 450 5th Street,
N.W., Washington, D.C. 20549. The SEC maintains a 'web site' that contains
reports, proxy and information statements and other information regarding
issuers that file electronically with the SEC. The address of such site is
"http://www.sec.gov."
26
<PAGE>
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Audited Financial Statements for the Years Ended December 31, 1997, 1996 and 1995
<S> <C>
Report of Independent Auditors........................................................................F-2
Balance Sheets as of December 31, 1997 and 1996 ......................................................F-3
Statements of Income for the years ended December 31, 1997, 1996 and 1995 ...........................F-4
Statements of Partners' Capital for the years ended December 31, 1997, 1996 and 1995 ................F-5
Statements of Cash Flows for the years ended December 31, 1997, 1996 and 1995 .......................F-6
Notes to Financial Statements.........................................................................F-7
Management's Discussion and Analysis of Financial Condition and Results of Operations.....................F-9
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Partners
Riverchase Investors I, Ltd.
We have audited the balance sheets of Riverchase Investors I, Ltd. (a limited
partnership) as of December 31, 1997 and 1996, and the related statements of
income, partners' capital and cash flows for each of the three years in the
period ended December 31, 1997. These financial statements are the
responsibility of Riverchase Investors I, Ltd.'s management. Our responsibility
is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with Generally Accepted Auditing
Standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatements. An audit includes examining on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used as well as significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Riverchase Investors I, Ltd. as
of December 31, 1997 and 1996, and the results of its operations and its cash
flows for each of the three years in the period ended December 31, 1997 in
conformity with generally accepted accounting principles.
Birmingham, Alabama /s/ Coopers & Lybrand L.L.P.
February 5, 1998 Coopers & Lybrand L.L.P.
F-2
<PAGE>
RIVERCHASE INVESTORS I, LTD.
(A LIMITED PARTNERSHIP)
BALANCE SHEETS
DECEMBER 31, 1997 and 1996
<TABLE>
<CAPTION>
1997 1996
------------ ------------
<S> <C> <C>
ASSETS
Cash and equivalents $ 62,322 $ 124,242
Restricted Cash 31,197 34,406
Accounts receivable 6,775 13,205
Prepaid Expenses 19,320 27,223
------------ ------------
Total current assets 119,614 199,076
Property, plant, and equipment:
Land 2,102,784 2,102,784
Buildings 6,724,619 6,586,431
Furniture and fixtures 1,027,261 975,845
Land improvements 138,429 95,951
Equipment 20,842 16,717
------------ ------------
10,013,935 9,777,728
Less accumulated
depreciation 2,719,923 2,529,208
------------ ------------
Net property, plant
and equipment 7,294,012 7,248,520
------------ ------------
Other assets 4,920 4,796
Total assets $ 7,418,546 $ 7,452,392
============ ============
LIABILITIES AND PARTNERS' CAPITAL
Accounts Payable $ 33,608 $ 13,034
Other accrued liabilities 9,161 9,234
Tenant deposits 31,197 24,497
Unearned rent 4,614 4,991
Due to affiliate 13 14,723
------------ ------------
Total current liabilities 78,593 66,479
------------ ------------
General partners' deficit (20,163) (20,919)
Limited partners' capital 7,360,116 7,406,832
(11,052 units)
------------ ------------
Total partners' capital 7,339,953 7,385,913
------------ ------------
$ 7,418,546 $ 7,452,392
============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-3
<PAGE>
RIVERCHASE INVESTORS I, LTD.
(A LIMITED PARTNERSHIP)
STATEMENTS OF INCOME
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996, 1995
<TABLE>
<CAPTION>
1997 1996 1995
----------- ----------- -----------
<S> <C> <C> <C>
Revenue:
Rent $ 1,301,007 $ 1,433,043 $ 1,454,909
Interest 10,172 9,385 11,520
Other 79,974 45,913 45,498
----------- ----------- -----------
1,391,153 1,488,341 1,511,927
----------- ----------- -----------
Expenses:
General and
administrative 79,848 78,796 91,971
Salaries and wages 96,737 119,576 122,967
Taxes and licenses 153,827 155,184 151,537
Management and
leasing fees 68,427 73,001 74,144
Repairs and
maintenance 207,118 262,190 232,057
Utilities 120,870 116,287 116,704
Insurance 29,599 19,954 20,574
Depreciation 190,715 176,739 170,283
----------- ----------- -----------
947,141 1,001,727 980,237
----------- ----------- -----------
Net income $ 444,012 $ 486,614 $ 531,690
=========== =========== ===========
New income per limited
partnership unit 39.77 43.59 47.63
=========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-4
<PAGE>
RIVERCHASE INVESTORS I, LTD.
(A LIMITED PARTNERSHIP)
STATEMENTS OF PARTNERS' CAPITAL
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996, 1995
<TABLE>
<CAPTION>
General Limited
Total Partner Partner
----------- ----------- -----------
<S> <C> <C> <C>
Balance, Dec, 31, 1994 $ 7,617,691 $ (18,598) $ 7,636,289
Distributions to partners (692,146) (6,925) (685,221)
Net income 531,690 5,317 526,373
----------- ----------- -----------
Balance, Dec. 31, 1995 7,457,235 (20,206) 7,477,441
Distributions to partners (557,936) (5,579) (552,357)
Net income 486,614 4,866 481,748
----------- ----------- -----------
Balance, Dec. 31, 1996 7,385,913 (20,919) 7,406,832
Distributions to partners (489,972) (3,684) (486,288)
Net income 444,012 4,440 439,572
----------- ----------- -----------
Balance, Dec. 31, 1997 7,339,953 (20,163) 7,360,116
=========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-5
<PAGE>
RIVERCHASE INVESTORS I, LTD.
(A LIMITED PARTNERSHIP)
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996, 1995
<TABLE>
<CAPTION>
1997 1996 1995
----------- ----------- -----------
<S> <C> <C> <C>
Operating Activities:
Net income $ 444,012 $ 486,614 $ 531,690
Adjustments to reconcile net
income to net cash provided
by operating activities:
Depreciation 190,715 176,739 170,283
Changes in operating
assets and liabilities:
Restricted cash 3,209 14 (7,451)
Accounts Receivable 6,430 (6,029) (6,076)
Prepaid expenses 7,903 (10,985) (6,728)
Other assets (124)
Accounts payable 20,574 (8,572) 8,542
Other accrued liabilities (73) (94) (885)
Tenant deposits 6,700 (8,782) 6,370
Unearned rent (377) (191) (4,106)
Due to affiliate (14,710) 14,707 (766)
------------ ------------ ------------
Net cash provided by operating activities 664,259 643,421 690,873
------------ ------------ ------------
Investing activities:
Capital Expenditures (236,207) (148,525) (29,862)
------------ ------------ ------------
Net cash used in investing activities (236,207) (148,525) (29,862)
------------ ------------ ------------
Financing activities:
Distribution to partners (489,972) (557,936) (692,146)
Net cash used in financing activities (489,972) (557,936) (692,146)
------------ ------------ ------------
Decrease in cash and equivalents (61,920) (63,040) (31,135)
Cash and equivalents, beginning of year 124,242 187,282 218,417
------------ ------------ ------------
Cash and equivalents, end of year $ 62,322 $ 124,242 $ 187,282
============ ============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-6
<PAGE>
RIVERCHASE INVESTORS I, LTD.
NOTES TO FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization - Riverchase Investors I, Ltd. (the Partnership) is a limited
partnership that is registered with the Security and Exchange Commission and
organized under the laws of the State of Florida, pursuant to a Certificate and
Agreement of Limited Partnership dated February 22, 1985, as amended and
restated as of December 30, 1985. The Partnership owns and operates 248
apartment units in Temple Terrace, Florida. The Partnership leases the apartment
units to individuals under short-term lease agreements.
Property, Plant, and Equipment - Land, buildings, and equipment are stated at
cost less accumulated depreciation. Depreciation is computed using the
straight-line method over lives ranging from 7 to 40 years. Maintenance and
repairs are charged to expense as incurred. Replacements and improvements are
capitalized and depreciated over the estimated useful lives of the assets. When
items of land, buildings, or equipment are sold or retired, the related cost and
accumulated depreciation are removed from the accounts and any gain or loss is
included in the results of operations.
Cash and Equivalents - The Partnership includes highly liquid marketable
securities and debt instruments purchased with an original maturity of three
months or less, if any, in cash and equivalents.
Revenue Recognition - Rental income attributable to leases is recognized on a
straight-line basis over the terms of the leases.
Income Taxes - No provision for income tax is recorded on the Partnership's
books as earnings and income tax credits are distributed to the individual
partners.
Net Income Per Limited Partnership Unit - net income per limited partnership
unit is computed by dividing 99% of the net income (limited partners' share) by
the weighted average limited partnership units outstanding (11,052) during each
period.
Use of Estimates - the preparation of the financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting periods. Actual results could differ from those
estimates.
2. RESTRICTED CASH
Restricted cash as of December 31, 1997 and 1996, consists of tenant deposits in
the amount of $31,197 and $34,406, respectively.
F-7
<PAGE>
3. RELATED PARTY TRANSACTIONS
The general partners of the Partnership are John H. McClintock; James H. Pugh,
Jr.; Thomas H. Lowder, James K. Lowder, Robert E. Lowder (the "Lowders"); and
Battery Park Corp., a New York corporation.
The Partnership has entered into contracts with affiliates of the Lowders to
manage the property for an annual fee of 5% of the gross collected revenues of
the property. The Partnership paid management fees of approximately $68,000,
$73,000, and $74,000 to Colonial Properties Services, Inc. (CPSI) in 1997, 1996,
and 1995, respectively.
Due to affiliate at December 31, 1997 and 1996 consists of an amount payable to
CPSI of $13 and $14,723, respectively, for amounts paid by CPSI on behalf of the
Partnership.
4. PROPOSED SALE OF THE PARTNERSHIP'S ASSETS
On September 2, 1997, the Partnership entered into a Real Estate Sales Contract
(the Sales Contract) with Colonial Realty Limited Partnership, a Delaware
limited partnership (the Purchaser), and an indirect subsidiary of Colonial
Properties Trust, an Alabama real estate investment trust, to sell Riverchase
Apartments - Phase I, consisting of 248 apartment units, related improvements,
and the land on which the apartment units and improvements are located in Temple
Terrace, Florida (the Project) to the Purchaser at a price of $8,480,000 in
cash. The consummation of the sale of the Project pursuant to the Sales Contract
is subject to and conditioned upon, among other things, the approval by the
limited partners of the Partnership holding a majority in interest of the
outstanding units of limited partnership of the Partnership of (i) an amendment
to the Partnership's Amended and Restated Certificate and Agreement of Limited
Partnership and (ii) the sale of the Project.
F-8
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
Substantially all of the liquid assets of the Partnership consist of
cash produced from the rental of apartments. The cash flow from operations is
distributed on a quarterly basis after deducting for the current liabilities and
cash needs of the Partnership. The Property generated an adequate amount of cash
in 1997 and 1996 to meet the cash needs of the enterprise. In addition, cash
distributions totaling $489,972 and $557,936 were paid to partners during 1997
and 1996, respectively. See "Statements of Cash Flows".
There are approximately $171,000 of capital improvements planned for
the Property during 1998. These improvements are necessary to enhance the
marketability of the property. The planned capital improvements include
replacing the exterior stairwells, landscaping, and refurbishing the clubhouse.
All improvements and repairs will be financed out of current-year cash flow. The
Property is unleveraged. Management has no plans at present or in the
foreseeable future to mortgage the Property.
RESULTS OF OPERATIONS
In 1997, the rent revenues of Riverchase I Apartments reflect the lower
occupancy rate of the surrounding area and the effect of the lease up of the
third phase of Riverchase (Riverchase III), noted below. Annual rent revenue
decreased by $132,036 or 9.2% and $21,866 or 1.5% in 1997 and 1996,
respectively. The annual average occupancy rate decreased year-to-year by
approximately 2.7% to 89.0% and by 5.2% to 91.7% in 1997 and 1996, respectively.
Therefore, while some of the decline in rent revenues resulted from lower
occupancy most of the decline is due to increased rent concessions deemed
necessary in order to attract tenants in the current Tampa market. When compared
with 1996, net income before depreciation decreased by $28,626 or 4.3%.
Total expenses before depreciation decreased by $68,562 or 8.3% in 1997
as compared to an increase of $15,034 or 1.9% in 1996. The decrease in
year-to-year total expenses before depreciation was made up of primarily two
line items. First, repairs and maintenance decreased by $55,072. This expense
reduction is primarily from the elimination of cable TV expense. Whereas cable
TV service was provided free of charge in 1996, the expenses were shifted to the
tenants in the current year. Second, salaries and wages decreased by $22,839.
The decrease in salaries and wages expense paid by Riverchase I is due to the
increased portion of salaries and wages paid by Riverchase III, a related
entity.
Colonial Properties Trust, an affiliate of Colonial Properties
Services, Inc. (CPSI), the management agent, is in the process of leasing up
Riverchase III. While Riverchase Investors I has no financial interest in
Riverchase III, the development of this phase will improve the overall
marketability of the Riverchase community and enable it to lower on-site
operating costs by spreading certain fixed expenses over a greater number of
units.
F-9
<PAGE>
See item four of the Notes to Financial Statements, above, for
information regarding the proposed sale of the Partnership's assets.
CPSI is aware of the potential issues associated with the data
conversion and system upgrades necessary for its computer systems to be year
2000 compliant. CPSI is also currently in the process of addressing the
operational impact the year 2000 issue will have on the Partnership. CPSI
expects to incur internal staff costs as well as other expenses related to
facilities enhancements necessary to prepare its systems for the year 2000. CPSI
currently believes that, with modifications to existing software at the
management agent level and upgrading operational systems at the property level,
the year 2000 issue will not have a material impact on the operations of the
Partnership. However, if such modifications or upgrades are not completed timely
or if software vendors, suppliers, or other companies upon whose systems CPSI
relies in the ordinary course of business have failed to appropriately address
the conversion issue, then the year 2000 issue may have a material impact on the
operations of the Partnership. At the current time, CPSI has not determined the
cost that will ultimately be incurred to be year 2000 compliant.
INFLATION
Inflation did not have a material impact on the Partnership during the
past three fiscal years. In the future, the Partnership may experience the
effects of inflation through increases in the costs of operating and maintaining
an apartment property of this type.
Any statement contained in this report which is not historical fact, or
which might be otherwise considered an opinion or projection concerning the
Company or its business, whether express or implied, is meant as and should be
considered a forward-looking statement as that term is defined in the Private
Securities Litigation Reform Act of 1996. Forward-looking statements are based
upon assumptions and opinions concerning a variety of known and unknown risks,
including but not necessarily limited to changes in market conditions, the
supply and demand for investable funds, interest rates, increased competition,
changes in governmental and local economic conditions generally, as well as
other risks completely described in the Company's filings with the Securities
and Exchange Commission, including this Consent Solicitation Statement. If any
of these assumptions or opinions prove incorrect, any forward-looking statements
made on the basis of such assumptions or opinions may also prove materially
incorrect in one or more respects.
F-10
<PAGE>
By order of the General Partners of the Partnership.
John H. McClintock, Jr.
James H. Pugh, Jr.
Battery Park Capital Corp.
Thomas H. Lowder
James K. Lowder
Robert E. Lowder
GENERAL PARTNERS
Date: May 14, 1998 By: /s/ Thomas H. Lowder
--------------------------
<PAGE>
Appendix A
- ----------
SALES CONTRACT
<PAGE>
REAL ESTATE SALES CONTRACT
--------------------------
THIS REAL ESTATE SALES CONTRACT made and entered into as of this 2nd day
of September, 1997 between:
SELLER: RIVERCHASE INVESTORS I, LTD., a Florida limited partnership;
and
PURCHASER: COLONIAL REALTY LIMITED PARTNERSHIP, a Delaware limited
partnership, its successors and assigns (hereinafter
referred to as "Purchaser").
The parties agree as follows:
1. AGREEMENT TO SELL AND PURCHASE: In consideration of the mutual
------------------------------
covenants and promises contained herein, Seller hereby agrees to sell and
Purchaser hereby agrees to purchase the real estate described on EXHIBIT "A",
which is attached hereto and incorporated herein by reference. Said real estate
is herein referred to as the "Property" and includes all improvements,
easements, appurtenances, rights-of-way, privileges, adjacent strips, gores of
land and other matters belonging to or pertaining to the Property. The Property
is commonly known as the Riverchase Apartments - Phase I. In addition to the
Property and as additional consideration for the payment of the purchase price,
Seller shall convey all personal property, tradename, furniture, fixtures and
equipment located on or used in connection with the Property.
2. PURCHASE PRICE: The purchase price shall be $8,480,000. The Earnest
--------------
Money shall be a credit against the Purchase Price.
3. DEPOSIT: Twenty-Five Thousand And No/100 Dollars ($25,000) (the
-------
"Initial Deposit") will be deposited by Purchaser with an agent of Chicago Title
Insurance Corporation ("Escrow Agent") upon Seller's acceptance of this offer as
evidenced by Seller's signature below. This Initial Deposit is paid as evidence
of Purchaser's good faith intention to review those materials provided in
Paragraph 11 and such other matters as Purchaser deems appropriate in order to
determine if the Property appears to be suitable for its portfolio. If Purchaser
is satisfied with the results of its inspection and investigation, then at the
end of the Due Diligence Period [as defined in Paragraph 4(a)], Purchaser will
deposit the additional sum of Seventy-Five Thousand And No/100 Dollars ($75,000)
(the "Additional Deposit"). Both the Initial Deposit and this Additional Deposit
are herein referred to as the "Earnest Money." In the event Purchaser fails to
make the Additional Deposit prior to the expiration of the Due Diligence
<PAGE>
Period, the Initial Deposit (less $100.00 as consideration to Seller for
entering into this Agreement) shall be returned to Purchaser, and neither party
shall have any further obligation to the other. Upon making the Additional
Deposit, the Earnest Money shall be held by the Escrow Agent and applied to the
cash due at Closing. The Earnest Money shall be deposited in an interest bearing
account with all interest earned for the benefit of Purchaser.
4. DUE DILIGENCE PERIOD AND SELLER'S OBLIGATIONS UNTIL CLOSING:
-----------------------------------------------------------
(a) Purchaser shall have until October 31, 1997 (the "Due Diligence
Period") within which to satisfy itself as to all matters concerning its
acquisition, ownership and operation of the Property, including, without
limitation, matters concerning title, survey, zoning, subdivision laws,
environmental matters, review and approval of leases, contracts and financial
matters affecting the Property, existence of all required licenses, permits and
approvals, approval of the condition of the improvements on the Property, all
soil, landscaping and other physical conditions of the Property, availability
and sufficient quantities of all utilities, and other matters in its discretion.
From the date this Agreement is executed until the Closing, Seller hereby grants
to Purchaser and its agents full access to the Property and all of Sellers
records in order to conduct such inspections and tests as Purchaser deems
necessary in order to reach its decision by the end of the Due Diligence Period.
(b) At the end of the Due Diligence Period discussed in Paragraph 4(a)
above, in the event Purchaser makes the Additional Deposit, then the Earnest
Money will be at risk and, as Seller's sole remedy, will be forfeited as
liquidated damages in the event Purchaser fails to close, except due to a
default by the Seller or the failure of any condition to Purchaser's
obligations, as set forth herein.
(c) Seller hereby agrees that between the date of this Agreement and
Closing, Seller will (i) maintain the Property in good repair and first class
operating condition, (ii) prepare for rental any vacant units that now exist or
become vacant prior to Closing, and (iii) maintain all personal property and
equipment in good working order. Seller will continue to use its best efforts
to lease the Property at current market rates and on current market terms.
5. SURVEY AND TITLE COMMITMENT; PERMITTED EXCEPTIONS.
-------------------------------------------------
(a) Preliminary Title Report. Purchaser shall cause Chicago Title Insurance
------------------------
Company, or an agent thereof, ("Title Company") to issue and deliver to
Purchaser an
3
<PAGE>
A.L.T.A. Form B title commitment on the 1970 form ("Title Commitment") in the
amount of the Purchase Price, accompanied by one copy of all documents affecting
the Property and which constitute exceptions to the Title Commitment. Purchaser
shall give Seller written notice (the "Title Notice") on or before the
expiration of the Due Diligence Period, whether such title is or is not
acceptable to Purchaser. In the event that the condition of title is not
acceptable to Purchaser, Purchaser shall state in the Title Notice which
exceptions to the Title Commitment are unacceptable and Seller shall undertake
to eliminate those exceptions as set forth below; provided, however, that at
Closing mortgages may be satisfied or the liens thereof released as to the
Property. Upon receipt of the Title Notice, Seller shall use good faith efforts
to eliminate or modify all unacceptable matters to the satisfaction of
Purchaser. Purchaser may at any time waive in writing its objection to title and
accept title to the Property subject to the exceptions objected to by Purchaser.
In the event Purchaser does not waive its objections (as set forth in the Title
Notice) and if Seller is unwilling or unable, upon exercise of due diligence, to
remove the matters within thirty (30) days after receipt of the Title Notice,
Purchaser may, at its option (i) accept title subject to the objections raised
by Purchaser, in which event said objection(s) shall be deemed waived for all
purposes, or (ii) rescind this Agreement, whereupon this Agreement shall
terminate and all Earnest Money with interest (less $100.00 as consideration to
be paid to Seller) shall be returned to Purchaser.
(b) Current Survey. Purchaser shall obtain a current as-built survey of
--------------
the Property prepared by a duly licensed land surveyor (the Survey"). Such
surveyor shall follow the survey instructions attached hereto as Exhibit "B-1"
and certify the survey pursuant to the Surveyor's Certificate attached hereto as
Exhibit "B-2". In the event the Survey shows any encroachments or any
improvements upon, from, or onto the Property, or on or between any building
setback line, property line, or any easement, or any other matter objectionable
to Purchaser, said encroachment or objection shall be treated in the same manner
as a title defect under the procedure set forth in Paragraph 5(a) above. Notice
of any such Survey encroachment or objection must be provided by Purchaser to
Seller on or before the expiration of the Due Diligence Period.
(c) Permitted Exceptions. The Property shall be conveyed to Purchaser
--------------------
subject to ad valorem taxes for the current year, and any exceptions or
encumbrances on the Title Commitment not objected to by Purchaser pursuant to
Paragraph 5(a) above on or before the expiration of the Due Diligence Period or
which Purchaser thereafter agrees to accept (the "Permitted Exceptions").
6. PROVISIONS WITH RESPECT TO CLOSING.
----------------------------------
(a) Closing Date. The consummation of the transaction contemplated by this
------------
Agreement ("Closing") shall take place at the offices of Leitman, Siegal &
Payne, P.C., 600
4
<PAGE>
North 20th Street, Suite 400, Birmingham, Alabama 35203, on or before thirty
(30) days following the expiration of the Due Diligence Period, provided
Purchaser has made the Additional Deposit.
(b) Seller's Obligations at Closing. At Closing, Seller shall do the
-------------------------------
following:
(i) Execute, acknowledge, and deliver to Purchaser a General
Warranty Deed conveying the Property to Purchaser subject only
to the Permitted Exceptions, which deed shall be in form
attached hereto as Exhibit "C" which is incorporated herein by
reference. The legal description of the Property contained in
such deed shall be identical to the legal description of the
Property as contained in the Survey and the Title Commitment.
(ii) Deliver to Title Company evidence satisfactory to it of Seller's
authority to execute and deliver the documents necessary or
advisable to consummate the transaction contemplated hereby in
the form of resolutions or minutes of Seller.
(iii) Cause to be furnished and delivered to Purchaser, and the Title
Company such documents necessary for the Title Company to issue
an owner's Title Insurance Policy as described in Paragraph
5(a).
(iv) Execute and deliver to Purchaser and Title Company a Lien Waiver
Affidavit so as to cause Title Company to remove the mechanics'
lien and parties in possession standard exceptions from the
Title Commitment.
(v) Execute and deliver to Purchaser and Title Company a FIRPTA
certificate concerning resident alien or non-alien status for
IRS withholding purposes in the form attached hereto as Exhibit
"D".
(vi) Execute and deliver to Purchaser a Bill of Sale as to the
Tangible Personal Property in the form attached hereto as
Exhibit "E".
5
<PAGE>
(vii) Execute an Assignment of any guaranties or warranties,
including a termite bond, with respect to the Property in the
form attached as Exhibit "H".
(viii) Execute an Assignment of Leases in the form attached as
Exhibit "I".
(ix) Execute and deliver an Assignment of Intangibles in the form
attached hereto as Exhibit "J".
(x) Execute and deliver an Assignment and Assumption of Contracts
in the form attached hereto as Exhibit "K".
(xi) Deliver to Purchaser audited consolidated balance sheets of
Seller at December 31, 1995 and December 31, 1996 and the
related consolidated statements of income and expense for each
of the fiscal years then ended, together with the report
thereon of Seller's independent certified public accountants.
Seller shall also deliver such other financial information in
Seller's possession or reasonably obtained by Seller as
Purchaser may reasonably request, including monthly income and
expenses statements.
(xii) Execute such other documents, resolutions, or instruments as
may reasonably be required by Purchaser or the Title Company
required by this Agreement to effectuate the agreement
memorialized herein.
(xiii) Execute and deliver to Purchaser certified financial
statements, including income and expense statements for the
prior calendar year as well as up-to-date for the year of
Closing in order for Purchaser to file various forms required
of Purchaser with the Securities and Exchange Commission.
(xiv) Seller agrees to provide to Purchaser all financial statements
and other information necessary to permit Purchaser and its
independent certified public accountants to prepare audited
financial statements and other financial information required
by the rules and regulations of the Securities and Exchange
Commission, including but not limited to Rule 3.14 and Article
XI of Regulation S-X, to be included in any report,
registration statement, or other document required to be filed
6
<PAGE>
with the Securities and Exchange Commission by Purchaser or
Colonial Properties Trust. Notwithstanding any other provision
of this Agreement, Seller's obligation to provide such
information shall survive the Closing.
(c) Purchaser's Obligations at Closing. Contemporaneously with the
----------------------------------
performance by Seller of its obligations set forth in Paragraph 6(b) above,
Purchaser shall at Closing do the following:
(i) Subject to adjustments, costs and prorations provided for herein,
deliver the balance of the Purchase Price required to close
hereunder, in accordance with the terms of Paragraph 2 above, by
check or bank wire transfer to the Title Company's designated
account.
(ii) Execute and/or deliver any such other document, resolution, or
instrument reasonably required by Seller or Title Company or
required by this Agreement to effectuate the agreement
memorialized herein.
(d) Closing Costs. Closing costs shall be allocated as follows:
-------------
(i) Seller shall pay the following costs and expenses in connection
with the Closing:
(a) Seller's attorney's fees; and
(b) Real estate commission to Bear Stearns pursuant to Paragraph
9 hereof.
(c) The premium for the Title Commitment and the Title Policy
issued pursuant thereto, and all Survey costs; and
(d) Environmental report obtained by Purchaser;
(ii) Purchaser shall only be responsible for the following closing
costs and expenses in connection with the Closing:
(a) Purchaser's attorneys' fees;
7
<PAGE>
(b) Recording fees and documentary stamps for the deed;
(c) Structural reports obtained by Purchaser;
(d) Investigation costs of Purchaser during Due Diligence
Period; and
(e) Lease review costs of Purchaser.
(e) Proration of Taxes. Taxes for the year of the Closing shall be
------------------
prorated to the date of Closing. If the Closing shall occur before the tax rate
is fixed for the then current year, the apportionment of taxes shall be upon the
basis of the tax rate of the preceding year applied to the latest assessed
valuation. Subsequent to the Closing, when the tax rate is fixed for the year
in which the Closing occurs, Seller and Purchaser agree to adjust the proration
of taxes and, if necessary, to refund or pay, as the case may be, on or before
January 1 of the year following the Closing, an amount necessary to effect such
adjustments. These obligations survive Closing.
(f) Additional Prorations. All current rent and other income from the
---------------------
Property and all current assessments, utilities, maintenance charges and similar
expenses of the Property shall be prorated between Seller and Purchaser as of
the Closing Date and, to the extent of information then available, such
prorations shall be made at the Closing. For matters which cannot be prorated
at Closing, Purchaser shall receive a credit at Closing for an amount equal to
the previous month's invoice for such matter(s) ("Credit") which Purchaser shall
hold for use in payment of the invoice when it is received, prorating the
invoice for the period prior to Closing for which Seller shall be responsible.
For all sums for which Purchaser receives a Credit hereunder, Purchaser shall
account for all invoices within sixty (60) days following Closing. Any portion
of the Credit not used to pay Seller's portion of any invoices shall be refunded
to Seller at the expiration of this sixty (60) day period. A proration
accounting shall also be delivered to Seller with any refund. Any shortfall
shall be paid to Purchaser by Seller upon demand. Purchaser will collect all
rents after Closing whether past due or for future periods. Purchaser will
credit all receipts first to current rentals and other payments due and will
remit to Seller any excess amounts which may be applied to past due rents.
Purchaser will have no liability for failure to collect past due rents.
7. REPRESENTATIONS AND WARRANTIES: Attached hereto and incorporated
------------------------------
herein by reference designated Exhibit "F" is a list of matters concerning the
legality and proper operation of the Property which Seller is making to
Purchaser.
8
<PAGE>
8. PROVISIONS WITH RESPECT TO DEFAULT.
----------------------------------
(a) Default by Seller. In the event that Seller should fail to consummate
-----------------
the transaction contemplated herein for any reason, except Purchaser's default,
Purchaser may (i) enforce specific performance on this Agreement, (ii) elect to
receive a return of all Earnest Money along with any interest earned thereon, or
(iii) pursue its remedies available at law or in equity.
(b) Default by Purchaser. In the event Purchaser should fail to consummate
--------------------
the transaction contemplated herein for any reason after expiration of the Due
Diligence Period, provided, however, that the Additional Deposit is made, except
default by Seller or the failure of any condition to Purchaser's obligations, as
set forth herein, Seller may, as its sole and exclusive remedy, terminate this
Agreement and retain the Earnest Money, with accrued interest, such sum being
agreed upon as liquidated damages for the failure of Purchaser to perform the
duties and obligations imposed upon it by the terms and provisions of this
Agreement and because of the difficulty, inconvenience, and uncertainty of
ascertaining actual damages. No other damages, rights or remedies shall in any
case be collectible, enforceable or available to Seller other than as provided
in this Paragraph 8(b).
(c) Attorney's Fees, etc. Should either party employ an attorney or
---------------------
attorneys to enforce any of the provisions hereof, or to protect its interest in
any matter arising under this Agreement, or to specifically enforce or to
recover the Earnest Money for the breach of this Agreement, the party prevailing
shall be entitled to recover from the other party all reasonable costs, charges
and expenses, including attorney's fees, expended or incurred in connection
therewith, including fees and expenses incurred in arbitration, on appeal or in
any bankruptcy action.
9. COMMISSIONS. The commission payable to Bear Stearns (the "Broker")
-----------
pursuant to this Agreement shall be paid by Purchaser, pursuant to separate
written agreement between the Purchaser and the Broker. Seller and Purchaser
further agree to indemnify and hold each other harmless from and against any and
all other claims or demands with respect to any brokerage fees or agents'
commissions or other compensation asserted against the other party by any
persons, firm or corporation claiming through the indemnifying party in
connection with this Agreement or the transaction contemplated hereby. The
Broker's commission is payable only if, as and when the transaction closes. The
provisions of this paragraph shall survive closing.
10. EMINENT DOMAIN AND CASUALTY DAMAGE.
----------------------------------
(a) Eminent Domain. If, before Closing, proceedings are commenced for the
--------------
taking by exercise of the power of eminent domain of all or a part of the
Property which
9
<PAGE>
would render the Property unacceptable to Purchaser or unsuitable for
Purchaser's intended use, Purchaser shall have the right, by giving notice to
Seller within thirty (30) days after Seller gives written notice of the
commencement of such proceedings to Purchaser, to terminate this Agreement, in
which event this Agreement shall terminate and all Earnest Money, including
interest thereon shall be refunded to Purchaser. If, before the Closing Date,
Purchaser has the right to terminate this Agreement pursuant to the preceding
sentence but Purchaser does not exercise such right, then this Agreement shall
remain in full force and effect and, at Closing, the condemnation award (or, if
not theretofore received, the right to receive such award) payable on account of
the taking shall be transferred to Purchaser. Seller shall give written notice
to Purchaser promptly after Seller's receiving notice of the commencement of any
proceedings for the taking by exercise of the power of eminent domain of all or
any part of the Property. Purchaser shall have a period of thirty (30) days
after Seller has given the notice to Purchaser required by this Paragraph 10(a)
to evaluate the extent of the taking and make the determination as to whether to
terminate this Agreement. If necessary, the Closing Date shall be postponed
until Seller has given the notice to Purchaser required by this Paragraph 10(a)
and the period of thirty (30) days described in this Paragraph 10(a) has
expired.
(b) Casualty Damage. If, before the Closing Date, all or any part of the
---------------
Property is damaged or destroyed by any casualty, Purchaser shall have the
right, by giving notice to Seller within thirty (30) days after Seller gives
written notice of the occurrence of such casualty to Purchaser, to terminate
this Agreement, in which event this Agreement shall terminate, and all Earnest
Money, including interest thereon shall be refunded to Purchaser. If, before
the Closing Date, all or any part of the Property are damaged by any casualty or
if Purchaser has the right to terminate this Agreement pursuant to the preceding
sentence but Purchaser does not exercise such right, then this Agreement shall
remain in full force and effect and, at Closing, any insurance proceeds shall be
assigned by Seller to Purchaser. Seller shall give written notice to Purchaser
promptly after the occurrence of any damage to the improvements on the Property
by any casualty. Purchaser shall have a period of thirty (30) days after Seller
has given the notice to Purchaser required by this Paragraph 10(b) to evaluate
the extent of the damage and make the termination as to whether to terminate
this Agreement. If necessary, the Closing shall be postponed until Seller has
given the notice to Purchaser required by this Paragraph 10(b) and the period of
thirty (30) days described in this Paragraph 10(b) has expired.
11. INFORMATION: Within five (5) days from the date this Agreement is
-----------
executed, Seller shall furnish such items as Purchaser shall reasonably request
but in any event including the following:
(a) Real estate tax bills for the current and two preceding years;
10
<PAGE>
(b) Owner's title insurance policy;
(c) Current survey;
(d) Environmental reports made or known to you with respect to the
Property;
(e) List of pending litigation and status report;
(f) Copies of covenants or restrictions pertaining to the Property, and
copies of approved site plan, zoning information, whether adjacent
roads have been accepted for public use, information as to
availability of utilities to the site, signage restrictions and
availability of signage to the Property, all zoning approvals,
variances and ordinances applicable;
(g) Utility bills for the current year;
(h) Copies of all contracts, if any, in effect such as janitorial,
maintenance, cable company, utility company, management, leasing or
other, as well as copies of any guaranties or warranties, including a
termite bond;
(i) Operating income and expenses for the current year;
(j) True and correct copies of the form lease and any amendments or
modifications thereof;
(k) Current rent roll;
(l) Present location of all utilities which will serve the premises,
whether underground or overhead, together with documentation
reflecting any easements or other rights pertaining thereto and the
ability of the owner of the Property to access such utilities and
easements;
(m) Copies of insurance policies and Loss Run regarding insurance;
(n) Engineering/structural reports on the Property;
(o) As-built constructions plans and site plans and drawings, certificates
of occupancy and building permits; and
11
<PAGE>
(p) List of all inventory, personal property, furniture, fixtures and
equipment located on or used in connection with the Property.
Note: Any management or leasing obligations must be satisfied and released
----
prior to Closing.
12. CONDITIONS PRECEDENT. This contract is conditioned upon the
--------------------
following being satisfied on or prior to Closing.
(a) Seller executing an amendment to its partnership agreement
permitting the sale of the Property; and
(b) approval by the limited partners of Seller to the transaction
contemplated by this contract.
In the event either of the conditions set forth above are not completed on or
prior to Closing, all Earnest Money shall be refunded to Purchaser, and this
Agreement shall terminate.
13. OTHER CONTRACTUAL PROVISIONS.
----------------------------
(a) Notices. Any notice to be given or to be served upon any party
-------
hereto in connection with this Agreement must be in writing, and may be given by
certified mail, or overnight receipt delivery service, and shall be deemed to
have been given and received when a certified letter containing such notice,
properly addressed, with postage prepaid, is deposited in the United States
mail; and, if given otherwise than by certified mail, it shall be deemed to have
been given when delivered to and received by the party to whom it is addressed.
Such notices shall be given to the parties hereto at the following addresses:
FOR PURCHASER: Colonial Realty Limited Partnership
c/o Colonial Properties Holding Company, Inc.
2101 6th Avenue North
Suite 750
Birmingham, Alabama 35203
Attention: Mr. Paul F. Earle
FOR SELLER: Riverchase Investors I, Ltd.
c/o Colonial Properties Management Association
2101 6th Avenue North, Suite 750
Birmingham, Alabama 35203
Attention: Mr. Thomas H. Lowder
12
<PAGE>
Any party hereto may, at any time by given written notice to the other party
hereto, designate any other address in substitution of the foregoing address to
which such notice shall be given and other parties to whom copies of all notices
hereunder shall be sent.
(b) Confidentiality. Seller acknowledges that it has been informed that
---------------
Purchaser is affiliated with Colonial Properties Trust (the "REIT"), a company
whose securities are publicly traded. Seller agrees not to disclose the
existence of this Agreement, or discussions about or the terms hereof (except to
its attorneys, accountants, other advisors and partners, provided that they
agree not to disclose such information) without Purchaser's consent, unless
required by law or unless such information is otherwise publicly available.
Seller also agrees not to utilize any confidential information about the REIT
learned as a result of this transaction in connection with investments and the
securities of the REIT.
(c) Entire Agreement; Modification. This Agreement embodies and
------------------------------
constitutes the entire understanding between the parties with respect to the
transaction contemplated herein. All prior or contemporaneous agreements,
understandings, representations, and statements, oral or written, are merged
into this Agreement. Neither this Agreement nor any provisions hereof may be
waived, modified, amended, discharged, or terminated except by an instrument in
writing signed by the party against whom the enforcement of such waiver,
modification, amendment, discharge or termination is sought, and then only to
the extent set forth in such instrument.
(d) Applicable Law. This Agreement shall be governed by, and construed in
--------------
accordance with, the laws of the State of Florida.
(e) Binding Effect. This Agreement shall be binding upon and inure to the
--------------
benefit of the parties hereto and their successors and assigns.
(f) Severability. In case any one or more of the provisions contained in
------------
this Agreement shall for any reason be held to be invalid, illegal or
unenforceable in any respect, such invalidity, illegality or unenforceability
shall not affect any other provision hereof, and this Agreement shall be
construed as if such invalid, illegal or unenforceable provision had never been
contained herein.
(g) Effective Date of Agreement. For all purposes herein, the "date" of
---------------------------
this Agreement shall be that date upon which the last of Seller or Purchaser
executes this Agreement.
(h) Gender. Whenever the context permits, singular shall include plural
------
and one gender shall include all.
13
<PAGE>
(i) Time of the Essence. Time is of the essence of this Agreement. Time
-------------------
periods herein of less than six (6) days, unless otherwise noted, shall in the
computation exclude Saturdays, Sundays and state or national legal holidays, and
any time period provided for herein which shall end on Saturday, Sunday or legal
holiday shall extend to 5:00 p.m. of the next business day.
(j) Risk of Loss. Except as otherwise set forth in this Agreement, Seller
------------
shall bear the risk of any loss to the Property prior to Closing.
(k) Construction. The parties hereby agree that each has played an equal
------------
part in the negotiations and drafting of this Agreement, and in the event any
ambiguities should be realized in the construction or interpretation of this
Agreement, the result of those ambiguities shall be equally assumed and realized
by each of the parties to this Agreement.
(l) Counterparts. This Agreement may be executed in counterparts, each of
------------
which shall be an original, but all of which shall constitute one and the same
Agreement.
(m) Survival. All provisions hereof which are executory in nature or
--------
otherwise by their context are intended to survive Closing shall be deemed to
survive such Closing.
(n) Radon Gas. Purchaser acknowledges the following statutory disclosure
---------
by Seller: Radon is a naturally occurring radioactive gas that, when it has
accumulated in a building in sufficient quantities, may present health risks to
persons who are exposed to it over time. Levels of radon that exceed federal
and state guidelines have been found in buildings in Florida. Additional
information regarding radon testing may be obtained from your county public
health unit.
14. ACCEPTANCE: The offer made in this Agreement by Purchaser shall
----------
expire and be null and void unless accepted, signed, and returned to
Purchaser by December 31, 1998. This offer supersedes any and all other
offers made by Purchaser with respect to the Property.
PURCHASER:
COLONIAL REALTY LIMITED PARTNERSHIP,
a Delaware limited partnership
By: Colonial Properties Holding Company, Inc.,
an Alabama corporation
Its: General Partner
14
<PAGE>
By: /s/ Charles A. McGehee
-------------------------------------
Charles A. McGehee
Its: Executive Vice President
SELLER:
RIVERCHASE INVESTORS I, LTD., a Florida limited
partnership
By: /s/ Thomas H. Lowder
-------------------------------------
Thomas H. Lowder
Its: General Partner
By: /s/ James K. Lowder
-------------------------------------
James K. Lowder
Its: General Partner
By: /s/ Robert E. Lowder
-------------------------------------
Robert E. Lowder
Its: General Partner
By: /s/ John H. McClintoch, Jr.
-------------------------------------
John H. McClintoch, Jr.
Its: General Partner
By: /s/ James H. Pugh, Jr.
-------------------------------------
James H. Pugh, Jr.
Its: General Partner
By: Battery Park Capital Corp.
Its: General Partner
By:
---------------------------------
Its:
--------------------------------
15
<PAGE>
Appendix B
- ----------
OPINION OF STANGER
<PAGE>
[LETTERHEAD OF ROBERT A. STANGER & CO.]
Riverchase Investors I, Ltd..
2101 6th Avenue North - Suite 750
Birmingham, Alabama 35202
Gentlemen:
You have advised us that Riverchase Investors I, Ltd. (the "Partnership")
is entering into a transaction (the "Sale") in which Colonial Village At River
Hills (also know as "Riverchase Apartments") - Phase I, an apartment property
consisting of 248 units owned by the Partnership and located in Temple Terrace,
Florida (the "Project"), will be sold to Colonial Realty Limited Partnership
(the "Purchaser"), an indirect subsidiary of Colonial Properties Trust, a
publicly-traded real estate investment trust affiliated with the general
partners of the Partnership, for an all-cash purchase price of $8,480,000 (the
"Purchase Price"). The limited partners of the Partnership will be asked to
approve the Sale.
The general partners of the Partnership (the "General Partners") have
requested on behalf of the limited partners that Robert A.Stanger & Co., Inc.
("Stanger") provide its opinion as to the fairness, from a financial point of
view, of the Purchase Price to be received by the Partnership in exchange for
the Project.
In the course of our review to render this opinion, we have, among other
things:
. Reviewed a draft of the Consent Solicitation Statement related to the
Sale, which management has informed us is in substantially the form
which will be filed with the Securities and Exchange Commission
("SEC");
. Reviewed a draft of the Real Estate Sales Contract between the
Partnership and the Purchaser, which management has informed us is in
substantially the form which will be used to consummate the
Sale;
. Reviewed the Partnership's annual reports filed with the SEC on Form
10-K for the four fiscal years ending December 31, 1994, 1995, 1996
and 1997, which reports the Partnership's management has indicated to
be the most current publicly available financial statements;
2
<PAGE>
. Reviewed summary historical operating statements for the Project for
1994, 1995, 1996 and 1997, and the operating budget for 1998;
. Reviewed the January 22, 1998 appraisal of the Project prepared by
Consortium Appraisal, Inc. (the "Appraiser"), and discussed with the
Appraiser the appraisal process, methodology, analysis and
conclusions;
. Performed a site inspection of the Project and reviewed local real
estate market conditions;
. Reviewed information regarding purchases and sales of apartment
properties in the general market area of the Project and by entities
affiliated with the Partnership and/or the General Partners and other
information relating to acquisition criteria for apartment properties;
. Discussed with management of the Partnership market conditions in the
Project's local market for apartment properties, conditions in the
Project's market for sales/acquisitions of properties similar to the
Project, current and projected operations and performance of the
Project, the physical condition of the Project, and the financial
condition of the Partnership;
. Interviewed representatives of Bear Stearns regarding the process of
soliciting, receiving and evaluating bids and conducting negotiations;
. Reviewed offering materials relating to the Project and the complex
provided to prospective purchasers, and a summary of the bids which
were received as a result of the conduct of the bidding process;
and
. Conducted other studies, analyses, inquires and investigations as
Stanger deemed appropriate.
In rendering this fairness opinion, we have relied upon and assumed,
without independent verification, the accuracy and completeness of all financial
and other information contained in the Consent Solicitation Statement or that
was furnished or otherwise communicated to us by the Partnership, the General
Partners, the Purchaser, Bear Stearns, the Appraiser, the Project's on-site
management and third party sources. We have not performed an independent
appraisal of the assets and liabilities of the Partnership. We have relied on
the assurances of the Partnership, the General Partners, the Purchaser and the
Project's on-site management that any financial statements, projections, or
forecasts contained in the Consent Solicitation Statement or otherwise provided
or communicated to us, were reasonably prepared on bases consistent with actual
historical experience and reflect the best currently available estimates and
good faith judgments; that no material changes have occurred in the information
reviewed between the date of such information and the date of this letter; and
that the Partnership, the General Partners, the Purchaser and the Project's on-
site management is not aware of any information or facts that would cause the
information supplied to us to be incomplete or misleading in any material
respect.
We have not been requested to, and therefore did not: (i) appraise the
Project; (ii) select the method of determining the Purchase Price offered in the
Transaction; (iii) make any recommendation to the partners of
3
<PAGE>
the Partnership with respect to whether to approve or reject the Sale; or
(iv) express any opinion as to the business decision to effect the Sale,
alternatives to the Sale, or tax factors resulting from the Sale. Our opinion is
based on business, economic, real estate and securities markets, and other
conditions as of the date of our analysis and addresses the Sale in the context
of information available and which could be evaluated as of the date of our
analysis. Events occurring after that date may materially affect the assumptions
used in preparing the opinion.
Based upon and subject to the foregoing, and in reliance thereon, it is our
opinion that as of the date of this letter the Purchase Price to be received by
the Partnership in exchange for the Project in the Sale is fair to the limited
partners from a financial point of view.
The preparation of a fairness opinion is a complex process and is not
necessarily susceptible to partial analysis or summary description. We have
advised the Partnership that our entire analysis must be considered as a whole
and that selecting portions of our analysis and the factors considered by us,
without considering all analyses and facts, could create an incomplete view of
the evaluation process underlying this opinion.
Yours truly,
Robert A. Stanger & Co., Inc.
Shrewsbury, New Jersey
May 13, 1998
4
<PAGE>
CONSENT FORM
This Consent Form (the "Consent Form") must be completed and returned by
every limited partner who wishes to vote for or against the proposals (the
"Proposals") to (i) amend (the "Amendment Proposal") the Amended and Restated
Certificate and Agreement of Limited Partnership (the "Partnership Agreement")
of Riverchase Investors I, Ltd. (the "Partnership") and (ii) sell (the "Sale
Proposal") the Riverchase Apartments -- Phase I owned by the Partnership (the
"Project"), that are described in the Consent Solicitation Statement. The
Proposals are being made in connection with the proposed sale of the Project
(the "Sale") pursuant to the Real Estate Sales Contract dated September 2, 1997
(the "Sales Contract") between the Partnership and Colonial Real Estate Limited
Partnership, a Delaware limited partnership (the "Purchaser"), and an indirect
subsidiary of Colonial Properties Trust, an Alabama real estate investment trust
("Colonial") and the resulting dissolution and liquidation of the Partnership.
THIS CONSENT FORM MUST BE RETURNED TO AND RECEIVED BY:
GEMISYS, Inc.
Proxy Department
7103 South Revere Parkway
Englewood, Colorado 80112
BY FACSIMILE: 1-800-387-7365
PRIOR TO 5:00 P.M., NEW YORK CITY TIME, ON Monday, June 22, 1998, OR SUCH
LATER DATE AS MAY BE DESIGNATED IN A MAILING TO ALL LIMITED PARTNERS (THE
"EXPIRATION DATE"). The Consent Form will be effective only when it is actually
received by GEMISYS. A self-addressed return envelope has been provided for
your convenience, if you desire to mail this Consent Form.
All Consent Forms that are properly executed and returned to GEMISYS prior
to the Expiration Date will be voted in accordance with the elections set forth
therein. ANY LIMITED PARTNER WHO ABSTAINS OR FAILS TO RETURN A SIGNED CONSENT
FORM WILL BE DEEMED TO HAVE VOTED AGAINST THE PROPOSALS. PROPERLY EXECUTED
CONSENT FORMS THAT ARE NOT MARKED AS TO A PARTICULAR PROPOSAL WILL BE DEEMED TO
BE VOTED FOR THE PROPOSAL.
Before completing this Consent Form, you and your advisor, if any, should
carefully review the Consent Solicitation Statement. The proposed amendments to
the Partnership Agreement, including the text of such amendments, is set forth
in detail in the Amendment Proposal of the Consent Solicitation Statement.
CERTAIN OF THE GENERAL PARTNERS OF THE PARTNERSHIP ARE AFFILIATES OF THE
PURCHASER AND COLONIAL AND, THEREFORE, HAVE SUBSTANTIAL CONFLICTS OF INTEREST
WITH RESPECT TO THE PROPOSALS. ACCORDINGLY, THE GENERAL PARTNERS MAKE NO
RECOMMENDATION TO ANY LIMITED PARTNER AS TO WHETHER TO VOTE FOR OR AGAINST THE
PROPOSALS. EACH LIMITED PARTNER MUST MAKE HIS OR HER OWN DECISION WHETHER OR
NOT TO VOTE FOR OR AGAINST THE PROPOSALS.
IF YOU HAVE ANY QUESTIONS REGARDING THE PROPOSALS, PLEASE CONTACT INVESTOR
RELATIONS AT (800) 645-3917. IF YOU WOULD LIKE ASSISTANCE IN COMPLETING THIS
CONSENT FORM, PLEASE CONTACT THE TRUST COMPANY OF AMERICA (THE "INFORMATION
AGENT") AT (800) 955-9033.
Consent Forms may be withdrawn at any time prior to the Expiration Date. In
addition, you may change your vote subsequent to the submission of a Consent
Form, but prior to the Expiration Date. For a withdrawal or change of vote to be
effective, you must execute and deliver, prior to the Expiration Date, a
subsequently dated Consent Form or a written notice stating that the consent is
revoked to GEMISYS at the address set forth above. Consent Forms and notices of
withdrawal or change of vote dated or received after the Expiration Date will
not be valid.
<PAGE>
FORM OF CONSENT
You may vote on each of the Proposals by marking the appropriate boxes
relating to the Amendment Proposal and the Sale Proposal (each as defined on the
front of this Consent Form) below. THE CONSUMMATION OF THE SALE AND THE
DISSOLUTION AND LIQUIDATION OF THE PARTNERSHIP REQUIRES THE AFFIRMATIVE CONSENT
OF LIMITED PARTNERS HOLDING A MAJORITY OF THE OUTSTANDING UNITS OF LIMITED
PARTNERSHIP INTEREST OF THE PARTNERSHIP (THE "UNITS"). Abstentions on any or all
of the Proposals will have the same effect as votes AGAINST such Proposal(s).
<TABLE>
<CAPTION>
AMENDMENT PROPOSAL SALE PROPOSAL
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<S> <C>
(PAGE 31 OF CONSENT SOLICITATION (PAGE 32 OF CONSENT SOLICITATION
STATEMENT) STATEMENT)
AMENDMENT TO THE PARTNERSHIP AGREEMENT SALE OF THE PROJECT TO THE PURCHASER
TO ALLOW THE SALE TO THE PURCHASER PURSUANT TO THE SALES CONTRACT
[_] FOR [_] AGAINST [_] ABSTAIN [_] FOR [_] AGAINST [_] ABSTAIN
</TABLE>
The undersigned hereby acknowledges receipt of the Consent Solicitation
Statement, dated May 14, 1998. If Units are owned jointly, all joint owners
must sign below. ALL OWNERS MUST SIGN THEIR NAMES EXACTLY AS SET FORTH ON THE
STICKER BELOW. All Units represented by properly executed consent forms will be
voted in accordance with the choices specified in the forms. IF NO CHOICE IS
SPECIFIED, THE UNITS WILL BE VOTED FOR THE PROPOSAL(S).
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DATE: __________________ SIGNATURE(S) OF PARTNER(S):_______________________
SIGNATURE(S) OF PARTNER(S):_______________________
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[attach identification sticker here]
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