<PAGE>
SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
(Amendment No. 1)
Filed by the registrant [x]
Filed by a party other than the registrant [ ]
Check the appropriate box:
[X] Preliminary proxy statement [ ] Confidential, For Use of the
[ ] Definitive proxy statement Commission Only (as
[ ] Definitive additional materials permitted by Rule 14a-6(e)(2))
[ ] Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
- -----------------------------------------------------------------------------
Windsor Park Properties 3, A California Limited Partnership
(Name of Registrant as Specified in Its Charter)
- -----------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
Payment of filing fee (check the appropriate box):
[ ] No Fee Required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
Units of limited partner interest
- -----------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
- -----------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11: (1)
$10,551,500
- -----------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
$10,551,500
- -----------------------------------------------------------------------------
(5) Total fee paid:
$2,111
- -----------------------------------------------------------------------------
[X] Fee paid previously with preliminary materials:
$2,111
- -----------------------------------------------------------------------------
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the form or schedule and the date of its filing.
(1) Amount previously paid:
- -----------------------------------------------------------------------------
(2) Form, schedule or registration statement no.:
- -----------------------------------------------------------------------------
(3) Filing party:
- -----------------------------------------------------------------------------
(4) Date filed:
- -----------------------------------------------------------------------------
- ---------------------------------
(1) Set forth the amount on which the filing fee is calculated and state how it
was determined.
<PAGE>
CONSENT SOLICITATION STATEMENT
Windsor Park Properties 3,
A California Limited Partnership
6160 South Syracuse Way
Greenwood Village, Colorado 80111
Pursuant to the Agreement of Limited Partnership (the "Partnership
Agreement") of Windsor Park Properties 3, A California Limited Partnership (the
"Partnership"), the term of the Partnership expired on December 31, 1999. As a
result, in accordance with the terms of the Partnership Agreement and California
law, The Windsor Corporation, the managing general partner of the Partnership
(the "Managing General Partner"), and John A. Coseo, Jr., the other general
partner of the Partnership (together, with the Managing General Partner, the
"General Partners"), are required (i) to develop a plan of liquidation for the
Partnership's assets and to liquidate and dissolve the Partnership or (ii) to
take such steps as are necessary to extend the term of the Partnership in order
to enable it to continue as a going concern.
The General Partners have approved, and recommend that the Partnership
proceed with, a plan of liquidation (the "Plan of Liquidation"), pursuant to
which the Partnership will sell (the "Sales") its four wholly-owned properties
and its partial ownership interests in four other properties (collectively, the
"Properties") to N'Tandem Trust, a California business trust ("N'Tandem"), and
make liquidating distributions to the partners in accordance with the terms of
the Partnership Agreement.
The Managing General Partner is a wholly-owned subsidiary of Chateau
Communities, Inc. ("Chateau") and the Managing General Partner and N'Tandem are
under common control of Chateau. Gary P. McDaniel and C.G. Kellogg, the
Directors of the Managing General Partner, are also the Chief Executive Officer
and the President, respectively, of Chateau. The Managing General Partner, in
addition to serving as the managing general partner of the Partnership, also
serves as the external investment advisor to N'Tandem.
The purpose of this Consent Solicitation Statement is to obtain the consent
of the holders (the "Limited Partners") of units of limited partner interest in
the Partnership (the "Units") to two proposals described herein (the
"Proposals"). The approval of the Proposals by the Limited Partners will enable
the Partnership to proceed with the Sales and the Plan of Liquidation.
Upon completion of the Plan of Liquidation, final liquidating distributions
(estimated to be approximately $38.19 per Unit) will be made to Limited Partners
in accordance with the terms of the Partnership Agreement.
The proposed transactions are subject to material risk factors described
herein, including the following:
o The Sales, and the recommendations and views of the Managing
General Partner with respect to the Sales, are subject to potential
conflicts of interest more particularly described herein. See
"MATERIAL RISK FACTORS AND OTHER CONSIDERATIONS -- Conflicts of
Interest";
<PAGE>
o Due to the potential conflicts of interests of the Managing General
Partner, the purchase prices for the Properties and other terms of
the Sales cannot be considered to be the result of arm's-length
negotiations and bargaining between independent parties and, as a
result, may not be as favorable as those that might have been
obtained had the purchase prices and terms of the Sales been the
result of such arm's-length negotiations;
o The General Partners did not retain an independent and disinterested
third party to represent the unaffiliated Limited Partners in
connection with the Sales or to negotiate the terms of the Sales;
o The General Partners have engaged in limited marketing efforts with
respect to the sale of the Properties to third parties;
o The purchase prices for the Properties are based upon appraisals
rendered between June 1999 and October 1999 and such appraisals have
not been updated. Accordingly, such appraisals may not reflect the
current fair market values of the Properties; and
o The Limited Partners will lose the opportunity to benefit from
potential increases in the market values of the Properties.
Consents to the Proposals are being solicited by the General Partners. The
General Partners believe that the Sales and Plan of Liquidation are fair, from
both a financial and a procedural point of view, to the Limited Partners.
Accordingly, the General Partners have approved the Sales and Plan of
Liquidation and recommend their approval and adoption by the Limited Partners.
However, before deciding whether to consent to the Proposals, Limited Partners
are urged to consider carefully the basis of the General Partners'
recommendation described herein and the conflicts of interest and risk factors
present in the Sales and Plan of Liquidation described herein under "MATERIAL
RISK FACTORS AND OTHER CONSIDERATIONS" and to consult with their independent
legal, financial and tax advisors.
The close of business on _________, 2000 has been fixed as the record date
for determining Limited Partners entitled to give written consent to the Sales
and the Plan of Liquidation. In order to be valid, a consent must be received
on or prior to ________, 2000.
This Consent Solicitation Statement was first mailed to Limited Partners on
or about _________, 2000.
LIMITED PARTNERS ARE URGED TO COMPLETE, SIGN AND DATE THE ENCLOSED CONSENT
FORM AND RETURN IT PROMPTLY IN THE ENCLOSED ENVELOPE, WHICH REQUIRES NO POSTAGE
IF MAILED IN THE UNITED STATES, TO BE RECEIVED NO LATER THAN ___________, 2000.
This Consent Solicitation Statement is dated _________, 2000.
ii
<PAGE>
NO PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS CONSENT SOLICITATION
STATEMENT AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS NOT
CONTAINED HEREIN MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE
PARTNERSHIP OR THE GENERAL PARTNERS. THIS CONSENT SOLICITATION STATEMENT DOES
NOT CONSTITUTE THE SOLICITATION OF A CONSENT IN ANY JURISDICTION TO OR FROM ANY
PERSON TO OR FROM WHOM IT IS UNLAWFUL TO SOLICIT SUCH CONSENT SOLICITATION IN
SUCH JURISDICTION.
NONE OF THE SALES, THE PLAN OF LIQUIDATION OR THIS CONSENT SOLICITATION
STATEMENT HAVE BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE
COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE FAIRNESS
OR MERITS OF THE SALES OR THE PLAN OF LIQUIDATION OR THE ACCURACY OR ADEQUACY OF
THIS CONSENT SOLICITATION STATEMENT. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
AVAILABLE INFORMATION
The Partnership is subject to informational reporting requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith files reports, proxy statements and other information with
the Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements and other information may be inspected and copied at the public
reference facilities maintained by the Commission at Room 1024, Judiciary Plaza,
450 Fifth Street, N.W., Washington, D.C. 20549, and at the regional offices of
the Commission at 7 World Trade Center, New York, New York 10048, and Citicorp
Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of
such material can be obtained from the Public Reference Section of the
Commission at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington,
D.C. 20549, at prescribed rates. The Commission maintains a site on the
Internet at http://www.sec.gov that contains reports, proxy statements and other
information regarding registrants that file electronically with the Commission.
Pursuant to Rule 13e-3 under the Exchange Act, N'Tandem, Chateau and the
Partnership have jointly filed with the Commission a Rule 13e-3 Transaction
Statement on Schedule 13E-3 (including any amendments thereto, the "Schedule
13E-3"), together with exhibits thereto, furnishing certain additional
information with respect to the Sales and the Plan of Liquidation. This Consent
Solicitation Statement does not contain all the information required to be
included in the Schedule 13E-3 and the exhibits thereto, certain portions of
which are omitted from this Consent Solicitation Statement as permitted by the
rules and regulations of the Commission.
Statements contained herein concerning the provisions of documents are
summaries of such documents and, as such, each statement is not necessarily
complete and is qualified in its entirety by reference to the copy of the
applicable document if attached as an appendix hereto or filed as an exhibit to
the Schedule 13E-3.
All reports from outside parties filed as exhibits to the Schedule 13E-3
filed with the Commission in connection with the proposed transactions also will
be made available for inspection and copying at the principal executive offices
of the Partnership during its regular business hours by any Limited Partner or
representative thereof who has been so designated in writing.
iii
<PAGE>
Table of Contents
<TABLE>
<CAPTION>
<S> <C>
PAGE
----
SUMMARY........................................................................................................................ 1
Purpose of the Consent Solicitation; Proposals 1 and 2.................................................................... 1
Background of the Proposed Transactions................................................................................... 2
Relationship of the Various Parties to the Proposed Transactions.......................................................... 4
Summary Risk Factors...................................................................................................... 5
Valuation of Properties................................................................................................... 6
Recommendation of the General Partners.................................................................................... 7
Fairness Opinion.......................................................................................................... 10
Alternatives Considered................................................................................................... 10
N'Tandem's and Chateau's Belief as to the Fairness of the Proposed Transactions; N'Tandem's and Chateau's Reasons for
Engaging in the Proposed Transactions.................................................................................... 12
Appraisals................................................................................................................ 12
Certain Federal Income Tax Considerations................................................................................. 13
Consent Procedures; Transactions Authorized by Consents................................................................... 13
Record Date; Required Consents............................................................................................ 13
No Appraisal or Dissenters' Rights........................................................................................ 14
Historical Distributions.................................................................................................. 14
No Established Trading Market For Units................................................................................... 14
SUMMARY HISTORICAL FINANCIAL DATA.............................................................................................. 15
MATERIAL RISK FACTORS AND OTHER CONSIDERATIONS................................................................................. 16
Conflicts of Interest..................................................................................................... 16
Purchase Prices Are Not the Result of Arm's-Length Negotiations........................................................... 16
No Appointment of Independent Representative.............................................................................. 17
The General Partners Have Engaged in Limited Marketing Efforts with Respect to the Properties............................. 17
Appraisals May Not Reflect the Current Fair Market Values of the Properties............................................... 17
Loss of Opportunity to Benefit from Future Events......................................................................... 17
DESCRIPTION OF THE PROPOSED TRANSACTIONS....................................................................................... 17
Purpose of the Consent Solicitation; Proposals 1 and 2.................................................................... 17
Background of the Proposed Transactions................................................................................... 18
Information Concerning N'Tandem and Chateau............................................................................... 22
The Purchase and Sale Agreement........................................................................................... 22
Solicitation Expenses..................................................................................................... 24
Estimate of Liquidating Distributions Payable to Limited Partners......................................................... 24
Ownership of Properties by N'Tandem Following Sales....................................................................... 26
SPECIAL FACTORS................................................................................................................ 26
Fairness of the Proposed Transactions; Recommendation of the General Partners............................................. 26
Fairness Opinion.......................................................................................................... 29
Valuation of the Partnership.............................................................................................. 31
Alternatives Considered................................................................................................... 33
</TABLE>
iv
<PAGE>
Table of Contents
<TABLE>
<CAPTION>
<S> <C>
PAGE
----
N'Tandem's and Chateau's Belief as to the Fairness of the Proposed Transactions; N'Tandem's and Chateau's Reasons for
Engaging in the Proposed Transactions.................................................................................... 35
Appraisals................................................................................................................ 35
The Appraiser and its Methodology......................................................................................... 37
Discount for Ownership Interests in Properties............................................................................ 45
SUMMARY OF SELECTED TERMS OF THE PARTNERSHIP AGREEMENT......................................................................... 46
Net Proceeds from the Sales............................................................................................... 46
Allocation of Profit or Loss on the Sales................................................................................. 46
Voting Rights of Limited Partners......................................................................................... 47
Limitation of Liability and Indemnification of the General Partners....................................................... 47
THE PARTNERSHIP'S PROPERTIES................................................................................................... 48
Nature of Ownership Interests in Properties............................................................................... 48
Description of the Properties, Appraised Values and Ownership Interests................................................... 49
FEDERAL INCOME TAX CONSIDERATIONS.............................................................................................. 50
Overview.................................................................................................................. 51
Taxation on the Sales..................................................................................................... 51
Liquidation of the Partnership............................................................................................ 52
Income Tax Rates/Taxation of Gains and Losses............................................................................. 52
CONSENT PROCEDURES; TRANSACTIONS AUTHORIZED BY CONSENTS........................................................................ 53
Solicitation of Consents.................................................................................................. 54
Record Date; Required Vote................................................................................................ 54
No Appraisal or Dissenters' Rights........................................................................................ 54
Consequences If Consents Are Not Obtained................................................................................. 55
FINANCIAL STATEMENTS........................................................................................................... 55
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE................................................................................ 55
APPENDIX A Fairness Opinion................................................................................................... A-1
APPENDIX B Information Concerning Officers and Directors of the Managing General Partner, N'Tandem and Chateau................ B-1
</TABLE>
v
<PAGE>
SUMMARY
The following summarizes information contained elsewhere in this Consent
Solicitation Statement. While the purpose of this Summary is to discuss and
disclose the material aspects of the Sales and the Plan of Liquidation, this
Summary is not intended to be complete and is qualified in its entirety by
reference to the more detailed information contained elsewhere herein.
Purpose of the Consent Solicitation; Proposals 1 and 2
In accordance with the Agreement of Limited Partnership (the "Partnership
Agreement") of Windsor Park Properties 3, A California Limited Partnership (the
"Partnership"), the term of the Partnership expired on December 31, 1999. As a
result, in accordance with the terms of the Partnership Agreement and California
law, The Windsor Corporation, the managing general partner of the Partnership
(the "Managing General Partner"), and John A. Coseo, Jr., the other general
partner of the Partnership (together, with the Managing General Partner, the
"General Partners"), are required (i) to develop a plan of liquidation for the
Partnership and to liquidate and dissolve the Partnership or (ii) to take such
steps as are necessary to extend the term of the Partnership in order to enable
it to continue as a going concern.
The purpose of this Consent Solicitation is to obtain the consent of the
holders (the "Limited Partners") of units of limited partner interest in the
Partnership (the "Units") to the two proposals described herein (the
"Proposals"). Upon approval of both of the Proposals by the Limited Partners,
the General Partners will proceed with a plan of liquidation that has been
adopted by the General Partners (the "Plan of Liquidation") pursuant to which
the Partnership will sell (the "Sales") to N'Tandem Trust, a California business
trust ("N'Tandem"), its four wholly-owned properties and its partial ownership
interests in four other properties (the "Ownership Interests" and, together with
the four wholly-owned properties, the "Properties"), and make liquidating
distributions to the partners in accordance with the terms of the Partnership
Agreement. The terms of the Sales are set forth in a Purchase and Sale
Agreement between N'Tandem and the Partnership (the "Purchase and Sale
Agreement"). Upon completion of the Plan of Liquidation, final liquidating
distributions (estimated to be approximately $38.19 per Unit) will be made to
Limited Partners in accordance with the terms of the Partnership Agreement.
Two Proposals are being proposed in this Consent Solicitation Statement for
approval by the Limited Partners. The first Proposal is for the General
Partners to proceed with the Sales to N'Tandem pursuant to the Purchase and Sale
Agreement ("Proposal 1"). The second Proposal is for the General Partners to
proceed with the Plan of Liquidation following the consummation of the Sales
("Proposal 2").
If each of the two Proposals is approved by a majority-in-interest of the
Limited Partners, the General Partners will proceed with the Sales and the Plan
of Liquidation. Each of the Proposals is conditioned upon approval of the other
Proposal by the Limited Partners. Accordingly, any Limited Partner desiring to
have the General Partners proceed with the Sales and the Plan of Liquidation
needs to vote for both Proposal 1 and Proposal 2.
----
The Managing General Partner is a wholly-owned subsidiary of Chateau
Communities, Inc. ("Chateau") and the Managing General Partner and N'Tandem are
under common control of Chateau. Gary P. McDaniel and C.G. Kellogg, the
Directors of the Managing General Partner, are the Chief Executive Officer and
the President, respectively, of Chateau. The Managing General Partner of the
Partnership is also the external investment advisor to N'Tandem. Chateau is one
of the largest publicly held companies in the United States engaged in the
ownership and operation of manufactured home communities. N'Tandem, rather than
Chateau, will be purchasing the Properties because the Properties
<PAGE>
are more in line with the type and quality of assets sought by N'Tandem. In
general, Chateau seeks to invest in large, institutional manufactured home
communities containing a full complement of amenities, including clubhouses,
pools, tennis and basketball courts, shuffleboard, playgrounds, curbed streets,
landscaping and off-street parking, and consisting primarily of multi-section
sites. In contrast, N'Tandem seeks to invest in lower profile manufactured home
communities which, like the Properties, are located in tertiary demographic and
geographic markets, are smaller in size with fewer amenities and contain a
greater proportion of single-wide spaces. Additionally, N'Tandem also has a
partial ownership interest in all of the manufactured home communities in which
the Partnership holds an Ownership Interest and, upon completion of the Sales,
will hold a 100% ownership interest in the Big Country Estates and Harmony Ranch
Properties and will hold a 65% ownership interest in the Apache East and Denali
Park Estates Properties.
Background of the Proposed Transactions
In September 1997, Chateau purchased 644,842 shares of common stock of the
Managing General Partner, constituting all of the outstanding capital stock of
the Managing General Partner, in exchange for 101,239 shares of Chateau's common
stock and $750,000 in cash (the "Windsor Acquisition").
Following the Windsor Acquisition, the General Partners began to analyze
the short-term and long-term business objectives of the Partnership and the
other four limited partnerships managed by the General Partners (collectively,
the "Windsor Limited Partnerships"). In connection with their analysis, the
General Partners reviewed each of the agreements of limited partnership of the
Windsor Limited Partnerships in order to ascertain, and to factor into their
analysis, the expiration date of the stated term of each Windsor Limited
Partnership. In addition, the General Partners also ordered appraisals for each
of the properties held by three of the five Windsor Limited Partnerships,
including the Partnership. As a result of their analysis, the General Partners
determined to begin selectively marketing for sale several of the properties and
partial ownership interests held by the Windsor Limited Partnerships.
As part of its analysis of the Partnership following the Windsor
Acquisition, the General Partners ordered appraisals for the five properties
which were wholly-owned by the Partnership and the four manufactured home
communities in which the Partnership held Ownership Interests. The General
Partners received these appraisals in late 1997 and early 1998 and, after
reviewing the appraisals, developed a plan for the marketing for sale of certain
of the Properties held by the Partnership.
Beginning in the first quarter of 1998, the General Partners began to
market for sale the Ponderosa Property, the Shady Hills Property, the Little
Eagle Property and the Harmony Ranch Property (in which the Partnership owns a
25% Ownership Interest) to third parties. As a result of such efforts, the
General Partners closed on the sale of the Little Eagle Property for $875,000 in
April 1999. The General Partners were unable to successfully market and sell
any of the other Properties. While the General Partners did solicit and receive
offers for the other Properties, such offers proposed sales prices which were
below the appraised values for such Properties set forth in the 1997 appraisals.
Upon completion of their marketing efforts with respect to the
Partnership's Properties, the General Partners began to explore possible
strategic alternatives for the Partnership with a view towards providing the
Limited Partners with an opportunity to achieve liquidity in their investment.
Accordingly, in November 1998, the General Partners began to consider the
possibility of merging the Partnership, together with three of the other Windsor
Limited Partnerships, into N'Tandem (the "Proposed Consolidation"). In the
Proposed Consolidation, the Limited Partners would have exchanged their Units
for common shares of beneficial interest or other securities in N'Tandem. In
contemplation of the Proposed Consolidation, the Managing General Partner (i)
retained Whitcomb Real Estate (the "Appraiser")
2
<PAGE>
to render the appraisals (the "Appraisals"), which updated the 1997 appraisals,
with respect to the Partnership's Properties and (ii) engaged Legg Mason Wood
Walker Incorporated ("Legg Mason") to act as financial advisor to the
Partnership and the other Windsor Limited Partnerships and, if the Managing
General Partner elected to proceed with the Proposed Consolidation, to deliver a
fairness opinion with respect to the Proposed Consolidation. The General
Partners considered and actively pursued the Proposed Consolidation involving
the Partnership and the other three Windsor Limited Partnerships through August
1999. For a discussion of the Managing General Partner's analysis of the
Proposed Consolidation, see "SPECIAL FACTORS Alternatives Considered."
In September 1999, the General Partners concluded that the best course of
action for the Partnership and its Limited Partners would be for the Partnership
to sell its remaining Properties to N'Tandem. The General Partners decided not
to attempt to market or remarket, as the case may be, the Partnership's
remaining Properties for sale to parties other than N'Tandem based, in part, on
their belief that (i) the price offered to be paid by N'Tandem for the wholly-
owned Properties, which is equal to the full appraised values set forth in the
Appraisals for such Properties (the "Appraised Values"), would be greater than
the price which would be paid by any prospective third-party purchaser, given
the results of the General Partner's previous marketing efforts of certain of
the Properties and (ii) very limited demand for the Ownership Interests exists
and that any prospective third-party purchaser of these interests would not be
willing to pay the Partnership the price being offered by N'Tandem for such
interests, given that control and management of the underlying properties and
the power to sell or dispose of the underlying properties is vested solely in
the Managing General Partner, an affiliate of N'Tandem, and that N'Tandem owns
all of the other partial ownership interests in two of the underlying properties
and a 25% partial ownership interest in each of the other two underlying
properties.
In determining whether to pursue the Sales, the General Partners analyzed
various alternatives for the Partnership, including the Proposed Consolidation,
and the terms and provisions of the Sales. In connection with its analysis of
the Sales and Plan of Liquidation, the Managing General Partner, on behalf of
the Partnership, engaged Legg Mason to render a written opinion (the "Fairness
Opinion") as to the fairness, from a financial point of view, to the Limited
Partners of the aggregate purchase price to be paid by N'Tandem to the
Partnership for the Properties. On November 15, 1999, Legg Mason delivered its
oral and written Fairness Opinion to the Managing General Partner stating that
the aggregate purchase price to be paid by N'Tandem for the Properties was fair
to the Limited Partners from a financial point of view.
3
<PAGE>
Relationship of the Various Parties to the Proposed Transactions
The relationships of the various parties to the proposed transactions are
set forth in the diagram below and described elsewhere in this Consent
Solicitation Statement under "RISK FACTORS -- Conflicts of Interest."
CHATEAU COMMUNITIES, INC.
(Parent entity of The Windsor Corporation and
direct or indirect holder of 9.8% of the outstanding
capital stock of N'Tandem)
(Gary P. McDaniel, the Chief Executive Officer
and a Director of Chateau, is a Director of The
Windsor Corporation and the Chairman of the
Board of Trustees of N'Tandem)
THE WINDSOR CORPORATION
JOHN A. COSEO, JR.
(Managing General Partner of the
Partnership, external advisor to N'Tandem, (Co-General Partner of the
and wholly-owned subsidiary of Chateau) Partnership)
N'TANDEM TRUST WINDSOR PARK PROPERTIES 3,
A CALIFORNIA LIMITED PARTNERSHIP
(9.8% of the outstanding capital
stock of N'Tandem is directly or
indirectly held by Chateau)
4
<PAGE>
Summary Risk Factors
The Sales involve material risks, conflicts of interest and other
considerations which are discussed elsewhere in this Consent Solicitation
Statement. They include the following:
Conflicts of Interest. The Sales and the Plan of Liquidation, and the
recommendation of the General Partners set forth herein, could be deemed to
involve conflicts of interest between the Managing General Partner and the
Limited Partners. The Managing General Partner and N'Tandem are under the
common control of Chateau. Chateau owns all of the issued and outstanding
capital stock of the Managing General Partner and Chateau's Chief Executive
Officer and President are the sole Directors of the Managing General Partner.
The Managing General Partner is also the external investment advisor of
N'Tandem. In connection with the Sales, pursuant to the advisory agreement
between such parties (the "Advisory Agreement"), the Managing General Partner
will receive an aggregate acquisition fee of $316,500 from N'Tandem equal to 3%
of the total purchase price paid by N'Tandem for the Properties. In addition,
the Sales will result in an increase in the annual and other fees and
compensation payable to the Managing General Partner under the Advisory
Agreement. As a result of the economic benefits accruing to the Managing
General Partner in connection with the Sales, the Sales and the recommendation
and views of the Managing General Partner are subject to potential conflicts of
interest.
Purchase Prices Are Not the Result of Arm's-Length Negotiations. Due to
the potential conflicts of interests of the Managing General Partner, the
purchase prices for the Properties and other terms of the Sales cannot be
considered to be the result of arm's-length negotiations and bargaining between
independent parties and, as a result, may not be as favorable as those that
might have been obtained had the purchase prices and terms of the Sales been the
result of such arm's-length negotiations.
No Appointment of Independent Representative. The General Partners have
not appointed an independent representative to represent the unaffiliated
Limited Partners in connection with the Sales or to negotiate the terms of the
Sales. If such a representative had been appointed, the purchase prices for the
Properties and the other terms of the Sales might have been different and
possibly more favorable to the Partnership and the Limited Partners.
The General Partners Have Engaged in Limited Marketing Efforts with Respect
to the Properties. The General Partners have engaged in limited marketing
efforts with respect to the Properties, with only four of the nine manufactured
home communities held by the Partnership immediately following the Windsor
Acquisition having been marketed for sale to third-party purchasers to date.
Marketing the Properties to third parties could conceivably result in higher
purchase prices being paid for the Properties than those that are being paid by
N'Tandem in connection with the Sales.
Appraisals May Not Reflect the Current Fair Market Values of the
Properties. The Appraisals were rendered between June 1999 and October 1999.
The General Partners do not intend to update the Appraisals or to order new
appraisals for the Properties. Accordingly, the Appraisals may not reflect the
current fair market values of the Properties.
Loss of Opportunity to Benefit from Future Events. It is possible that the
future performance of the Properties will improve or that prospective third-
party purchasers may be willing to pay more for the Properties in the future.
It is possible that Limited Partners might earn a higher return on their
investment if the Partnership extended its stated term for a second time and
retained ownership of the Properties. By approving the Sales, Limited Partners
will also be foregoing current benefits of ownership of the Properties, such as
continuing distributions.
5
<PAGE>
Valuation of Properties
The following table sets forth information regarding the Partnership's
Properties and their respective values (based on the Appraised Values), the
discount being applied to the Ownership Interests, the debt attributable to the
Properties as of September 30, 1999, and the value of the Properties after
deducting attributable debt and applicable discount:
<TABLE>
<CAPTION>
Value, Based on Discount on
Percentage Date Appraised Value, Ownership Debt Attributable
Name of Property Ownership Acquired Before Debt(1) Interest(1)(2) as of 9/30/99(1) Net Value(1)
- ----------------------- ----------- --------- ---------------- ---------------- ------------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Ponderosa 100% 3/1986 $ 2,200,000 -- $ 400,000 $1,800,000
Indianapolis, IN
The Pines 100% 8/1986 $ 700,000 -- -- $ 700,000
Charleston, SC
Shady Hills 100% 9/1986 $ 2,400,000 -- -- $2,400,000
Ladson, TN
Trailmont 100% 1/1996 $ 2,300,000 -- $1,170,400 $1,129,600
Nashville, TN
Big Country Estates 40%(3) 12/1986 $ 1,124,000 $112,400 -- $1,011,600
Cheyenne, WY
Apache East 29%(4) 2/1997 $ 576,900(5) $ 57,700 $ 316,600 $ 202,600
Apache Junction, AZ
Denali Park Estates 29%(4) 2/1997 $ 1,003,600(5) $100,400 $ 550,900 $ 352,300
Apache Junction, AZ
Harmony Ranch 25%(6) 12/1986 $ 575,000 $ 57,500 $ 300,000 $ 217,500
Thonotosassa, FL ----------- -------- ---------- ----------
Total $10,879,500 $328,000 $2,737,900 $7,813,600
=========== ======== ========== ==========
</TABLE>
__________________________
(1) With respect to the four Ownership Interests, such amount represents the
Partn allocable share based upon its ownership percentage in the
underlying property.
(2) With respect to the four Ownership Interests, N'Tandem is applying a 10%
disco the fact that the Partnership only owns a minority interest in the
underlying property. In a similar transaction which was in June 1999
involving N'Tandem and the General Partners, no discount was applied to
the purchase price paid for any of th ties acquired by N'Tandem in that
transaction. For a discussion of the discount being applied to the
Ownership Interests, see "SP TORS -- Discount for Ownership Interests in
Properties."
(3) The remaining 60% interest in this Property is held by N'Tandem as tenant
in common with the Partnership.
(4) Each of these Properties is owned by Windsor Park 345, An Arizona Limited
Part ("Windsor Park 345"). The Partnership is a 29% limited partner in
Windsor Park 345. In addition to being the sole general partne sor Park
345, the Managing General Partner is also the sole managing general
partner of Windsor Park Properties 5, A California artnership ("Windsor
5"), and Windsor Park Properties 7, A California Limited Partnership
("Windsor 7"), and is the external nt advisor to N'Tandem, which together
own all of the remaining limited partner interests in Windsor Park 345.
N'Tandem, Windsor ndsor 7 have a 36%, 9% and 26% limited partner interest,
respectively, in Windsor Park 345.
(5) The Apache East and Denali Park Estates Properties are contiguous
properties with similar characteristics. Accordingly, the Appraiser
appraised both Properties together and, in its Appraisal, stated that the
aggregate Appraised Value of both Properties was $5,450,000. For purposes
of this table, the Managing General Partner allocated 36.5% of the
aggregate Appraised Value to Apache East and 63.5% of the aggregate
Appraised Value to Denali Park Estates.
(6) The remaining 75% interest in this Property is held by N'Tandem as tenant
in common with the Partnership.
6
<PAGE>
Recommendation of the General Partners
The General Partners believe that the Sales and the Plan of Liquidation are
(i) consistent with the original objectives of the Partnership and (ii)
contemplated by the terms of the Partnership Agreement. In addition, the General
Partners believe that the terms of the Sales are fair, from a financial point of
view and from a procedural point of view, to the affiliated and unaffiliated
Limited Partners. Accordingly, the General Partners have approved the Sales and
the Plan of Liquidation and recommend their approval and adoption by the Limited
Partners.
In reaching the determination that the Sales and the Plan of Liquidation
are fair to the unaffiliated Limited Partners from a financial point of view,
the General Partners considered the following factors:
o N'Tandem is willing to purchase all of the Properties and is paying
the full Appraised Value for the wholly-owned Properties and is only
applying a 10% discount to the Appraised Value of the Ownership
Interests for the fact that the Partnership owns a minority interest
in the underlying properties. The General Partners believe that the
discount being applied in connection with the Sales is substantially
less than the 25% discount that, in the opinion of the Appraiser,
would have been applied had the Ownership Interests been sold to a
third-party purchaser. See "SPECIAL FACTORS -- Discount for Ownership
Interests in Properties";
o As an additional amount distributable to Limited Partners, an
aggregate of approximately $213,200, less attorney's fees and
expenses, shall be paid to Limited Partners in connection with the
proposed settlement of an existing class action and derivative
lawsuit. As a result, if the proposed settlement is approved, the
General Partners estimate that those Limited Partners who do not elect
to exclude themselves from the class will receive, after payment of
estimated attorney's fees and expenses to plaintiffs' counsel, an
additional amount of approximately $.76 per Unit. See "DESCRIPTION OF
THE PROPOSED TRANSACTIONS --Background of the Proposed Transactions";
o The aggregate consideration of approximately $8,026,800 (which
includes the amount payable in settlement of the lawsuit) being paid
in connection with the proposed transactions exceeds the net book
value of the Partnership's assets of $2,823,800 as of September 30,
1999 by $5,203,000;
o Due to the familiarity of N'Tandem's external investment advisor with
the Properties, N'Tandem is willing to purchase the Properties "as-is"
and without representations and warranties from the Partnership;
o Because N'Tandem is buying the Properties in a single transaction and
is buying such Properties without representations and warranties from
the Partnership, the General Partners will be able to wind up the
Partnership and make full liquidating distributions promptly upon the
approval of the Sales and the Plan of Liquidation by the Limited
Partners;
o The estimated net liquidating proceeds payable in connection with the
Sales ($38.19 per Unit) are substantially higher than (i) the $19.30
per Unit offered to Limited Partners on January 13, 2000 in connection
with a tender offer for up to 4.9% of the Partnership's outstanding
Units made by Madison Liquidity Investors 104, LLC, (ii) the $19.30
7
<PAGE>
o per Unit offered to Limited Partners on September 28, 1999 in
connection with a tender offer for up to 4.9% of the Partnership's
outstanding Units made by Madison Liquidity Investors 109, LLC, (iii)
the $24.00 per Unit offered to Limited Partners on March 16, 1999 in
connection with a tender offer for up to 4.8% of the Partnership's
outstanding Units made by Everest Investors 8, LLC and (iv) the
weighted average trading price of $26.38 per Unit in the secondary
markets, as reported by The Partnership Spectrum, for the period of
May 1, 1999 through December 31, 1999;
o The Sales do not involve any brokerage fees payable by the
Partnership, resulting in a savings to the Partnership estimated to be
between $317,000 and $633,000 (based upon brokerage fees of 3% to 6%
typically paid by sellers of real properties); and
o Legg Mason has delivered the Fairness Opinion to the effect that the
aggregate purchase price to be paid to the Partnership is fair, from a
financial point of view, to the Limited Partners. The General Partners
have adopted, in its entirety, the Fairness Opinion, including its
underlying analysis, prepared by Legg Mason as part of their analysis
of the Sales and Plan of Liquidation. The General Partners did not
undertake to perform their own analysis with respect to the matters
considered by the Fairness Opinion. For a discussion of the Fairness
Opinion, see "SPECIAL FACTORS -- Fairness Opinion."
In reaching their determination that the Sales and the Plan of Liquidation
are fair from a financial point of view to the affiliated and unaffiliated
Limited Partners, the General Partners also considered the following potentially
negative aspects of the Sales:
o The purchase prices for the Properties are based upon independent
Appraisals rendered between June 1999 and October 1999 which have not
been updated and, thus, may not reflect the current fair market values
of the Properties;
o With respect to the Ownership Interests held by the Partnership, the
remaining interests in the properties underlying such Ownership
Interests are held by Windsor Park 345, an affiliated limited
partnership which has the Managing General Partner as its sole general
partner and Windsor 5 and Windsor 7, two affiliated limited
partnerships, as its other limited partners, or N'Tandem, which
together with the Managing General Partner is under common control of
Chateau;
o With respect to the discount being applied by N'Tandem to the
Ownership Interests held by the Partnership, no discount was applied
to the purchase price paid for any of the properties acquired by
N'Tandem in a similar transaction which was completed in June 1999
involving N'Tandem and the General Partners;
o It is possible that the future performance of the Properties will
improve or that prospective third-party buyers may be willing to pay
more for the Properties in the future; and
o It is possible that Limited Partners might earn a higher return on
their investment if the Partnership extended its stated term for a
second time and retained ownership of the Properties. By approving the
Sales and the Plan of Liquidation, Limited Partners will also be
foregoing current benefits of the ownership of the Properties such as
continuing distributions.
8
<PAGE>
The above described factors are all of the material factors considered by
the General Partners in determining that the Sales and the Plan of Liquidation
are fair to the affiliated and unaffiliated Limited Partners from a financial
point of view. In reaching their determination that the Sales and the Plan of
Liquidation are fair to the affiliated and unaffiliated Limited Partners from a
financial point of view, the General Partners did not assign relative weights to
the above factors or determine that any factor was of particular importance;
rather, the General Partners viewed the positive factors as a totality and the
negative factors as a totality and concluded that the positive factors
outweighed the negative factors. Accordingly, the General Partners determined
that the Sales and the Plan of Liquidation are fair to the affiliated and
unaffiliated Limited Partners from a financial point of view.
The General Partners also determined that the Sales and the Plan of
Liquidation are fair to the Limited Partners from a procedural point of view
based on the following factors:
o The Properties have been independently appraised by the Appraiser;
o In assessing the discount being applied to the Ownership Interests by
N'Tandem, the Managing General Partner had the Appraiser, which
concluded that in its estimation the application of a discount of
approximately 25% would be appropriate for a minority interest in real
estate, analyze the applicability of a discount in valuing a partial
ownership interest in a manufactured home community. See "SPECIAL
FACTORS Discount for Ownership Interests in Properties";
o The Sales are subject to the approval of unaffiliated Limited Partners
holding not less than a majority of the issued and outstanding Units;
and
o The Managing General Partner in connection with the Sales retained
Legg Mason to render its Fairness Opinion.
In reaching their determination that the Sales and the Plan of Liquidation
are fair from a procedural point of view to the affiliated and unaffiliated
Limited Partners, the General Partners also considered the following potentially
negative aspects of the Sales:
o The Sales were negotiated on behalf of the Partnership by the Managing
General Partner, which is under common control with N'Tandem and is
receiving substantial economic benefits from the proposed transactions
(including acquisition fees of $316,500 that are being paid by
N'Tandem), and were not the result of arm's-length negotiations and
bargaining between independent parties. Accordingly, the Sales may be
subject to potential conflicts of interest;
o Gary P. McDaniel and C.G. Kellogg, the sole Directors of the Managing
General Partner, are the Chief Executive Officer and the President,
respectively, of Chateau and, as a result, the Sales and the Plan of
Liquidation have not been approved on behalf of the Managing General
Partner by directors who are not affiliated with N'Tandem;
o No independent representatives or disinterested third party was
appointed or retained to negotiate the terms of the Sales on behalf of
the Partnership or the unaffiliated Limited Partners or to otherwise
represent the interests of the unaffiliated Limited Partners in
connection with the Sales;
o The Appraisals were rendered between June 1999 and October 1999 and no
updates or new appraisals have been or will be ordered in connection
with the Sales; and
9
<PAGE>
o The General Partners have engaged in limited marketing efforts on
behalf of the Partnership with respect to the Properties, with only
four of the nine manufactured home communities held by the Partnership
immediately following the Windsor Acquisition having been marketed for
sale to third-party purchasers to date. The General Partners do not
intend to take any actions to market or sell the Properties pending
the results of this Consent Solicitation.
The above described factors are all of the material factors considered by
the General Partners in determining that the Sales and the Plan of Liquidation
are fair to the affiliated and unaffiliated Limited Partners from a procedural
point of view. In reaching their determination that the Sales and the Plan of
Liquidation are fair to the affiliated and unaffiliated Limited Partners from a
procedural point of view, the General Partners concluded that the approval of
the Proposals by a majority-in-interest of the unaffiliated Limited Partners is
sufficient to insure that procedural fairness has been preserved for the Limited
Partners. The General Partners also believe that the potentially negative
factors influencing procedural fairness were in each case mitigated by the
following other factors or considerations: (i) although the Managing General
Partner and N'Tandem are under common control, the General Partners concluded
that the common control (a) did not adversely affect the terms of the Sales for
Limited Partners and (b) allowed N'Tandem to offer terms of the Sales that they
believed would not be available from third parties; (ii) although no independent
or disinterested third party was appointed to represent the Limited Partners in
connection with, or to negotiate the terms of, the Sales, the Managing General
Partner did retain Legg Mason to assess the fairness of the aggregate purchase
price to be paid to the Partnership in the Sales; (iii) even though the
Appraisals were rendered between June 1999 and October 1999, the General
Partners believe that no material changes have occurred in the Properties or in
the conditions of the market for manufactured home communities since those dates
that would result in higher values for the Properties; and (iv) the General
Partner's belief that marketing the Properties held by the Partnership would not
have provided a better transaction for the Limited Partners and would have
ultimately delayed the timing of the Sales and the distribution of liquidating
proceeds to the Limited Partners.
Fairness Opinion
On November 15, 1999, Legg Mason delivered the Fairness Opinion to the
Managing General Partner to the effect that, as of such date, the aggregate
purchase price to be paid to the Partnership by N'Tandem for the Properties is
fair, from a financial point of view, to the Limited Partners. In rendering
such opinion, Legg Mason conducted (i) a liquidation analysis assuming that the
Properties were sold to third-party purchasers, (ii) a comparable company
analysis to establish an implied equity value for the Units and (iii) a
continuation analysis assuming that the Partnership extended its stated term and
the Properties continued to be held by the Partnership until December 31, 2004.
The Fairness Opinion, which is set forth in Appendix A to this Consent
Solicitation Statement, should be read in its entirety for a description of the
procedures followed, assumptions and qualifications made, matters considered and
the limits of the review undertaken by Legg Mason. The Fairness Opinion is
based on conditions as of its date and, although subsequent developments could
have a material effect on the opinion stated, the Fairness Opinion will not be
updated.
Alternatives Considered
In addition to considering the Sales and the Plan of Liquidation, the
General Partners also identified and considered the following alternative
courses of action for the Partnership:
Continuation of the Partnership. The General Partners did not consider
extending the stated term of the Partnership for a second time, which would have
required the consent of the holders of a majority of the issued and outstanding
Units. The reason this option was not considered was that the
10
<PAGE>
Managing General Partner believes that Limited Partners desire to achieve the
near-term liquidation of their investments in the Partnership. This belief is
based on unsolicited inquiries received from time to time by the Managing
General Partner from Limited Partners regarding the status of their investment
in the Partnership following the expiration of its stated term and the Managing
General Partner's observation that most Limited Partners have held their
investments in the Partnership for more than fourteen years. In addition, the
Managing General Partner believes that continuing to own and operate the
Properties is not in the best interests of the Partnership and its Limited
Partners, especially in view of the opportunity to sell the Properties to
N'Tandem on the terms outlined herein. Additionally, while extending the term of
the Partnership would have resulted in the Limited Partners receiving the
benefits of continued ownership of the Properties, the Limited Partners would
have also remained subject to the risks of continuing such ownership and would
continue to be unable to liquidate their investments at fair value since no
formal trading market for the Units exists.
Sale of the Properties to Third-Party Purchasers. While the General
Partners did consider the possibility of selling the Properties to purchasers
other than N'Tandem, the General Partners ultimately concluded that such sale of
the Properties would not be likely to result in the distribution of greater
liquidating proceeds to the Limited Partners than the amounts being distributed
in connection with the Sales and the Plan of Liquidation. The principal reasons
for this conclusion are that the Managing General Partner believes that (i) the
Appraisals continue to reflect the fair market values of the Properties, (ii)
the Limited Partners would receive greater liquidating proceeds in a third-party
transaction only if such third party was willing to pay in excess of the
purchase prices for the Properties being paid by N'Tandem, something the General
Partners believe few, if any, third-party purchasers would be willing to do,
especially with respect to the partial Ownership Interests, (iii) the Ownership
Interests would have the effect of deterring potential third-party purchasers
because of their minority status, and (iv) the expenses of the Sales are lower
than they would be in connection with the sale of the Properties to an
unaffiliated third-party purchaser (principally due to the fact that no
brokerage commissions are being paid by the Partnership in connection with the
Sales, which results in estimated savings of between $317,000 and $633,000 based
upon prevailing commission rates).
While the General Partners do not believe, at this time, that the sale of
the Properties to a third-party purchaser would be more beneficial to the
Partnership and the Limited Partners than the Sales and Plan of Liquidation
proposed herein, the General Partners do recognize that a third-party purchaser
could propose a superior or competing offer to that proposed by N'Tandem during
the course of this Consent Solicitation and will not allow this Consent
Solicitation to preclude the Partnership from entertaining such a transaction
should one emerge prior to the end of the solicitation period for this Consent
Solicitation.
Proposed Consolidation. The General Partners also considered and analyzed
the Proposed Consolidation in which the Partnership, together with three of the
other Windsor Limited Partnerships, would have been merged with and into
N'Tandem. In the Proposed Consolidation, the Limited Partners would have had
the right to exchange their Units for common shares of beneficial interest or
other securities of N'Tandem. Based upon the Managing General Partner's
analysis of the Proposed Consolidation, the General Partners have concluded that
the Proposed Consolidation would not result in the Limited Partners receiving a
price per Unit, on a post-consolidation basis, greater than the estimated price
per Unit proposed to be paid to Limited Partners by N'Tandem. For a discussion
of the Managing General Partner's analysis of the Proposed Consolidation, see
"SPECIAL FACTORS Alternatives Considered." In analyzing of the Proposed
Consolidation, the Managing General Partner also considered that (i) the
anticipated time period for the completion of the Proposed Consolidation was
likely to be quite lengthy and would more than likely close well after both the
expiration date of the Partnership's stated term and the completion of the Sales
and (ii) the estimate of the value of the Units assuming their conversion into
N'Tandem's common shares in the Proposed Consolidation was not based on any
established trading price for the common shares, but was instead based on an
analysis of companies that
11
<PAGE>
the Managing General Partner considered to be comparable to N'Tandem on a post-
consolidation basis that sought to anticipate the market price of N'Tandem's
common shares following the Proposed Consolidation by reference to the current
trading prices of the securities of such comparative companies.
N'Tandem's and Chateau's Belief as to the Fairness of the Proposed Transactions;
N'Tandem's and Chateau's Reasons for Engaging in the Proposed Transactions
N'Tandem and Chateau believe that the Sales are fair to the Limited
Partners from both a financial point of view and a procedural point of view. In
reaching such determination, N'Tandem and Chateau considered the same factors
and positive and negative aspects of the Sales as were considered by the General
Partners, as described in this Consent Solicitation Statement under "SPECIAL
FACTORS -- Fairness of the Proposed Transactions; Recommendation of the General
Partners," and have specifically adopted the analyses and conclusions of the
General Partners described herein.
In October 1998, N'Tandem amended and restated N'Tandem's Declaration of
Trust and By-laws to convert N'Tandem from a finite-life entity to an infinite-
life entity in order to enable it to begin implementing a growth-oriented
business plan intended to cause N'Tandem to attain greater size and asset
diversity. The acquisition by N'Tandem of the Properties is being engaged in by
N'Tandem as part of such growth-oriented business plan.
Appraisals
The Appraiser, Whitcomb Real Estate located in Tampa, Florida, was
retained by the Managing General Partner to render the Appraisals with respect
to the Partnership's Properties. The Appraiser is certified as a Master
Appraiser by the Appraisal Institute and was selected based upon its expertise
as well as its familiarity with valuing real estate underlying manufactured home
communities.
A summary description of the Appraisals, including the values of the
Properties, is included elsewhere in this Consent Solicitation Statement under
the caption "SPECIAL FACTORS -- Appraisals." The Appraisals are based on
conditions as of their respective dates. Subsequent developments could have a
material effect on the valuations stated therein.
The purpose of the Appraisals was, and the Appraiser was instructed by the
Managing General Partner, to determine the fair market value of each Property.
In connection with the Appraisals, no fair market values or value ranges were
suggested by the Managing General Partner. Only one Appraisal was sought with
respect to each Property. If more than one Appraisal had been sought with
respect to each Property, the other appraisal values might have been higher or
lower than the Appraised Values determined by the Appraiser.
The Appraisals were rendered between June 1999 and October 1999 and,
therefore, may no longer reflect the fair market values of the Properties.
Accordingly, the value of the Properties may have increased since that time.
However, the Managing General Partner (i) does not believe that any significant
events have occurred since that time which would cause the conclusions reached
by the Appraiser in the Appraisals and Appraised Values to be different had the
Appraisals been rendered as of a more recent date, (ii) is not aware of any
material developments, trends or other uncertainties that relate to the
conclusions expressed in the Appraisals or that are reasonably likely to
materially affect such conclusions and (iii) does not intend to update the
Appraisals or order new appraisals for the Properties in connection with the
Sales.
Copies of the Appraisals are filed as exhibits to the Schedule 13E-3 and
are available for inspection and copying at the Partnership's principal
executive offices during regular business hours by
12
<PAGE>
any interested Limited Partner or any representative of a Limited Partner who
has been designated in writing. Copies may also be obtained through the written
request of any Limited Partner made to the Managing General Partner at 6160
South Syracuse Way, Greenwood Village, Colorado 80111.
Certain Federal Income Tax Considerations
The following is a brief summary of United States federal income tax
consequences to Limited Partners arising from the Sales and liquidation of the
Partnership:
Tax Consequences of the Sales. The Sales should result in the recognition
of gain by the Partnership and, therefore, should result in recognition of gain
by the Limited Partners. The amount of gain recognized by the Partnership with
respect to each of the Properties will equal the difference between (i) the
Partnership's amount realized (i.e., the amount of cash received increased by
the amount of liabilities of the Partnership assumed or taken subject to by
N'Tandem) and (ii) the Partnership's adjusted tax basis in each of the
Properties. The aggregate gain expected to be recognized by the Partnership on
the Sales is approximately $1,913,600.
Allocation of Gain. The $1,913,600 gain expected to be recognized by the
Partnership in the year of the Sales will be allocated among the partners in
accordance with the terms of the Partnership Agreement. These provisions will
result in an allocation of approximately $1,894,400 of taxable gain on the Sales
to Limited Partners (or an average of $10.06 per Unit). The gain per Unit
resulting from the Sales is primarily caused by the fact that the Partnership
generated tax losses in certain prior years that were allocated to Limited
Partners.
Tax Consequences of Liquidation. Upon liquidation of the Partnership, a
Limited Partner will recognize gain or loss equal to the difference between the
cash received by such Limited Partner (including the Limited Partner's share of
partnership liabilities under Section 752 of the Internal Revenue Code of 1986,
as amended (the "Code")) and the adjusted tax basis of the Limited Partner's
Units, adjusted by such Limited Partner's allocable share of income, gain or
loss arising from normal Partnership operations for the year of liquidation and
the sale of the Properties in the year of liquidation. See "-- Allocation of
Gain" above. It is expected that a Limited Partner will recognize an average
loss of approximately $11.70 per Unit on liquidation of the Partnership.
Consent Procedures; Transactions Authorized by Consents
The consents being solicited hereby will authorize the General Partners:
(i) to complete the Sales at any time on or prior to _____________, 2000 and to
proceed with the Plan of Liquidation; and (ii) to take all actions necessary or
appropriate, as determined by the General Partners, to complete the Sales and to
proceed with the Plan of Liquidation, including, without limitation, the
adoption of any amendments to the Partnership Agreement that may be required to
effectuate the Sales and Plan of Liquidation. Consents may be revoked by
Limited Partners at any time prior to receipt by the General Partners of
consents from unaffiliated Limited Partners holding a majority of the
outstanding Units.
Consents are being solicited from the Limited Partners in accordance with
the requirements of the Partnership Agreement.
Record Date; Required Consents
The close of business on __________, 2000 has been fixed as the record date
(the "Record Date") for determining Limited Partners entitled to consent to the
Sales and the Plan of Liquidation. As of the Record Date, there were _________
Units outstanding held of record by a total of _________ Limited Partners.
13
<PAGE>
Each of the Proposals require the approval of unaffiliated Limited Partners
holding at least a majority of the outstanding Units. Each Unit entitles the
holder thereof to cast one vote with respect to the approval of each of the
Proposals. As of the Record Date, the General Partners and their affiliates own
approximately _______ Units (or approximately _____% of total outstanding
Units), but have agreed to abstain from voting on the Proposals with respect to
all such Units.
No Appraisal or Dissenters' Rights
If Limited Partners owning the requisite number of Units in the Partnership
consent to the Sales and Plan of Liquidation, all Limited Partners of the
Partnership will be bound by such consent, including Limited Partners who have
not returned their consents or who have abstained from voting on, or denied
consent to, the Proposals. None of the Partnership Agreement, California law or
the proposed terms and conditions of the Sales or the Plan of Liquidation
provide objecting Limited Partners with the right to exercise any dissenters',
appraisal or similar rights. Under California law, the general partner of a
California limited partnership owes fiduciary duties to its limited partners.
To the extent that a general partner has engaged in a transaction in breach of
its fiduciary duties to limited partners, a damages remedy may be available to
such limited partners.
Historical Distributions
Set forth below is information relating to distributions made by the
Partnership since January 1, 1993:
<TABLE>
<CAPTION>
Year Total Aggregate Total Aggregate Per Unit to
To all Partners(1) to Limited Partners(1) Limited Partners(1)
- --------------------------------------- ---------------------- ------------------------ ---------------------
<S> <C> <C> <C>
1999.................................... $ 280,500 $ 265,800 $ 1.40
1998.................................... 283,600 268,900 1.40
1997.................................... 294,700 280,000 1.43
1996.................................... 294,700 280,000 1.42
1995.................................... 221,000 210,000 1.05
1994.................................... 421,100 400,000 2.00
1993.................................... 12,483,000 12,326,500 61.37
----------- ----------- ------
Total................................ $14,278,600 $14,031,200 $70.07
=========== =========== ======
</TABLE>
- ----------------------------------------
(1) The portion of such distribution representing a return of capital to the
Limited Partners is as follows: 50% in 1999, 34% in 1998, 74% in 1997, 79%
in 1996, 17% in 1995, 100% in 1994 and 72% in 1993.
The Partnership typically makes distributions to its partners on a semi-
annual basis. There are no restrictions on the Partnership's present or future
ability to make distributions. The Partnership is not in arrears with respect
to any dividends or distributions and has made all distributions required to be
made by it under the Partnership Agreement.
No Established Trading Market For Units
The Units are not listed on any securities exchange and no established
trading market for the Units exists.
14
<PAGE>
SUMMARY HISTORICAL FINANCIAL DATA
The following summary historical financial data, insofar as it relates to
each of the years ended December 31, 1994 through 1998, has been derived from
the annual financial statements of the Partnership, including the balance sheet
at December 31, 1998 and the related statements of income for the two years
ended December 31, 1997 and 1998, and the notes thereto as included in the
Partnership's Annual Report on Form 10-KSB for the year ended December 31, 1998.
The data for the nine months ended September 30, 1999 has been derived from
unaudited financial statements as included in the Partnership's Quarterly Report
on Form 10-QSB for the quarter ended September 30, 1999, which, in the opinion
of the Managing General Partner, include all adjustments, consisting only of
normal recurring adjustments, necessary for a fair statement of the results for
the unaudited interim periods.
<TABLE>
<CAPTION>
For the Nine
Months Ended
September 30, For the Year Ended December 31,
--------------- ------------------------------------------------------------------------
1999 1998 1997 1996 1995 1994
<S> <C> <C> <C> <C> <C> <C>
Statement of Operations Data:
Revenues............................ $1,691,800 $1,784,600 $1,702,100 $1,557,800 $1,090,900 $1,066,600
Net income (loss)................... $ 515,600 $ 180,400 $ 74,600 $ 59,100 $ 176,100 $(464,500)
Earnings (loss) per Unit before $ 3.08 -- -- -- -- --
extraordinary item.................
Extraordinary loss per Unit from $ (0.39) -- -- -- -- --
early extinguishment of debt.......
Earnings (loss) per Unit........... $ 2.69 $ 0.93 $ 0.38 $ 0.30 $ 0.87 $ (2.29)
Balance Sheet Data:
Total assets........................ $4,736,900 $5,901,000 $6,096,100 $6,303,800 $3,584,700 $3,618,300
Long-term debt...................... $1,570,400 $2,970,400 $2,970,400 $2,970,400 -- --
Other Data:
Distributions per Unit.............. $ 1.40 $ 1.40 $ 1.43 $ 1.42 $ 1.05 $ 2.00
</TABLE>
- ------------------------------------
(1) On April 1, 1999, the Partnership sold the Little Eagle Property. The sale
resulted in a net gain on sale to the Partnership of $424,600. In
connection with the sale, the Partnership obtained a $400,000 term loan and
paid off a related mortgage note payable of $1,800,000, resulting in an
extraordinary loss on early extinguishment of the debt of approximately
$74,600.
15
<PAGE>
MATERIAL RISK FACTORS AND OTHER CONSIDERATIONS
The Sales involve material risks, conflicts of interest and other
considerations which are discussed below. Limited Partners are urged to
consider such factors and considerations and to consult with their independent
legal, financial and tax advisors before consenting to the Sales and the Plan of
Liquidation.
Conflicts of Interest
Managing General Partner and N'Tandem are Under Common Control of Chateau.
The Sales and the Plan of Liquidation, and the recommendation of the General
Partners set forth herein, could be deemed to involve conflicts of interest
between the Managing General Partner and the Limited Partners. The Managing
General Partner and N'Tandem are under the common control of Chateau. Chateau
owns all of the issued and outstanding capital stock of the Managing General
Partner and the Chief Executive Officer and the President of Chateau are the
sole Directors of the Managing General Partner. Chateau, which effectively
controls N'Tandem, currently owns approximately 9.8% of the outstanding capital
stock of N'Tandem and, following the consummation of the Sales, will hold
approximately $51.2 million of indebtedness in N'Tandem. Chateau and N'Tandem
have discussed the possibility of converting all or a portion of the principal
amount of such indebtedness into common or preferred shares of beneficial
interest of N'Tandem. However, there is no agreement or understanding between
Chateau and N'Tandem relating to any such conversion.
Managing General Partner to Receive $316,500 in Acquisition Fees From
N'Tandem and Other Economic Benefits From the Proposed Transactions. The
Managing General Partner is also the external investment advisor of N'Tandem. In
connection with the Sales, pursuant to the Advisory Agreement between such
parties, the Managing General Partner will receive an aggregate acquisition fee
of $316,500 from N'Tandem equal to 3% of the total purchase price for the
Properties. On a Property-by-Property basis, this acquisition fee is estimated
to be $66,000 for the Ponderosa Property, $21,000 for The Pines Property,
$72,000 for the Shady Hills Property, $69,000 for the Trailmont Property,
$30,300 for the Big Country Estates Property, $15,600 for the Apache East
Property, $27,100 for the Denali Park Estates Property and $15,500 for the
Harmony Ranch Property. Under the Advisory Agreement, the Managing General
Partner is entitled to the following fees: (i) annual subordinated advisory fees
of up to 1% of invested assets and .05% of uninvested assets of N'Tandem, (ii)
acquisition fees in connection with the acquisition of properties by N'Tandem
equal to 3% of the sales price, and (iii) a subordinated incentive fee on the
disposition of N'Tandem's assets equal to 15% of cash remaining from sales or
financing of N'Tandem's assets after holders of shares of beneficial interest of
N'Tandem have received specified preferred returns. The Sales will result in an
increase of invested assets of N'Tandem by approximately $10.6 million and,
accordingly, will increase the annual subordinated advisory fee payable by
N'Tandem by approximately $105,500 per year. To the extent that N'Tandem is
able to generate returns to its shareholders in excess of 9% per annum over the
life of N'Tandem (the "Excess Returns"), the Managing General Partner will be
entitled to a subordinated incentive fee equal to 15% of the Excess Returns. As
a result of the economic benefits accruing to the Managing General Partner in
connection with the Sales, the Sales and the recommendation and views of the
Managing General Partner, are subject to potential conflicts of interest.
Purchase Prices Are Not the Result of Arm's-Length Negotiations
Due to the potential conflicts of interests of the Managing General
Partner, the aggregate purchase price being paid by N'Tandem for the Properties
and other deal terms cannot be considered to be the result of arm's-length
negotiations and bargaining between independent parties and, as a result, may
16
<PAGE>
not be as favorable as those that might have been obtained had the terms of the
Sales been the result of such arm's-length negotiations.
No Appointment of Independent Representative
The General Partners have not appointed an independent representative to
represent the unaffiliated Limited Partners in connection with the Sales or to
negotiate the terms of the Sales. If an independent representative had been
appointed, the purchase prices for the Properties and the other terms of the
Sales might have been different and possibly more favorable to the Partnership
and the Limited Partners.
The General Partners Have Engaged in Limited Marketing Efforts with Respect to
the Properties
The General Partners have engaged in only limited marketing efforts with
respect to the Properties. The only marketing activities engaged in by the
General Partners with respect to the Properties was to (i) list the Ponderosa
Property, the Little Eagle Property and the Harmony Ranch Property (in which the
Partnership owns a 25% Ownership Interest) with local real estate brokers and
(ii) market the Shady Hills Property directly to potential third-party
purchasers. Additionally, the General Partners do not intend to take any
actions to market or sell the Properties pending the results of this Consent
Solicitation; however, if a superior or competing offer were to emerge prior to
the end of the solicitation period for this Consent Solicitation Statement, the
General Partners would entertain any such offer. Marketing the Properties to
third parties could conceivably result in higher purchase prices being paid for
the Properties than those that are being paid by N'Tandem in connection with the
Sales.
Appraisals May Not Reflect the Current Fair Market Values of the Properties
All of the Appraisals were rendered between June 1999 and October 1999.
The General Partners do not intend to update the Appraisals or to order new
appraisals for the Properties. Accordingly, the Appraisals may not reflect the
current fair market values of the Properties.
Loss of Opportunity to Benefit from Future Events
It is possible that the future performance of the Properties will improve
or that prospective third-party purchasers may be willing to pay more for the
Properties in the future. It is possible that Limited Partners might earn a
higher return on their investment if the Partnership extended its stated term
for a second time and retained ownership of the Properties. By approving the
Sales and the Plan of Liquidation, Limited Partners will also be foregoing
current benefits of ownership of the Properties, such as continuing
distributions.
DESCRIPTION OF THE PROPOSED TRANSACTIONS
Purpose of the Consent Solicitation; Proposals 1 and 2
In accordance with the Partnership Agreement, the term of the Partnership
expired on December 31, 1999. As a result, in accordance with the terms of the
Partnership Agreement and California law, the General Partners are required (i)
to develop a plan of liquidation for the Partnership's assets and to liquidate
and dissolve the Partnership or (ii) to take such actions as are necessary to
extend the Partnership term in order to enable it to continue as a going
concern.
The purpose of this Consent Solicitation is to obtain the consent of the
Limited Partners to the two Proposals described herein. Upon approval of both
of the Proposals by the Limited Partners, the
17
<PAGE>
General Partners will proceed with the Plan of Liquidation pursuant to which the
Partnership will sell its four wholly-owned Properties and its Ownership
Interests in four other Properties to N'Tandem. The terms of the Sales are set
forth in a Purchase and Sale Agreement between N'Tandem and the Partnership. See
"DESCRIPTION OF THE PROPOSED TRANSACTIONS -- The Purchase and Sale Agreement."
Upon completion of the Plan of Liquidation, final liquidating distributions
(estimated to be approximately $38.19 per Unit) will be made to Limited Partners
in accordance with the terms of the Partnership Agreement.
Two Proposals are being proposed in this Consent Solicitation Statement for
approval by the Limited Partners. Proposal 1 is for the General Partners to
proceed with the Sales to N'Tandem pursuant to the Purchase and Sale Agreement.
Proposal 2 is for the General Partners to proceed with the Plan of Liquidation
following the consummation of the Sales.
If each of the two Proposals is approved by a majority-in-interest of the
Limited Partners, the General Partners will proceed with the Sales and the Plan
of Liquidation. Each of the Proposals is conditioned upon the approval of the
other Proposal by the Limited Partners. Accordingly, any Limited Partner
desiring to have the General Partners proceed with the Sales and the Plan of
Liquidation needs to vote for both Proposal 1 and Proposal 2.
----
The Managing General Partner is a wholly-owned subsidiary of Chateau and
the Managing General Partner and N'Tandem are under common control of Chateau.
Gary P. McDaniel and C.G. Kellogg, the Directors of the Managing General
Partner, are the Chief Executive Officer and the President, respectively, of
Chateau. The Managing General Partner of the Partnership is also the external
investment advisor to N'Tandem. Chateau is one of the largest publicly held
companies in the United States engaged in the ownership and operation of
manufactured home communities. N'Tandem, rather than Chateau, will be purchasing
the Properties because the Properties are more in line with the type and quality
of assets sought by N'Tandem. In general, Chateau seeks to invest in large,
institutional manufactured home communities containing a full complement of
amenities, including clubhouses, pools, tennis and basketball courts,
shuffleboard, playgrounds, curbed streets, landscaping and off-street parking,
and consisting primarily of multi-section sites. In contrast, N'Tandem seeks to
invest in lower profile manufactured home communities which, like the
Properties, are located in tertiary demographic and geographic markets, are
smaller in size with fewer amenities and contain a greater proportion of single-
wide spaces. Additionally, N'Tandem also has a partial ownership interest in
all of the manufactured home communities in which the Partnership holds an
Ownership Interest and, upon completion of the Sales, will hold a 100% ownership
interest in the Big Country Estates and Harmony Ranch Properties and will hold a
65% ownership interest in the Apache East and Denali Park Estates Properties.
Background of the Proposed Transactions
The Partnership was formed in August 1985 pursuant to the provisions of the
California Revised Limited Partnership Act. The Partnership was organized as a
finite-life entity to acquire and hold existing manufactured home communities
for investment for a limited period of time. Its principal investment
objectives were to provide to Limited Partners: (i) distributions of cash from
operations; (ii) preservation, protection and eventual return of the Limited
Partners' investment; and (iii) realization of appreciation in the value of the
properties acquired (collectively, the "Original Objectives"). It was
originally anticipated that the Partnership would be liquidated and dissolved at
the end of December 1996; however, in June 1995, a majority-in-interest of the
Limited Partners consented to an extension of the term of the Partnership until
the end of December 1999.
In September 1997, Chateau purchased 644,842 shares of common stock of the
Managing General Partner, constituting all of the outstanding capital stock of
the Managing General Partner, in
18
<PAGE>
exchange for 101,239 shares of Chateau's common stock and $750,000 in cash (the
"Windsor Acquisition"). The total value of the Windsor Acquisition, based on the
trading prices of Chateau's shares of common stock at the time of the
acquisition, was approximately $4.0 million. Following the Windsor Acquisition,
at the request of Chateau, the sole stockholder of The Windsor Corporation, the
Trustees of N'Tandem voluntarily resigned and, in connection with such
resignation, appointed three new Trustees proposed by Chateau. These appointed
Trustees were re-elected as N'Tandem's Trustees at a special meeting of
stockholders of N'Tandem held on October 23, 1998 and, then again, at N'Tandem's
1999 annual meeting of stockholders held on June 15, 1999. In accordance with
N'Tandem's Declaration of Trust, two of the appointed Trustees of N'Tandem are
"independent trustees." An "independent trustee" is a Trustee who is not
affiliated, directly or indirectly, with N'Tandem or an advisor of N'Tandem,
whether by ownership of, ownership in, employment by, or any material business
or professional relationship with N'Tandem or such advisor or an affiliate of
N'Tandem or such advisor, or by virtue of serving as an officer or director of
N'Tandem or any advisor or affiliate of N'Tandem or such advisor. As a result of
the Windsor Acquisition, Chateau became the indirect owner of 1,000 Units in the
Partnership. No particular value was attributed or allocated to such Units in
connection with the Windsor Acquisition. Since February 1997, Chateau has
provided property management services to N'Tandem and the Partnership, pursuant
to a management agreement between the Partnership and the Managing General
Partner. The total amount received by Chateau in respect of services rendered
pursuant to such management agreement was approximately $61,400 for the first
nine months of 1999, approximately $77,200 in 1998 and approximately $72,600 in
1997.
Following the Windsor Acquisition, the General Partners began to analyze
the short-term and long-term business objectives of each of the Windsor Limited
Partnerships, including the Partnership. In connection with their analysis, the
General Partners reviewed each of the agreements of limited partnership of the
Windsor Limited Partnerships in order to ascertain, and to factor into their
analysis, the expiration date of the stated term of each Windsor Limited
Partnership. In addition, the General Partners also ordered appraisals for each
of the properties held by three of the five Windsor Limited Partnerships,
including the Partnership. As a result of their analysis, the General Partners
determined to develop a plan to liquidate Windsor Park Properties 4, A
California Limited Partnership ("Windsor 4"), following the expiration of its
stated term in December 1997 as well as to begin selectively marketing for sale
several of the properties and partial ownership interests held by the other
Windsor Limited Partnerships.
The General Partners promptly began developing and implementing their plan
of liquidation for Windsor 4. In accordance with their plan of liquidation, the
General Partners (i) sold one of Windsor 4's wholly-owned properties in May 1998
to a third-party purchaser and (ii) in June 1999, completed a transaction (the
"Windsor 4 Transaction") in which Windsor 4 sold all of its remaining assets to
N'Tandem and, thereafter, made liquidating distributions to its partners in
accordance with the terms of its agreement of limited partnership. Prior to its
liquidation, Windsor 4 held partial ownership interests in two Properties, the
Apache East and the Denali Park Estates Properties, in common with the
Partnership and, like the Partnership, had the General Partners as its sole
general partners.
As part of its analysis of the Partnership following the Windsor
Acquisition, the General Partners ordered appraisals for the five properties
which were wholly-owned by the Partnership and the four manufactured home
communities in which the Partnership held Ownership Interests. The General
Partners received these appraisals in late 1997 and early 1998, which reported
on the appraised values of the wholly-owned and partially-owned properties held
by the Partnership. After reviewing the 1997 appraisals, the General Partners
developed a plan for the marketing for sale of certain of the Properties held by
the Partnership.
Beginning in the first quarter of 1998, the General Partners began to
market for sale the Ponderosa Property, the Shady Hills Property, the Little
Eagle Property and the Harmony Ranch Property
19
<PAGE>
(in which the Partnership owns a 25% Ownership Interest) to third parties. In
this regard, the General Partners (i) listed the Ponderosa Property, the Little
Eagle Property and the Harmony Ranch Property with local real estate brokers for
sale to third parties and (ii) directly tried to market the Shady Hills Property
to The Carlisle Group and Follett Investments, third parties known to the
Managing General Partner to have an interest in such property. As a result of
such efforts, the General Partners entered into a purchase and sale agreement
with Floral Park Outreach, Inc. relating to the Little Eagle Property and, in
April 1999, closed on the sale of the Little Eagle Property for $875,000. In
addition, in July 1998, the Partnership entered into a letter of intent with
Park Advisors, Inc., a corporation based in Minneapolis, Minnesota, providing
for the sale of the Harmony Ranch Property to Park Advisors, Inc. for a net
purchase price of $2,350,000, of which $587,500 would be attributable to the
Partnership's 25% Ownership Interest. Subsequently, a portion of the Harmony
Ranch Property became flooded as a result of a period of unusually high rainfall
in central Florida. Although most of the damage to the Harmony Ranch Property
was covered by insurance, as a result of the flooding problems, Park Advisors,
Inc. refused to close on the sale. Similarly, the General Partners were also
unable to successfully market and sell either the Ponderosa Property or the
Shady Hills Property. While the General Partners did solicit and receive offers
for these two Properties, such offers proposed sales prices which were below the
appraised values for such Properties set forth in the 1997 appraisals.
Upon completion of their marketing efforts with respect to the
Partnership's Properties, the General Partners began to explore possible
strategic alternatives for the Partnership with a view towards providing the
Limited Partners with an opportunity to achieve liquidity in their investment.
Accordingly, in November 1998, the General Partners began to consider the
possibility of merging the Partnership, together with three of the other Windsor
Limited Partnerships, into N'Tandem. In the Proposed Consolidation, the Limited
Partners would have exchanged their Units for common shares of beneficial
interest or other securities in N'Tandem. In contemplation of the Proposed
Consolidation, the Managing General Partner (i) retained the Appraiser to render
the Appraisals, which updated the 1997 appraisals, with respect to the
Partnership's Properties and (ii) engaged Legg Mason to act as financial advisor
to the Partnership and the other Windsor Limited Partnerships and, if the
Managing General Partner elected to proceed with the Proposed Consolidation, to
deliver a fairness opinion with respect to the Proposed Consolidation. The
General Partners considered and actively pursued the Proposed Consolidation
involving the Partnership and the other three Windsor Limited Partnerships
through August 1999. For a discussion of the Managing General Partner's
analysis of the Proposed Consolidation, see "SPECIAL FACTORS Alternatives
Considered."
In September 1999, the General Partners concluded that the best course of
action for the Partnership and its Limited Partners would be for the Partnership
to sell its remaining Properties to N'Tandem in a transaction similar to the one
that was completed with Windsor 4. The General Partners decided not to attempt
to market or remarket, as the case may be, the Partnership's remaining
Properties for sales to parties other than N'Tandem based, in part, on their
belief that (i) the price offered to be paid by N'Tandem for the wholly-owned
Properties, which is equal to the full Appraised Values for such Properties,
would be greater than the price which would be paid by any prospective third-
party purchaser, given the results of the General Partner's previous marketing
efforts of certain of the Properties and (ii) very limited demand for the
Ownership Interests exists and that any prospective third-party purchaser of
these interests would not be willing to pay the Partnership the price being
offered by N'Tandem for such interests, given that control and management of the
underlying properties and the power to sell or dispose of the underlying
properties is vested solely in the Managing General Partner, an affiliate of
N'Tandem, and that N'Tandem owns all of the other partial ownership interests in
two of the underlying properties and a 25% partial ownership interest in each of
the other two underlying properties.
In determining whether to pursue the Sales, the General Partners analyzed
various alternatives for the Partnership, including the Proposed Consolidation,
and the terms and provisions of the Sales. In
20
<PAGE>
connection with its analysis of the Sales and Plan of Liquidation, the Managing
General Partner, on behalf of the Partnership, engaged Legg Mason to render the
Fairness Opinion as to the fairness, from a financial point of view, to the
Limited Partners of the aggregate purchase price to be paid by N'Tandem to the
Partnership for the Properties. On November 15, 1999, Legg Mason delivered its
oral and written Fairness Opinion to the Managing General Partner stating that
the aggregate purchase price to be paid by N'Tandem for the Properties was fair
to the Limited Partners from a financial point of view.
On May 10, 1999, Ira Gaines, a limited partner of Windsor 4, filed a
purported class action and derivative complaint (the "Complaint"), on behalf of
himself and other similarly situated limited partners, against the General
Partners, in their capacity as the general partners of Windsor 4, and the
Directors and the President of the Managing General Partner, in the Superior
Court of the State of California, County of San Diego. The Complaint asserts
causes of action arising out of the Windsor 4 Transaction and alleges the
following: (i) wrongful failure to liquidate timely Windsor 4 in that its term
expired on December 31, 1997 and to engage in sustained efforts to liquidate
Windsor 4's remaining properties, thus allegedly tying up the limited partners'
money for longer than was contemplated or allowed under the agreement of limited
partnership of Windsor 4, (ii) breach of fiduciary duty owed by the defendants
to Windsor 4 and its limited partners in that the defendants allegedly failed to
take steps to ensure the entire fairness of the transaction and that the selling
prices for Windsor 4's assets allegedly do not fairly and adequately represent
their present value, and (iii) breach of the defendants' contractual duties owed
to Windsor 4 and its limited partners in that the agreement of limited
partnership of Windsor 4 prohibits sales of property to a Windsor 4 sponsor. In
the Complaint, the plaintiff is seeking relief in the form of monetary damages
and an award of expenses and a dissolution of Windsor 4 and the appointment of
an independent liquidating trustee to liquidate Windsor 4's assets.
On December 3, 1999, Mr. Gaines, also a limited partner of the Partnership
and Windsor Park Properties 6, A California Limited Partnership ("Windsor 6"),
amended the Compliant by filing an amended purported class action and derivative
complaint (the "Amended Complaint"), on behalf of himself and other similarly
situated limited partners, against the General Partners, in their capacity as
the general partners of the Partnership, Windsor 4, and Windsor 6, and the
Directors and the President of the Managing General Partner, in the Superior
Court of the State of California, County of San Diego. In addition to the
original allegations set forth in the Complaint, the Amended Complaint also
alleges generally breach of fiduciary duty and contractual duties owed by the
defendants to the Partnership and Windsor 6 and their limited partners in that
the defendants allegedly failed to take steps to ensure the entire fairness of
the transactions by proposing to sell the partnerships' assets at prices that
were improperly discounted from the appraisal values and without taking steps to
seek out alternative purchasers or otherwise maximize value to the limited
partners.
In the Amended Complaint, the plaintiff asserts causes of action for breach
of contract, breach of fiduciary duty and a derivative claim for breach of
fiduciary duty and seeks relief in the form of monetary damages and an award of
expenses and a dissolution of Windsor 4 and the appointment of an independent
liquidating trustee to liquidate Windsor 4's assets. Although the General
Partners dispute each claim set forth in the Amended Complaint, they have
concluded that the further defense of this action would be protracted, expensive
and distracting to their operations. To that end, the General Partners have
reached an agreement in principle that would settle all claims in the action,
subject to court approval of a definitive signed agreement. The proposed
settlement, if approved, provides for the total payment of more than $1 million
by the defendants, plus the costs of administering the settlement fund
(including the mailing of notice to class members), in return for releases from
all actual and potential claims concerning the management or operation of the
Partnership, Windsor 4 and Windsor 6 against all of the defendants and any
affiliated persons or entities. Accordingly, there would be available for
distribution to Limited Partners an aggregate of approximately $213,200 as
additional compensation if the proposed settlement is approved. In connection
with the proposed settlement, the defendants have agreed not to object to the
21
<PAGE>
application by plaintiffs' counsel to the court for an award of up to one-third
of the aggregate settlement amount to be paid as attorney's fees and expenses.
As a result, if the proposed settlement is approved, the General Partners
estimate that those Limited Partners who do not elect to exclude themselves from
the class will receive, after payment of estimated attorney's fees and expenses
to plaintiffs' counsel, an additional amount of approximately $.76 per
Unit.
It is currently anticipated that the Sales will occur as soon as
practicable following the approval by Limited Partners of the Proposals. If
sufficient consents to proceed with the Proposals are not obtained, the General
Partners intend to explore, consider and pursue such alternatives as may be
available to the Partnership.
Information Concerning N'Tandem and Chateau
N'Tandem is an unincorporated California business trust with principal
executive offices at 6160 South Syracuse Way, Greenwood Village, Colorado 80111.
The principal business of N'Tandem is the acquisition, ownership and operation
of manufactured home communities. Chateau owns all of the capital stock of the
Managing General Partner and effectively controls N'Tandem through its 9.8%
equity ownership interest in N'Tandem and its representation on N'Tandem's Board
of Trustees. Gary P. McDaniel, the Chief Executive Officer of Chateau, is
Chairman, and one of three Trustees, of the Board of Trustees of N'Tandem.
Following the Sales, it is anticipated that Chateau will also hold approximately
$51.2 million of indebtedness in N'Tandem. Chateau's principal executive
offices are at 6160 South Syracuse Way, Greenwood Village, Colorado 80111.
Chateau is one of the largest publicly held real estate investment trusts
principally engaged in the acquisition, ownership and operation of manufactured
home communities and is one of the largest owner/operators of manufactured home
communities in the United States. The Managing General Partner, which is
wholly-owned by Chateau, is also the external investment advisor to N'Tandem.
Gary P. McDaniel, the Chief Executive Officer of Chateau, and Jeff Kellogg, the
President of Chateau, are the sole directors of the Managing General Partner.
Information concerning the Trustees of N'Tandem and the executive officers and
directors of Chateau and the Managing General Partner is set forth in Appendix B
to this Consent Solicitation Statement and is incorporated herein by reference.
The Purchase and Sale Agreement
General. The Purchase and Sale Agreement does not contain any seller
representations and warranties. As a result, following the closing of the Sales,
N'Tandem will have no recourse against the Partnership in connection with the
condition of, or other matters affecting, the Properties.
22
<PAGE>
Purchase Prices. The following table sets forth information regarding the
Partnership's Properties and their respective values (based on the Appraised
Values), the discount being applied to the Ownership Interests, the debt
attributable to the Properties as of September 30, 1999 and the value of the
Properties after deducting attributable debt and applicable discount:
<TABLE>
<CAPTION>
Value, Based on Discount on
Percentage Date Appraised Value, Ownership Debt Attributable
Name of Property Ownership Acquired Before Debt(1) Interests(1)(2) as of 9/30/99(1) Net Value(1)
- -------------------- ------------- ----------- ------------------- ------------------ ----------------- ------------
<S> <C> <C> <C> <C> <C> <C>
Ponderosa 100% 3/1986 $ 2,200,000 -- $ 400,000 $1,800,000
Indianapolis, IN
The Pines 100% 8/1986 $ 700,000 -- -- $ 700,000
Charleston, SC
Shady Hills 100% 9/1986 $ 2,400,000 -- -- $2,400,000
Nashville, TN
Trailmont 100% 1/1996 $ 2,300,000 -- $1,170,400 $1,129,600
Nashville, TN
Big Country Estates 40%(3) 12/1986 $ 1,124,000 $112,400 -- $1,011,600
Cheyenne, WY
Apache East 29%(4) 2/1997 $ 576,900(5) $ 57,700 $ 316,600 $ 202,600
Apache Junction, AZ
Denali Park Estates 29%(4) 2/1997 $ 1,003,600(5) $100,400 $ 550,900 $ 352,300
Apache Junction, AZ
Harmony Ranch 25%(6) 12/1986 $ 575,000 $ 57,500 $ 300,000 $ 217,500
Thonotosassa, FL ----------- -------- ---------- ----------
$10,879,500 $328,000 $2,737,900 $7,813,600
Total =========== ======== ========== ==========
</TABLE>
- ------------------------
(1) With respect to the four Ownership Interests, such amount represents the
Partnership's allocable share based upon its ownership percentage in the
underlying property.
(2) With respect to the four Ownership Interests, N'Tandem is applying a 10%
discount for the fact that the Partnership only owns a minority interest
in the underlying property. In a similar transaction which was completed
in June 1999 involving N'Tandem and the General Partners, no discount was
applied to the purchase price paid for any of the properties acquired by
N'Tandem in that transaction. For a discussion of the discount being
applied to the Ownership Interests, see "SPECIAL FACTORS -- Discount for
Ownership Interests in Properties."
(3) The remaining 60% interest in this Property is held by N'Tandem as tenant
in common with the Partnership.
(4) Each of these Properties is owned by Windsor Park 345. The Partnership is
a 29% limited partner in Windsor Park 345. In addition to being the sole
general partner of Windsor Park 345, the Managing General Partner is also
the sole managing general partner of Windsor 5 and Windsor 7 and is the
external investment advisor to N'Tandem, which together own all of the
remaining limited partner interests in Windsor Park 345. N'Tandem, Windsor
5 and Windsor 7 have a 36%, 9% and 26% limited partner interest,
respectively, in Windsor Park 345.
(5) The Apache East and Denali Park Estates Properties are contiguous
properties with similar characteristics. Accordingly, the Appraiser
appraised both Properties together and, in its Appraisal, stated that the
aggregate Appraised Value of both Properties was $5,450,000. For purposes
of this table, the Managing General Partner allocated 36.5% of the
aggregate Appraised Value to Apache East and 63.5% of the aggregate
Appraised Value to Denali Park Estates.
(6) The remaining 75% interest in this Property is held by N'Tandem as tenant
in common with the Partnership.
N'Tandem has agreed to pay cash for the Properties. The aggregate purchase
price to be paid by N'Tandem for the Properties is expected to be $10,551,500,
which includes $7,813,600 to be paid in cash
23
<PAGE>
and $2,737,900 representing debt attributable to the Properties being assumed by
N'Tandem. All of the funds required by N'Tandem to complete the acquisition of
the Properties will be supplied by Chateau in exchange for the issuance by
N'Tandem of an unsecured promissory note (the "Promissory Note"). The Promissory
Note will be in a principal amount of $7,813,600, will bear interest at an
annual rate equal to 1% per annum above the prime rate established by Bank One,
N.A. and will be payable in full on March 31, 2001. Chateau and N'Tandem have
discussed the possibility of converting all or a portion of the principal amount
of the Promissory Note into common or preferred shares of beneficial interest of
N'Tandem. However, there is no agreement or understanding between Chateau and
N'Tandem relating to any such conversion. In the event that only a portion of
the principal amount of the Promissory Note is converted into shares of
beneficial interest, N'Tandem anticipates that it will finance the remainder of
the Promissory Note primarily through third-party equity and debt sources and/or
advances under its existing $20 million acquisition line of credit.
Sales Expenses. The Partnership will pay certain closing costs customarily
paid by sellers in the respective jurisdictions in which the Properties are
located, including the seller's portion of title insurance and escrow fees.
There are no acquisition fees payable by the Partnership in connection with the
Sales.
Solicitation Expenses
The Partnership will bear the costs incurred in connection with this
Consent Solicitation.
Estimate of Liquidating Distributions Payable to Limited Partners
The following table sets forth the basis of the General Partners' estimate
of the liquidating distributions payable to Limited Partners. The table assumes
the Sales occurred as of December 31, 1999. The actual liquidating
distributions will vary from the amount shown below depending upon the operating
results of the Properties, the level of distributions, if any, to partners, the
capital expenditures for the Properties for the period January 1, 2000 through
the closing date, the amount of closing adjustments and, with respect to each
Limited Partner, whether such Limited Partner elects to be excluded from the
class entitled to receive a distribution in connection with the proposed
settlement of the Amended Complaint.
24
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
Aggregate Purchase Price for the Properties $10,551,500
Less: Outstanding Mortgage Indebtedness(1) $(2,737,900)
Current Liabilities $ (364,800)
Estimated Transactional Expenses Payable by the Partnership(2):
Prepayment Penalties $ (27,400)
Legal Fees $ (200,000)
Accounting Fees $ (15,000)
Fairness Opinion $ (50,000)
Surveys $ (37,000)
Closing Costs $ (50,000)
Solicitation Expenses $ (25,000)
Printing Costs $ (25,000)
-----------
Total Estimated Transactional Expenses Payable by the Partnership $ (429,400)
-----------
Plus: Cash, Cash Equivalents and Other Current Assets $ 100,300
-----------
Cash Available for Distribution $ 7,119,700
===========
Allocable to General Partners $ 71,200
Allocable to Limited Partners $ 7,048,500
Additional Compensation Payable to Limited Partners(3) $ 142,800
-----------
Total Cash Available for Distribution to Limited Partners $ 7,191,300
===========
Estimated Cash Available for Distribution per Unit(3)(4)(5) $38.19
</TABLE>
- --------------------------------------
(1) Based on amounts outstanding, including accrued interest, as of September
30, 1999, on debt attributable to the Ownership Interests.
(2) See "-- The Purchase and Sale Agreement -- Sales Expenses" and "--
Solicitation Expenses" above.
(3) Assumes (i) execution and court approval of a definitive settlement
agreement, (ii) an award of one-third of $213,200, the portion of aggregate
settlement amount allocable to the Limited Partners of the Partnership, to
be paid to plaintiffs' counsel as attorney's fees and expenses and (iii)
that no Limited Partner elects to be excluded from the class entitled to
receive a distribution in connection with the proposed settlement of the
Amended Complaint. See "--Background of the Proposed Transactions" above.
(4) Based on 188,296 Units outstanding as of January 7, 2000.
(5) Includes additional amount (estimated to be approximately $.76 per Unit)
payable to Limited Partners upon liquidation of the Partnership as a result
of the proposed settlement. Limited Partners electing to be excluded from
the class participating in the proposed settlement will not be entitled to
receive any portion of such additional amount.
Since the organization of the Partnership, total distributions to Limited
Partners have amounted to approximately $22,572,800 (or an average of
approximately $114.09 per Unit). If the Sales are completed and the liquidating
distributions estimated above are paid to Limited Partners, total distributions
to Limited Partners will amount to approximately $29,764,100 (or approximately
$152.28 per Unit), compared to an initial purchase price for each Unit of
$100.00.
As the Partnership is not making any representations and warranties under
the Purchase and Sale Agreement, the General Partners do not intend to reserve
any funds out of the cash available for liquidating distributions to fund
contingent liabilities arising out of potential claims or litigation which might
arise after the Sales are consummated. The full amount of the net proceeds from
the Sales will be distributed to the partners of the Partnership as soon as
practicable following the closing.
25
<PAGE>
Ownership of Properties by N'Tandem Following Sales
Following the consummation of the Sales, N'Tandem will be entitled to all
of the benefits of ownership of the Properties, including future cash flows,
earnings and increases in the values of the Properties, if any.
SPECIAL FACTORS
Fairness of the Proposed Transactions; Recommendation of the General Partners
The General Partners believe that the Sales and the Plan of Liquidation are
(i) consistent with the Original Objectives of the Partnership and (ii)
contemplated by the terms of the Partnership Agreement. In addition, the General
Partners believe that the terms of the Sales are fair, from a financial point of
view and from a procedural point of view, to the affiliated and unaffiliated
Limited Partners. Accordingly, the General Partners have approved the Sales and
the Plan of Liquidation and recommend their approval and adoption by the Limited
Partners.
In reaching the determination that the Sales and the Plan of Liquidation
are fair to the unaffiliated Limited Partners from a financial point of view,
the General Partners considered the following factors:
o N'Tandem is willing to purchase all of the Properties and is paying
the full Appraised Value for the four wholly-owned Properties and is
only applying a 10% discount to the Appraised Value of the Ownership
Interests for the fact that the Partnership owns a minority interest
in the underlying properties. The General Partners believe that the
discount being applied in connection with the Sales is substantially
less than the 25% discount that, in the opinion of the Appraiser,
would have been applied had the Ownership Interests been sold to a
third-party purchaser. See "-- Discount for Ownership Interests in
Properties";
o As an additional amount distributable to Limited Partners, an
aggregate of approximately $213,200, less attorney's fees and
expenses, shall be paid to Limited Partners in connection with the
proposed settlement of the Amended Complaint. As a result, if the
proposed settlement is approved, the General Partners estimate that
those Limited Partners who do not elect to exclude themselves from the
class will receive, after payment of estimated attorney's fees and
expenses to plaintiffs' counsel, an additional amount of approximately
$.76 per Unit. See "DESCRIPTION OF THE PROPOSED TRANSACTIONS --
Background of the Proposed Transactions";
o The aggregate consideration of approximately $8,026,800 (which
includes the amount payable in settlement of the Amended Complaint)
being paid in connection with the proposed transactions exceeds the
net book value of the Partnership's assets of $2,823,800 as of
September 30, 1999 by $5,203,000;
o Due to the familiarity of N'Tandem's external investment advisor with
the Properties, N'Tandem is willing to purchase the Properties "as-is"
and without representations and warranties from the Partnership;
o Because N'Tandem is buying the Properties in a single transaction and
is buying such Properties without representations and warranties from
the Partnership, the General Partners will be able to wind up the
Partnership and make full liquidating distributions
26
<PAGE>
promptly upon the approval of the Sales and the Plan of Liquidation by
the Limited Partners;
o The estimated net liquidating proceeds payable in connection with the
Sales ($38.19 per Unit) are substantially higher than (i) the $19.30
per Unit offered to Limited Partners on January 13, 2000 in connection
with a tender offer for up to 4.9% of the Partnership's outstanding
Units made by Madison Liquidity Investors 104, LLC, (ii) the $19.30
per Unit offered to Limited Partners on September 28, 1999 in
connection with a tender offer for up to 4.9% of the Partnership's
outstanding Units made by Madison Liquidity Investors 109, LLC, (iii)
the $24.00 per Unit offered to Limited Partners on March 16, 1999 in
connection with a tender offer for up to 4.8% of the Partnership's
outstanding Units made by Everest Investors 8, LLC and (iv) the
weighted average trading price of $26.38 per Unit in the secondary
markets, as reported by The Partnership Spectrum, a nationally
recognized publication focusing exclusively on limited partnerships,
for the period of May 1, 1999 through December 31, 1999;
o The Sales do not involve any brokerage fees payable by the
Partnership, resulting in a savings to the Partnership estimated to be
between $317,000 and $633,000 (based upon brokerage fees of 3% to 6%
typically paid by sellers of real properties); and
o Legg Mason has delivered the Fairness Opinion to the effect that the
aggregate purchase price to be paid to the Partnership is fair, from a
financial point of view, to the Limited Partners. The General Partners
have adopted, in its entirety, the Fairness Opinion, including its
underlying analysis, prepared by Legg Mason as part of their analysis
of the Sales and Plan of Liquidation. The General Partners did not
undertake to perform their own analysis with respect to the matters
considered by the Fairness Opinion. For a discussion of the Fairness
Opinion, see "SPECIAL FACTORS -- Fairness Opinion."
In reaching their determination that the Sales and the Plan of Liquidation
are fair from a financial point of view to the affiliated and unaffiliated
Limited Partners, the General Partners also considered the following potentially
negative aspects of the Sales:
o The purchase prices for the Properties are based upon independent
Appraisals rendered between June 1999 and October 1999 which have not
been updated and, thus, may not reflect the current fair market values
of the Properties;
o With respect to the Ownership Interests held by the Partnership, the
remaining interests in the properties underlying such Ownership
Interests are held by Windsor Park 345, an affiliated limited
partnership which has the Managing General Partner as its sole general
partner and Windsor 5 and Windsor 7, two affiliated limited
partnerships, as its other limited partners, or N'Tandem, which
together with the Managing General Partner is under common control of
Chateau;
o With respect to the discount being applied by N'Tandem to the
Ownership Interests held by the Partnership, no discount was applied
to the purchase price paid for any of the properties acquired by
N'Tandem in the Windsor 4 Transaction which was completed in June 1999
involving N'Tandem and the General Partners;
o It is possible that the future performance of the Properties will
improve or that prospective third-party buyers may be willing to pay
more for the Properties in the future; and
27
<PAGE>
o It is possible that Limited Partners might earn a higher return on
their investment if the Partnership extended its stated term for a
second time and retained ownership of the Properties. By approving the
Sales and the Plan of Liquidation, Limited Partners will also be
foregoing current benefits of the ownership of the Properties such as
continuing distributions.
The above described factors are all of the material factors considered by
the General Partners in determining that the Sales and the Plan of Liquidation
are fair to the affiliated and unaffiliated Limited Partners from a financial
point of view. In reaching their determination that the Sales and the Plan of
Liquidation are fair to the affiliated and unaffiliated Limited Partners from a
financial point of view, the General Partners did not assign relative weights to
the above factors or determine that any factor was of particular importance;
rather, the General Partners viewed the positive factors as a totality and the
negative factors as a totality and concluded that the positive factors
outweighed the negative factors. Accordingly, the General Partners determined
that the Sales and the Plan of Liquidation are fair to the affiliated and
unaffiliated Limited Partners from a financial point of view.
The General Partners also determined that the Sales and the Plan of
Liquidation are fair to the Limited Partners from a procedural point of view
based on the following factors:
o The Properties have been independently appraised by the Appraiser;
o In assessing the discount being applied to the Ownership Interests by
N'Tandem, the Managing General Partner had the Appraiser, which
concluded that in its estimation the application of a discount of
approximately 25% would be appropriate for a minority interest in real
estate, analyze the applicability of a discount in valuing a partial
ownership interest in a manufactured home community. See " Discount
for Ownership Interests in Properties";
o The Sales are subject to the approval of unaffiliated Limited Partners
holding not less than a majority of the issued and outstanding Units;
and
o The Managing General Partner in connection with the Sales retained
Legg Mason to render its Fairness Opinion.
In reaching their determination that the Sales and the Plan of Liquidation
are fair from a procedural point of view to the affiliated and unaffiliated
Limited Partners, the General Partners also considered the following potentially
negative aspects of the Sales:
o The Sales were negotiated on behalf of the Partnership by the Managing
General Partner, which is under common control with N'Tandem and is
receiving substantial economic benefits from the proposed transactions
(including acquisition fees of $316,500 that are being paid by
N'Tandem), and were not the result of arm's-length negotiations and
bargaining between independent parties. Accordingly, the Sales may be
subject to potential conflicts of interest;
o Gary P. McDaniel and C.G. Kellogg, the sole Directors of the Managing
General Partner, are the Chief Executive Officer and the President,
respectively, of Chateau and, as a result, the Sales and the Plan of
Liquidation have not been approved on behalf of the Managing General
Partner by directors who are not affiliated with N'Tandem;
28
<PAGE>
o No independent representatives or disinterested third party was
appointed or retained to negotiate the terms of the Sales on behalf of
the Partnership, or the unaffiliated Limited Partners or to otherwise
represent the interests of the unaffiliated Limited Partners in
connection with the Sales;
o The Appraisals were rendered between June 1999 and October 1999 and no
updates or new appraisals have been or will be ordered in connection
with the Sales; and
o The General Partners have engaged in limited marketing efforts on
behalf of the Partnership with respect to the Properties, with only
four of the nine manufactured home communities held by the Partnership
immediately following the Windsor Acquisition having been marketed for
sale to third-party purchasers to date. The General Partners do not
intend to take any actions to market or sell the Properties pending
the results of this Consent Solicitation.
The above described factors are all of the material factors considered by
the General Partners in determining that the Sales and the Plan of Liquidation
are fair to the affiliated and unaffiliated Limited Partners from a procedural
point of view. In reaching their determination that the Sales and the Plan of
Liquidation are fair to the affiliated and unaffiliated Limited Partners from a
procedural point of view, the General Partners concluded that the approval of
the Proposals by a majority-in-interest of the unaffiliated Limited Partners is
sufficient to insure that procedural fairness has been preserved for the Limited
Partners. The General Partners also believe that the potentially negative
factors influencing procedural fairness were in each case mitigated by the
following other factors or considerations: (i) although the Managing General
Partner and N'Tandem are under common control, the General Partners concluded
that the common control (a) did not adversely affect the terms of the Sales for
Limited Partners and (b) allowed N'Tandem to offer terms of the Sales that they
believed would not be available from third parties; (ii) although no independent
or disinterested third party was appointed to represent the Limited Partners in
connection with, or to negotiate the terms of, the Sales, the Managing General
Partner did retain Legg Mason to assess the fairness of the aggregate purchase
price to be paid to the Partnership in the Sales; (iii) even though the
Appraisals were rendered between June 1999 and October 1999, the General
Partners believe that no material changes have occurred in the Properties or in
the conditions of the market for manufactured home communities since those dates
that would result in higher values for the Properties; and (iv) the General
Partners' belief that marketing the Properties held by the Partnership would not
have provided a better transaction for the Limited Partners and would have
ultimately delayed the timing of the Sales and the distribution of liquidating
proceeds to the Limited Partners.
Fairness Opinion
The Managing General Partner, on behalf of the Partnership, engaged Legg
Mason to render the Fairness Opinion as to the fairness, from a financial point
of view, to the Limited Partners of the aggregate purchase price to be paid by
N'Tandem to the Partnership for the Properties. Legg Mason delivered its oral
and written Fairness Opinion to the Managing General Partner on November 15,
1999. A copy of the Fairness Opinion, setting forth the matters considered,
procedures followed and the scope of review by Legg Mason, is set forth in
Appendix A to this Consent Solicitation Statement and is incorporated herein by
reference. Limited Partners are urged to read the Fairness Opinion in its
entirety.
The Managing General Partner selected Legg Mason based upon Legg Mason's
experience and reputation and the fee charged for its services. Legg Mason, as
a part of its investment banking business, is regularly engaged in the valuation
of businesses and securities in connection with mergers and acquisitions,
negotiated underwritings, competitive biddings, secondary distributions of
listed and unlisted securities, private placements and valuations for estate,
corporate and other purposes.
29
<PAGE>
Legg Mason was initially engaged by the Managing General Partner to render
a fairness opinion with respect to the Proposed Consolidation; however, because
the General Partners determined to proceed with the Sales and Plan of
Liquidation, no fairness opinion was ever rendered with respect to the Proposed
Consolidation. Neither of the General Partners nor any of their affiliates have
any material relationship with Legg Mason.
In arriving at its Fairness Opinion and the basis therefor, Legg Mason,
among other things, reviewed:
(i) the management agreement between the Partnership and the
Managing General Partner and other agreements pertaining to the
operation and management of the Properties;
(ii) the Partnership Agreement of the Partnership;
(iii) the financial statements and the related filings of the
Partnership on Form 10-K for the year ended December 31, 1998
and Form 10-Q for the six months ended June 30, 1999;
(iv) the NAREIT Index, the Morgan Stanley REIT Index, capital flows
to public real estate investment trusts and other similar
measures of operating performance and trading data of real
estate investment trusts;
(v) an analysis of comparable publicly traded real estate investment
trusts;
(vi) a draft of this Consent Solicitation Statement;
(vii) internal financial analyses, financial and operating forecasts
and reports and information relating to outstanding debt
attributable to the Properties and number of outstanding Units
prepared by the Managing General Partner or its representatives;
and
(viii) the Appraisals of the Properties prepared by the Appraiser.
Legg Mason also visited a number of the Properties and held discussions
with various members of management and representatives of the Managing General
Partner concerning the Properties' historical and current operations, financial
condition and prospects. In addition, Legg Mason conducted such other
investigations, financial analyses and studies and reviewed such other
information and factors as it deemed appropriate for the purposes of its
Fairness Opinion. In connection with this engagement, Legg Mason was not asked
to, and did not, advise the Managing General Partner or the Partnership with
respect to the determination of the aggregate purchase price for the Properties,
make any recommendations to the Managing General Partner or the Partnership with
respect to the proposed Sales or Plan of Liquidation, assess any alternatives to
the Proposals or make any recommendation as to how Limited Partners should vote
on the Proposals. In addition, Legg Mason was not asked to solicit, and did not
solicit, third party indications of interest from any party with respect to an
acquisition of the Units, the Properties or any part thereof. Legg Mason did
also note that the Managing General Partner is owned by Chateau, the parent
company of N'Tandem.
In rendering its Fairness Opinion, Legg Mason relied, without assuming
responsibility for independent verification, on the accuracy and completeness of
all financial and operating data, financial analyses, financial and operating
forecasts, reports and other information that were publicly available or
30
<PAGE>
furnished or otherwise communicated to Legg Mason by or on behalf of the
Managing General Partner. With respect to forecasts regarding the Properties'
future financial condition and operating results, Legg Mason assumed, without
taking any responsibility for independent verification, that such forecasts were
reasonably prepared on bases reflecting the best currently available
information, estimates and judgment of the Managing General Partner. Legg Mason
also assumed that the Appraisals were reasonably prepared by the Appraiser and
reflected the good faith judgments of the Appraiser and did not take any
responsibility for their accuracy or completeness. Legg Mason did not make an
independent appraisal of the assets or liabilities (contingent or otherwise) of
the Partnership. No limitations were imposed by the Managing General Partner on
Legg Mason with respect to the investigation made or procedures followed by Legg
Mason. Legg Mason also assumed that the allocation of consideration provided by
the Managing General Partner between the General Partners and the Limited
Partners has been determined in accordance with, and complies with the terms and
conditions of, the Partnership Agreement. Furthermore, Legg Mason did not opine
to the fairness of the allocation of consideration between the General Partners
and Limited Partners.
The following paragraphs summarize the significant quantitative and
qualitative analyses performed by Legg Mason in arriving at its Fairness
Opinion. Legg Mason considered all such quantitative and qualitative analyses
in connection with its valuation analysis, and no one method of analysis was
given particular emphasis.
Valuation of the Partnership
Liquidation Analysis. Legg Mason estimated the liquidation value of the
--------------------
Partnership assuming that the Partnership sold the Properties, as stand alone
assets, to third-party purchasers and liquidated the Partnership on December 31,
1999. In estimating the liquidation value of the Units, Legg Mason first
calculated the net equity value for each of the Properties by (i) subtracting
from each Property's Appraised Value the amount of indebtedness attributable to
such Property and (ii) in the case of the Ownership Interests, applying a 10%
discount to the Appraised Value attributable to the Ownership Interests to
account for the fact that the Partnership only owns a minority interest in the
underlying property. In determining the discount to be applied to the Appraised
Value attributable to the Ownership Interests, Legg Mason applied the same
discount being used by N'Tandem and did not independently determine whether the
discount being used was fair. Legg Mason then adjusted the aggregate net equity
value of the Properties by (i) subtracting the estimated liquidation costs
associated with selling the Properties, (ii) subtracting the net assets of the
Partnership, and (iii) subtracting 1% of the remaining net equity value to
reflect the General Partners' interest in the Partnership. Legg Mason then
divided the remaining net equity value by the number of Units outstanding in
order to arrive at a liquidation equity value for each Unit. Legg Mason's
analysis indicated a liquidation equity value of $36.89 per Unit and Legg Mason
noted that the aggregate consideration offered by N'Tandem for the Properties
and the net current assets on a per Unit basis was $38.19. Legg Mason believed
that its liquidation analysis supported its fairness determination because the
aggregate net purchase price offered by N'Tandem on a per Unit basis was in
excess of the liquidation value indicated by such analysis.
In making its assessment of the liquidation value, Legg Mason relied,
without independent verification of the accuracy, on the Appraised Value in the
Appraisal as provided by the Appraiser. In addition, Legg Mason's estimated
liquidation costs associated with selling the Properties did not include general
and administrative expenses of the Partnership during the liquidation period,
liquidation costs associated with a prolonged marketing period or the time value
of the proceeds from the sale of the Properties.
Comparable Company Analysis. Legg Mason employed a comparable company
---------------------------
analysis to establish an implied equity value for the Units. Legg Mason
reviewed and compared financial
31
<PAGE>
information for the following publicly traded real estate investment trusts:
Chateau, Manufactured Home Communities, Inc., Sun Communities, Inc., United
Mobile Homes, Inc. and Assets Investors Corporation (the "Comparable
Companies"). The Comparable Companies represent all of the publicly traded real
estate investment trusts whose principal business, like that of the
Partnership's, is the ownership and operation of manufactured home communities
in the United States. All of the trading multiples of the Comparable Companies
were based on the closing stock prices on November 11, 1999 and all funds from
operations ("FFO") per share estimates were based on information published by
First Call Corporation. The estimates published by First Call Corporation were
not prepared in connection with the Sales or at the request of Legg Mason. Legg
Mason noted that certain factors differentiated the Partnership from the
Comparable Companies, including (i) the absence of an actively traded public
market for the Units, (ii) the fact that the Partnership is externally managed
and advised, (iii) the fact that the Partnership owns a minority interest in
certain of the underlying properties, and (iv) certain other economic and
general market data that Legg Mason deemed appropriate. To reflect these
factors, Legg Mason deemed it appropriate to discount the Comparable Companies'
trading multiples by 20%. Legg Mason believed that this discount was a
reasonable estimate of the discount which the market might have applied to the
Comparative Companies' trading multiples to reflect these factors. In order to
derive an implied equity value for the Units, Legg Mason deducted 1% from the
implied equity value of the Partnership to reflect General Partners' interest in
the Partnership.
Based on its review, Legg Mason observed that the discounted trading
multiples for the Comparable Companies (i) ranged from 6.7x to 8.8x for the 1999
FFO per share estimates, (ii) ranged from 5,8x to 8.3x for the 2000 FFO per
share estimates and (iii) ranged from 8.5x to 9.6x for the trailing twelve
months earnings before interest, taxes, depreciation and amortization per share
estimates ("EBITDA"). Based on the Managing General Partner's estimates of the
Partnership's 1999 and 2000 FFO, including potential cost savings and
operational efficiencies associated with general and administrative cost
reductions and the subtraction of the net assets of the Partnership and
estimated transaction costs and the range of discounted trading multiples for
the Comparable Companies of 6.7x to 8.8x and 5.8x to 8.3x, respectively, for
1999 and 2000, Legg Mason's analysis indicated an implied value range per Unit
of $30.57 to $22.75 based on 1999 FFO multiples and $30.14 to $20.60 based on
2000 FFO multiples. In addition, based on the Managing General Partner's
estimate of the Partnership's trailing twelve months EBITDA, including potential
cost savings and operational efficiencies associated with general and
administrative cost reductions and the subtraction of the net assets of the
Partnership and estimated transaction costs and the range of discounted trading
multiples for the Comparable Companies of 8.5x to 9.6x, Legg Mason's analysis
indicated an implied value range per Unit of $30.05 to $24.88. Legg Mason
believed that its comparable company analysis supported its fairness
determination because the aggregate net purchase price offered by N'Tandem on a
per Unit basis was in excess of the high end of the range for each of the
implied equity values of the Units indicated by such analysis.
Discounted Cash Flow Analysis. Legg Mason estimated the continuation
-----------------------------
equity value of the Units assuming that the term of the Partnership was extended
and the Properties were held by the Partnership until December 31, 2004. Legg
Mason performed a discounted cash flow analysis (i.e., an analysis utilizing a
range of discount rates) of (i) the present value of the forecasted cash flows
from the Properties' future operations and (ii) the present value of the
forecasted proceeds of a sale of the Properties, on an aggregate basis, less the
General Partners' 1% interest in the Partnership, assuming a sale to third-party
purchasers at the conclusion of the forecast period. In completing its
analysis, Legg Mason utilized the financial and operating forecasts of the
Partnership's cash flow to equity for the forecasted period of January 1, 2000
to December 31, 2004 provided by the Managing General Partner and applied
discount rates of 14.4% to 17.0% to the forecasted equity cash flows and the
forecasted residual equity value. Forecasted residual equity value was based
upon applying the Comparable Companies' discounted trading multiples of 7.1x to
8.8x for the trailing twelve months to the Partnership's forecasted FFO for the
year 2004, less the net assets of the Partnership and estimated transaction
costs.
32
<PAGE>
Legg Mason's analysis indicated a range of continuation equity values based upon
the discounted cash flow and discounted residual equity value of $32.43 to
$25.43 per Unit. Legg Mason believed that its continuation analysis supported
its fairness determination because the aggregate net purchase price offered by
N'Tandem was in excess of the high end of the range of implied equity values of
the Units indicated by such analysis.
The preparation of a fairness opinion involves various determinations as to
the most appropriate and relevant quantitative and qualitative methods of
financial analyses and the application of those methods to the particular
circumstances and, therefore, such an opinion is not readily susceptible to
partial analyses or summary description. Accordingly, Legg Mason believes that
its analyses must be considered as a whole and that considering any portion of
such analyses and of the factors considered, without considering all analyses
and factors, could create a misleading or incomplete view of the process
underlying its opinion. The analyses underlying the Fairness Opinion were based
on information, other than the share prices of the Comparable Companies,
available as of June 30, 1999. Any estimates contained in these analyses are
not necessarily indicative of actual values or predictive of future results or
values, which may be significantly more or less favorable than the values
developed by Legg Mason. In addition, analyses relating to the value of the
Properties do not purport to be appraisals or to reflect the prices at which the
Properties may actually be sold. The Fairness Opinion is based on conditions as
of its date and, although subsequent developments could have a material effect
on the opinion stated, the Fairness Opinion will not be updated.
A copy of the Fairness Opinion is set forth in Appendix A to this Consent
Solicitation Statement and is available for inspection and copying at the
Partnership's principal executive offices during regular business hours by any
interested Limited Partner or any representative of a Limited Partner who has
been designated by a Limited Partner in writing. Copies may also be obtained
through the written request of any Limited Partner made to the Managing General
Partner at 6160 South Syracuse Way, Greenwood Village, Colorado 80111.
As compensation for rendering its Fairness Opinion to the Partnership, Legg
Mason will receive a fee of $50,000.
Alternatives Considered
In addition to considering the Sales and the Plan of Liquidation, the
General Partners also identified and considered the following alternative
courses of action for the Partnership:
Continuation of the Partnership. The General Partners did not consider
extending the stated term of the Partnership for a second time, which would have
required the consent of the holders of a majority of the issued and outstanding
Units. The reason this option was not considered was that the Managing General
Partner believes that Limited Partners desire to achieve the near-term
liquidation of their investments in the Partnership. This belief is based on
unsolicited inquiries received from time to time by the Managing General Partner
from Limited Partners regarding the status of their investment in the
Partnership following the expiration of its stated term and the Managing General
Partner's observation that most Limited Partners have held their investments in
the Partnership for more than fourteen years. In addition, the Managing General
Partner believes that continuing to own and operate the Properties is not in the
best interests of the Partnership and its Limited Partners, especially in view
of the opportunity to sell the Properties to N'Tandem on the terms outlined
herein. Additionally, while extending the term of the Partnership would have
resulted in the Limited Partners receiving the benefits of continued ownership
of the Properties, would have also remained subject to the risks of continuing
such ownership and the Limited Partners would continue to be unable to liquidate
their investments at fair value since no formal trading market for the Units
exists.
33
<PAGE>
Sale of the Properties to Third-Party Purchasers. While the General
Partners did consider the possibility of selling the Properties to purchasers
other than N'Tandem, the General Partners ultimately concluded that such sale of
the Properties would not be likely to result in the distribution of greater
liquidating proceeds to the Limited Partners than the amounts being distributed
in connection with the Sales and the Plan of Liquidation. The principal reasons
for this conclusion are that the Managing General Partner believes that (i) the
Appraisals continue to reflect the fair market values of the Properties, (ii)
the Limited Partners would receive greater liquidating proceeds in a third-party
transaction only if such third party was willing to pay in excess of the
purchase prices for the Properties being paid by N'Tandem, something the General
Partners believe few, if any, third-party purchasers would be willing to do,
especially with respect to the partial Ownership Interests, (iii) the Ownership
Interests would have the effect of deterring potential third-party purchasers
because of their minority status, and (iv) the expenses of the Sales are lower
than they would be in connection with the sale of the Properties to an
unaffiliated third-party purchaser (principally due to the fact that no
brokerage commissions are being paid by the Partnership in connection with the
Sales, which results in estimated savings of between $317,000 and $633,000 based
upon prevailing commission rates). With respect to the Managing General
Partner's belief that the Appraisals continue to reflect the fair market value
of the Properties, even though the Appraisals were rendered between June 1999
and October 1999, it is noted that the Managing General Partner (i) does not
believe that any significant events have occurred since that time which would
cause the conclusions reached in the Appraisals, including the Appraised Values,
to be different had the Appraisals been rendered as of a more recent date and
(ii) is not aware of any material developments, trends or other uncertainties
that relate to the conclusions expressed in the Appraisals, or that are
reasonably likely to materially affect such conclusions.
While the General Partners do not believe, at this time, that the sale of
the Properties to a third-party purchaser would be more beneficial to the
Partnership and the Limited Partners than the Sales and Plan of Liquidation
proposed herein, the General Partners do recognize that a third-party purchaser
could propose a superior or competing offer to that proposed by N'Tandem during
the course of this Consent Solicitation and will not allow this Consent
Solicitation to preclude the Partnership from entertaining such a transaction
should one emerge prior to the end of the solicitation period for this Consent
Solicitation.
Proposed Consolidation. The General Partners also considered and analyzed
the Proposed Consolidation in which the Partnership, together with three of the
other Windsor Limited Partnerships, would have been merged with and into
N'Tandem. In the Proposed Consolidation, the Limited Partners would have had
the right to exchange their Units for common shares of beneficial interest or
other securities of N'Tandem.
As part of its analysis of the Proposed Consolidation, the Managing General
Partner compared the estimated price per Unit of approximately $38.19 expected
to be paid by N'Tandem in the Sales to the estimated range of values per Unit
expected to be received upon completion of the Proposed Consolidation assuming
that the Units were converted into N'Tandem's common shares of beneficial
interest. The Managing General Partner's analysis indicated that the estimated
range of values per Unit following the Proposed Consolidation was $32.37 to
$35.97.
In preparing its consolidation analysis, the Managing General Partner
applied the forecasted funds from operations per share of N'Tandem for the year
2000, which assumed completion of the Proposed Consolidation, to a range of
forecasted funds from operations per share multiples for the Comparative
Companies for the year 2000. The Comparative Companies selected by the Managing
General Partner were: Chateau, Manufactured Home Communities, Inc., Sun
Communities, Inc., United Mobile Homes, Inc. and Asset Investors Corporation.
By applying the forecasted funds from operations per share of N'Tandem for the
year 2000 to a range of forecasted funds from operations per share multiples for
the Comparative Companies, the Managing General Partner was able to estimate
ranges of
34
<PAGE>
values for N'Tandem's common shares following the completion of the Proposed
Consolidation. The Managing General Partner determined the range of forecasted
funds from operations per share multiples for the Comparative Companies by
applying a discount, which ranged from 0% to 10%, to the multiples of the
Comparative Companies in order to account for the difference in N'Tandem's size,
percentage of leverage and operational history as compared to the Comparative
Companies. The Managing General Partner then multiplied these estimated ranges
by the exchange ratio per Unit for each Windsor Limited Partnership
participating in the Proposed Consolidation to determine the estimated value of
the Units assuming they were converted into N'Tandem's common shares.
In analyzing of the Proposed Consolidation, the Managing General Partner
also considered that (i) the anticipated time period for the completion of the
Proposed Consolidation was likely to be quite lengthy and would more than likely
close well after both the expiration date of the Partnership's stated term and
the completion of the Sales and (ii) the estimate of the value of the Units
assuming their conversion into N'Tandem's common shares in the Proposed
Consolidation was not based on any established trading price for the common
shares, but was instead based on an analysis of the Comparative Companies that
sought to anticipate the market price of N'Tandem's common shares following the
Proposed Consolidation by reference to the current trading prices of the
securities of the Comparative Companies.
In assessing the Proposed Consolidation described above, the Managing
General Partner recognized that the valuation estimates used in its analysis are
subject to significant uncertainties, variables and assumptions, as well as
varying market conditions, and no assurance can be given that the estimated
values indicated could ever be realized. The analysis relating to the Proposed
Consolidation was based on information available as of October 15, 1999. The
General Partners do not anticipate updating the analyses or other information
relating to the foregoing alternatives.
N'Tandem's and Chateau's Belief as to the Fairness of the Proposed Transactions;
N'Tandem's and Chateau's Reasons for Engaging in the Proposed Transactions
N'Tandem and Chateau believe that the Sales are fair to the affiliated and
unaffiliated Limited Partners from both a financial point of view and a
procedural point of view. In reaching such determination, N'Tandem and Chateau
considered the same factors and positive and negative aspects of the Sales as
were considered by the General Partners, as described above under "-- Fairness
of the Proposed Transactions; Recommendation of the General Partners" and have
specifically adopted the analyses and conclusions of the General Partners
described therein.
In October 1998, N'Tandem amended and restated N'Tandem's Declaration of
Trust and By-laws to convert N'Tandem from a finite-life entity to an infinite-
life entity in order to enable it to begin implementing a growth-oriented
business plan intended to cause N'Tandem to attain greater size and asset
diversity. The acquisition by N'Tandem of the Properties is being engaged in by
N'Tandem as part of such growth-oriented business plan.
Appraisals
Overview of Appraisals. The Appraiser, Whitcomb Real Estate located
in Tampa, Florida, was retained by the Managing General Partner to render the
Appraisals with respect to the Partnership's Properties. The Appraiser is
certified as a Master Appraiser by the Appraisal Institute and was selected
based upon its expertise as well as its familiarity with valuing real estate
underlying manufactured home communities. The Appraisals set forth the
Appraised Values of the four wholly-owned Properties and the four manufactured
home communities in which the Partnership holds Ownership Interests as of
various dates between June 1999 and October 1999.
35
<PAGE>
The purpose of the Appraisals was, and the Appraiser was instructed by the
Managing General Partner, to determine the fair market value of each Property.
In connection with the Appraisals, no fair market values or value ranges were
suggested by the Managing General Partner. Each of the Properties was appraised
in accordance with the Uniform Standards of Professional Appraisal Practice.
Only one Appraisal was sought with respect to each Property. If more than one
appraisal had been sought with respect to each Property, the values determined
for the Properties might have been higher or lower than the Appraised Values
determined by the Appraiser.
In conducting the Appraisals, the Appraiser utilized two approaches, the
income capitalization approach and the sales comparison approach. In the income
capitalization approach, an appraiser calculates an estimate of net operating
income for the subject property ("NOI"). The appraiser then determines an
appropriate capitalization rate for the subject property based upon
capitalization rates for comparable properties sold in the same geographic area
as the subject property. The appraised value of the subject property is then
determined by the appraiser by dividing the NOI by the appropriate
capitalization rate. In utilizing the sales comparison approach, an appraiser
determines the market value of the subject property by comparing such property
against other properties deemed comparable to the subject property and sold
within a specified time period and then adjusting the market value of the
comparable properties to account for material differences between the subject
property and the comparable properties.
The Appraisals were rendered between June 1999 and October 1999 and,
therefore, may no longer reflect the fair market values of the Properties.
Accordingly, the value of the Properties may have increased since that time.
However, the Managing General Partner (i) does not believe that any significant
events have occurred since that time which would cause the conclusions reached
by the Appraiser in the Appraisals and the Appraised Values to be different had
the Appraisals been rendered as of a more recent date, (ii) is not aware of any
material developments, trends or other uncertainties that relate to the
conclusions expressed in the Appraisals or that are reasonably likely to
materially affect such conclusions, and (iii) does not intend to update the
Appraisals or order new appraisals for the Properties in connection with the
Sales.
The Appraisals have been based in part upon information supplied to the
Appraiser by the Managing General Partner, including, but not limited to: rent
rolls; building reports; lease information; financial schedules of current lease
rates, income, expenses, cash flow and related financial information; and
property descriptive information. The Appraiser relied upon such information
and assumed that the information provided by the Managing General Partner was
accurate and complete and generally did not attempt to independently verify such
information. The Appraiser also interviewed and relied upon the Managing
General Partner to obtain information relating to the condition of each
Property, including any deferred maintenance, capital budgets, environmental
conditions, status of ongoing or newly planned expansions, and other factors
affecting the physical condition of the Property improvements. The Appraiser
also interviewed the Managing General Partner's management personnel regarding
competitive conditions in property markets, trends affecting the Properties,
certain lease and financing factors, and historical and anticipated lease
revenues and expenses and reviewed historical operating statements for the
Properties.
Copies of the Appraisals are filed as exhibits to the Schedule 13E-3 and
are available for inspection and copying at the Partnership's principal
executive offices during regular business hours by any interested Limited
Partner or any representative of a Limited Partner who has been designated by a
Limited Partner in writing. Copies may also be obtained through the written
request of any Limited Partner made to the Managing General Partner at 6160
South Syracuse Way, Greenwood Village, Colorado 80111.
36
<PAGE>
The Appraiser and its Methodology.
Information with respect to Whitcomb Real Estate. The Appraiser was
------------------------------------------------
founded in 1986, and currently has four full-time appraisers on its staff. Each
of the Properties was appraised by John Whitcomb, the President of the
Appraiser. Mr. Whitcomb is certified as a Master Appraiser by the Appraisal
Institute, is a Certified Commercial Investment Member, has been in the real
estate appraisal business since 1985, and has conducted in excess of a thousand
property appraisals since that time. Mr. Whitcomb has extensive experience
appraising manufactured home communities, having conducted in excess of 250 such
appraisals since 1993. The Managing General Partner previously engaged the
Appraiser (i) to render appraisals in connection with the original purchase by
the Partnership and other Windsor Limited Partnerships of their interests in
several properties, including the Partnership's Ownership Interest in Harmony
Ranch and (ii) since late 1997, to render additional or updated appraisals, in
addition to the Appraisals, on several properties in which the Windsor Limited
Partnerships currently hold, or have in the past held, interests, including the
Shady Hills Property, the Trailmont Property and the Harmony Ranch Property.
The Appraiser was paid usual and customary market based fees in connection with
its appraisals. Neither of the General Partners nor any of their affiliates
have any material relationship with the Appraiser. The Appraiser received
$33,300 in connection with rendering the Appraisals. Total fees and
compensation paid to the Appraiser by the Partnership, the General Partners, and
their respective affiliates since January 1, 1997 has been $104,600. No
additional compensation is mutually understood to be contemplated to be paid to
the Appraiser in connection with the Appraisals or otherwise.
Assumption and Limitations of the Whitcomb Appraisals. Each of the
-----------------------------------------------------
Appraisals were based upon assumptions and limiting conditions, including the
following: (i) that the factual information contained in each Appraisal upon
which the analysis and conclusions are based was true and correct; (ii) that the
information, estimates and opinions furnished to the Appraiser in connection
with the Appraisals were true and correct; (iii) each Property was appraised as
though it were free and clear of mortgages, liens, leases, servitudes and
encumbrances, except as identified in the Appraisals; (iv) that each Appraisal
applies to the real estate only and does not include personal property or other
non-realty items located at or on the Property; (v) that there is good and
marketable title to the Property; (vi) that the Property is free of
encroachments and zoning or other violations or problems; (vii) that management
of the Property is competent; (viii) that there are no material hidden or
unapparent problems of the soil, subsoil or structures of the Property; (ix)
that all of the improvements, equipment, and building services are structurally
sound and suffer no latent defects or inadequacies; (x) that the subject
improvements are free of insect infestation or rot or damage due to such
infestation or rot; (xi) that there are no environmental problems with respect
to the Property or its improvements; (xii) that no adverse events, conditions or
circumstances materially affecting the Property have taken place subsequent to
the date of the field inspection; and (xiii) that there have been no material
changes in economic conditions affecting the Property following the date of the
Appraisal.
The Appraiser also noted that (i) the estimates of value stated in the
Appraisals apply only to the effective dates of value stated in the Appraisals,
(ii) value is affected by many related and unrelated economic conditions within
a local, regional, national and/or worldwide context, which might necessarily
affect the prospective value of the subject property, (iii) the Appraiser
assumes no liability for any unforeseen changes in the economy or at the subject
property, (iv) the underlying assumptions and conditions provide a reasonable
basis for the value estimate stated in the Appraisals, (v) some assumptions or
projections inevitably will not materialize and unanticipated events and
circumstances may occur during the forecast period, and (vi) the actual results
achieved during the projected holding period and investor requirements relative
to anticipated annual returns and overall yields could vary from the projection
and that such variations could be material and have an impact on the individual
value conclusions stated in the Appraisals.
37
<PAGE>
Summary of Appraisals. A summary description of the Appraisals, including
the Appraised Values of the Properties, is set forth below. The Appraisals are
based on conditions as of their respective dates. Subsequent developments could
have a material effect on the valuations stated therein.
Summary of Ponderosa Property Appraisal. In utilizing the income
---------------------------------------
capitalization approach in connection with appraising the Ponderosa Property,
the Appraiser first projected 12 months of income for the Property based upon
the then current rent levels. The potential gross income from the rentals was
calculated at $394,272 per year. Vacancy and credit loss was estimated at 5% of
potential gross income, or $19,174. Additional income, based on historical
numbers, was calculated at $75.00 per site, leaving an effective gross income
estimate of $385,658 for the Property. Total annual operating expenses for the
Property were estimated to be $166,347, leaving NOI of $219,311. In determining
a capitalization rate for the Ponderosa Property, the Appraiser looked at
capitalization rates for recently sold comparable communities, which ranged from
8.40% to 10.51%. The Appraiser noted that the Property has an economic vacancy
of 5.5% and was observed to be in average overall condition. Based on these
considerations, the Appraiser determined that a capitalization rate of 10% for
the Property was appropriate. Utilizing the 10% capitalization rate, the
Appraiser was able to calculate an market value for the Ponderosa Property of
$2,200,000. The Appraiser also performed a debt coverage ratio analysis, which
yielded a capitalization rate equal to approximately 9.8%, to verify the
accuracy of the utilized capitalization rate.
In utilizing the sales comparison approach in connection with appraising
the Ponderosa Property, the Appraiser compared the Property to five other
manufactured home communities sold in the same general geographic area as the
Property within the ten-month period prior to the date of the Appraisal. The
sales prices of the five comparable properties ranged from a low of $650,000 to
a high of $7,150,000. Total sites ranged from 57 to 447 and occupancy ranged
from 80.1% to 99%. The average price per site ranged from $11,404 to $25,176
and the average site rent ranged from $140.00 to $262.00. All of the comparable
sales were fee simple transactions with atypical acquisition financing reflected
in the cash equivalent price. There were no atypical sale conditions known to
have occurred and all of the sales represented transactions that took place in
the ten-month period prior to the date of the Appraisal and traded under similar
market conditions.
The Appraiser also employed the effective gross income multiplier ("EGIM")
in the sales comparison analysis. In applying the EGIM analysis, the Appraiser
determined that (i) the EGIM for the comparable sale properties ranged from 6.17
to 8.33, (ii) the EGIM was essentially a function of the average site rent,
(iii) average site rent reflects, in most cases, the market perception of a
property's position in the marketplace, (iv) typically, increases in site rent
contribute to increases in NOI, (v) average site rent is a function of the
physical aspects of the property, such as age and condition, location and
amenities, and (vi) the EGIM also reflects the market's perception of the
potential for future rent increases.
The Appraiser also noted that the expense ratio of the Property was higher
than that of all of the comparable properties. Based on these considerations,
the Appraiser concluded that an EGIM of 6.0, which was at the lower end of the
indicated range for the comparable properties, was appropriate for the Property.
Based upon the Property's effective gross income of $385,658 and an EGIM of 6.0,
the Appraiser calculated the market value of the Property to be $2,300,000,
representing $15,541 per site.
In reconciling the income capitalization approach and the sales comparison
approach, the Appraiser (i) reviewed each approach to ascertain the reliability
of the data, (ii) weighted the approach that best represented the actions of
typical users and investors in the marketplace, (iii) determined that in the
current instance, the availability of sufficient, reliable and supportable
historical data for the Property made the income capitalization approach a
reliable gauge of the market value of the Property,
38
<PAGE>
(iv) determined that the sales comparison approach was reliable, (v)
determined that the two approaches reflected a narrow range of value, (vi)
determined that the opinion of value should be based on the sales comparison
approach given the relative homogeneity of the locations and availability of
market data, and (vii) concluded that the market value of the Property, based on
a reasonable exposure period of six months, as of August 5, 1999, was
$2,200,000.
Summary of The Pines Property Appraisal. In utilizing the income
---------------------------------------
capitalization approach in connection with appraising The Pines Property, the
Appraiser first projected 12 months of income for the Property based upon the
then current rent levels. The potential gross income from the rentals was
calculated at $212,280 per year. Vacancy and credit loss was estimated at 5% of
potential gross income, or $10,614. Additional income, based on historical
numbers, was calculated at $60.00 per site, leaving an effective gross income
estimate of $210,966 for the Property. Total annual operating expenses for the
Property were estimated to be $127,655, leaving NOI of $83,311. In determining
a capitalization rate for The Pines Property, the Appraiser looked at
capitalization rates for recently sold comparable communities, which ranged from
9.5% to 12.9%. Based on the comparison of the sale data to the Property and
considering the current investor and interest rate environment, the Appraiser
determined that a capitalization rate of 10% for the Property was appropriate.
Utilizing the 10% capitalization rate, the Appraiser was able to calculate a
market value for The Pines Property of $730,000. The Appraiser also performed a
debt coverage ratio analysis, which yielded a capitalization rate equal to
approximately 9.1%, to verify the accuracy of the utilized capitalization rate.
In utilizing the sales comparison approach in connection with appraising
The Pines Property, the Appraiser compared the Property to four other
manufactured home communities recently sold in the same general geographic area
as the Property and elsewhere in South Carolina and neighboring Georgia. The
sales prices of the four comparable properties ranged from a low of $179,000 to
a high of $3,000,000. Total sites ranged from 37 to 311 and occupancy ranged
from 70.9% to 95%. The average price per sites ranged from $4,838 to $11,739
and average site rent ranged from $123.28 to $225.00. All of the sales were fee
simple transactions with typical acquisition financing. There were no atypical
sale conditions known to have occurred.
The Appraiser also employed the EGIM in the sales comparison analysis. In
applying the EGIM analysis, the Appraiser determined that (i) the EGIM for the
comparable sale properties ranged from 3.1 to 7.5, (ii) that EGIM was
essentially a function of the average site rent, (iii) average site rent
reflects, in most cases, the market perception of a property's position in the
marketplace, (iv) typically, increases in site rent contribute to increases in
NOI, (v) average site rent is a function of the physical aspects of the
property, such as age and condition, location and amenities, and (vi) the EGIM
also reflects the market's perception of the potential for future rent
increases.
The Appraiser also noted that (i) the Property is an all age community in a
rural setting and (ii) all the comparable properties except one had a higher
expense ratio than the Property, ranging from 25% to 60%. Based on these
considerations, the Appraiser concluded that an EGIM of expense ratio 4.0, which
was at the lower end of the indicated range for the comparable properties, was
appropriate for the Property. Based upon the Property's effective gross income
of $210,966 and an EGIM of 4.0 the Appraiser calculated the market value of the
Property to be $840,000, representing $5,419 per site. After adjustments and
deduction of $100,000 for the installation of water meters, the Appraiser
concluded that the market value of the Property was $700,000 under the sales
comparison approach.
In reconciling the income capitalization approach and the sales comparison
approach, the Appraiser (i) reviewed each approach to ascertain the reliability
of the data, (ii) weighted the approach that best represented the actions of
typical users and investors in the marketplace, (iii) determined that in the
current instance, the availability of sufficient, reliable and supportable
historical data for the Property
39
<PAGE>
made the income capitalization approach a reliable gauge of the market value of
the Property, (iv) determined that the sales comparison approach was reliable,
(v) determined that the two approaches reflected a narrow range of value, (vi)
determined that the opinion of value should be based on the income
capitalization approach because buyers are most concerned with cash flow to
service debt, and (vii) concluded that the market value of the Property, based
on a reasonable exposure period of six months, as of June 1, 1999, was $700,000.
Summary of Shady Hills Property Appraisal. In utilizing the income
-----------------------------------------
capitalization approach in connection with appraising the Shady Hills Property,
the Appraiser first projected 12 months of income for the Property based upon
the then current rent levels. The potential gross income from the rentals was
calculated at $486,480 per year. Vacancy and credit loss was estimated at 15%
of potential gross income, or $72,972. Additional income, based on historical
numbers, was calculated at $380.00 per site, leaving an effective gross income
estimate of $499,008 for the Property. Total annual operating expenses for the
Property were estimated to be $247,791, leaving NOI of $251,217. In determining
a capitalization rate for the Shady Hills Property, the Appraiser first looked
at capitalization rates for recently sold comparable communities, which ranged
from 8.33% to 12.69%. The Appraiser then noted that the Property is located in
an older, mature commercial/residential area and reflects additional risk in
terms of investment. Based on these considerations, the Appraiser determined
that a capitalization rate of 10.5% for the Property was appropriate. Utilizing
the 10.5% capitalization rate the Appraiser was able to calculate a market value
for the Shady Hills Property of $2,400,000. The Appraiser also performed a debt
coverage ratio analysis, which yielded a capitalization rate equal to
approximately 10.6%, to verify the accuracy of the utilized capitalization rate.
In utilizing the sales comparison approach in connection with appraising
the Shady Hills Property, the Appraiser compared the Property to five other
manufactured home communities sold in the same general geographic area as the
Property within the 27-month period prior to the date of the Appraisal. The
sales prices of the five comparable properties ranged from a low of $740,000 to
a high of $12,250,000. Total sites ranged from 89 to 486 and occupancy ranged
from 88% to 100%. The average price per site ranged from $7,255 to $25,206 and
average site rent ranged from $120.00 to $290.00. All of the sales were fee
simple transactions with typical acquisition financing. There were no atypical
sale conditions known to have occurred and all of the sales represented
transactions that took place in the 27-month period prior to the date of the
Appraisal and traded under similar market conditions.
The Appraiser also employed the EGIM in the sales comparison analysis. In
applying the EGIM, the Appraiser determined that the EGIM for the comparable
sale properties ranged from 4.55 to 7.57. The Appraiser noted that (i) the
Property is an all age community in a mature commercial/residential area that
has exhibited economic decline during recent years, (ii) with the exception of
two comparables, the expense ratio of the Property was higher than all of the
comparable properties, and (iii) the Property has a moderate level of occupancy
with some deferred maintenance. Based on these considerations, the Appraiser
concluded that an EGIM of 5.0, which was at the lower end of the indicated
range, was appropriate for the Property. Based upon the Property's effective
gross income of $499,008 and an EGIM of 5.0, the Appraiser calculated the market
value of the Property to be $2,500,000, representing $11,089 per site.
In reconciling the income capitalization approach and the sales comparison
approach, the Appraiser (i) reviewed each approach to ascertain the reliability
of the data, (ii) weighted the approach that best represented the actions of
typical users and investors in the marketplace, (iii) determined that in the
current instance, the availability of sufficient, reliable and supportable
historical data for the Property made the income capitalization approach a
reliable gauge of the market value of the Property, (iv) determined that the
sales comparison approach was reliable, (v) determined that the two approaches
reflected a narrow range of value, (vi) determined that the opinion of value
should be based on the income
40
<PAGE>
capitalization approach because buyers are most concerned with cash flow to
service debt, and (vii) concluded that the market value of the Property, based
on a reasonable exposure period of six months, as of October 28, 1999, was
$2,400,000.
Summary of Trailmont Property Appraisal. In utilizing the income
---------------------------------------
capitalization approach in connection with appraising the Trailmont Property,
the Appraiser first projected 12 months of income for the Property based upon
the then current rent levels. The potential gross income from the rentals was
calculated at $352,368 per year. Vacancy and credit loss was estimated at 5% of
potential gross income, or $17,618. Additional income, based on historical
numbers, was calculated at $330.00 per site, leaving an effective gross income
estimate of $377,980 for the Property. Total annual operating expenses for the
Property were estimated to be $149,852, leaving NOI of $228,128. In determining
a capitalization rate for the Trailmont Property, the Appraiser first looked at
capitalization rates for recently sold comparable communities, which ranged from
8.33% to 12.69%. The Appraiser then noted that the Property is located in a
mixed-use commercial, residential and agricultural area and reflects additional
risk in terms of investment. Based on these considerations, the Appraiser
determined that a capitalization rate of 10% was appropriate. Utilizing the 10%
capitalization rate, the Appraiser was able to calculate a market value for the
Trailmont Property of $2,300,000. The Appraiser also performed a debt coverage
ratio analysis, which yielded a capitalization rate equal to approximately
10.2%, to verify the accuracy of the utilized capitalization rate.
In utilizing the sales comparison approach in connection with appraising
the Trailmont Property, the Appraiser compared the Property to five other
manufactured home communities sold in the same general geographic area as the
Property within the 27-month period prior to the date of the Appraisal. The
sales prices of the five comparable properties ranged from a low of $740,000 to
a high of $12,250,000. Total sites ranged from 89 to 486 and occupancy ranged
from 88% to 100%. The average price per site ranged from $7,255 to $25,206 and
average site rent ranged from $120.00 to $290.00. All of the sales were fee
simple transactions with typical acquisition financing. There were no atypical
sale conditions known to have occurred and all of the sales represented
transactions that took place in the 27-month period prior to the date of the
Appraisal and traded under similar market conditions.
The Appraiser also employed the EGIM in the sales comparison analysis. In
applying the EGIM, the Appraiser determined that the EGIM for the comparable
sale properties ranged from 4.55 to 7.57. The Appraiser noted that (i) the
Property is an all age community in a rural commercial/residential area that has
exhibited new development during recent years, (ii) the Property has a high
level of occupancy with a minimal amount of deferred maintenance, and (iii) with
the exception of two comparable properties, the Property has a lower expense
ratio than all of the comparable properties. Based on these considerations, the
Appraiser concluded that an EGIM of 6.0, which is at the upper end of the EGIM
range for the comparable properties, was appropriate for the Property. Based
upon the Property's effective gross income of $377,980 and an EGIM of 6.0, the
Appraiser calculated the fair market value of the Property to be $2,250,000,
representing $17,176 per site.
In reconciling the income capitalization approach and the sales comparison
approach, the Appraiser (i) reviewed each approach to ascertain the reliability
of the data, (ii) weighted the approach that best represented the actions of
typical users and investors in the marketplace, (iii) determined that in the
current instance, the availability of sufficient, reliable and supportable
historical data for the Property made the income capitalization approach a
reliable gauge of the market value of the Property, (iv) determined that the
sales comparison approach was reliable, (v) determined that the two approaches
reflected a narrow range of value, (vi) determined that the opinion of value
should be based on the income capitalization approach because buyers are most
concerned with cash flow to service debt, and (vii) concluded that the market
value of the Property, based on a reasonable exposure period of six months, as
of October 28, 1999, was $2,300,000.
41
<PAGE>
Summary of Big Country Estates Property Appraisal. In utilizing the income
-------------------------------------------------
capitalization approach in connection with appraising the Big Country Estates
Property, the Appraiser first projected 12 months of income for the Property
based upon the then current rent levels. The potential gross income from the
rentals was calculated at $566,124 per year. Vacancy and credit loss was
estimated at 5% of potential gross income, or $28,306. Additional income, based
on historical numbers, was calculated at $35.00 per site, leaving an effective
gross income estimate of $622,573 for the Property. Total annual operating
expenses for the Property were estimated to be $327,236, leaving NOI of
$295,337. In determining a capitalization rate for the Big Country Estates
Property, the Appraiser looked at capitalization rates for recently sold
comparable communities, which ranged from 9.0% to 11.4%. The Appraiser noted
that the Property has a vacancy and expense ratio in line with market
comparables. Based on these considerations, the Appraiser determined that a
capitalization rate of 10.5% for the Property was appropriate. Utilizing the
10.5% capitalization rate, the Appraiser was able to calculate a market value
for the Big Country Estates Property of $2,810,000. The Appraiser also
performed a debt coverage ratio analysis, which yielded a capitalization rate
equal to approximately 10.75%, to verify the accuracy of the utilized
capitalization rate.
In utilizing the sales comparison approach in connection with appraising
the Big Country Estates Property, the Appraiser compared the Property to five
other manufactured home communities sold in the same general geographic area as
the Property within the nine-month period prior to the date of the Appraisal.
The sales prices of the five comparable properties ranged from a low of $707,720
to a high of $4,200,000. Total sites ranged from 61 to 250 and occupancy was
95% for each of the properties. The average price per site ranged from $10,559
to $16,981 and average site rent ranged from $180.00 to $235.00. All of the
sales were fee simple transactions with typical acquisition financing. There
were no atypical sale conditions known to have occurred and all of the sales
represented transactions that took place in the nine-month period prior to the
date of the Appraisal and traded under similar market conditions.
The Appraiser also employed the EGIM in the sales comparison analysis. In
applying the EGIM analysis, the Appraiser determined that (i) the EGIM for the
comparable sale properties ranged from 5.07 to 6.41, (ii) the EGIM was
essentially a function of the average site rent, (iii) average site rent
reflects, in most cases, the market perception of a property's position in the
marketplace, (iv) typically, site rent increases contribute to increases in NOI,
(v) average site rent is a function of the physical aspects of the property,
such as age and condition, location and amenities, and (vi) the EGIM also
reflects the market's perception of the potential for future rent increases.
The Appraiser also noted that (i) the Property is an all age community with
a 5.1% physical vacancy, (ii) the Property was observed to be in average
condition and with a good location in Laramie County, Wyoming, and (iii) the
comparable properties all had the same occupancy rate as the Property but had
lower expense ratios, ranging from 36.6% to 45.2%. By comparison, the Property
had a forecast expense ratio of 52.56%. Based on these considerations, the
Appraiser concluded that an EGIM of 5.0, which was at the low end of the
indicated range for the comparable properties, was appropriate for the Property.
Based upon the Property's effective gross income of $622,573 and an EGIM of 5.0,
the Appraiser calculated the fair market value to be $3,110,000, representing
$12,292 per site.
In reconciling the income capitalization approach and the sales comparison
approach, the Appraiser (i) reviewed each approach to ascertain the reliability
of the data, (ii) weighted the approach that best represented the actions of
typical users and investors in the marketplace, (iii) determined that in the
current instance, the availability of sufficient, reliable and supportable
historical data for the Property made the income capitalization approach a
reliable gauge of the market value of the Property, (iv) determined that the
sales comparison approach was reliable, (v) determined that the two approaches
reflected a narrow range of value, (vi) determined that the opinion of value
should be based on the income
42
<PAGE>
capitalization approach because buyers are most concerned with cash flow to
service debt and (vii) concluded that the market value of the Property, based on
a reasonable exposure period of six months, as of September 1, 1999, was
$2,810,000.
Summary of Apache East and Denali Park Properties Appraisal. The Apache
-----------------------------------------------------------
East and Denali Park Estates Properties are contiguous Properties with similar
characteristics. Accordingly, the Appraisals of these Properties were combined
in a single Appraisal report. In utilizing the income capitalization approach
in connection with appraising the Properties, the Appraiser first projected 12
months of income for the Properties based upon the then current rent levels.
The potential gross income from the rentals was calculated at $776,640 per year.
Vacancy and credit loss was estimated at 7% of potential gross income, or
$54,365. Additional income, based on historical numbers, was calculated at
$30.00 per site, leaving an effective gross income estimate of $767,875 for the
Properties. Total annual operating expenses for the Properties were estimated
to be $312,038, leaving NOI of $455,837. In determining a capitalization rate
for the Properties, the Appraiser looked at capitalization rates for recently
sold comparable communities, which ranged from 8.22% to 10.30%. The Appraiser
noted that the Properties are located in a 50% developed neighborhood where
development has taken the form of mixed-use residential, commercial and light
industrial type properties and reflects additional risk in terms of investment.
Based on these considerations, the Appraiser determined that a capitalization
rate of 9% for the Properties was appropriate. Utilizing the 9% capitalization
rate, the Appraiser was able to calculate an aggregate market value for the
Properties of $5,064,856. The market value with excess vacant land valued at
$390,000 was calculated to be $5,450,000. The Appraiser also performed a debt
coverage ratio analysis, which yielded a capitalization rate equal to
approximately 9%, to verify the accuracy of the utilized capitalization rate.
In utilizing the sales comparison approach in connection with appraising
the Properties, the Appraiser compared the Properties to five other manufactured
home communities sold in the same general geographic area as the Properties
within the nine-month period prior to the date of Appraisal. The sales prices
of the five comparable properties ranged from a low of $1,675,000 to a high of
$9,500,000. Total sites ranged from 75 to 451 and occupancy ranged from 93.0%
to 98.04%. The average price per site ranged from $16,262 to $30,270 and
average site rent ranged from $200.00 to $278.00. All of the sales were fee
simple transactions with typical acquisition financing. There were no atypical
sale conditions known to have occurred and all of the sales represented
transactions that took place in the nine-month period prior to the date of the
Appraisal and traded under similar market conditions.
The Appraiser also employed the EGIM in the sales comparison analysis. In
applying the EGIM analysis, the Appraiser determined that (i) the EGIM for the
comparable sale properties ranged from 6.84 to 8.27, (ii) the EGIM was
essentially a function of the average site rent, and (iii) average site rent
reflects, in most cases, the market perception of a property's position in the
marketplace, (iv) typically, site rent increases contribute to increases in NOI,
(v) average site rent is a function of the physical aspects of the property,
such as age and condition, location and amenities, and (vi) the EGIM also
reflects the market's perception of the potential for future rent increases.
The Appraiser also determined that (i) each of the Properties is an all age
community with a 7.0% physical vacancy, (ii) the Properties were observed to be
in excellent condition and with a good location near Superstition Freeway in
Apache Junction, Arizona, and (iii) the comparable properties all had a much
higher occupancy rate than the Properties and had lower expense ratios, ranging
from 25.55% to 35.62%. By comparison, the Properties had a forecast expense
ratio of 40.64%. Based on these considerations, the Appraiser concluded that an
EGIM of 6.8, which was in the middle of the indicated range for the comparable
properties, was appropriate for the Properties. Based upon the Properties
effective gross income of $767,875 and an EGIM of 6.8, the Appraiser concluded
the aggregate market
43
<PAGE>
value of the Properties to be $5,221,550, representing $18,231 per site. The
aggregate market value of the Properties, with excess vacant land valued at
$390,000, was calculated to be $5,610,000.
In reconciling the income capitalization approach and the sales comparison
approach, the Appraiser (i) reviewed each approach to ascertain the reliability
of the data, (ii) weighted the approach that best represented the actions of
typical users and investors in the marketplace, (iii) determined that in the
current instance, the availability of sufficient, reliable and supportable
historical data for the Properties made the income capitalization approach a
reliable gauge of the market value of the Properties, (iv) determined that the
sales comparison approach was reliable, (v) determined that the two approaches
reflected a narrow range of value, (vi) determined that the opinion of value
should be based on the income capitalization approach because buyers are most
concerned with cash flow to service debt, and (vii) concluded that the aggregate
market value of the Properties with excess vacant land, based on a reasonable
exposure period of six months, as of September 1, 1999, was $5,450,000.
Summary of Harmony Ranch Property Appraisal. In utilizing the income
-------------------------------------------
capitalization approach in connection with appraising the Harmony Ranch
Property, the Appraiser first projected 12 months of income for the Property
based upon the then current rent levels. The potential gross income from the
rentals was calculated at $578,340 per year. Vacancy and credit loss was
estimated at 20% of potential gross income, or $115,668. Additional income,
based on historical numbers, was calculated at $50.00 per site, leaving an
effective gross income estimate of $472,272 for the Property. Total annual
operating expenses for the Property were estimated to be $219,679, leaving NOI
of $252,593. In determining a capitalization rate for the Harmony Ranch
Property, the Appraiser first looked at capitalization rates for comparable
communities, which ranged from 8.51% to 9.79%. After determining that the above
market vacancy and expense ratio of the Property and the risk of future flooding
would require a higher yield, the Appraiser determined that a capitalization
rate of 11% was appropriate. Utilizing the 11% capitalization rate, the
Appraiser was able to calculate a market value for the Harmony Ranch Property of
$2,300,000. The Appraiser also performed a debt coverage ratio analysis, which
yielded a capitalization rate equal to approximately 10.3%, to verify the
accuracy of the utilized capitalization rate.
In utilizing the sales comparison approach in connection with appraising
the Harmony Ranch Property, the Appraiser compared the Property against five
other manufactured home communities sold in the same general geographic area as
the Property within the nine-month period prior to the date of the Appraisal.
The sales prices of the five comparable properties ranged from a low of
$2,160,000 to a high of $15,400,000. Total sites ranged from 185 to 499 and
occupancy ranged from 89.2% to 96.9%. The average price per site ranged from
$11,676 to $30,651 and average site rent ranged from $159.39 to $382.80. All of
the sales were fee simple transactions with typical acquisition financing.
There were no atypical sale conditions known to have occurred and all of the
sales represented transactions that took place in the nine-month period prior to
the date of the Appraisal and traded under similar market conditions.
The Appraiser also employed the EGIM in the sales comparison analysis. In
applying the EGIM analysis, the Appraiser determined that (i) the EGIM for the
comparable sale properties ranged from 4.97 to 7.35, (ii) the EGIM was
essentially a function of the average site rent, (iii) average site rent
reflects, in most cases, the market perception of a property's position in the
marketplace, (iv) typically, site rent increases contribute to increases in NOI,
(v) average site rent is a function of the physical aspects of the property,
such as age and condition, location and amenities, and (vi) the EGIM also
reflects the market's perception of the potential for future rent increases.
The Appraiser also determined that (i) the Property is an all age community
with a 15.1% physical vacancy, (ii) the Property was observed to be in average
condition and with a good location in Hillsborough County, Florida, and (iii)
the comparable properties all had a much higher occupancy rate
44
<PAGE>
than the Property and, with the exception of one comparable property, had lower
expense ratios, ranging from 32.8% to 40.7%. By comparison, the Property had a
forecast expense ratio of 46.52%. In addition, the Property experienced flooding
in December 1997. Based on these considerations, the Appraiser concluded that an
EGIM of 5.0, which was below the indicated range for the comparable properties,
was appropriate for the Property. Based upon the Property's effective gross
income of $472,272 and an EGIM of 5.0, the Appraiser calculated the market value
of the Property to be $2,400,000, representing $12,500 per site.
In reconciling the income capitalization approach and the sales comparison
approach, the Appraiser (i) reviewed each approach to ascertain the reliability
of the data, (ii) weighted the approach that best represented the actions of
typical users and investors in the marketplace, (iii) determined that in the
current instance, the availability of sufficient, reliable and supportable
historical data for the Property made the income capitalization approach a
reliable gauge of the market value of the Property, (iv) determined that the
sales comparison approach was reliable, (v) determined that the two approaches
reflected a narrow range of value, (vi) determined that the opinion of value
should be based on the income capitalization approach because buyers are most
concerned with cash flow to service debt, and (vii) concluded that the market
value of the Property, based on a reasonable exposure period of six months, as
of August 15, 1999, was $2,300,000.
Discount for Ownership Interests in Properties
The Appraiser advised the Managing General Partner, and subsequently
confirmed in writing, that in its estimation the application of a discount of
approximately 25% would be appropriate in the context of valuing a minority
ownership interest in a manufactured home community. In determining the
purchase price to be paid for each of the Ownership Interests, N'Tandem applied
a 10% discount to the Appraised Value of each Ownership Interest for the fact
that the Partnership only owns a minority interest in the underlying property.
Accordingly, based upon the information provided by the Appraiser, the General
Partners believe that the discount being applied by N'Tandem in connection with
the Sales is substantially less than the discount which would have been applied
in the market had the Ownership Interests been sold to a third-party
purchaser.
The purpose of the Appraiser's report was, and the Appraiser was instructed
by the Managing General Partner, to determine the applicable valuation
procedures for a partial ownership interest in a manufactured home community.
In analyzing this issue, the Appraiser (i) surveyed real estate brokers and
owners regarding their experience with sales of partial ownership interests in
properties, (ii) surveyed real estate lenders regarding their experience with
financings of, and underwriting criteria relating to, partial ownership
interests in properties, and (iii) reviewed articles and treatises relating to
the sale and valuation of partial ownership interests and partnership interests
in general. Based upon the Appraiser's review of available information, the
Appraiser determined that discounts, ranging from 14% to 46% depending on the
type of partnership, are commonly applied in the sale of partnership interests
and that, while the discount applied in the sale of a partial ownership interest
in real estate would not be as high as the discount applied in the sale of a
partnership interest, an average discount of 25% to the sale price would be
appropriate in the valuation of a minority ownership interest in a manufactured
home community. In connection with the report, no percentage discount or ranges
of percentage discounts were suggested by the Managing General Partner. A copy
of the Appraiser's written report is filed as an exhibit to the Schedule 13E-3
and is available for inspection and copying at the Partnership's principal
executive offices during regular business hours by any interested Limited
Partner or any representative of a Limited Partner who has been designated by a
Limited Partner in writing. A copy may also be obtained through the written
request of any Limited Partner made to the Managing General Partner at 6160
South Syracuse Way, Greenwood Village, Colorado 80111.
45
<PAGE>
SUMMARY OF SELECTED TERMS OF THE PARTNERSHIP AGREEMENT
The rights and obligations of the partners in the Partnership are governed
by the Partnership Agreement which is set out in its entirety as an exhibit to
the Schedule 13E-3. The following statements and other statements in this
solicitation concerning the Partnership Agreement and related matters are merely
a selected summary of the terms of the Partnership Agreement and do not purport
to be complete and in no way modify or amend the Partnership Agreement.
Net Proceeds from the Sales
Pursuant to the Partnership Agreement upon the consummation of the Sales
and a liquidation of the Partnership, net proceeds from the Sales, after
providing for the debts and liabilities of the Partnership, will be distributed
in the following order of priority:
(i) To the Limited Partners, an amount equal to the sum of: (i)
Adjusted Invested Capital (as defined below) attributable to each Limited
Partner and (ii) the excess, if any, of an amount equal to a 9% per annum
cumulative (but not compounded) return on Adjusted Invested Capital,
calculated from each Limited Partner's respective date of admission to the
Partnership, over total prior distributions of cash from operations with
respect to the Units; and
(ii) To the extent of any balance remaining, 85% of the Limited
Partners to be shared on a pro rata basis in accordance with their
respective ownership of Units and 15% to the General Partners.
The above notwithstanding, the General Partners will receive at least 1% of
the distributions of net proceeds from the Sales in accordance with the
Partnership Agreement.
Allocation of Profit or Loss on the Sales
Profit or loss in connection with the Sales and a liquidation of the
Partnership will be allocated to and among the partners, after providing for the
debts and liabilities of the Partnership, as follows:
(i) The profit on the Sales first shall be allocated to each partner
with a negative capital account pro ratably in an amount equal to the
amount of the negative capital account of each partner;
(ii) Profit on the Sales next shall be allocated to the Limited
Partners until each Limited Partner's capital account shall equal a
positive amount equal to the sum of: (i) the Adjusted Invested Capital
attributable to each Limited Partner and (ii) the excess, if any, of an
amount equal to a 9% per annum cumulative (but not compounded) return on
Adjusted Invested Capital, calculated from each Limited Partner's
respective date of admission to the Partnership, over total prior
distributions of cash from operations with respect to the Units; and
(iii) To the extent of any balance remaining, 85% of the profit on
the Sales will be allocated to the Limited Partners on a pro rata basis in
accordance with their respective ownership of Units and 15% will be
allocated to the General Partners.
Notwithstanding the foregoing, the General Partners shall be allocated at
least 1% of the profit or loss on the Sales, and, to the extent possible, in
characterizing the allocated profit on the Sales, that portion which constitutes
ordinary income by reason of recapture of depreciation or investment tax credit
46
<PAGE>
recapture, shall be allocated among the partners such that a partner (or
successor) who realized the benefit of the deduction or credit will bear the tax
burden of the corresponding recapture.
"Adjusted Invested Capital" means the original capital contribution paid
for each Unit reduced by any return of capital and further reduced by the total
cash distributed from net proceeds from refinancing and net proceeds from the
sale of properties with respect to each Unit. Thus, distributions of cash from
operations do not reduce Adjusted Invested Capital.
Voting Rights of Limited Partners
The Limited Partners have the right to vote upon the following matters:
(i) The dissolution and winding up of the Partnership;
(ii) The sale, exchange, lease, mortgage, pledge, or other transfer of
all or a substantial part of the assets of the Partnership other than in
the ordinary course of its business;
(iii) The incurrence of indebtedness by the Partnership other than in
the ordinary course of its business;
(iv) A change in the nature of the business of the Partnership;
(v) Transactions in which the General Partners have an actual or
potential conflict of interest with the Limited Partners or the
Partnership;
(vi) The removal of a General Partner, and the election of a General
Partner;
(vii) An election to continue the business of the Partnership other
than under the circumstances described in (ix) or (x) below;
(viii) The admission of a General Partner other than under the
circumstances described in (ix) or (x) below;
(ix) The admission of a General Partner or an election to continue the
business of the Partnership after a General Partner ceases to be a General
Partner other than by removal where there is no remaining or surviving
General Partner; and
(x) The admission of a General Partner or an election to continue the
business of the Partnership after the removal of a General Partner where
there is no remaining or surviving General Partner.
The voting rights described above are effected by the vote or consent of a
majority in interest of Limited Partners without the necessity for concurrence
by the General Partners.
Limitation of Liability and Indemnification of the General Partners
The Partnership Agreement provides for a limitation of liability and the
indemnification of the General Partners as follows:
(i) except in the case of negligence or misconduct, the General
Partners and agents acting on their behalf shall not be liable, responsible
or accountable in damages or otherwise to the Partnership (in a Partnership
derivative suit) or to any Limited Partner for the doing of any act
47
<PAGE>
or the failure to do any act, the effect of which may cause or result in
loss or damage to the Partnership if done in good faith or to promote the
best interests of the Partnership;
(ii) the General Partners and their agents are entitled to be
indemnified by the Partnership, from the assets of the Partnership or as an
expense of the Partnership but not from the Limited Partners, against any
liability or loss, as a result of any claim or legal proceeding (whether or
not the same proceeds to judgment or is settled or otherwise brought to a
conclusion) relating to the performance or non-performance of any act
concerning the activities of the Partnership (including all liabilities
under federal and state securities acts as permitted by law), except in the
case where the General Partners or their agents are guilty of bad faith,
negligence, misconduct or reckless disregard of duty, provided such act or
omission was done in good faith to promote the best interests of the
Partnership; and
(iii) the indemnification provided for the General Partners includes
the payment of reasonable attorneys' fees and other expenses (not limited
to taxable costs) incurred in settling or defending any claims, threatened
action or finally adjudicated legal proceedings.
THE PARTNERSHIP'S PROPERTIES
Nature of Ownership Interests in Properties
Properties Owned by Limited Partnerships in which the Partnership is a
Limited Partner. Each of the Apache East and Denali Park Estates Properties is
owned by Windsor Park 345 and each of the Ownership Interests of the Partnership
in such properties is in the form of a limited partner interest in Windsor Park
345. Under the agreement of limited partnership of Windsor Park 345, virtually
all management, business and other decisions relating to the properties owned by
Windsor Park 345 are within the control and discretion of the Managing General
Partner and the limited partners in Windsor Park 345 have no control over the
management of, and decisions with respect to, the properties owned by Windsor
Park 345, including, without limitation, any disposition of any such
properties.
Although the limited partners in Windsor Park 345 (including the
Partnership) can legally sell their limited partner interests, the transferee of
any such limited partner interest will be entitled to the full benefits relating
to the limited partner interest only if the Managing General Partner, as general
partner of Windsor Park 345, in its sole discretion, determines to admit such
transferee as a limited partner of Windsor Park 345. If the Managing General
Partner fails to do so, the transferee generally will be entitled only to the
economic benefits relating to the transferred limited partner interest, but
would not be entitled to certain other rights (such as voting rights) conferred
upon such limited partners under the agreement of limited partnership of Windsor
Park 345 and by law.
The Partnership is a 29% limited partner in Windsor Park 345. In addition
to being the sole general partner of Windsor Park 345, the Managing General
Partner is also the sole managing general partner of Windsor 5 and Windsor 7 and
is the external investment advisor to N'Tandem, which together own all of the
remaining limited partner interests in Windsor Park 345. N'Tandem, Windsor 5
and Windsor 7 have a 36%, 9% and 26% limited partner interest, respectively, in
Windsor Park 345.
Properties Owned Pursuant to Joint Venture Agreements. The Partnership
owns (i) a 40% undivided interest in the Big Country Estates Property as a
tenant in common with N'Tandem, which owns the remaining 60% interest in this
Property and (ii) a 25% undivided interest in the Harmony Ranch Property as a
tenant in common with N'Tandem, which owns the remaining 75% interest in this
Property. Each of the Partnership's Ownership Interests in the Big Country
Estates and Harmony Ranch Properties are subject to joint venture agreements
relating to such Properties between the Partnership and N'Tandem.
48
<PAGE>
Pursuant to the Purchase and Sale Agreement, the Partnership will assign all of
its rights under the respective joint venture agreements to N'Tandem at the
closing of the Sales.
Difficulty of Selling Ownership Interests to Third-Party Buyers. Given the
fact that the control and management of the properties underlying the Ownership
Interests is vested in the Managing General Partner and the Partnership, as a
holder of the Ownership Interests, has no control over the disposition of the
underlying properties, the General Partners believe that (i) finding third-party
purchasers willing to pay full value for the Ownership Interests based on the
Appraised Values of the underlying properties would be extremely difficult, (ii)
efforts to sell such Ownership Interests to third-party purchasers would be
likely to result in the application of a 25% discount to the purchase prices to
be paid for such Ownership Interests, which is greater than the 10% discount
being applied to the purchase prices offered by N'Tandem for the Ownership
Interests, and (iii) the sale of such Ownership Interests would likely result in
substantially higher selling expenses and, ultimately, lower liquidating
distributions to the Limited Partners. See "SPECIAL FACTORS--Discounts for
Ownership Interests in Properties."
Description of the Properties, Appraised Values and Ownership Interests
Ponderosa. Ponderosa is a 148-site manufactured home community located at
3559 Cossell Road in Indianapolis, Indiana. Amenities include an office, a
maintenance building and a basketball court. The Appraisal for this Property
was prepared as of August 5, 1999. The "as-is" Appraised Value of the Property
is $2,200,000. The Partnership has a 100% ownership interest in this Property.
There is no mortgage on this Property.
The Pines. The Pines is a 155-site manufactured home community located at
9919 Highway 78 in Charleston, South Carolina. Amenities include an office, a
playground and 21 storage sheds. The Appraisal for this Property was prepared
as of June 1, 1999. The "as-is" Appraised Value of the Property is $700,000.
The Partnership has a 100% ownership interest in this Property. There is no
mortgage on this Property.
Shady Hills. Shady Hills is a 225-site manufactured home community located
at 1508 Dickerson Pike in Ladson, Tennessee. Amenities include an office, a
storage building, a maintenance building and a commercial building. The
Appraisal for this Property was prepared as of October 28, 1999. The "as-is"
Appraised Value of the Property is $2,400,000. The Partnership has a 100%
ownership interest in this Property. There is no mortgage on this Property.
Trailmont. Trailmont is a 131-site manufactured home community located at
1341 Dickerson Pike in Nashville, Tennessee. Amenities include an office, a
maintenance building and two playgrounds. The Appraisal for this Property was
prepared as of October 28, 1999. The "as-is" Appraised Value of the Property is
$2,300,000. The Partnership has a 100% ownership interest in this Property.
There is an outstanding mortgage on this Property securing $1,170,400 which is
expected to continue following the Sales.
Big Country Estates. Big Country Estates is a 255-site manufactured home
community located at 3400 South Greeley Highway in Cheyenne, Wyoming. Amenities
include a clubhouse, an office and playground/recreation area. The Appraisal
for this Property was prepared as of September 1, 1999. The "as-is" Appraised
Value of the Property is $2,810,000. The Partnership has a 40% Ownership
Interest in this Property. There is no mortgage on this Property.
Apache East. Apache East is a 123-site adult manufactured home community
located at 3800 South Tomahawk Road in Apache Junction, Arizona. Amenities
include two clubhouses, a laundry, two pools with spas and eight shuffleboard
courts. This Property is adjacent to Denali Park Estates.
49
<PAGE>
Accordingly, the two Properties were appraised together and the aggregate
Appraised Value was included in a single Appraisal. The Appraisal for this
Property was prepared as of September 1, 1999. The combined "as-is" appraised
value of the Apache East and Denali Park Estates Properties is $5,450,000. The
Partnership has a 29% Ownership Interest in this Property. There is a single
mortgage covering both Properties relating to outstanding indebtedness in the
amount of $2,991,400. For purposes of calculating the value of the Partnership's
Ownership Interests in these two properties, the Managing General Partner has
assumed that 310% of such indebtedness, or $1,091,900, is allocable to the
Apache East Property and that 63.5% of such indebtedness, or $1,899,500, is
allocable to the Denali Park Estates Property. This mortgage and the related
indebtedness are expected to continue following the Sales.
Denali Park Estates. Denali Park Estates is a 162-site adult manufactured
home community located at 3405 South Tomahawk Road in Apache Junction, Arizona.
Amenities include two club houses, a laundry, two pools with spas and eight
shuffleboard courts. In addition, excess land at Denali Park Estates is
currently being used as a desert golf course. This Property is adjacent to the
Apache East Property. Accordingly, the two Properties were appraised together
and the aggregate Appraised Value was included in a single Appraisal. The
Appraisal for this Property was prepared as of September 1, 1999. The combined
"as-is" appraised value of the Denali Park Estates and Apache East Properties is
$5,450,000. The Partnership has a 29% Ownership Interest in this Property.
There is a single mortgage covering both Properties relating to outstanding
indebtedness in the amount of $2,991,400. For purposes of calculating the value
of the Partnership's Ownership Interests in these two properties, the Managing
General Partner has assumed that 63.5% of such indebtedness, or $1,899,500, is
allocable to the Denali Park Estates and, that 310% of such indebtedness, or
$1,091,900, is allocable to the Apache East Property. This mortgage and the
related indebtedness are expected to continue following the Sales.
Harmony Ranch. Harmony Ranch is a 192-space manufactured home community
located at 10321 Main Street in Thonotosassa, Florida. Amenities include an
office, a clubhouse, a laundry and a playground/recreation area. The Appraisal
for this Property was prepared as of August 15, 1999. The "as-is" Appraisal
Value of the Property is $2,300,000. The Partnership has a 25% Ownership
Interest in this Property. There is an outstanding mortgage on this Property
securing $1,200,000 of indebtedness which is expected to continue following the
Sales.
FEDERAL INCOME TAX CONSIDERATIONS
The following is a brief summary of United States federal income tax
consequences to Limited Partners arising from the Sales and liquidation of the
Partnership. This summary is based upon the Code, as currently in effect,
applicable Treasury Regulations adopted thereunder, reported judicial decisions
and Internal Revenue Service ("IRS") rulings all as of the date hereof, all of
which are subject to prospective or retroactive change in a manner which could
adversely affect Limited Partners.
This summary is based on the assumption that Units in the Partnership are
held as capital assets and have been held since the Partnership's inception, and
does not purport to address Limited Partners in special tax situations such as
insurance companies, financial institutions, tax-exempt entities, nonresident
aliens, foreign corporations and Limited Partners who acquired their Units after
the original offering. Moreover, this summary does not address the possible
consequences to Limited Partners under any state, local or foreign tax laws of
the states and localities where they reside or otherwise do business or where
the Partnership operates. AS SUCH, EACH LIMITED PARTNER SHOULD CONSULT HIS OR
HER OWN TAX ADVISOR CONCERNING THE CONSEQUENCES TO HIM OR HER OF THE SALE OF THE
PROPERTIES AND OWNERSHIP INTERESTS AND LIQUIDATION OF THE PARTNERSHIP.
50
<PAGE>
Overview
The Sales should result in the recognition of gain by the Partnership and,
therefore, should result in recognition of gain by Limited Partners. The amount
of gain recognized by the Partnership with respect to each of the Properties
will equal the difference between (i) the amount realized by the Partnership
(i.e., the amount of cash received plus the amount of liabilities of the
Partnership assumed or taken subject to by N'Tandem) and (ii) the Partnership's
adjusted tax basis in each of the Properties. The aggregate gain expected to be
recognized by the Partnership on the Sales is approximately $1,913,600. This
gain will be allocated among the partners of the Partnership in accordance with
the terms of the Partnership Agreement. These provisions will result in the
allocation of approximately $1,894,400 of taxable gain on the Sales to Limited
Partners (or an average of $10.06 per Unit). Upon liquidation of the
Partnership, a Limited Partner will recognize gain or loss equal to the
difference between the cash received by such Limited Partner (including the
Limited Partner's share of Partnership Liabilities under Section 752 of the
Code) and the adjusted tax basis of such Limited Partner's Units. It is
expected that a Limited Partner will recognize an average of approximately
$11.70 of loss per Unit on liquidation. The gain per Unit resulting from the
Sales is primarily caused by the fact that the Partnership generated tax losses
in certain prior years that were allocated to Limited Partners. Limited
Partners should be aware that all of the per-Unit amounts stated above may vary
for each Limited Partner depending on the historical losses allocated and cash
distributions to such Limited Partner.
Taxation on the Sales
Tax Consequences of the Sales. The Sales should result in the recognition
of gain by the Partnership and, therefore, should result in recognition of gain
by Limited Partners. The amount of gain recognized by the Partnership with
respect to each of the Properties will equal the difference between (i) the
Partnership's amount realized (i.e., the amount of cash received increased by
the amount of liabilities of the Partnership assumed or taken subject to by
N'Tandem) and (ii) the Partnership's adjusted tax basis in each of the
Properties. The aggregate gain expected to be recognized by the Partnership on
the Sales is approximately $1,913,600.
Allocation of Gain. The $1,913,600 gain expected to be recognized by the
Partnership in the year of Sales will be allocated among the partners in
accordance with the terms of the Partnership Agreement. These provisions will
result in an allocation of approximately $1,894,400 of taxable gain on the Sales
to Limited Partners (or an average of $10.06 per Unit). The gain per Unit
resulting from the Sales is primarily caused by the fact that the Partnership
generated tax losses in prior years that were allocated to Limited Partners.
See "-- Income Tax Rates/Taxation of Gains and Losses," below.
Characterization of Gain or Loss. In general, gains (other than the amount
of gain attributable to certain depreciation recapture, which would be
classified as ordinary income, and gain attributable to Ownership Interests that
are partnership interests) recognized with respect to the Sales should be
treated as recognized from the sale of a "Section 1231" asset (i.e., real
property and depreciable assets used in a trade or business and held for more
than one year). A portion of such gain should be attributable to the recapture
of depreciation with respect to real property and taxed at the 25% rate
discussed below. A Limited Partner's share of gains from the sale of Section
1231 assets of a Partnership will be combined with any other Section 1231 gains
and losses recognized by such Limited Partner in that year. If the result is a
net loss, such loss is characterized as an ordinary loss. If the result is a
net gain, such gain is characterized as a capital gain; provided, however, that
such gain will be treated as ordinary income to the extent the Limited Partner
has "non-recaptured" Section 1231 losses. For these purposes, "non-recaptured"
Section 1231 losses means a Limited Partner's aggregate Section 1231 losses for
the five most recent prior years that have not previously been recaptured.
51
<PAGE>
In general, gain or loss recognized with respect to the Sale of Ownership
Interests that are partnership interests will be gain or loss from the sale or
exchange of a capital asset. However, any amount received in exchange for a
partnership interest attributable to a partnership's "unrealized receivables"
(including certain depreciation recapture) or "inventory items" will be
considered to be gain or loss from the sale or exchange of property other than a
capital asset.
For purposes of the passive activity loss limitations of Section 469 of the
Code, gains recognized from the Sales generally will be treated as passive
activity income.
Liquidation of the Partnership
Tax Consequences of Liquidation. Upon liquidation of the Partnership, a
Limited Partner will recognize gain or loss equal to the difference between the
cash received by such Limited Partner (including the Limited Partner's share of
partnership liabilities under Section 752 of the Code) and the adjusted tax
basis of the Limited Partner's Units, adjusted by such Limited Partner's
allocable share of income, gain or loss arising from normal Partnership
operations for the year of liquidation and the sale of the Properties in the
year of liquidation. See "-- Taxation on Sales -- Allocation of Gain" above.
It is expected that a Limited Partner will recognize an average of approximately
$11.70 of loss per Unit on liquidation of the Partnership.
Characterization of Gain or Loss. Any gain or loss recognized by a Limited
Partner on liquidation of the Partnership should be treated as gain or loss from
the sale of a capital asset if the Units are held as a capital asset by the
Limited Partner. Such gain or loss generally will be treated as passive gain or
loss pursuant to Section 469 of the Code.
The combined effect of the Sales and the liquidation of the Partnership
should result in a net taxable loss to Limited Partners of approximately $1.64
per Unit. However, the treatment of the gains and losses recognized by the
Limited Partners (as capital or ordinary gain or loss and the ability to offset
the two) may differ depending on whether Limited Partners have any non-
recaptured Section 1231 losses or other items recaptured at ordinary income
rates as discussed above. See "-- Income Tax Rates/Taxation of Capital Gains
and Losses" below regarding limitations with respect to the deductibility of
capital losses against ordinary income.
Income Tax Rates/Taxation of Gains and Losses
The Taxpayer Relief Act of 1997 and the IRS Restructuring and Reform Act of
1998 contain significant changes to the taxation of capital gains of
individuals, trusts and estates. The maximum rate of tax on net capital gains
of individuals, trusts and estates from the sale or exchange of capital assets
held for more than one year has been reduced to 20%, and the maximum rate for
net capital gains attributable to the sale of depreciable real property held for
more than one year (other than certain depreciation recapture taxable as
ordinary income) is 25% to the extent of the deductions for depreciation with
respect to such property. The current maximum tax rate on ordinary income of
individuals is 39.6%. This disparity in tax rates could be beneficial to
individual Limited Partners with suspended losses attributable to the
Partnership. Since a Limited Partner will be considered to have disposed of his
or her entire interest in the Partnership, such Limited Partner will be entitled
to deduct all suspended passive losses from the Partnership against any ordinary
income earned by such Limited Partner in the year of liquidation of the
Partnership or use such suspended losses to offset any gain allocable to such
Limited Partner on the Sales. Capital gains of individuals and corporate
taxpayers can be offset by capital losses. However, capital losses can be
deducted, in any year, only to the extent of a Limited Partner's capital gains
plus, in the case of an individual, taxable income of up to $3,000.
52
<PAGE>
CONSENT PROCEDURES; TRANSACTIONS AUTHORIZED BY CONSENTS
The consents to the Proposals being solicited hereby (the "Consents") will
authorize the General Partners: (i) to complete the Sales at any time on or
prior to _________, 2000 and to proceed with the Plan of Liquidation; and (ii)
to take all actions necessary or appropriate, as determined by the General
Partners, to complete the Sales and to proceed with the Plan of Liquidation,
including, without limitation, the adoption of any amendments to the Partnership
Agreement that may be required to effectuate the Sales and Plan of Liquidation;
provided, however, that following approval of the Proposals by the Limited
Partners, no change or modification will be made to the Purchase and Sale
Agreement.
Consents are being solicited from the Limited Partners as required by the
Partnership Agreement which provides that transactions such as the Sales and
Plan of Liquidation must be approved by Limited Partners owning a majority of
the issued and outstanding Units.
The Consents being sought are for approval of the Proposals, including the
Sales and the Plan of Liquidation, and not for the approval of any individual or
particular Sale. If sufficient Consents approving the Proposals are received,
the Partnership intends to consummate the Sales and proceed with the Plan of
Liquidation. If sufficient Consents are not received, the Partnership intends
to explore such alternatives as may be available to it.
Set forth below are the procedures to be followed by Limited Partners in
order to consent to, or deny consent to, or abstain from consenting to the
Proposals. A form of Consent was mailed to Limited Partners along with this
Consent Solicitation Statement. These procedures must be strictly followed in
order for the instructions of a Limited Partners as marked on such Consent to be
effective:
(i) A Limited Partner may make his or her election on the Consent only
during the solicitation period commencing upon the date of delivery of this
Consent Solicitation Statement and continuing until the earlier of (i)
_______, 2000 or such later date as may be determined by the General
Partners and (ii) the date upon which the General Partners determine that
holders of not less than a majority of all issued and outstanding Units
have consented to the Proposals (the "Solicitation Period").
(ii) Each Limited Partner must consent to, deny consent to, or abstain
from consenting to the Proposals with respect to all Units held by such
Limited Partner. The effect of abstaining or failing to sign and return
the Consent will be the same as denying consent.
(iii) All questions as to the validity, form, eligibility (including
time of receipt), acceptance and withdrawal of the Consent will be
determined by the General Partners, whose determination will be final and
binding. The General Partners reserve the absolute right to reject any or
all Consents that are not in proper form or the acceptance of which, in the
opinion of the General Partners, would be unlawful. The General Partners
also reserve the right to waive any irregularities or conditions of the
Consent as to particular Units. Unless waived, any irregularities in
connection with the Consents must be cured within such time as the General
Partners shall determine.
(iv) A Consent delivered by a Limited Partner may be changed or
revoked prior to the expiration of the Solicitation Period by delivering to
the Partnership a notice of revocation or a substitute Consent, properly
completed and executed, together with a letter indicating that the Limited
Partner's prior Consent has been revoked.
53
<PAGE>
(v) Limited Partners are encouraged to return a properly completed and
executed Consent in the enclosed envelope prior to the expiration of the
Solicitation Period.
(vi) A Limited Partner submitting a signed but unmarked Consent will
be deemed to have consented to the Proposals.
Each Limited Partner is requested to complete, date and sign the
accompanying form of Consent and return such Consent to Arlen Capital, LLC, 1650
Hotel Circle North, Suite 200, San Diego, California 92108, which has been
appointed to serve as the solicitation agent for the proposed transactions (the
"Solicitation Agent"). If the Solicitation Period is extended, the General
Partners will give written notice of such extension to all Limited Partners.
For more information concerning this Consent Solicitation, Limited Partners may
call the Solicitation Agent at (800) 553-4039. The costs of this Consent
Solicitation, including fees payable to the Solicitation Agent, will be borne by
the Partnership.
Solicitation of Consents
In addition to soliciting consents by mail, consents may be solicited by
directors, officers and employees of the General Partners and their affiliates,
who will not receive additional compensation for such services, by personal
interview, telephone, telegram, courier service or other similar means of
communication. Arlen Capital, LLC has been engaged as Solicitation Agent to
solicit Consents to the Proposals from Limited Partners, administer the delivery
of information to Limited Partners and receive and tally votes.
Under the solicitation agreement between the Partnership and the
Solicitation Agent (the "Solicitation Agreement"), the Partnership has agreed to
pay the Solicitation Agent a base fee of $8,100 plus an additional per Unit fee
for re-mails and incoming and outgoing phone calls, plus expenses. The General
Partners expect that the total amount payable under the Solicitation Agreement
will not exceed $32,000.
Record Date; Required Vote
The close of business on _________, 2000 has been fixed as the Record Date
for determining Limited Partners entitled to Consent to the Proposals. As of
the Record Date, there were ________ Units outstanding held of record by a total
of ________ Limited Partners. Each of the Proposals require approval of
unaffiliated Limited Partners holding at least a majority of the outstanding
Units. Each Unit entitles the holder thereof to cast one vote with respect to
the approval of each of the Proposals.
As of the Record Date, the General Partners and/or their affiliates held
and are entitled to exercise voting rights with respect to an aggregate of
______ Units, representing approximately _____% of the outstanding Units of the
Partnership. The General Partners and their affiliates have agreed to abstain
from voting on the Proposals with respect to all Units for which they hold
voting rights. Approval of the Proposals by unaffiliated Limited Partners
holding _______ Units, representing a majority of all outstanding Units, is
required to proceed with the Sales and the Plan of Liquidation. Neither
N'Tandem nor any affiliate of N'Tandem (other than the Managing General Partner)
owns, or has voting rights, with respect to any Units.
No Appraisal or Dissenters' Rights
If Limited Partners owning the requisite number of Units in the Partnership
consent to the Proposals, all Limited Partners of the Partnership will be bound
by such consent, including Limited Partners who have not returned their Consents
or who have abstained from or denied consent. None of
54
<PAGE>
the Partnership Agreement, California law or the proposed terms and conditions
of the Sales or the Plan of Liquidation provide objecting Limited Partners with
the right to exercise any dissenters', appraisal or similar rights. Under
California law, the general partner of a California limited partnership owes
fiduciary duties to its limited partners. To the extent that a general partner
has engaged in a transaction in breach of its fiduciary duties to limited
partners, a damages remedy may be available to such limited partners.
Consequences If Consents Are Not Obtained
If sufficient Consents to proceed with the Sales and the Plan of
Liquidation are not obtained, the General Partners intend to proceed to explore
such alternatives as may be available to the Partnership.
FINANCIAL STATEMENTS
The financial information contained in the Partnership's Annual Report on
Form 10-KSB, as amended and restated in the Partnership's Annual Report on Form
10-KSB/A, for the year ended December 31, 1998 and the Partnership's Quarterly
Report on Form 10-QSB, as amended and restated in the Partnership's Quarterly
Report on Form 10-QSB/A, for the quarter ended September 30, 1999 identified in
"INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE" below is incorporated herein
by reference.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents (or portions thereof) filed with the Commission by
the Partnership (File No. 0-15699) pursuant to the Exchange Act are incorporated
herein by reference:
(i) the Partnership's Annual Report on Form 10-KSB for the year ended
December 31, 1998, as amended and restated by the Partnership's Annual
Report on Form 10-KSB/A filed on February 3, 2000;
(ii) the Partnership's Quarterly Report on Form 10-QSB for the quarter
ended March 31, 1999, as amended and restated by the Partnership's
Quarterly Report on Form 10-QSB/A filed on February 3, 2000;
(iii) the Partnership's Quarterly Report on Form 10-QSB for the
quarter ended June 30, 1999, as amended and restated by the Partnership's
Quarterly Report on Form 10-QSB/A filed on February 3, 2000;
(iv) the Partnership's Quarterly Report on Form 10-QSB for the quarter
ended September 30, 1999, as amended and restated by the Partnership's
Quarterly Report on Form 10-QSB/A filed on February 3, 2000; and
(v) the Partnership's Current Report on Form 8-K filed on April 13,
1999.
Any statement contained in a document incorporated by reference herein
shall be deemed to be modified or superseded for the purposes of this Consent
Solicitation Statement to the extent that a statement contained herein or in any
other subsequently filed document that is incorporated by reference herein
modifies or supersedes such earlier statement. Any such statements modified or
superseded shall not be deemed, except as so modified or superseded, to
constitute a part of this Consent Solicitation Statement.
55
<PAGE>
Copies of any or all of the documents specifically incorporated herein by
reference (not including the exhibits to such documents, unless such exhibits
are specifically incorporated by reference in such documents) will be furnished
without charge to each person, including any beneficial owner, to whom a copy of
this Consent Solicitation Statement is delivered upon written or oral request.
Requests should be made to: Windsor Park Properties 3 -- Investor Relations,
6160 South Syracuse Way, Greenwood Village, Colorado 80111.
56
<PAGE>
APPENDIX A
Fairness Opinion
LEGG MASON
Corporate Finance
Legg Mason Wood Walker, Incorporated
100 Light Street, 34th Floor, Baltimore, MD 21202
410-539-0000 Fax: 410-454-4508
Member New York Stock Exchange, Inc./Member SIPC
November 15, 1999
The General Partners of
Windsor Park Properties 3, A California Limited Partnership
c/o The Windsor Corporation
6160 South Syracuse Way
Greenwood Village, Colorado 80111
General Partners:
We have been advised by the managing general partner (the "Managing
General Partner") of Windsor Park Properties 3, A California Limited Partnership
(the "Partnership"), that the Partnership intends to sell its four wholly-owned
properties and its partial ownership interests in four other properties
(collectively, the "Properties") to N'Tandem Trust, a California business trust
("N'Tandem"), for a net aggregate amount of $7,928,400 on terms and conditions
more fully described in the consent solicitation statement (the "Consent
Solicitation Statement") relating to the purchase and sale of the Properties
(the transaction is referred to herein as the "Sale").
You have requested our opinion, as investment bankers, as to the
fairness to the limited partners (the "Limited Partners") of the Partnership,
from a financial point of view, of the aggregate purchase price to be paid by
N'Tandem in the Sale.
In connection with our opinion, we have, among other things, reviewed:
(i) the management agreement between the Partnership and the Managing
General Partner and other agreements pertaining to the operation
and management of the Properties;
(ii) the partnership agreement of the Partnership;
(iii) the financial statements and the related filings of the
Partnership on Form 10-K for the year ended December 31, 1998
and Form 10-Q for the six months ended June 30, 1999;
A-1
<PAGE>
(iv) certain market and economic data applicable to the Sale;
(v) an analysis of comparable publicly traded real estate investment
trusts;
(vi) the draft Consent Solicitation Statement;
(vii) certain financial and other information relating to the
Partnership and the Properties that was furnished to Legg Mason
by the Managing General Partner, including certain internal
financial analyses, financial and operating forecasts and
reports and other information prepared by the Managing General
Partner or its representatives;
(viii) the appraisals of the Properties prepared by Whitcomb Real
Estate, Inc; and
(ix) conducted such other financial studies, analyses and
investigations and considered such other information as we deemed
appropriate.
In connection with our review, we relied, without independent
verification, on the accuracy and completeness of all information that was
publicly available, supplied or otherwise communicated to Legg Mason on behalf
of the Partnership and we have further relied upon the assurances of the
Managing General Partner that it is unaware of any facts that would make the
information provided to us incomplete or misleading.
Legg Mason has also relied upon the Managing General Partner as to the
reasonableness and achievability of the financial forecasts and projections (and
the assumptions and bases therein) provided to us for the Partnership, and we
have assumed such forecasts and projections were reasonably prepared on bases
reflecting the best currently available estimates and judgments of management as
to the future operating performance of the Partnership. Neither the Managing
General Partner nor the Partnership publicly discloses internal management
forecasts and projections of the type provided to Legg Mason. Such forecasts
and projections were not prepared with the expectation of public disclosure.
The forecasts and projections were based on numerous variables and assumptions
that are inherently uncertain, including, without limitation, facts related to
general economic conditions. Accordingly, actual results could vary
significantly from those set forth in such forecasts and projections. Legg Mason
has relied on these forecasts and does not in any respect assume any
responsibility for the accuracy or completeness thereof.
Legg Mason has not been requested to make, and has not made, an
independent evaluation or appraisal of the assets, properties, facilities, or
liabilities (contingent or otherwise) of the Partnership and, with the exception
of the appraisal of the underlying properties of the Partnership referred to
above, we have not been furnished with any such appraisals or evaluations.
Estimates of value of the Partnership and its assets do not purport to be
appraisals or necessarily reflect the prices at which the Partnership and assets
may actually be sold. Because such estimates are inherently subject to
uncertainty, Legg Mason assumes no responsibility for their accuracy. We note
that the Managing General Partner and N'Tandem are under common control of the
parent of the Managing General Partner, and we have assumed that this potential
conflict of interest had no effect on the Sale. Our opinion is necessarily
based upon financial, economic, market and other conditions and circumstances
existing and disclosed to us on the date hereof. We were not requested to, nor
did we, solicit the interest of any other party in acquiring interests in the
Partnership or its assets. We have also assumed that the Sale will be
consummated on the terms and conditions described in the Consent Solicitation
Statement, without any waiver of material terms or conditions by the
Partnership.
A-2
<PAGE>
It is understood that this letter is directed to the General Partners.
The opinion expressed herein is provided for the use of the General Partners in
their evaluation of the Sale and our opinion does not constitute a
recommendation to the General Partners or to any Limited Partner as to how such
partners should vote or otherwise respond on the Sale. In addition, this letter
does not constitute a recommendation of the Sale over any other alternative
transaction which may be available to the Partnership and does not address the
underlying business decision of the Managing General Partner to proceed with or
effect the Sale. This letter is not to be quoted or referred to, in whole or in
part, in any registration statement, prospectus, or in any other document used
in connection with the offering or sale of securities, nor shall this letter be
used for any other purposes, without the prior written consent of Legg Mason;
provided that this opinion may be included in its entirety in any filing made by
the Partnership or N'Tandem with the Securities and Exchange Commission with
respect to the Sale.
Legg Mason will receive a fee for providing this opinion to the
General Partners.
Based upon and subject to the foregoing, we are of the opinion that,
as of the date hereof, the aggregate amount of consideration to be paid by
N'Tandem in the Sale is fair to the Limited Partners from a financial point of
view.
Very truly yours,
/s/ Legg Mason Wood Walker, Incorporated
----------------------------------------
Legg Mason Wood Walker, Incorporated
A-3
<PAGE>
APPENDIX B
Information Concerning Officers and
Directors of the Managing General Partner,
N'Tandem and Chateau
A. The Managing General Partner
The Windsor Corporation is the Managing General Partner of the Partnership.
The Directors and executive officers of The Windsor Corporation are as follows:
Gary P. McDaniel, 54, became a Director of The Windsor Corporation in
September 1997. Mr. McDaniel's biographical information is set forth below under
"C. Chateau Communities, Inc."
C. G. Kellogg, 56, became a Director of The Windsor Corporation in
September 1997. Mr. Kellogg's biographical information is set forth below under
"C. Chateau Communities, Inc."
Steven G. Waite, 44, has been President of The Windsor Corporation since
September 1997. From 1990 through the date he accepted his position at The
Windsor Corporation, Mr. Waite was Vice President/General Manager of Communities
at Clayton Homes, Inc., a company which owns and operates manufactured home
factories, sales centers, financing and insurance units and communities (NYSE:
CMH). Mr. Waite holds a B.S. from the University of Colorado and an M.B.A. from
the University of Alabama.
Each of Messrs. McDaniel, Kellogg and Waite is a United States citizen.
B. N'Tandem Trust
As an unincorporated business trust, N'Tandem Trust is managed by its
Trustees. The Trustees of N'Tandem are as follows:
Gary P. McDaniel, 54, became a Trustee of N'Tandem in September of 1997.
Mr. McDaniel's biographical information is set forth below under "C. Chateau
Communities, Inc."
Richard B. Ray, 59, became a Trustee of N'Tandem in September of 1997.
Since 1995 he has been Co-Chairman of the Board and Chief Financial Officer of
21st Century Mortgage Corporation, (a lender to the manufactured home industry)
and a director of the following companies: BankFirst, Radio Systems Corporation
and Knox Housing Partnership (a not for profit developer of low income housing
in Knox County, Tennessee). Previously, he was Executive Vice President, Chief
Financial Officer, and Director of Clayton Homes Inc. (a vertically integrated
manufactured housing company) from 1982-1994 and a Director of Palm Harbor
Homes, Inc. (a national producer of manufactured homes) from 1994-1995.
Kenneth G. Pinder, 62, became a Trustee of N'Tandem in September of 1997.
Mr. Pinder entered the manufactured housing business in 1970 managing a
manufactured housing site rental community and formed American Living Homes
Inc., a manufactured housing dealership, in 1974; he continues to be the owner
and president of that corporation. He is also sole owner of Able Mobile Housing
Inc., a temporary housing company for fire loss victims and has developed
manufactured home sites and purchased and sold numerous communities over the
past twenty years. Mr. Pinder has been a member of the Michigan
B-1
<PAGE>
Manufactured Housing Association for over 35 years. In 1992 he was elected to
the Michigan Manufactured Housing Board of Directors, and serves on its
Executive Committee.
Each of Messrs. McDaniel, Ray and Pinder is a United States citizen.
C. Chateau Communities, Inc.
Chateau Communities, Inc. owns all of the capital stock of The Windsor
Corporation, the Managing General Partner of the Partnership and the advisor to
N'Tandem Trust. Chateau also owns a 9.8% equity ownership interest in N'Tandem.
The Directors and executive officers of Chateau are as follows:
Gary P. McDaniel, 54, has been Chief Executive Officer and a Director of
Chateau since February 1997. He served as the Chairman of the Board, President
and Chief Executive Officer of ROC Communities, Inc. ("ROC"), a publicly held
real estate investment trust specializing in owning and operating manufactured
home communities since 1993 and had been a principal of ROC's predecessors since
1979. He has been active in the manufactured home industry since 1972. He is a
Trustee of N'Tandem Trust and a Director of The Windsor Corporation. Mr.
McDaniel has been active in several state and national manufactured home
associations, including associations in Florida and Colorado. In 1996, he was
named "Industry Person of the Year" by the National Manufactured Housing
Industry Association. Mr. McDaniel is on the Board of Directors of the
Manufactured Housing Institute. He is a graduate of the University of Wyoming
and served as a Captain in the United States Air Force.
Gebran S. Anton, Jr., 67, first became a Director of Chateau in 1993. He
is the owner of Gebran Anton Development Co. and Anton, Zorn & Associates, Inc.,
a commercial and industrial real estate broker and former owner of Anton's, a
men's retail chain. He is an incorporator and Director of Community Central
Bank, and a former Chairman of the Board for First National Bank, St. Joseph
Hospital, and Downtown Development Committee.
James M. Lane, 70, first became a Director of Chateau in 1993. He retired
as the Senior Vice President and Chief Investment Officer of the Investment
Management Division, NBD Bank, Detroit, where he served for approximately
thirteen years. Mr. Lane was associated with the Chase Manhattan Corporation
from 1953 to 1978, attaining the position of Executive Vice President while also
serving as President and Chief Executive Officer of Chase Investors Management
Corporation. He has a B.A. degree in economics from Wheaton College and an MBA
in finance from the University of Chicago.
Rhonda G. Hogan, 46, has served as Director of Chateau since March 1997.
Ms. Hogan is presently a partner of Tishman Speyer Properties. She recently
served on the Board of Directors and as President of The Water Club Condominium
Association, Inc. and is on the Silver Council of the Urban Land Institute. In
addition, she served on the Board of Directors of Barnett Bank of South Florida,
N.A. from 1986 to 1996. Ms. Hogan has also served or currently serves on
several other Boards of Directors and as a member of several councils or
institutes, including appointments to State Boards by the Governor and Cabinet
of the State of Florida. Ms. Hogan received her B.B.A. from the University of
Iowa.
C.G. Kellogg, 56, has been President and a Director of Chateau since its
inception, and was Chief Executive Officer of Chateau from its inception to
February 1997. For the five years preceding the formation of Chateau, Mr.
Kellogg was President and Chief Operating Officer of Chateau Estates. Mr.
Kellogg is a Director of The Windsor Corporation. He is extremely active in
local and national industry associations, often in leadership positions. Mr.
Kellogg is a past President of the Michigan Manufactured Housing Association and
served on the Manufactured Housing Institute's Community Operations Committee.
He is a graduate of Michigan Technological University with a B.S. in Civil
Engineering.
B-2
<PAGE>
Mr. Kellogg is the husband of Tamara D. Fischer, who is Chateau's Executive Vice
President and Chief Financial Officer.
Edward R. Allen, 58, has served as a director of Chateau since 1993. He
was, for the five years preceding the formation of Chateau, Chairman and Chief
Executive Officer of InterCoastal Communities, Inc., a Florida corporation which
was engaged in operating seven manufactured home communities in Florida. Prior
to joining InterCoastal, Mr. Allen developed a chain of steak houses which he
and his partner sold in 1977 to Green Giant Corporation. He remained as
President for two years, and expanded the chain nearly doubling the number of
restaurants. Mr. Allen is a graduate of Cornell University.
James M. Hankins, 65, served as a director of ROC from August 1993 until
ROC's merger with Chateau on February 11, 1997 (the "Merger"). Since the
Merger, he has served as a director of Chateau. He is managing general partner
of a partnership which owns and operates destination RV resorts in Arizona.
Prior to organizing the partnership in 1985, Mr. Hankins was a founder of Mobile
Home Communities, Inc. in 1969, and served as President and Chief Executive
Officer from 1973 to 1984. He holds a B.S. from the University of South
Carolina and an MBA from Harvard University, and has served as a Captain in the
United States Air Force.
Donald E. Miller, 69, served as a director of ROC from August 1993 to
February 1997, and has served as a director of Chateau since February 1997. In
May 1994, Mr. Miller was appointed Vice Chairman of the Board of Directors of
The Gates Corporation. Form 1987 to May 1994, he was President, Chief Operating
Officer and director of The Gates Corporation and The Gates Rubber Company,
which engage in the production and manufacture of rubber products, primarily for
automotive needs. Mr. Miller is a graduate of the Colorado School of
Mines.
John A. Boll, 70, has been Chairman of the Board of Directors of Chateau
since its inception in 1993. Prior to the formation of Chateau, Mr. Boll was
the co-founder, partner and Chief Executive Officer of Chateau Estates, which
was formed in 1966. He was inducted in the MH/RV Hall of Fame in 1992 for his
outstanding contributions to the manufactured housing industry. Mr. Boll was
appointed by the Governor of the State of Michigan to become the first Chairman
of the Michigan Mobile Home Commission, which is the principal Michigan
authority regulating manufactured housing, a position he held for six
years.
James L. Clayton, 65, served as a director of ROC from August 1993 until
February 1997 and as a director of Chateau since February 1997. He is the
founder, and since 1966 has been the Chairman of the Board and Chief Executive
Officer of Clayton Homes, Inc. ("Clayton Homes"), a company which owns and
operates manufactured home factories, sales centers, financing and insurance
units and communities (NYSE: CMH). Mr. Clayton is a director of Dollar General
Stores and Chairman of the Board of BankFirst. In 1992, Mr. Clayton was
inducted into the MH/RV Hall of Fame. Mr. Clayton received an undergraduate
degree in electrical engineering and a law degree from the University of
Tennessee.
Steven G. Davis, 50, has served as a director of Chateau since February
1997. He is currently the owner of East Silent Advisors, a real estate
consulting firm. He served as Chief Financial Officer, Executive Vice President
and a director of ROC from 1993 to 1997. From 1990 to 1993, Mr. Davis served as
an officer and director of The Windsor Group, an owner/operator of 42
manufactured home communities, and, from 1991 through March 1993, as that
company's President. Mr. Davis served as a director of ASR Investments, a REIT
owning apartments in the Southwest, and is currently on the advisory boards of
Arlen Capital Advisors and Leroc Partners, Inc. Mr. Davis is a Certified Public
Accountant and is a graduate of the University of San Diego.
B-3
<PAGE>
Tamara D. Fischer, 44, is Executive Vice President, Chief Financial Officer
of Chateau, having served in these roles since Chateau's formation. Prior to
joining Chateau, Ms. Fischer was employed by Coopers & Lybrand for 11 years.
Ms. Fischer is a CPA and a graduate of Case Western Reserve University. Ms.
Fischer is the wife of Mr. Kellogg who is the President and a Director of
Chateau.
Rees F. Davis, Jr., 41, is Executive Vice President-Acquisitions of
Chateau, having served in such capacity since February 1997. He served as
Executive Vice President of Acquisitions and Sales for ROC from 1993 to February
1997. Prior to that, Mr. Davis previously served as Vice President of
Acquisitions and Sales and a director for ROC's predecessors since 1986. Mr.
Davis is a two-term past officer of the Colorado Manufactured Housing
Association. He is also an active member of The Manufactured Housing Institute.
Mr. Davis is a graduate of Colorado State University.
Each of the executive officers and Directors of Chateau is a United States
citizen.
B-4
<PAGE>
----------------
The WINDSOR
CORPORATION
----------------
SPECIALIZING IN
MANUFACTURED HOME
COMMUNITIES
6160 SOUTH SYRACUSE WAY
GREENWOOD VILLAGE, CO 80111
(303) 741-3707
Steve G. Waite
President
_____________,2000
Re: Liquidation of Windsor Park Properties 3 ("WPP3")
-------------------------------------------------
Dear Broker:
Enclosed you will find the Consent Solicitation Statement and related proxy
materials that are being sent to the unit holders of WPP3. The Consent
Solicitation Statement outlines a proposed transaction whereby all of the assets
held by WPP3 will be acquired by N'Tandem Trust and, subsequently, WPP3 will be
liquidated. Upon receiving the approval from a majority in interest of the units
to both the proposals described in the Consent Solicitation Statement, we will
finalize the transaction, liquidate WPP3 in accordance with its partnership
agreement and make a final liquidating distribution to unit holders of
approximately $38.19 per unit. This liquidating distribution is substantially in
excess of recent tender offers received by unit holders.
As you may recall, the WPP3 investors paid $100 per partnership unit in 1985.
There was a distribution to the limited partners in 1993 of approximately $61.00
per unit as four properties in the portfolio were sold. Semi-annual
distributions have been made to unit holders of approximately $0.70 per unit.
Upon receiving the final liquidating distribution of $28.19 per unit, unit
holders will received approximately $152.28 per unit in total over the term of
their investment.
We feel this proposal is in the best interest of, and very much aligned with the
desires of, the unit holders. We encourage you to speak to your investors,
answer their questions and recommend that they consent to both of the proposals
described in the Consent Solicitation Statement. Also enclosed is a Questions
and Answers supplement that we hope will be helpful in answering any questions
that you or your investors may have regarding the proposed transaction. If you
have any questions or comments, please feel free to call me at the above-listed
number. We appreciate your support of the proposed transaction.
Sincerely,
Steven G. Waite
President
SGW/cem
Enclosure
<PAGE>
"Promptly upon receiving the consents
ofthe limited partners in WPP 3 holding
a majority-in-interest of the units,
WPP 3 will proceed with prosposed in
cash distributions to limited partners
of approximately $38 per unit."
WINDSOR PARK PROPERTIES 3
THE WINDSOR CORPORATION
VERY IMPORTANT NOTICE
PLEASE READ AND RESPOND IMMEDIATELY
_____________, 2000
Dear Limited Partner:
In order to provide limited partners with an opportunity to achieve
liquidity in their investment in Windsor Park Properties 3, A California Limited
Partnership (the "Partnership"), and in connection with the near-term expiration
of the stated term of the Partnership, we have worked diligently to develop a
plan which would liquidate and dissolve the Partnership. Accordingly, we are
pleased to announce that N'Tandem Trust, a real estate investment trust managed
by the managing general partner of the Partnership, has offered to acquire
immediately all of the assets of the Partnership for cash which will enable the
Partnership to proceed with a plan of liquidation whereby limited partners will
receive liquidating distributions estimated to be $38.19 per unit (the "Sales
and Plan of Liquidation").
We have enclosed in this package for your review the following documents
relating to the proposed Sales and Plan of Liquidation: (i) a Consent
Solicitation Statement and (ii) a Consent Form.
In order to proceed with the Sales and Plan of Liquidation, limited
partners holding a majority-in-interest of the Partnership's units of limited
partner interest must consent to both proposals relating to the Sales and Plan
----
of Liquidation. Limited partners may consent to the proposed Sales and Plan of
Liquidation by completing and returning the enclosed Consent Form provided for
that purpose on or before ________, 2000. Promptly upon receiving the consents
of limited partners holding a majority-in-interest of the units of limited
partner interest, the Partnership will proceed with the proposed Sales and Plan
of Liquidation.
Failure to consent and/or an abstention count as "no" votes. Please make
your desires count and "consent" to the proposed transactions.
We urge you to take the time to read the enclosed Consent Solicitation
Statement which describes in substantial detail the proposed Sales and Plan of
Liquidation and to complete and return your Consent Form in the postage-paid
envelope provided. Please remember, failure to consent and/or an abstention
count as "no" votes. This is your opportunity to liquidate your investment in
the Partnership for cash.
Should you have any questions about the Sales and Plan of Liquidation,
please do not hesitate to call Arlen Capital, the Partnership's solicitation
agent for the proposed transactions, at (800) 553-4039.
Very truly yours,
Steven G. Waite
President
Enclosures
<PAGE>
WINDSOR PARK PROPERTIES 3
CONSENT SOLICITATION STATEMENT
QUESTIONS & ANSWERS SUPPLEMENT
1. Q. I don't want to read all of the provided materials -- can you just
tell me what I'm voting on?
A. Two Proposals are being proposed in the Consent Solicitation
Statement for approval by the Limited Partners. Proposal 1 is for
the General Partners to proceed with the Sales to N'Tandem Trust,
an affiliate of the Partnership, pursuant to the Purchase and
Sale Agreement. Proposal 2 is for the General Partners to proceed
with the Plan of Liquidation following the consummation of the
Sales.
2. Q. What happens if these Proposals are approved?
A. Approval of both of the Proposals will permit the General
Partners of the Partnership to proceed with the liquidation of
the Partnership by selling the Partnership's four wholly-owned
properties and its partial Ownership Interests in four other
properties to N'Tandem Trust and to make distributions of
approximately $38.19 per Unit to the Limited Partners.
3. Q. What happens if these Proposals are not approved?
A. If Limited Partners holding of a majority of Units fail to
consent to both of the Proposals, the General Partners intend to
----
proceed to explore such alternatives as may be available to the
Partnership. These alternatives may include selling the
Partnership's Properties to unaffiliated third parties or the
merger of the Partnership with another entity, each as further
described in the Consent Solicitation Statement. The General
Partners anticipate that selling such interests and winding up
the Partnership would take at least one year and probably longer.
Additionally, the General Partners believe it is likely that the
prices paid by such third parties would be substantially
discounted due to the fact that the Partnership owns only partial
interests in four of the eight Properties it has interests in and
that such sales are also likely to involve the payment of
brokerage fees, thereby reducing liquidating distributions to
Limited Partners.
4. Q. What are the consequences if I do not vote?
A. The consent of Limited Partners holding at least a majority of
the outstanding Units is necessary to approve the Proposals. If
you do not vote, you will be considered to have abstained from
consenting to the Proposals, which has the same effect as voting
"no" on the Proposals. In doing so, you are effectively leaving
the decision to consent or not to consent to the Proposals in the
hands of the other Limited Partners, but as a Limited Partner you
will be bound by the results of the Consent Solicitation
regardless of whether you send in your consent form. It is very
important, therefore, that you vote on the Proposals.
5. Q. How much are you going to pay for my Units?
A. No one is actually buying your Units in the proposed
transactions. N'Tandem has agreed to buy all of the assets
currently held by the Partnership. N'Tandem is willing to
<PAGE>
purchase all of the Properties and is paying the full Appraised
Value for the four wholly-owned Properties and is only applying a
10% discount to the Appraised Value of the Ownership Interests
for the fact that the Partnership owns a minority interest in the
underlying properties. As an additional amount distributable to
Limited Partners, an aggregate of approximately $213,200, less
attorney's fees and expenses, shall be paid to Limited Partners
in connection with the proposed settlement of an existing class
action and derivative lawsuit. See Answer 25 below. The
Partnership will then pay off its remaining liabilities and make
final distributions to Limited Partners. The General Partners
estimate that the final distributions on the Units will be
approximately $38.19 per Unit.
6. Q. Why is a discount being applied to the Appraised Value of the
Ownership Interests?
A. In determining the purchase price to be paid for each of the
Ownership Interests, N'Tandem applied a 10% discount to the
Appraised Value of each Ownership Interest for the fact that the
Partnership only owns a minority interest in the underlying
property. Generally, discounts are applied to the sale of partial
interests in real estate because, by their nature, partial
interests are more difficult to sell than wholly-owned properties
due to (i) the lack of control of the underlying property
associated with such interests, (ii) an increased difficulty in
arranging future financing for such interests and (iii) the
disproportionately high costs associated with the purchase and
management of such interests. The General Partners believe that
the discount being applied in connection with the Sales is
substantially less than the 25% discount that, in the opinion of
the Appraiser, would have been applied had the Ownership
Interests been sold to a third-party purchaser. Details relating
to the discount being applied to the Ownership Interests are
described on page ___ of the Consent Solicitation Statement.
7. Q. Why is a discount being applied in this transaction when no discount
was applied in the Windsor 4 transaction?
A. Following the Windsor 4 Transaction, N'Tandem determined that a
discount to the Appraised Value of the Ownership Interests would
be necessary in order to offset the difficulties and additional
costs associated with the ownership of a partial interest in four
of the Properties. In particular, following the Windsor 4
Transaction, N'Tandem has found it more difficult to arrange
acceptable financing for the properties in which it holds partial
ownership interests and, as a result, has not been able to fully
execute its business plan with respect to such interests. Also,
see Answer 6 above. In connection with the application of the
discount, N'Tandem believes that the benefits to the Partnership
and the Limited Partners of not having to give N'Tandem any
representations or warranties with respect to the Properties as
well as the cost savings associated with not having to pay any
brokerage fees or commissions should more than offset the costs
associated with the application of the discount.
8. Q. What does it mean to liquidate the Partnership?
A. All partnerships are finite-life entities, which means that they
are created to conduct business for a specified period of time.
This specified period of time is known as the partnership term.
Following the end of the term, the general partners of a
partnership typically proceed to sell all of the partnership's
assets, which is known as a liquidation, and to make liquidating
or final distributions of cash to its partners.
2
<PAGE>
9. Q. When will I get paid?
A. It is expected that the Sales will take place within 15 days of
the Limited Partners' consenting to the Proposals and that
liquidating distributions will be paid to the Limited Partners
within 30 days of the Sales. If the Limited Partners consent by
the specified consent date, it is expected that final
distributions will be paid to Limited Partners in ______ 2000.
10. Q. What risks are involved?
A. Risk factors relating to the Proposals are set forth on pages __
and __ of the Consent Solicitation Statement and pages __ and __
in the Summary section of the Consent Solicitation Statement.
While the General Partners believe that it is important for the
Limited Partners to be aware of these, the General Partners note
they that considered such risk factors in making their
recommendation that the Limited Partners vote for the Proposals
and that they concluded that the potential benefits of adopting
the Proposals outweighed the potential risks. Also, see Answer 13
below.
11. Q. What other options do I have?
A. As a practical matter, you only have a couple of options. First,
you can consent to, withhold consent to, or abstain with respect
to, the Proposals. If the holders of a majority of the Units
consent to both Proposals, the General Partners will proceed with
----
a liquidation of the Partnership and make liquidating
distributions to the Limited Partners estimated to be
approximately $38.19 per Unit.
If holders of a majority of Units fail to consent to either of
the Proposals, the General Partners intend to proceed to explore
such alternatives as may be available to the Partnership. These
alternatives may include selling the Partnership's Properties to
unaffiliated third parties or the merger of the Partnership with
another entity, each as further described in the Consent
Solicitation Statement.
Lastly, you can try to sell your Units in the Partnership.
Unfortunately, no established trading market for the Units
exists. Given the limited trading activity and limited demand for
the Units and recent sales prices of which we are aware, we don't
think that's a very attractive option.
12. Q. What happened to my initial investment of $100? Why am I getting less
than this amount now?
A. Total distributions to the Limited Partners since the
Partnership's inception have amounted to $114.09 per Unit. As you
may recall, in 1993, four of the Partnership's manufactured home
communities were sold and proceeds of $61.00 per Unit were
distributed to Limited Partners. Final liquidating distributions
to Limited Partners if the Proposals are approved are estimated
to be approximately $38.19 per Unit, resulting in total
distributions to Limited Partners of approximately $152.28 per
Unit versus an initial investment of $100 per Unit.
3
<PAGE>
13. Q. What about all of the Risk Factors and negative factors described in
the Consent Solicitation Statement? How can the proposed transactions
be fair given these factors?
A. The General Partners considered both positive and negative factors
(all of which are described on pages __ through __ of the Consent
Solicitation Statement) in reaching their determination that the
Sales and the Plan of Liquidation are fair to the Limited Partners
from both a financial point of view and from a procedural point of
view.
In reaching their determination that the Sales and the Plan of
Liquidation are fair to the affiliated and unaffiliated Limited
Partners from a financial point of view, the General Partners did
not assign relative weights to the positive and negative factors
relating the financial fairness of the Sales and the Plan of
Liquidation or determine that any one factor was of particular
importance; rather, the General Partners viewed the positive
factors as a totality and the negative factors as a totality and
concluded that the positive factors outweighed the negative
factors. Accordingly, the General Partners determined that the
Sales and the Plan of Liquidation are fair to the affiliated and
unaffiliated Limited Partners from a financial point of view .
In reaching their determination that the Proposals are fair to the
Limited Partners from a procedural point of view, the General
Partners concluded that the approval of the Proposals by a
majority-in-interest of the unaffiliated Limited Partners is
sufficient to insure that procedural fairness has been preserved
for the Limited Partners.
The General Partners also believe that the potentially negative
factors influencing procedural fairness were in each case
mitigated by other factors or considerations, including the
following:
. Although the Managing General Partner and N'Tandem are under
common control, the General Partners concluded that the
common control did not adversely affect the terms of the
Sales for Limited Partners and allowed N'Tandem to offer
terms of the Sales that they believed would not be available
from third parties;
. Although no independent or disinterested third party was
appointed to represent the Limited Partners in connection
with, or to negotiate the terms of, the Sales, the Managing
General Partner did retain Legg Mason to assess the fairness
of the aggregate purchase price to be paid to the Partnership
in the Sales;
. Even tough the Appraisals were rendered between June 1999 and
October 1999, the General Partners believe that no material
changes have occurred in the Properties or in the conditions
of the market for manufactured home communities since those
dates that would result in higher values for the Properties;
and
. The General Partners' belief that marketing the Properties
held by the Partnership would not have provided a better
transaction for the Limited Partners and would have
ultimately delayed the timing of the Sales and the
distribution of liquidating proceeds to the Limited Partners.
14. Q. What is the purpose of the Fairness Opinion? What does the Fairness
Opinion say?
A. In connection with its analysis of the Sales and Plan of
Liquidation, the Managing General Partner, on behalf of the
Partnership, engaged Legg Mason to render the Fairness Opinion,
which addresses the fairness, from a financial point of view, to
the Limited
4
<PAGE>
Partners of the aggregate purchase price to be paid by N'Tandem to
the Partnership for the Properties.
Legg Mason delivered the Fairness Opinion to the Managing General
Partner to the effect that, as of November 15, 1999, the aggregate
purchase price to be paid to the Partnership by N'Tandem for the
Properties is fair, from a financial point of view, to the Limited
Partners. In rendering such opinion, Legg Mason conducted (i) a
liquidation analysis assuming that the Properties were sold to third-
party purchasers; (ii) a comparable company analysis to establish an
implied equity value for the Units; and (iii) a continuation analysis
assuming that the Partnership extended its stated term and the
Properties continued to be held by the Partnership until December 31,
2004.
The Fairness Opinion, which is set forth in Appendix A to this Consent
Solicitation Statement, should be read in its entirety for a
description of the procedures followed, assumptions and qualifications
made, matters considered and the limits of the review undertaken by
Legg Mason.
15. Q. When was the last Appraisal? Why were new Appraisals not done?
A. The Appraisals were rendered between June 1999 and October 1999. The
Appraisals were not updated because the Managing General Partner (i)
believes that the Appraisals continue to reflect the fair market value
of the Properties, (ii) does not believe that any significant events
have occurred since that time which would cause the conclusions
reached by the Appraiser in the Appraisals and the Appraised Values to
be different had the Appraisals been rendered as of a more recent date
and (iii) is not aware of any material developments that are
reasonably likely to materially affect such conclusions.
16. Q. Will I be receiving future distributions?
A. No. The purpose of the liquidating distributions following the Sales
is to distribute out to the Partners all cash remaining in the
Partnership after payment of the Partnership's remaining liabilities.
Accordingly, once such distributions are made, there will be no
further distributions by the Partnership.
17. Q. Why is N'Tandem paying over $7.8 million when the net book value of the
Partnership's assets is approximately $2.8 million?
A. The purchase prices for the Properties are based upon the Appraised
Values of the Properties, which, in this case, exceeds their net book
value.
18. Q. Instead of cash, can I get stock in N'Tandem?
A. No. When the General Partners structured the transaction they
structured it so that all of the Limited Partners would receive cash.
They did so because they believed that the Limited Partners would want
cash, rather than other securities.
19. Q. Why is N'Tandem willing to buy the Properties "as-is," without
representations and warranties?
A. The principal reason N'Tandem is willing to purchase the Properties
"as-is" and without representations and warranties is because of
N'Tandem's familiarity with the Properties due to the fact that The
Windsor Corporation, which is the Managing General Partner of the
Partnership, is also the Advisor to N'Tandem.
5
<PAGE>
20. Q. Were any other third-party offers considered?
A. No third parties made offers with respect to the Properties that
were equal to the prices being paid by N'Tandem, other than with
respect to the Harmony Ranch Property. The Partnership entered
into a letter of intent with a third-party buyer for the sale of
the Harmony Ranch Property, but the buyer backed out as a result
of flooding that occurred at the Property prior to closing.
Details of the offer are described on page __ of the Consent
Solicitation Statement.
21. Q. What are the advantages/disadvantages to me if this is approved?
A. The principal advantage to Limited Partners if the Sales and the
Plan of Liquidation are approved is that they will receive
liquidating distributions of approximately $38.19 per Unit
promptly following approval of the Proposals and that they will
no longer be subject to the risks inherent in their investment
in the Partnership.
The Sales and the Plan of Liquidation also provide the Limited
Partners with the following benefits and advantages:
. N'Tandem is willing to purchase all of the Partnership's
Properties and is paying the full Appraised Value for the
wholly-owned Properties and is only applying a 10%
discount to the Appraised Value of the Ownership Interests
for the fact that the Partnership owns a minority interest
in the underlying properties;
. As an additional amount distributable to Limited Partners,
an aggregate of approximately $213,200, less attorney's
fees and expenses, shall be paid to Limited Partners in
connection with the proposed settlement of an existing
class action and derivative lawsuit. As a result, if the
proposed settlement is approved, the General Partners
estimate that those Limited Partners who do not elect to
exclude themselves from the class will receive, after
payment of estimated attorney's fees and expenses to
plaintiffs' counsel, an additional amount of approximately
$.76 per Unit
. Due to the familiarity of N'Tandem's external investment
advisor with the Properties, N'Tandem is willing to
purchase the Properties "as-is," and without
representations and warranties from the Partnership;
. Because N'Tandem is buying the Partnership's Properties in
a single transaction, and is buying the Properties without
representations and warranties from the Partnership, the
General Partners will be able to wind up the Partnership
and make full liquidating distributions promptly upon the
approval of the Sales and the Plan of Liquidation by the
Limited Partners; and
. The Sales do not involve any brokerage fees payable by the
Partnership, resulting in a savings to the Partnership
estimated to be between $317,000 and $633,000 (based upon
brokerage fees of 3% to 6% typically paid by sellers of
real properties).
The principal disadvantages to the Limited Partners of the Sales and
the Plan of Liquidation are that (i) the Sales and the Plan of
Liquidation are subject to the risk factors identified in the Consent
Solicitation Statement and (ii) that the Limited Partners will no
longer receive the benefits of their investment in the Partnership
(such as continuing distributions).
6
<PAGE>
22. Q. Why are the General Partners proposing the Sales and the Plan of
Liquidation? How do they benefit the General Partners?
A. The term of the Partnership expired on December 31, 1999.
Accordingly, the General Partners are required to develop a plan of
liquidation for the Partnership's assets or take such steps as are
necessary to extend the Partnership term. After considering the
alternatives available to the Partnership, the General Partners
approved, and recommended that the Partnership proceed with, the
sale of the Properties to N'Tandem, an affiliate of the
Partnership.
If the Sales and the Plan of Liquidation are approved by the
Limited Partners, the General Partners will receive 1% of the
liquidating proceeds in accordance with the partnership agreement
of the Partnership.
Additionally, they will receive certain other benefits and fees,
all of which are described on page __ of the Consent Solicitation
Statement.
23. Q. What are the costs involved in proceeding with the Sales and the Plan
of Liquidation?
A. The General Partners have estimated the costs in connection with
the Consent Solicitation and the Sales and the Plan of Liquidation
to be approximately $429,400. Most of these costs relate to work
which will already have been done for the Partnership at the time
of the mailing of the Consent Solicitation Statement. Accordingly,
they will be incurred by the Partnership regardless of whether the
Proposals are adopted. A breakdown of these expenses and
calculations relating to the estimate of liquidating proceeds are
set forth on page __ of the Consent Solicitation Statement.
24. Q. What are the Complaint and the Amended Complaint?
A. On May 10, 1999, a limited partner of Windsor 4 filed a purported
class action and derivative Complaint, on behalf of himself and
other similarly situated limited partners, against the General
Partners, in their capacity as the general partners of Windsor 4,
and the Directors and the President of the Managing General
Partner, in the Superior Court of the State of California, County
of San Diego. On December 3, 1999, the same person, also a limited
partner of the Partnership and Windsor 6, amended the Complaint by
filing the Amended Complaint, on behalf of himself and other
similarly situated limited partners, against the General Partners,
in their capacity as the general partners of the Partnership,
Windsor 4, and Windsor 6, and the Directors and the President of
the Managing General Partner, in the Superior Court of the State of
California, County of San Diego.
The Amended Complaint asserts causes of action arising out of the
Windsor 4 Transaction and alleges the following: (i) wrongful
failure to liquidate timely Windsor 4 in that its term expired on
December 31, 1997 and to engage in sustained efforts to liquidate
Windsor 4's remaining properties, thus allegedly tying up the
limited partners' money for longer than was contemplated or allowed
under the agreement of limited partnership of Windsor 4, (ii)
breach of fiduciary duty owed by the defendants to Windsor 4 and
its limited partners in that the defendants allegedly failed to
take steps to ensure the entire fairness of the transaction and
that the selling prices for Windsor 4's assets allegedly do not
fairly and adequately represent their present value, (iii) breach
of the defendants' contractual duties owed to Windsor 4 and its
limited partners in that the agreement of limited partnership of
Windsor 4 prohibits sales of property to a Windsor 4
7
<PAGE>
sponsor and (iv) breach of fiduciary duty and contractual duties ow
ed by the defendants to the Partnership and Windsor 6 and their
limited partners in that the defendants allegedly failed to take
steps to ensure the entire fairness of the transactions by
proposing to sell the partnerships' assets at prices that were
improperly discounted from the appraisal values and without taking
steps to seek out alternative purchasers or otherwise maximize
value to the limited partners. In the Amended Complaint, the
plaintiff asserts causes of action for breach of contract, breach
of fiduciary duty and a derivative claim for breach of fiduciary
duty and seeks relief in the form of monetary damages and an award
of expenses and a dissolution of Windsor 4 and the appointment of
an independent liquidating trustee to liquidate Windsor 4's assets.
25. Q. What is the proposed settlement relating to the claims set forth in
the Amended Complaint?
A. Although the General Partners dispute each claim set forth in the
Amended Complaint, they have concluded that the further defense of
this action would be protracted, expensive and distracting to their
operations. To that end, the General Partners have reached an
agreement in principle that would settle all claims in the action,
subject to court approval of a definitive signed agreement. The
proposed settlement, if approved, provides for the total payment of
more than $1 million by the defendants, plus the costs of
administering the settlement fund (including the mailing of notice
to class members), in return for releases from all actual and
potential claims concerning the management or operation of the
Partnership, Windsor 4 and Windsor 6 against all of the defendants
and any affiliated persons or entities. Accordingly, there would be
available for distribution to Limited Partners an aggregate of
approximately $213,200 as additional compensation if the proposed
settlement is approved. As a result, if the proposed settlement is
approved, the General Partners estimate that those Limited Partners
who do not elect to exclude themselves from the class will receive,
after payment of estimated attorney's fees and expenses to
plaintiffs' counsel, an additional amount of approximately $.76 per
Unit. If approved, the settlement will be reflected in the final
distribution to Limited Partners of $38.19 per Unit.
26. Q. How did Chateau and N'Tandem get involved with this?
A. Chateau first came into contact with the Partnership in 1992 when
it began to supply on-site management services to the Partnership
and certain affiliates of the Partnership. Further, in September
1997, Chateau purchased all of the outstanding capital stock of The
Windsor Corporation, the Managing General Partner of the
Partnership. Chateau owns a 9.8% ownership interest in N'Tandem.
27. Q. Where can I get a copy of the Limited Partners' names and addresses?
A. A list of names and addresses of Limited Partners of the
Partnership is available to any Limited Partner who makes a request
to the Partnership for them. However, any recipient of a Limited
Partner list will need to comply with federal and state securities
laws in connection with the use of the list.
28. Q. What are my tax consequences?
A. The combined effect of the Sales and Plan of Liquidation for
Limited Partners who purchased Units in the original offering of
Units is expected to be a net taxable loss to Limited Partners of
approximately $1.64 per Unit.
8
<PAGE>
29. Q. What is each of my Units worth today?
A. There is no established trading market for the Units, which
makes it tough to come up with a market value for the Units.
However, the estimated net liquidating proceeds payable in
connection with the Sales ($38.19 per Unit) are substantially
higher than (i) the $19.30 per Unit offered to Limited Partners
on January 13, 2000 in connection with a tender offer for up to
4.9% of the Partnership's outstanding Units made by Madison
Liquidity Investors 104, LLC, (ii) the $19.30 per Unit offered
to Limited Partners on September 28, 1999 in connection with a
tender offer for up to 4.9% of the Partnership's outstanding
Units made by Madison Liquidity Investors 109, LLC, (iii) the
$24.00 per Unit offered to Limited Partners on March 16, 1999 in
connection with a tender offer for up to 4.8% of the
Partnership's outstanding Units made by Everest Investors 8, LLC
and (iv) the weighted average trading price of $26.38 per Unit
in the secondary markets, as reported by The Partnership
Spectrum, for the period of May 1, 1999 through December 31,
1999.
30. Q. How much have I received in distributions to date?
A. Since the organization of the Partnership, total distributions
to Limited Partners have amounted to approximately $22,572,800
(or an average of approximately $114.09 per Unit). If the Sales
and Plan of Liquidation are completed, total distributions to
Limited Partners will amount to approximately $29,764,100 (or an
average of approximately $152.28 per Unit), compared to an
initial purchase price for each Unit of $100.00.
Your actual past distributions on the Units will depend upon how
long you have held such Units. Distributions by the Partnership
in the past five years are set forth on page __ of the Consent
Solicitation Statement.
31. Q. How can I dispose of my Units now (or later)?
A. As you are probably aware, a formal trading market for the Units
does not exist. If the Proposals are approved, liquidating
distributions (of approximately $38.19 per Unit) will be paid to
Limited Partners, the Partnership will be liquidated and
dissolved, and the Units will cease to exist.
32. Q. What do you think I should do?
A. The General Partners believe that the Sales and the Plan of
Liquidation are fair, from both a financial and a procedural
point of view, to the Limited Partners and have recommended that
Limited Partners consent to the Proposals.
The reasons for their recommending that the Limited Partners
consent to the Sales and the Plan of Liquidation, and their
reasons for their belief that the Sales and the Plan of
Liquidation are fair to the Limited Partners are set forth in
substantial detail on pages __ through __ of the Consent
Solicitation Statement under the caption "FAIRNESS OF THE
PROPOSED TRANSACTIONS; RECOMMENDATION OF THE GENERAL PARTNERS."
33. Q. The Units are in my husband's and my name -- he died last year --
what do I do?
A. The Partnership's attorneys have advised us that generally the
beneficiary of the Units under your husband's will has the right
to consent with respect to the Units on your husband's behalf if
the estate has been fully probated. If not, the executor or
executrix
9
<PAGE>
should be able to consent with respect to the Units on your
husband's behalf. We would urge you, however, to call the lawyer
who handled your husband's estate in order to address your
particular situation.
34. Q. I hold these Units in my IRA -- who needs to sign in order for the
consent to be valid?
A. You need to speak to your IRA custodian or trustee. They will
either execute the consent with respect to your Units for you or
direct you to sign the consent with respect to the Units
yourself.
35. Q. What additional paperwork do you need for my consent to be valid?
A. If the Units are solely in your name, the only thing you need to
do is to fully fill out the consent form, sign and date it and
enclose it in the pre-paid, pre-addressed envelope and mail or
Federal Express the envelope to Arlen Capital, LLC, the
Partnership's solicitation agent with respect to the Proposals,
for receipt no later than _____, 2000.
If the Units are in multiple names, all Limited Partners need to
sign the consent form. Additionally, if someone other than the
person who is the Limited Partner of record is signing on behalf
of such person, then we need evidence of the signing person's
authority to do so, such as a copy of a power-of-attorney or
letter of administration.
36. Q. What took so long? What about the related party aspects of the
proposed transactions?
A. The fact that the Partnership owns only a non-controlling
partial Ownership Interest in four of the eight Properties made
it difficult for the Managing General Partner to find willing
third-party buyers. After reviewing the alternatives, the
General Partners determined that the best course of action was
to sell the Ownership Interests and wholly-owned Properties to
N'Tandem. Fortunately, because of N'Tandem's familiarity with
the Properties and The Windsor Corporation, N'Tandem is willing
to purchase, without representations and warranties from the
Partnership, the wholly-owned Properties for their full value
based on the Appraisals and is only applying a 10% discount to
the Appraised Value of the Ownership Interests for the fact that
the Partnership owns a minority interest in the underlying
properties.
10
<PAGE>
THIS CONSENT IS SOLICITED BY THE GENERAL PARTNERS
OF
WINDSOR PARK PROPERTIES 3
The undersigned represents that he or she is the holder of Units in Windsor
Park Properties 3, A California Limited Partnership. The undersigned
acknowledges receipt from the General Partners of the Consent Solicitation
Statement dated ___________, 2000. Capitalized terms used in this consent have
the meanings given to them in the Consent Solicitation Statement. The General
Partners request that the Limited Partners consent to the following Proposals:
Proposal 1 -- Proposal 1 is for the General Partners to proceed with the Sales
to N'Tandem in accordance with the Purchase and Sale Agreement.
[ ] CONSENT [ ] WITHHOLD CONSENT [ ] ABSTAIN
Proposal 2 -- Proposal 2 is for the General Partners to proceed with the Plan of
Liquidation following such Sales.
[ ] CONSENT [ ] WITHHOLD CONSENT [ ] ABSTAIN
Each of Proposal 1 and Proposal 2 is conditioned upon approval of the other
Proposal by the Limited Partners. Accordingly, any Limited Partner desiring to
have the General Partners proceed with the Sales and the Plan of Liquidation
needs to consent to both Proposal 1 and Proposal 2.
----
PLEASE FILL IN THE APPROPRIATE BOX ABOVE WITH RESPECT TO EACH PROPOSAL AND SIGN
ON THE REVERSE SIDE.
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Please sign exactly as name appears hereon. When Units are held by joint
tenants, both should sign. When signing as an attorney, as executor,
administrator, trustee or guardian, please give full title of such. If a
corporation, please have this consent signed by a President or other authorized
officer. If a partnership, please have this consent signed by a general
partner. PLEASE FILL IN THE DATE OF THIS CONSENT AS CONSENTS MUST BE DATED TO
BE VALID. UNITHOLDERS WHO SIGN AND DATE THIS CONSENT BUT FAIL TO OTHERWISE MARK
THIS CONSENT WILL BE DEEMED TO HAVE CONSENTED TO THE PROPOSALS.
PLEASE FILL OUT, SIGN AND RETURN THIS FORM BY 5:00 P.M. (EASTERN DAYLIGHT TIME)
ON ___________, 2000.
________________________________
Signature
________________________________
Signature (if held jointly)
Dated:__________________________
