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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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SCHEDULE 14D-9
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SOLICITATION/RECOMMENDATION STATEMENT PURSUANT TO SECTION 14(D)(4)
OF THE SECURITIES EXCHANGE ACT OF 1934
JOHNSTOWN/CONSOLIDATED INCOME PARTNERS,
A CALIFORNIA LIMITED PARTNERSHIP
(Name of Subject Company)
JOHNSTOWN/CONSOLIDATED INCOME PARTNERS,
A CALIFORNIA LIMITED PARTNERSHIP
(Name of Person(s) Filing Statement)
UNITS OF LIMITED PARTNERSHIP INTEREST
(Title of Class of Securities)
N/A
(Cusip Number of Class of Securities)
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WILLIAM H. JARRARD, JR.
PRESIDENT
CONCAP EQUITIES, INC.
ONE INSIGNIA FINANCIAL PLAZA
GREENVILLE, SOUTH CAROLINA 29602
(864) 239-1300
(Name, Address and Telephone Number of Person
Authorized to Receive Notice and Communications on Behalf of
the person(s) filing statement)
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ITEM 1. SECURITY AND SUBJECT COMPANY.
The name of the subject company is Johnstown/Consolidated Income
Partners, a California limited partnership (the "Partnership"), and the address
of the principal executive offices of the Partnership is One Insignia Financial
Plaza, Greenville, South Carolina 29602. The title of the class of equity
securities to which this statement relates is the units of limited partnership
interest ("Units") of the Partnership.
ITEM 2. TENDER OFFER OF THE BIDDER.
This statement relates to an offer by Madison River Properties,
L.L.C., a Delaware limited liability company (the "Purchaser"), to purchase up
to 39,000 of the outstanding Units at a purchase price of $68 per Unit, net to
the seller in cash, without interest, upon the terms and subject to the
conditions set forth in an Offer to Purchase dated December 19, 1997 (the
"Offer to Purchase") and related Assignment of Partnership Interest (which
collectively constitute the "Offer"). A Tender Offer Statement on Schedule
14D-1 with respect to the Offer has been filed by the Purchaser, Insignia
Properties, L.P., a Delaware limited partnership ("IPLP"), Insignia Properties
Trust, a Maryland real estate investment trust ("IPT") and Insignia Financial
Group, Inc., a Delaware corporation ("Insignia") (collectively, the "Bidders").
The address of the Purchaser's principal executive offices is One
Insignia Financial Plaza, P.O. Box 19059, Greenville, South Carolina 29602.
ITEM 3. IDENTITY AND BACKGROUND.
(a) The name and business address of the Partnership, which is
the person filing this statement, are set forth in Item 1 above.
(b)(1) The Partnership's general partner is ConCap Equities,
Inc., a Delaware corporation and an affiliate of the Purchaser (the "General
Partner").
Upon the Partnership's formation in 1986, Consolidated Capital
Equities Corporation ("CCEC"), a Colorado corporation, was the sole general
partner and Johnstown/Consolidated Depositary Corporation, a wholly-owned
subsidiary of CCEC, was the sole limited partner. As a result of a succession
of agreements, CCEC became the Partnership's managing general partner. In 1988,
through a series of transactions, Southmark Corporation acquired control of
CCEC. In December 1988, CCEC filed for reorganization under Chapter 11 of the
United States Bankruptcy Code. In 1990, as part of CCEC's reorganization plan,
the General Partner acquired CCEC's interest as managing general partner in the
Partnership and its general partner interests in the Partnership and in 15
other affiliated public limited partnerships (the "Affiliated Partnerships")
and the General Partner replaced CCEC as the general partner of the Partnership
(and as the general partner of each of the Affiliated Partnerships). The
selection of the General Partner as the general partner of the Partnership (and
of each of the Affiliated Partnerships) was approved by a majority of the
Limited Partners in the Partnership (and by a majority of the limited partners
in each of the Affiliated Partnerships) pursuant to solicitations commenced in
August 1990. Insignia acquired the stock of the General Partner through two
transactions in December 1994 and October 1995, and contributed that stock to
IPT in December 1996 in connection with IPT's formation. By reason of these
relationships, the General Partner has conflicts of interest in considering the
Offer.
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Under the Limited Partnership Agreement, the General Partner
holds an interest in the Partnership and is entitled to participate in certain
cash distributions made by the Partnership to its partners. The General Partner
received in respect of its interest in the Partnership cash distributions of
$10,000 to date in 1997, and $10,000 in each of 1996 and 1995. In late December
1994, Insignia Residential Group, L.P. ("IRG") and Insignia Commercial Group,
Inc. ("ICG") (which are affiliates of the Purchaser and the General Partner)
assumed day-to-day property management responsibilities for the Partnership's
properties. The Partnership paid IRG and ICG property management fees for
property management services in the amounts of approximately $95,000 and
$115,000 for the years ended December 31, 1996 and 1995, respectively, and has
paid IRG and ICG property management fees equal to $82,000 during the first
nine months of 1997. The Partnership reimbursed the General Partner and its
affiliates (including Insignia) for expenses incurred in connection with asset
management and partnership administration services performed by them for the
Partnership during 1996 and 1995 in the amounts of $129,000 and $132,000,
respectively, and has reimbursed them for such services in the amount of
$88,000 through September 30, 1997 (including $23,000 for reimbursements of
costs incurred in connection with construction oversight services). In 1996,
the Partnership reimbursed an affiliate of the General Partner approximately
$12,000 for costs incurred in connection with a refinancing of the debt
encumbering one of the Partnership's properties. The Partnership paid an
affiliate of the General Partner $6,000 in 1996, $4,000 in 1995 and $43,000 for
the nine months ended September 30, 1997, for commercial leasing commissions.
The Partnership Agreement also provides for an asset management fee to be paid
to the General Partner or an affiliate in monthly installments equal to 0.625%
of the purchase price of the properties plus improvements for managing the
Partnership's assets. Pursuant to this provision, asset management fees of
$98,000 were paid to the General Partner and affiliates in each of the years
ended December 31, 1996 and 1995 and asset management fees of $73,000 were paid
in the nine months ended September 30, 1997. On July 1, 1995, the Partnership
began insuring its properties under a master policy through an agency and
insurer unaffiliated with the General Partner. An affiliate of the General
Partner acquired, in the acquisition of a business, certain financial
obligations from an insurance agency which was later acquired by the agent who
placed the current year's master policy. The current agent assumed the
financial obligations to the affiliate of the General Partner who receives
payments on these obligations from the agent. Insignia and the General Partner
believe that the aggregate financial benefit derived by Insignia and its
affiliates from the arrangement described in the three preceding sentences has
been immaterial.
The General Partner has conflicts of interest with respect to the
Offer, including conflicts resulting from its affiliation with IPT and the
Purchaser. The General Partner also would have a conflict of interest (i) as a
result of the fact that a sale or liquidation of the Partnership's assets would
result in a decrease or elimination of the fees paid to the General Partner
and/or its affiliates and (ii) as a consequence of the Purchaser's ownership of
Units, because the Purchaser (which is an affiliate of the General Partner) may
have incentives to seek to maximize the value of its ownership of Units, which
in turn may result in a conflict for the General Partner in attempting to
reconcile the interests of the Purchaser (which is an affiliate of the General
Partner) with the interests of the other Limited Partners. In addition, the
Purchaser (which is an affiliate of the General Partner) is making the Offer
with a view to making a profit. Accordingly, there is a conflict between the
desire of the Purchaser (which is an affiliate of the General Partner) to
purchase Units at a low price and the desire of the Limited Partners to sell
their Units at a high price.
As described in the Offer to Purchase, the Purchaser (which is an
affiliate of the General Partner) expects to pay for the Units it purchases
pursuant to the Offer with funds
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provided by IPLP as capital contributions. IPLP in turn intends to use its cash
on hand to make such contributions. See Section 12. It is possible, however,
that in connection with its future financing activities, IPT or IPLP may cause
or request the Purchaser (which is an affiliate of the General Partner) to
pledge the Units as collateral for loans, or otherwise agree to terms which
provide IPT, IPLP and the Purchaser with incentives to generate substantial
near-term cash flow from the Purchaser's investment in the Units. This could be
the case, for example, if a loan has a "balloon" maturity after a relatively
short time or bears a high or increasing interest rate. In such a situation,
the General Partner may experience a conflict of interest in seeking to
reconcile the best interests of the Partnership with the need of its affiliates
for cash flow from the Partnership's activities.
If the Purchaser is successful in acquiring a significant number
of Units pursuant to the Offer, the Purchaser (which is an affiliate of the
General Partner) will have the right to vote those Units and thereby
significantly influence all voting decisions with respect to the Partnership,
including decisions concerning liquidation, amendments to the Limited
Partnership Agreement, removal and replacement of the General Partner and
mergers, consolidations and other extraordinary transactions. This means that
(i) non-tendering Limited Partners could be prevented from taking action they
desire but that IPT (which is an affiliate of the General Partner) opposes and
(ii) IPT (which is an affiliate of the General Partner) may be able to take
action desired by IPT but opposed by the non-tendering Limited Partners.
Under the Limited Partnership Agreement, Limited Partners holding
a majority of the Units are entitled to take action with respect to a variety
of matters, including: removal of the General Partner and in certain
circumstances election of a new or successor general partner; dissolution of
the Partnership; the sale of all or substantially all of the assets of the
Partnership; and most types of amendments to the Limited Partnership Agreement.
In general, IPLP and the Purchaser (which are affiliates of the General
Partner) will vote the Units owned by them in whatever manner they deem to be
in the best interest of IPT, which, because of their relationship with the
General Partner, also may be in the interest of the General Partner, but may
not be in the interest of other Limited Partners. This could (i) prevent
non-tendering Limited Partners from taking action they desire but that IPT
opposes and (ii) enable IPT to take action desired by IPT but opposed by
non-tendering Limited Partners.
To the best knowledge of the General Partner, except as described
in this Schedule 14D-9, there are no other material agreements, arrangements,
understandings or any actual or potential conflicts of interest between the
Partnership, the General Partner and their affiliates and the Bidders, their
executive officers, directors or affiliates.
ITEM 4. THE SOLICITATION OR RECOMMENDATION.
Because of the existing and potential future conflicts of
interest described in Item 3 above, the Partnership and the General Partner are
remaining neutral and making no recommendation as to whether Limited Partners
should tender their Units in response to the Offer.
ITEM 5. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED.
Neither the Partnership nor any person acting on its behalf has
employed, retained or compensated, or intends to employ, retain or compensate,
any person or class of person to make solicitations or recommendation to
Limited Partners on its behalf concerning the Offer.
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ITEM 6. RECENT TRANSACTIONS AND INTEREST WITH RESPECT TO SECURITIES.
(a) No transactions in the Units have been effected during the
past 60 days by the Partnership or the General Partner or, to the knowledge of
the General Partner, by any of its current or former executive officers,
directors or affiliates.
(b) To the knowledge of the Partnership, neither the General
Partner nor any of its current or former executive officers, directors or
affiliates intends to tender pursuant to the Offer any Units beneficially owned
by them.
ITEM 7. CERTAIN NEGOTIATIONS AND TRANSACTIONS BY THE SUBJECT COMPANY.
None.
ITEM 8. ADDITIONAL INFORMATION TO BE FURNISHED.
None.
ITEM 9. MATERIAL TO BE FILED AS EXHIBITS.
(a) Form of cover letter to Limited Partners of the
Partnership dated December 19, 1997.
(b) None.
(c) None.
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SIGNATURE
After reasonable inquiry and to the best of my knowledge and
belief, I certify that the information set forth in this statement is true,
complete and correct.
Dated: December 19, 1997
JOHNSTOWN/CONSOLIDATED INCOME PARTNERS,
a California limited partnership
By: ConCap Equities, Inc.
Its General Partner
By: /s/ William H. Jarrard, Jr.
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William H. Jarrard, Jr.
President
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EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION
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(a) Form of cover letter to Limited Partners from the Partnership
dated December 19, 1997.
(b) None.
(c) None.
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Exhibit (a)
Johnstown/Consolidated Income Partners
December 19, 1997
Dear Limited Partner:
Enclosed is the Schedule 14D-9 which was filed by
Johnstown/Consolidated Income Partners (the "Partnership") with the Securities
and Exchange Commission in connection with an offer (the "Offer") by Madison
River Properties, L.L.C., a Delaware limited liability company (the
"Purchaser"), Insignia Properties, L.P., a Delaware limited partnership
("IPLP"), Insignia Properties Trust, a Maryland real estate investment trust
("IPT"), and Insignia Financial Group, Inc., a Delaware corporation
("Insignia," and together with IPLP, IPT and the Purchaser, the "Bidders"), to
purchase units of limited partnership interest ("Units") in the Partnership.
The Partnership's sole general partner (the "General Partner") is
ConCap Equities, Inc., which is an affiliate of the Bidders. Due to the
affiliation between the General Partner of the Partnership and the Bidders, the
General Partner is subject to certain conflicts of interest in connection with
the response to the Offer.
AS A RESULT OF THE EXISTING AND POTENTIAL CONFLICTS OF INTEREST,
NEITHER THE PARTNERSHIP NOR THE GENERAL PARTNER EXPRESSES ANY OPINION AS TO THE
OFFER AND EACH IS REMAINING NEUTRAL AND MAKING NO RECOMMENDATION AS TO WHETHER
LIMITED PARTNERS SHOULD TENDER THEIR UNITS IN RESPONSE TO THE OFFER.
Limited Partners are advised to carefully read the enclosed
Schedule 14D-9.
Johnstown/Consolidated Income Partners
