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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
VMS INVESTORS FIRST-STAGED EQUITY L.P. II,
A DELAWARE LIMITED PARTNERSHIP
(Name of Subject Company)
VMS INVESTORS FIRST-STAGED EQUITY L.P. II,
A DELAWARE 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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CARROLL D. VINSON
PRESIDENT
MAERIL, INC.
ONE INSIGNIA FINANCIAL PLAZA
GREENVILLE, SOUTH CAROLINA 29602
(864) 239-2747
(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 VMS Investors First-Staged Equity
L.P. II, a Delaware 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 Cooper River Properties,
L.L.C., a Delaware limited liability company (the "Purchaser"), to purchase up
to 11,500 of the outstanding Units at a purchase price of $55 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 September 29, 1998 (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, 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) MAERIL, Inc., which is the general partner of the Partnership
(the "General Partner"), is a direct, wholly-owned subsidiary of IPT. The
Purchaser is a recently formed, wholly-owned subsidiary of IPLP, which is the
operating partnership of IPT. IPT is the sole general partner of IPLP (owning
approximately 70% of the total equity interests in IPLP), and Insignia is the
sole limited partner of IPLP (owning approximately 30% of the total equity
interests in IPLP). Insignia and its affiliates also own approximately 57% of
the outstanding common shares of IPT.
For more than the past three years, Insignia/ESG, Inc. (formerly
known as Insignia Commercial Group, Inc.) ("I/ESG"), which is an affiliate of
IPT and the Purchaser, has provided property management services to the
Partnership, and Insignia (directly or through affiliates) has performed asset
management, partnership administration and investor relations services for the
Partnership.
By reason of these relationships, the General Partner has conflicts
of interest in considering the Offer.
The Partnership paid I/ESG fees for property management services in
the amounts of approximately $145,000, $146,000 and $139,000 for the years
ended December 31, 1997, 1996 and 1995, respectively, and has paid I/ESG
property management fees equal to $64,000 during the first six months of 1998.
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 for
the years ended December 31, 1997, 1996 and 1995 in the amounts of $89,000,
$76,000 and $136,000, respectively, and has
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reimbursed them for such services in the amount of $32,000, through June 30,
1998 (including reimbursements paid to an affiliate of the General Partner in
the amounts of $8,000 for the year ended December 31, 1997 (for commercial
lease commissions) and $4,000 for the six months ended June 30, 1998 (for costs
incurred in connection with construction oversight services).
As described above, the Purchaser and the General Partner are
affiliates of and controlled by IPT, which is controlled by Insignia. The
General Partner has conflicts of interest in considering the Offer, including
(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) the fact that as a consequence
of the Purchaser's ownership of Units, 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. As with any rational investment decision, 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 provided by IPLP as capital contributions.
IPLP in turn intends to use its cash on hand and, if necessary, funds available
to it under its credit facility to make such contributions. 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.
The Limited Partnership Agreement provides that the General Partner
has absolute discretion as to whether to admit an assignee of Units to the
Partnership as a substituted Limited Partner. The Purchaser (which is an
affiliate of the General Partner) will seek to be admitted to the Partnership
as a substituted Limited Partner upon consummation of the Offer and, when
admitted, will have the right to vote each Unit purchased pursuant to the
Offer. Even if the Purchaser (which is an affiliate of the General Partner) is
not admitted to the Partnership as a substituted Limited Partner, however, the
Purchaser nonetheless will have the right to vote each Unit purchased in the
Offer pursuant to the irrevocable appointment by tendering Limited
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Partners of the Purchaser (which is an affiliate of the General Partner) and
its managers and designees as proxies with respect to the Units tendered by
such Limited Partners and accepted for payment by the Purchaser. As a result,
if the Purchaser (which is an affiliate of the General Partner) is successful
in acquiring a significant number of Units pursuant to the Offer, the Purchaser
will have the right to vote those Units and thereby significantly influence all
voting decisions with respect to the Partnership. 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 IPT's best interests,
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. 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; sale of all or
substantially all of the assets of the Partnership; and most types of
amendments to the Limited Partnership Agreement.
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.
ITEM 6. RECENT TRANSACTIONS AND INTEREST WITH RESPECT TO SECURITIES.
None.
ITEM 7. CERTAIN NEGOTIATIONS AND TRANSACTIONS BY THE SUBJECT COMPANY.
None.
ITEM 8. ADDITIONAL INFORMATION TO BE FURNISHED.
None.
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ITEM 9. MATERIAL TO BE FILED AS EXHIBITS.
(a) Form of cover letter to Limited Partners of the Partnership
dated September 29, 1998.
(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: September 29, 1998
VMS Investors First-Staged Equity L.P. II,
a Delaware limited partnership
By: MAERIL, Inc.,
its General Partner
By: /s/ Carroll D. Vinson
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Carroll D. Vinson
President
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EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION
(a) Form of cover letter to Limited Partners from the
Partnership dated September 29, 1998.
(b) None.
(c) None.
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Exhibit (a)
VMS Investors First-Staged Equity L.P. II
September 29, 1998
Dear Limited Partner:
Enclosed is the Schedule 14D-9 which was filed by VMS Investors
First-Staged Equity L.P. II (the "Partnership") with the Securities and
Exchange Commission in connection with an offer (the "Offer") by Cooper 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 general partner is MAERIL, Inc. (the "General
Partner"), 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.
VMS Investors First-Staged Equity L.P. II
