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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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SCHEDULE 14D-9
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SOLICITATION/RECOMMENDATION STATEMENT PURSUANT TO SECTION 14(D)(4)
OF THE SECURITIES EXCHANGE ACT OF 1934
CONSOLIDATED CAPITAL INSTITUTIONAL PROPERTIES/3,
A CALIFORNIA LIMITED PARTNERSHIP
(Name of Subject Company)
CONSOLIDATED CAPITAL INSTITUTIONAL PROPERTIES/3,
A CALIFORNIA LIMITED PARTNERSHIP
(Name of Person(s) Filing Statement)
UNITS OF LIMITED PARTNERSHIP INTEREST
(Title of Class of Securities)
N/A
(Cusip Number of Class of Securities)
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WILLIAM H. JARRARD, JR.
PRESIDENT
CONCAP EQUITIES, INC.
ONE INSIGNIA FINANCIAL PLAZA
GREENVILLE, SOUTH CAROLINA 29602
(864) 239-2747
(Name, Address and Telephone Number of Person Authorized to
Receive Notice and Communications on Behalf of the person(s) filing statement)
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ITEM 1. SECURITY AND SUBJECT COMPANY.
The name of the subject company is Consolidated Capital Institutional
Properties/3, a California limited partnership (the "Partnership"), and the
address of the principal executive offices of the Partnership is One Insignia
Financial Plaza, Greenville, South Carolina 29602. The title of the class of
equity securities to which this statement relates is the units of limited
partnership interest ("Units") of the Partnership.
ITEM 2. TENDER OFFER OF THE BIDDER.
This statement relates to an offer by Cooper River Properties, L.L.C., a
Delaware limited liability company (the "Purchaser"), to purchase up to 125,000
of the outstanding Units at a purchase price of $100 per Unit, net to the
seller in cash, without interest, upon the terms and subject to the conditions
set forth in an Offer to Purchase dated July 30, 1998 (the "Offer to Purchase")
and related Assignment of Partnership Interest (which collectively constitute
the "Offer"). A Tender Offer Statement on Schedule 14D-1 with respect to the
Offer has been filed by the Purchaser, Insignia Properties, L.P., a Delaware
limited partnership ("IPLP"), Insignia Properties Trust, a Maryland real estate
investment trust ("IPT") and Insignia Financial Group, Inc., a Delaware
corporation ("Insignia") (collectively, the "Bidders").
The address of the Purchaser's principal executive offices is One Insignia
Financial Plaza, Greenville, South Carolina 29602.
ITEM 3. IDENTITY AND BACKGROUND.
(a) The name and business address of the Partnership, which is the person
filing this statement, are set forth in Item 1 above.
(b)(1) The Partnership's general partner is ConCap Equities, Inc., a
Delaware corporation (the "General Partner"), and an affiliate of the
Purchaser.
Upon the Partnership's formation in 1984, Consolidated Capital Equities
Corporation ("CCEC"), a Colorado corporation, was the corporate general partner
of the Partnership. As a result of a succession of agreements, CCEC became the
Partnership's managing general partner. In 1988, through a series of
transactions, Southmark Corporation acquired control of CCEC. In December 1988,
CCEC filed for reorganization under Chapter 11 of the United States Bankruptcy
Code. In 1990, as part of CCEC's reorganization plan, the General Partner
acquired CCEC's general partner interests in the Partnership and in 15 other
affiliated public limited partnerships (the "Affiliated Partnerships") and the
General Partner replaced CCEC as the general partner of the Partnership (and as
the general partner of each of the Affiliated Partnerships). The selection of
the General Partner as the general partner of the Partnership (and of each of
the Affiliated Partnerships) was approved by a majority of the Limited Partners
in the Partnership (and by a majority of the limited partners in each of the
Affiliated Partnerships) pursuant to solicitations commenced in August 1990.
Insignia acquired the stock of the General Partner through two transactions in
December 1994 and October 1995, and contributed that stock to IPT in December
1996 in connection with IPT's formation. By reason of these relationships, the
General Partner has conflicts of interest in considering the Offer.
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The General Partner is a wholly-owned subsidiary of IPT. The Purchaser is
a newly-formed, wholly-owned subsidiary of IPLP, which is the operating
partnership of IPT. IPT is the sole general partner of IPLP (owning
approximately 66% of the total equity interests in IPLP) and Insignia is the
sole limited partner of IPLP (owning approximately 34% of the total equity
interests in IPLP). Insignia and its affiliates also own approximately 68% of
the outstanding common shares of IPT.
For more than the past three years, Insignia Residential Group, L.P.
("IRG") and Insignia Commercial Group ("ICG"), which are affiliates of Insignia
and the Purchaser, have provided property management services to the
Partnership, and Insignia (directly or through affiliates) has performed asset
management, partnership administration and investor relations services for the
Partnership.
By reason of the relationships described in the three preceding
paragraphs, the General Partner has conflicts of interest in considering the
Offer.
Under the Limited Partnership Agreement, the General Partner holds an
interest in the Partnership and is entitled to participate in certain cash
distributions made by the Partnership to its partners. The General Partner
received from the Partnership in respect of its interest in the Partnership
cash distributions of $165,000 in 1997, $48,000 in 1996 and $36,000 in 1995.
The Partnership paid IRG and ICG property management fees for property
management services in the amounts of approximately $737,000, $658,000 and
$572,000 for the years ended December 31, 1997, 1996 and 1995, respectively,
and has paid IRG and ICG property management fees equal to $191,000 during the
first three months of 1998. The Partnership reimbursed the General Partner and
its affiliates (including Insignia) for expenses incurred in connection with
asset management and partnership administration services performed by them for
the Partnership for the years ended December 31, 1997, 1996 and 1995 in the
amounts of $374,000, $403,000 and $429,000, respectively, and has reimbursed
them for such services in the amount of $103,000 through March 31, 1998. The
reimbursement amounts for the three months ended March 31, 1998 and for the
years ended December 31, 1997, 1996 and 1995 include $13,000, $33,000, $27,000
and $32,000, respectively, which amounts were paid to an affiliate of the
General Partner for costs incurred in connection with construction oversight
services. The Partnership also paid $36,000, $32,000 and $14,000 for the years
ended December 31, 1997, 1996 and 1995, respectively, and $11,000 for the three
months ended March 31, 1998, to an affiliate of the General Partner for
commercial lease commissions. During 1996, an affiliate of the General Partner
was paid $98,000 in connection with obtaining financing on certain of the
Partnership's properties. For the period July 1, 1995 through August 31, 1997,
the Partnership insured its properties under a master policy through an agency
affiliated with the General Partner, but with an insurer unaffiliated with the
General Partner. An affiliate of the General Partner acquired, in the
acquisition of a business, certain financial obligations from an insurance
agency which was later acquired by the agent who placed the then current year's
master policy. That agent assumed the financial obligations to the affiliate of
the General Partner who received payments on these obligations from the agent.
Insignia and the General Partner believe that the aggregate financial benefit
derived by Insignia and its affiliates from such arrangement was immaterial.
As described above, the Purchaser and the General Partner are affiliates
of and controlled by IPT, which is controlled by Insignia. The General Partner
has conflicts of interest with respect to the Offer, including conflicts
resulting from its affiliation with IPT and the Purchaser. The General Partner
also would have conflicts of interest including (i) as a result of the fact
that a sale or liquidation of the Partnership's assets would result in a
decrease or
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elimination of the fees paid to the General Partner and/or its affiliates and
(ii) as a consequence of the Purchaser's ownership of Units, because the
Purchaser (which is an affiliate of the General Partner) may have incentives to
seek to maximize the value of its ownership of Units, which in turn may result
in a conflict for the General Partner in attempting to reconcile the interests
of the Purchaser (which is an affiliate of the General Partner) with the
interests of the other Limited Partners. In addition, the Purchaser (which is
an affiliate of the General Partner) is making the Offer with a view to making
a profit. Accordingly, there is a conflict between the desire of the Purchaser
(which is an affiliate of the General Partner) to purchase Units at a low price
and the desire of the Limited Partners to sell their Units at a high price.
As described in the Offer to Purchase, the Purchaser (which is an
affiliate of the General Partner) expects to pay for the Units it purchases
pursuant to the Offer with funds provided by IPLP as capital contributions.
IPLP in turn intends to use its cash on hand and, if necessary, borrowings from
its credit facility with a commercial bank and financial institution to make
such contributions. See Section 12 of the Offer to Purchase. It is possible,
however, that in connection with its future financing activities, IPT or IPLP
may cause or request the Purchaser (which is an affiliate of the General
Partner) to pledge the Units as collateral for loans, or otherwise agree to
terms which provide IPT, IPLP and the Purchaser with incentives to generate
substantial near-term cash flow from the Purchaser's investment in the Units.
This could be the case, for example, if a loan has a "balloon" maturity after a
relatively short time or bears a high or increasing interest rate. In such a
situation, the General Partner may experience a conflict of interest in seeking
to reconcile the best interests of the Partnership with the need of its
affiliates for cash flow from the Partnership's activities.
If the Purchaser (which is an affiliate of the General Partner) is
successful in acquiring more than 100,017 Units, IPT will own in excess of 50%
of the total Units outstanding and, accordingly, will be able to control the
outcome of all voting decisions with respect to the Partnership, including
decisions regarding liquidation, amendments to the Limited Partnership
Agreement, removal and replacement of the General Partner. Even if the
Purchaser acquires a lesser number of Units pursuant to the Offer, however,
because IPT already owns (through IPLP) approximately 24% of the outstanding
Units it will be able to significantly influence the outcome of all voting
decisions with respect to the Partnership. This means that (i) non- tendering
Limited Partners could be prevented from taking action they desire but that IPT
(which is an affiliate of the General Partner) opposes and (ii) IPT (which is
an affiliate of the General Partner) may be able to take action desired by IPT
but opposed by the non-tendering Limited Partners.
Under the Limited Partnership Agreement, Limited Partners holding a
majority of the Units are entitled to take action with respect to a variety of
matters, including removal of the General Partner and in certain circumstances
election of a new or successor general partner, dissolution of the Partnership,
the sale of all or substantially all of the assets of the Partnership, and most
types of amendments to the Limited Partnership Agreement. In general, IPLP and
the Purchaser (which are affiliates of the General Partner) will vote the Units
owned by them in whatever manner they deem to be in the best interest of IPT,
which, because of their relationship with the General Partner, also may be in
the interest of the General Partner, but may not be in the interest of other
Limited Partners.
To the best knowledge of the General Partner, except as described in this
Schedule 14D- 9, there are no other material agreements, arrangements,
understandings or any actual or potential conflicts of interest between the
Partnership, the General Partner and their affiliates and the Bidders, their
executive officers, directors or affiliates.
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ITEM 4. THE SOLICITATION OR RECOMMENDATION.
Because of the existing and potential future conflicts of interest
described in Item 3 above, the Partnership and the General Partner are
remaining neutral and making no recommendation as to whether Limited Partners
should tender their Units in response to the Offer.
ITEM 5. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED.
Neither the Partnership nor any person acting on its behalf has employed,
retained or compensated, or intends to employ, retain or compensate, any person
or class of person to make solicitations or recommendation to Limited Partners
on its behalf concerning the Offer.
ITEM 6. RECENT TRANSACTIONS AND INTEREST WITH RESPECT TO SECURITIES.
(a) Except as described in Schedule I attached hereto, no transactions in
the Units have been effected during the past 60 days by the Partnership or the
General Partner or, to the knowledge of the General Partner, by any of its
current or former executive officers, directors or affiliates.
(b) To the knowledge of the Partnership, neither the General Partner nor
any of its current or former executive officers, directors or affiliates
intends to tender pursuant to the Offer any Units beneficially owned by them.
ITEM 7. CERTAIN NEGOTIATIONS AND TRANSACTIONS BY THE SUBJECT COMPANY.
None.
ITEM 8. ADDITIONAL INFORMATION TO BE FURNISHED.
Litigation. On March 24, 1998, certain persons claiming to own limited
partner interests in certain limited partnerships (including the Partnership)
whose general partners (the "General Partners") are affiliates of Insignia (the
"Partnerships") filed a purported class and derivative action in California
Superior Court in the County of San Mateo (the "Complaint") against Insignia,
the General Partners (including the General Partner), certain persons and
entities who purportedly formerly controlled the General Partners, and
additional entities affiliated with and individuals who are officers, directors
and/or principals of several of the defendants. The complaint contains
allegations that, among other things, (i) the defendants breached their
fiduciary duties to the plaintiffs by selling or agreeing to sell their
"fiduciary positions" as stockholders, officers and directors of the General
Partners for a profit and retaining said profit rather than distributing it to
the plaintiffs; (ii) the defendants breached their fiduciary duties by
mismanaging the Partnerships and misappropriating the assets of the
Partnerships by (a) manipulating the operations of the Partnerships to depress
the trading price of limited partnership units (the "Units") of the
Partnerships; (b) coercing and fraudulently inducing unitholders to sell Units
to certain of the defendants at depressed prices; and (c) using the voting
control obtained by purchasing Units at depressed prices to entrench certain of
the defendants' positions of control over the Partnerships; and (iii) the
defendants breached their fiduciary duties to the plaintiffs by (a) selling
assets of the Partnerships such as mailing lists of unitholders; and (b)
causing the General Partners to enter into exclusive arrangements with their
affiliates to sell goods and services to the General Partners, the unitholders
and tenants of Partnership properties. The complaint also alleges that the
foregoing allegations constitute
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violations of various California securities, corporate and partnership
statutes, as well as conversion and common law fraud. The complaint seeks
unspecified compensatory and punitive damages, an injunction blocking the sale
of control of the General Partners to AIMCO and a court order directing the
defendants to discharge their fiduciary duties to the plaintiffs. As of the
date of this Offer to Purchase, defendants have not served or filed a reply to
the complaint. IPT and Insignia believe that the allegations contained in the
Complaint are without merit and intend to vigorously contest the plaintiffs'
action.
ITEM 9. MATERIAL TO BE FILED AS EXHIBITS.
(a) Form of cover letter to Limited Partners of the Partnership dated July
30, 1998.
(b) None.
(c) None.
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SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete and
correct.
Dated: July 30, 1998
CONSOLIDATED CAPITAL INSTITUTIONAL PROPERTIES/3,
a California limited partnership
By: CONCAP EQUITIES, INC.
Its General Partner
By: /s/ William H. Jarrard, Jr.
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William H. Jarrard, Jr.
President
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SCHEDULE I
TRANSACTIONS IN THE UNITS
EFFECTED BY IPLP WITHIN THE PAST 60 DAYS
Number of Price
DATE Units Purchased Per Unit
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6/17/98 8.00 $94.91
6/17/98 8.00 $94.91
6/17/98 8.00 $94.91
6/17/98 8.00 $94.91
6/17/98 67.00 $94.91
6/17/98 67.00 $94.91
6/17/98 20.10 $94.91
6/17/98 4.10 $94.91
6/17/98 4.00 $94.91
6/17/98 16.00 $94.91
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EXHIBIT INDEX
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EXHIBIT NO. DESCRIPTION
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(a) Form of cover letter to Limited Partners from the
Partnership dated July 30, 1998.
(b) None.
(c) None.
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Exhibit (a)
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Consolidated Capital Institutional Properties/3
July 30, 1998
Dear Limited Partner:
Enclosed is the Schedule 14D-9 which was filed by Consolidated Capital
Institutional Properties/3 (the "Partnership") with the Securities and Exchange
Commission in connection with an offer (the "Offer") by Cooper River
Properties, L.L.C., a Delaware limited liability company (the "Purchaser"),
Insignia Properties, L.P., a Delaware limited partnership ("IPLP"), Insignia
Properties Trust, a Maryland real estate investment trust ("IPT"), and Insignia
Financial Group, Inc., a Delaware corporation ("Insignia," and together with
IPLP, IPT and the Purchaser, the "Bidders"), to purchase units of limited
partnership interest ("Units") in the Partnership.
The Partnership's general partner is ConCap Equities, Inc. (the "General
Partner"), which is an affiliate of the Bidders. Due to the affiliation between
the General Partner of the Partnership and the Bidders, the General Partner is
subject to certain conflicts of interest in connection with the response to the
Offer.
AS A RESULT OF THE EXISTING AND POTENTIAL CONFLICTS OF INTEREST, NEITHER
THE PARTNERSHIP NOR THE GENERAL PARTNER EXPRESSES ANY OPINION AS TO THE OFFER
AND EACH IS REMAINING NEUTRAL AND MAKING NO RECOMMENDATION AS TO WHETHER
LIMITED PARTNERS SHOULD TENDER THEIR UNITS IN RESPONSE TO THE OFFER.
Limited Partners are advised to carefully read the enclosed Schedule
14D-9.
Consolidated Capital Institutional Properties/3
