<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
<TABLE>
<CAPTION>
Filed by the registrant [X]
<S> <C>
Filed by a party other than the registrant [ ]
Check the appropriate box:
[ ] Preliminary proxy statement [ ] Confidential, For Use of the Commission
[X] Definitive proxy statement (as permitted by Rule 14a-6(e)(2))
[ ] Definitive additional materials
[ ] Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
</TABLE>
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)
<TABLE>
<CAPTION>
<S> <C>
[ ] 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:
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
- -------------------------
/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 the 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 the 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 the 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 March 15, 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 April 28, 2000.
This Consent Solicitation Statement was first mailed to Limited
Partners on or about March 22, 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 APRIL 28,
2000.
This Consent Solicitation Statement is dated March 22, 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
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...........................6
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..................................14
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 the Sales.........................26
SPECIAL FACTORS.................................................26
Fairness of the Proposed Transactions;
Recommendation of the General Partners...............26
Fairness Opinion................................................29
Alternatives Considered.........................................34
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.........................36
Appraisals......................................................36
Discount for Ownership Interests in Properties..................46
SUMMARY OF SELECTED TERMS
OF THE PARTNERSHIP
AGREEMENT............................................46
Net Proceeds from the Sales.....................................46
Allocation of Profit or Loss on the Sales.......................47
Voting Rights of Limited Partners...............................47
Limitation of Liability and Indemnification
of the General Partners..............................48
THE PARTNERSHIP'S PROPERTIES....................................49
iv
<PAGE>
TABLE OF CONTENTS
Page
----
Nature of Ownership Interests in Properties.....................49
Description of the Properties; Appraised
Values and Ownership Interests.......................50
FEDERAL INCOME TAX
CONSIDERATIONS.......................................51
Overview........................................................51
Taxation on the Sales...........................................52
Liquidation of the Partnership..................................52
Income Tax Rates/Taxation of Gains and Losses...................53
CONSENT PROCEDURES; TRANSACTIONS
AUTHORIZED BY CONSENTS...............................53
Solicitation of Consents........................................55
Record Date; Required Vote......................................55
No Appraisal or Dissenters' Rights..............................55
Consequences If Consents Are Not Obtained.......................55
FINANCIAL STATEMENTS............................................56
INCORPORATION OF CERTAIN
DOCUMENTS BY REFERENCE...............................56
APPENDIX A Fairness Opinion...................................A-1
APPENDIX B Information Concerning
Officers and Directors of the Managing
General Partner, N'Tandem and Chateau...............B-1
APPENDIX C Financial and Operating Forecasts and
Projections for the Partnership Prepared
by the Managing General Partner.....................C-1
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
2
<PAGE>
(the "Appraiser") 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 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 an 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 March 1, 2000, Legg Mason
reconfirmed its earlier opinion by delivering an oral and written fairness
opinion (the "Fairness Opinion"), which amended and supplanted such earlier
opinion.
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 "MATERIAL RISK FACTORS AND OTHER CONSIDERATIONS --
Conflicts of Interest."
[FLOW CHART APPEARS HERE]
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 forgoing 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>
Debt
Affiliate Value, Based on Discount on Attributable
Percentage Percentage Date Appraised Value, Ownership as of
Name of Property Ownership Ownership(1) Acquired Before Debt(2) Interest(2)(3) 9/30/99(2) Net Value(2)
---------------- --------- ------------ -------- -------------- -------------- ---------- ------------
Ponderosa
<S> <C> <C> <C> <C> <C>
Indianapolis, IN 100% -- 3/1986 $ 2,200,000 -- $ 400,000 $1,800,000
The Pines
Charleston, SC 100% -- 8/1986 $ 700,000 -- -- $ 700,000
Shady Hills
Ladson, TN 100% -- 9/1986 $ 2,400,000 -- -- $2,400,000
Trailmont
Nashville, TN 100% -- 1/1996 $ 2,300,000 -- $1,170,400 $1,129,600
Big Country Estates
Cheyenne, WY 40% 60%(4) 12/1986 $ 1,124,000 $ 112,400 -- $1,011,600
Apache East
Apache Junction, AZ 29% 71%(5) 2/1997 $ 576,900(6) $ 57,700 $ 316,600 $ 202,600
Denali Park Estates
Apache Junction, AZ 29% 71%(5) 2/1997 $ 1,003,600(6) $ 100,400 $ 550,900 $ 352,300
Harmony Ranch
Thonotosassa, FL 25% 75%(7) 12/1986 $ 575,000 $ 57,500 $ 300,000 $ 217,500
------------ --------- --------- ------------
Total $ 10,879,500 $ 328,000 $2,737,900 $7,813,600
============ ========= ========== ============
</TABLE>
- ------------------------------
(1) Represents the ownership percentage held by affiliates of the
Managing General Partner, other than the Partnership, in properties
underlying the Ownership Interests.
(2) With respect to the four Ownership Interests, such amount represents
the Partnership's allocable share based upon its ownership percentage
in the underlying property.
(3) 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."
(4) The 60% interest in this Property is held by N'Tandem as tenant in
common with the Partnership.
(5) Each of these Properties is owned by Windsor Park 345, An Arizona
Limited Partnership ("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 Park Properties 5,
A California Limited Partnership ("Windsor 5"), and Windsor Park
Properties 7, A California Limited Partnership ("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.
(6) 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.
(7) The 75% interest in this Property is held by N'Tandem as tenant in
common with the Partnership.
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
6
<PAGE>
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. This additional amount per Unit distributable to
Limited Partners has been included in the estimated $38.19
to be paid to Limited Partners upon final liquidation of the
Partnership. See "DESCRIPTION OF THE PROPOSED TRANSACTIONS
-- Background of the Proposed Transactions" and "-- Estimate
of Liquidating Distributions Payable to Limited Partners";
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 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
7
<PAGE>
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 for the Properties 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 -- "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 forgoing 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
8
<PAGE>
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
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
9
<PAGE>
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 an oral and written
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.
On March 1, 2000, Legg Mason reconfirmed its earlier opinion by delivering the
Fairness Opinion, which amended and supplanted such earlier opinion. In
rendering the Fairness 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 addresses only the fairness, from a
financial point of view, of the aggregate purchase price to be paid to the
Partnership by N'Tandem for the Properties and does not account for or factor
into its analysis the additional consideration distributable to Limited Partners
in connection with the proposed settlement of an existing class action and
derivative lawsuit. See "DESCRIPTION OF THE PROPOSED TRANSACTIONS -- Background
of the Proposed Transactions" and " -- Estimate of Liquidating Distributions
Payable to Limited Partners." 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:
10
<PAGE>
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 investment 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
11
<PAGE>
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 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.
12
<PAGE>
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 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 May 31, 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.
13
<PAGE>
Record Date; Required Consents
The close of business on March 15, 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 188,296
Units outstanding held of record by a total of 2,694 Limited Partners. 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 1,010 Units (or
approximately 0.5% 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>
Total Aggregate Total Aggregate Per Unit to
Year 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
semiannual 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 For the Year Ended December 31,
September 30, ----------------------------------------------------------------------------
1999(1) 1998 1997 1996 1995 1994
-------------- ----------- ------------- ------------- ------------- -------------
Statement of Operations Data:
<S> <C> <C> <C> <C> <C> <C>
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
extraordinary item........... $ 3.08 -- -- -- -- --
Extraordinary loss per Unit
from early extinguishment
of debt..................... $ (0.39) -- -- -- -- --
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 that 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 forgoing
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
"-- 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 exchange for 101,239 shares of
Chateau's common stock and $750,000 in cash (the "Windsor
18
<PAGE>
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
that 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, which reported on the appraised values of
the wholly-owned and partially-owned properties held by the Partnership, in late
1997 and early 1998. 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 (in which the Partnership owns a
25% Ownership Interest) to third parties. In this regard, the General
19
<PAGE>
Partners (i) listed the Ponderosa Property, the Little Eagle Property and the
Harmony Ranch Property with Continental Atlantic, Inc., a national real estate
broker specializing in manufactured home communities, 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. Since 1997, Continental Atlantic, Inc. has
been involved, as real estate broker, in the sale of two manufactured home
communities and the purchase of three manufactured home communities by
affiliates of the Managing General Partner. As a result of the marketing efforts
of Continental Atlantic, Inc., 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, the Partnership received four non-binding offers for the
Harmony Ranch Property ($2.5 million from Richard Nodel, $2.0 million from the
National Realty Group, $2.6 million from Sterling Financial and $2.35 million
from Park Advisors, Inc.) and, in July 1998, 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
Partners' 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
20
<PAGE>
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 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 an 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 March 1, 2000, Legg Mason
reconfirmed its earlier opinion by delivering the Fairness Opinion, which
amended and supplanted such earlier opinion.
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
21
<PAGE>
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 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. Pursuant to the terms of the proposed
settlement agreement, the General Partners have the right, but not the
obligation, to terminate the proposed settlement if the Limited Partners fail to
approve the Proposals or the limited partners of Windsor 6, who are voting on
proposals similar to those set forth in this Consent Statement, fail to approve
such similar proposals.
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 of, and one of three Trustees on, 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>
Debt
Affiliate Value, Based on Discount on Attributable
Percentage Percentage Date Appraised Value, Ownership as of
Name of Property Ownership Ownership(1) Acquired Before Debt(2) Interests(2)(3) 9/30/99(2) Net Value(2)
---------------- --------- ------------ -------- -------------- --------------- ---------- ------------
Ponderosa
<S> <C> <C> <C> <C> <C>
Indianapolis, IN 100% -- 3/1986 $ 2,200,000 -- $400,000 $ 1,800,000
The Pines
Charleston, SC 100% -- 8/1986 $ 700,000 -- -- $ 700,000
Shady Hills
Nashville, TN 100% -- 9/1986 $ 2,400,000 -- -- $ 2,400,000
Trailmont
Nashville, TN 100% -- 1/1996 $ 2,300,000 -- $1,170,400 $ 1,129,600
Big Country Estates
Cheyenne, WY 40% 60%(4) 12/1986 $ 1,124,000 $ 112,400 -- $ 1,011,600
Apache East
Apache Junction, AZ 29% 71%(5) 2/1997 $ 576,900(6) $ 57,700 $316,600 $ 202,600
Denali Park Estates
Apache Junction, AZ 29% 71%(5) 2/1997 $ 1,003,600(6) $ 100,400 $550,900 $ 352,300
Harmony Ranch
Thonotosassa, FL 25% 75%(7) 12/1986 $ 575,000 $ 57,500 $300,000 $ 217,500
----------- ------------ -------- ------------
Total $10,879,500 $ 328,000 $2,737,900 $ 7,813,600
=========== ============ ========== ============
</TABLE>
- -------------------------
(1) Represents the ownership percentage held by affiliates of the
Managing General Partner, other than the Partnership, in properties
underlying the Ownership Interests.
(2) With respect to the four Ownership Interests, such amount represents
the Partnership's allocable share based upon its ownership percentage
in the underlying property.
(3) 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."
(4) The 60% interest in this Property is held by N'Tandem as tenant in
common with the Partnership.
(5) 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.
(6) 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.
(7) The 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 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
23
<PAGE>
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>
<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 the Record Date.
(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 the 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. This additional
amount per Unit distributable to Limited Partners has been
included in the estimated $38.19 to be paid to Limited
Partners upon final liquidation of the Partnership. See
"DESCRIPTION OF THE PROPOSED TRANSACTIONS-- Background of
the Proposed Transactions" and "--Estimate of Liquidating
Distributions Payable to Limited Partners";
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;
26
<PAGE>
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 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 for the Properties 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 "-- 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;
27
<PAGE>
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 forgoing 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
28
<PAGE>
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
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 a written 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 an
oral and written fairness opinion to the Managing General Partner on November
15, 1999 and subsequently reconfirmed this opinion by delivering the Fairness
Opinion, which amended and supplanted its earlier opinion, on March 1, 2000. 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.
29
<PAGE>
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.
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 nine months ended September 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) financial and operating forecasts and projections relating
to the Partnership and schedules setting forth information
relating to the outstanding debt attributable to the
Properties and the number of outstanding Units prepared by
the Managing General Partner or its representatives; and
(viii) the Appraisals of the Properties prepared by the Appraiser.
The financial and operating forecasts and projections prepared by the Managing
General Partner and its representatives for use by Legg Mason in connection with
the preparation of its Fairness Opinion are set forth in Appendix C to this
Consent Solicitation Statement and are incorporated herein by reference.
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
30
<PAGE>
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 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, 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 Fairness Opinion addresses only the fairness, from a financial
point of view, of the aggregate purchase price to be paid to the Partnership by
N'Tandem for the Properties and does not account for or factor into its analysis
the additional consideration distributable to Limited Partners in connection
with the proposed settlement of the Amended Complaint. In connection with the
preparation of its Fairness Opinion, 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 $37.43.
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
31
<PAGE>
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 $37.00 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 $37.43. Legg Mason
believed that its liquidation analysis supported its fairness determination
because the aggregate net purchase price offered by N'Tandem for the Properties
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 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 February 28, 2000 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 5.8x to 7.9x for the 2000
FFO per share estimates, (ii) ranged from 5.2x to 7.2x for the 2001 FFO per
share estimates and (iii) ranged from 7.8x to 9.3x for the trailing twelve
months earnings before interest, taxes, depreciation and amortization per share
estimates ("EBITDA"). Based on the Managing General Partner's financial and
operating forecasts and projections and Legg Mason's estimates of the
Partnership's 2000 and 2001 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
32
<PAGE>
the Comparable Companies of 5.8x to 7.9x and 5.2x to 7.2x, respectively, for
2000 and 2001, Legg Mason's analysis indicated an implied value range per Unit
of $28.58 to $20.72 based on 2000 FFO multiples and $27.17 to $19.19 based on
2001 FFO multiples. In addition, based on the Managing General Partner's
financial and operating forecasts and projections and Legg Mason'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 7.8x to 9.3x, Legg Mason's analysis indicated an
implied value range per Unit of $28.15 to $21.22. Legg Mason believed that its
comparable company analysis supported its fairness determination because the
aggregate net purchase price offered by N'Tandem for the Properties 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 and projections
provided by the Managing General Partner and the Partnership's cash flow to
equity for the forecasted period of January 1, 2000 to December 31, 2004
prepared by Legg Mason and applied discount rates of 14.9% to 18.6% 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 6.4x to 8.4x 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. Legg Mason's analysis
indicated a range of continuation equity values based upon the discounted cash
flow and discounted residual equity value of $30.72 to $23.22 per Unit. Legg
Mason believed that its continuation analysis supported its fairness
determination because the aggregate net purchase price offered by N'Tandem for
the Properties 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 September 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.
33
<PAGE>
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.
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.
34
<PAGE>
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 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.
35
<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
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.
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
36
<PAGE>
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.
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;
37
<PAGE>
(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.
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.
38
<PAGE>
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, (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
39
<PAGE>
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 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.
40
<PAGE>
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 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.
41
<PAGE>
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.
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
42
<PAGE>
$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 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
43
<PAGE>
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 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
44
<PAGE>
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 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.
45
<PAGE>
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.
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
46
<PAGE>
(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 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;
47
<PAGE>
(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 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.
48
<PAGE>
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.
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."
49
<PAGE>
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.
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
50
<PAGE>
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.
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
51
<PAGE>
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.
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
52
<PAGE>
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.
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 May 31, 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
53
<PAGE>
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) April 28, 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.
(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.
54
<PAGE>
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 March 15, 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 188,296 Units outstanding held of record by a
total of 2,694 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
1,010 Units, representing approximately 0.5% 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 94,149 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 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.
55
<PAGE>
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.
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
March 1, 2000
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 an aggregate amount of $7,813,600 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 nine months ended September 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;
A-1
<PAGE>
(v) an analysis of comparable publicly traded real estate
investment trusts;
(vi) the draft Consent Solicitation Statement;
(vii) financial and operating forecasts and projections relating
to the Partnership and schedules setting forth information
relating to the outstanding debt attributable to the
Properties and the number of outstanding units of limited
partner interest in the Partnership 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. In performing our analyses,
we relied, with your permission and without independent verification of their
accuracy or fairness, on the discounts which the Managing General Partner
provided to us for application to the appraised values of certain of the
Properties to reflect the fact that the partnership owns only a partial interest
therein.
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 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
B-2
<PAGE>
Engineering. 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>
APPENDIX C
Financial and Operating Forecasts and Projections for
the Partnership Prepared by the Managing General Partner
The following financial and operating forecasts and projections were
prepared by the Managing General Partner and its representatives for use by Legg
Mason in connection with the preparation of its Fairness Opinion relating to the
Sales. These financial and operating forecasts and projections, which relate to
the Partnership and certain of its Properties, involve known and unknown risks,
uncertainties and other factors which may cause the actual results, performance
and achievements of the Partnership and such Properties to be materially
different from future results, performance and achievements expressed or implied
by such forecasts or projections. The actual financial and operating results,
including net income, of the Partnership and certain of its Properties will
depend to a large extent on a number of factors that cannot be predicted with
certainty or which may be outside of the control of the Managing General Partner
and its representatives, including general business, market and economic
conditions, market factors affecting manufactured home communities, supply and
demand for homesites at the Properties, changes in tax laws and other factors.
C-1
<PAGE>
Windsor Park Properties 3 Projections
<TABLE>
<CAPTION>
Revenues: 1999 2000 2001 2002 2003 2004
-----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Rent and utilities 1,580,344 1,627,754 1,676,587 1,726,885 1,778,691 1,832,052
Equity in earnings (losses) of joint ventures
and limited partnerships 46,023 54,648 54,902 65,152 74,909 84,218
Interest 6,060 6,242 6,429 6,622 6,821 7,025
Other 29,880 29,880 30,776 31,700 32,651 33,630
-----------------------------------------------------------------------------
Total Revenues 1,662,307 1,718,524 1,768,694 1,830,358 1,893,071 1,956,926
-----------------------------------------------------------------------------
Operating costs and expenses:
Property operating 835,659 860,729 886,551 913,148 940,542 968,758
Interest 186,400 186,400 186,400 186,400 186,400 186,400
Depreciation and amortization 195,928 197,239 199,212 201,204 203,216 205,248
General and administrative:
Related parties 38,010 39,911 41,906 44,001 46,201 48,511
Other 68,460 71,883 75,477 79,251 83,214 87,374
-----------------------------------------------------------------------------
Total operating costs and expenses 1,324,457 1,356,162 1,389,546 1,424,004 1,459,573 1,496,292
-----------------------------------------------------------------------------
-----------------------------------------------------------------------------
Net Income (loss) 337,849 362,362 379,148 406,355 433,498 460,634
=============================================================================
Projected capital expenditures $ 96,490
============
($100 per site)
</TABLE>
- --------------------------------------------------------------------------------
Notes:
1. Little Eagle excluded in 1999 and beyond
2. Projections assume 3% revenue growth and 3% expense growth
C-2
<PAGE>
Projections for joint venture Windsor Park Properties 345
Apache East, Denali Park Estates
<TABLE>
<CAPTION>
Revenues: 1997 1998 1999 2000 2001 2002 2003 2004
------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Rent and utilities 520,676 640,865 722,997 763,585 786,492 810,087 834,390 859,421
Interest 349
Other 9,129 17,589 780 - - - - -
------------------------------------------------------------------------------------------
Total Revenues 530,155 658,454 723,777 763,585 786,492 810,087 834,390 859,421
------------------------------------------------------------------------------------------
Operating costs and expenses:
Property operating 277,012 344,998 338,108 354,775 365,419 376,381 387,673 399,303
Interest 204,912 289,853 264,000 240,453 219,006 199,471 181,680 165,475
Depreciation and amortization 156,697 190,044 195,000 200,085 205,303 210,657 216,151 221,787
General and administrative:
Related parties 98
Other 7,354 8,407
------------------------------------------------------------------------------------------
Total operating costs
and expenses 646,073 833,302 797,108 795,313 789,727 786,510 785,503 786,565
------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------
Net Income (loss) (115,918) (174,848) (73,331) (31,729) (3,235) 23,577 48,887 72,856
==========================================================================================
</TABLE>
C-3
<PAGE>
Projections for joint venture property - Big Country Estates
<TABLE>
<CAPTION>
Revenues: 1997 1998 1999 2000 2001 2002 2003 2004
------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Rent and utilities 536,456 581,721 609,839 628,134 646,978 666,387 686,379 706,970
Interest
Other 28,555 44,941 8,280
------------------------------------------------------------------------------------------
Total Revenues 565,011 626,662 618,119 628,134 646,978 666,387 686,379 706,970
------------------------------------------------------------------------------------------
Operating costs and expenses:
Property operating 326,623 332,226 309,198 318,474 328,029 337,869 348,006 358,446
Interest
Depreciation and amortization 131,411 156,993 164,843 173,085 181,739 190,826 200,367 210,386
General and administrative:
Related parties
Other 7
------------------------------------------------------------------------------------------
Total operating costs
and expenses 458,033 489,225 474,041 491,559 509,768 528,696 548,373 568,831
------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------
Net Income (loss) 106,977 137,437 144,078 136,575 137,210 137,692 138,006 138,139
===========================================================================================
</TABLE>
C-4
<PAGE>
Projections for joint venture property - Harmony Ranch
<TABLE>
<CAPTION>
Revenues: 1997 1998 1999 2000 2001 2002 2003 2004
------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Rent and utilities 460,760 467,261 474,670 488,910 503,577 518,685 534,245 550,273
Interest 664 425
Other 10,377 8,654 8,700
------------------------------------------------------------------------------------------
Total Revenues 471,801 476,340 483,370 488,910 503,577 518,685 534,245 550,273
------------------------------------------------------------------------------------------
Operating costs and expenses:
Property operating 194,945 219,068 201,962 208,021 214,262 220,689 227,310 234,129
Interest 115,204 115,204 115,204 115,204 115,204 115,204 115,204 115,204
Depreciation and amortization 125,138 126,350 127,574 128,809 130,057 131,317 132,588 133,873
General and administrative:
Related parties
Other 430
------------------------------------------------------------------------------------------
Total operating costs
and expenses 435,287 461,052 444,740 452,034 459,522 467,210 475,102 483,206
------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------
Net Income (loss) 36,514 15,288 38,630 36,876 44,055 51,475 59,143 67,067
==========================================================================================
</TABLE>
C-5
<PAGE>
"Promptly upon receiving the consents of
the limited partners in WPP 3 holding a [LOGO OF THE WINDSOR CORPORATION]
majority-in-interest of the units, WPP 3 SPECIALIZING IN
will proceed with the proposed Sales and MANUFACTURED HOME
Plan of Liquidation resulting in cash COMMUNITIES
distributions to limited partners of
approximately $38 per unit."
VERY IMPORTANT NOTICE
PLEASE READ AND RESPOND IMMEDIATELY
March 22, 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 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
final 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 April 28, 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,
/s/ Steven G. Waite
Steven G. Waite
President
Enclosures
<PAGE>
[LOGO OF THE WINDSOR CORPORATION]
SPECIALIZING IN
MANUFACTURED HOME
COMMUNITIES
--------------------------------------
6160 SOUTH SYRACUSE WAY
GREENWOOD VILLAGE, CO 80111
(303) 741-3707
Steven G. Waite
President
March 22, 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 of the proposals described in the Consent Solicitation Statement, we
will finalize the transaction, liquidate WPP3 in accordance with its partnership
agreement and, as described in the Consent Solicitation Statement, 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 $38.19 per unit, unit
holders will have received approximately $152.28 per unit in total over the term
of their investment.
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,
/s/ Steven G. Waite
Steven G. Waite
President
Enclosures
<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 March 22, 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 your name appears on this consent. When Units are held by
joint tenants, both should sign. When signing as an attorney, executor,
administrator, trustee or guardian, please give full title of such. If a
corporation, please have this consent signed by an 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 APRIL 28, 2000.
_____________________________________
Signature
_____________________________________
Signature (if held jointly)
Dated _______________________________
<PAGE>
WINDSOR PARK PROPERTIES 3
CONSENT SOLICITATION STATEMENT
QUESTIONS & ANSWERS SUPPLEMENT
1. Q. What are the Proposals that I am being asked to vote 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 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 the 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 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
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
<PAGE>
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 26 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,
including amounts distributable in connection with the
proposed settlement, 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. All of the remaining interests in
the properties underlying the Ownership Interests not held
by the Partnership are held, directly or indirectly, by
entities, including N'Tandem, affiliated with the Managing
General Partner. Details relating to the discount being
applied to the Ownership Interests are described on page
46 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. With respect to the Ownership Interests, all of
the remaining interests in the properties underlying the
Ownership Interests not held by the Partnership are held,
directly or indirectly, by entities, including N'Tandem,
affiliated with the Managing General Partner. 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 generally will proceed
to sell all of the partnership's assets, which is known as
a
2
<PAGE>
liquidation, if the term of the partnership is not
otherwise extended and, thereafter, make liquidating or
final distributions of cash to its partners.
9. Q. When will I get paid?
A. It is expected that the Sales will take place within 30
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 June 2000.
10. Q. What risks are involved?
A. The Proposals are subject to material risks, conflicts of
interest and other considerations which are set forth on
pages 16 and 17 of the Consent Solicitation Statement and
page 5 in the Summary section of the Consent Solicitation
Statement. They include 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;
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.
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 the 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
3
<PAGE>
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.
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 26 through 29
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:
o 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;
4
<PAGE>
o 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;
o 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
o 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 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 March 1, 2000,
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.
5
<PAGE>
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 external investment advisor to N'Tandem.
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 20 of the Consent
Solicitation Statement.
21. Q. What are the advantages 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:
o 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;
6
<PAGE>
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. This
additional amount per Unit distributable to
Limited Partners has been included in the
estimated $38.19 to be paid to Limited Partners
upon final liquidation of the Partnership;
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 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
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).
22. Q. What are the disadvantages to me if this is approved?
A. The principal disadvantages to the Limited Partners of the
Sales and the Plan of Liquidation are that:
o The Sales and Plan of Liquidation are subject
to the Risk Factors identified in the Consent
Solicitation Statement. See Answer 10 above;
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; 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
forgoing current benefits of the ownership of
the Properties such as continuing
distributions.
7
<PAGE>
23. 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 16 of the Consent
Solicitation Statement.
24. 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 25 of the Consent
Solicitation Statement.
25. 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
8
<PAGE>
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 and (iv) 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.
26. 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.
27. 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.
28. 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. Requests should be made to: Windsor
Park Properties 3 -- Investor Relations, 6160 South
Syracuse Way, Greenwood Village, Colorado 80111. In
connection with any request for a Limited Partner list,
the Partnership will charge a fee of $50.00 in order to
offset certain costs associated with the processing of
such request and the copying and mailing of the list to
the requesting Limited Partner.
9
<PAGE>
29. 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.
30. 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.
31. 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 14 of the Consent Solicitation Statement.
32. 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.
33. 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 26 through 29 of
the Consent Solicitation Statement under the caption
"SPECIAL FACTORS -- Fairness of the Proposed Transactions;
Recommendation of the General Partners."
10
<PAGE>
34. 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 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.
35. 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.
36. 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 April
28, 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.
37. 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.
11
