SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Schedule 14D-9
Solicitation/Recommendation Statement
Pursuant to Section 14(d)(4) of the
Securities Exchange Act of 1934
MRI Business Properties Fund, Ltd. III
(Name of Subject Company)
MRI Business Properties Fund, Ltd. III
(Name of Person Filing Statement)
Unit of Limited Partnership Interest
(Title of Class of Securities)
None
(CUSIP Number of Class of Securities)
Martin Lifton
NPI Equity Investments II, Inc.
100 Jericho Quadrangle
Suite 214
Jericho, New York 11753
(516) 822-0022
(Name, Address and Telephone Number of Person
Authorized to Receive Notices and Communications
on Behalf of the Person(s) filing Statement)
Copy to:
David J. Heymann
Post & Heymann
100 Jericho Quadrangle
Jericho, New York 11753
(516) 681-3636
<PAGE>
Item 1. Security and Subject Company
The name of the subject partnership is MRI Business Properties
Fund, Ltd. III, a California limited partnership (the
"Partnership"), and the address of its principal executive offices
is 5665 Northside Drive, N.W., Suite 370, Atlanta, Georgia 30328.
The title of the class of equity securities to which this Statement
relates is Units of Limited Partnership Interest of the Partnership
("Units").
Item 2. Tender Offer of the Bidder
This Statement relates to the tender offer of DeForest
Ventures I L.P., a Delaware limited partnership (the "Purchaser"),
to purchase up to 51,243 outstanding Units at a purchase price of
$140 per Unit, net to the seller in cash, without interest,
pursuant to the terms and conditions of an Offer to Purchase dated
October 17, 1994, and the related Letter of Transmittal (together,
the "Offer"). The Offer is being made pursuant to a tender offer
statement on Schedule 14D-1 dated October 17, 1994.
The address of the executive offices of the Purchaser is 5665
Northside Drive, N.W., Suite 370, Atlanta, Georgia 30328.
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) DeForest Capital I Corporation, the general partner of
the Purchaser ("DeForest Capital"), is affiliated with NPI Equity
Investments II, Inc., the entity which controls the general
partners of the Partnership (together, the "General Partner").
Certain Relationships. The General Partner owns a 2% interest
in the Partnership and thus receives, as a continuing interest in
the Partnership, an amount equal to a 2% allocation of the
Partnership's profits and losses, and 2% of distributions. The
General Partner and its affiliates are also entitled to be
reimbursed for certain expenses and to receive fees pursuant to the
terms of the Partnership Agreement. For information as to the
amounts paid to the General Partner and its affiliates during the
last three fiscal years and the nine months ended June 30, 1994,
see Note 2 to the Financial Statements of the Partnership in the
Form 10-K of the Partnership for the fiscal year ended September
30, 1993 and Note 2 to the Financial Statements of the Partnership
in the Form 10-Q of the Partnership for the nine months ended June
30, 1994. For the period from July 1, 1994 through September 30,
1994, the General Partner and its affiliates received from the
Partnership an aggregate of approximately $33,000 with respect to
the foregoing interests, reimbursements and fees.
Tender Offer Loan. As disclosed in the Offer, the Purchaser
may obtain a loan in connection with consummation of the Offer.
One of several sources of repayment of such loan is the Purchaser's
distributable portion of the proceeds of any sales or refinancings
of Partnership properties. Consequently, the General Partner may
have a conflict of interest in determining whether and when to sell
and/or refinance the Partnership's properties. In addition,
because the terms of the loan will require a payment by the
Purchaser after a property sale or refinancing by the Partnership
(whether or not the proceeds of such sale or refinancing are
distributed by the Partnership), a conflict of interest may exist
for the General Partner in determining whether and when to cause
the Partnership to distribute any of such proceeds.
Item 4. The Solicitation or Recommendation
Because of the conflict of interest inherent in the fact that
the General Partner is, as described above, an affiliate of the
Purchaser, the Partnership is making no recommendation and is
remaining neutral as to whether Unitholders should tender their
Units pursuant to the Offer.
Item 5. Persons Retained, Employed or to be Compensated
Neither the Partnership nor any person acting on its behalf
has or currently intends to employ, retain or compensate any person
or class of persons to make solicitations or recommendations to
Unitholders on its behalf concerning the Offer.
Item 6. Recent Transactions and Intent with Respect to Securities
(a) None
(b) Except for 76 Units beneficially owned by an affiliate of
the General Partner, none of which will be tendered in the Offer,
neither the Partnership nor any executive officer, director,
affiliate or subsidiary of the Partnership owns any Units.
Item 7. Certain Negotiations and Transactions by the Subject Company
None.
Item 8. Additional Information to be Furnished
None.
<PAGE>
Item 9. Material to be Filed as Exhibits
The following Exhibits are filed herewith:
Exhibit (a)(i) - Offer to Purchase of the Purchaser dated
October 17, 1994
Exhibit (a)(ii) - Cover Letter to Unitholders from the
Partnership dated October 17, 1994
Exhibit (b) - None
Exhibit (c)(i) - Note 2 to the financial statements of the
Partnership included in the Form 10-K of
the Partnership for the fiscal year ended
September 30, 1993.
Exhibit (c)(ii) - Note 2 to the financial statements of the
Partnership included in the Form 10-Q of
the Partnership for the nine months ended
June 30, 1994.
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.
MRI BUSINESS PROPERTIES FUND, LTD. III
By: MONTGOMERY REALTY COMPANY - 85,
its managing general partner
By: FOX REALTY INVESTORS,
its managing partner
By: NPI EQUITY INVESTMENTS II, INC.
its managing partner
Date: October 17, 1994 By: /s/ Martin Lifton
Martin Lifton, Chairman
Offer to Purchase for Cash
Up to 51,243 Units of Limited Partnership Interest
of
MRI BUSINESS PROPERTIES FUND, LTD. III
at
$140 Net Per Unit
by
DEFOREST VENTURES I L.P.
DeForest Ventures I L.P., a newly-formed Delaware limited
partnership (the "Purchaser"), hereby offers to purchase up to
51,243 of the outstanding Units of Limited Partnership Interest
(the "Units") of MRI Business Properties Fund, Ltd. III, a
California limited partnership (the "Partnership"), at a purchase
price of $140 per Unit, net to the seller in cash, without
interest, upon the terms and subject to the conditions set forth in
this Offer to Purchase (the "Offer to Purchase") and in the related
Letter of Transmittal as each may be supplemented or amended from
time to time (which together constitute the "Offer"). The Offer is
made to Unitholders of record as of October 10, 1994. The 51,243
Units sought pursuant to the Offer represent approximately 47% of
the Units outstanding as of October 10, 1994.
The Offer is not conditioned upon any minimum number of Units
being tendered. If more than 51,243 Units are validly tendered and
not withdrawn, the Purchaser will accept for purchase on a pro rata
basis 51,243, subject to the terms and conditions herein.
A Unitholder must tender all Units owned by such Unitholder in
order for the tender to be valid.
The Purchaser expressly reserves the right, in its sole
discretion, at any time and from time to time, (i) to extend the
period of time during which the Offer is open and thereby delay
acceptance for payment of, and the payment for, any Units, (ii) to
terminate the Offer and not accept for payment any Units not
theretofore accepted for payment or paid for, (iii) upon the
occurrence of any of the conditions specified in Section 14, to
delay the acceptance for payment of, or payment for, any Units not
theretofore accepted for payment or paid for, and (iv) to amend the
Offer in any respect (including, without limitation, by increasing
the consideration offered, increasing or decreasing the number of
Units being sought, or both). Notice of any such extension,
termination or amendment will promptly be disseminated to
Unitholders in a manner reasonably designed to inform Unitholders
of such change in compliance with Rule 14d-4(c) under the
Securities Exchange Act of 1934 (the "Exchange Act"). In the case
of an extension of the Offer, such extension will be followed by a
press release or public announcement which will be issued no later
than 9:00 a.m., New York City time, on the next business day after
the scheduled Expiration Date, in accordance with Rule 14e-1(d)
under the Exchange Act.
_____________________________
The Information Agent for the Offer is:
The Herman Group Inc.
1-800-530-4966
The Dealer Manager of the Offer is:
GKN Securities Corp.
October 17, 1994
TABLE OF CONTENTS
Page
INTRODUCTION. . . . . . . . . . . . . . . . . . . . 1
THE TENDER OFFER. . . . . . . . . . . . . . . . . . 3
Section 1. Terms of the Offer . . . . . . . . 3
Section 2. Proration; Acceptance for Payment
and Payment for Units . . . . . . . . . . 3
Section 3. Procedures for Tendering Units . . 4
Section 4. Withdrawal Rights. . . . . . . . . 5
Section 5. Extension of Tender Period;
Termination; Amendment. . . . . . . . . . 5
Section 6. Certain Federal Income Tax
Consequences. . . . . . . . . . . . . . . 6
Section 7. Effects of the Offer . . . . . . . 8
Section 8. Future Plans . . . . . . . . . . . 8
Section 9. Certain Information Concerning the
Partnership . . . . . . . . . . . . . . . 9
Section 10. Conflicts of Interest and
Transactions With Affiliates. . . . . . . 9
Section 11. Certain Information Concerning the
Purchaser . . . . . . . . . . . . . . . . 10
Section 12. Source of Funds. . . . . . . . . . 10
Section 13. Background of the Offer. . . . . . 13
Section 14. Conditions of the Offer. . . . . . 15
Section 15. Certain Legal Matters. . . . . . . 17
Section 16. Fees and Expenses. . . . . . . . . 17
Section 17. Miscellaneous. . . . . . . . . . . 17
Schedule 1 Information with respect to Directors and Executive
Officers of DeForest Capital
Schedule 2 Financial Statements of the Purchaser
and DeForest Capital
Schedule 3 NPI Partnerships and Fox Subject
Partnerships
<PAGE>
To the Holders of Units of
Limited Partnership Interest
of MRI Business Properties Fund, Ltd. III
INTRODUCTION
DeForest Ventures I L.P., a newly-formed Delaware limited
partnership (the "Purchaser"), hereby offers to purchase up to
51,243 of the outstanding Units of Limited Partnership Interest
(the "Units") of MRI Business Properties Fund, Ltd. III, a
California limited partnership (the "Partnership"), at a purchase
price of $140 per Unit (the "Purchase Price"), net to the seller in
cash, without interest, upon the terms and subject to the
conditions set forth in this Offer to Purchase (the "Offer to
Purchase") and in the related Letter of Transmittal as each may be
supplemented or amended from time to time (which together
constitute the "Offer"). Holders of Units ("Unitholders") who
tender their Units will not be obligated to pay any commissions or
partnership transfer fees, which commissions and fees will be borne
by the Purchaser. The Purchaser will also pay all charges and
expenses of The Herman Group, Inc. (the "Information Agent") and
GKN Securities Corp. (the "Dealer Manager") in connection with the
Offer. A Unitholder must tender all Units owned by such Unitholder
in order for the tender to be valid.
The Offer will provide Unitholders with an opportunity to
liquidate their investment without the usual transaction costs
associated with market sales. Unitholders may no longer wish to
continue with their investment in the Partnership for a number of
reasons, including:
Although not necessarily an indication of value, an Offer
price substantially in excess of recent secondary market
trades for Units
The absence of a formal trading market for the Units
General disenchantment with real estate investments,
particularly long-term investments in limited partnerships
The continuing administrative costs and resultant negative
financial impact on the value of the Partnership's assets due
to their ownership in a publicly registered limited
partnership
More immediate use for the cash tied up in an investment in
the Units
The delays and complications in preparing and filing personal
income tax returns which may result from an investment in the
Units
The opportunity to transfer Units without the costs and
commissions normally associated with a transfer
The Offer is not conditioned upon any minimum number of Units
being tendered. If more than 51,243 Units are validly tendered and
not withdrawn, the Purchaser will accept for purchase on a pro rata
basis 51,243, subject to the terms and conditions herein.
As discussed herein, the Purchaser is affiliated with the
general partners of the Partnership and, accordingly, the general
partners of the Partnership have certain conflicts of interest with
respect to the Offer. The Partnership has indicated in its
statement on Schedule 14D-9 filed with the Securities and Exchange
Commission (the "Commission") that, because of such conflicts, it
makes no recommendation and is remaining neutral as to whether a
Unitholder should accept the Offer. (See "THE TENDER OFFER -
Section 13. Background of the Offer"; and "Section 10. Conflicts of
Interest and Transactions with Affiliates".)
<PAGE>
The general partner of the Purchaser is DeForest Capital I
Corporation, a newly-formed Delaware corporation ("DeForest
Capital") which is affiliated with NPI Equity Investments II, Inc.
("NPI Equity"), the entity which, on December 6, 1993, assumed
management and obtained control of Montgomery Realty Company-85 and
MRI Associates, Ltd. III, the general partners of the Partnership
(together, the "General Partner"). (See "THE TENDER OFFER -
Section 13. Background of the Offer".)
Unitholders who desire liquidity may wish to consider the
Offer. However, each Unitholder must make his or her own decision
based upon such Unitholder's particular circumstances, including
the Unitholder's own financial needs, other investment
opportunities and tax position. Each Unitholder should consult
with his or her own advisors, tax, financial or otherwise, in
evaluating the terms of and whether to tender Units pursuant to the
Offer.
The Purchaser has made its own independent analysis in
establishing the Purchase Price. No independent person has been
retained to evaluate or render any opinion with respect to the
fairness of the Purchase Price. Accordingly, Unitholders are urged
to consider carefully all of the information contained herein
before accepting the Offer. (See "THE TENDER OFFER - Section 13.
Background of the Offer".)
According to information supplied by the Partnership, there
are 109,027 Units issued and outstanding held by 8,448 Unitholders.
The Purchaser does not directly own any of these Units; however, an
affiliate of the Purchaser owns 76 Units in the Partnership,
constituting approximately .1% of the Units outstanding.
Certain information contained in this Offer to Purchase which
relates to the Partnership, or represents statements made by the
General Partner, has been derived from information provided to the
Purchaser by the General Partner.
Unitholders are urged to read this Offer to Purchase and the
accompanying Letter of Transmittal carefully before deciding
whether to tender their Units.
<PAGE>
THE TENDER OFFER
Section 1. Terms of the Offer. Upon the terms of the Offer,
the Purchaser will pay for Units validly tendered on or prior to
the Expiration Date and not withdrawn in accordance with Section 4
of this Offer to Purchase. The term "Expiration Date" shall mean
5:00 p.m., New York City time, on November 18, 1994, unless the
Purchaser shall have extended the period of time for which the
Offer is open. In the event the Offer is extended, the term
"Expiration Date" shall mean the latest time and date on which the
Offer, as extended by the Purchaser, shall expire.
If, prior to the Expiration Date, the Purchaser shall increase
the consideration offered to Unitholders pursuant to the Offer,
such increased consideration shall be paid for all Units accepted
for payment pursuant to the Offer, whether or not such Units were
tendered prior to such increase.
The Offer is conditioned on satisfaction of certain
conditions. See Section 14, which sets forth in full the
conditions of the Offer. The Purchaser reserves the right (but
shall not be obligated), in its sole discretion, to waive any or
all of such conditions. If, on or prior to the Expiration Date,
any or all of such conditions have not been satisfied or waived,
the Purchaser reserves the right to (i) decline to purchase any of
the Units tendered, terminate the Offer and return all tendered
Units to tendering Unitholders, (ii) waive all the unsatisfied
conditions and, subject to complying with applicable rules and
regulations of the Commission, purchase all Units validly tendered,
(iii) extend the Offer and, subject to the right of Unitholders to
withdraw Units until the Expiration Date, retain the Units that
have been tendered during the period or periods for which the Offer
is extended, or (iv) amend the Offer.
This Offer to Purchase and the related Letter of Transmittal
are being mailed by the Purchaser to Unitholders or beneficial
owners of Units (in the case of Individual Retirement Accounts and
qualified plans) of record as of October 10, 1994.
Section 2. Proration; Acceptance for Payment and Payment for
Units. If the number of Units validly tendered on or prior to the
Expiration Date and not withdrawn is 51,243 or less, the Purchaser
will accept for payment, subject to the terms and conditions of the
Offer, all Units so tendered.
If the number of Units validly tendered on or prior to the
Expiration Date and not withdrawn exceeds 51,243, the Purchaser
will accept for payment, subject to the terms and conditions of the
Offer, Units so tendered on a pro rata basis (with such adjustments
to avoid purchase of fractional Units). In the event that
proration is required, because of the difficulty of immediately
determining the precise number of Units to be accepted, the
Purchaser does not expect to announce the final results of
proration until at least ten business days following the Expiration
Date. The Purchaser will not pay for any Units tendered until
after the final proration factor has been determined.
The Purchaser will pay for Units validly tendered and not
withdrawn in accordance with Section 4, as promptly as practicable
following the Expiration Date. In all cases, payment for Units
purchased pursuant to the Offer will be made only after timely
receipt by Purchaser of a properly completed and duly executed
Letter of Transmittal (or facsimile thereof) and "any other
documents required by the Letter of Transmittal. (See "Section 3.
Procedures for Tendering Units".) Under no circumstances will
interest be paid on the purchase price by reason of any delay in
making such payment.
If any tendered Units are not purchased for any reason, the
Letter of Transmittal with respect to such Units will be destroyed
by the Purchaser. If for any reason acceptance for payment of, or
payment for, any Units tendered pursuant to the Offer is delayed or
the Purchaser is unable to accept for payment, purchase or pay for
Units tendered pursuant to the Offer, then, without prejudice to
the Purchaser's rights under Section 14, the Purchaser may retain
tendered Units and such Units may not be withdrawn except to the
extent that the tendering Unitholders are entitled to withdrawal
rights as described in Section 4; provided, however, that the
Purchaser is required, pursuant to Rule 14e-1(c) under the Exchange
Act, to pay Unitholders the Purchase Price in respect of Units
tendered or return such Units promptly after termination or with-
drawal of the Offer.
<PAGE>
Section 3. Procedures for Tendering Units.
Valid Tender. To validly tender Units, a properly completed
and duly executed Letter of Transmittal and any other documents
required by the Letter of Transmittal, must be received by the
Purchaser on or prior to the Expiration Date. A Unitholder must
tender all Units owned by such Unitholder in order for the tender
to be valid.
Signature Requirements. If the Letter of Transmittal is
signed by the registered holder of the Units and payment is to be
made directly to that holder, then no notarization or signature
guarantee is required on the Letter of Transmittal. Similarly, if
the Units are tendered for the account of a member firm of a
registered national securities exchange, a member of the National
Association of Securities Dealers, Inc. or a commercial bank,
savings bank, credit union, savings and loan association or trust
company having an office, branch or agency in the United States
(each an "Eligible Institution"), no notarization or signature
guarantee is required on the Letter of Transmittal. However, in
all other cases, all signatures on the Letter of Transmittal must
either be notarized or guaranteed by an Eligible Institution.
In order for a tendering Unitholder to participate in the
Offer, Units must be validly tendered and not withdrawn on or prior
to the Expiration Date, which is 5:00 p.m., New York City time, on
November 18, 1994.
The method of delivery of the Letter of Transmittal and all
other required documents is at the option and risk of the tendering
Unitholder and delivery will be deemed made only when actually
received by the Purchaser.
Backup Federal Income Tax Withholding. To prevent the
possible application of backup federal income tax withholding with
respect to payment of the purchase price, a tendering Unitholder
must provide the Purchaser with such Unitholder's correct taxpayer
identification number by completing the Substitute Form W-9
included in the Letter of Transmittal. (See the Instructions to
the Letter of Transmittal and "Section 6. Certain Federal Income
Tax Consequences".)
FIRPTA Withholding. To prevent the withholding of federal
income tax in an amount equal to 10% of the amount of the Purchase
Price plus Partnership liabilities allocable to each Unit
purchased, each Unitholder must complete the FIRPTA Affidavit
included in the Letter of Transmittal certifying such Unitholder's
taxpayer identification number and address and that the Unitholder
is not a foreign person. (See the Instructions to the Letter of
Transmittal and "Section 6. Certain Federal Income Tax
Consequences".)
Other Requirements. By executing a Letter of Transmittal, a
tendering Unitholder irrevocably appoints the designees of the
Purchaser as such Unitholder's proxies, in the manner set forth in
the Letter of Transmittal, each with full power of substitution, to
the full extent of such Unitholder's rights with respect to the
Units tendered by such Unitholder and accepted for payment by the
Purchaser. Such appointment will be effective when, and only to
the extent that, the Purchaser accepts such Units for payment.
Upon such acceptance for payment, all prior proxies given by such
Unitholder with respect to such Units will, without further action,
be revoked, and no subsequent proxies may be given (and if given
will not be effective). The designees of the Purchaser will, as to
such Units, be empowered to exercise all voting and other rights of
such Unitholder as they in their sole discretion may deem proper at
any meeting of Unitholders, by written consent or otherwise. The
Purchaser reserves the right to require that, in order for Units to
be deemed validly tendered, immediately upon the Purchaser's
acceptance for payment of such Units, the Purchaser must be able to
exercise full voting rights with respect to such Units, including
voting at any meeting of Unitholders then scheduled.
<PAGE>
Determination of Validity; Rejection of Units; Waiver of
Defects; No Obligation to Give Notice of Defects. All questions as
to the validity, form, eligibility (including time of receipt) and
acceptance for payment of any tender of Units pursuant to the
procedures described above will be determined by the Purchaser, in
its sole discretion, which determination shall be final and
binding. The Purchaser reserves the absolute right to reject any
or all tenders if not in proper form or if the acceptance of, or
payment for, the Units tendered may, in the opinion of the
Purchaser's counsel, be unlawful. The Purchaser also reserves the
right to waive any defect or irregularity in any tender with
respect to any particular Units of any particular Unitholder, and
the Purchaser's interpretation of the terms and conditions of the
Offer (including the Letter of Transmittal and the Instructions
thereto) will be final and binding. Neither the Purchaser, the
Information Agent, the Dealer Manager nor any other person will be
under any duty to give notification of any defects or
irregularities in the tender of any Units or will incur any
liability for failure to give any such notification.
A tender of Units pursuant to any of the procedures described
above will constitute a binding agreement between the tendering
Unitholder and the Purchaser on the terms set forth in the Offer.
Section 4. Withdrawal Rights. Except as otherwise provided
in this Section 4, all tenders of Units pursuant to the Offer are
irrevocable, provided that Units tendered pursuant to the Offer may
be withdrawn at any time prior to the Expiration Date and, unless
already accepted for payment as provided in this Offer to Purchase,
may also be withdrawn at any time after November 18, 1994.
For withdrawal to be effective, a written or facsimile
transmission notice of withdrawal must be timely received by the
Purchaser at the address set forth on the back cover of this Offer
to Purchase. Any such notice of withdrawal must specify the name
of the person who tendered the Units to be withdrawn and must be
signed by the person(s) who signed the Letter of Transmittal in the
same manner as the Letter of Transmittal was signed.
If purchase of, or payment for, Units is delayed for any
reason or if the Purchaser is unable to purchase or pay for Units
for any reason, then, without prejudice to the Purchaser's rights
under the Offer, tendered Units may be retained by the Purchaser
and may not be withdrawn except to the extent that tendering
Unitholders are entitled to withdrawal rights as set forth in this
Section 4; provided, however, that the Purchaser is required,
pursuant to Rule 14e-1(c) under the Exchange Act, to pay
Unitholders the Purchase Price in respect of Units tendered or
return such Units promptly after termination or withdrawal of the
Offer.
Any Units properly withdrawn will be deemed not to be validly
tendered for purposes of the Offer. Withdrawn Units may be re-
tendered, however, by following any of the procedures described in
Section 3 at any time prior to the Expiration Date.
Section 5. Extension of Tender Period; Termination;
Amendment. The Purchaser expressly reserves the right, in its sole
discretion, at any time and from time to time, (i) to extend the
period of time during which the Offer is open and thereby delay
acceptance for payment of, and the payment for, any Units, (ii) to
terminate the Offer and not accept for payment any Units not
already accepted for payment or paid for, (iii) upon the occurrence
of any of the conditions specified in Section 14, to delay the
acceptance for payment of, or payment for, any Units not already
accepted for payment or paid for, and (iv) to amend the Offer in
any respect (including, without limitation, by increasing the
consideration offered, increasing or decreasing the number of Units
being sought, or both). Notice of any such extension, termination
or amendment will promptly be disseminated to Unitholders in a
manner reasonably designed to inform Unitholders of such change in
compliance with Rule 14d-4(c) under the Exchange Act. In the case
of an extension of the Offer, such extension will be followed by a
press release or public announcement which will be issued no later
than 9:00 a.m., New York City time, on the next business day after
the scheduled Expiration Date, in accordance with Rule 14e-1(d)
under the Exchange Act.
<PAGE>
If the Purchaser extends the Offer, or if the Purchaser
(whether before or after its acceptance for payment of Units) is
delayed in its payment for Units or is unable to pay for Units
pursuant to the Offer for any reason, then, without prejudice to
the Purchaser's rights under the Offer, the Purchaser may retain
tendered Units and such Units may not be withdrawn except to the
extent tendering Unitholders are entitled to withdrawal rights as
described in Section 4; provided, however, that the Purchaser is
required, pursuant to Rule 14e-1(c) under the Exchange Act, to pay
Unitholders the Purchase Price in respect of Units tendered or
return such Units promptly after termination or withdrawal of the
Offer.
If the Purchaser makes a material change in the terms of the
Offer or the information concerning the Offer or waives a material
condition of the Offer, the Purchaser will extend the Offer and
disseminate additional tender offer materials to the extent
required by Rules 14d-4(c) and 14d-6(d) under the Exchange Act.
The minimum period during which an offer must remain open following
a material change in the terms of the offer or information
concerning the offer will depend upon the facts and circumstances,
including the relative materiality of the change in the terms or
information. In the Commission's view, an offer should remain open
for a minimum of five business days from the date the material
change is first published, sent or given to securityholders, and if
material changes are made with respect to information that
approaches the significance of price or the percentage of
securities sought, a minimum of ten business days may be required
to allow for adequate dissemination to securityholders and for
investor response. As used in this Offer to Purchase, "business
day" means any day other than a Saturday, Sunday or a federal
holiday, and consists of the time period from 12:01 a.m. through
12:00 Midnight, New York City time.
Section 6. Certain Federal Income Tax Consequences. The
following summary is a general discussion of certain federal income
tax consequences of a sale of Units pursuant to the Offer. This
summary is based on the Internal Revenue Code of 1986, as amended
(the "Code"), applicable Treasury regulations thereunder,
administrative rulings, practice and procedures and judicial
authority as of the date of the Offer. All of the foregoing are
subject to change, and any such change could affect the continuing
accuracy of this summary. This summary does not discuss all
aspects of federal income taxation that may be relevant to a
particular Unitholder in light of such Unitholder's specific
circumstances or to certain types of Unitholders subject to special
treatment under the federal income tax laws (for example, foreign
persons, dealers in securities, banks, insurance companies and tax-
exempt organizations), nor does it discuss any aspect of state,
local, foreign or other tax laws. Sales of Units pursuant to the
Offer will be taxable transactions for federal income tax purposes,
and may also be taxable transactions under applicable state, local,
foreign and other tax laws. EACH UNITHOLDER SHOULD CONSULT HIS OR
ITS TAX ADVISOR AS TO THE PARTICULAR TAX CONSEQUENCES TO SUCH
UNITHOLDER OF SELLING UNITS PURSUANT TO THE OFFER.
A taxable Unitholder will recognize gain or loss on a sale of
Units pursuant to the Offer equal to the difference between (i) the
Unitholder's "amount realized" on the sale and (ii) the
Unitholder's adjusted tax basis in the Units sold. The amount of
a Unitholder's adjusted tax basis in such Units will vary depending
upon such Unitholder's particular circumstances. The "amount
realized" with respect to a Unit will be a sum equal to the amount
of cash received by the Unitholder for the Unit pursuant to the
Offer plus the amount of Partnership liabilities allocable to the
Unit (as determined under Code Section 752).
Based on the results of Partnership operations through
December 31, 1993, it is estimated that, depending on the
Unitholder's date of entry into the Partnership, a taxable
Unitholder who or which tenders Units that were acquired by such
Unitholder at the time of the Partnership's original offering of
Units will recognize a loss for federal income tax purposes of
between $337 per Unit for those admitted in January 1986 and $358
per Unit for those admitted in July 1986. It also is estimated
that such Unitholder has "suspended" passive activity losses (i.e.,
post-1986 net taxable losses in excess of statutorily provided
"phase-in" amounts) from the Partnership of $379 per Unit (subject
to reduction to the extent such Unitholder utilized any of such
losses to offset passive activity income from other investments).
Once the Unitholder sells all his Units, such losses should no
longer be subject to the passive activity loss limitation, and
therefore should be deductible by such Unitholder from his other
income subject to any other applicable limitations. (See the
discussion of the passive activity loss limitation below.)
<PAGE>
The gain or loss recognized by a Unitholder on a sale of a
Unit pursuant to the Offer generally will be treated as a capital
gain or loss if the Unit was held by the Unitholder as a capital
asset. Such capital gain or loss will be treated as long-term
capital gain or loss if the tendering Unitholder's holding period
for the Unit exceeds one year. Under current law, long-term
capital gains of individuals and other non-corporate taxpayers are
taxed at a maximum marginal federal income tax rate of 28%, whereas
the maximum marginal federal income tax rate for other income of
such persons is 39.6%. Capital losses are deductible only to the
extent of capital gains, except that non-corporate taxpayers may
deduct up to $3,000 of capital losses in excess of the amount of
their capital gains against ordinary income. Excess capital losses
generally can be carried forward to succeeding years (a corpora-
tion's carryforward period is five years and a non-corporate
taxpayer can carry forward such losses indefinitely); in addition,
corporations are allowed to carry back excess capital losses to the
three preceding taxable years.
If any portion of the amount realized by a Unitholder is
attributable to "unrealized receivables" (which includes
depreciation recapture) or "substantially appreciated inventory" as
defined in Code Section 751, then a portion of the Unitholder's
gain or loss may be ordinary rather than capital. It is possible
that the basis allocation rules of Code Section 751 may result in
a Unitholder's recognizing ordinary income with respect to such
items while recognizing a larger capital loss with respect to the
remainder of the Unit, even though such Unitholder has an overall
loss on the sale.
Under Code Section 469, a non-corporate taxpayer or personal
service corporation can deduct passive activity losses in any year
only to the extent of such person's passive activity income for
such year, and closely held corporations may not offset such losses
against so-called "portfolio" income. A loss recognized by a
Unitholder upon a sale of a Unit pursuant to the Offer can be
currently deducted (subject to other applicable limitations) to the
extent of such Unitholder's taxable income from the Partnership for
that year, and gain recognized by a Unitholder upon such sale can
be offset by such Unitholder's passive activity losses (if any)
from the Partnership. If a Unitholder disposes of all his Units
pursuant to the Offer, such Unitholder generally will be able to
deduct his remaining passive activity losses (if any) from the
Partnership that could not previously be deducted by such
Unitholder due to the foregoing limitation.
A tendering Unitholder will be allocated a pro rata share of
the Partnership's taxable income or loss for the year of sale with
respect to the Units sold in accordance with the provisions of the
Partnership Agreement of the Partnership (the "Partnership
Agreement") concerning transfers of Units. Such allocation and any
cash distributed by the Partnership to such Unitholder for such
year will affect the Unitholder's adjusted tax basis in Units and,
therefore, the amount of such Unitholder's taxable gain or loss
upon a sale of Units pursuant to the Offer.
A taxable Unitholder (other than corporations and certain
foreign individuals) who tenders Units may be subject to 31% backup
withholding unless the Unitholder provides a taxpayer
identification number ("TIN") and certifies that the TIN is correct
or properly certifies that he is awaiting a TIN. A Unitholder may
avoid backup withholding by properly completing and signing the
Substitute Form W-9 included as part of the Letter of Transmittal.
If a Unitholder who is subject to backup withholding does not
properly complete and sign the Substitute Form W-9, the Purchaser
will withhold 31% from payments to such Unitholder.
Gain realized by a foreign Unitholder on a sale of a Unit
pursuant to the Offer will be subject to federal income tax. Under
Section 1445 of the Code, the transferee of a partnership interest
held by a foreign person is generally required to deduct and with-
hold a tax equal to 10% of the amount realized on the disposition.
The Purchaser will withhold 10% of the amount realized by a
tendering Unitholder unless the Unitholder properly completes and
signs the FIRPTA Affidavit included as part of the Letter of
Transmittal certifying the Unitholder's TIN, that such Unitholder
is not a foreign person and the Unitholder's address. Amounts
withheld would be creditable against a foreign Unitholder's federal
income tax liability and, if in excess thereof, a refund could be
obtained from the Internal Revenue Service by filing a U.S. income
tax return.
<PAGE>
Section 7. Effects of the Offer.
Limitations on Resales. Pursuant to authority contained in
the Partnership Agreement, the General Partner restricts transfers
of Units if a transfer, when considered with all other transfers
during the same applicable twelve-month period, would cause a
termination of the Partnership for federal or applicable state
income tax purposes (which termination may occur when more than 50%
of the Units are transferred in a twelve-month period).
Consequently, sales of Units on the secondary market in private
transactions for the twelve-month period following completion of
the Offer may be limited. The Partnership will not process any
requests for recognition of substitution of Unitholders upon a
transfer of Units during such twelve-month period which the General
Partner believes may cause a tax termination. In determining the
number of Units for which the Offer to Purchase is made
(representing approximately 47% of the outstanding Units if 51,243
Units are tendered), the Purchaser took this restriction into
account so as to permit normal historical levels of transfers to
occur without violating this restriction.
Effect on Trading Market. There is no established public
trading market for the Units and, therefore, a reduction in the
number of Unitholders should not materially further restrict the
Unitholders' ability to find purchasers for their Units. (See
"Section 13. Background of the Offer - Establishment of the
Purchase Price" for certain limited information regarding recent
secondary sales of the Units.)
Control of all Unitholder Voting Decisions by Purchaser;
Effect of Affiliation with General Partner. The Purchaser will
have the right to vote each Unit purchased. As a result, the
Purchaser could be in a position to significantly influence all
voting decisions with respect to the Partnership. This could (i)
prevent non-tendering Unitholders from taking action they desire
but that the Purchaser opposes and (ii) enable the Purchaser to
take action desired by the Purchaser but opposed by non-tendering
Unitholders. Under the Partnership Agreement, Unitholders holding
a majority of the Units are entitled to take action with respect to
a variety of matters. When voting on such matters, the Purchaser
will vote the Units acquired pursuant to the Offer in its interest,
which, because of its affiliation with the General Partner, will
also likely be in the interest of the General Partner. However,
the Purchaser agrees, for the benefit of non-tendering Unitholders,
that it will vote its Units in proportion to the votes cast by
other Unitholders on matters put to a vote of Unitholders which
propose to change the fees and other compensation payable by the
Partnership to the General Partner and any of its affiliates.
Except for the foregoing, no other limitations are imposed on the
Purchaser's right to vote each Unit tendered.
The Units are registered under the Exchange Act, which
requires, among other things, that the Partnership furnish certain
information to its Unitholders and to the Commission and comply
with the Commission's proxy rules in connection with meetings of,
and solicitation of consents from, Unitholders. Purchase of Units
pursuant to the Offer will not result in the Units becoming
eligible for deregistration under the Exchange Act.
Section 8. Future Plans. The Purchaser is acquiring the
Units pursuant to the Offer for investment purposes. Subject to
the limitation on resales discussed in Section 7, following the
completion of the Offer, the Purchaser may acquire additional
Units. Any such acquisition may be made through private purchases,
through one or more future tender offers or by any other means
deemed advisable. Any such acquisition may be at a price higher or
lower than the price to be paid for the Units purchased pursuant to
the Offer. Neither the Purchaser nor the General Partner has any
present plans or intentions with respect to a liquidation, sale of
assets or, except as described in "Section 13. Background of the
Offer", refinancing of any of the Partnership's properties.
However, the Purchaser believes that consistent with its fiduciary
obligations the General Partner will continue to review any
opportunities such as sales or refinancings and will seek to
maximize returns to investors in the Units. The General Partner's
stated intentions are to manage the Partnership's assets to
maximize capital appreciation, improve property operations and
reduce Partnership debt. See "Section 10. Conflicts of Interest
and Transactions with Affiliates" for information concerning the
General Partner's potential conflict of interest with respect to
sales or refinancings.
<PAGE>
Section 9. Certain Information Concerning the Partnership.
The Partnership was organized on June 28, 1984, under the laws of
the State of California. Its principal executive offices are
located at 5665 Northside Drive, N.W., Suite 370, Atlanta, Georgia
30328. Its telephone number is (404) 916-9050.
The Partnership's primary business is real estate related
operations.
Unitholders are referred to the financial and other
information included in the Partnership's Annual Report on Form 10-
K for the fiscal year ended September 30, 1993, and the Partner-
ship's Quarterly Report on Form 10-Q for the nine months ended
June 30, 1994. Such reports and other documents may be examined
and copies may be obtained from the offices of the Commission at
450 Fifth Street, N.W., Washington, D.C 20549, and at the regional
offices of the Commission located in the Northwestern Atrium
Center, 500 Madison Street, Suite 1400, Chicago, Illinois 60661,
and 7 World Trade Center, New York, New York 10048. Copies should
be available by mail upon payment of the Commission's customary
charges by writing to the Commission's principal offices at 450
Fifth Street, N.W., Washington, D.C. 20549.
Section 10. Conflicts of Interest and Transactions with
Affiliates. The General Partner, the Purchaser and their
affiliates have conflicts of interest with respect to the Offer as
set forth below.
Conflicts of Interest With Respect to the Offer. The General
Partner has a conflict of interest with respect to the Offer,
including as a result of its affiliation with the Purchaser. (See
"Section 13 Background of the Offer".)
Voting by the Purchaser. As a result of the Offer, the
Purchaser may be in a position to significantly influence all
Partnership decisions on which Unitholders may vote. However, the
Purchaser agrees, for the benefit of non-tendering Unitholders,
that it will vote its Units in proportion to the votes cast by
other Unitholders on matters put to a vote of Unitholders which
propose to change the fees and other compensation payable by the
Partnership to the General Partner and any of its affiliates. (See
"Section 7. Effects of the Offer".)
Repayment of Tender Offer Loan. A loan (the "DeForest Loan")
may be obtained by the Purchaser in connection with the Offer.
(See "Section 12. Source of Funds".) The Purchaser plans to
service the DeForest Loan with Purchaser Cash Flow and Tender Cash
Flow (as defined in Section 12). The amount of the DeForest Loan,
and consequently the ability of the Purchaser to repay such amount,
is dependent upon the number of Units tendered in the DeForest
Tender Offers (as defined in Section 12), which number is not
currently ascertainable. One of several possible sources of Tender
Cash Flow is the Purchaser's distributable portion of the proceeds
of any sales or refinancings of Partnership properties attributable
to the Units tendered. Consequently, a conflict of interest may
exist for the General Partner in determining whether and when to
sell and/or refinance the Partnership's properties. Any such
conflict, however, may be mitigated by the fact that (i) proceeds
from the sale or refinancing of properties owned by other
partnerships in which the Purchaser or its affiliates may have an
interest may be available to the Purchaser (see "Section 12. Source
of Funds."), (ii) there exist other repayment sources, including
capital contributions from the Purchaser's partners, (iii) certain
of the Purchaser's partners have agreed to loan funds to the
Purchaser in order to enable the Purchaser to make timely interest
payments, and (iv) the Purchaser may be able to refinance all or a
portion of the DeForest Loan.
Distributions upon Sales or Refinancings. As mentioned above,
one source of Tender Cash Flow is the Purchaser's distributable
portion of the proceeds of any sales or refinancings of Partnership
properties attributable to the Units tendered. The agreement
governing the DeForest Loan will provide that the Purchaser will be
required to make a prepayment on the DeForest Loan of an amount
equal to 60% (100% in the case of a refinancing) of the Purchaser's
distributable portion of the proceeds of such sale or refinancing,
whether or not distributed by the Partnership. Consequently,
unless the Purchaser otherwise has funds available to make such a
required prepayment, a conflict of interest may exist for the
General Partner in determining whether and when to cause the
Partnership to distribute the proceeds of any such sale or
refinancing to the Partnership's partners.
<PAGE>
Transactions with Affiliates. The General Partner of the
Partnership, an affiliate of the Purchaser, owns, a 2% interest in
the Partnership and thus receives, as a continuing interest in the
Partnership, an amount equal to a 2% allocation of the
Partnership's profits and losses, and 2% of distributions. The
General Partner is also entitled to be reimbursed for certain
expenses and to receive certain fees pursuant to the terms of the
Partnership Agreement. For information as to the amounts paid to
the General Partner and its affiliates during the last three fiscal
years and the nine months ended June 30, 1994, see Note 2 to the
Financial Statements of the Partnership in the Form 10-K of the
Partnership for the fiscal year ended September 30, 1993 and Note
2 to the Financial Statements of the Partnership in the Form 10-Q
of the Partnership for the nine months ended June 30, 1994. For
the period from July 1, 1994 through September 30, 1994, the
General Partner and its affiliates received from the Partnership an
aggregate of approximately $33,000 with respect to the foregoing
interests, reimbursements and fees.
Section 11. Certain Information Concerning the Purchaser.
The Purchaser was organized for the purpose of acquiring the Units.
The principal executive office of the Purchaser and DeForest Capi-
tal is at 5665 Northside Drive, N.W., Suite 370, Atlanta, Georgia
30328. DeForest Capital was organized for the purpose of acting as
the general partner of the Purchaser.
For certain information concerning the directors and executive
officers of DeForest Capital, the general partner of the Purchaser,
see Schedule 1 to this Offer to Purchase.
For certain financial information concerning the Purchaser and
DeForest Capital, see Schedule 2 to this Offer to Purchase.
Except with respect to 76 Units owned by an affiliate of the
Purchaser, and except as otherwise set forth herein, (i) neither
the Purchaser, DeForest Capital, to the best of Purchaser's
knowledge, the persons listed on Schedule 1 nor any affiliate of
the foregoing beneficially owns or has a right to acquire any
Units, (ii) neither the Purchaser, DeForest Capital, to the best of
Purchaser's knowledge, the persons listed on Schedule 1, nor any
affiliate thereof or director, executive officer or subsidiary of
DeForest Capital has effected any transaction in the Units,
(iii) neither the Purchaser, DeForest Capital, to the best of
Purchaser's knowledge, any of the persons listed on Schedule 1, nor
any director or executive officer of DeForest Capital has any
contract, arrangement, understanding or relationship with any other
person with respect to any securities of the Partnership,
including, but not limited to, contracts, arrangements,
understandings or relationships concerning the transfer or voting
thereof, joint ventures, loan or option arrangements, puts or
calls, guarantees of loans, guarantees against loss or the giving
or withholding of proxies, (iv) there have been no transactions or
business relationships which would be required to be disclosed
under the rules and regulations of the Commission between any of
the Purchaser, DeForest Capital or, to the best of Purchaser's
knowledge, the persons listed on Schedule 1, on the one hand, and
the Partnership or its affiliates, on the other hand, and (v) there
have been no contracts, negotiations or transactions between the
Purchaser, DeForest Capital or, to the best of Purchaser's
knowledge, the persons listed on Schedule 1, on the one hand, and
the Partnership or its affiliates, on the other hand, concerning a
merger, consolidation or acquisition, tender offer or other
acquisition of securities, an election of directors or a sale or
other transfer of a material amount of assets.
The 76 Units owned by the Purchaser's affiliate are owned by
QAL Associates, whose address is 100 Jericho Quadrangle, Suite 214,
Jericho, New York 11753.
Section 12. Source of Funds. The Purchaser expects that
approximately $7,374,000 would be required to purchase 51,243
Units, if tendered, and to pay related fees and expenses.
Purchaser will obtain not less than $1,799,000 of such funds from
capital contributions from its partners. The remainder of such
funds will be obtained from debt financing to be provided by Kidder
Peabody Mortgage Capital Corporation or an affiliate thereof (the
"Lender") concurrently with the consummation of the Offer pursuant
to the terms of a commitment letter, dated October 11, 1994 (the
"Commitment Letter") among the Lender, the Purchaser and the NPI
Purchaser (as defined below).
<PAGE>
The Commitment Letter provides for two separate loans
(together, the "Loans"). One loan, the DeForest Loan, will be made
to the Purchaser in order to enable the Purchaser to consummate the
Offer as well as to tender for units of limited partnership
interest of eleven other Fox Partnerships (as defined in Section
13) (together with the Partnership, the "Fox Subject
Partnerships"). The Purchaser commenced such other tender offers
concurrently with the commencement of the Offer (the Offer and such
other tender offers are collectively referred to herein as the
"Deforest Tender Offers"). The second loan (the "DeForest II
Loan") will be made to DeForest Ventures II L.P. (the "NPI
Purchaser"), an affiliate of the Purchaser, which is the offeror in
tenders for units of limited partnership interest in seven limited
partnerships (collectively, the "NPI Partnerships"). The NPI
Purchaser commenced such tender offers (the "DeForest II Tender
Offers") concurrently with the commencement of the Offer. The
units of limited partnership interest of the Fox Subject
Partnerships which are purchased by the Purchaser pursuant to the
Deforest Tender Offers, and the units of limited partnership
interest of the NPI Partnerships which are purchased by the NPI
Purchaser pursuant to the DeForest II Tender Offers, are
collectively referred to herein as the "Tendered Units". Schedule
3 hereto sets forth the identity of each other Fox Subject Partner-
ship and each NPI Partnership.
The maximum aggregate principal amount of the Loans will be
$55 million, of which $36,775,000 has been allocated to the
Purchaser for its use in consummating the DeForest Tender Offers.
In no event, however, will the aggregate principal amount of the
Loan made to the Purchaser exceed 80% of the aggregate purchase
price of the Tendered Units to be acquired by it. It is
anticipated that the aggregate maximum purchase price, including
related fees and expenses, will be approximately $48,640,000 for
the Tendered Units in the Fox Subject Partnerships and will be
approximately $23,325,000 for the Tendered Units in the NPI
Partnerships. The Purchaser will obtain not less than
approximately $11,900,000 of the anticipated maximum aggregate
purchase price for the Tendered Units in the Fox Subject
Partnerships from capital contributions from its partners, and the
NPI Purchaser will obtain not less than approximately $5,100,000
of the anticipated maximum aggregate purchase price for the
Tendered Units in the NPI Partnerships from capital contributions
from its partners. Accordingly, it is anticipated that not more
than approximately $36,775,000 of such aggregate maximum purchase
price will be borrowed by the Purchaser and not more than
approximately $18,225,000 will be borrowed by the NPI Purchaser.
To the extent that the number of Tendered Units is less than the
aggregate number of units of limited partnership interest sought by
the Purchaser and the NPI Purchaser, the aggregate principal amount
of the Loans will be reduced.
The DeForest Loan and the DeForest II Loan will be cross-
defaulted and cross-collateralized. Each Loan will be due and
payable one year after initial funding subject to the right of the
borrower to extend such Loan for two consecutive one-year periods
provided that the Loans are not then in default. Interest on each
Loan will accrue monthly and be payable in arrears at a rate per
annum equal to 250 basis points over LIBOR during the initial 12
months of the Loan, 350 basis points over LIBOR during the second
12 months of the Loan and 450 basis points over LIBOR during the
last 12 months of the Loan. As of October 11, 1994 the LIBOR rate
was 5.125% per annum.
The Lender will also be entitled to additional interest on the
Loans in the form of a residual fee. Payment of the Lender's
additional interest, however, is subordinate to the prior return of
the aggregate capital contributions received by the Purchaser and
the NPI Purchaser, together with a 15% per annum return thereon.
The residual fee will consist of the greater of 20% or a specified
percentage of Tender Cash Flow until the Lender has received a 17%
per annum rate of return. The specified percentage to be received
by the Lender will be based upon the actual monthly outstanding
balance of the Loans and the period of time during which the Loans
were outstanding, and will continue to be paid to the Lender after
its receipt of a 17% per annum rate of return. The amount of the
Loans is dependent upon the number of Tendered Units acquired.
Because such amount and the time of repayment of the Loans cannot
be ascertained at this time, the effective rate of interest on the
Loans cannot be determined. "Tender Cash Flow" is the amount to be
received by the Purchaser with respect to the Tendered Units
acquired by it, whether in the form of distributions from the Fox
Subject Partnerships or as proceeds from the sale or other
disposition of such Tendered Units.
<PAGE>
Although the Loans will be prepayable at any time without
premium or penalty, a prepayment is required upon the occurrence of
certain events. The Purchaser will be required to prepay the
outstanding principal amount of the DeForest Loan utilizing
Purchaser Cash Flow (as defined herein), if any, remaining after
its application to the payment of interest on the Loans and, under
certain circumstances, to the prepayment of the DeForest II Loan.
Further, whether or not distributed to the Purchaser, 60% of the
Purchaser's distributable portion of the net proceeds of a sale
(and 100% of the net proceeds of a refinancing) of a property owned
by a Fox Subject Partnership is required to be applied in
prepayment of the DeForest Loan. (See "Section 10. Conflicts of
Interest and Transactions With Affiliates" for a discussion of
certain conflicts of interest which will be created as a result of
the Purchaser's obligation to prepay the DeForest Loan with the
proceeds of sales or refinancings of Partnership properties.)
"Purchaser Cash Flow" means the cash revenues, with certain
exceptions, to be received by NPI-AP Management, L.P. ("NPI-AP
Management"), an affiliate of the Purchaser, and by certain other
entities affiliated with National Property Investors, Inc. ("NPI")
less allowable operating expenses. Each of NPI-AP Management and
NPI will guarantee the Loan.
As collateral security for the Loans, among other things, the
Purchaser and the NPI Purchaser will be required to pledge and
collaterally assign the Tendered Units to the Lender, and their
respective partners will be required to pledge all partnership
interests in the borrowers. As additional collateral security, all
outstanding shares of the common stock of NPI Equity (and its
parent NPI) and all partnership interests in NPI-AP Management will
be required to be pledged to the Lender by the holders thereof.
The Purchaser and the NPI Purchaser anticipate that the loan
agreement(s) governing the Loans will contain certain customary
affirmative and negative reporting and operational covenants.
The borrowers will be required to pay the Lender reasonable and
customary fees in connection with the Loans and will also be
required to indemnify the Lender against certain liabilities,
including liabilities under the Exchange Act. It is also
anticipated that the agreement(s) governing the Loans will provide
that certain actions (i.e., bankruptcy or insolvency and default
under mortgage indebtedness) by Fox Subject Partnerships or NPI
Partnerships having in the aggregate an Attributed Net Value (as
defined below) of more than 20% of the Attributed Net Value of all
the Fox Subject Partnerships and the NPI Partnerships shall
constitute a default under the Loans. "Attributed Net Value" of
any Fox Subject Partnership or any NPI Partnership will represent
the purchase price actually paid by the Purchaser or the NPI
Purchaser for Tendered Units of such Partnership multiplied by the
number of Tendered Units actually acquired.
Neither the Purchaser nor the General Partner has any present
plans or intentions with respect to a liquidation, sale of assets
or, except as described in "Section 13. Background of the Offer",
refinancing of any of the Partnership's properties. However, the
Purchaser believes that the General Partner will continue to review
opportunities to sell the Partnership's properties and refinance
its indebtedness consistent with its fiduciary obligations and with
a view to maximizing returns to Unit Holders.
The amount of the Loans is dependent upon the number of
Tendered Units to be acquired, which number is not currently
ascertainable. If the DeForest Tender Offers are successful, and
the maximum number of Tender Units sought are acquired, unless
properties owned by one or more of the Fox Subject Partnerships
and/or the NPI Partnerships are sold or refinanced, repayment of
the Loans would be dependent upon the ability of the Purchaser or
the NPI Purchaser to obtain replacement financing. (See "Section
10. Conflicts of Interest and Transactions with Affiliates" for a
discussion of certain conflicts of interest which will be created
as a result of the Purchaser consummating the DeForest Loan.)
There are 86 individual properties owned by the Fox Subject
Partnerships and the NPI Partnerships. Except for one property
owned by MRI Business Properties Fund, Ltd. ("MRI"), neither the
Purchaser nor the General Partner is able to identify any specific
property owned by any Fox Subject Partnership or NPI Partnership
which is intended to be sold. MRI has entered into a letter of
intent to sell its interests in the Dallas Marriott Quorum Hotel.
It is anticipated that the sale of this property will be
consummated prior to December 31, 1994, and MRI anticipates
receiving net proceeds of approximately $1,500,000 from this sale.
There can be no assurance, however, that the sale of this property
will be consummated. The Purchaser anticipates that, over the
course of the Loans or any refinancing thereof, the allocable share
of sale or refinancing proceeds to be received by it on account of
its investment in the Tendered Units, together with the Purchaser
Cash Flow available to service the Loans, will be sufficient to
retire the principal balance of the Loans or any replacement loans.
However, neither the Purchaser nor the NPI Purchaser has made any
plans or arrangements to refinance the Loans.
<PAGE>
Section 13. Background of the Offer.
Acquisition of Control. On December 6, 1993, NPI Equity, a wholly-
owned subsidiary of NPI, an affiliate of the Purchaser, assumed
management and obtained control of the General Partner of the
Partnership, as well as the respective general partners of certain
other affiliated limited partnerships (together with the
Partnership, the "Fox Partnerships"), by being appointed as
substitute managing partner of Fox Realty Investors ("FRI"), a
partner of the General Partner and the respective direct or
indirect general partner of certain of the other Fox Partnerships,
and by entering into a voting trust agreement with the beneficial
owners of the outstanding shares of stock of Fox Capital Management
Corporation ("FCMC"), another direct or indirect general partner of
certain of the other Fox Partnerships. Three of the eleven former
individual general partners of FRI are limited partners of the
Purchaser.
In connection with the acquisition by NPI Equity of management
and control of the Partnership and the Fox Partnerships, NPI Realty
Advisors, Inc. ("NPI Realty"), an affiliate of NPI Equity, acquired
for cash and notes an aggregate of approximately $10,800,000 of
loans made by FRI and/or FCMC to the Fox Partnerships (the
"Partnership Advances") for the outstanding balance of such loans.
As of the date of this Offer, the Fox Partnerships have repaid all
but $182,000 of the Partnership Advances from, among other sources,
the proceeds of the sales of certain Fox Partnership properties.
On October 12, 1994, NPI sold one-third of its stock to AP-NPI
II, L.P. ("AP-NPI"), an affiliate of Apollo Real Estate Advisors,
L.P. ("Apollo"). (See the Partnership's Form 8-K dated October 12,
1994 for additional information with respect to this transaction.)
Certain individual beneficial owners of NPI and an entity
affiliated with Apollo formed both the Purchaser and DeForest
Capital on September 30, 1994 for the purpose of making the Offer.
Establishment of Purchase Price. The Purchaser has set the
Purchase Price at $140 net per Unit. The Purchaser established the
Purchase Price by analyzing a number of both quantitative and
qualitative factors including: (i) the volume and prices of recent
secondary market resales of the Units; (ii) the lack of liquidity
of, and lack of current income derived from, an investment in the
Partnership; (iii) an estimate of the underlying value of the
Partnership's assets; (iv) the costs to the Purchaser associated
with acquiring the Units; and (v) the administrative costs of
continuing to own the Partnership's assets through a publicly
registered limited partnership.
Secondary sales activity for the Units has been limited and
sporadic. According to information obtained from trade
publications which report on public real estate limited
partnerships, from July 1, 1993 through June 30, 1994, an aggregate
of 887 Units were transferred in the secondary market at prices
ranging from $20.00 to $62.00 per Unit. Secondary market sales may
not be an efficient measure of value. However, such sales of Units
on the secondary market and in private transactions are the only
current means available to a Unitholder to liquidate his investment
in his Units since the Units are not listed or traded on any
exchange or quoted on any NASDAQ list or system. Therefore, the
Purchaser believes resale prices may be relevant to establishing
the Purchase Price. Based solely on the price range set forth
herein, the Purchase Price is 225% of the highest secondary market
sales price.
The Purchaser is offering to purchase Units which are a
relatively illiquid investment and which do not presently generate
current income and is not offering to purchase the Partnership's
underlying assets. Consequently, the Purchaser does not believe
that the underlying asset value of the Partnership is determinative
in arriving at the Purchase Price. Nevertheless, the Purchaser
derived an estimated net value (the "Derived Value") for the
Partnership's assets. In determining the Derived Value, the
Purchaser first calculated the "Adjusted Value" of each of the
Partnership's properties. The Adjusted Value was determined by
subtracting a reserve (the "FF&E Reserve") from a property's
earnings before interest, depreciation and amortization ("EBIDA")
for the twelve month period commencing on July 1, 1993 and ending
June 30, 1994, which earnings were based upon the Partnership's
actual operating results. This amount was then divided by a
capitalization rate (the "Cap Rate") to determine the property's
Adjusted Value. In calculating Adjusted Values, a 10.5% cap rate
was used. The FF&E Reserve used was 4% of gross revenues for
Holiday Inn Crowne Plaza and 37% of gross revenues for the other
three properties which are limited service hotels. The Adjusted
Value at the Partnership's Holiday Inn Crowne Plaza property
represents the Partnership's 50% ownership interest in such
property and was reduced by 1% of the existing mortgage debt to
account for the costs to be incurred in connection with the
extension of the financing of such property in 1995. In addition,
the Adjusted Value at the Residence Inn - Orlando was then reduced
by $250,000 to provide for the cost required to make necessary
improvements at such property.
<PAGE>
The Purchaser believes that the FF&E Reserve and Cap Rates
utilized by it are within a range of reserves and capitalization
rates currently employed in the marketplace. The utilization of
different FF&E reserves and capitalization rates could also be
appropriate. Unitholders should be aware that the use of lower
FF&E reserves and/or capitalization rates would result in higher
Adjusted Values for the Partnership's properties.
The following table applies the method used by the Purchaser
to determine the Adjusted Value.
FF&E Adjusted
Property Year EBIDA Reserve Cap Rate Adjustment Value
Built
Holiday Inn 1986 $3,190,000 $811,000 10.50% $11,498,571 $11,158,571
Crowne
Plaza
Residence 1986 $1,714,000 $143,580 10.50% ---- $14,956,381
Inn-
Sacramento
Residence 1984 $1,170,000 $126,030 10.50% $ 250,00 $ 9,692,571
Inn-
Orlando
Embassy 1984 $2,141,000 $187,590 10.50% ---- $18,603,905
Suites
Tempe
To determine the Derived Value of the Partnership's assets,
the Purchaser then added to the aggregate Adjusted Value the net
amount of all cash and cash equivalents of the Partnership at
June 30, 1994, less all accounts payable and other claims against
the Partnership which net amount equaled $3,471,000. Finally, the
Adjusted Value of each property was reduced by subtracting to the
extent of such property's Adjusted Value its long term debt as of
June 30, 1994, which reduction amounted to approximately
$27,332,000 in the aggregate. The resulting Derived Value of the
Partnership's assets was approximately $30,550,000 or $275 per
Unit (based upon the percentage of capital distributions to which
Unitholders are entitled).
The Purchaser believes that realization by the Partnership of
the Derived Value may be impacted by several factors affecting real
estate assets generally, including: (i) the reduced availability of
real estate financing resulting from various factors including the
present condition of financial institutions, and (ii) the continued
sale of properties acquired by financial institutions and
government agencies. No Partnership properties or assets have been
identified for sale, and neither the General Partner nor the Pur-
chaser has any present plans or intentions with respect to liquida-
tion of the Partnership. Furthermore, the Purchaser believes that
sales of the Partnership's properties for all cash purchase prices
may be affected by the foregoing factors.
<PAGE>
Unitholders should also be aware that, in connection with
Apollo's decision to make an investment in the Purchaser and its
affiliates, Apollo retained an independent third party to conduct
an equity analysis of, among other entities, the Partnership as of
June 30, 1994. The foregoing analysis estimated the equity value
of the Partnership at an amount equivalent to $299 per Unit.
However, Unitholders are advised that this valuation was not
prepared with a view toward public disclosure (including disclosure
in this Offer) and that Apollo does not as a matter of course make
public its internal valuations. The fact that Apollo commissioned
this evaluation of the Partnership in connection with its decision
to make an investment in the Purchaser and its affiliates should
not be considered as an indication that either Apollo or the
Purchaser considers this valuation as an accurate indicator of the
net amount the Partnership could realize for its assets.
In establishing the Purchase Price, the Purchaser also took
into account the administrative costs regularly incurred by the
Partnership. Because the Purchaser is offering to purchase Units
rather than the underlying assets of the Partnership, the Purchaser
believes it is appropriate to consider such costs. From
information set forth in the Partnership's Annual Report on Form
10-K for the fiscal year ended September 30, 1993, the average
administrative costs of the Partnership for its three prior fiscal
years was $526,333 or $4.83 per outstanding Unit per year.
Furthermore, the Purchaser gave consideration to the costs
associated with the acquisition of the Units of approximately
$200,000 or $3.90 per Unit assuming it was able to purchase all of
the Units sought. To the extent less Units are purchased, the
Purchaser's cost per Unit will be proportionately increased.
The Partnership Agreement of the Partnership provides, among
other things, that upon dissolution of the Partnership subsequent
to the sale of all of the Partnership's properties, the General
Partner is required to contribute capital to the Partnership in an
amount equal to any deficit then existing in its capital account.
Through ownership of Units by the Purchaser, an affiliate of the
General Partner, the potential liability of the General Partner and
its affiliates would be effectively reduced. Although there was a
deficit in the capital account of the General Partner of $1,521,355
as of the end of the Partnership's last fiscal year, such amount is
subject to future reduction through allocation of a portion of the
taxable gain, if any, that results from the sale by the Partnership
of its properties under the Partnership Agreement. Consequently,
the ultimate amount, if any, of the deficit and the date on which
it would be paid are indeterminable. Accordingly, the Purchaser
has attributed no value to this obligation in establishing the
Purchase Price.
By taking into consideration all of the above factors, the
Purchaser determined the Purchase Price to be $140. The Purchase
Price represents the price at which the Purchaser is willing to
purchase Units. No independent person has been retained to
evaluate or render any opinion with respect to the fairness of the
Purchase Price and no representation is made by the Purchaser or
any affiliate of the Purchaser as to such fairness. The Purchaser
did not attempt to obtain current independent valuations or
appraisals of the underlying properties and other assets owned by
the Partnership; however, the Purchaser is aware of the equity
analysis referred to above. As indicated above, the Purchaser does
not believe that such valuations or appraisals should be
determinative as to the Purchaser's establishment of the Purchase
Price. Other measures of the value of the Units may be relevant to
Unitholders. Unitholders are urged to consider carefully all of
the information contained herein and consult with their own
advisors, tax, financial or otherwise, in evaluating the terms of
the Offer before deciding whether to tender Units.
Partnership Makes No Recommendation. The Partnership has
indicated in its Statement of Schedule 14D-9 filed with the
Commission that it makes no recommendation and is remaining neutral
as to whether Unitholders should tender their Units pursuant to the
Offer because the General Partner of the Partnership is subject to
an inherent conflict of interest resulting from the General
Partner's affiliation with the Purchaser.
Section 14. Conditions of the Offer. Notwithstanding any
other term of the Offer, the Purchaser shall not be required to
accept for payment or to pay for any Units tendered if all
authorizations, consents, orders or approvals of, or declarations
or filings with, or expirations of waiting periods imposed by, any
court, administrative agency or commission or other governmental
authority or instrumentality, domestic or foreign, necessary for
the consummation of the transactions contemplated by the Offer
shall not have been filed, occurred or been obtained. Furthermore,
notwithstanding any other term of the Offer, the Purchaser shall
not be required to accept for payment or pay for any Units not
theretofore accepted for payment or paid for and may terminate or
amend the Offer as to such Units if, at any time on or after the
date of the Offer and before the acceptance of such Units for
payment or the payment therefor, any of the following conditions
exists:
<PAGE>
(a) a preliminary or permanent injunction or other order
of any federal or state court, government or governmental
authority or agency shall have been issued and shall remain in
effect which (i) makes illegal, delays or otherwise directly
or indirectly restrains or prohibits the making of the Offer
or the acceptance for payment of or payment for any Units by
the Purchaser, (ii) imposes or confirms limitations on the
ability of the Purchaser effectively to exercise full rights
of ownership of any Units, including, without limitation, the
right to vote any Units acquired by the Purchaser pursuant to
the Offer or otherwise on all matters properly presented to
the Partnership's Unitholders, (iii) requires divestiture by
the Purchaser of any Units, (iv) causes any material
diminution of the benefits to be derived by the Purchaser as
a result of the transactions contemplated by the Offer, or
(v) might materially adversely affect the business,
properties, assets, liabilities, financial condition,
operations, results of operations or prospects of the
Purchaser or the Partnership;
(b) there shall be any action taken, or any statute,
rule, regulation or order proposed, enacted, enforced,
promulgated, issued or deemed applicable to the Offer by any
federal or state court, government or governmental authority
or agency, which might, directly or indirectly, result in any
of the consequences referred to in clauses (i) through (v) of
paragraph (a) above;
(c) any change or development shall have occurred or
been threatened since the date hereof, in the business,
properties, assets, liabilities, financial condition,
operations, results of operations or prospects of the
Partnership, which, in the sole judgment of the Purchaser, is
or may be materially adverse to the Partnership, or the
Purchaser shall have become aware of any fact that, in the
sole judgment of the Purchaser, does or may have a material
adverse effect on the value of the Units;
(d) there shall have occurred (i) any general suspension
of trading in, or limitation on prices for, securities on any
national securities exchange or in the over-the-counter market
in the United States, (ii) a declaration of a banking
moratorium or any suspension of payments in respect of banks
in the United States, (iii) any limitation by any governmental
authority on, or other event which might affect, the extension
of credit by lending institutions or result in any imposition
of currency controls in the United States, (iv) a commencement
of a war or armed hostilities or other national or
international calamity directly or indirectly involving the
United States, (v) a material change in United States or other
currency exchange rates or a suspension of a limitation on the
markets thereof, or (vi) in the case of any of the foregoing
existing at the time of the commencement of the Offer, a
material acceleration or worsening thereof;
(e) it shall have been publicly disclosed or the
Purchaser shall have otherwise learned that (i) more than ten
percent of the outstanding Units have been or are proposed to
be acquired by another person (including a "group" within the
meaning of Section 13(d)(3) of the Exchange Act), or (ii) any
person or group that prior to such date had filed a Statement
with the Commission pursuant to Section 13(d) or (g) of the
Exchange Act has increased or proposes to increase the number
of Units beneficially owned by such person or group as
disclosed in such Statement by two percent or more of the
outstanding Units; or
(f) the transactions contemplated by the Commitment
Letter shall not have been consummated.
The foregoing conditions are for the sole benefit of the
Purchaser and may be asserted by the Purchaser regardless of the
circumstances giving rise to such conditions or may be waived by
the Purchaser in whole or in part at any time and from time to time
in its sole discretion. Any determination by the Purchaser
concerning the events described above will be final and binding
upon all parties.
<PAGE>
Section 15. Certain Legal Matters.
General. Except as set forth in this Section 15, the
Purchaser is not aware of any filings, approvals or other actions
by any domestic or foreign governmental or administrative agency
that would be required prior to the acquisition of Units by the
Purchaser pursuant to the Offer. Should any such approval or other
action be required, it is the Purchaser's present intention that
such additional approval or action would be sought. While there
is no present intent to delay the purchase of Units tendered
pursuant to the Offer pending receipt of any such additional
approval or the taking of any such action, there can be no
assurance that any such additional approval or action, if needed,
would be obtained without substantial conditions or that adverse
consequences might not result to the Partnership's business, or
that certain parts of the Partnership's business might not have to
be disposed of or held separate or other substantial conditions
complied with in order to obtain such approval or action, any of
which could cause the Purchaser to elect to terminate the Offer
without purchasing Units thereunder. The Purchaser's obligation to
purchase and pay for Units is subject to certain conditions,
including conditions related to the legal matters discussed in this
Section 15.
Antitrust. The Purchaser does not believe that the Hart-
Scott-Rodino Antitrust Improvements Act of 1976, as amended, is
applicable to the acquisition of Units contemplated by the Offer.
Margin Requirements. The Units are not "margin securities"
under the regulations of the Board of Governors of the Federal
Reserve System and, accordingly, such regulations are not
applicable to the Offer.
State Takeover Laws. A number of states have adopted anti-
takeover laws which purport, to varying degrees, to be applicable
to attempts to acquire securities of corporations which are
incorporated in such states or which have substantial assets,
securityholders, principal executive offices or principal places of
business therein. Although the Purchaser has not attempted to
comply with any state anti-takeover statutes in connection with the
Offer, the Purchaser reserves the right to challenge the validity
or applicability of any state law allegedly applicable to the Offer
and nothing in this Offer to Purchase nor any action taken in
connection herewith is intended as a waiver of such right. If any
state anti-takeover statute is applicable to the Offer, the
Purchaser might be unable to accept for payment or purchase Units
tendered pursuant to the Offer or be delayed in continuing or
consummating the Offer. In such case, the Purchaser may not be
obligated to accept for purchase or pay for any Units tendered.
Section 16. Fees and Expenses. Except as set forth in this
Section 16, the Purchaser will not pay any fees or commissions to
any broker, dealer or other person for soliciting tenders of Units
pursuant to the Offer. The Purchaser has retained The Herman
Group, Inc. to act as Information Agent, and GKN Securities Corp.
to act as Dealer Manager, in connection with the Offer. The Pur-
chaser will pay the Information Agent and Dealer Manager reasonable
and customary compensation for their respective services in connec-
tion with the Offer, plus reimbursement for out-of-pocket expenses,
and will indemnify the Information Agent and the Dealer Manager
against certain liabilities and expenses in connection therewith,
including liabilities under the federal securities laws. The
Purchaser will also pay all costs and expenses of printing and
mailing the Offer.
Section 17. Miscellaneous. The Purchaser is not aware of any
jurisdiction in which the making of the Offer is not in compliance
with applicable law. If the Purchaser becomes aware of any
jurisdiction in which the making of the Offer would not be in
compliance with applicable law, the Purchaser will make a good
faith effort to comply with any such law. If, after such good
faith effort, the Purchaser cannot comply with any such law, the
Offer will not be made to (nor will tenders be accepted from or on
behalf of) the holders of Units residing in such jurisdiction. In
those jurisdictions whose securities or blue sky laws require the
Offer to be made by a licensed broker or dealer, the Offer is being
made on behalf of the Purchaser by the Dealer Manager.
<PAGE>
No person has been authorized to give any information or to
make any representation on behalf of the Purchaser not contained
herein or in the Letter of Transmittal and, if given or made, such
information or representation must not be relied upon as having
been authorized.
The Purchaser has filed with the Commission a Schedule 14D-1,
pursuant to Rule 14d-3 under the Exchange Act, furnishing certain
additional information with respect to the Offer, and may file
amendments thereto. The Schedule 14D-1 and any amendments thereto,
including exhibits, may be inspected and copies may be obtained at
the same places and in the same manner as set forth in Section 9
hereof (except that they will not be available at the regional
offices of the Commission).
DEFOREST VENTURES I L.P.
October 17, 1994
<PAGE>
Schedule 1
DIRECTORS AND EXECUTIVE OFFICERS
Set forth below is the name, current business address, present
principal occupation, and employment history for at least the past
five years of each director and executive officer of DeForest Capi-
tal. Except for Mr. Koenigsberger, who is a citizen of Guatemala,
each person listed below is a citizen of the United States.
Present Principal Occupation or Employment;
Material Occupation, Position, Office
or Employment During the Past Five Years
Michael L. Ashner. Since October 1994, Mr. Ashner has been
a Director, President and Co-Chairman of DeForest Capital and
DeForest Capital II Corporation ("DeForest Capital II"), the
general partner of the NPI Purchaser. Since June 1994, Mr. Ashner
has been a Director, President and Co-Chairman of NPI, and since
December 1984 has been a Director and President of NPI Equity. Mr.
Ashner has also been a Director and executive officer of NPI
Property Management Corporation ("NPI Management"), the general
partner of NPI-AP Management, L.P., since April 1984, and is
currently NPI Management's Chairman. Since 1981, Mr. Ashner has
also served as President of Exeter Capital Corporation, a firm
which has organized and administered real estate limited
partnerships. Mr. Ashner's business address is 100 Jericho
Quadrangle, Suite 214, Jericho, New York 11753.
Martin Lifton. Since October 1994, Mr. Lifton has been a
Director and Chairman of DeForest Capital and DeForest Capital II,
and since June 1994 has been a Director and Chairman of NPI. Since
November 1991, Mr. Lifton has been a Director and executive officer
of NPI Equity, and is currently NPI Equity's Chairman. Mr. Lifton
has also been a Director and/or executive officer of NPI Management
since November 1991, and is currently a Director and NPI
Management's Co-Chairman. Mr. Lifton has also served as Chairman
and President of The Lifton Company, a real estate investment firm,
since January 1985, and as Chairman of The Bank of Great Neck, a
Great Neck, New York bank, since March 1986. Mr. Lifton's business
address is 100 Jericho Quadrangle, Suite 214, Jericho, New York
11753.
W. Edward Scheetz. Mr. Scheetz has been a Director of
DeForest Capital, DeForest Capital II, NPI and NPI Equity since
October 1994. Since May 1993, Mr. Scheetz has been a limited
partner of Apollo Real Estate Advisors, L.P. ("Apollo"), the
managing general partner of Apollo Real Estate Investment Fund,
L.P., a private investment fund. Mr. Scheetz has also served as a
Director of Roland International, Inc. ("Roland"), a real estate
investment company, since January 1994, and as a Director of
Capital Apartment Properties, Inc., a multi-family residential real
estate investment trust, since January 1994. From 1989 to May
1993, Mr. Scheetz was a principal of Trammell Crow Ventures, a
national real estate investment firm. Mr. Scheetz' business
address is 1301 Avenue of the Americas, 38th floor, New York, New
York 10019.
Ricardo Koenigsberger. Mr. Koenigsberger has been a Director
of DeForest Capital, DeForest Capital II, NPI and NPI Equity since
October 1994. Since October 1990, Mr. Koenigsberger has been an
associate of Apollo and of Lion Advisors, L.P., which acts as
financial advisor to and representative for certain institutional
investors with respect to securities investments. For more than
one year prior thereto, Mr. Koenigsberger was an associate with
Drexel Burnham Lambert Incorporated. Mr. Koenigsberger's business
address is 1301 Avenue of the Americas, 38th floor, New York, New
York 10019.
Arthur N. Queler. Mr. Queler has been a Director, Executive
Vice President, Secretary and Treasurer of DeForest Capital and
DeForest Capital II since October 1994, and of NPI since June 1994.
Mr. Queler has been a Director and executive officer of NPI Equity
and NPI Management since December 1984 and April 1984,
respectively. Mr. Queler has also served as President of ANQ
Securities, Inc., a NASD registered broker-dealer firm which has
been responsible for supervision of licensed brokers and
coordination with a nationwide broker-dealer network for the
marketing of NPI investment programs, since 1983. Mr. Queler's
business address is 5665 Northside Drive, N.W., Suite 370, Atlanta,
Georgia 30328.
<PAGE>
Lee Neibart. Mr. Neibart has been a Director of DeForest
Capital, DeForest Capital II, NPI and NPI Equity since October
1994. Mr. Neibart has also been an associate of Apollo since
December 1993. From 1986 to 1993, Mr. Neibart also served as
Executive Vice President of the Robert Martin Company, a private
real estate development and management firm based in Westchester
County, New York, and from 1982 to 1985 Mr. Neibart served as
President of the New York Chapter of the National Association of
Industrial Office Parks, a professional real estate organization.
Mr. Neibart's business address is 1301 Avenue of the Americas, 38th
floor, New York, New York 10019.
G. Bruce Lifton. Since October 1994, Mr. Lifton has been a
Director and Vice President of DeForest Capital and DeForest
Capital II. Mr. Lifton has also been Vice President of NPI and NPI
Equity since January 1991 and November 1991, respectively, and a
Director and Vice President of NPI Management since June 1994. Mr.
Lifton has also served as Vice President of The Lifton Company
since September 1986. Mr. Lifton is a son of Martin Lifton and the
brother of Steven Lifton. Mr. Lifton's business address is 5665
Northside Drive, N.W., Suite 370, Atlanta, Georgia 30328.
Steven Lifton. Mr. Lifton has been a Vice President of
DeForest Capital and DeForest Capital II since October 1994 and of
NPI Management since June 1994. Since June 1994, Mr. Lifton has
been a Director and Vice President of NPI. Mr. Lifton has been
Vice President of NPI Equity since November 1991 and a director
since October 1994. Mr. Lifton has also served as Senior Vice
President of The Lifton Company since September 1984 and as a
Director of The Bank of Great Neck since March 1986. Steven Lifton
is a son of Martin Lifton and the brother of G. Bruce Lifton. Mr.
Lifton's business address is 100 Jericho Quadrangle, Suite 214,
Jericho, New York 11753.
<PAGE>
Schedule 2
FINANCIAL STATEMENTS OF THE
PURCHASER AND DEFOREST CAPITAL
<PAGE>
Independent Auditors' Report
DeForest Ventures I L.P.
(A Delaware Limited Partnership)
We have audited the accompanying balance sheet of DeForest Ventures
I L.P. (A Delaware Limited Partnership) as of October 12, 1994.
This financial statement is the responsibility of the Company's
management. Our responsibility is to express an opinion on this
financial statement based on our audit.
We conducted our audit in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the
balance sheet is free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the balance sheet. An audit also includes assessing
the accounting principles used and significant estimates made by
management, as well as evaluating the overall balance sheet
presentation. We believe that our audit of the balance sheet
provides a reasonable basis for our opinion.
In our opinion, the balance sheet referred to above presents
fairly, in all material respects, the financial position of
DeForest Ventures I L.P. (A Delaware Limited Partnership) as of
October 12, 1994 in conformity with generally accepted accounting
principles.
IMOWITZ KOENIG & COMPANY
Certified Public Accountants
New York, NY
October 13, 1994
<PAGE>
DeFOREST VENTURES I L.P.
(A Delaware Limited Partnership)
Balance Sheet
October 12, 1994
ASSETS
Cash $ 11,900,000
Deferred Costs 1,800,000
Total Assets $ 13,700,000
LIABILITIES AND PARTNERS' EQUITY
Accrued Expenses $ 1,511,000
Due to Affiliate 289,000
Total Current Liabilities 1,800,000
Commitments and Contingencies
Partners' Equity:
General Partner 119,000
Limited Partners 11,781,000
Total Partners' Equity 11,900,000
Total Liabilities and Partners' Equity $ 13,700,000
See Notes to Financial Statement
<PAGE>
DeFOREST VENTURES I L.P.
(A Delaware Limited Partnership)
Notes to Financial Statement
October 12, 1994
1. ORGANIZATION
DeForest Ventures I L.P., a Delaware Limited Partnership
("DeForest"), was formed on September 30, 1994 for the purpose
of acquiring limited partnership units in various limited
partnerships (the "Limited Partnerships"). The general
partner of DeForest is DeForest Capital I Corporation, a
Delaware Corporation ("DeForest Capital"). Shareholders who
control DeForest Capital also control the general partners of
all the Limited Partnerships. The $289,000 due to an
affiliate represents fees and expenses paid by a related party
on behalf of DeForest.
Concurrently with this transaction, DeForest Ventures II L.P.
("DeForest II"), a Delaware Limited Partnership, was formed
for the purpose of acquiring limited partnership units in
various other affiliated limited partnerships.
2. DEFERRED COSTS
Deferred costs consist of fees and expenses related to the
offers to purchase units in the Limited Partnerships. These
costs will be capitalized as part of DeForest's investment
once the purchases are consummated.
3. COMMITMENTS AND CONTINGENCIES
In order to complete the purchase of limited partnership
units, DeForest and DeForest II have received a commitment for
debt financing from Kidder Peabody Mortgage Capital
Corporation for up to $55 million. The financing will be in
the form of two separate loans which will be cross-defaulted
and cross-collateralized. Each loan will be due one year
after initial funding subject to the right to extend such loan
for two consecutive one-year periods provided that the loan is
not then in default. Interest will accrue at a rate per annum
equal to 250 basis points over LIBOR during the initial 12
months of the loan, 350 basis points over LIBOR during the
second 12 months of the loan and 450 basis points over LIBOR
during the last 12 months of the loan. The lender will also
be entitled to additional interest on the loan pursuant to the
terms of the formula set forth in the commitment. It is
anticipated that DeForest and DeForest II will incur a total
of approximately $1,300,000 in fees and expenses relating to
the financing which will be divided between the two entities
based upon the amount of their respective loans.
<PAGE>
Independent Auditors' Report
DeForest Capital I Corporation
We have audited the accompanying balance sheet of DeForest Capital
I Corporation as of October 12, 1994. This financial statement is
the responsibility of the Company's management. Our responsibility
is to express an opinion on this financial statement based on our
audit.
We conducted our audit in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the
balance sheet is free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the balance sheet. An audit also includes assessing
the accounting principles used and significant estimates made by
management, as well as evaluating the overall balance sheet
presentation. We believe that our audit of the balance sheet
provides a reasonable basis for our opinion.
In our opinion, the balance sheet referred to above presents
fairly, in all material respects, the financial position of
DeForest Capital I Corporation as of October 12, 1994 in conformity
with generally accepted accounting principles.
IMOWITZ KOENIG & COMPANY
Certified Public Accountants
New York, NY
October 13, 1994
<PAGE>
DeFOREST CAPITAL I CORPORATION.
Balance Sheet
October 12, 1994
ASSETS
Investment in DeForest Ventures I L.P. $ 119,000
STOCKHOLDERS' EQUITY
Capital Stock, Par Value $.01,
7,500 Shares Authorized, 600
issued and outstanding $ 6
Additional Paid in Capital 1,118,994
Notes Receivable from Stockholders (1,000,000)
Total Stockholders' Equity $ 119,000
See Notes to Financial Statement
<PAGE>
DeFOREST CAPITAL I CORPORATION
Notes to Financial Statement
October 12, 1994
1. ORGANIZATION
DeForest Capital I Corporation ("DeForest Capital"), a
Delaware Corporation, was incorporated on September 30, 1994
and will serve as the general partner of DeForest Ventures I
L.P. ("DeForest"). DeForest was formed for the purpose of
acquiring limited partnership units in various limited
partnerships (the "Limited Partnerships").
Shareholders who control DeForest Capital also control the
general partners of all of the Limited Partnerships.
2. STOCKHOLDERS' EQUITY
Shareholders of DeForest Capital have contributed $119,000 in
cash and $1,000,000 in negotiable demand promissory notes.<PAGE>
Schedule 3
NPI PARTNERSHIPS
National Property Investors II
National Property Investors III
National Property Investors 4
National Property Investors 5
National Property Investors 6
National Property Investors 7
National Property Investors 8
FOX SUBJECT PARTNERSHIPS
Century Properties Fund XII
Century Properties Fund XIII
Century Properties Fund XIV
Century Properties Fund XV
Century Properties Fund XVI
Century Properties Fund XVII
Century Properties Fund XVIII
Century Properties Fund XIX
Century Properties Growth Fund XXII
MRI Business Properties Fund, Ltd.
MRI Business Properties Fund, Ltd. II
<PAGE>
Facsimile copies of the Letter of Transmittal, properly
completed and duly executed, will be accepted. The Letter of
Transmittal and any other required documents should be sent or
delivered by each Unitholder or his broker, dealer, commercial
bank, trust company or other nominee to the Purchaser at its
address set forth below:
DEFOREST VENTURES I L.P.
By Hand, Mail (insured or registered
recommended) or Overnight Delivery:
DeForest Ventures I L.P.
c/o The Herman Group, Inc.
13760 Noel Road, Suite 320
Dallas, Texas 75240
By Facsimile:
(214) 991-4422 or (214) 991-4432
For Telephone Information:
1-800-530-4966
Any questions or requests for assistance or for additional
copies of this Offer to Purchase, the Letter of Transmittal, the
Notice of Guaranteed Delivery and other tender offer materials may
be directed to the Information Agent at the telephone number and
address below. You may also contact the Dealer Manager or your
broker for assistance concerning the Offer. To confirm delivery of
your Letter of Transmittal, please contact the Purchaser.
The Information Agent for the Offer is:
The Herman Group, Inc.
13760 Noel Road, Suite 320
Dallas, Texas 75240
1-800-530-4966
The Dealer Manager of the Offer is:
GKN Securities Corp.
61 Broadway, 12th Floor
New York, New York 10006
MRI Business Properties Fund, Ltd. III
5665 Northside Drive, N.W., Suite 370
Atlanta Georgia 30328
October 17, 1994
Dear Limited Partner:
Enclosed is the Schedule 14D-9 which was filed by the
Partnership with the Securities and Exchange Commission in
connection with the offer by DeForest Ventures I L.P. (the
"Purchaser") to purchase limited partnership units.
The general partner of the Partnership is affiliated with
the Purchaser. Accordingly, the Partnership is making no
recommendation and is remaining neutral as to whether limited
partners should tender their units pursuant to the offer.
Limited partners are advised to carefully read the enclosed
Schedule 14D-9.
MRI Business Properties Fund, Ltd. III
2. Transactions With the General Partner and Affiliates
In accordance with the Partnership Agreement, the
Partnership may be charged by the general partner and affiliates
for services provided to the Partnership. From March 1988 to
December 1992 such amounts were assigned pursuant to a services
agreement by the general partner and affiliates to Metric Realty
Services, L.P., which performed partnership management and other
services for the Partnership. On January 1, 1993, Metric
Management, Inc., a company which is not affiliated with the
general partner, commenced providing certain property and
portfolio management services to the Partnership under a new
services agreement. As provided in the new services agreement
effective January 1, 1993, no reimbursements were made to the
general partner and affiliates after December 31, 1992.
Subsequent to December 31, 1992, reimbursements were made to
Metric Management, Inc. On December 16, 1993, the service
agreement with Metric Management, Inc. was modified and, as a
result thereof, the Partnership's general partner will assume
responsibility for cash management of the Partnership as of
December 23, 1993 and for investor relations services as of April
1, 1994. Related party expenses for the years ended September
30, 1993, 1992 and 1991 are as follows:
1993 1992 1991
Reimbursement of expenses:
Partnership accounting..... $44,000 $184,000 $229,000
Professional services...... 11,000 44,000 36,000
Investor services.......... 8,000 34,000 34,000
Total........................... $63,000 $262,000 $299,000
In accordance with the Partnership Agreement, the general
partner received cash distributions as follows: (1) a
Partnership management incentive equal to an allocation of ten
percent determined on a cumulative, noncompounded basis, of cash
available for distribution (as defined in the Partnership
Agreement) which is distributed to partners, and (2) a continuing
interest representing two percent of cash available for
distribution distributed to partners remaining after the
allocation of the Partnership management incentive. Subsequent
to December 31, 1986, the Partnership management incentive is
subordinated to certain cash distributions to the unit holders.
There were no cash distributions to the general partner for the
years ended September 30, 1993, 1992 and 1991.
In accordance with the Partnership Agreement, the general
partner is entitled to receive an allocation of net loss and
taxable loss of two percent.
MRI BUSINESS PROPERTIES FUND, LTD. III - FORM 10-Q - JUNE 30, 1994
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
2. Transactions with Related Parties
Affiliates of the Managing General Partner received
reimbursements of administrative expenses amounting to
$58,000 during the nine months ended June 30, 1994. These
reimbursements are primarily included in general and
administrative expenses.
