<PAGE>
OFFER TO PURCHASE FOR CASH
LIMITED PARTNERSHIP DEPOSITARY UNITS
OF
AETNA REAL ESTATE ASSOCIATES, L.P.
AT
$8.00 NET CASH PER UNIT
BY
OAK INVESTORS, LLC
------------------------------------------------------
THE OFFER, WITHDRAWAL RIGHTS AND PRORATION PERIOD WILL
EXPIRE AT 12:00 MIDNIGHT, EASTERN TIME, ON
AUGUST 18, 2000, UNLESS THE OFFER IS EXTENDED.
------------------------------------------------------
Oak Investors, LLC, a Delaware limited liability company (the "Purchaser"
or "Oak"), hereby offers to purchase up to 1,000,000 Limited Partnership
Depositary Units including any rights attributable to claims, damages,
recoveries, including recoveries from any class action lawsuits, and causes of
action accruing to the ownership of such Limited Partnership Depositary Units
(collectively, "Units") in Aetna Real Estate Associates, L.P., a Delaware
limited partnership (the "Partnership"), at a purchase price of $8.00 net cash
per Unit, without interest, and less the amount of any cash distributions
declared or paid, including any return of capital made in cash with respect to
the Units after June 1, 2000 (the "Purchase Price"), upon the terms and subject
to the conditions set forth in this Offer to Purchase (the "Offer to Purchase")
and in the related Agreement of Sale, as each may be supplemented or amended
from time to time (which together constitute the "Offer"). The 1,000,000 Units
sought to be purchased pursuant to the Offer represent, to the best knowledge of
the Purchaser, approximately 7.9% of the Units outstanding as of the date of the
Offer.
THE OFFER TO PURCHASE IS NOT CONDITIONED UPON THE VALID TENDER OF ANY
MINIMUM NUMBER OF UNITS. IF MORE THAN 1,000,000 UNITS ARE VALIDLY TENDERED AND
NOT WITHDRAWN, THE PURCHASER WILL ACCEPT FOR PURCHASE UP TO 1,000,000 OF THE
TENDERED UNITS, ON A PRO RATA BASIS, SUBJECT TO THE TERMS AND CONDITIONS HEREIN,
SEE "TENDER OFFER--SECTION 13. CERTAIN CONDITIONS OF THE OFFER."
A HOLDER OF UNITS ("UNIT HOLDER") MAY TENDER ANY OR ALL UNITS OWNED BY SUCH
UNIT HOLDER.
FOR MORE INFORMATION OR FOR FURTHER ASSISTANCE PLEASE CALL:
Arlen Capital, LLC
1-800-891-4105
July 5, 2000
<PAGE>
SUMMARY OF THE OFFER
THE FOLLOWING IS A SUMMARY OF CERTAIN INFORMATION CONTAINED ELSEWHERE IN
THE OFFER TO PURCHASE AND AGREEMENT OF SALE. REFERENCE IS MADE TO, AND THIS
SUMMARY IS QUALIFIED IN ITS ENTIRETY BY, THE MORE DETAILED INFORMATION CONTAINED
ELSEWHERE IN THE OFFER TO PURCHASE AND AGREEMENT OF SALE. UNIT HOLDERS ARE URGED
TO READ THE OFFER TO PURCHASE AND AGREEMENT OF SALE IN THEIR ENTIRETY BEFORE
TENDERING THEIR UNITS.
- The Purchaser, Oak Investors, LLC, a Delaware limited liability company,
is offering to buy your Units. (See Section 11 - Certain Information Concerning
the Purchaser and Schedule 1 in the Offer to Purchase.)
- The Purchaser is offering to buy up to 1,000,000 Units. (See the
Introduction Section and Section 1 - Terms of the Offer in the Offer to
Purchase.)
- The Purchaser is offering to pay $8.00 in cash for each Unit tendered to
it. (See the Introduction Section in the Offer to Purchase.)
- The Purchaser is borrowing the money (up to $8,000,000) to pay for the
Units from Credit Suise First Boston Mortgage Capital, LLC. (See Section 12 -
Source of Funds in the Offer to Purchase.)
- You have until August 18, 2000 to decide whether or not to tender your
Units, unless the Offer is extended. (See the Introduction Section and Section 1
- Terms of the Offer in the Offer to Purchase.)
- The Offer can be extended at any time, and from time to time, by the
Purchaser. (See Section 5 - Extension of Tender Period; Termination; Amendment
in the Offer to Purchase.)
- If the Offer is extended, the Purchaser will make a public announcement
by press release and by the filing of an amendment to the tender offer filing
with the Securities and Exchange Commission ("Commission"). (See Section 5 -
Extension of Tender Period; Termination; Amendment in the Offer to Purchase.)
- The Offer is subject to certain conditions, some of which are:
- That the Units tendered to Purchaser will be transferred to
Purchaser.
- All consents, authorizations, orders and approvals, etc. are
obtained.
(See Section 13 - Certain Conditions of the Offer in the Offer to Purchase.)
- Units can be tendered by completing and signing the (i) Agreement of Sale
and (ii) Depositary Receipt For Certificate of Limited Partnership Interests
("Certificate") which you have in your, or is in your broker's, possession. ALL
OF THE SIGNATURES ON THE (i) AGREEMENT OF SALE AND (ii) CERTIFICATE MUST BE
MEDALLION GUARANTEED and sent to the Purchaser so that the Purchaser receives
them
<PAGE>
before August 18, 2000, unless that date is extended. (See Introduction
Section and Section 3 - Procedure for Tendering Units.)
- Tendered Units can be withdrawn on or before August 18, 2000, unless the
Offer is extended, and then until the new Expiration Date. Unless previously
accepted for payment, tenders may be withdrawn any time after September 5, 2000.
(See Section 4 - Withdrawal Rights in the Offer to Purchase.)
- Units not tendered will continue to have the same ownership percentage
and rights in the Partnership. (See Section 7 - Purpose and Effects of the
Offer.)
- The Units are not traded on an established public market. The Units may
be listed on a Matching Service. The Partnership disclosed that as of March 31,
2000 the Units had a net asset value of $16.41.
- QUESTIONS OR REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES OF THIS OFFER
TO PURCHASE OR THE AGREEMENT OF SALE MAY BE DIRECTED TO ARLEN CAPITAL, LLC (THE
"DEPOSITARY") BY CALLING THE TOLL-FREE INFORMATION LINE: 1-800-891-4105.
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Any Unit Holder desiring to tender any or all of the Unit Holder' s Units
should complete and sign the Agreement of Sale and Certificate in accordance
with the instructions in the Agreement of Sale and mail or deliver a fully
executed original of the Agreement of Sale and Certificate along with any other
required documents to the Purchaser at the address set forth on the back cover
of this Offer to Purchase, or request the Unit Holder's broker, dealer,
commercial bank, credit union, trust company or other nominee to effect the
transaction on their behalf.
NO PERSON HAS BEEN AUTHORIZED TO MAKE ANY RECOMMENDATION OR ANY
REPRESENTATION ON BEHALF OF THE PURCHASER OR TO PROVIDE ANY INFORMATION OTHER
THAN AS CONTAINED HEREIN OR IN THE AGREEMENT OF SALE. NO SUCH RECOMMENDATION,
INFORMATION OR REPRESENTATION MAY BE RELIED UPON AS HAVING BEEN AUTHORIZED.
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
<S> <C>
INTRODUCTION.........................................................................................1
OFFER TO PURCHASE....................................................................................5
Section 1. Terms of the Offer..............................................................5
Section 2. Proration; Acceptance for Payment and Payment for Units..................................5
Section 3. Procedures for Tendering Units...........................................................7
Valid Tender.....................................................................7
Backup Federal Income Tax Withholding............................................7
Tenders by Beneficial Holders....................................................7
Signature Guarantees.............................................................7
Appraisal Rights.................................................................8
Other Requirements...............................................................8
Determination of Validity; Rejection of Units; Waiver of Defects;
No Obligation to Give Notice of Defects.....................................8
Section 4. Withdrawal Rights........................................................................9
Section 5. Extension of Tender Period; Termination; Amendment.......................................9
Section 6. Certain Tax Consequences................................................................10
Consequences to Tendering Unit Holder...........................................10
Consequences to a Non-Tendering Unit Holder.....................................12
Section 7. Purpose and Effects of the Offer........................................................12
Purpose of the Offer............................................................12
Certain Restrictions on Transfer of Units.......................................13
Effect on Trading Market and Price Range of the Units...........................13
Section 8. Future Plans............................................................................14
Section 9. Past Contacts and Negotiations With General Partner.....................................14
Section 10. Certain Information Concerning the Business of the Partnership and Related Matters.....16
Business........................................................................16
Distributions...................................................................16
Selected Financial Information..................................................17
Litigation......................................................................18
Section 11. Certain Information Concerning the Purchaser...........................................19
Section 12. Source of Funds........................................................................20
-i-
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Section 13. Certain Conditions of the Offer........................................................20
Section 14. Certain Legal Matters and Required Regulatory Approvals................................22
General.........................................................................22
Antitrust.......................................................................22
State Takeover Laws.............................................................23
Section 15. Fees and Expenses......................................................................23
Section 16. Miscellaneous..........................................................................23
SCHEDULE 1.......................................................................................S-1-1
SCHEDULE 2.......................................................................................S-2-1
</TABLE>
-ii-
<PAGE>
To the Holders of Limited Partnership Depositary Units
of Aetna Real Estate Associates, L.P.
INTRODUCTION
Oak Investors, LLC, a Delaware limited liability company (the "Purchaser"
or "Oak"), hereby offers to purchase up to 1,000,000 Limited Partnership
Depositary Units including any rights attributable to claims, damages,
recoveries, including recoveries from any class action lawsuits, and causes of
action accruing to the ownership of such Limited Partnership Depositary Units
(collectively, "Units") of Aetna Real Estate Associates, L.P., a Delaware
limited partnership (the "Partnership"), 242 Trunbull Street, Hartford,
Connecticut 06103, Telephone No. (860) 275-2178, at a purchase price of $8.00
net cash per Unit, without interest, less the amount of any cash distributions
declared or paid, including any cash return of capital, if any, (collectively
hereinafter referred to as "Distributions") made or declared with respect to the
Units after June 1, 2000 (the "Purchase Price"), upon the terms and subject to
the conditions set forth in this Offer to Purchase and in the related Agreement
of Sale (which together constitute the "Offer"). The 1,000,000 Units sought to
be purchased pursuant to the Offer represent, to the best knowledge of the
Purchaser, approximately 7.9% of the Units outstanding as of the date of the
Offer.
We encourage you to consider the following factors:
- Holders of Units ("Unit Holders") who tender their Units will be giving up
the opportunity to participate in any future potential benefits represented
by ownership of Units, including, for example, the right to participate in
any future distributions of cash or property, whether from operations, the
proceeds of a sale of the Partnership's assets or in connection with any
future liquidation of the Partnership. However, there is no guarantee of
future results of the Partnership and investment in the Partnership.
- Although the Purchaser cannot predict the future value of the Partnership's
assets on a per Unit basis, the Purchase Price could differ significantly
from the net proceeds that would be recognized on a per Unit basis from the
sale of the Partnership's assets or that may be realized upon a future
liquidation of the Partnership.
- The tax consequences of the Offer to a particular Unit Holder may be
different from those of other Unit Holders and we urge you to consult your
own tax advisors in connection with the Offer.
- The Partnership in a Quarterly Report on Form 10-Q dated May 15, 2000 (the
"1st Quarter 10-Q") and filed on the same date with the Commission stated:
"The Net Asset Value of each of the Partnership's Units, based upon
quarterly independent appraisals, decreased to $16.41 at March 31, 2000
from $18.14 at March 31, 1999. The decrease in Net Asset Value per Unit is
primarily attributable to the distributing sales proceeds of $3.25 per
Unit, partially offset by significant increases in the appraised values of
certain of the Partnership's properties, including Summit Village
Apartments, Village Square and Oakland Pointe Shopping Center. The
increase in appraised value of Summit Village is a result of an
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increase in projected market rents. The increase in the appraised value
of Village Square and Oakland Pointe Shopping Center is primarily due
to improved occupancy and increases in market rent assumptions. Leasing
at Village Square has improved with the conversion from retail to
primarily office use."
- The Purchaser is making the Offer with a view towards making a profit.
Accordingly, there may be a conflict between the desire of the Purchaser to
acquire the Units at a low price and the desire of the Unit Holders to sell
the Units at a high price. No independent person has been retained to
evaluate or render any opinion with respect to the fairness of the $8.00
Purchase Price and no representation is made as to such fairness. Other
measures of value may be relevant to a Unit Holder and all Unit Holders are
urged to carefully consider all of the information contained in the Offer
to Purchase and Agreement of Sale and to consult with their own advisors
(tax, financial or otherwise) in evaluating the terms of the Offer before
deciding whether to tender their Units.
- The Purchaser is not using an independent Depositary to process the Offer,
but is using its Manager, Arlen Capital, LLC ("Arlen") as such. There is,
therefore, a conflict of interest between Arlen's duties as Depositary and
Arlen's duties as the Manager of the Purchaser. Arlen has committed that it
will, if faced with any such conflict, act in the best interests of the
selling Unit Holders. Arlen will also have possession of the selling Unit
Holders' Agreements of Sale, which it has agreed to hold for the benefit of
the selling Unit Holders until the sale of Units represented by such
Agreements of Sale has been completed.
Unit Holders may no longer wish to continue with their investment in the
Partnership and might consider accepting the Offer for one or more of the
following reasons:
- There is no established public trading market for the Units. The
Partnership's Units may be listed on certain matching services (the
"Matching Programs") currently maintained by various broker-dealers. These
Matching Programs are computerized listing systems that put individuals who
wish to sell listed securities in contact with persons who wish to buy such
securities. Neither the broker-dealers nor the General Partners are
required to list the Partnership's Units on the Matching Program. There can
be no assurance that any Units listed on the Matching Program will be sold.
(See the Partnership's Annual Report on Form 10-K for the fiscal year ended
December 31, 1999 ("the 1999 10-K")). Unit Holders who desire resale
liquidity may wish to consider the Offer. The Offer affords a significant
number of Unit Holders with an opportunity to dispose of their Units for
cash, which otherwise might not be available to them. The Purchase Price is
not intended to represent either the fair market value of a Unit or the
Partnership's assets on a per Unit basis.
- The Offer may be attractive to certain Unit Holders who wish in the future
to avoid the continued additional expense, delay and complication in filing
income tax returns which result from the ownership of the Units.
- The Offer provides Unit Holders with the opportunity to liquidate their
Units and to reinvest the proceeds in other investments should they desire
to do so.
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- The Offer will provide Unit Holders with an immediate opportunity to
liquidate their investment in the Partnership without the usual transaction
costs associated with secondary market sales.
If you wish to sell some or all of your Units now, please read carefully
the Offer to Purchase and the Agreement of Sale. All you need to do is (1) sign
your Depositary Receipt For Certificate of Limited Partnership Interests
("Certificate") which you or your broker should have possession of, (2) have the
signature on the Certificate Medallion Guaranteed, (3) complete the Agreement of
Sale in accordance with the instructions provided therein, (4) have your
signature on the Agreement of Sale Medallion Guaranteed, and (5) return both the
Certificate and the Agreement of Sale to the Purchaser in the pre-addressed
return envelope. If you desire to accept this Offer, please carefully follow the
instructions on the Agreement of Sale. Errors will delay and possibly prevent
acceptance of your tender of the Units.
If, prior to the Expiration Date, the Purchaser increases the consideration
offered to Unit Holders pursuant to the Offer, such increased consideration will
be paid with respect to all Units that are purchased pursuant to the Offer,
whether or not such Units were tendered prior to such increase in consideration.
The Offer is being made by the Purchaser as a speculative investment based
upon the belief that the Units represent an attractive investment at the price
offered based upon, in part, the expected liquidation of the Partnership's
assets. The purpose of the Offer is to allow the Purchaser to benefit from any
one combination of the following: (i) any cash distributions from Partnership
operations in the ordinary course of business; (ii) distributions, if any, of
net proceeds from the liquidation of any properties after the Partnership has
satisfied its liabilities; (iii) any cash from any redemption of the Units by
the Partnership; and (iv) sale of the Units.
The Offer is not conditioned upon the valid tender of any minimum number of
the Units. If more than 1,000,000 Units, are validly tendered and not withdrawn,
the Purchaser will accept up to 1,000,000 of the tendered Units for purchase on
a pro rata basis, subject to the terms and conditions herein. See "Tender
Offer--Section 13. Certain Conditions of the Offer." The Purchaser expressly
reserves the right to terminate the Offer at anytime and to waive any or all of
the conditions of the Offer, although the Purchaser does not presently intend to
waive any such conditions.
The Partnership is subject to the information and reporting requirements of
the Securities Exchange Act of 1934, as amended ("Exchange Act"), and in
accordance therewith is required to file reports and other information with the
Commission relating to its business, financial condition and other matters. Such
reports and other information are available on the Commission's Electronic Data
Gathering and Retrieval System (EDGAR), at its internet website at
www.sec.gov.com and may be inspected at the public reference facilities
maintained by the Commission at room 1024, Judiciary Plaza, 450 Fifth Street,
N.W., Washington, D.C. 20549, and is available for inspection and copying at the
regional offices of the Commission located in Northwestern Atrium Center, 500
West Madison Street, Suite 1400, Chicago, Illinois 60661 and at 7 World Trade
Center, 13th Floor, New York, New York 10048. Copies of such material can also
be obtained from the Public Reference Room of the Commission in Washington, D.C.
at prescribed rates.
The Purchaser has filed with the Commission a Tender Offer Statement on
Schedule TO (including exhibits) pursuant to Rule 14d-3 of the General Rules and
Regulations under the Exchange Act, which
3
<PAGE>
provides certain additional information with respect to the Offer. Such
Statements and any amendments thereto, including exhibits, may be inspected
and copies may be obtained from the Commission in the manner specified above.
According to publicly available information, there were 12,724,547 Units
issued and outstanding at March 1, 2000, held by approximately 17,000 Unit
Holders. The Purchaser currently owns 764,955 Units which is approximately 5.14%
of the outstanding Units.
Information contained in this Offer to Purchase which relates to, or
represents statements made by the Partnership or the General Partner, has been
derived from information provided in reports and other information filed with
the Commission by the Partnership and General Partner.
Unit Holders are urged to read this Offer to Purchase and the accompanying
Agreement of Sale carefully before deciding whether to tender their Units.
4
<PAGE>
OFFER TO PURCHASE
SECTION 1. TERMS OF THE OFFER. Upon the terms and subject to the conditions
of the Offer, the Purchaser will accept for payment and pay for up to 1,000,000
Units that are validly tendered on or prior to the Expiration Date and not
withdrawn in accordance with Section 4 of this Offer to Purchase. The term
"Expiration Date" shall mean 12:00 midnight, Eastern Time, on August 18, 2000,
unless and until the Purchaser shall have extended the period of time for which
the Offer is open, in which event the term "Expiration Date" shall mean the
latest date on which the Offer, as so extended by the Purchaser shall expire.
Subject to any approval rights of the General Partner under the terms of
the Partnership Agreement, the Purchaser reserves the right to transfer or
assign, (in whole or in part from time to time), to one or more of the
Purchaser's affiliates, the right to purchase all or any portion of the Units
tendered pursuant to the Offer. Any such transfer or assignment will not relieve
the Purchaser of its obligations under the Offer or prejudice the rights of
tendering Unit Holders to receive payment for Units validly tendered and
accepted for payment pursuant to the Offer.
The Offer is conditioned on satisfaction of certain conditions. See "Tender
Offer--Section 13. Certain Conditions of the Offer," which sets forth in full
the conditions of the Offer. The Purchaser reserves the right (but shall not be
obligated) to waive any or all of such conditions. If any or all of such
conditions have not been satisfied or waived by the Expiration Date, the
Purchaser reserves the right (but shall not be obligated) to (i) decline to
purchase any of the Units tendered, (ii) terminate the Offer and return all
tendered Units to tendering Unit Holders, (iii) waive all the unsatisfied
conditions and, subject to complying with applicable rules and regulations of
the Commission, purchase all Units validly tendered, (iv) extend the Offer and,
subject to the right of Unit Holders to withdraw Units until the Expiration
Date, retain the Units that have been tendered during the period or periods for
which the Offer is extended or (v) to otherwise amend the Offer.
The Offer to Purchase and the related Agreement of Sale are being mailed at
the Purchaser's expense to Unit Holders or beneficial owners of Units (in case
of Individual Retirement Accounts (IRA) and qualified plans).
SECTION 2. PRORATION; ACCEPTANCE FOR PAYMENT AND PAYMENT FOR UNITS. If not
more than 1,000,000 Units are validly tendered and not properly withdrawn prior
to the Expiration Date the Purchaser, upon the terms and subject to the
conditions of the Offer, will accept for payment all such Units so tendered.
If more than 1,000,000 Units are validly tendered and not properly
withdrawn on or prior to the Expiration Date, the Purchaser, upon the terms and
subject to the conditions of the Offer, will accept for payment 1,000,000 Units
so tendered, on a pro rata basis with appropriate adjustments to avoid tenders
of fractional Units and purchases that would violate transfer restrictions
contained in the Partnership's Revised Limited Partnership Agreement
("Partnership Agreement").
In the event that proration is required, because of the difficulty of
immediately determining the precise number of Units to be accepted, the
Purchaser will announce the final results of proration as soon as practicable,
but in no event later than five to ten business days following the Expiration
Date. Subject to the Purchaser's obligations under Rule 14e-1(c) under the
Exchange Act to pay Unit Holders the
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Purchase Price in respect of Units tendered or to return those Units
promptly after termination or withdrawal of the Offer, the Purchaser will not
pay for any Units tendered until after the final proration results have been
determined.
Upon the terms and subject to the conditions of the Offer (including, if
the Offer is extended or amended, the terms and conditions of any extension or
amendment), the Purchaser will accept for payment, and will pay for, Units
validly tendered and not withdrawn in accordance with Section 4 below, as
promptly as practicable following the Expiration Date. Upon written notification
by the Partnership that the Units purchased by the Purchaser have been approved
for transfer to it or that the selling Unit Holder's address has been changed to
Purchaser's address, the Purchaser will pay for the Units. In all cases, payment
for Units purchased pursuant to the Offer will be made only after the Expiration
Date and timely receipt by the Purchaser of a properly completed and duly
executed Agreement of Sale, Certificate and any other documents required by the
Agreement of Sale.
For purposes of the Offer, the Purchaser shall be deemed to have accepted
for payment (and thereby purchased) tendered Units when, as and if the Purchaser
gives oral or written notice to the Depositary of the Purchaser's acceptance for
payment of such Units pursuant to the Offer. Upon the terms and subject to the
conditions of the Offer, payment for Units purchased pursuant to the Offer will
in all cases be made by the deposit of the Purchase Price with the Depositary
who will act as agent for the purpose of receiving payment from the Purchaser
and transmitting payment to the tendering Unit Holders. Under no circumstances
will interest be paid on the Purchase Price for any Unit by reason of any delay
in making such payment.
If any tendered Units are not purchased for any reason, the Agreement of
Sale with respect to such Units not purchased will be of no force or effect. If,
for any reason whatsoever, acceptance for payment of, or payment for, any Units
tendered pursuant to the Offer is delayed, then, without prejudice to the
Purchaser's rights under Section 13 (but subject to compliance with Rule
14e-1(c) under the Exchange Act), the Purchaser may retain tendered Units,
subject to any limitations of applicable law, and such Units may not be
withdrawn except to the extent that the tendering Unit Holders are entitled to
withdrawal rights as described in Section 4.
If, prior to the Expiration Date, the Purchaser shall increase the
consideration offered to Unit Holders pursuant to the Offer, such increased
consideration shall be paid for all Units accepted for payment pursuant to the
Offer, whether or not such Units were tendered prior to such increase.
The Purchaser reserves the right to transfer or assign, at any time and
from time to time, in whole or in part, to one or more affiliates or direct or
indirect subsidiaries of the Purchaser, the right to purchase Units tendered
pursuant to the Offer, but no such transfer or assignment will relieve the
Purchaser of its obligations under the Offer or prejudice the rights of
tendering Unit Holders to receive payment for Units validly tendered and
accepted for payment pursuant to the Offer.
SECTION 3. PROCEDURES FOR TENDERING UNITS.
VALID TENDER. For Units to be validly tendered pursuant to the Offer, a
properly completed and duly executed Agreement of Sale and Certificate must be
received by the Purchaser at its address set forth on
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the back cover of this Offer to Purchase on or prior to the Expiration Date. A
Unit Holder may tender any or all Units owned by such Unit Holder.
In order for a tendering Unit Holder to participate in the Offer, Units
must be validly tendered and not withdrawn prior to the Expiration Date, which
is 12:00 midnight, Eastern Time, on August 18, 2000, unless extended.
Although the Purchaser has included a pre-addressed envelope with this
Offer for the convenience of Unit Holders, the method of delivery of the
Agreement of Sale and Certificate is at the option and sole risk of the
tendering Unit Holder, and the delivery will be deemed made only when actually
received by the Purchaser. If delivery is by mail, registered mail with return
receipt requested is recommended. In all cases, sufficient time should be
allowed to ensure timely delivery.
BACKUP FEDERAL INCOME TAX WITHHOLDING. To prevent the possible application
of backup federal income tax withholding with respect to payment of the Purchase
Price for Units purchased pursuant to the Offer, a tendering Unit Holder must
verify such Unit Holder's correct taxpayer identification number or social
security number, as applicable, and make certain certifications that the Unit
Holder is not subject to backup federal income tax withholding.
The Unit Holder is required to certify in the Agreement of Sale, under
penalties of perjury, that (i) the tax identification number shown on the
Agreement of Sale is the Unit Holder's correct taxpayer identification number;
and (ii) the Unit Holder is not subject to backup withholding either because the
Unit Holder has not been notified by the Internal Revenue Service (the "IRS")
that the Unit Holder is subject to backup withholding as a result of failure to
report all interest or dividends, or the IRS has notified the Unit Holder that
the Unit Holder is no longer subject to backup withholding.
The Unit Holder is also required to certify in the Agreement of Sale, under
penalties of perjury, that the Unit Holder, if an individual, is not a
nonresident alien for purposes of U.S. income taxation, and if not an
individual, is not a foreign corporation, foreign partnership, foreign trust, or
foreign estate (as those terms are defined in the Internal Revenue Code and
Income Tax Regulations). The Unit Holder understands that this certification may
be disclosed to the IRS by the Purchaser and that any false statements contained
herein could be punished by fine, imprisonment, or both.
TENDERS BY BENEFICIAL HOLDERS. Tenders of Units made by beneficial holders
of Units will be deemed an instruction to brokers, dealers, commercial banks,
trust companies, custodian and similar persons or entities whose names, or the
names of whose nominees, appear as the registered owner of such Units, to tender
such Units on behalf of such beneficial holder. A tender of Units can only be
made by the registered owner of such Units.
SIGNATURE GUARANTEES. The signature(s) on the (i) Agreement of Sale and
(ii) the Certificate must be Medallion Guaranteed by a commercial bank, savings
bank, credit union, savings and loan association or trust company having an
office, branch or agency in the United States, a brokerage firm that is a member
firm of a registered national securities exchange or a member of the National
Association of Securities Dealers, Inc., as provided in the Agreement of Sale.
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APPRAISAL RIGHTS. Unit Holders will not have any appraisal or dissenter's
rights with respect to or in connection with the Offer.
OTHER REQUIREMENTS. By executing and delivering the Agreement of Sale, a
tendering Unit Holder irrevocably appoints the Purchaser and/or designees of the
Purchaser and each of them as such Unit Holder's proxies, with full power of
substitution, in the manner set forth in this Agreement of Sale.
By executing and delivering the Agreement of Sale, a tendering Unit Holder
also irrevocably assigns to the Purchaser and its assignees, all of the right,
title and interest, free and clear of all liens and encumbrances of any kind,
such Units in the Partnership tendered and purchased pursuant to the Offer,
including, without limitation, such Unit Holder's right, title and interest in
and to any and all Distributions made by the Partnership after June 1, 2000 in
respect of the Units tendered by such Unit Holder and accepted for payment by
the Purchaser, regardless of the fact that the record date for any such
Distribution may be a date prior to June 1, 2000. The Purchaser will seek to be
admitted to the Partnership as an assignee and/or a substitute limited partner
upon consummation of the purchase of Unit Holder's Units pursuant to the Offer
and it is the intention of the Unit Holder that upon consummation of the
purchase of Unit Holder's Units pursuant to the Offer that the Purchaser succeed
to the Unit Holder's interest as an assignee and/or a substitute limited partner
of the Partnership in such Unit Holder's place.
By executing an Agreement of Sale as set forth above, a tendering Unit
Holder also agrees that notwithstanding any provisions of the Partnership's
Partnership Agreement which provide that any transfer is not effective until a
date subsequent to the date of any transfer of Units under the Offer, the
Purchase Price shall be reduced by any Distributions with respect to the Units
after June 1, 2000.
DETERMINATION OF VALIDITY; REJECTION OF UNITS; WAIVER OF DEFECTS; NO
OBLIGATION TO GIVE NOTICE OF DEFECTS. All questions as to the form of documents
and validity, eligibility (including time of receipt) and acceptance for payment
of any tender of Units will be determined by the Purchaser, in its sole
discretion, which determination will be final and binding on all parties. The
Purchaser reserves the absolute right to reject any or all tenders determined by
it not to be in proper form or the acceptance of or payment for which may, in
the opinion of the Purchaser or Purchaser's counsel, be unlawful. The Purchaser
also reserves the absolute right to waive any of the conditions of the Offer or
any defect or irregularity in any tender of Units of any particular Unit Holder
whether or not similar defects or irregularities are waived in the case of other
Unit Holders.
The Purchaser's interpretation of the terms and conditions of the Offer
(including the Agreement of Sale and the instructions thereto) will be final and
binding. No tender of Units will be deemed to have been validly made until all
defects and irregularities with respect to such tender have been cured or
waived. Neither the Purchaser nor any of its affiliates or assigns, if any, or
any other person will be under any duty to give any notification of any defects
or irregularities in tenders or incur any liability for failure to give any such
notification.
The Purchaser's acceptance for payment of Units tendered pursuant to any of
the procedures described above will constitute a binding agreement between the
tendering Unit Holder and the Purchaser upon the terms and subject to the
conditions of the Offer.
8
<PAGE>
SECTION 4. WITHDRAWAL RIGHTS. Except as otherwise provided in this Section
4, tenders of Units made pursuant to the Offer are irrevocable. Units tendered
pursuant to the Offer may be withdrawn at any time on or prior to the Expiration
Date and, unless previously accepted for payment as provided herein, may also be
withdrawn at any time after September 5, 2000 (or such later date as may apply
in case the Offer is extended).
If, for any reason whatsoever, acceptance for payment of any Units tendered
pursuant to the Offer is delayed, or the Purchaser is unable to accept for
payment or pay for Units tendered pursuant to the Offer, then, without prejudice
to the Purchaser's rights set forth herein, the Purchaser may retain tendered
Units and such Units may not be withdrawn, except to the extent that the
tendering Unit Holder is entitled to and duly exercises withdrawal rights as
described in this Section 4. Any such delay will be by an extension of the Offer
to the extent required by law.
In order for a withdrawal to be effective, a written notice of withdrawal
must be timely received by the Depositary at its address set forth on the last
page of this Offer to Purchase. Any such notice of withdrawal must specify the
name of the person who tendered the Units to be withdrawn, with the signature of
such person Medallion Guaranteed in the same manner as the signature in the
Agreement of Sale, the number of Units to be withdrawn, and (if the Agreement of
Sale has been delivered) the name of the Unit Holder as set forth in the
Agreement of Sale. Withdrawals of Units may not be rescinded. Any Units properly
withdrawn will be deemed not validly tendered for purposes of the Offer, but may
be retendered at any subsequent time prior to the Expiration Date by following
any of the procedures described in Section 3.
All questions as to the form and validity (including time of receipt) of
notices of withdrawal will be determined by the Purchaser, in its sole
discretion, whose determination will be final and binding. Neither the Purchaser
nor any of its affiliates or assigns, if any, or any other person will be under
any duty to give any notification of any defects or irregularities in any notice
of withdrawal or incur any liability for failure to give any such notification.
SECTION 5. EXTENSION OF TENDER PERIOD; TERMINATION; AMENDMENT. The
Purchaser expressly reserves the right, in its sole discretion, at any time and
from time to time, (i) to extend the period of time during which the Offer is
open and thereby delay acceptance for payment of, and the payment for, any Units
by giving oral or written notice of such extension, (ii) to terminate the Offer
and not accept for payment any Units not therefore accepted for payment or paid
for, by giving oral or written notice of such termination, upon the failure to
satisfy any of the conditions specified in Section 13, (iii) to delay the
acceptance for payment of, or payment for, any Units not heretofore accepted for
payment or paid for, by giving oral or written notice of such termination or
delay, and (iv) to amend the Offer in any respect (including, without
limitation, by increasing or decreasing the consideration offered or the number
of Units being sought in the Offer or both) by giving oral or written notice of
such amendment. Any extension, termination or amendment will be followed as
promptly as practicable by public announcement, the announcement in the case of
an extension to be issued no later than 9:00 a.m., Eastern Time, on the next
business day after the previously scheduled Expiration Date, in accordance with
the public announcement requirement of Rule 14e-1(d) under the Exchange Act.
If the Purchaser makes a material change in the terms of the Offer or the
information concerning the Offer or waives a material condition of the Offer,
the Purchaser will extend the Offer to the extent
9
<PAGE>
required by Rules 14d-4(c) and 14d-6(d) under the Exchange Act. The minimum
period during which an offer must remain open following a material change in the
terms of the offer or of information concerning the offer, other than a change
in price or a change in percentage of securities sought, will depend upon the
facts and circumstances, including the relative materiality of the change in the
terms or information. With respect to a change in price or a change in
percentage of securities sought (other than an increase of not more than 2% of
the securities sought), however, a minimum ten business day period is generally
required to allow for adequate dissemination to security holders and for
investor response. As used in this Offer, "business day" means any day other
than a Saturday, Sunday or a federal holiday, and consists of the time period
from 12:01 a.m. through 12:00 midnight, Eastern Time.
SECTION 6. CERTAIN TAX CONSEQUENCES.
The following is a summary of certain federal income tax consequences of a
sale of Units pursuant to the Offer assuming that the Partnership is a
partnership for federal income tax purposes and that it is not a "publicly
traded partnership" as defined in Section 7704 of the Internal Revenue Code of
1986, as amended (the "Code"). This summary is based on the Code, applicable
Treasury Regulations thereunder, administrative rulings, practice and procedures
and judicial authorities as of the date of the Offer. All of the foregoing are
subject to change, and any such change could affect the continuing accuracy of
this summary. This summary does not address all aspects of federal income
taxation that may be relevant to a particular Unit Holder in light of such Unit
Holder's specific circumstances, or that may be relevant to Unit Holders subject
to special treatment under the federal income tax laws (for example, foreign
persons, dealers in securities, banks, insurance companies and tax-exempt
entities), nor does it address any aspect of state, local, foreign or other tax
laws. Sales of Units pursuant to the Offer will be taxable transactions for
federal income tax purposes, and may also be taxable transactions under
applicable state, local, foreign and other tax laws. EACH UNIT HOLDER SHOULD
CONSULT HIS OR HER TAX ADVISOR AS TO THE PARTICULAR TAX CONSEQUENCES TO SUCH
UNIT HOLDER OF SELLING UNITS PURSUANT TO THE OFFER, INCLUDING, WITHOUT
LIMITATION, FEDERAL, STATE AND LOCAL TAX CONSEQUENCES.
CONSEQUENCES TO TENDERING UNIT HOLDER. A Unit Holder will recognize gain or
loss on a sale of Units pursuant to the Offer equal to the difference between
(i) the Unit Holder's "amount realized" on the sale and (ii) the Unit Holder's
adjusted tax basis in the Units sold. The "amount realized" with respect to a
Unit sold pursuant to the Offer will be a sum equal to the amount of cash
received by the Unit Holder for the Unit plus the amount of Partnership
liabilities allocable to the Unit (as determined under Code Section 752). The
amount of a Unit Holder's adjusted tax basis in Units sold pursuant to the Offer
will vary depending upon the Unit Holder's particular circumstances and will be
affected by allocations of Partnership taxable income or loss to a Unit Holder
with respect to such Units, and distributions to a Unit Holder. In this regard,
tendering Unit Holders will be allocated a pro rata share of the Partnership's
taxable income or loss with respect to Units sold pursuant to the Offer through
the last day of the month preceding the effective date of the sale.
Subject to Code Section 751 (discussed below), the gain or loss recognized
by a Unit Holder on a sale of a Unit pursuant to the Offer generally will be
treated as a capital gain or loss if the Unit was held by the Unit Holder as a
capital asset. Changes to the federal income tax laws in recent years modified
applicable capital gain rates and holding periods. Gain with respect to Units
held for more than one year will be taxed at long-term capital gain rates not
exceeding 20 percent. Gain with respect to Units held
10
<PAGE>
one year or less will be taxed at ordinary income rates, up to a maximum rate of
39.6 percent. To the extent of depreciation recapture of previously deducted
straight-line depreciation with respect to real property, a maximum rate of 25
percent is imposed (assuming eligibility for long-term capital gain treatment).
A portion of the gain realized by a Unit Holder with respect to the disposition
of the Units may be subject to this maximum 25 percent rate to the extent that
the gain is attributable to depreciation recapture inherent in the properties of
the Partnership.
Capital losses are deductible only to the extent of capital gains, except
that non-corporate taxpayers may deduct up to $3,000 of capital losses in excess
of the amount of their capital gains against ordinary income. Excess capital
losses generally can be carried forward to succeeding years (a corporation's
carry forward period is five years and non-corporate taxpayer can carry forward
such capital losses indefinitely). In addition, corporations (but not
non-corporate taxpayers) are allowed to carry back excess capital losses to the
three preceding taxable years.
A portion of Unit Holder's gain or loss on a sale of a Unit pursuant to the
Offer may be treated as ordinary income or loss. Such portion will be determined
by allocating a Unit Holder's amount realized for a Unit between amounts
received in exchange for all or a part of the Unit Holder's interest in the
Partnership attributable to "Section 751 items" and non-Section 751 items.
Section 751 items include "inventory items" and "unrealized receivables"
(including depreciation recapture) as defined in Code Section 751. The
difference between the portion of the Unit Holders amount realized that is
allocable to Section 751 items and the portion of the Unit Holder's adjusted tax
basis in the Units sold that is so allocable will be treated as ordinary income
or loss. The difference between the Unit Holder's remaining amount realized and
adjusted tax basis will be treated as capital gain or loss assuming the Units
were held by the Unit Holder as a capital asset.
Under Code Section 469, a non-corporate taxpayer or personal service
corporation can deduct passive activity losses in any taxable year only to the
extent of such person's passive activity income for such year. Closely held
corporations may offset passive activity losses against passive activity income
and active income, but may not offset such losses against portfolio income. If a
Unit Holder is subject to these restrictions and has unused passive losses from
prior years, such losses will generally become available upon a sale of Units,
provided the Unit Holders sells all of his or her Units. If a Unit Holder does
not sell all of his or her Units, the deductibility of such losses would
continue to be subject to the passive activity loss limitation until the Unit
Holder sell his or her remaining Units.
Gain realized by a foreign Unit Holder on a sale of a Unit pursuant to the
Offer will be subject to federal income tax. Under Code Section 1445 of the
Code, the transferee of a partnership interest held by a foreign person is
generally required to deduct and withhold a tax equal to 10% of the amount
realized on the disposition. The Purchaser will withhold 10% of the amount
realized by a tendering Unit Holder form the Purchase Price payable to such Unit
Holder unless the Unit Holder properly completes and signs the Agreement of Sale
certifying the accuracy of the Unit Holder's TIN and address, and that such Unit
Holder is not a foreign person. Amounts withheld are creditable against a
foreign Unit Holder's federal income tax liability. If amounts withheld are in
excess of such liability, a refund can be obtained.
A Unit Holder who tenders Units must file an information statement with his
or her federal income tax return for the year of the sale which provides the
information specified in Treasury Regulation Section
11
<PAGE>
1.751-1(a)(3). The selling Unit Holder must also notify the Partnership of the
date of the transfer and the names, addresses and tax identification numbers of
the transferors and transferees within 30 days of the date of the transfer (or,
if earlier, January 15 of the following calendar year).
CONSEQUENCES TO A NON-TENDERING UNIT HOLDER. The Purchaser anticipates that
a Unit Holder who does not tender his or her Units will not realize any material
federal income tax consequences as a result of the decision not to tender.
SECTION 7. PURPOSE AND EFFECTS OF THE OFFER.
PURPOSE OF THE OFFER. The Purchaser is making the Offer for investment
purposes only (See Section 8 --"Future Plans" and Section 9 -- "Past Contacts
and Negotiations With General Partner") with a view towards making a profit. The
Purchaser's intent is to acquire the Units at a discount to the value that the
Purchaser might ultimately realize from owning the Units.
The Offer is being made by the Purchaser as a speculative investment based
upon the belief that the Units represent an attractive investment at the price
offered based upon, in part, the remaining assets of the Partnership. The
purpose of the Offer is to allow the Purchaser to benefit from any one
combination of the following: (i) any cash distributions from Partnership
operations in the ordinary course of business; (ii) distributions, if any, of
net proceeds from the liquidation of any properties after the Partnership has
satisfied its liabilities; (iii) any cash from any redemption of the Units by
the Partnership; and (iv) sale of the Units.
The Purchaser established the Purchase Price of $8.00 per Unit based on a
number of factors, including (i) the illiquid nature of the investment and (ii)
the costs to the Purchaser associated with acquiring the Units ("Factors").
The Purchase Price represents the price at which the Purchasers are willing
to purchase Units. No independent person has been retained by the Purchaser to
evaluate or render any opinion with respect to the fairness of the Purchase
Price to the Seller's and no representation is made as to such fairness. The
Purchaser urges those Unitholders that are considering tendering their Units
pursuant to the Offer to first consult with their own advisors (e.g., tax,
financial or otherwise) in evaluating the terms of the Offer before deciding
whether or not to tender Units.
The Purchaser is offering to purchase Units which are a relatively illiquid
investment and are not offering to purchase the Partnership's underlying assets.
Consequently, the Purchaser does not believe that the underlying asset value of
the Partnership is solely determinative in arriving at the Purchase Price.
Nevertheless, using publicly available information concerning the Partnership
contained in the 1999 10-K and the 1st Quarter 10-Q the Purchaser used an
estimated asset value to derive an estimated market value for the Units solely
for purposes of formulating their Offer.
In determining the estimated value of the Units the Purchaser considered
the Factors set forth above and (i) the Net Asset Value calculated by the
Partnership based on the Partnership's appraisals, (ii) the estimated current
net operating income in accordance with the Partnership's financial statements,
(iii) the Partnership's current assets exclusive of its properties, which amount
was then reduced by (z) the Purchaser's estimate of the hypothetical costs to
liquidate properties and the Partnership.
12
<PAGE>
Other measures of value may be relevant to a Unit Holder and all Unit
Holders are urged to carefully consider all of the information contained in the
Offer to Purchase and Agreement of Sale and to consult with their own advisors
(tax, financial or otherwise) in evaluating the terms of the Offer before
deciding whether to tender Units. The Offer is being made as a speculative
investment by the Purchaser based on its belief that there is inherent
underlying value in the assets of the Partnership.
The General Partner disclosed in its 1999 10-K filed with the Commission
the following information with regard to trading of Units:
There is no established public trading market for the Units. The
Registrant's Units are listed on certain matching services (the
"Matching Programs") currently maintained by various broker-dealers.
These Matching Programs are computerized listing systems that put
individuals who wish to sell listed securities in contact with persons
who wish to buy such securities. Neither the broker-dealers nor the
General Partners are required to list the Registrant's Units on the
Matching Program. There can be no assurance that any Units listed on
the Matching Program will be sold.
CERTAIN RESTRICTIONS ON TRANSFER OF UNITS. The Partnership Agreement
restricts transfers of Units if a transfer, (a) when considered with all other
transfers during the same applicable twelve month period, would cause a
termination of the Partnership for federal or applicable state income tax
purposes, (b) would prevent the Partnership from being taxed as a partnership
for federal income tax purposes, (c) if state Blue Sky laws would be violated,
and if prior required government regulatory consent was not obtained, or (d) if
any transferor or transferee would hold fewer than the number of Units as
established by the Partnership's General Partner or holds fractional Units.
In determining the number of Units for which the Offer is made
(representing approximately 7.9% of the outstanding Units), the Purchaser took
these restrictions into account and has conditioned the Offer on not violating
such restrictions. See "Tender Offer--Section 13. Certain Conditions of the
Offer." The foregoing are hereafter referred to as the "Transfer Restrictions."
EFFECT ON TRADING MARKET AND PRICE RANGE OF THE UNITS. If a substantial
number of Units are purchased pursuant to the Offer, the result will be a
reduction in the number of Unit Holders. In the case of certain kinds of equity
securities, a reduction in the number of security-holders might be expected to
result in a reduction in the liquidity and volume of activity in the trading
market for the security. In this case, however, there is a limited trading
market for the Units and, therefore, the Purchaser does not believe a reduction
in the number of Unit Holders will materially further restrict the Unit Holders'
ability to find purchasers for their Units.
The Units are registered under Section 12(g) of the Exchange Act, which
means, among other things, that the Partnership is required to file periodic
reports with the Commission and to comply with the Commission's proxy rules. The
Purchaser does not expect or intend that consummation of the Offer will cause
the Units to cease to be registered under Section 12(g) of the Exchange Act.
Currently, there are approximately 17,000 Unit Holders. If the Units were to be
held by fewer than 300 persons, the Partnership could apply to de-register the
Units under the Exchange Act. Because the Units are widely held, however, the
Purchaser expects that even if it purchases the maximum number of Units in the
Offer, after that purchase the Units will be held of record by substantially
more than 300 persons.
13
<PAGE>
The successful purchase of 7.9% of the outstanding Units by the Purchaser
will cause the Purchaser to own approximately 13.00% of the outstanding Units.
The Purchaser may then be a position to exert a strong influence upon the
General Partner and the operation of the Partnership.
SECTION 8. FUTURE PLANS. The Purchaser is acquiring the Units pursuant to
the Offer for investment purposes only, has no current intentions to change
current management or operations of the Partnership and has no current plans for
any extraordinary transactions involving the Partnership.
The Purchaser believes that current market conditions are such that a sale
of the Partnership's properties would be in the best interests of the Unit
Holders. Purchaser has sought, and may in the future seek, to encourage the
Partnership to have the Partnership's properties sold and have the Partnership
liquidated and dissolved. If the Partnership does not sell its properties in a
timely manner, the Purchaser may seek the Partnership to cause a vote of Unit
Holders to sell the properties, or remove the General Partner, and elect a new
general partner who will sell the properties. See Section 9 ("Past Contacts and
Negotiations With General Partner").
The Purchaser and its affiliates may acquire additional Units through
private purchases, one or more future tender offers or by any other means deemed
advisable. Such future purchases will also be for investment purposes only and
may be at prices higher or lower than the Purchase Price.
SECTION 9. PAST CONTACTS AND NEGOTIATIONS WITH GENERAL PARTNER.
Purchaser initiated a request for the list of Limited Partners of the
Partnership in the summer of 1998, and after executing a standstill agreement
dated August 20, 1998 received the list of Limited Partners from the Partnership
in a timely manner. From then to present Purchaser has had continuous
discussions by telephone, letter, and memorandum with the Partnership pursuant
to matters pertaining to the transfer of Units from sellers to Purchaser.
Pursuant to a Confidentiality Agreement dated September 30, 1998 between
Purchaser and the Partnership, Purchaser obtained appraisals of the properties
owned by the Partnership dated as of June 30, 1998, which appraisals have since
been superceded (See "Introduction - We encourage you to consider the following
factors").
Commencing in June and July 1999, Purchaser initiated and had several
telephone conversations with the Partnership's General Partners, advising them
that Purchaser was very dissatisfied with regard to the efforts of the General
Partners to market all of the properties owned by the Partnership. Purchaser
advised the General Partners it was aware of several substantial purchasers that
were interested in purchasing the entire portfolio and that Purchaser had been
advised that there was little or no interest evidenced by the General Partners.
In a telephone conversation it initiated sometime in June or July of 1999,
Purchaser advised the General Partners that Purchaser was so dissatisfied with
the actions of the General Partners that Purchaser was contemplating forming a
group of Limited Partners that would own more than 10% of the issued and
outstanding Units to cause the Partnership to call a meeting of the Limited
Partners for the purpose of removing the General Partners to facilitate the sale
of the Partnership's properties.
Mark Marcucci, as an officer of one of the General Partners, indicated that
a substantial amount of money would be due to the General Partners if the
Limited Partners removed the General Partners as
14
<PAGE>
provided for in the Partnership Agreement and referred to as "Removal
Compensation." Purchaser, having reviewed the provisions of the Partnership
Agreement, concluded that if the General Partners were removed, the General
Partners would be entitled to no Removal Compensation, and telephonically
discussed this matter with Mr. Marcucci. In that regard, Purchaser forwarded a
memorandum on August 2, 1999 to Mr. Marcucci indicating the basis for its belief
that no Removal Compensation would be due upon the removal of the General
Partners, which memorandum was not responded to.
Purchaser, on August 30, 1999, telephoned Mr. Marcucci and asked for
comments on the memorandum of August 2, 1999. Mr. Marcucci indicated he had
misplaced the memorandum, had not reviewed it, nor had he had his outside
counsel review and he requested another copy. Purchaser sent Mr. Marcucci
another copy of the memorandum, but as of this date has heard nothing from Mr.
Marcucci.
Purchaser is considering forming a group of Limited Partners that would own
more than 10 percent of the issued and outstanding Units to cause the
Partnership to call a meeting of Limited Partners for purpose of removing the
General Partners to facilitate the sale of the Partnership's properties, which
can be done by a majority vote of the Unit Holders.
Purchaser, pursuant to four separate limited tender offers between November
1, 1998 and May 12, 1999, at a price of $12.50 per Unit, acquired a total of
480,684 Units, which is approximately 3.77% of the issued and outstanding Units
of the Partnership. Purchaser commenced a fifth limited tender offer on February
11, 2000 (which terminated on April 7, 2000) pursuant to which it acquired
15,354 Units at a price of $10.00 per Unit (less certain distributions).
Purchaser, in a letter dated June 1, 2000, requested an updated list of the
Limited Partners of the Partnership ("List") and indicated a willingness to sign
a "Standstill Agreement" with regard to the use of such List. Several telephone
conversations with Mr. Marcucci and the Partnership attorney lead Purchaser to
believe it will most likely receive an updated List; however, it will probably
be received too late to use for this Offer. Purchaser recently contacted the
General Partner, who authorized the Partnership's appraisers to discuss the
March 30, 2000 appraisal.
SECTION 10. CERTAIN INFORMATION CONCERNING THE BUSINESS OF THE PARTNERSHIP
AND RELATED MATTERS.
BUSINESS. The following information was extracted from the Partnership's
1999 10-K and the 1st Quarter 10-Q (collectively the "Reports"), which Reports
were filed with the Commission. The Purchaser did not prepare any of the
information contained in such Reports and extracted in this Offer and the
Purchaser makes no representation as to the accuracy or completeness of such
information.
The Partnership was organized on September 11, 1986 under the laws of
Delaware. The Partnership is engaged in the business of investing in income
producing apartment complexes, office buildings, shopping centers and other
commercial real estate ("Properties"). The Partnership's business offices are
located at 242 Trumbull Street, Hartford, Connecticut 06103.
For information concerning the properties owned by the Partnership, please
refer to Schedule 2 attached hereto, which is incorporated herein by reference.
15
<PAGE>
DISTRIBUTIONS. The Partnership disclosed in its 1999 10-K, that it made
distributions as follows:
<TABLE>
<CAPTION>
Year Ended Distributions Per
December 31 Unit
----------- ----
<S> <C>
1997 $0.72
1998 $0.72
1999 $4.17
Three Months Ended $0.18
March 31, 2000
</TABLE>
Set forth below is a summary of certain financial information with respect
to the Partnership, which has been excerpted or derived from the Partnership's
1999 10-K and 1st Quarter 10-Q. More comprehensive financial and other
information is included in such Reports and other documents filed by the
Partnership with the Commission, and the following summary is qualified in its
entirety by reference to such Reports and other documents and all the financial
information and related notes contained therein. Such Reports and other
documents may be examined and copies may be obtained from the offices of the
Commission at the addresses set forth in the "Introduction." The Purchaser
disclaims any responsibility for the information included in such Reports and
documents, and extracted in this Offer to Purchase.
16
<PAGE>
SELECTED FINANCIAL DATA
(in thousands of dollars, except per unit data)
<TABLE>
<CAPTION>
Years Ended December 31
-----------------------
1999 1998 1997 1996 1995
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Revenue $31,437 $30,589 $29,597 $29,030 $28,438
Operating Income before Impairment of 7,764 7,894 6,793 5,711 5,002
Investment in Real Estate
Impairment of Investment in Real Estate -- 9,007 -- -- 4,408
Operating Income (Loss) 7,764 (1,113) 6,793 5,711 594
Gain (Loss) on Sales of Property 4,563 - - - (23)
Cash and Cash Equivalents 10,419 12,597 10,833 9,133 8,971
Total Assets (Historical Cost Basis) 151,089 193,184 203,416 205,750 209,334
Total Assets (Current Value Basis) 211,530 236,917 218,719 204,222 199,709
Rental Income 30,230 29,716 28,604 28,242 27,455
Interest Income 753 538 404 336 367
Earnings (Loss) per Weighted Average Unit .96 (.09) .53 .44 .04
Cash Distributions per Unit 4.17 .72 .72 .72 .72
Net Asset Value per Unit 16.21 18.12 16.71 15.59 15.24
</TABLE>
Three Months Ended
------------------
March 31
--------
(in thousands, except per Unit amounts)
(unaudited)
<TABLE>
<CAPTION>
2000 1999
---- ----
<S> <C> <C>
Revenue $6,662 $8,025
Net income 15,853 1,165
17
<PAGE>
Total assets 164,121 151,089
Earnings per Unit 1.23 .09
Distributions per Unit .18 .18
Net Asset Value per Unit 16.41 18.14
</TABLE>
The foregoing summary is qualified in its entirety by reference to such
Reports and all of the financial information and related notes contained
therein.
LITIGATION. In November 1996, the Partnership and its general partners,
Aetna/AREA Corporation and AREA GP Corporation (the "General Partners"), were
named as defendants in two purported class action lawsuits filed in the Chancery
Court of Delaware in New Castle County, entitles Bobbit v. Aetna Real Estate
Associates, L.P., et al and Estes v. Aetna Real Estate Associates, L.P., et al
(collectively, the "Complaints"). The Complaints alleged, among other things,
that management fees that had been paid to the General Partners were excessive
and that a standstill agreement with a then tender offeror which had the effect
of limiting the number of Partnership Units that would be the subject of any
tender offer was unlawful.
On March 15, 1999, the parties entered into a Stipulation and Agreement of
Compromise, Settlement and Release (the "Settlement Agreement"), which was filed
with and subject to approval by the Delaware Chancery Court. The Court approved
the Settlement Agreement on May 19, 1999, and no appeal was filed within the
applicable period.
Upon the approval by the court of the Settlement Agreement, the Applicable
Percentage, as defined in Section 6.6 of the Partnership Agreement, used to
calculate the Investment Portfolio Fee per quarter which is paid to the General
Partners, was reduced by 0.0625% ( the "First Reduction"). The First Reduction
was effective on June 19, 1999 (the "Final Date") and was applied retroactively
to March 15, 1999, the date of the execution of the Settlement Agreement. The
First Reduction will result in a 0.25% reduction of the annual Investment
Portfolio Fee otherwise provided in the Partnership Agreement. Effective on the
second anniversary of the Final Date, the Applicable Percentage will be reduced
by an additional 0.0625% per quarter (the "Second Reduction'). The First and
Second Reductions will apply cumulatively so that the annual Investment
Portfolio Fee from the second anniversary of the Final Date through the
termination of the Partnership will be a total of 0.50% below the annual
Investment Portfolio Fee otherwise provided in the Partnership Agreement. The
Investment Portfolio Fee reduction for the period from March 15, 1999 through
March 31, 1999 of $27,144 was recognized in the Partnership's consolidated
financial statements during the nine months ended September 30, 1999.
As discussed above, pursuant to the terms of the Settlement Agreement, the
Partnership made a special cash distribution out of Partnership cash reserves on
April 14, 1999 of $2,544,909 ($0.20 per Unit) to Limited Partners and $25,706 to
the General Partners.
18
<PAGE>
As part of the Settlement Agreement the plaintiff's attorneys were paid
fees and out-of-pocket expenses totaling $2,195,757 during the nine months ended
September 30, 1999. In addition, legal expenses on behalf of the Partnership and
the General Partners amounting to $275,893 were accrued at September 30, 1999.
The total legal expense of the litigation for the nine months ended September
30, 1999 aggregated $2,471,650.
SECTION 11. CERTAIN INFORMATION CONCERNING THE PURCHASER.
The Purchaser is a Delaware limited liability company which was organized
for the purpose of acquiring the Units in the Partnership. The Manager of the
Purchaser is Arlen Capital, LLC, a California limited liability company ("AC"),
which is controlled by its two members, Don Augustine and Lynn T. Wells. AC is
engaged in financial and business consulting, and making opportunistic
investments which include making tender offers on public and private real estate
limited partnerships. The Purchaser's and AC's offices are located at 1650 Hotel
Circle North, Suite 200, San Diego, California 92108 telephone no. (619)
686-2002. For certain information concerning the members of AC, see Schedule 1
to this Offer to Purchase.
On January 12, 2000 the Purchaser purchased, with its working capital,
15,304 Units for $129,252 in negotiated transactions using the telephone and
U.S. mail. Payment for the Units was made by check. The Purchaser owns 764,955
Units which is approximately 6% of the issued and outstanding Units.
Except as otherwise set forth herein, (i) neither the Purchaser nor, to the
best knowledge of the Purchaser, any of the persons listed on Schedule 1, or any
affiliate of the Purchaser beneficially owns or has a right to acquire any
Units; (ii) neither the Purchaser nor, to the best knowledge of the Purchaser,
any of the persons listed on Schedule 1, or any affiliate of the Purchaser or
any member, director, executive officer, or subsidiary of any of the foregoing
has effected any transaction in the Units; (iii) neither the Purchaser nor, to
the best knowledge of the Purchaser, any of the persons listed on Schedule 1 or
any affiliate of the Purchaser has any contract, arrangement, understanding, or
relationship with any other person with respect to any securities of the
Partnership, including but not limited to, contracts, arrangements,
understandings, or relationships concerning the transfer or voting thereof,
joint ventures, loan or option arrangements, puts or calls, guarantees of loans,
guarantees against loss, or the giving or withholding of proxies, consents, or
authorizations; (iv) there have been no transactions or business relationships
which would be required to be disclosed under the rules and regulations of the
SEC between any of the Purchasers, or, to the best knowledge of the Purchaser,
any of the persons listed on Schedule 1 or any affiliate of the Purchaser, on
the one hand, and the Partnership or affiliates, on the other hand; and (v)
there have been no contracts, negotiations, or transactions between the
Purchaser or to the best knowledge of the Purchaser, any of the persons listed
on Schedule 1 or any affiliate of the Purchaser, on the one hand, and the
Partnership or its affiliates, on the other hand, concerning a merger,
consolidation or acquisition, tender offer (other than as described in Section 8
of this Offer) or other acquisition of securities, an election or removal of the
General Partner, or a sale or other transfer of a material amount of assets.
19
<PAGE>
SECTION 12. SOURCE OF FUNDS. The Purchaser expects that approximately
$8,000,000 (exclusive of fees and expenses) will be required to purchase
1,000,000 Units (approximately 7.9% of the 12,724,547 Units outstanding), if
tendered. The Purchaser is not a public company.
Credit Suisse First Boston Mortgage Capital, LLC, a Delaware limited liability
company ("CS") has made an oral commitment to loan the Purchaser up to
$8,000,000 to purchase the Units pursuant to a promissory note (the "Note"),
which will be due and payable on April 30, 2001. Interest on the Note is payable
at the rate of 10% per annum (the "Loan Rate"), payable monthly out of Net
Revenues (as defined in the Note); provided, however, that if Net Revenues are
not sufficient to pay the Loan Rate ("Monthly Shortfall"), such Monthly
Shortfall shall be aggregated with any Monthly Shortfall from prior months, and
such Monthly Shortfall bear interest at the Loan Rate, compounded monthly. In
addition, Purchaser will be required to pay to CS monthly after the Loan Rate,
Monthly Shortfall and interest thereon have been paid (a) any Net Revenues
remaining, which will reduce the principal sum of the Note and (b) as additional
interest, the Applicable Percentage (as hereafter defined) of the Net Revenues
remaining after payment of the monthly interest and reduction of principal.
Applicable Percentage means 75%, until the internal rate of return (i.e., the
rate per annum at which all payments due CS through the determination date must
be discounted to cause the present value of such payments as of the date of the
Note to equal the amount of monies advanced to Purchaser under the Note or from
any source by CS or its affiliates) equals 25%; and thereafter 50%. The Note
will be secured by a Pledge and Security Agreement and will be guaranteed by
Arlen. The Note will be repaid from the proceeds of any distributions made by
the Partnership and from the sale or other disposition of the Units by
Purchaser.
There are no material conditions to the financing and Purchaser has no
alternative financing plans.
SECTION 13. CERTAIN CONDITIONS OF THE OFFER. Notwithstanding any other
provisions of the Offer, the Purchaser will not be required to accept for
payment or, subject to any applicable rules or regulations of the Commission,
including Rule 14e-1(c) under the Exchange Act (relating to the Purchaser's
obligation to pay for or return tendered Units promptly after the expiration or
termination of the Offer), to pay for any Units tendered, and may postpone the
acceptance for payment or, subject to the restriction referred to above, payment
for any Units tendered, and may amend or terminate the Offer if (i) the
Purchaser shall not have confirmed to its reasonable satisfaction that, upon
purchase of the Units pursuant to the Offer, the Purchaser will have full rights
to ownership as to all such Units and that the Purchaser will become a
registered owner on the books and records of the Partnership, (ii) the Purchaser
shall not have confirmed to its reasonable satisfaction that, upon the purchase
of the Units pursuant to the Offer, the Transfer Restrictions will have been
satisfied, or (iii) all authorizations, consents, orders or approvals of, or
declarations or filings with, or expirations of waiting periods imposed by, any
court, administrative agency or commission or other governmental authority or
instrumentality, domestic or foreign, necessary for the consummation of the
purchase contemplated by the Offer shall not have been filed, occurred or been
obtained. Furthermore, notwithstanding any other term of the Offer, the
Purchaser will not be required to accept for payment or pay for any Units not
theretofore accepted for payment or paid for and may terminate or amend the
Offer as to such Units if, at any time on or after the date of the Offer and
before the Expiration Date any of the following conditions exist:
(a) the acceptance by the Purchaser of Units tendered and not withdrawn
pursuant to the Offer or the transfer of such Units to the Purchaser violates
restrictions in the Partnership Agreement which
20
<PAGE>
prohibit any transfer of Units which would cause a termination of the
Partnership or would cause the Partnership to be taxed as a "publicly traded
partnership" under the Internal Revenue Code;
(b) there shall have been threatened, instituted or pending any action or
proceeding before any court or governmental agency or other regulatory or
administrative agency or commission or by any other person, challenging the
acquisition of any Units pursuant to the Offer or otherwise directly or
indirectly relating to the Offer, or otherwise, in the reasonable judgment of
the Purchaser, adversely affecting the Purchaser or the Partnership;
(c) any statute, rule or regulation shall have been proposed, enacted,
promulgated or deemed applicable to the Offer, or any action or order shall have
been proposed, entered into or taken, by any government, governmental agency, or
other regulatory or administrative agency or authority, which, in the reasonable
judgment of the Purchaser, might (i) result in a delay in the ability of the
Purchaser or render the Purchaser unable, to purchase or pay for some or all of
the tendered Units, (ii) make such purchase or payment illegal, or (iii)
otherwise adversely affect the Purchaser or the Partnership;
(d) any change shall have occurred or be threatened in the business,
financial condition, results of operations, tax status or prospects of the
Partnership which, in reasonable the judgment of the Purchaser, is or may be
adverse to the Partnership, or the Purchaser shall have become aware of any
facts which, in the reasonable judgment of the Purchaser, have or may have
adverse significance with respect to the value of the Units;
(e) there shall have occurred (i) any general suspension of, or limitation
on prices for or trading in, securities in the over-the-counter market or on the
New York Stock Exchange, Inc., (ii) a declaration of a banking moratorium or any
suspension of payment in respect of banks in the United States or any limitation
by federal or state authorities on the extension of credit by lending
institutions or (iii) the commencement of a war, armed hostilities or other
international or national calamity directly or indirectly involving the United
States; or, in the case of any of the foregoing existing at the time of the
commencement of the Offer, a material acceleration or worsening thereof;
(f) a tender or exchange offer for some or all of the Units is made, or
publicly proposed to be made or amended, by another person;
(g) the Partnership shall have (i) issued, or authorized or proposed the
issuance of, any partnership interests of any class, or any securities
convertible into, or rights, warrants or options to acquire, any such interests
or other convertible securities, (ii) issued or authorized or proposed the
issuance of any other securities, in respect of, in lieu of, or in substitution
for, all or any of the presently outstanding Units, (iii) declared or paid any
distribution, other than in cash, on any of its partnership interests, (iv)
authorized, proposed or announced its intention to propose any merger,
consolidation or business combination transaction, acquisition of assets,
disposition of assets or material change in its capitalization, or any
comparable event not in the ordinary course of business, or (v) proposed or
effected any amendment to the Partnership's Agreement of Limited Partnership;
21
<PAGE>
(h) the failure to occur of any necessary approval or authorization by any
Federal or state authorities necessary to consummation of the Purchaser of all
or any part of the Units to be acquired hereby, which in the reasonable judgment
of the Purchaser in any such case, and regardless of the circumstances
(including any action of the Purchaser) giving rise thereto, makes it
inadvisable to proceed with such purchase or payment; or
(i) the Purchaser or any of its affiliates and the Partnership shall have
agreed that the Purchaser shall amend or terminate the Offer or postpone the
payment for the Units pursuant thereto.
The foregoing conditions are for the sole benefit of the Purchaser and its
affiliates and may be asserted by the Purchaser regardless of the circumstances
(including, without limitation, any action or inaction by the Purchaser or any
of its affiliates) giving rise to such condition, or may be waived by the
Purchaser, in whole or in part, from time to time in its sole discretion. The
failure by the Purchaser at any time to exercise the foregoing rights will not
be deemed a waiver of such rights, which rights will be deemed to be ongoing and
may be asserted at any time and from time to time. Any determination by the
Purchaser concerning the events described in this Section 13 will be final and
binding upon all parties.
SECTION 14. CERTAIN LEGAL MATTERS AND REQUIRED REGULATORY APPROVALS.
GENERAL. Except as set forth in this Offer to Purchase, based on its review
of publicly available filings by the Partnership with the Commission and other
publicly available information regarding the Partnership, the Purchaser is not
aware of any licenses or regulatory permits that would be material to the
business of the Partnership, taken as a whole, and that might be adversely
affected by the Purchaser's acquisition of Units as contemplated herein, or any
filings, approvals or other actions by or with any domestic, foreign or
governmental authority or administrative or regulatory agency that would be
required prior to the acquisition of Units by the Purchaser pursuant to the
Offer as contemplated herein. Should any such approval or other action be
required, there can be no assurance that any such additional approval or action,
if needed, would be obtained without substantial conditions or that adverse
consequences might not result to the Partnership's business, or that certain
parts of the Partnership's or the Purchaser's business might not have to be
disposed of or held separate or other substantial conditions complied with in
order to obtain such approval. The Purchaser's obligation to purchase and pay
for Units is subject to certain conditions. See "Offer to Purchase -- Section
13. Certain Conditions of the Offer."
ANTITRUST. Under the Hart-Scott-Rodino Antitrust Improvements Act of 1976,
as amended (the "HSR Act"), and the rules and regulations that have been
promulgated thereunder by the Federal Trade Commission (the "FTC"), certain
acquisition transactions may not be consummated until certain information and
documentary material has been furnished for review by the Antitrust Division of
the Department of Justice (the "Antitrust Division") and the FTC and certain
waiting period requirements have been satisfied. The Purchaser does not
currently believe any filing is required under the HSR Act with respect to its
acquisition of Units contemplated by the offer.
Based upon an examination of publicly available information relating to the
business in which the Partnership is engaged, the Purchaser believes that the
acquisition of Units pursuant to the Offer
22
<PAGE>
would not violate the antitrust laws. Nevertheless, there can be no assurance
that a challenge to the Offer on antitrust grounds will not be made, or, if such
challenge is made, what the result will be.
STATE TAKEOVER LAWS. The Purchaser has not attempted to comply with any
state takeover statutes in connection with the Offer. The Purchaser reserves the
right to challenge the validity or applicability of any state law allegedly
applicable to the Offer and nothing in the Offer, nor any action taken in
connection herewith, is intended as a waiver of that right. In the event that
any state takeover statute is found applicable to the Offer, the Purchaser might
be unable to accept for payment or purchase Units tendered pursuant to the Offer
or be delayed in continuing or consummating the Offer. In such case, the
Purchaser may not be obligated to accept for purchase, or pay for, any Units
tendered.
SECTION 15. FEES AND EXPENSES. The Purchaser will pay all expenses of the
Offer, including the fees and expenses of Arlen Capital, LLC, the Depositary.
The Purchaser will not pay any fees or commissions to any broker, dealer or
other person for soliciting tenders of Units pursuant to the Offer. Brokers,
dealers, commercial banks and trust companies and other nominees, if any, will,
upon request and prior approval of the Purchaser, be reimbursed by the Purchaser
for reasonable and customary clerical and mailing expenses incurred by them in
forwarding materials to their customers.
SECTION 16. MISCELLANEOUS. THE OFFER IS NOT BEING MADE TO (NOR WILL TENDERS
BE ACCEPTED FROM OR ON BEHALF OF) UNIT HOLDERS IN ANY JURISDICTION IN WHICH THE
MAKING OF THE OFFER OR THE ACCEPTANCE THEREOF WOULD NOT BE IN COMPLIANCE WITH
THE LAWS OF SUCH JURISDICTION. THE PURCHASER IS NOT AWARE OF ANY JURISDICTION
WITHIN THE UNITED STATES IN WHICH THE MAKING OF THE OFFER OR THE ACCEPTANCE
THEREOF WOULD BE ILLEGAL.
In any jurisdiction where the securities, blue sky or other laws require
the Offer to be made by a licensed broker or dealer, the Purchaser will engage
one or more registered brokers or dealers that are licensed under the laws of
such jurisdiction to make the Offer. The Purchaser has filed with the Commission
the Schedule TO, together with exhibits, pursuant to Rule 14d-3 of the General
Rules and Regulations under the Exchange Act, furnishing certain information
with respect to the Offer, and may file amendments thereto. Such Schedule TO and
any amendments thereto, including exhibits, may be examined and copies may be
obtained from the Commission as set forth above in "Introduction."
No person has been authorized to give any information or to make any
representation on behalf of the Purchaser not contained in this Offer to
Purchase or in the Agreement of Sale and, if given or made, any such information
or representation must not be relied upon as having been authorized. Neither the
delivery of the Offer to Purchase nor any purchase pursuant to the Offer shall,
under any circumstances, create any implication that there has been no change in
the affairs of the Purchaser or the Partnership since the date as of which
information is furnished or the date of this Offer to Purchase.
Oak Investors, LLC
July 5, 2000
23
<PAGE>
SCHEDULE 1
INFORMATION REGARDING THE MANAGERS
OF ARLEN CAPITAL, LLC
Set forth in the table below are the names of the members of Arlen Capital,
LLC and their present principal occupations and five (5) year employment
histories. Each individual is a citizen of the United States and the business
address of each person is 1650 Hotel Circle North, Suite 200, San Diego,
California 92108, telephone no. (619) 686-2002.
<TABLE>
<CAPTION>
Present Principal Occupation or Employment
Name and Five-Year Employment History
<S> <C>
Don Augustine Member and Manager of Arlen Capital LLC. President of Arlen Capital, Inc., a
California corporation, its predecessor entity since 1989.
Lynn T. Wells Member and Manager of Arlen Capital LLC. Vice President of Arlen Capital,
Inc., a California corporation, its predecessor entity since 1989.
</TABLE>
Arlen Capital, LLC and its predecessor entity, Arlen Capital, Inc. ("AC"),
have been providing business and financial consulting services since 1989. AC
principals have an extensive background in the capital markets, real estate
securities, and real estate markets. Commencing in 1996, AC and its affiliates
have been in the business of making opportunistic investments, which include a
number of tender offers on public and private real estate limited partnerships.
S-1-1
<PAGE>
SCHEDULE 2
PROPERTIES OWNED BY THE PARTNERSHIP
The following information on the Properties owned by the Partnership was
extracted from the Partnership's 1999 10-K and the 1st Quarter 10-Q. The
Purchaser did not prepare any of the information contained in such reports and
extracted below and the Purchaser makes no representations as to the accuracy or
completeness of such information.
As of December 31, 1999, the Partnership held nine investments in the Properties
listed below. The information for each property is as of December 31, 1999.
<TABLE>
<CAPTION>
(in thousands)
Historical
Property Cost (1)
-------- --------------
<S> <C>
Lincoln Square Apartments 13,794(2)
Summit Village 38,081
Village Square 8,211
Marina Bay Industrial Park 11,310
Town Center Business Park 45,839
Oakland Pointe Shopping Center 10,422
Windmont Apartments 8,247(2)
Powell Street Plaza 32,085
Westgate Distribution Center 14,148
--------------
Total $182,137
==============
</TABLE>
(1) Historical cost is before accumulated depreciation and may not equal cash
invested because of certain adjustments based on the application of
generally accepted accounting principles. For historical cost purposes,
properties are recorded at the lower of cost, net of impairment
write-downs, or estimated fair value.
(2) Subsequent to December 31, 1999 Lincoln Square Apartments and Windmont
Apartments were sold.
The Partnership determines the current value of each of its Investments in
Properties quarterly based on independent appraisals of the underlying real
estate using generally accepted valuation techniques. These appraisals are used
to determine Net Asset Value per Unit on a quarterly basis and to prepare the
Partnership's current value financial statements.
S-2-1
<PAGE>
Each appraisal is based on numerous assumptions, limiting conditions and
valuation techniques utilized by the independent appraisers retained by the
Partnership. Two of the many assumptions utilized by the appraisers are the
terminal capitalization rate and the discount rate. The terminal capitalization
rate is used to estimate the reversionary proceeds to be received from the
assumed sale of an investment at the end of a typical holding period. The
discount rate is used to determine the net present value of the estimated annual
cash flows of an investment, including the residual proceeds, over the holding
period. Terminal capitalization rates utilized in the appraisals of the
Investments in Properties at December 31, 1999 ranged from 8.5% to 10.75%.
Discount rates utilized in the appraisals of the Investments in Properties at
December 31, 1999 ranged from 10.75% to 12.75%.
CURRENT PROPERTIES
A brief description of all Investments in Properties is set forth below. Neither
the Partnership, if it owns a Property directly, nor any joint venture or
partnership in which the Partnership has invested, have incurred any debt to
acquire or maintain any of the Properties.
LINCOLN SQUARE APARTMENTS
The Partnership owns Lincoln Square Apartments, a 240-unit apartment project on
a 12.7-acre site located in Arlington Heights, Illinois. As of December 31,
1999, the project was 98% leased and 95% occupied.
On February 22, 2000 Lincoln Square Apartments was sold to an unaffiliated
party.
SUMMIT VILLAGE
The Partnership owns Summit Village, a 366-unit apartment complex built in two
phases on a 6.2-acre site in the Rosslyn area of Arlington County, Virginia.
Historical leasing and occupancy information with respect to Summit Village for
the five most recent years is as follows:
<TABLE>
<CAPTION>
Leased Occupied
------ --------
<S> <C> <C>
12/31/95 99% 99%
12/31/96 98% 98%
12/31/97 99% 99%
12/31/98 99% 99%
12/31/99 100% 99%
</TABLE>
The current leases generally have terms of seven or twelve months at monthly
rental rates ranging from $1,139 to $1,596 per unit.
S-2-2
<PAGE>
The Arlingon County market includes approximately 13 Class A apartment
communities with almost 5,000 units. Two new competitive high-rise apartment
buildings have recently been added: Meridian at Ballstorn Apartments with 435
units completed lease-up and Arlington Courthouse Place formerly known as
Courthouse Hill Apartments with 564 units has also completed lease-up during
1999, each with minimal impact on Summit Village rents and occupancy.
MARINA BAY INDUSTRIAL PARK
The Partnership owns a controlling general partnership interest in a limited
partnership that owns the Marina Bay Industrial Park, a 165,780 square foot
industrial park located in Richmond, California on an 8.6-acre site. The Marina
Bay Industrial Park is a four-building complex that includes a rehabilitated
industrial distribution building (approximately 103,680 square feet) and three
newer research/development/light industrial buildings (approximately 62,100
square feet). As of December 31, 1999, the complex was 100% leased and occupied.
VILLAGE SQUARE
The Partnership owns Village Square in Hazelwood, Missouri, a former community
shopping center that was converted to primarily back office use during 1998. It
contains approximately 207,304 square feet of net rentable area on approximately
20 acres of land. As of December 31, 1999, the property was 90% leased and
occupied.
TOWN CENTER BUSINESS PARK
The Partnership owns a controlling interest in a general partnership which owns
and operates Town Center Business Park, totaling approximately 457,500 square
feet of net rentable area on approximately 28 acres in Santa Fe Springs,
California. Town Center Business Park was developed in two phases. Phase I
consists of a three-story office building and six industrial buildings totaling
approximately 323,100 rentable square feet. Phase II consists of a two-story
office/service building and two industrial buildings containing approximately
134,400 square feet.
During 2000, twenty-four leases covering 27% of the space in Town Center
Business Park are scheduled to expire. One tenant totaling 4,781 square feet has
already renewed. Six tenants occupying 22,139 square feet are vacating at the
end of their lease term and lease negotiations are underway with potential
tenants. Renewal negotiations have begun with four tenants totaling 36,683
square feet. The remaining 13 tenants, comprising 13% of the space, expire in
the latter part of the year, and these tenants will be contacted in the first
and second quarters to commence renewal discussions. Also, the Partnership
completed an office and an industrial lease for one new tenant in early 2000 for
one percent of space in Town Center Business Park.
Town Center Business Park has no single tenant which occupies 10% or more of the
rentable square footage. During 2001 and 2002, eight and fourteen leases,
respectively, are scheduled to expire, each covering 16% of the space in Town
Center Business Park.
S-2-3
<PAGE>
Historical leasing and occupancy information with respect to Town Center
Business Park for the five most recent years is as follows:
<TABLE>
<CAPTION>
Leased Occupied
------ --------
<S> <C> <C>
12/31/95 84% 72%
12/31/96 85% 83%
12/31/97 93% 92%
12/31/98 93% 89%
12/31/99 97% 93%
</TABLE>
Average annualized rental rates for December 1999 were $11.55 per square foot as
compared to $11.16 and $11.12 per square foot for December 1998 and 1997,
respectively.
OAKLAND POINTE SHOPPING CENTER
The Partnership owns a portion of the Oakland Pointe Shopping Center, a shopping
center containing approximately 434,150 square feet located on 49.8 acres in
Pontiac, Michigan. The portion owned by the Partnership (the "Oakland Project")
contains approximately 213,350 square feet of rentable area on approximately
32.1 acres. As of December 31, 1999, the Oakland Project was approximately 95%
leased and 92% occupied.
WINDMONT APARTMENTS
The Partnership owns Windmont Apartments, a 178-unit apartment complex which is
located on 6.8 acres in DeKalb County, Georgia. As of December 31, 1999, the
complex was approximately 95% leased and 92% occupied.
On January 19, 2000 Windmont Apartments were sold to an unaffiliated party.
POWELL STREET PLAZA
The Partnership owns Powell Street Plaza, a shopping center with approximately
169,551 square feet of rentable space, located on approximately 12.9 acres in
Emeryville, California.
Certain governmental agencies in California, led by the Alameda County Health
Care Services Agency (the "Agency"), delivered a letter (the "Request Letter")
to the Partnership on June 4, 1993 requiring that it remediate certain soil and
ground water contamination by petroleum hydrocarbons existing on the Powell
Street property. The contamination is the result of a use of the property prior
to its acquisition by the Partnership in 1990. Pursuant to the agreement under
which the Partnership acquired Powell Street Plaza, the Partnership has made a
demand on the former owner from which it acquired the property (the "Former
Owner") to remediate the contamination. The Former Owner has agreed to respond
to the
S-2-4
<PAGE>
governmental agencies. The Former Owner prepared a site characterization
and submitted a remediation plan to the Alameda County Healthcare Services
Agency, which have been approved. On October 15, 1997 the Agency determined the
site was low risk and agreed to close the case pending an approved Long-term
Site Management Plan. The Partnership is monitoring the process and anticipates
that all costs of complying with the Request Letter will be borne by the Former
Owner. The Partnership has hired its own consultant to prepare a Long-Term Site
Management Plan.
During 2000, two leases are scheduled to expire covering 2% of the space, and
during 2001 one lease is scheduled to expire totaling 4% of the space. Four
leases expire in 2002 covering 5% of the space in Powell Street Plaza. Powell
Street Plaza has two tenants with leases covering 10% or more of the rentable
square footage of the property. The first lease, for 27,275 square feet, expires
in 2009 and provided annual base rent of $337,563 (11% of total rent) in 1999.
The lease contains two consecutive five-year options to renew. The second lease,
for 25,025 square feet, expires in 2009 and provided annual base rent of
$353,999 (12% of total rent) in 1999. The lease contains four consecutive
five-year options to renew.
Historical leasing and occupancy information with respect to Powell Street Plaza
for the five most recent years is as follows:
<TABLE>
<CAPTION>
Leased Occupied
------ --------
<S> <C> <C>
12/31/95 100% 100%
12/31/96 91% 91%
12/31/97 98% 95%
12/31/98 100% 100%
12/31/99 100% 100%
</TABLE>
Average annualized base rental rates for December 1999 were $18.45 per square
foot as compared to $17.27 and $17.26 per square foot for December 1998 and
1997, respectively.
In spring 2000, a 250,000 square foot Ikea furniture and home furnishing store
is scheduled to open approximately one-half mile south of Powell Street. In
addition, Madison Marquette Inc. is developing a 340,000 square foot commercial
development, including a 60,000 to 80,000 square foot multiplex theater, 230 to
300 residential units and a 150 to 200 room hotel that is anticipated to be open
in two to three years. The retail component of this development is expected to
be specialty retail and entertainment that should not compete directly with
Powell Street. However, The Gap Inc. may execute a lease to place the whole line
of Gap stores in the project, including Old Navy, which leases approximately
14,845 square feet at Powell Street. Discussions with The Gap inc. indicate that
they currently plan to keep both stores open, provided they are able to generate
sufficient sales.
WESTGATE DISTRIBUTION CENTER
S-2-5
<PAGE>
The Partnership owns Westgate Distribution Center, which consists of three
warehouse/distribution buildings totaling approximately 324,200 rentable square
feet on 15.6 acres in Corona, California. As of December 31, 1999, the buildings
were 100% leased and occupied.
Subsequent to December 31, 1999 the Partnership entered into an agreement with
an unaffiliated third party to sell one of the three buildings, approximately
98,000 square feet, and a parcel of land, approximately 5.1 acres. A closing is
anticipated during the quarter ended June 30, 2000.
S-2-6
