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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[x] Preliminary Proxy Statement [_] Soliciting Material Pursuant to
[_] Confidential, For Use of the SS.240.14a-11(c) or SS.240.14a-12
Commission Only (as permitted
by Rule 14a-6(e)(2))
[_] Definitive Proxy Statement
[_] Definitive Additional Materials
Winthrop California Investors Limited Partnership
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[x] 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:
________________________________________________________________________________
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 (set forth the amount on which the filing fee is
calculated and state how it was determined):
________________________________________________________________________________
4) Proposed maximum aggregate value of transaction:
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5) Total fee paid:
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[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
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2) Form, Schedule or Registration Statement No.:
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3) Filing Party:
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4) Date Filed:
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WINTHROP FINANCIAL ASSOCIATES
Five Cambridge Center
9th Floor
Cambridge, Massachusetts 02142
To The Limited Partners of
Winthrop California Investors Limited Partnership
February , 2000
Dear Limited Partner:
We are pleased to provide you with the enclosed Consent Solicitation
Statement. The Statement contains information relating to the potential sale of
your partnership's 25% limited partnership interest in Crow Winthrop Development
Partnership. The development partnership owns approximately 90 acres of land in
Orange County, California. During the past several years your partnership has
had a series of acrimonious disputes with the general partner of the development
partnership. These disputes have been, and continue to be, the subject of
extensive litigation that is described in the enclosed Statement. Your
partnership has determined that, in order to protect and maximize the value of
its investment in the development partnership, it should exercise its rights
under the buy/sell provisions of the partnership agreement of the development
partnership. As a result of the exercise of the buy/sell provisions, your
partnership will either acquire the interest of the general partner of the
development partnership or sell its interest in the development partnership.
Under the terms of your partnership's limited partnership agreement, the consent
of holders of a majority of the limited partnership interests is required for
your partnership to sell its interest in the development partnership. Consent is
not required for the acquisition of the interest of the general partner of the
development partnership. Accordingly, we are seeking your consent to a sale of
your partnership's interest in the development partnership provided that your
partnership receives net proceeds of at least $6,500,000 for its interest in the
development partnership. Your partnership will not exercise its rights under the
buy/sell provisions unless the requisite consent of limited partners to a sale
is obtained.
Your general partners believe that the exercise of the buy/sell provisions
is in the best interests of limited partners and your partnership and recommend
you vote "YES" in favor of the sale of your partnership's interest in the
development partnership.
The enclosed Statement includes a complete discussion of the proposal. We
urge you to read the enclosed Statement carefully and to return your signed
Consent Form as quickly as possible. A postage-paid return envelope has been
included for your convenience. Consent Forms must be received by March , 2000.
If you have any questions about the enclosed material, please call us at
617-234-3000.
Very truly yours,
WINTHROP FINANCIAL ASSOCIATES,
A LIMITED PARTNERSHIP
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WINTHROP CALIFORNIA INVESTORS LIMITED PARTNERSHIP
Five Cambridge Center
9th Floor
Cambridge, Massachusetts 02142
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CONSENT SOLICITATION STATEMENT
Dated: February , 2000
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This Statement is furnished by the general partners of your partnership,
Winthrop California Investors Limited Partnership, a Delaware limited
partnership. We are soliciting your consent to a proposal authorizing your
partnership to sell its 25% limited partnership interest in a development
partnership, Crow Winthrop Development Limited Partnership.
As more fully described herein, your partnership and the development
partnership's general partner have had continuing and acrimonious disputes
resulting in extensive litigation regarding the development partnership. In
light of these ongoing disputes, your partnership has determined that in order
to protect and maximize the value of your partnership's interest in the
development partnership, your partnership should exercise its rights under the
buy/sell provisions of the partnership agreement of the development partnership.
As a result of the exercise of the buy/sell provisions, your partnership will
either acquire the interest of the general partner of the development
partnership or sell its interest in the development partnership. Under the terms
of your partnership's limited partnership agreement, the consent of holders of a
majority of the limited partnership interests is required for your partnership
to sell its interest in the development partnership. Consent is not required for
the acquisition of the interest of the general partner of the development
partnership. Accordingly, we are seeking your consent to a sale of your
partnership's interest in the development partnership provided that your
partnership receives net proceeds of at least $6,500,000 for its interest in the
development partnership. Your partnership will not exercise its rights under the
buy/sell provisions unless the requisite consent of limited partners to a sale
is obtained.
Approval of the proposal requires the consent of limited partners owning more
than 50% of the outstanding limited partnership interests ("Units"). There are
presently outstanding 3,500 Units. Under the partnership agreement, limited
partners will be deemed to have consented to the proposal unless prior to the
close of business on March , 2000 holders of more than 1,750 Units submit
consents disapproving the proposal. Affiliates of your general partners who
beneficially own an aggregate of 1,582.897 Units intend to vote in favor of the
proposal. Limited partners of record as of the close of business on February ,
2000 are entitled to vote on the proposal.
Your general partners believe that adoption of the proposal is in the best
interests of your partnership and its limited partners and recommend that you
vote "yes" in favor of the proposal.
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IMPORTANT
Your consent is important. Please read this Statement carefully and then
complete, sign and date the enclosed consent form and return it in a
self-addressed, postage pre-paid envelope. Any consent form that is not returned
or that is signed and does not specifically approve or disapprove the proposal
will effectively be treated as approving the proposal.
To be counted, the consent form must be received on or before 5:00 p.m.
Boston time on March , 2000. A consent may be revoked by written notice
received on or before the expiration of the time for responding.
The principal executive offices of your partnership and its general
partners are located at Five Cambridge Center, 9th Floor, Cambridge,
Massachusetts 02142. The approximate date on which this Statement and the
enclosed consent form were first sent or given to limited partners was
February , 2000.
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Please call your general partners at (617) 234-3000
with any questions relating to the proposal.
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THE PROPOSAL
The partnership agreement of the development partnership provides that if
at any time either your partnership or Crow Irvine #2 Limited Partnership ("Crow
Irvine"), the general partner of the development partnership, believes in good
faith that irreconcilable differences between them prevent the development
partnership from achieving its purposes, either party may exercise buy/sell
rights by making a written offer to purchase the partnership interest of the
other party. The offer must set forth a definite price for the other partner's
interest based on a hypothetical sales price for the real property then owned by
the development partnership, assuming such property were sold for cash subject
to existing debt and that all allocations and distributions were made in
accordance with the terms of the partnership agreement of the development
partnership.
The partner to whom an offer is made has 30 days to elect to either sell
its partnership interest pursuant to the offer or to purchase for cash the
interest of the other partner based on the hypothetical sales price contained in
the offer. If the partner to whom the offer was made fails to make such an
election within the 30 day period or, having so elected, fails to make the
required tender of the purchase price within 120 days of its election, it shall
be conclusively presumed that it has elected to sell its interest.
As described below, there have been continuing and acrimonious disputes
resulting in extensive litigation regarding the development partnership. In
light of these ongoing disputes, your partnership believes that irreconcilable
differences between your partnership and Crow Irvine prevent the development
partnership from achieving its purposes. Accordingly, your partnership has
determined that, in order to protect and maximize the value of its investment in
the development partnership, it should exercise its buy/sell rights. If your
partnership exercises its buy/sell rights, there exists the possibility that
Crow Irvine will elect to purchase your partnership's interest in the
development partnership. However, the partnership agreement of your partnership
requires the consent of holders of more than 50% of the outstanding Units to
sell your partnership's interest in the development partnership. Accordingly,
this solicitation is made to facilitate your partnership's exercise of the
buy/sell provisions of the development partnership agreement. The proposal
authorizes your partnership to sell its interest in the development partnership
pursuant to the exercise of the buy/sell rights provided your partnership
receives net proceeds of not less than $6,500,000 for its interest in the
development partnership. (See "Your Partnership - The Development Partnership".)
The purchase price that your partnership intends to offer will take into
account a number of factors, including the price that your partnership would
have to pay for Crow Irvine's partnership interest and the net proceeds that
your partnership would receive on a sale of its partnership interest. Under the
terms of the partnership agreement of the development partnership, the amount
that your partnership would receive for its partnership interest under the
buy/sell provisions is equal to the amount that would be distributed to your
partnership as a result of a sale of the development partnership's real property
(subject to existing debt) for a cash price equal to the offer price followed by
the distribution of the development partnership's assets in complete
liquidation. The amount that would be distributed to your partnership in
liquidation of the development partnership depends in part on the relative
adjusted capital account balances of the partners as determined under the
capital account maintenance provisions of the partnership agreement of the
development partnership.
Continuing disputes between Crow Irvine and your partnership have prevented
your partnership from obtaining sufficient information for your partnership to
calculate the adjusted
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capital account balances of the partners in the development partnership. In any
event, your partnership will not exercise its buy/sell rights unless it
reasonably believes that if Crow Irvine acquires your partnership interest in
the development partnership the offer price will result in your partnership's
receiving net cash proceeds of at least $6,500,000.
If your partnership is required to purchase Crow Irvine's interest in the
development partnership, your partnership expects that it will use cash reserves
of your partnership and the development partnership to finance the purchase. In
addition, your partnership may elect to finance all or a portion of such
purchase through the sale of Units or by borrowing. Your partnership has the
right to sell additional Units on such terms as your general partners determine
provided that the interest of existing limited partners is not diluted by more
than 25%. Your partnership also has the right to borrow money on both a secured
and an unsecured basis.
In view of the history of disputes with Crow Irvine, your general partners
anticipate that Crow Irvine may resist your partnership's efforts to exercise
the buy/sell rights. Your general partners believe that your partnership is
entitled to exercise the buy/sell rights and intend to resist any efforts of
Crow Irvine to contest those rights. However, there can be no assurance that
your partnership will be able to successfully exercise the buy/sell rights or to
consummate a transaction in a timely fashion without resorting to litigation. In
addition, your partnership may be required to expend significant costs in
seeking to enforce its buy/sell rights.
After establishing reserves for future contingencies, your partnership
intends to distribute to partners the remaining net proceeds received from a
sale of your partnership's interest in the development partnership. If no
reserves were established, your general partners estimate that a sale resulting
in your partnership's receiving net cash proceeds of $6,500,000 would enable
your partnership to distribute $1,839 per Unit to limited partners.
Distributions would increase if your partnership received more than $6,500,000.
Deemed Consent to the Proposal
Approval of the proposal requires the consent of limited partners owning
more than 50% of the outstanding Units. There are presently outstanding 3,500
Units. Under the partnership agreement, limited partners will be deemed to have
consented to the proposal unless prior to 5:00 p.m. on March , 2000 holders of
more than 1,750 Units submit consents disapproving the proposal. Affiliates of
your general partners who beneficially own an aggregate of 1,582.897 Units
intend to vote in favor of the proposal. Limited partners of record as of the
close of business on February , 2000 are entitled to vote on the proposal.
Your general partners believe that adoption of the proposal is in the best
interests of your partnership and its limited partners and recommend that you
vote "yes" in favor of the proposal.
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YOUR PARTNERSHIP
General
Your partnership was originally organized on January 24, 1985 under the
laws of the State of Maryland. On October 16, 1985, your partnership was
reorganized as a Delaware limited partnership in accordance with the provisions
of the Delaware Revised Uniform Limited Partnership Act. The general partners of
your partnership are Three Winthrop Properties, Inc. and Winthrop Financial
Associates, A Limited Partnership.
Your partnership owns (i) a 99% general partnership interest in Crow
Winthrop Operating Partnership, a Maryland general partnership (the "operating
partnership"), (ii) a 25% limited partnership interest in the development
partnership and (iii) a 99% limited partnership interest in Winthrop California
Management Limited Partnership, a Maryland limited partnership ("WC
Management").
The Operating Partnership
The operating partnership was originally organized to acquire, own and
operate a headquarters office facility known as the Fluor Corporation World
Headquarters Facility in Irvine (Orange County), California. For various reasons
including the vacating of the facility by Fluor Corporation, the operating
partnership was unable to meet its debt obligations. The operating partnership
successfully negotiated a workout with the holder of its mortgage indebtedness
pursuant to which the operating partnership filed a voluntary petition under
Chapter 11 of the United States Bankruptcy Code on March 28, 1997. Pursuant to a
June 27, 1997 plan or reorganization, the operating partnership contributed all
of its assets and liabilities, including all of its right, title and interest in
the headquarters facility and $500,000 of unencumbered cash, to Jamboree LLC, a
newly formed Delaware limited liability company, in exchange for a 10% ownership
interest in Jamboree LLC. In addition, Jamboree LLC paid your partnership a
$500,000 fee in connection with the plan.
The headquarters facility owned by Jamboree LLC consists of eight
buildings; a 10-story tower, a single story concourse and six four-story
buildings; containing, in the aggregate, approximately 1,692,219 rentable square
feet of space and approximately 15 acres of land. The property is located in the
Greater Airport area of Irvine, California and is used principally by an
engineering firm and as various tenants' corporate headquarters.
The Development Partnership
The development partnership was formed in 1985 for the purpose of
acquiring, owning and developing approximately 122 acres of land surrounding the
headquarters facility in Irvine (Orange County), California and presently owns
approximately 90 acres of land.
During 1997, the development partnership formed Shops at Park Place LLC for
the purpose of owning and operating a retail center. The development partnership
is the managing and sole member of Shops at Park Place LLC. During 1998, the
development partnership formed Park Place Residential Realty LLC and Park Place
Residential Realty-Land LLC, for the purpose of reacquiring and reselling
approximately 32 acres of residential property located in Orange County,
California. The 32 acres were sold in 1998 for a gross sales price of
$50,000,000. In addition, during 1998, the development partnership formed 3121
Michelson Drive LLC and Park Place Hotel Company LLC and, in January 1998 formed
Park Place Parking
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Company LLC for the purposes of developing, owning and operating a 150,000
square foot Class A office building, a luxury hotel and parking structures,
respectively. In 1999, Park Place Hotel signed a 20-year operating agreement
with a hotel operator. The development partnership is the managing and sole
member of each of these limited liability companies.
Your partnership has invested an aggregate of $44,211,000 in the development
partnership and has received distributions from the development partnership
aggregating $12,114,810. Your partnership accounts for its investment in the
development partnership under the equity method of accounting. As of December
31, 1998, for financial statement purposes your partnership's carrying value of
its investment in the development partnership was $30,963,000 which amount
reflects an impairment in value determined with respect to the development
partnership during 1995. The development partnership's financial statements at
December 31, 1998 reported your partnership's net equity in the development
partnership at $42,719,000. The foregoing financial information was prepared in
accordance with generally accepted accounting principles and is not necessarily
indicative of the amount your partnership would receive for its partnership
interest under the buy/sell provisions of the partnership agreement of the
development partnership. As described above, the amount your partnership would
receive depends in part on the relative adjusted capital account balances of the
partners of the development partnership as determined under the capital account
maintenance provisions of the partnership agreement of the development
partnership. Continuing disputes between Crow Irvine and your partnership have
prevented your partnership from obtaining sufficient information to calculate
the adjusted capital account balances of the partners in the development
partnership.
As previously mentioned, your partnership and Crow Irvine have had
continuing and ongoing acrimonious disputes resulting in extensive litigation
regarding the development partnership. The claims and counterclaims brought by
your partnership and Crow Irvine are as follows:
1. Crow Winthrop Development Limited Partnership, et al. v. Winthrop
California Investors Limited Partnership, et al., Civil Action No. 174570,
Circuit Court of Montgomery County, Maryland. In August 1997, the development
partnership and Crow Irvine sued your partnership and its general partners
seeking a declaratory judgment and injunctive relief to prevent your partnership
from converting the operating partnership, in which your partnership and Crow
Irvine were partners, from a general partnership to a limited partnership and
from converting Crow Irvine to a limited partner. The plaintiffs also sought
unspecified damages. Upon the filing of the action, the Court granted a
temporary restraining order in favor of the plaintiffs. In October 1997, after
hearing, the Court refused to grant a preliminary injunction in favor of the
plaintiffs and the temporary restraining order expired. The operating
partnership thereafter was converted to a limited partnership with Crow Irvine
as its limited partner. An answer was filed on behalf of your partnership and
each of the parties served written discovery. The court thereafter stayed the
action due to the pendency of actions in California involving the parties or
their affiliates. The stay has now expired and on November 3, 1999 the Court
dismissed the action without prejudice.
2. Crow Winthrop Development Limited Partnership and Crow Orange County
Management Company, Inc. v. Winthrop California Management Limited Partnership,
Superior Court of California, County of Orange, Docket No. 789429. In January
1998, WC Management was named as a defendant in an action seeking declaratory
relief that certain agreements between the parties have been terminated and that
plaintiff has the exclusive right to manage the common areas of certain
contiguous parcels of real estate containing office and retail space located in
Irvine, California. In the alternative, the plaintiffs sought a declaration that
WC Management
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perform certain tasks and be prevented from assessing certain charges in
connection with its management of the common areas. The action was removed to
federal court and transferred to the Bankruptcy Court which, in April 1998,
granted summary adjudication in favor of WC Management on plaintiffs'
termination claims. The plaintiffs did not appeal from that decision. The
remainder of the claims were thereafter remanded to state court. Plaintiffs'
alternative claims for declaratory relief concerning performance issues related
to the management of the subject property remain pending. The case was
transferred to the complex litigation panel of the Orange County Superior Court
and deemed related to two other actions which involve the same subject property.
WC Management is not a party to those other actions.
On or about September 24, 1999, the plaintiffs were granted the right to
file an amended complaint. The amended complaint is not substantively different
from the original complaint, and the only relief sought is declaratory relief.
An answer was filed on behalf of WC Management and Winthrop Management, LLC on
or about October 22, 1999. Discovery is ongoing, and several of the plaintiffs'
claims are now moot.
There are two motions pending which seek the consolidation of this action
with other pending actions involving the same subject property. One motion filed
on or about October 21, 1999, by the plaintiffs in this action seeks to
consolidate this action with an action captioned as Crow Winthrop Development
Limited Partnership, a Maryland limited partnership, and Crow Orange County
Management Company, Inc., a Texas corporation vs. Jamboree LLC, a Delaware
limited liability company, OCSC Case No. 813915.
The second motion filed by Jamboree LLC on or about November 12, 1999, in
one of the other currently pending actions, in which your partnership is not a
party, seeks to consolidate this action with the same action for which
consolidation is sought in the first motion to consolidate (OCSC Case No.
813915) and with three additional cases: Crow Winthrop Development Limited
Partnership v. Jamboree LLC, et al., OCSC Case No. 789562; Crow Winthrop
Development Limited Partnership v. Jamboree LLC, et al., OCSC Case No. 791662;
and Jamboree LLC v. Crow Winthrop Development Limited Partnership, Crow Orange
County Management Company, Inc., et al., OCSC Case No. 806526. WC Management has
filed notices that it does not oppose these motions to consolidate.
3. Winthrop California Investors Limited Partnership v. Crow Winthrop
Development Limited Partnership, Civil Action No. 178303, Circuit Court of
Montgomery County, Maryland. In October 1997, your partnership brought suit
against the development partnership and Crow Irvine seeking declaratory and
injunctive relief to allow your partnership to exercise its rights as a limited
partner in the development partnership to audit the development partnership's
books and records and seeking damages for the development partnership's past
refusals to allow such access. In January 1998, the Court granted partial
summary judgment in favor of your partnership, declaring and ordering that your
partnership has the right to inspect and audit the development partnership's
books, records and files. Your partnership's auditors thereafter reviewed
certain of the development partnership's books and records but were not
permitted to review all of the books and records necessary to complete audited
financial statements. After obtaining access to the development partnership's
books and records, your partnership voluntarily dismissed its claim for breach
of fiduciary duty based on the development partnership's past refusals to allow
your partnership access.
4. Winthrop California Investors Limited Partnership v. Crow Winthrop
Development Limited Partnership, Superior Court of California, County of Orange,
Case No. 812346. In January 1999 your partnership brought suit in Maryland
against the development
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partnership, Crow Irvine, Crow Irvine's general partner and the general partner
of that entity alleging claims for breach of the development partnership
agreement, breach of fiduciary duty, and conversion and requested that a
receiver be appointed to conduct the business of the development partnership.
Your partnership sought approximately $9 million in damages resulting from
wrongful distributions of capital proceeds of the development partnership in
connection with a 1998 sale of real estate by the development partnership.
The defendants filed a motion to dismiss the action claiming that they are
not subject to personal jurisdiction in Maryland and that Maryland is an
inconvenient forum. Defendants argued that the action should proceed in
California, if at all. The court in Maryland granted the defendants' motion on
the ground of inconvenient forum in July, 1999.
Your partnership thereafter filed substantially the same claims in
California, with the above-caption. The defendants filed a demurrer to the
complaint, arguing that it should be dismissed for a variety of reasons. The
court overruled the defendants' demurrer on September 24, 1999. On or about
November 5, 1999, the defendants filed their answer in which they alleged a
general denial to the allegations of the complaint. The case is now in
discovery.
5. Winthrop California Investors Limited Partnership v. Crow Winthrop
Development Limited Partnership, et al.,/Crow Winthrop Development Limited
Partnership and Crow Irvine #2 v. Winthrop California Investors Limited
Partnership, et al., United States District Court for the Central District of
California, Southern Division, Case No. SACV99-1519 GLT (ANx). On or about
November 5, 1999, the development partnership and its general partner filed a
cross-complaint in the action described in numbered paragraph 4 above,
purporting to allege claims for breach of fiduciary duty, aiding and abetting
breach of fiduciary duty and unfair business practices. Your partnership and
certain affiliates, as well as several unaffiliated entities are named as
cross-defendants in the cross-complaint. In summary, the cross-complaint appears
to allege that the cross-defendants have engaged in a conspiracy to fraudulently
acquire and manipulate the management positions of numerous partnerships to
their benefit and in particular have done so with respect to the operating
partnership, which the cross-claimants allege was improperly forced into
bankruptcy to the alleged detriment of the cross-claimants. The cross-claimants
also allege that your partnership in its capacity as a limited partner in the
development partnership has breached its alleged fiduciary duties to the
development partnership by allegedly participating in or filing lawsuits, in
order to hinder the development of the development partnership's land; failing
to abide by agreements; and by disclosing proprietary information concerning the
development partnership.
On December 8, 1999, your partnership and others removed the
cross-complaint to the United States District Court for the Central District of
California, Southern Division seeking the reference of the cross-complaint to
the United States Bankruptcy Court for the Central District of California where
the operating partnership bankruptcy proceeding remains open.
WC Management
Your partnership holds a 99% limited partnership interest in WC Management.
WC Management has the right to perform management and leasing functions at the
headquarters facility. WC Management has, in turn, contracted with Winthrop
Management, LLC, an affiliate of your general partners, to provide such
services. WC Management is entitled to receive a fee of 2% of gross receipts
from the headquarters facility. From this amount, WC Management reimburses
Winthrop Management LLC for the compensation paid by Winthrop Management LLC to
certain senior level on-site employees as well as for accounting and other
support
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functions performed off-site by Winthrop Management. Additionally, WC Management
will receive certain incentive fees based on reductions it is able to achieve,
if any, with respect to certain operating and other expenses. Leasing commission
payments, consistent with prevailing market rates, will be paid to WC Management
for all third-party leases it procures for the headquarters facility.
TRANSACTIONS WITH AFFILIATES
Your partnership paid an affiliate of your general partners a $750,000
annual asset management fee for 1997, 1998 and 1999.
An affiliate of your general partners is the general partner of WC
Management and holds a 1% interest in WC Management. In 1997, 1998 and 1999 the
affiliate received distributions of $16,076, $12,382 and $12,464, respectively,
for its 1% interest.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following summary is a general discussion of certain federal income tax
consequences of the proposal. This summary is based on the Internal Revenue Code
of 1986, as amended (the "Code"), applicable Treasury regulations thereunder,
administrative rulings, practice and procedures and judicial authority, all as
of the date of this Statement. All of the foregoing are subject to change, and
any such change could affect the continuing accuracy of this summary. This
summary does not discuss all aspects of federal income taxation that may be
relevant to you in light of your specific circumstances or to certain types of
limited partners who or which are subject to special tax rules (for example,
dealers in securities, banks, insurance companies and, except as discussed
below, foreign and tax-exempt investors), nor does it discuss any aspect of
state, local, foreign or other tax laws. YOU SHOULD CONSULT YOUR OWN TAX ADVISOR
AS TO THE PARTICULAR TAX CONSEQUENCES, INCLUDING STATE AND LOCAL TAX
CONSEQUENCES, TO YOU OF THE PROPOSAL.
Sale of Development Partnership Interest
Your partnership will recognize gain or loss on a sale of its interest in
the development partnership to Crow Irvine pursuant to the buy/sell provisions
equal to the difference between (i) your partnership's "amount realized" on the
sale and (ii) its adjusted tax basis in the interest sold. The amount of your
partnership's adjusted tax basis in its development partnership interest
generally will equal its cash investment in the development partnership,
increased by your partnership's share of the development partnership's income
and gain and decreased by your partnership's share of the development
partnership's losses and distributions. Your partnership's "amount realized" on
the sale will be a sum equal to the cash price received for its development
partnership interest plus the amount of the development partnership's
liabilities that are allocable to the interest sold.
You will be allocated a share of your partnership's taxable gain or loss on
a sale of its development partnership interest, as well as a share of your
partnership's taxable income or loss from the development partnership up to the
date of the sale, in accordance with the provisions of your partnership's
limited partnership agreement. Under the passive activity loss rules (described
below), your partnership's taxable gain or loss on a sale of its development
partnership interest generally would be treated as passive activity income (if
the sale results in gain) or as a passive activity loss (if the sale results in
a loss). Assuming that your partnership sells its entire interest in the
development partnership, your allocable share of any tax loss realized on the
sale generally
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should be deductible in full in the year of sale (subject to any other
applicable limitations) under these rules. If the sale results in taxable gain,
then your allocable share of your partnership's gain generally could be offset
by your unused passive activity losses from your partnership or other
investments.
Based on your partnership's adjusted tax basis in its development
partnership interest as of December 31, 1998, your general partners estimate
that a sale of your partnership's interest in the development partnership for a
price resulting in your partnership's receiving net cash proceeds of $6,500,000
would result in a tax loss to your partnership. However, your partnership may
offer a higher price, in which event the sale may result in a taxable gain. As
indicated, such gain (if any) could be offset by your unused passive activity
losses from your partnership. In this regard, your general partners estimate,
based on the results of your partnership's operations through December 31, 1998,
and without giving effect to your partnership's operations, transactions or
distributions after that date, that if you purchased your Units in your
partnership's original offering and elected to defer recognizing your share of
your partnership's debt discharge income from its 1997 debt restructuring, then,
depending on whether you paid the purchase price for your Units in full when you
subscribed or in installments, you may have "suspended" passive activity losses
(i.e., tax losses that you could not previously deduct under the passive
activity loss rules described below) from your partnership of between $40,226
per Unit for Units paid for in full and $43,812 per Unit for Units paid for in
installments, subject to reduction to the extent you utilized such losses to
offset passive activity income from other investments. (If you did not elect to
defer recognizing your share of your partnership's 1997 debt discharge income
and purchased your Units in your partnership's original offering, then your
general partners estimate that you may have suspended passive activity losses
from your partnership, based on the results of your partnership's operations
through December 31, 1998 and subject to reduction to the extent you utilized
such losses to offset passive activity income from other investments, of between
$17,517 per Unit for Units paid for in full and $21,103 per Unit for Units paid
for in installments.)
Your partnership's gain or loss on a sale of its development partnership
interest generally would be treated as a long-term capital gain or loss. Under
current law, capital gains and losses of individuals and non-corporate taxpayers
are taxed under tax rules different from the rules applicable to corporations.
Long-term capital gains of individuals and other non-corporate taxpayers are
taxed at a maximum federal income tax rate of 20%; however, their gain
attributable to straight-line depreciation deductions is taxed at a federal
income tax rate of 25%. (A portion of your partnership's gain, if any, on the
sale would constitute 25%-rate capital gain as to non-corporate limited
partners.) The maximum federal income tax rate for other income of such persons
is 39.6%. Capital losses can offset only capital gains, except that
non-corporate taxpayers may deduct up to $3,000 of their capital losses for the
year in excess of their total capital gains for the year against their ordinary
income. Excess capital losses generally can be carried forward to succeeding
years (a corporation's carryforward period is five years and a non-corporate
taxpayer can carry forward such losses indefinitely); in addition, corporations,
but not non-corporate taxpayers, are allowed to carry back excess capital losses
to the three preceding taxable years.
Under special tax rules applicable to "passive activity losses," if you are
a non-corporate taxpayer or closely held corporation, you generally cannot use
losses from your partnership to offset your non-passive activity income. As a
result, you may have suspended passive activity losses from your partnership.
Such unused losses could be applied to offset any taxable gain that is allocated
to you on account of your partnership's sale of its development partnership
interest pursuant to the buy/sell provisions. If your partnership sells its
entire development partnership interest at a loss, then your allocable share of
such loss generally could be deducted by you in the year of sale (subject to any
other applicable limitations).
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Any cash distributed to you by your partnership in connection with a sale
of its development partnership interest will reduce your adjusted tax basis in
your Units but will not result in your recognition of any income or gain except
if and to the extent that such distributions (and the amount of any reduction in
your share of your partnership's liabilities as a result of the sale) exceed
your adjusted tax basis in your Units. Your adjusted tax basis in your Units
will be increased by your allocable share of any taxable gain reported by your
partnership on the sale, and decreased by your allocable share of any tax loss
reported by your partnership on the sale. Your general partners currently do not
anticipate that you would recognize any further income or gain as a result of
receiving cash distributions of the proceeds of a sale of your partnership's
interest in the development partnership on the terms described in this Statement
if you acquired your Units in your partnership's original offering.
The development partnership's assets are debt-financed and consist in part
of certain assets (such as a hotel), the income (if any) from which must be
treated by tax-exempt limited partners as unrelated business taxable income.
Accordingly, the foregoing discussion of certain tax consequences of a sale of
your partnership's interest in the development partnership generally will be
relevant to you if you are a tax-exempt limited partner, and should be reviewed
by you with your tax advisor. If you are a tax-exempt organization described in
section 501(c)(7), (c)(9), (c)(17) or (c)(20) of the Code, you also should
consult your tax advisor concerning the application of "set aside" and reserve
requirements to any gain that might be allocated to you on account of the sale.
Gain, if any, allocable to a foreign limited partner on a sale of your
partnership's interest in the development partnership would be subject to U.S.
federal income tax. If the sale results in a gain, your partnership would be
required to deduct and withhold from amounts otherwise distributable to you on
account of such sale, a tax (calculated at the highest applicable federal income
tax rate) based on the amount of gain allocable to you. Amounts withheld would
be creditable against your U.S. federal income tax liability and, if in excess
thereof, a refund could be obtained from the Internal Revenue Service by filing
a U.S. income tax return.
In addition to federal income tax, you may be subject to state and local
taxes on your allocable share of any taxable gain recognized by your partnership
on a sale of its development partnership interest. You should consult your own
professional tax advisers concerning the state and local tax consequences to you
of such sale.
Purchase of Crow Irvine's Interest
No gain or loss is anticipated to result to your partnership or to you if
your partnership purchases Crow Irvine's interest in the development partnership
pursuant to the buy/sell provisions. Following such purchase, the development
partnership would be deemed liquidated for income tax purposes, and 100% (rather
than 25%) of the income, gain, loss and deductions arising from the ownership,
operation and sale of the development partnership's properties would be
includable by your partnership in determining its annual taxable income or tax
loss. As is currently the case, your allocable share of your partnership's
taxable income (or tax loss) from the development partnership's properties
generally would be treated as passive activity income (or loss) for purposes of
the passive activity loss rules described above, and would be treated in part as
unrelated business taxable income as to tax-exempt limited partners. Your
partnership's application of cash flow from operations to make non-deductible
expenditures, such as capital improvements to the development partnership's
properties or principal payments on indebtedness, could result in your
partnership's reporting taxable income from the development partnership's
properties in excess of the cash available for distribution to limited partners.
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The income tax basis of the development partnership's properties would be
adjusted in connection with the liquidation of the development partnership, and
such adjustment, if positive, would result in additional depreciation deductions
for your partnership and the limited partners. Your partnership's holding period
in the development partnership's properties (except for the portion of the
development partnership's properties previously allocable to your partnership's
interest in the development partnership) would begin for income tax purposes on
the date of your partnership's purchase of Crow Irvine's development partnership
interest, rather than on the earlier date on which the development partnership
acquired the development partnership's properties.
In addition to federal income taxes, your allocable share of your
partnership's income and gain (if any) from the ownership and operation of the
development partnership's properties is and, following the purchase of Crow
Irvine's interest, would continue to be subject to tax in California, where the
development partnership's properties are located, as well as in your state of
residence. Any taxes that you pay to the State of California may be creditable
against your income taxes owed to your state of residence with respect to the
same income. You should consult your own professional tax advisers concerning
the state and local tax consequences to you of your partnership's purchase of
Crow Irvine's development partnership interest.
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding Units owned by
each person who is known by your partnership to own beneficially or exercise
voting or dispositive control over more than 5% of the Units, by Winthrop
Financial Associates, the managing general partner of your partnership, and by
all directors and executive officers of your general partners as a group as of
February , 2000.
<TABLE>
<CAPTION>
Name and address of Amount and nature of % of Class
Beneficial Owner Beneficial Owner
- ----------------------------------------------------------------------------------------------
<S> <C> <C>
WILCAP Limited 1,000 (4) 28.6
Partnership (1) (2)
- ----------------------------------------------------------------------------------------------
WILCAP Holdings 18 *
Limited Partnership
(1) (2) (3)
- ----------------------------------------------------------------------------------------------
Winthrop Financial Associates, 6 *
A Limited Partnership
(1) (2)
- ----------------------------------------------------------------------------------------------
Quadrangle Associates II LLC (1) 558.897(5) 16.0
- ----------------------------------------------------------------------------------------------
All directors and executive officers as -- --
a group (five persons)
- ----------------------------------------------------------------------------------------------
</TABLE>
* Less than one percent
(1) The business address for each of WILCAP Limited Partnership, WILCAP
Holdings Limited Partnership, Winthrop Financial Associates and Quadrangle
Associates II LLC is Five Cambridge Center, 9th Floor, Cambridge,
Massachusetts 02142.
(2) Based upon information supplied to your partnership by WILCAP Limited
Partnership.
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<PAGE>
(3) WILCAP Holdings Limited Partnership is the general partner of WILCAP
Limited Partnership.
(4) These Units have been pledged to a lending institution as security for a
loan.
(5) All Units accepted for purchase at a price of $5,100 per Unit pursuant to a
recently concluded tender offer. Quadrangle Associates II LLC has all
voting rights with respect to these Units.
Your partnership is a limited partnership and has no officers or directors.
WILCAP Limited Partnership, WILCAP Holdings Limited Partnership and Quadrangle
Associates II LLC are affiliates of your general partners. All of the foregoing
entities have advised your partnership that they intend to vote their Units (see
chart above) in favor of the proposal.
GENERAL INFORMATION CONCERNING THE VOTING
Record Date and Voting. Your general partners have fixed February , 2000
as the record date for the determination of limited partners entitled to vote on
the proposal. Only holders of record of Units at the close of business on the
record date are entitled to notice of and to vote on the proposal. As of the
record date, there were 3,500 Units outstanding, which were held by
approximately 1,335 holders of record. Each holder of record of units on the
record date is entitled to cast one vote per Unit on the proposal.
Pursuant to Section 5.1 of the partnership agreement, your general partners
are not permitted, without the requisite consent of limited partners, to sell
your partnership's limited partnership interest in the development partnership.
Accordingly, in order for your partnership to exercise its rights under the
buy/sell provisions of the development partnership agreement, your general
partners are seeking, pursuant to this Statement, the requisite consent of
limited partners.
The consent of holders of a majority of the outstanding Units is required
to approve the proposal under the provisions of your partnership's limited
partnership agreement. Limited partners will be deemed to have consented to the
proposal unless, prior to 5:00 p.m. on March , 2000, your partnership receives
consents from holders of more than 1,750 Units disapproving the proposal.
Accordingly, if you do not submit a consent, you will be effectively consenting
to the proposal.
Your general partners and their affiliates beneficially own or have the
right to vote, an aggregate of 1,582.897 Units which they intend to vote in
favor of the proposal. Such Units represent approximately 45.2% of the total
number of outstanding Units. (See "Security Ownership of Certain Beneficial
Owners and Management".)
All consent forms received on or prior to 5:00 p.m. on March , 2000 and
not revoked will be voted in accordance with the instructions indicated on such
consent forms. If no instructions are indicated or if you fail to return your
consent form, such consent form will, in effect, be deemed to be a vote in favor
of the proposal.
Revocation of Consents. Any consent form given by a limited partner
pursuant to this Statement may be revoked by the person giving it at any time
before 5:00 p.m. on March , 2000 by (i) delivering to the general partners a
written notice of revocation bearing a later date than the consent form to be
revoked; or (ii) delivering to the general partners a duly executed consent form
bearing a later date. Any written notice of revocation or subsequently executed
consent form should be sent so as to be delivered to your partnership c/o Three
Winthrop
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<PAGE>
Properties, Inc., Five Cambridge Center, 9th Floor, Cambridge, Massachusetts
02142, or hand delivered to your general partners on or before March , 2000.
Solicitation. The cost of assembling and mailing the enclosed consent form,
this Statement and other materials that may be sent to limited partners in
connection with this solicitation shall be borne by your partnership. It is
estimated that total expenditures relating to the solicitation made hereby,
including legal fees, printing and mailing fees, will be approximately $25,000.
Certain directors, officers and employees of your general partners may solicit
the execution and return of consent forms by mail, telephone, telegraph and
personal interview. Such directors, officers and employees will not be
additionally compensated, but may be reimbursed for out-of-pocket expenses in
connection with such solicitation.
Dissenters' Rights. There will be no dissenters' rights of appraisal with
respect to the proposal.
* * *
Winthrop Financial Associates, A Limited Partnership
Three Winthrop Properties, Inc.,
as general partners of your partnership
Cambridge, Massachusetts
February , 2000
14
<PAGE>
WINTHROP CALIFORNIA INVESTORS LIMITED PARTNERSHIP
The undersigned, a holder of limited partnership interests (the "Units") in
Winthrop California Investors Limited Partnership (the "Partnership"), does
hereby vote as follows, with respect to all Units in the Partnership owned by
the undersigned for the proposal more fully described in the accompanying
Consent Solicitation Statement, dated February , 2000, receipt of which is
hereby acknowledged.
APPROVAL of the sale of the Partnership's limited partnership interest in
Crow Winthrop Development Partnership.
/ / FOR / / AGAINST / / ABSTAIN
THIS CONSENT IS SOLICITED BY WINTHROP FINANCIAL ASSOCIATES, A LIMITED
PARTNERSHIP AND THREE WINTHROP PROPERTIES, INC., AS GENERAL PARTNERS OF THE
PARTNERSHIP, WHEN THIS PROXY IS PROPERLY EXECUTED, THE UNITS REPRESENTED HEREBY
WILL BE VOTED AS SPECIFIED. IF NO SPECIFICATION IS MADE ON THIS CARD, THIS
CONSENT WILL BE VOTED FOR THE PROPOSAL.
Dated , 2000
----------------------------
---------------------------------
---------------------------------
---------------------------------
Signature
---------------------------------
Signature (if held jointly)
---------------------------------
---------------------------------
Please sign exactly as name appears hereon. When Units are held by joint
tenants, both should sign. When signing as an attorney, as executor,
administrator, trustee or guardian, please give full title as such. If a
corporation, please sign in name by President or other authorized officer. If a
partnership, please sign in partnership name by authorized person.
PLEASE MARK, SIGN, DATE AND RETURN THIS CONSENT PROMPTLY USING THE
ENCLOSED PRE-PAID ENVELOPE TO:
THREE WINTHROP PROPERTIES, INC. IF YOU HAVE ANY QUESTIONS, PLEASE CALL THE
INVESTOR RELATIONS DEPARTMENT AT (617) 234-3000.
