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SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
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Check the appropriate box:
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[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the Commission
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REAL ESTATE INCOME PARTNERS III
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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)
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0-11(a)(2) and identify the filing for which the offsetting fee was paid
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or the Form or Schedule and the date of its filing.
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BIRTCHER/LIQUIDITY PROPERTIES
915 Broadway, Fifth Floor
New York, New York 10010
February 8, 1997
Dear Limited Partner:
Birtcher/Liquidity Properties (the "General Partner") has become aware
that an entity named Madison Partnership Liquidity Investors XVI, LLC ("Madison
LLC") has recently sent an unsolicited tender offer to the limited partners of
Real Estate Income Partners III (the "Partnership") to purchase up to 4.9% of
the Partnership's outstanding limited partnership interests for approximately
$300 per $1,000 of original subscription amount (the "Offer"), reduced by any
cash distributions made to you by the Partnership after January 24, 1997. As
described in more detail in the Form 8-K enclosed with this letter, the
Partnership recently sold one of its properties (NorthTech) for $13.6 million
and will distribute sale proceeds of approximately $184 per $1,000 interest on
February 28, 1997. That distribution will reduce the Offer to approximately
$116 per $1,000 interest.
The General Partner believes that each limited partner should consider
each of the factors listed below in making a decision whether to tender to
Madison LLC. The factors that the General Partner believes to be significant
are:
o The Offer was not discussed with, and is not sponsored or
endorsed by, the General Partner. Madison LLC did not afford
the General Partner an opportunity to negotiate on behalf of
the limited partners. In fact, the General Partner does not
know who owns or controls Madison LLC or how it obtained your
name, address and ownership interest in the Partnership. The
General Partner believes that Madison LLC is affiliated with a
limited partner of the Partnership that recently purchased an
interest in the Partnership.
o The Offer price of approximately $300 per $1,000 of original
investment ($116 after taking into account the NorthTech
distribution) is below the price of recent bid prices and
trade prices on the secondary market for limited partnership
interests. Limited partners seeking immediate cash for their
interests should check the secondary market prior to making
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Limited Partner
February 8, 1997
Page 2
any decision to tender. Please keep in mind that the
secondary market itself is an inefficient market that the
General Partner does not believe has generally reflected the
true value of Partnership interests. Please also keep in mind
that the secondary market may not be able to accommodate
substantial sales of limited partnership interests over a
short period of time at current prevailing prices.
o On January 29, 1997, the Partnership filed with the Securities
and Exchange Commission ("SEC") a preliminary Information
Statement pursuant to which it will seek the consent of the
limited partners to dissolve the Partnership and liquidate its
remaining properties. Pending the SEC's review, you will be
receiving your Information Statement in the next few weeks.
If the limited partners consent to the dissolution, the
General Partner would be authorized and directed to settle and
close the Partnership's business in an orderly fashion and
dispose of and convey to one or more buyers the Partnership's
property as soon as practicable, consistent with obtaining
reasonable value for the properties.
o Among other things, the Information Statement sets forth the
General Partner's estimate that the Partnership's remaining
properties could be sold for an aggregate price ranging from
approximately $14,300,000 to $17,250,000. If the remaining
properties are sold for an aggregate price within this range,
the limited partners would receive aggregate sale proceeds of
between $213 to $257 per $1,000 invested in the Partnership.
The Madison LLC Offer, after deducting $184 for the estimated
distribution of NorthTech sales proceeds, is for $116 per
$1,000 invested in the Partnership.
o The General Partner's estimates are based upon a variety of
assumptions that are subject to significant uncertainties and
contingencies. Such estimates are inherently imprecise and
there can be no assurance they can be realized.
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Limited Partner
February 8, 1997
Page 3
o The timing of property sales and distributions of sale
proceeds are and will be determined solely by the General
Partner. There is no current agreement or understanding to
sell or dispose of any property, and there can be no assurance
as to when any or all of the remaining Partnership properties
can be sold or disposed of or when any sales proceeds will
actually be distributed. Accordingly, limited partners who do
not accept the Offer may not receive any distribution of sale
proceeds for a significant period of time following the Offer.
o The General Partner's estimates of sales proceeds do not take
into account Partnership operating expense or net income or
net loss of the Partnership for any period prior to the time
the remaining properties are sold, which could affect the
amount of sales proceeds available for distribution.
Therefore, the actual proceeds to be received by the limited
partners may vary materially from the estimates, and therefore
possibly be substantially less. The General Partner's
estimates do not take into account future distributions from
operations of the Partnership's properties, if any. Since
NorthTech generated approximately 68% of the cash flow that
funded the Partnership's regular operations and distributions
for the year ended December 31, 1996, future distributions to
limited partners of net cash from operations are expected to
be significantly reduced.
In light of the factors discussed above, and because each limited
partner's need for short-term liquidity may vary significantly, the General
Partner expresses no opinion and is remaining neutral with respect to the
financial terms contained in the Offer.
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Limited Partner
February 8, 1997
Page 4
If you have any questions about the Offer that you want to address to
the General Partner, please call The Herman Group at 800-657-8814.
Very truly yours,
BIRTCHER/LIQUIDITY PROPERTIES
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15 (d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported) January 24, 1997
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REAL ESTATE INCOME PARTNERS III, LIMITED PARTNERSHIP
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(Exact name of registrant as specified in its charter)
Delaware
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(State or other jurisdiction of incorporation or organization)
0-16027 13-3341425
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Commission File Number (I.R.S. Employer Identification No.)
27611 La Paz Road, P.O. Box A-1, Laguna Niguel, California 92677-0100
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(Address of principal executive offices) (Zip Code)
(714) 643-7700
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(Registrant's telephone number, including area code)
N/A
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(Former name, former address and former fiscal year,
if changed since last report.)
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REAL ESTATE INCOME PARTNERS III
ITEM 5. OTHER EVENTS.
On January 24, 1997, Real Estate Income Partners III, Limited
Partnership (the "Partnership") sold Northtech, a research and
development complex consisting of three two-story buildings
encompassing 73,166 rentable square feet, located on 10.2 acres of
land in Gaithersburg, Maryland for $13,600,000. Northtech had been
appraised at a value of $14,700,000 as of January 1, 1996.
Since the last appraisal, a tenant that occupies approximately
50% of the property had sold off a portion of its business,
restructured the balance, defaulted on its lease and announced its
intention to vacate the property at the expiration of its lease term
in 1999 unless its lease payments were reduced substantially. The
likelihood that in the near future the owner of Northtech would be
faced with reduced revenues and demands for capital and tenant
improvements from any tenant that would replace the defaulting tenant,
and the uncertain financial status of the incumbent tenant reduced the
market value of the property.
The Partnership realized approximately $13,079,000 from the
sale of Northtech, after accounting for closing costs and prorations
of approximately $521,000. The purchaser of Northtech has for three
years had a preexisting relationship with an affiliate of Birtcher
Investors, pursuant to which the purchaser had contracted with
Birtcher to locate, acquire and manage real property for the
purchaser's account. No broker was paid a commission as part of the
transaction. Since the sale price exceeded the January 1, 1993
appraised value ($12,900,000), pursuant to the 1993 Amendment of the
Partnership Agreement, the General Partner earned and has been paid a
property disposition fee of approximately $340,000 in connection with
the sale. The purchaser paid a net investment advisory fee of $52,350
to the affiliate of Birtcher Investors and has retained Birtcher
Property Services to manage the property.
The Partnership will distribute proceeds of the sale of
Northtech to the limited partners on February 28, 1997, together with
the Partnership's normal quarterly distribution. After paying the
property disposition fee and holding back approximately $1,000,000 to
replenish and increase the Partnership's reserves, the General Partner
currently estimates that the Partnership will distribute approximately
$11,700,000 to the limited partners, or approximately $184 per $1,000
investment.
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REAL ESTATE INCOME PARTNERS III
ITEM 5. OTHER EVENTS. (CONT'D.)
The large reserve fund is prudent because after the sale of
Flaircentre and Northtech, the Partnership's asset base is effectively
half its former size. The Partnership's remaining assets will
generate less cash flow, necessitating a larger reserve fund to cover
potential emergencies or demands for capital expenditures. Since
NorthTech generated approximately 68% of the cash flow that funded the
Partnership's regular operations and distributions for the year ended
December 31 1996, future distributions to limited partners of net cash
from operations are expected to be significantly reduced.
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REAL ESTATE INCOME PARTNERS III
SIGNATURES
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Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
REAL ESTATE INCOME PARTNERS III,
LIMITED PARTNERSHIP
By: BIRTCHER/LIQUIDITY By: BIRTCHER INVESTORS,
PROPERTIES a California limited partnership
(General Partner)
By: BIRTCHER INVESTMENTS,
a California general partnership,
General Partner of Birtcher Investors
By: BIRTCHER LIMITED,
a California limited partnership,
General Partner of Birtcher
Investments
By: BREICORP,
a California corporation,
formerly known as Birtcher
Real Estate Inc., General
Partner of Birtcher Limited
Date: January 31, 1997 By: /s/Robert M. Anderson
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Robert M. Anderson
Executive Director
BREICORP
By: LF Special Fund I, L.P.,
a California limited partnership
By: Liquidity Fund Asset Management, Inc.,
a California corporation, General
Partner of LF Special Fund I, L.P.
Date: January 31, 1997 By: /s/ Brent R. Donaldson
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Brent R. Donaldson
President
Liquidity Fund Asset Management, Inc.
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