SECURITIES & EXCHANGE COMMISSION
Washington, D.C. 20549
------
SCHEDULE 13E-3
(Amendment No. 2)
Rule 13e-3 Transaction Statement
(Pursuant to Section 13(e) of the Securities Exchange Act
of 1934)
WINDSOR PARK PROPERTIES 4,
a California limited partnership
--------------------------------
(Name of Issuer)
N' TANDEM TRUST
CHATEAU COMMUNITIES, INC.
WINDSOR PARK PROPERTIES 4,
a California limited partnership
(Name of Person(s) Filing Statement)
Units of Limited Partnership Interest
-------------------------------------
(Title of Class of Securities)
(CUSIP Number of Class of Securities)
Steven G. Waite
Windsor Park Properties 4
6430 S. Quebec Street
Englewood, CO 80111
303-741-3707
(Name, Address and Telephone number of persons authorized
to receive
notices and communications on behalf of person(s) filing
statement)
With copies to:
Jay L. Bernstein, Esq.
Rogers & Wells LLP
200 Park Avenue
New York, New York 10166-0153
(212) 878-8000
<PAGE>
This Statement is filed in connection with (check the appropriate box):
a.|X| The filing of solicitation materials or an information statement subject
to Regulation 14A, Regulation 14C or Rule 13e-3(C) under the Securities
Exchange Act of 1934.
b.|_| The filing of a registration statement under the Securities Act of 1933.
c.|_| A tender offer.
d.|_| None of the above.
Check the following box if the soliciting materials or information statement
referred to in checking box "a." above are preliminary copies: |X|
2
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Calculation of Filing Fee
================================================================================
Transaction Valuation /1/ Amount of Filing Fee
- --------------------------------------------------------------------------------
$11,871,750 $2,374.35
- --------------------------------------------------------------------------------
================================================================================
|_| Check box if any part of the fee is offset as provided by Rule 0-11(a)(2)
and identify the filing with which the offsetting fee was previously paid.
Identify the previous filing by registration statement number, or the form
or schedule and the date of its filing.
Amount previously paid: Filing party:
Form or registration no.: Date Filed:
This Transaction Statement on Schedule 13E relates to the proposed sale of
the assets of Windsor Park Properties 4, a California limited partnership (the
"Partnership") pursuant to a plan of liquidation (the "Plan of Liquidation")
adopted by the general partners of the partnership (the "General Partners").
Pursuant to the Plan of Liquidation, the Partnership will sell its single
remaining wholly owned property and its six partial ownership interests in other
properties (together, the "Properties") to N' Tandem Trust, an unincorporated
California business trust ("N' Tandem"), whose advisory company, The Windsor
Corporation, is also the managing general partner of the partnership (the
"Managing General Partner"). Chateau Communities, Inc., which owns the Managing
General Partner, also holds 9.8% of the capital stock of N' Tandem.
In accordance with the Agreement of Limited Partnership of the Partnership
(the "Partnership Agreement"), the General Partners are seeking the consent of
the holders (the "Limited Partners") of units of limited partnership interest in
the Partnership (the "Units") to the sale of assets (the "Sales") and the Plan
of Liquidation.
The Cross Reference Sheet below is furnished pursuant to General
Instruction F to Schedule 13E-3 and shows the location of the information
required to be included in response to the items of this Schedule 13E-3 in the
Partnership's Consent Solicitation Statement filed on February 5, 1999, by the
Partnership with the Securities and Exchange Commission (the "Commission")
pursuant to Regulation 14A, as amended by Amendment No. 2 filed with the
Commission on March 16, 1999 and Amendment No. 3 filed with the Commission on
April 3, 1999 (as amended, the "Consent Solicitation Statement"). The
information in the Consent Solicitation Statement is incorporated into this
Schedule 13E-3 by reference. A copy of the Consent Solicitation Statement is
attached hereto as Exhibit (d). Capitalized terms not defined herein have the
meanings ascribed to them in the Consent Solicitation Statement.
- -------------------------
/1/ For purposes of calculating the filing fee only.
3
<PAGE>
CROSS REFERENCE SHEET
Item in Schedule 13E-3 Location in Consent Solicitation
- ---------------------- tatement by Caption; Proposal 1 and 2
----------------------------------------
Item 1. Issuer and Class of
Security Subject to the
Transaction
(a) Cover Page. Summary - Purpose of
the Consent Solicitation;
Proposals 1 and 2
(b) Consent Procedures; Transactions
Authorized By Consents - Record
Date; Required Vote
(c) Summary - No Established Trading
Market for the Units
(d) Summary - Historical Distributions
(e) Not applicable
(f) Description of the Proposed
Transaction - Background of the
Transaction
Item 2. Identity and Background
(a) - (d) Certain Risk Factors and Other
Considerations - Conflicts of
Interest. Description of the
Proposed Transaction - Information
Concerning N' Tandem and Chateau.
Appendix A - Information
Concerning Officers and Directors
of the Managing General Partner,
N' Tandem and Chateau
(e) Not applicable
(f) Not applicable
4
<PAGE>
Item in Schedule 13E-3 Location in Consent Solicitation
- ---------------------- tatement by Caption; Proposal 1 and 2
----------------------------------------
(g) Appendix A - Information
Concerning the Officers and
Directors of the Managing General
Partner, N' Tandem and Chateau
Item 3. Past Contacts, Transactions
or Negotiations
(a)(1) Description of the Proposed
Transaction - Background of the
Proposed Transaction
(2) Description of the Proposed
Transaction - Background of the
Proposed Transaction and - The
Purchase and Sale Agreement
(b) Description of the Proposed
Transaction - Background of the
Proposed Transaction and - The
Purchase and Sale Agreement
Item 4. Terms of the Transaction
(a) Description of the Proposed
Transaction
(b) Not applicable
Item 5. Plans or Proposal of the
Issuer or Affiliate
(a) - (g) Description of the Proposed
Transaction
Item 6. Source and Amounts of
Funds or Other
Consideration
(a) Description of the Proposed
Transaction - The Purchase and Sale
Agreement
5
<PAGE>
Item in Schedule 13E-3 Location in Consent Solicitation
- ---------------------- tatement by Caption; Proposal 1 and 2
----------------------------------------
(b) Description of the Proposed
Transaction - The Purchase and Sale
Agreement. Consent Procedures;
Transactions Authorized by Consents
- Solicitation Expenses and -
Estimate of Liquidating
Distributions
(c) Description of the Proposed
Transaction - Purchase and Sale
Agreement
(d) Not applicable
Item 7. Purposes, Alternatives,
Reasons and Effects
(a) - (c) Description of the Proposed
Transaction - Purpose of the
Consent Solicitation; Proposals 1
and 2, - Background of the Proposed
Transaction. Special Factors -
Fairness of the Transaction;
Recommendation of the General
Partners and - Alternatives
Considered
(d) Description of the Proposed
Transaction - Purpose of the
Consent Solicitation and -
Background of the Proposed
Transaction. Special Factors -
Fairness of the Transaction;
Recommendation of the General
Partners, and - Ownership of
Properties By N' Tandem Following
Sales. Certain Federal Income Tax
Considerations
6
<PAGE>
Item in Schedule 13E-3 Location in Consent Solicitation
- ---------------------- tatement by Caption; Proposal 1 and 2
----------------------------------------
Item 8. Fairness of the
Transaction
(a) - (b) Description of the Proposed
Transaction - Purpose of the
Consent Solicitation; Proposals 1
and 2 and - Background of the
Proposed Transaction. Special
Factors - Fairness of the
Transaction; Recommendation of the
General Partners and - N' Tandem's
and Chateau's belief as to the
Fairness of the Proposed
Transaction; N' Tandem's and
Chateau's Reasons for Engaging in
the Transaction
(c) Consent Procedures; Transactions
Authorized by Consents - Record
Date; Required Vote
(d) Special Factors - Fairness of the
Transaction; Recommendation of the
General Partners. Certain Risk
Factors and Other Considerations -
No Fairness Opinion; No
Appointment of Independent
Representative
(e) Not applicable
(f) Description of the Proposed
Transaction - Background of the
Proposed Transaction, Special
Factors - Fairness of the
Transaction; Recommendation of the
General Partners
Item 9. Reports, Opinions,
Appraisals and Certain
Negotiations
(a) - (c) Special Factors - Appraisals
7
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Item in Schedule 13E-3 Location in Consent Solicitation
- ---------------------- tatement by Caption; Proposal 1 and 2
----------------------------------------
Item 10. Interest in Securities of
the Issuer
(a) Consent Procedures; Transactions
Authorized By Consents - Record
Date; Required Vote
(b) Not applicable
Item 11. Contracts, Arrangements Not applicable
or Understandings with
Respect to the Issuer's
Securities
Item 12. Present Intention and
Recommendation of Certain
Persons with Regard to
the Transaction
(a) Consent Procedures; Transactions
Authorized By Consents - Record
Date; Required Vote
(b) Consent Procedures; Transactions
Authorized By Consents - Record
Date; Required Vote. Special
Factors - Fairness of the
Transaction; Recommendation of the
General Partners
Item 13. Other Provisions of the
Transaction
(a) Consent Procedures; Transactions
Authorized By Consents - No
Appraisal or Dissenters' Rights
(b) Not applicable
8
<PAGE>
Item in Schedule 13E-3 Location in Consent Solicitation
- ---------------------- tatement by Caption; Proposal 1 and 2
----------------------------------------
(c) Not applicable
Item 14. Financial Information
(a) Financial Statements.
Incorporation of Certain Documents
by Reference
(b) Not applicable
Item 15. Persons and Assets
Employed, Retained or
Utilized Consent Procedures; Transactions
Authorized By Consents -
(a) Solicitation of Consents
(b) Consent Procedures; Transactions
Authorized By Consents -
Solicitation of Consents
Item 16. Additional Information Summary. Certain Risk Factors and
Other Considerations. Description
of the Proposed Transaction.
Special Factors. Summary of
Selected Terms of the Partnership
Agreement. The Partnership
Agreement. The Partnership's
Properties. Federal Income Tax
Considerations. Consent
Procedures; Transactions
Authorized By Consents. Financial
Statements. Incorporation of
Certain Documents By Reference.
Item 1. Issuer and Class of Security Subject to the Transaction.
(a) The name of the issuer of the class of equity securities which is the
subject of the Rule 13e-3 transaction is Windsor Park Properties 4, a California
limited partnership (the "Partnership"), and the address of its principal
executive offices is 6430 S. Quebec Street, Englewood, CO 80111. The information
set forth on the cover page of the Consent Solicitation Statement and under the
caption "Summary - Purpose of the Consent Solicitation" is incorporated herein
by reference.
(b) The class of security which is the subject of the Rule 13e-3 transaction is
the units of limited partnership interest of the Partnership (the "Units"). The
information set forth under the caption "Consent Procedures; Transactions
Authorized by Consents - Record Date; Required Vote" in the Consent Solicitation
Statement is incorporated herein by reference.
9
<PAGE>
(c) The information set forth under the caption "Summary - No Established
Trading Market For the Units" in the Consent Solicitation Statement is
incorporated herein by reference.
(d) The information set forth under the caption "Summary - Historical
Distributions" in the Consent Solicitation Statement is incorporated herein by
reference.
(e) Not applicable.
(f) The information set forth under the caption "Description of the Proposed
Transaction - Background of the Proposed Transaction" is incorporated herein by
reference.
Item 2. Identity and Background.
This Schedule 13E-3 is being filed jointly by N' Tandem, which is an affiliate
of the Partnership, Chateau, an entity that controls N' Tandem and the Managing
General Partner of the Partnership, and the Partnership (the issuer of the class
of equity securities which is the subject of the Rule 13e-3 transaction). The
information set forth under the captions "Background of the Transaction -
Information Concerning N' Tandem and Chateau" and "Certain Risk Factors and
Other Considerations - Conflicts of Interest," in the Consent Solicitation
Statement is incorporated herein by reference.
(a)-(d) Information required by this item relating to directors and executive
officers of N' Tandem, Chateau, and The Windsor Corporation is set forth in
Appendix A to the Consent Solicitation Statement, which is incorporated herein
by reference.
(e) To the knowledge of N' Tandem, Chateau and the General Partners of the
Partnership, none of the persons with respect to whom information is provided in
response to this Item 2 was, during the last five years, convicted in a criminal
proceeding (excluding traffic violations or similar misdemeanors).
(f) To the knowledge of N' Tandem, Chateau and the General Partners of the
Partnership, none of the persons with respect to whom information is provided in
response to this Item 2 was, during the last five years, a party to a civil
proceeding of a judicial or administrative body of competent jurisdiction and as
a result of such proceeding was or is subject to a judgment, decree or final
order enjoining further violations of, or prohibiting activities, subject to,
Federal or state securities laws or finding any violation of such laws.
(g) Information required by this item relating to directors and executive
officers of N' Tandem, Chateau and The Windsor Corporation is set forth in
Appendix A to the Consent Solicitation Statement, which is incorporated herein
by reference.
10
<PAGE>
Item 3. Past Contacts, Transactions or Negotiations.
(a) (1) The information under set forth the caption "Description of the
Proposed Transaction - Background of the Proposed Transaction" in the
Consent Solicitation Statement is incorporated herein by reference.
(2) The information set forth under the caption "Description of the
Proposed Transaction - Background of the Proposed Transaction" and "- The
Purchase and Sale Agreement" in the Consent Solicitation Statement is
incorporated herein by reference.
(b) The information set forth under the caption and "Description of the
Proposed Transaction" in the Consent Solicitation Statement is incorporated
herein by reference.
Item 4. Terms of the Transaction.
(a) The information set forth under the caption "Description of the Proposed
Transaction" in the Consent Solicitation Statement is incorporated herein by
reference.
(b) Not applicable.
Item 5. Plans or Proposals of the Issuer or Affiliate.
(a)-(g) The Rule 13e-3 transaction provides for the sale of all of the
Partnership's assets, a dissolution and winding up of the Partnership, and a
termination of registration of the Units under the Exchange Act. The information
set forth under the caption "Description of the Proposed Transaction" in the
Consent Solicitation Statement is incorporated herein by reference.
Item 6. Source and Amounts of Funds or Other Consideration.
(a) The information contained in the last paragraph of "Description of the
Proposed Transaction - The Purchase and Sale Agreement" in the Consent
Solicitation Statement is incorporated herein by reference.
(b) The information set forth under the captions "Description of the Proposed
Transaction - The Purchase and Sale Agreement," "Consent Procedures;
Transactions Authorized by Consents -Solicitation Expenses" and "-Estimate of
Liquidating Distributions" in the Consent Solicitation Statement relating to the
expenses estimated to be incurred in the transaction, is incorporated herein by
reference.
(c) The information contained in the last paragraph under the caption
"Description of the Proposed Transaction - The Purchase and Sale Agreement" in
the Consent Solicitation Statement is incorporated herein by reference.
(d) Not applicable.
Item 7. Purpose(s), Alternatives, Reasons and Effects.
(a)-(c) The information set forth under the captions "Description of the
Proposed Transaction-Purpose of the Consent Solicitation; Proposals 1 and 2," "-
Background of the Proposed Transaction," and "Special Factors Fairness of the
Transaction; Recommendation of the General Partners", and "- Alternatives
Considered" in the Consent Solicitation Statement is incorporated herein by
reference.
(d) The information set forth under the captions "Description of the Proposed
Transaction - Background of the Proposed Transaction" and "Ownership of
Properties By N' Tandem Following Sales" and "Special Factors - Fairness of the
Transaction; Recommendation of the General Partners" in the Consent Solicitation
Statement is incorporated herein by reference. The information contained under
the caption "Certain Federal Income Tax Considerations" is incorporated herein
by reference.
11
<PAGE>
Item 8. Fairness of the Transaction.
(a)-(b) N' Tandem, Chateau and the General Partners of the Partnership
reasonably believe that the transaction is fair to the unaffiliated Limited
Partners. The information set forth under the captions "Description of the
Proposed Transaction - Background of the Proposed Transaction" and "Special
Factors - Fairness of the Transaction; Recommendation of the General Partners"
and "N' Tandem's and Chateau's Belief as to the Fairness of the Proposed
Transaction; N' Tandem's and Chateau's Reasons for Engaging in the Transaction,"
in the Consent Solicitation Statement is incorporated herein by reference.
(c) The information contained under the caption "Consent Procedures;
Transactions Authorized By Consents - Record Date; Required Vote" in the Consent
Solicitation Statement is incorporated herein by reference.
(d) The General Partners of the Partnership have not retained an independent
representative to act on behalf of unaffiliated Unitholders. The information set
forth under the caption "Special Factors - Fairness of the Transaction;
Recommendation of the General Partners" and "Certain Risk Factors and Other
Considerations - No Appointment of Independent Representative" and " - No
Fairness Opinion" in the Consent Solicitation Statement is incorporated herein
by reference.
(e) The proposed transaction was approved by both of the General Partners of the
Partnership. As a limited partnership, the Partnership does not have directors.
All of the directors of the Managing General Partner were appointed by Chateau.
(f) The information contained under the captions "Description of the Proposed
Transaction - Background of the Proposed Transaction" and "Special Factors -
Fairness of the Transaction; Recommendation of the General Partners" in the
Consent Solicitation Statement is incorporated herein by reference.
Item 9. Reports, Opinions, Appraisals and Certain Negotiations.
(a)-(c) The information contained under the captions "Special Factors
Appraisals," in the Consent Solicitation Statement is incorporated herein by
reference.
Item 10. Interest in Securities of the Issuer.
(a) The information contained under the caption "Consent Procedures;
Transactions Authorized By Consents - Record Date; Required Vote" in the Consent
Solicitation Statement is incorporated herein by reference.
(b) Not applicable.
Item 11. Contracts, Arrangements or Understandings with Respect to the Issuer's
Securities.
Not applicable.
Item 12. Present Intention and Recommendation of Certain
Persons with Regard to the Transaction.
(a) The information contained under the caption "Consent Procedures;
Transactions Authorized By Consents - Record Date; Required Vote" in the Consent
Solicitation Statement is incorporated herein by reference.
(b) The information contained under the caption "Consent Procedures;
Transactions Authorized By Consents - Record Date; Required Vote" in the Consent
Solicitation Statement is incorporated herein by reference. The information set
forth under the caption "Special Factors - Fairness of the Transaction;
12
<PAGE>
Recommendation of the General Partners" in the Consent Solicitation Statement is
incorporated herein by reference. No other person has made a recommendation
required to be described herein.
Item 13. Other Provisions of the Transaction.
(a) The information set forth under the caption "Consent Procedures;
Transactions Authorized By Consents - No Appraisal or Dissenters' Rights" in the
Consent Solicitation Statement is incorporated herein by reference.
(b) Not applicable.
(c) Not applicable.
Item 14. Financial Information.
(a) The information set forth under the captions "Financial Statements" and
"Incorporation of Certain Documents By Reference" in the Consent Solicitation
Statement is incorporated herein by reference.
(b) Not applicable.
Item 15. Persons and Assets Employed, Retained or Utilized.
(a) The information set forth under the caption "Consent Procedures;
Transactions Authorized By Consents - Solicitation of Consents" in the Consent
Solicitation Statement is incorporated herein by reference.
(b) The information set forth under the caption "Consent Procedures;
Transactions Authorized By Consents - Solicitation of Consents" in the Consent
Solicitation Statement is incorporated herein by reference.
Item 16. Additional Information.
The information contained in the Consent Solicitation Statement is incorporated
herein by reference in its entirety.
Item 17. Materials to be Filed as Exhibits.
(a) Promissory Note of N' Tandem in favor of Chateau Communities, Inc.*
(b)(1) Appraisals of Whitcomb Real Estate, Inc.*
(b)(2) Appraisals of Landmark Valuation, Inc.*
(b)(3) Appraisals of Appraisal Technology, Inc.*
(d) Preliminary Consent Solicitation Statement and related proxy materials, as
filed with the Commission on April 5, 1999.
Signature
After due 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.
- -----------------------
* To be Filed by Amendment
13
<PAGE>
WINDSOR PARK PROPERTIES 4,
California Limited Partnership
By: The Windsor Corporation,
general partner
By: /s/ Steven G. Waite
----------------------------
Steven G. Waite
President
Date: April 5, 1999
14
<PAGE>
Signature
After due 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.
N' TANDEM TRUST
By: /s/ Gary P. McDaniel
----------------------
Gary P. McDaniel
Trustee
Date: April 5, 1999
15
<PAGE>
Signature
After due 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.
CHATEAU COMMUNITIES, INC.
By: /s/ Gary P. McDaniel
_________________________
Gary P. McDaniel
Chief Executive Officer
Date: April 5, 1999
16
<PAGE>
INDEX TO EXHIBITS
EXHIBIT NO. DESCRIPTION PAGE
- ----------- ----------- ----
(a) Promissory Note of N' Tandem in favor of
Chateau Communities, Inc.*
(b)(1) Appraisals of Whitcomb Real Estate, Inc.*
(b)(2) Appraisals of Landmark Valuation, Inc.*
(b)(3) Appraisals of Appraisal Technology, Inc.*
(d) Preliminary Consent Solicitation Statement
and related proxy materials, as filed with
the Commission on April 5, 1999.
- --------
* To be Filed by Amendment
17
CONSENT SOLICITATION STATEMENT
Windsor Park Properties 4,
A California Limited Partnership
6430 South Quebec Street
Englewood, Colorado 80111
Pursuant to the Agreement of Limited Partnership (the "Partnership
Agreement") of Windsor Park Properties 4, a California limited partnership (the
"Partnership"), the term of the Partnership expired on December 31, 1997. As a
result, in accordance with the terms of the Partnership Agreement and California
law, unless the term of the Partnership is extended, The Windsor Corporation
(the "Managing General Partner") and John A. Coseo, Jr., the general partners of
the Partnership (the "General Partners"), are required to develop a plan of
liquidation for the Partnership's assets and to liquidate and dissolve the
Partnership.
The purpose of this Consent Solicitation is to obtain the consent of the
holders (the "Limited Partners") of units of limited partner interest in the
Partnership (the "Units") to two proposals described herein ("Proposals 1 and
2"). Upon approval of Proposals 1 and 2 by the Limited Partners, the General
Partners will proceed with a plan of liquidation that has been adopted by the
General Partners (the "Plan of Liquidation"), pursuant to which the Partnership
will sell (the "Sales") its single remaining wholly owned property and its six
partial ownership interests in other properties (together, the "Properties") to
N' Tandem Trust, a California business trust ("N' Tandem" or the "Purchaser").
The Managing General Partner is also a wholly-owned subsidiary of Chateau and
the Managing General Partner and N' Tandem are under common control of Chateau
Communities, Inc. ("Chateau"). The Directors of the Managing General Partner are
also the Chief Executive Officer and President, respectively, of Chateau. The
Managing General Partner, in addition to serving as the managing general partner
of the Partnership, also serves as the external investment advisor to the
Purchaser. Upon completion of the Plan of Liquidation, final liquidating
distributions (estimated to be an average of approximately $44.18 per Unit) will
be made to the partners in accordance with the terms of the Partnership
Agreement.
The proposed transaction is subject to material risk factors described
herein, including the following:
o The Sales, and the recommendations and views of the Managing General
Partner with respect to the Sales, are subject to potential conflicts of
interest more particularly described herein. See "Risk Factors - Conflicts
of Interest";
o Due to the potential conflicts of interests of the Managing General
Partner, the purchase prices for the Properties and other transaction terms
cannot be considered to be the result of arm's-length negotiations and
bargaining between independent parties, and as a result may not be as
favorable as those that might have been obtained had the purchase prices
and terms of the Sales been the result of such arm's-length negotiations;
o No fairness opinion has been sought with respect to the Sales;
o The General Partners did not retain an independent and disinterested
third party to represent the unaffiliated Limited Partners in connection
with the proposed transaction or to negotiate the terms of the Sales;
o The General Partners have engaged in limited marketing efforts with
respect to the sales of the Properties;
-1-
<PAGE>
o The Purchase Prices for the Properties are based upon appraisals
obtained in November and December 1997 and such appraisals have not been
updated. Accordingly, such appraisals may not reflect the current fair
market values of the Properties; and
o The Limited Partners will lose the opportunity to benefit from
potential increases in the values of the Properties.
The close of business on March __, 1999 has been fixed as the record date
for determining Limited Partners entitled to give written consent to the Sales
and the Plan of Liquidation. In order to be valid, a consent must be received
prior to May __, 1999.
LIMITED PARTNERS ARE URGED TO COMPLETE, SIGN AND DATE THE ENCLOSED CONSENT
FORM AND RETURN IT PROMPTLY IN THE ENCLOSED ENVELOPE, WHICH REQUIRES NO POSTAGE
IF MAILED IN THE UNITED STATES, TO BE RECEIVED NO LATER THAN MAY __, 1999.
This Consent Solicitation Statement is dated April __, 1999.
-2-
<PAGE>
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION NOT CONTAINED IN THIS CONSENT SOLICITATION STATEMENT, AND, IF
GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION NOT CONTAINED HEREIN MUST NOT
BE RELIED UPON AS HAVING BEEN AUTHORIZED. THIS CONSENT SOLICITATION STATEMENT
DOES NOT CONSTITUTE THE SOLICITATION OF A CONSENT IN ANY JURISDICTION TO OR FROM
ANY PERSON TO OR FROM WHOM IT IS UNLAWFUL TO MAKE SUCH CONSENT SOLICITATION IN
SUCH JURISDICTION.
NEITHER THE PLAN OF LIQUIDATION NOR THIS CONSENT SOLICITATION STATEMENT
HAVE BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR
ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION
OR ANY STATE SECURITIES COMMISSION PASSED UPON THE FAIRNESS OR MERITS OF THE
PLAN OF LIQUIDATION OR THE ACCURACY OR ADEQUACY OF THIS CONSENT SOLICITATION
STATEMENT. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
NO PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED HEREIN, AND, IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED
BY THE PARTNERSHIP OR THE GENERAL PARTNERS.
AVAILABLE INFORMATION
The Partnership is subject to certain informational reporting requirements
of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith file reports, proxy statements and other information with
the Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements and other information may be inspected and copied at the public
reference facilities maintained by the Commission at Room 1024, Judiciary Plaza,
450 Fifth Street, N.W., Washington, D.C. 20549, and at the regional offices of
the Commission at 7 World Trade Center, New York, New York 10048, and Northwest
Atrium Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661.
Copies of such material can be obtained from the Public Reference Section of the
Commission at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington,
D.C. 20549, at prescribed rates. The Commission maintains a site on the Internet
at http://www.sec.gov that contains reports, proxy and other information
statements and other information regarding registrants that file electronically
with the Commission.
Statements contained herein concerning the provisions of documents are
summaries of such documents, and each statement is qualified in its entirety by
reference to the copy of the applicable document if attached as an appendix
hereto.
Pursuant to Rule 13e-3 of the General Rules and Regulations under the
Exchange Act N' Tandem, Chateau and the Partnership have jointly filed with the
Commission a Rule 13e-3 Transaction Statement on Schedule 13E-3 (including any
amendments thereto, the "Schedule 13E-3"), together with exhibits thereto,
furnishing certain additional information with respect to the Sales and the Plan
of Liquidation. This Consent Solicitation Statement does not contain all the
information contained in the Schedule 13E-3 and the exhibits thereto, certain
portions of which are omitted as permitted by the rules and regulations of the
Commission.
All reports from outside parties filed as exhibits to the Schedule 13E-3
filed with the Commission in connection with the proposed transaction also
-3-
<PAGE>
will be made available for inspection and copying at the principal executive
offices of the Partnership during its regular business hours by any interested
Limited Partner or representative thereof who has been so designated in writing.
This Consent Solicitation Statement was first mailed to Limited Partners
on April __, 1999.
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<PAGE>
TABLE OF CONTENTS
Page
SUMMARY.................................................1
Purpose of the Consent Solicitation; Proposals 1 and 2..1
Background of the Proposed Transaction..................2
Relationship of the Various Parties to the
Proposed Transaction....................................3
Summary Risk Factors....................................4
Valuation of Properties.................................5
SPECIAL FACTORS.........................................5
Recommendation of the General Partners..................5
Alternatives Considered.................................8
N'Tandem's and Chateau's Belief as to the Fairness
of the Proposed Transaction; N'Tandem's and Chateau's
Reasons for Engaging in the Transaction.................9
Certain Federal Income Tax Considerations..............10
Consent Procedures; Transactions Authorized
by Consents............................................10
Record Date; Required Consents.........................11
No Appraisal or Dissenters' Rights.....................11
Historical Distributions...............................12
No Established Trading market For Units................12
SUMMARY HISTORICAL FINANCIAL DATA......................13
MATERIAL RISK FACTORS AND OTHER CONSIDERATIONS.........14
Conflicts of Interest..................................14
No Fairness Opinion Sought with Respect to the Sales...15
No Appointment of Independent Representative...........15
The General Partners Have Engaged in
Limited Marketing Efforts with Respect to the
Properties.............................................15
Appraisals May Not Reflect the Current
Fair Market Values of the Properties...................15
Loss of Opportunity to Benefit from Future Events......15
Tax Consequences.......................................15
DESCRIPTION OF THE PROPOSED TRANSACTION................16
Purpose of the Consent Solicitation;
Proposals 1 and 2......................................16
Background of the Proposed Transaction.................16
The Purchase and Sale Agreement........................18
Solicitation Expenses..................................19
Estimate of Liquidating Distributions Payable to
Limited Partners.......................................19
Ownership of Properties by N' Tandem Following Sales...20
SPECIAL FACTORS........................................20
Fairness of the Transaction; Recommendation of the
General Partners.......................................20
Alternatives Considered................................23
N' Tandem's and Chateau's Belief as to the Fairness
of the Proposed Transaction............................24
Appraisals.............................................24
SUMMARY OF SELECTED TERMS OF THE PARTNERSHIP AGREEMENT.35
THE PARTNERSHIP'S PROPERTIES...........................37
Nature of Ownership Interests in Properties............37
Description of Properties, Appraised Values and
Ownership Interests....................................38
FEDERAL INCOME TAX CONSIDERATIONS......................40
Overview...............................................40
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TABLE OF CONTENTS
(continued)
Taxation on the Sales..................................40
Liquidation of the Partnership.........................41
Income Tax Rates/Taxation of Gains and Losses..........42
CONSENT PROCEDURES; TRANSACTIONS AUTHORIZED BY
CONSENTS...............................................42
Solicitation of Consents...............................43
Record Date; Required Vote.............................43
No Appraisal or Dissenters' Rights.....................44
Consequences If Consents Are Not Obtained..............44
FINANCIAL STATEMENTS...................................44
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE........45
APPENDIX A Information Concerning Officers
And Directors Of The Managing General Partner,
N' Tandem And Chateau..................................46
APPENDIX B Agreement of Limited Partnership of the
Partnership............................................50
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SUMMARY
The following summarizes certain information contained elsewhere in this
Consent Solicitation Statement. While the purpose of this Summary is to discuss
and disclose the material aspects of the Sales and the Plan of Liquidation, this
Summary is not intended to be complete, and is qualified in its entirety by
reference to the more detailed information contained elsewhere herein.
Purpose of the Consent Solicitation; Proposals 1 and 2
In accordance with the Agreement of Limited Partnership (the "Partnership
Agreement") of Windsor Park Properties 4, a California limited partnership (the
"Partnership"), the term of the Partnership expired on December 31, 1997, and
accordingly, unless the term of the Partnership is extended, the General
Partners are obligated to take actions to liquidate and dissolve the
Partnership. The purpose of this Consent Solicitation is to obtain the consent
of the holders (the "Limited Partners") of units of limited partner interest in
the Partnership (the "Units") to the two proposals described herein. Upon
approval of Proposals 1 and 2 by the Limited Partners, the General Partners will
proceed with a plan of liquidation that has been adopted by the General Partners
(the "Plan of Liquidation"), pursuant to which the Partnership will sell (the
"Sales") to N' Tandem Trust, a California business trust ("N' Tandem"), its six
partial ownership interests ("Ownership Interests") in properties and its single
remaining wholly owned property (such property, together with the Ownership
Interests are sometimes hereinafter referred to as the "Properties"). The terms
of the Sales are set forth in a Purchase and Sale Agreement between N' Tandem
and the Partnership (the "Purchase and Sale Agreement"), as more particularly
described herein. Upon completion of the Plan of Liquidation, final liquidating
distributions will be made (estimated to average approximately $44.18 per Unit)
to the partners in accordance with the terms of the Partnership Agreement.
Two Proposals are being proposed in this Consent Solicitation Statement for
approval of the Limited Partners. Proposal 1 is for the General Partners to
proceed to sell the Partnership's assets and to liquidate and dissolve the
Partnership in accordance with the terms of the Partnership Agreement of the
Partnership, generally. A vote for Proposal 1 is not an approval of the Sales,
but an approval of the sale of all the Partnership assets, and the liquidation
and dissolution of the Partnership, generally. Proposal 2 is for the General
Partners to proceed with the Sales to N' Tandem pursuant to the Purchase and
Sale Agreement and to proceed with the Plan of Liquidation following such Sales.
If Proposals 1 and 2 are approved by the Limited Partners, the General
Partners will proceed with the Sales and the Plan of Liquidation. Each of
Proposal 1 and Proposal 2 is conditioned upon approval of the other Proposal by
the Limited Partners. Accordingly, any Limited Partner desiring to have the
General Partners proceed with the Sales and the Plan of Liquidation needs to
vote for both Proposal 1 and Proposal 2.
The Managing General Partner and the Purchaser are under common control of
Chateau, and the Directors of the Managing General Partner are the Chief
Executive Officer, and President, respectively, of Chateau. The Managing General
Partner of the Partnership is also the external investment advisor to the
Purchaser, and is wholly owned by Chateau. Chateau is the largest publicly-held
company in the United States engaged in the ownership and operation of
manufactured home communities. N' Tandem, rather than Chateau, will be
purchasing the Properties because the Properties are more in line with the type
and quality of assets sought by N' Tandem, than by Chateau. In general, Chateau
seeks investments in large, institutional, fully-amenitized manufactured home
communities. In contrast, N' Tandem seeks lower profile assets which, like the
Properties owned by the Partnership, are located in tertiary demographic and
geographic markets, are smaller with fewer amenities and contain a greater
proportion of single-wide spaces. Additionally, N' Tandem already has a partial
ownership interest in two of the Properties.
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Background of the Proposed Transaction
In September of 1997, Chateau purchased 644,842 Common Shares of the
Managing General Partner, constituting all of the outstanding capital stock of
the Managing General Partner in exchange for 101,239 common shares of Chateau,
and $750,000 in cash (the "Windsor Acquisition"). Promptly following the Windsor
Acquisition, the General Partners began to develop a plan to liquidate the
Partnership. As a first step in this process, the General Partners ordered
Appraisals for the two Properties which were wholly owned by the Partnership and
for the six communities in which the Partnership holds a partial Ownership
Interest. The General Partners received the Appraisals in December 1997, which
reported on the Appraised Values of the Properties as of December 1997.
After reviewing the Appraisals, the General Partners established the basic
outline for a plan of liquidation for the Partnership. This plan had two basic
aspects. The first part involved efforts to sell one of the Partnership's wholly
owned Properties, and its largest Ownership Interest, to third parties. In this
regard, the General Partners marketed the Sunrise Village Property and the
Harmony Ranch Property (in which the Partnership has a 75% Ownership Interest)
for sale to third parties. These efforts resulted in the sale of the Sunrise
Village Property in May 1998, but not in any other completed transactions.
The second part of the plan involved the sale of the remaining Ownership
Interests and any other assets not sold to third parties to N' Tandem, which
already owned separate partial interests in two of the Properties. The General
PartnerS decided not to attempt to market the remaining Partnership's Ownership
Interests for sales to parties other than N' Tandem based, in part, on their
belief that very limited demand for these Ownership Interests exists and that
any prospective buyers for these interests would not be willing to pay the
Partnership full value for the Ownership Interests, based on the value of the
underlying Properties because control and management of the underlying
Properties, and the power to sell or dispose of the Properties, is vested in the
Managing General Partner. The General Partners also believed that N' Tandem
would not view these control issues in the same negative light as a prospective
buyer who is unaffiliated with the Managing General Partner, and that N' Tandem
would be willing to purchase the Ownership Interests without a minority interest
discount. However, the General Partners could not engage in serious discussions
or negotiations with N' Tandem until N' Tandem adopted certain changes to its
organizational documents which permitted N' Tandem to purchase additional
properties. After N' Tandem adopted these changes in the third quarter of 1998,
the Managing General Partner and representatives of N' Tandem negotiated the
purchase prices (the "Purchase Prices") and the other terms of the Sales for the
remaining Property and the Ownership Interests. Representatives of N' Tandem
agreed to pay the full Appraised Value for the remaining Property and an amount
for each Ownership Interest equal to the full value of the Ownership Interest
based on the Appraised Values. N' Tandem has agreed to pay cash for the Property
and Ownership Interests.
It is currently anticipated that the Sales will occur as soon as
practicable following the approval by Limited Partners of the Sales and the Plan
of Liquidation. If sufficient consents to proceed with the Plan of Liquidation
are not obtained, the General Partners intend to explore, consider and pursue
such alternatives as may be available to the Partnership.
2
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Relationship of the Various Parties to the Proposed Transaction
The relationships of the various parties to the proposed transaction are
set forth in the diagram below and described elsewhere in this Consent
Solicitation Statement under "Risk Factors -- Conflicts of Interest."
[GRAPHIC]
3
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Summary Risk Factors
The Sales involve material risks, conflicts of interest and other
considerations which are discussed elsewhere in this Consent Solicitation
Statement. They include the following:
Conflicts of Interest.. The Sales and the Plan of Liquidation, and the
recommendation of the General Partners set forth herein, could be deemed to
involve certain conflicts of interest between the Managing General Partner and
the Limited Partners. The Managing General Partner of the Partnership and the
Purchaser are under the common control of Chateau. Chateau owns all of the
issued and outstanding capital stock of the Managing General Partner, and the
Chief Executive Officer, and President, respectively, of Chateau, are the sole
directors of the Managing General Partner.
The Managing General Partner of the Partnership is also the external
investment advisor to the Purchaser. In connection with the Sales, pursuant to
the advisory agreement between such parties, the Managing General Partner will
receive a brokerage commission from the Purchaser equal to 3% of the Purchase
Price for each Property or Ownership Interest, or $356,153. In addition, the
Sales will result in an increase in the annual and other fees and compensation
payable to the Managing General Partner under the advisory agreement. As a
result of the economic benefits accruing to the Managing General Partner in
connection with the Sales, the Sales and the recommendation and views of the
Managing General Partner are subject to potential conflicts of interest.
Purchase Prices Are Not the Result of Arm's-length Negotiations. Due to
the potential conflicts of interests of the Managing General Partner the
Purchase Prices for the Properties and other deal terms cannot be considered to
be the result of arm's-length negotiations and bargaining between independent
parties, and as a result may not be as favorable as those that might have been
obtained had the terms of the Sales been the result of such arm's-length
negotiations.
No Fairness Opinion Sought with Respect to the Sales. The General
Partners have not sought to obtain an opinion relating to the fairness, to the
Limited Partners, of the Sales. Had such a fairness opinion been obtained, the
Purchase Prices, or other terms of the Sales, might have been different, and
possibly more favorable to the Partnership and the Limited Partners.
No Appointment of Independent Representative. The General Partners have not
appointed an independent representative to represent the unaffiliated Limited
Partners in connection with the Sales, or to negotiate the terms of the Sales.
Had such a representative been appointed, the Purchase Prices, or other terms of
the Sales, might have been different, and possibly more favorable to the
Partnership and the Limited Partners.
The General Partners Have Engaged in Limited Marketing Efforts with Respect
to the Properties. The General Partners have engaged in only limited marketing
efforts with respect to the Properties. Marketing the Properties to third
parties could conceivably result in a higher purchase price being paid for the
Properties than those that are being paid in connection with the Sales.
Appraisals May Not Reflect the Current Fair Market Values of the
Properties. The Appraisals were rendered as of November or December 1997. The
General Partners do not intend to update the Appraisals, or to order new
appraisals for the Properties. Accordingly, the Appraisals may not reflect the
current fair market values of the Properties.
Loss of Opportunity to Benefit from Future Events. It is possible that the
future performance of the Properties will improve or that prospective buyers may
be willing to pay more for the remaining Properties in the future. It is
possible that Limited Partners might earn a higher return on their investment if
the Partnership retained ownership of the Properties. By approving the Sales,
4
<PAGE>
Limited Partners will also be foregoing certain current benefits of ownership of
the Properties, such as continuing distributions.
Tax Consequences. The Sales should result in a taxable gain to the Limited
Partners of approximately $15.03 per Unit while the liquidation of the
Partnership should result in a taxable loss of approximately $10.80 per Unit.
See "Federal Income Tax Considerations."
Valuation of Properties
The following table sets forth a list of the Partnership's wholly owned
Property and the Ownership Interests and their respective values (based on the
Appraised Values), the debt attributable to the Ownership Interests held by the
Partnership, and the value of the Property or Ownership Interest after deducting
attributable debt: ,r>
<TABLE>
<CAPTION>
Debt Attributable
Value of Property or to Property or Net Value of
Ownership Interest Ownership Property or
Before Indebtedness Interest Ownership
Name of Property Ownership % Date Acquired Based on Appraised Value as of 12/31/98 Interest
---------------- ----------- ------------- ------------------------ -------------- --------
<S> <C> <C> <C> <C> <C>
Sunset Vista 100% April 1987 $ 3,800,000 $ 0 $ 3,800,000
Magna, UT
Big Country Estates 60% December 1986 $ 1,620,000 $ 0 $ 1,620,000
Cheyenne, WY
Harmony Ranch 75% December 1986 $ 1,762,500 $ 900,000 $ 862,500
Thonotosassa, FL
Rancho Margate 33% September 1995 $ 2,112,000 $ 1,202,000 $ 910,000
Margate, FL
Winter Haven 33% October 1995 $ 1,221,000 $ 528,330 $ 692,670
Winter Haven, FL
Apache East 25% February 1997 $ 495,000 $ 276,123 $ 218,877
Phoenix, AZ
Denali Park 25% February 1997 $ 861,250 $ 480,378 $ 380,872
============ ========== ==========
Phoenix, AZ
Total $ 11,871,750 $ 3,386,831 $ 8,484,919
</TABLE>
SPECIAL FACTORS
Recommendation of the General Partners
The General Partners believe that the Sales and the Plan of Liquidation are
(i) consistent with the original objectives of the Partnership and (ii)
contemplated by the terms of the Partnership Agreement. In addition, the General
Partners believe that the terms of the Sales are fair to the affiliated and
unaffiliated Limited Partners from a financial point of view and from a
procedural point of view, have approved the Sales and the Plan of Liquidation
and recommend their approval by the Limited Partners.
In reaching the determination that the Sales and the Plan of Liquidation
are fair to the unaffiliated Limited Partners from a financial point of view,
the General Partners considered the following factors:
5
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o N' Tandem is willing to purchase all of the Properties and is paying the
full Appraised Value for the Properties, without a discount for the fact
that the Partnership owns only a minority Ownership Interest in the
majority of the Properties, something the General Partners believe most
third parties would be unwilling to do;
o The Purchase Price being offered in respect of the Harmony Ranch Ownership
Interest, which is one of the Ownership Interests that the General Partners
attempted to market for sale to third parties, is also equal to the
purchase price of $2,350,000 offered in July 1998 for such Ownership
Interest by a third party, prior to flooding at such Property that caused
such third party to cancel the sale;
o The aggregate net purchase price of $8,848,919 being paid by N' Tandem
exceeds $___________, the Net Book Value of the Partnership's assets, by
$3,231,519;
o Due to N' Tandem's Advisor's familiarity with the Properties, it is willing
to purchase the Properties "as-is," and without representations and
warranties from the Partnership;
o Because N' Tandem is buying the Properties in a single transaction, and is
buying such Properties without representations and warranties from the
Partnership, the General Partners will be able to wind up the Partnership,
and make full liquidating distributions (without any holdback for future
contingencies) promptly upon the approval of the Sales and the Plan of
Liquidation by the Limited Partners;
o The estimated net liquidating proceeds payable in connection with the Sales
($44.18 per Unit) are substantially higher than those offered to Limited
Partners on February 1, 1999 in connection with a tender offer for up to
__% of the Partnership's outstanding Units made by Everest Investors 9,
LLC, a party unaffiliated with the Partnership, N' Tandem or Chateau, in
the amount of $30;
o The Sales do not involve any brokerage commissions payable by the
Partnership, resulting in a savings to the Partnership estimated to be
between $356,153 and $712,306 (based upon brokerage fees of 3% to 6%
typically paid by sellers of properties); and
o The other expenses likely to be incurred by the Partnership in connection
with the Sales (which are estimated to be $_____) are substantially lower
than if the Properties were sold to a third party (which are estimated to
be $___________).
In reaching their determination that the Sales, and the Plan of
Liquidation, are fair to the affiliated and unaffiliated Limited Partners from a
financial point of view, the General Partners did not assign relative weights to
the above factors or determine that any factor was of particular importance;
rather, the General Partners viewed the positive factors as a totality and the
negative factors as a totality and concluded that the positive factors
outweighed the negative factors, and thus that the Sales and the Plan of
Liquidation are fair to the affiliated and unaffiliated Limited Partners from a
financial point of view.
In reaching their determination that the Sales and the Plan of Liquidation
are fair from a financial point of view to the affiliated and unaffiliated
Limited Partners, the General Partners also considered the following potentially
negative aspects of the Sales:
o The Purchase Prices for the Properties are based upon independent
Appraisals obtained in December 1997 and such Appraisals have not been
updated., and thus Appraisals may not reflect the current fair market
values of the Properties;
6
<PAGE>
o It is possible that the future performance of the Properties will improve
or that prospective buyers may be willing to pay more for the Properties in
the future;
o It is possible that Limited Partners might earn a higher return on their
investment if the Partnership retained ownership of the Properties. By
approving the Sales and the Plan of Liquidation, Limited Partners will also
be foregoing certain current benefits of the ownership of the Properties
such as continuing distributions; and
o The Sales and Plan of Liquidation will have a tax impact on Limited
Partners resulting in an estimated taxable gain to Limited Partners of
approximately $4.23 per Unit.
The General Partners also believe that the Sales and the Plan of
Liquidation are fair to the Limited Partners from a procedural point of view,
based on the following factors:
o The Properties have been independently appraised by appraisers certified by
the Appraisal Institute, and the fact that N' Tandem is paying the full
value of the Properties based on the Appraised Values; and
o The Sales are subject to the approval of unaffiliated Limited Partners
holding not less than a majority of the issued and outstanding Units.
In reaching their determination that the Sales and the Plan of Liquidation
are fair from a procedural point of view to the affiliated and unaffiliated
Limited Partners, the General Partners also considered the following potentially
negative aspects of the Sales:
o The transaction was negotiated on behalf of the Partnership by the Managing
General Partner, who is under common control with the Purchaser, and is
receiving substantial economic benefits from the transaction (including
brokerage fees of $356,153 that are being paid by the Purchaser), and
accordingly, may be subject to potential conflicts of interest;
o That the sole directors of the Managing General Partner are the Chief
Executive Officer, and President, respectively, of Chateau, and as a result
of such affiliation, the Sales and the Plan of Liquidation have not been
approved by directors who are not employees of the Partnership or its
affiliates;
o No independent or disinterested third party was appointed to negotiate the
terms of the Sales on behalf of the Partnership, or the unaffiliated
Limited Partners;
o The General Partners have not in connection with the Sales sought to obtain
an opinion relating to the fairness, to the unaffiliated Limited Partners,
of the Sales;
o The General Partners have not retained an independent representative to
represent the unaffiliated Limited Partners in connection with the Sales;
o The Appraisals were made in November and December of 1997, and no updates,
or new appraisals, have been or will be ordered in connection with the
Sales;
o That few alternatives to the Sales were considered by the General Partners;
and
o The Partnership has engaged in limited marketing efforts with respect to
the Properties and the Partnership does not intend to take significant
actions to market or sell the Properties pending the results of this
Consent Solicitation.
7
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In reaching their determination that the Sales, and the Plan of
Liquidation, are fair to the affiliated and unaffiliated Limited Partners from a
procedural point of view, the General Partners concluded that the approval of
the transaction by a majority in interest of the unaffiliated Limited Partners
is sufficient to insure that procedural fairness has been preserved for the
Limited Partners. The General Partners also believe that the potentially
negative factors influencing procedural fairness were in each case mitigated by
the following other factors or considerations: (i) although the Partnership and
N' Tandem are under common control, the General Partners concluded that the
common control (a) did not adversely affect the terms of the Sales for Limited
Partners, and (b) allowed N' Tandem to offer deal terms that they believed would
not be available from third parties; (ii) that the involvement in the
transaction of independent or disinterested third parties to negotiate on behalf
of the Limited Partners would have added to the cost of the overall transaction
without necessarily providing any additional benefits to the Limited Partners;
(iii) obtaining a fairness opinion would, to a large extent, be duplicative of
the Appraisals that were obtained in the transaction, and would have involved
the payment of a significant fee; (iv) even though the Appraisals were prepared
in November and December of 1997, the General Partners believe that no material
changes have occurred in the Properties or in the conditions of the market for
manufactured home communities since those dates that would result in higher
values for the Properties; and (v) the General Partner's belief that marketing
the partial Ownership Interests held by the Partnership would not have provided
a better transaction for the Limited Partners and would have ultimately delayed
the timing of the Sales and the distribution of liquidating proceeds to the
Limited Partners.
Alternatives Considered
Under the Partnership Agreement, the term of the Partnership is through
December 31, 1997. Pursuant to the Partnership Agreement and California law,
unless the term of the Partnership is extended, the General Partners are
required to (i) proceed with a winding up and liquidation of the Partnership,
and to take such actions as are required to cause the partners of the
Partnership to receive liquidating distributions or (ii) take such actions as
may be necessary to extend the Partnership term.
The General Partners did not consider extending the Partnership term, which
would have required the consent of the holders of a majority of the issued and
outstanding Units. The reason that this option was not considered is that the
Managing General Partner believes that Limited Partners desire to achieve the
near term liquidation of their investments in the Partnership. This belief is
based on the Managing General Partner's observation that most Limited Partners
have held their investments in the Partnership for more than a dozen years.
Additionally, while extending the life of the Partnership would have resulted in
the Limited Partners receiving the benefits of continued ownership of the
Properties, they would have also remained subject to the risks of continuing
such ownership and their investments would have remained illiquid and all
Limited Partners would continue to be unable to liquidate their investments at
fair value since no formal trading market for the Units exists.
While the General Partners did consider the possibility of selling the
Properties to parties other than N' Tandem, the General Partners ultimately
concluded that such alternative transactions would not be likely to result in
the distribution of greater liquidating proceeds to the Limited Partners. The
principal reason for this belief is that the Limited Partners would receive
greater liquidating proceeds in a third party transaction only if such third
party was willing to pay in excess of the Appraised Values for the Properties
and Ownership Interests, something the General Partners believe few, if any,
parties would be willing to do, especially with respect to the partial Ownership
Interests. This is because the expenses of the Sales are lower than they would
be in connection with the sale of the Properties and Ownership Interests to an
unaffiliated third party (principally due to the fact that no brokerage
commissions are being paid in connection with the Sales, which results in
estimated savings of between $356,153 and $712,306 based upon prevailing
8
<PAGE>
commission rates) and because N' Tandem is paying the full Appraised Value for
the Properties and Ownership Interests.
N' Tandem and Chateau did not consider any alternative ways to acquire the
Properties from the Partnership, due to their belief that the holders of a
majority of Units desire to achieve near term liquidation of their investments
in the Partnership.
N' Tandem's and Chateau's Belief as to the Fairness of the Proposed Transaction;
N'Tandem's and Chateau's Reasons for Engaging in the Transaction
N' Tandem and Chateau believe that the Sales are fair to the affiliated and
unaffiliated Limited Partners from both a financial point of view, and from a
procedural point of view. In reaching such determination, N' Tandem and Chateau
considered the same factors, and positive and negative aspects of the Sales, as
were considered by the General Partners, as described in this Consent
Solicitation Statement under SPECIAL FACTORS - "Fairness of the Transaction;
Recommendation of the General Partners" and have specifically adopted the
analyses and conclusions of the General Partners described herein.
In October 1998, N'Tandem amended and restated N'Tandem's Declaration of
Trust and By-laws to convert N'Tandem from a finite-life to an infinite-life
entity to enable it to begin implementing a growth-oriented business plan
intended to cause N'Tandem to attain greater size and asset diversity. The
acquisition by N'Tandem of the Properties is being engaged in by N'Tandem as
part of such growth-oreinted business plan.
Appraisals
Three Appraisers were involved in rendering Appraisals with respect to the
Partnership's Properties in November and December, 1997. Whitcomb Real Estate,
Inc., located in Tampa, FL, appraised the Harmony Ranch, Rancho Margate and
Winter Haven Properties. Landmark Valuation, Inc., with principal offices in
Aurora, CO appraised the Sunset Vista and Big Country Estates Properties.
Appraisal Technology, Inc., with principal offices in Phoenix, AZ, appraised the
Apache East and Denali Park Estates Properties.
Each of the Appraisers is certified as a Master Appraiser by the Appraisal
Institute and was selected based upon such Appraiser's expertise and/or
experience within the geographic area that each Property was located, as well as
such Appraiser's familiarity with valuing real estate underlying manufactured
home communities.
A summary description of the Appraisals, including the values of the
Properties elsewhere in this Consent Solicitation Statement under the caption
"SPECIAL FACTORS - Appraisals." The Appraisals are based on conditions as of
their respective dates. Subsequent developments could have a material effect on
the valuations stated therein.
The Appraisals were ordered by the Managing General Partner in connection
with the anticipated liquidation of the Partnership's assets following the
expiration of the Partnership term, and were not obtained in contemplation of
the Sales, or the Plan of Liquidation. The purpose of the Appraisals was, and
each Appraiser was instructed by the Managing General Partner, to determine the
fair market value of each Property. In connection with the Appraisals, no fair
market values, or value ranges, were suggested by the Managing General Partner.
Only one Appraisal was sought with respect to each Property. Had more than one
Appraisal been sought with respect to each Property, the other appraisal values
might have been higher or lower than the Appraised Values.
The Appraisals were rendered as of November and December 1997, and
accordingly, may no longer reflect the fair market values of the Properties, and
the value of the Properties may have increased since that time. However, the
Managing General Partner (i) does not believe that any significant events have
occurred since that time which would cause the conclusions reached in the
Appraisals, and Appraised Values, to be different had the Appraisals been
rendered as of a more recent date, (ii) is not aware of any material
developments, trends or other uncertainties that relate to the conclusions
9
<PAGE>
expressed in the Appraisals, or that are reasonably likely to materially affect
such conclusions, and (iii) does not intend to update the Appraisals, or order
new appraisals for the Properties in connection with the Sales.
Copies of the Appraisals are filed as Exhibits to the Schedule 13E-3 and
are available for inspection and copying at the Partnership's principal
executive offices during regular business hours by any interested Limited
Partner, or any representative of a Limited Partner who has been designated in
writing. Copies may also be obtained through the written request of any Limited
Partner made to the Managing General Partner at 6430 S. Quebec Street,
Englewood, CO 80111.
Certain Federal Income Tax Considerations
The following is a brief summary of certain United States federal income
tax consequences to Limited Partners arising from the Sales and liquidation of
the Partnership:
Tax Consequences of the Sales. The Sales should result in the recognition
of gain by the Partnership and, therefore, should result in recognition of gain
by the Limited Partners. The amount of gain recognized by the Partnership with
respect to each of the Properties and Ownership Interests will equal the
difference between (i) the Partnership's amount realized (i.e., the amount of
cash received increased by the amount of liabilities of the Partnership assumed
or taken subject to by the purchaser) and (ii) the Partnership's adjusted tax
basis in each of the Properties and Ownership Interests. The aggregate gain
expected to be recognized by the Partnership on the Sales is approximately
$2,965,573.
Allocation of Gain. The $2,965,573 gain recognized by the Partnership in
the year of Sales will be allocated among the partners in accordance with the
terms of the Partnership Agreement. These provisions will result in an
allocation of approximately $2,935,917 of taxable gain on the Sales to Limited
Partners (or an average of $15.03 per Unit). The gain per Unit resulting from
the Sales is primarily caused by the fact that the Partnership generated tax
losses in prior years that were allocated to Limited Partners.
Tax Consequences of Liquidation. Upon liquidation of the Partnership, a
Limited Partner will recognize gain or loss equal to the difference between the
cash received by such Limited Partner (including the Limited Partner's share of
partnership liabilities under Section 752 of the Code (as hereafter defined)
assumed by the Purchaser) and the adjusted tax basis of the Limited Partner's
Units, adjusted by such Limited Partner's allocable share of income, gain or
loss arising from normal Partnership operations for the year of liquidation and
the sale of the Properties and Ownership Interests in the year of liquidation.
See "-- Allocation of Gain" above. It is expected that a Limited Partner will
recognize an average loss of approximately $10.80 per Unit on liquidation of the
Partnership.
Consent Procedures; Transactions Authorized by Consents
The consents being solicited hereby will authorize the General Partners:
(i) to complete the Sales at any time on or prior to September 30, 1999, and to
proceed with the Plan of Liquidation; and (ii) to take all actions necessary or
appropriate, as determined by the General Partners, to complete the Sales and to
proceed with the Plan of Liquidation. Consents may be revoked by Limited
Partners up until the time that the General Partners have received consents from
unaffiliated Limited Partners holding a majority of the outstanding Units.
Consents are being solicited from the Limited Partners in accordance with
the requirements of the Partnership Agreement.
Record Date; Required Consents
10
<PAGE>
The close of business on March __, 1999 has been fixed as the record date
(the "Record Date") for determining Limited Partners entitled to consent to the
Sales and the Plan of Liquidation. As of the Record Date, there were 195,366
Units outstanding held of record by a total of 2,424 Limited Partners. The Sales
and the Plan of Liquidation require the consents of unaffiliated Limited
Partners holding at least a majority of the outstanding Units. Each Unit
entitles the holder thereof to cast one vote with respect to the approval of the
Sales and the Plan of Liquidation. As of the Record Date, the General Partners
and their affiliates own approximately 1,000 Units (or approximately 0.5% of
total outstanding Units), but have agreed to abstain from consenting to the
Sales and the Plan of Liquidation with respect to all such Units.
No Appraisal or Dissenters' Rights
If Limited Partners owning the requisite number of Units in the Partnership
consent to the Sales and Plan of Liquidation, all Limited Partners of the
Partnership will be bound by such consent, including Limited Partners who have
not returned their consents or who have denied consent. None of the Partnership
Agreement, California law or the proposed terms and conditions of the Sales or
the Plan of Liquidation provide objecting Limited Partners with the right to
exercise any dissenters', appraisal or similar rights. Under California law, the
general partner of a California limited partnership owes fiduciary duties to its
limited partners. To the extent that a general partner has engaged in a
transaction in breach of its fiduciary duties to limited partners, a damages
remedy may be available to such limited partners.
11
<PAGE>
Historical Distributions
Set forth below is certain information relating to distributions made by the
Partnership since January 1, 1993:
<TABLE>
<CAPTION>
Total Aggregate Total Aggregate to Limited Per Unit to
Year To all Partners Partners Limited Partners
- ---- --------------- -------- ----------------
<S> <C> <C> <C>
1998 $ 440,200 $ 435,700 $ 2.23
1997 452,500 448,000 2.28
1996 452,500 448,000 2.26
1995 339,400 336,000 1.68
1994 813,100 805,000 4.00
1993 5,516,300 5,461,200 27.17
------------ ------------ --------
Total $ 8,014,000 $ 7,933,900 $ 39.62
============ ============ ========
- -----------------------
(1) The portion of such distribution representing a return of capital to
Limited Partners is as follows: 1998 (0%); 1997 (0%); 1996 (0%), 1995 (0%);
1994 (50%); and 1993 (87%).
</TABLE>
The Partnership typically makes distributions to its partners on a
quarterly basis. There are no restrictions on the Partnership's present or
future ability to make distributions. The Partnership is not in arrears with
respect to any dividends or distributions, and the Partnership has made all
distributions required to be made by it under the Partnership Agreement.
No Established Trading market For Units
The Units are not listed on any securities exchange, and no established
trading market for the Units exists.
12
<PAGE>
SUMMARY HISTORICAL FINANCIAL DATA
The following summary historical financial data, insofar as it relates
to each of the years ended December 31, 1994 through 1998, has been derived from
the annual financial statements of the Partnership, including the balance sheet
at December 31, 1998 and the related statements of income for the two years
ended December 31, 1997 and 1998, and notes thereto as included in the
Partnership's annual report on Form 10-KSB for December 31, 1998.
<TABLE>
<CAPTION>
For the Year Ended December 31,
1998 1997 1996 1995 1994
<S> <C> <C> <C> <C> <C>
Statement of Operations Data:
Revenues $1,083,500 $1,359,500 $1,349,800 $1,241,600 $ 1,139,100
Net income (loss)(1) $ 174,000 $ 38,900 $ 144,400 $(991,200) $ (567,400)
Earnings (loss) per unit before
extraordinary item $.88 $.20 $.72 $(4.89) $(2.79)
Extraordinary loss from early
extinguishment of debt (.18) -- -- -- --
Earnings (loss) per unit .70 .20 .72 (4.89) (2.79)
Balance Sheet Data:
Total Assets $5,339,900 $7,390,800 $7,815,900 $7,826,800 $7,760,500
Long tem debt $1,775,000 $1,775,000 $1,775,000 $1,400,000 -
Other Data:
Distributions per limited(1) $2.23 $2.28 $2.26 $1.68 $4.00
partnership unit
- ---------------
(1) The Partnership sold its interests in three investment properties,
incurring a gain of $1,104,000.
</TABLE>
13
<PAGE>
MATERIAL RISK FACTORS AND OTHER CONSIDERATIONS
The Sales involve material risks, conflicts of interest and other
considerations, which are discussed below. Limited Partners are urged to
consider such factors and considerations and to consult with their independent
legal, financial and tax advisors before consenting to the Sales and the Plan of
Liquidation.
Conflicts of Interest
Managing General Partner and Purchaser are Under Common Control of Chateau.
The Sales and the Plan of Liquidation, and the recommendation of the General
Partners set forth herein, could be deemed to involve certain conflicts of
interest between the Managing General Partner and the Limited Partners. The
Managing General Partner of the Partnership and the Purchaser are under the
common control of Chateau. Chateau owns all of the issued and outstanding
capital stock of the Managing General Partner, and the Chief Executive Officer,
and President, respectively, of Chateau, are the sole directors of the Managing
General Partner. Chateau currently owns approximately 9.8% of the outstanding
capital stock of the Purchaser, and following the consummation of the Sales,
will own approximately $14.5 million of indebtedness in the Purchaser, and
effectively controls the Purchaser. Chateau and the Purchaser also anticipate
that in the second or third quarter of 1999, Chateau may acquire additional
equity interests in the Purchaser that could cause it to own up to a 45% equity
interest in the Purchaser.
Managing General Partner to Receive Brokerage Fees From the Purchaser and
Other Economic Benefits From the Proposed Transaction. The Managing General
Partner of the Partnership is also the external investment advisor (the
"Advisor") to the Purchaser. In connection with the Sales, pursuant to the
advisory agreement between such parties (the "Advisory Agreement"), the Managing
General Partner will receive a brokerage commission from the Purchaser equal to
3% of the gross Purchase Price for each Property or Ownership Interest, or
$356,153. Under the Advisory Agreement, the Managing General Partner is entitled
to the following fees: (i) annual subordinated advisory fees of up to 1% of
invested assets, and .05% of uninvested assets of the Purchaser, (ii) brokerage
commissions in connection with the acquisition of properties by the Purchaser
equal to the lesser of one-half of the brokerage commission paid, or 3% of the
sales price, and (iii) a subordinated incentive fee on the disposition of the
Purchaser's assets equal to 15% of cash remaining from sales or financing of the
Purchaser's assets after holders of shares of beneficial interest of the
Purchaser have received specified preferred returns. The Sales will result in an
increase of invested assets of N' Tandem by $11.9 million, and accordingly, will
increase the annual subordinated advisory fee payable by N' Tandem by
approximately $119,000 per year. To the extent that N' Tandem is able to
generate returns to its shareholders in excess of 9% per annum over the life of
N' Tandem ("Excess Returns"), the Managing General Partner will be entitled to a
subordinated incentive fee equal to 15% of the Excess Returns. As a result of
the economic benefits accruing to the Managing General Partner in connection
with the Sales, the Sales and the recommendation and views of the Managing
General Partner, are subject to potential conflicts of interest.
Purchase Prices Are Not the Result of Arm's-length Negotiations
Due to the potential conflicts of interests of the Managing General Partner
the Purchase Prices for the Properties and other deal terms cannot be considered
to be the result of arm's-length negotiations and bargaining between independent
parties, and as a result may not be as favorable as those that might have been
obtained had the terms of the Sales been the result of such arm's-length
negotiations.
14
<PAGE>
No Fairness Opinion Sought with Respect to the Sales
The General Partners have not sought to obtain an opinion relating to the
fairness, to the Limited Partners, of the Sales. The Partnership Agreement does
not require any such fairness opinion to be obtained and the General Partners
concluded that because all of the Purchase Prices for the Partnership's
Properties are based on Appraised Values, no such opinion is warranted. Had such
a fairness opinion been obtained, the Purchase Prices, or other terms of the
Sales, might have been different, and possibly more favorable to the Partnership
and the Limited Partners.
No Appointment of Independent Representative
The General Partners have not appointed an independent representative to
represent the unaffiliated Limited Partners in connection with the Sales or to
negotiate the terms of the Sales. Had an independent representative been
appointed, the Purchase Prices, or other terms of the Sales, might have been
different, and possibly more favorable to the Partnership and the Limited
Partners.
The General Partners Have Engaged in Limited Marketing Efforts with Respect to
the Properties
The General Partners have engaged in only limited marketing efforts with
respect to the Properties. The only marketing activities engaged in by the
General Partners with respect to the Properties and Ownership Interests was to
list each of the Sunrise Village and Harmony Ranch Properties with local real
estate brokers. Additionally, the General Partners do not intend to take
significant actions to market or sell the Properties pending the results of this
Consent Solicitation. Marketing the Properties to third parties could
conceivably result in a higher purchase price being paid for the Properties than
those that are being paid in connection with the Sales.
Appraisals May Not Reflect the Current Fair Market Values of the Properties
All of the Appraisals were rendered as of November or December 1997. The
General Partners do not intend to update the Appraisals, or to order new
appraisals for the Properties. Accordingly, the Appraisals may not reflect the
current fair market values of the Properties.
Loss of Opportunity to Benefit from Future Events
It is possible that the future performance of the Properties will improve
or that prospective buyers may be willing to pay more for the remaining
Properties in the future. It is possible that Limited Partners might earn a
higher return on their investment if the Partnership retained ownership of the
Properties. By approving the Sales and the Plan of Liquidation, Limited Partners
will also be foregoing certain current benefits of ownership of the Properties,
such as continuing distributions.
Tax Consequences
The Sales should result in a taxable gain to the Limited Partners of
approximately $15.03 per Unit while the liquidation of the Partnership should
result in a taxable loss of approximately $10.80 per Unit. For a discussion of
the tax impact of the Sales and the liquidation of the Partnership, and the
Partnership's assumptions and the bases therefor, see "Federal Income Tax
Considerations." THE SPECIFIC TAX IMPACT OF THE SALES ON LIMITED PARTNERS SHOULD
BE DETERMINED BY LIMITED PARTNERS IN CONSULTATION WITH THEIR OWN TAX ADVISORS.
15
<PAGE>
DESCRIPTION OF THE PROPOSED TRANSACTION
Purpose of the Consent Solicitation; Proposals 1 and 2
In accordance with the Partnership Agreement of the Partnership, the term
of the Partnership expired on December 31, 1997, and accordingly, unless the
term of the Partnership is extended, the General Partners are obligated to take
actions to liquidate and dissolve the Partnership. The purpose of this Consent
Solicitation is to obtain the consent of the Limited Partners to the two
proposals described herein. Upon approval of Proposals 1 and 2 by the Limited
Partners, the General Partners will proceed with the Plan of Liquidation
pursuant to which the Partnership will sell its six partial Ownership Interests
in Properties and its single remaining wholly owned Property to N' Tandem. The
terms of the Sales are set forth in a Purchase and Sale Agreement between N'
Tandem and the Partnership , as more particularly described herein. Upon
completion of the Plan of Liquidation, final liquidating distributions will be
made (estimated to average approximately $44.18 per Unit) to the partners in
accordance with the terms of the Partnership Agreement.
Two Proposals are being proposed in this Consent Solicitation Statement for
approval of the Limited Partners. Proposal 1 is for the General Partners to
proceed to sell the Partnership's assets and to liquidate and dissolve the
Partnership in accordance with the terms of the Partnership Agreement of the
Partnership, generally. A vote for Proposal 1 is not an approval of the Sales,
but an approval of the sale of all the Partnership assets, and the liquidation
and dissolution of the Partnership, generally. Proposal 2 is for the General
Partners to proceed with the Sales to N' Tandem pursuant to the Purchase and
Sale Agreement and to proceed with the Plan of Liquidation following such Sales.
If Proposals 1 and 2 are approved by the Limited Partners, the General
Partners will proceed with the Sales and the Plan of Liquidation. Each of
Proposal 1 and Proposal 2 is conditioned upon the approval of the other Proposal
by the Limited Partners. Accordingly, any Limited Partner desiring to have the
General Partners proceed with the Sales and the Plan of Liquidation needs to
vote for both Proposal 1 and Proposal 2.
The Managing General Partner and the Purchaser are under common control of
Chateau, and the Directors of the Managing General Partner are the Chief
Executive Officer, and President, respectively, of Chateau. The Managing General
Partner of the Partnership is also the external investment advisor to the
Purchaser, and is wholly owned by Chateau. Chateau is the largest publicly-held
company in the United States engaged in the ownership and operation of
manufactured home communities. N' Tandem, rather than Chateau, will be
purchasing the Properties because the Properties are more in line with the type
and quality of assets sought by N' Tandem, than by Chateau. In general, Chateau
seeks investments in large, institutional, fully-amenitized manufactured home
communities. In contrast, N' Tandem seeks lower profile assets which, like the
Properties owned by the Partnership, are located in tertiary demographic and
geographic markets, are smaller with fewer amenities and contain a greater
proportion of single-wide spaces. Additionally, N' Tandem already has a partial
ownership interest in two of the Properties.
Background of the Proposed Transaction
The Partnership was formed in June 1986 pursuant to the provisions of the
California Uniform Limited Partnership Act. The Partnership was organized as a
finite-life entity to acquire and hold existing manufactured home communities
for investment for a limited time period. Its principal investment objectives
were to provide to its Limited Partners: (i) distributions of cash from
operations, (ii) preservation, protection and eventual return of the Limited
16
<PAGE>
Partners' investment, and (iii) realization of appreciation in the value of the
properties acquired (the "Original Objectives"). It was originally anticipated
that the Partnership would be liquidated and dissolved at year end 1997.
In September of 1997, Chateau purchased 644,842 Common Shares of the
Managing General Partner, constituting all of the outstanding capital stock of
the Managing General Partner in exchange for 101,239 common shares of Chateau,
and $750,000 in cash (the "Windsor Acquisition"). The total value of the Windsor
Acquisition, based on the trading prices of Chateau's common shares at the time
of the acquisition, was approximately $____ million. Following the Windsor
Acquisition, at the request of, Chateau, the sole stockholder of The Windsor
Corporation (i) the Trustees of N' Tandem voluntarily resigned, and (ii) in
connection with such resignation, appointed three new Trustees proposed by
Chateau. Such Trustees were re-elected as N' Tandem's Trustees at the special
meeting of Shareholders of N' Tandem held on October 23, 1998. In accordance
with N' Tandem's Declaration of Trust, two of the appointed Trustees of N'
Tandem are "independent trustees" meaning a Trustee who is not affiliated,
directly or indirectly, with an advisor of the Trust, whether by ownership of,
ownership in, employment by, any material business or professional relationship
with, such advisor, or an affiliate of such advisor, or by virtue of serving as
an officer or director of any advisor, or affiliate of such advisor. As a result
of the Windsor Acquisition, Chateau became the indirect owner of 1000 Units in
the Partnership. No particular value was attributed or allocated to the Units in
connection with the Windsor Acquisition. Since February, 1997, Chateau has
provided property management services to N' Tandem and the Partnership, pursuant
to a management agreement between the Partnership and the Managing General
Partner. The total amount received by the Managing General Partner in respect of
services rendered pursuant to such management agreement was approximately
$33,000 in 1998, and approximately $58,000 in 1997.
Promptly following the Windsor Acquisition, the General Partners began to
develop a plan to liquidate the Partnership. As a first step in this process,
the General Partners ordered Appraisals for the two Properties which were wholly
owned by the Partnership and for the six communities in which the Partnership
holds a partial Ownership Interest. The General Partners received the Appraisals
in December 1997, which reported on the Appraised Values of the Properties as of
December 1997.
After reviewing the Appraisals, the General Partners established the basic
outline for a plan of liquidation for the Partnership. This plan had two basic
aspects. The first part involved efforts to sell the Sunrise Village Property
and Harmony Ranch Property (in which the Partnership owns a 75% Ownership
Interest) to third parties. In this regard, the General Partners listed the
Sunrise Village and the Harmony Ranch Property with local real estate brokers
for sale to third parties. The General Partners entered into a purchase and sale
agreement relating to the Sunrise Village Property and closed on the sale of the
Sunrise Village Property in May, 1998. In July, 1998, the Partnership entered
into a letter of intent with providing for the sale of the
Harmony Ranch Property to for $2,350,000, of which $1,762,500
would be attributable to the Partnership's 75% Ownership Interest. Subsequently,
a portion of the Harmony Ranch Property became flooded as a result of a period
of unusually high rainfall in central Florida. Although most of the damage to
the Harmony Ranch Property was covered by insurance, as a result of the flooding
problems, the purchaser refused to close on the sale. The General Partners
subsequently re-listed the Harmony Ranch Property with a local real estate
broker without success, as all subsequent offers were substantially below the
original contract price.
The second part of the plan involved the sale of the remaining Ownership
Interests, and any other assets not sold to third parties, to N' Tandem, which
already owned separate partial interests in two of the Properties. The General
Partners decided not to attempt to market the remaining Partnership's Ownership
Interests for sales to parties other than N' Tandem based, in part, on their
belief that very limited demand for these Ownership Interests exists and that
any prospective buyers for these interests would not be willing to pay the
Partnership the full value of the Ownership Interest, based on the value of the
17
<PAGE>
underlying Properties, because control of and management of the underlying
Properties, and the power to sell or dispose of the underlying Properties, is
vested solely in the Managing General Partner.
The General Partners also believed that N' Tandem would not view these
control issues in the same negative light as a prospective buyer who is
unfamiliar with the Properties and unaffiliated with the Managing General
Partner, and that N' Tandem would be willing to purchase the Ownership Interests
without a minority interest discount. However, the General Partners could not
engage in serious discussions or negotiations with N' Tandem until N' Tandem
adopted certain changes to its organizational documents which permitted N'
Tandem to purchase additional properties. After N' Tandem adopted these changes
in the third quarter of 1998, the General Partners and representatives of N'
Tandem negotiated the Purchase Prices and the other terms of the Sales.
Representatives of N' Tandem agreed to pay the full Appraised Value for the
Partnership's remaining wholly owned Property and an amount for each Ownership
Interest equal to the full value of the Ownership Interest based on the
Appraised Values.
Information Concerning N' Tandem and Chateau
N' Tandem is an unincorporated California business trust with principal
executive offices at 6430 S. Quebec Street, Englewood, CO 80111. The principal
business of N' Tandem is the acquisition, ownership and operation of
manufactured home communities. Chateau owns all of the capital stock of the
Managing General Partner and effectively controls N' Tandem through its 9.8%
equity ownership interest in N' Tandem and its representation on N' Tandem's
Board of Trustees. Gary P. McDaniel, the Chief Executive Officer of Chateau, is
one of three Trustees of N' Tandem, and is the Chairman of the Board of Trustees
of N' Tandem. Following the Sales, it is anticipated that Chateau will also hold
approximately $14.5 million of indebtedness of N' Tandem. Chateau's principal
executive offices are at 6430 S. Quebec Street, Englewood, CO 80111. Chateau is
the largest publicly-held REIT principally engaged in the acquisition, ownership
and operation of manufactured home communities, and is the largest
owner/operator of manufactured home communities in the United States. Chateau
also owns the Managing General Partner which is also the Advisor to N' Tandem.
Gary P. McDaniel, the Chief Executive Officer of Chateau, and Jeff Kellogg, the
President of Chateau, are the sole directors of the Managing General Partner.
Information concerning the Trustees of N' Tandem and the executive officers and
directors of Chateau and The Windsor Corporation is included in Appendix A which
is incorporated herein by reference.
The Purchase and Sale Agreement
General. The Purchase and Sale Agreement does not contain any seller
representations and warranties. As a result, following the closing, N' Tandem
will have no recourse against the Partnership in connection with the condition
of, or other matters affecting, the Properties.
Purchase Prices. The following table sets forth a list of the Partnership's
wholly owned Property and the Ownership Interests and their respective values
(based on the Appraised Values), the debt attributable to the Ownership
Interests held by the Partnership, and the value of the Property or Ownership
Interest after deducting attributable debt:
18
<PAGE>
<TABLE>
<CAPTION>
Debt Attributable
Value of Property or to Property or Net Value of
Ownership Interest Ownership Property or
Before Indebtedness Interest as of Ownership
Name of Property Ownership % Date Acquired Based on Appraised Value 12/31/98 Interest
---------------- ----------- ------------- ------------------------ -------- --------
<S> <C> <C> <C> <C> <C>
Sunset Vista 100% April 1987 $ 3,800,000 $ 0 $ 3,800,000
Magna, UT
Big Country Estates 60% December 1986 $ 1,620,000 $ 0 $ 1,620,000
Cheyenne, WY
Harmony Ranch 75% December 1986 $ 1,762,500 $ 900,000 $ 862,500
Thonotosassa, FL
Rancho Margate 33% September 1995 $ 2,112,000 $ 1,202,000 $ 910,000
Margate, FL
Winter Haven 33% October 1995 $ 1,221,000 $ 528,330 $ 692,670
Winter Haven, FL
Apache East 25% February 1997 $ 495,000 $ 276,123 $ 218,877
Phoenix, AZ
Denali Park 25% February 1997 $ 861,250 $ 480,378 $ 380,872
============= =========== ===========
Phoenix, AZ
Total $ 11,871,750 $ 3,386,831 $ 8,484,919
</TABLE>
N' Tandem has agreed to pay cash for the Property and Ownership Interests.
The total cost to N' Tandem of consummating the Sales is expected to be $____.
Substantially all of the funds required by N' Tandem to complete the acquisition
of the Properties will be supplied by Chateau, in exchange for the issuance by
N' Tandem of an unsecured promissory note (the "Promissory Note"). The
Promissory Note will be in a principal amount of $9,000,000, will bear interest
at an annual rate equal to 1% per annum above the prime rate established by
First Chicago NBD Corporation and will be payable in full on April __, 2000.
Chateau and N' Tandem have discussed the possibility of converting all or a
portion of the principal amount of the Promissory Note into common or preferred
shares of beneficial interest of N' Tandem. However, there is no agreement or
understanding between N' Tandem and Chateau relating to any such conversion.
Sales Expenses. The Partnership will pay certain closing costs customarily
paid by sellers in the respective jurisdictions in which the Properties are
located, including the seller's portion of title insurance and escrow fees. The
aggregate amount of such costs is expected to be approximately $142,000. There
are no brokerage fees payable by the Partnership in connection with the Sales.
Solicitation Expenses
The Partnership will bear the costs incurred in connection with this
Consent Solicitation. The aggregate amount of such costs is expected to be
approximately $125,000, which the Partnership expects to pay out of the proceeds
from the Sales.
Estimate of Liquidating Distributions Payable to Limited Partners
The following table sets forth the basis of the General Partners' estimate
of the liquidating distributions payable to Limited Partners. The table assumes
the Sales occurred as of December 31, 1998. The actual liquidating distributions
will vary from the amount shown below depending upon the operating results of
19
<PAGE>
the Properties, the level of distributions, if any, to partners, capital
expenditures for the Properties for the period January 1, 1999 through the
closing date, and the amount of closing adjustments.
<TABLE>
<CAPTION>
<S> <C>
Aggregate Purchase Price for Properties and Ownership Interests $ 11,871,750.00
Less: Outstanding mortgage indebtedness(1) $ (3,386,831.00)
Current liabilities
Estimated Transactional expenses payable by the Partnership(2)
Filing Fees $ ______________
Legal Fees $ ______________
Accounting Fees $ ______________
Closing Costs
(other than legal) $ ______________
Appraisals $ ______________
Solicitation Expenses $ 125,000.00
Printing Costs $ ______________
Total Estimated Transactional Expenses Payable by the Partnership ($ 267,000.00)
Plus: Cash, cash equivalents and other current assets $ 500,000.00
Cash available for distribution $ 8,717,919.00
Allocable to Limited Partners(3) $ 8,630,740.00
Allocable to the General Partners $ 87,179.00
Estimated Cash available for distribution per Unit(3) $ 44.18
- ---------------------
(1) Based on amounts outstanding, including accrued interest, as of December
31, 1998, on debt attributable to the Ownership Interests.
(2) See "-- The Purchase and Sale Agreement -- Expenses" and "--Solicitation
Expenses."
(3) Based on 195,366 Units outstanding as of the Record Date.
</TABLE>
Since the organization of the Partnership, total distributions to Limited
Partners have amounted to approximately $14,366,800.00 (or an average of
approximately $73.54 per Unit). If the Sales are completed and the liquidating
distributions estimated above are paid to Limited Partners, total distributions
to Limited Partners will amount to approximately $22,997,627.00 (or an average
of approximately $117.72 per Unit), compared to an initial purchase price for
each Unit of $100.00.
As the Partnership is not making any representations and warranties under
the Purchase and Sale Agreement, the General Partners do not intend to reserve
any funds out of the cash available for liquidating distributions to fund
contingent liabilities arising out of potential claims or litigation which might
arise after the Sales are consummated, and the full amount of the net proceeds
from the Sales will be distributed to the Partners as soon as practicable
following the closing.
Ownership of Properties by N' Tandem Following Sales
Following the consummation of the Sales, N' Tandem will be entitled to all
of the benefits of ownership of the Properties, including future cash flows,
earnings and increases in the values of the Properties, if any.
SPECIAL FACTORS
Fairness of the Transaction; Recommendation of the General Partners
The General Partners believe that the Sales and the Plan of Liquidation are
(i) consistent with the Original Objectives of the Partnership and (ii)
contemplated by the terms of the Partnership Agreement. In addition, the General
Partners believe that the terms of the Sales are fair to the affiliated and
20
<PAGE>
unaffiliated Limited Partners from a financial point of view and from a
procedural point of view, have approved the Sales and the Plan of Liquidation
and recommend their approval by the Limited Partners.
In reaching the determination that the Sales and the Plan of Liquidation
are fair to the unaffiliated Limited Partners from a financial point of view,
the General Partners considered the following factors:
o N' Tandem is willing to purchase all of the Properties and is paying the
full Appraised Value for the Properties, without a discount for the fact
that the Partnership owns only a minority Ownership Interest in the
majority of the Properties, something the General Partners believe most
third parties would be unwilling to do;
o The Purchase Price being offered in respect of the Harmony Ranch Ownership
Interest, which is one of the Ownership Interests that the General Partners
attempted to market for sale to third parties, is also equal to the
purchase price of $2,350,000 offered in July 1998 for such Ownership
Interest by a third party, prior to flooding at such Property that caused
such third party to cancel the sale;
o The aggregate net purchase price being paid by N' Tandem of $8,717,919
exceeds $__________, the Net Book Value of the Partnership's assets as of
December 31, 1998, by $3,231,519;
o Due to N' Tandem's Advisor's familiarity with the Properties, it is willing
to purchase the Properties "as-is," and without representations and
warranties from the Partnership;
o Because N' Tandem is buying the Properties in a single transaction, and is
buying such Properties without representations and warranties from the
Partnership, the General Partners will be able to wind up the Partnership,
and make full liquidating distributions (without any holdback for future
contingencies) promptly upon the approval of the Sales and the Plan of
Liquidation by the Limited Partners;
o The estimated net liquidating proceeds payable in connection with the Sale
of $44.18 per unit are substantially higher than those offered to Limited
Partners on February 1, 1999 in connection with a tender offer for up to
% of the Partnership's outstanding Units, made by Everest Investors 9,
LLC, a party unaffiliated with the Partnership, N' Tandem or Chateau, in
the amount of $30;
o The Sales do not involve any brokerage commissions payable by the
Partnership, resulting in a savings to the Partnership estimated to be
between $356,153 and $712,306 (based upon brokerage fees of 3% to 6%
typically paid by sellers of properties); and
o The other expenses likely to be incurred by the Partnership in connection
with the Sales (which are estimated to be $______) are expected to be
substantially lower than if the Properties were sold to a third party
(which are estimated to be $_____).
In reaching their determination that the Sales and the Plan of Liquidation
are fair from a financial point of view to the affiliated and unaffiliated
Limited Partners, the General Partners also considered the following potentially
negative aspects of the Sales:
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o The Purchase Prices for the Properties are based upon Appraisals obtained
in December 1997 and such Appraisals have not been updated. Accordingly,
such Appraisals may not reflect the current fair market values of the
Properties;
o It is possible that the future performance of the Properties will improve
or that prospective buyers may be willing to pay more for the Properties in
the future;
o It is possible that Limited Partners might earn a higher return on their
investment if the Partnership retained ownership of the Properties and by
approving the Sales, and Limited Partners will also be foregoing certain
current benefits of ownership of the Properties, such as continuing
distributions; and
o The Sales and Plan of Liquidation will have a tax impact on Limited
Partners resulting in an estimated net taxable gain of approximately $4.23
per Unit.
In reaching their determination that the Sales, and the Plan of
Liquidation, are fair to the affiliated and unaffiliated Limited Partners from a
financial point of view, the General Partners did not assign relative weights to
the above factors or determine that any factor was of particular importance;
rather, the General Partners viewed the positive factors as a totality and the
negative factors as a totality and concluded that the positive factors
outweighed the negative factors, and thus that the Sales and the Plan of
Liquidation are fair to the affiliated and unaffiliated Limited Partners from a
financial point of view.
The General Partners also believe that the Sales and the Plan of
Liquidation are fair to the Limited Partners from a procedural point of view,
based on the following factors:
o The Properties have been independently appraised by appraisers certified by
the Appraisal Institute, and the fact that N' Tandem is paying the full
value of the Properties based on the Appraised Values; and
o The Sales are subject to the approval of unaffiliated Limited Partners
holding not less than a majority of the issued and outstanding Units.
In reaching their determination that the Sales and the Plan of Liquidation
are fair from a procedural point of view to the affiliated and unaffiliated
Limited Partners, the General Partners also considered the following potentially
negative aspects of the Sales:
o The transaction was negotiated on behalf of the Partnership by the Managing
General Partner, who is under common control with the Purchaser, and is
receiving substantial economic benefits from the transaction (including
brokerage fees of $356,153 that are being paid by the Purchaser), and
accordingly, may be subject to potential conflicts of interest;
o That the sole Directors of the Managing General Partner are the Chief
Executive Officer, and President, respectively, of Chateau, and as a result
of such affiliation, the Sales and the Plan of Liquidation have not been
approved by Directors who are not employees of the Partnership or its
affiliates;
o No independent or disinterested third party was appointed to negotiate the
terms of the Sales on behalf of the Partnership, or the unaffiliated
Limited Partners;
o The General Partners have not in connection with the Sales sought to obtain
an opinion relating to the fairness, to the unaffiliated Limited Partners,
of the Sales;
o The General Partners have not retained an independent representative to
represent the unaffiliated Limited Partners in connection with the Sales;
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o The Appraisals were made in November and December of 1997, and no updates,
or new appraisals, have been or will be ordered in connection with the
Sales;
o That few alternatives to the Sales were considered by the General Partners;
and
o The Partnership has engaged in limited marketing efforts with respect to
the Properties and the Partnership does not intend to take significant
actions to market or sell the Properties pending the results of this
Consent Solicitation.
In reaching their determination that the Sales, and the Plan of
Liquidation, are fair to the affiliated and unaffiliated Limited Partners from a
procedural point of view, the General Partners concluded that the approval of
the transaction by a majority in interest of the unaffiliated Limited Partners
is sufficient to insure that procedural fairness has been preserved for the
Limited Partners. The General Partners also believe that the potentially
negative factors influencing procedural fairness were in each case mitigated by
the following other factors or considerations: (i) although the Partnership and
N' Tandem are under common control, the General Partners concluded that the
common control (a) did not adversely affect the terms of the Sales for Limited
Partners, and (b) allowed N' Tandem to offer deal terms that they believed would
not be available from third parties; (ii) that the involvement in the
transaction of independent or disinterested third parties to negotiate on behalf
of the Limited Partners would have added to the cost of the overall transaction
without necessarily providing any additional benefits to the Limited Partners;
(iii) obtaining a fairness opinion would, to a large extent, be duplicative of
the Appraisals that were obtained in the transaction, and would have involved
the payment of a significant fee; (iv) even though the Appraisals were prepared
in November and December of 1997, the General Partners believe that no material
changes have occurred in the Properties or in the conditions of the market for
manufactured home communities since those dates that would result in higher
values for the Properties; and (v) the General Partner's belief that marketing
the partial Ownership Interests held by the Partnership would not have provided
a better transaction for the Limited Partners and would have ultimately delayed
the timing of the Sales and the distribution of liquidating proceeds to the
Limited Partners.
Alternatives Considered
Under the Partnership Agreement, the term of the Partnership is through
December 31, 1997. Pursuant to the Partnership Agreement and California law,
unless the term of the Partnership is extended, the General Partners are
required to (i) proceed with a winding up and liquidation of the Partnership,
and to take such actions as are required to cause the partners of the
Partnership to receive liquidating distributions or (ii) take such actions as
may be necessary to extend the Partnership term.
The General Partners did not consider extending the Partnership term, which
would have required the consent of the holders of a majority of the issued and
outstanding Units. The reason that this option was not considered is that the
Managing General Partner believes that Limited Partners desire to achieve the
near term liquidation of their investments in the Partnership. This belief is
based on the Managing General Partner's observation that most Limited Partners
have held their investments in the Partnership for more than a dozen years.
Additionally, while extending the life of the Partnership would have resulted in
the Limited Partners receiving the benefits of continued ownership of the
Properties, they would have also remained subject to the risks of continuing
such ownership and their investments would have remained illiquid and all
Limited Partners would continue to be unable to liquidate their investments at
fair value since no formal trading market for the Units exists.
While the General Partners did consider the possibility of selling the
Properties to parties other than N' Tandem, the General Partners ultimately
concluded that such alternative transactions would not be likely to result in
the distribution of greater liquidating proceeds to the Limited Partners. The
principal reason for this belief is that the Limited Partners would receive
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greater liquidating proceeds in a third party transaction only if such third
party was willing to pay in excess of the Appraised Values for the Properties
and Ownership Interests, something the General Partners believe few, if any,
parties would be willing to do, especially with respect to the partial Ownership
Interests. This is because the expenses of the Sales are lower than they would
be in connection with the sale of the Properties and Ownership Interests to an
unaffiliated third party (principally due to the fact that no brokerage
commissions are being paid in connection with the Sales, which results in
estimated savings of between $356,153 and $712,306 based upon prevailing
commission rates) and because N' Tandem is paying the full Appraised Value for
the Properties and Ownership Interests.
N' Tandem and Chateau did not consider any alternative ways to acquire the
Properties from the Partnership, due to their belief that the holders of a
majority of Units desire to achieve near term liquidation of their investments
in the Partnership.
N' Tandem's and Chateau's Belief as to the Fairness of the Proposed Transaction;
N'Tandem's and Chateau's Reasons for Engaging in the Transaction
N' Tandem and Chateau believe that the Sales are fair to the affiliated and
unaffiliated Limited Partners from both a financial point of view, and from a
procedural point of view. In reaching such determination, N' Tandem and Chateau
considered the same factors, and positive and negative aspects of the Sales and
the Plan of Liquidation as were considered by the General Partners, as described
in this Consent Solicitation Statement under "Fairness of the Transaction;
Recommendation of the General Partners" and have specifically adopted the
analyses and conclusions described therein.
In October 1998, N'Tandem amended and restated N'Tandem's Declaration of
Trust and By-laws to convert N'Tandem from a finite-life to an infinite-life
entity to enable it to begin implementing a growth-oriented business plan
intended to cause N' Tandem to attain greater size and asset diversity. The
acquisition by N'Tandem of the Properties is being engaged in by N'Tandem as
part of such growth-oreinted business plan.
Appraisals
Overview of Appraisals
Three Appraisers were involved in rendering Appraisals with respect to the
Partnership's Properties in November and December, 1997. Whitcomb Real Estate,
Inc. ("Whitcomb"), located in Tampa, Florida, appraised the Harmony Ranch,
Rancho Margate and Winter Haven Properties. Landmark Valuation, Inc.
("Landmark"), with principal offices in Aurora, Colorado, appraised the Sunset
Vista and Big Country Estates Properties. Appraisal Technology, Inc. ("Appraisal
Technology"), with principal offices in Phoenix, Arizona, appraised the Apache
East and Denali Park Estates Properties. Each of the Appraisers is certified as
a Master Appraiser by the Appraisal Institute and was selected based upon such
Appraiser's expertise and/or experience within the geographic area that each
Property was located, as well as such Appraiser's familiarity with valuing real
estate underlying manufactured home communities. Each of the Appraisals set
forth the Appraised Values of the Properties as of December 1997, except for
Harmony Ranch Property which was reappraised as of December 1998, in light of
the flooding problems that occurred at such Property subsequent to the original
Appraisal.
The Appraisals were ordered by the Managing General Partner in connection
with the anticipated liquidation of the Partnership's assets following the
expiration of the Partnership term, and were not obtained in contemplation of
the Sales or the Plan of Liquidation. The purpose of the Appraisals was, and
each Appraiser was instructed by the Managing General Partner, to determine the
fair market value of each Property. In connection with the Appraisals, no fair
market values, or value ranges, were suggested by the Managing General Partner.
Each of the Properties was appraised in accordance with the Uniform Standards of
Professional Appraisal Practice. Only one Appraisal was sought with respect to
each Property. Had more than one appraisal been sought with respect to each
Property, the values determined for the Properties might have been higher or
lower than the Appraised Values.
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In conducting the Appraisals, the Appraisers utilized two approaches, the
income capitalization approach, and the sales comparison approach. In the income
capitalization approach, the Appraiser calculates an estimate of net operating
income for the subject Property ("NOI"). The Appraiser then determines an
appropriate capitalization rate for the subject Property based upon
capitalization rates for comparable properties sold in the same geographic area
as the subject Property. The appraised value of the subject Property is then
determined by applying the appropriate capitalization rate to the NOI. In
utilizing the sales comparison approach, the Appraiser determines market value
by comparing the subject Property against other manufactured home communities
deemed comparable to the subject Property and sold within a specified time
period, and adjusting for material differences between the subject Property and
the comparables.
The Appraisals were rendered as of November and December 1997, and
accordingly, may no longer reflect the fair market values of the Properties, and
the value of the Properties may have increased since that time. However, the
Managing General Partner (i) does not believe that any significant events have
occurred since that time which would cause the conclusions reached in the
Appraisals, and Appraised Values, to be different had the Appraisals been
rendered as of a more recent date, (ii) is not aware of any material
developments, trends or other uncertainties that relate to the conclusions
expressed in the Appraisals, or that are reasonably likely to materially affect
such conclusions, and (iii) does not intend to update the Appraisals, or order
new appraisals for the Properties, in connection with the Sales.
The Appraisals have been based in part upon information supplied to the
Appraisers by the Managing General Partner, including but not limited to: rent
rolls; building reports; lease information; financial schedules of current lease
rates, income, expenses, cash flow and related financial information; and
property descriptive information. The Appraisers relied upon such information
and assumed that the information provided by the Managing General Partner was
accurate and complete and generally did not attempt to independently verify such
information. The Appraisers also interviewed and relied upon the Managing
General Partner to obtain information relating to the condition of each
Property, including any deferred maintenance, capital budgets, environmental
conditions, status of on-going or newly planned expansions, and other factors
affecting the physical condition of the Property improvements. The Appraisers
also interviewed the Managing General Partner's management personnel regarding
competitive conditions in property markets, trends affecting the Properties,
certain lease and financing factors, and historical and anticipated lease
revenues and expenses and reviewed historical operating statements for the
Properties.
Copies of the Appraisals are filed as Exhibits to the Schedule 13E-3
and are available for inspection and copying at the Partnership's principal
executive offices during regular business hours by any interested Limited
Partner, or any representative of a Limited Partner who has been designated by a
Limited Partner in writing. Copies may also be obtained through the written
request of any Limited Partner made to the Managing General Partner at 6430 S.
Quebec Street, Englewood, Colorado 80111.
A summary description of the Appraisals, including the Appraised Values of
the Properties is set forth below. The Appraisals are based on conditions as of
their respective dates. Subsequent developments could have a material effect on
the valuations stated therein.
Appraisal of Harmony Ranch, Rancho Margate and Winter Haven Properties by
Whitcomb Real Estate, Inc.
Information with respect to Whitcomb Real Estate, Inc. ("Whitcomb").
Whitcomb was founded in 1986, and currently has four full time appraisers on its
staff. Each of the subject properties was appraised by John Whitcomb, the
President of Whitcomb. Mr. Whitcomb is certified as a Master Appraiser by the
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Appraisal Institute, is a Certified Commercial Investment Member, has been in
the real estate appraisal business since 1985, and has conducted in excess of a
thousand property appraisals since that time. Mr. Whitcomb has extensive
experience appraising manufactured home communities, having conducted in excess
of 250 such appraisals since 1993. Whitcomb received customary and market-based
fees in connection with the rendering of the Appraisals, which were based upon
arm's-length negotiations between Whitcomb and the Managing General Partner. The
Partnership previously utilized Whitcomb Real Estate in connection with the
original purchase by the Partnership of the Sunrise Village Property and the
Partnership's Ownership Interest in the Harmony Ranch, Rancho Margate and Winter
Haven Properties. Whitcomb was paid usual and customary market based fees in
connection with such original appraisals and neither the General Partners, the
Partnership, nor any affiliates of the General Partners, have any material
relationship with Whitcomb. Whitcomb received $__________ in connection with
rendering the Appraisals. Total fees and compensation paid to Whitcomb by the
Partnership, the General Partners, and their respective affiliates since January
1, 1997 was $______________. No additional compensation is mutually understood
to be contemplated to be paid to Whitcomb, in connection with the Appraisals, or
otherwise.
Assumption and Limitations of the Whitcomb Appraisals. Each of the
Appraisals were based upon certain assumptions and limiting conditions,
including the following: (i) that the factual information contained in each
Appraisal upon which the analysis and conclusions are based was true and
correct, (ii) that the information, estimates and opinions furnished to Whitcomb
in connection with the Appraisals were true and correct, (iii) each Property was
appraised as though free and clear of mortgage's, liens, leases, servitudes and
encumbrances, except as identified in the Appraisals, (iv) that each Appraisal
applies to the real estate only, and does not include personal property or other
non-realty items, (v) that there is good and marketable title to the subject
Property, (vi) that the Property is free of encroachments, and zoning or other
violations or problems, (vii) that management of the Property is competent,
(viii) that there are no material hidden or unapparent problems of the soil,
subsoil or structures of the Property, (ix) that all of the improvements,
equipment, and building services are structurally sound and suffer no latent
defects or inadequacies, (x) that the subject improvements are free of insect
infestation or rot, or damage due to such infestation or rot, (xi) that there
are no environmental problems with respect to the Property or its improvements,
(xii) that no adverse events, conditions or circumstances materially affecting
the Property took place subsequent to the date of the field inspection, and
(xiii) that there have been no material changes in economic conditions affecting
the Property following the date of the Appraisal.
Whitcomb also noted that (i) the estimates of value stated in the
Appraisals apply only to the effective dates of value stated in the Appraisals,
(ii) value is affected by many related and unrelated economic conditions within
a local, regional, national and/or worldwide context, which might necessarily
affect the prospective value of the subject property, (iii) Whitcomb assumes no
liability for an unforeseen change in the economy, or at the subject property,
(iv) that the underlying assumptions and conditions provide a reasonable basis
for the value estimate stated in the Appraisals, (v) some assumptions or
projections inevitably will not materialize and unanticipated events and
circumstances may occur during the forecast period, (vi) the actual results
achieved during the projected holding period and investor requirements relative
to anticipated annual returns and overall yields could vary from the projection
and that such variations could be material and have an impact on the individual
value conclusions stated in the Appraisals.
Summary of Harmony Ranch Property Appraisal. In utilizing the income
capitalization approach in connection with appraising the Harmony Ranch
Property, Whitcomb first projected 12 months of income for the Property based
upon the then current rent levels. The potential gross income from the rentals
was calculated at $552,996 per year. Vacancy and credit loss was estimated at
17% of potential gross income, or $94,000. Additional income, based on
historical numbers, was calculated at $45 per space, leaving an effective gross
income estimate of $468,587 for the Property. Total annual operating expenses
for the Property were estimated to be $210,485, leaving NOI of $258,102. In
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determining a capitalization rate for the Harmony Ranch Property, Whitcomb first
looked at capitalization rates for comparable communities, which ranged from
9.17% to 10.01%. After determining that the above market vacancy and expense
ratio of the Property, and the risk of future flooding would require a higher
yield, Whitcomb determined that a capitalization rate of 11% was appropriate.
Utilizing the 11% capitalization rate yielded an appraised value for the Harmony
Ranch Property of $2,350,000. Whitcomb also performed a debt coverage ratio
analysis, as a check with respect to the utilized capitalization rate, which
yielded a capitalization rate, equal to approximately 10.6%.
In utilizing the sales comparison approach in connection with appraising
the Harmony Ranch Property, Whitcomb compared the subject property against five
other manufactured home communities sold in the same general geographic area as
the subject Property within 12 months of the Appraisal date. The sales prices of
the five comparable properties ranged from a low of $1,520,000 to a high of
$8,400,000. Total spaces ranged from 80 to 326 and occupancy ranged from 89.2%
to 98.7%. The average price per space ranged from $11,676 to $27,660 and average
lot rent ranged from $159.39 to $363.88. All of the sales were fee simple
transactions, with no abnormal financing. There were no abnormal sale conditions
known to have occurred and all of the sales represented transactions that took
place in the nine-month period prior to the Appraisal, and traded under similar
market conditions.
Whitcomb also employed the effective gross income multiplier ("EGIM"), in
the sales comparison analysis. In applying the EGIM analysis, Whitcomb (i)
determined that the EGIM for the comparable sale properties ranged between 5.54
and 6.63, (ii) that EGIM is essentially a function of the average lot rent,
(iii) average lot rent reflects, in most cases, the market perception of a
property's position in the marketplace, (iv) typically, lot rent increases
contribute to increases in NOI, (v) that average lot rent is a function of the
physical aspects of the property, such as age and condition, location and
amenities, and (vi) EGIM's also reflect the market's perception of the potential
for future rent increases.
Whitcomb also determined that (i) the subject property is an all age
community with a 13.5% physical vacancy, (ii) the subject property was observed
to be in average condition and with a good location in Hillsborough County,
Florida, (iii) the comparables all had a much higher occupancy rate than at the
subject property and the expense ratios were lower, ranging from 38.4% to 44.8%.
By comparison, the subject property (i) had a forecast expense ratio of 44.92%,
and (ii) the subject property experienced flooding in December 1997. Based on
these considerations, Whitcomb concluded an EGIM of 5.00, which was below the
indicated range for the comparable properties was appropriate. Based upon the
subject property's effective gross income of $468,587 with an EGIM of 5.00 and a
fair market value of $2,340,000, representing $12,188 per space.
In reconciling the income capitalization approach and the sales comparison
approach, Whitcomb (i) reviewed each approach to ascertain the reliability of
the data, (ii) weighted the approach that best represented the actions of
typical users and investors in the marketplace, (iii) determined that in the
current instance, the availability of sufficient, reliable and supportable
historical data for the subject property made the income capitalization approach
a reliable gauge of the market value of the subject property, (iv) determined
that the sales comparison approach was reliable, (v) determined that the two
approaches reflected a narrow range of value, (vi) determined that the opinion
of value should be based on the income capitalization approach, because buyers
are most concerned with cash flow to debt service, and (vii) concluded that the
market value of the Property, based on a reasonable exposure period of six
months, as of December 4, 1998, was $2,350,000.
Summary of Rancho Margate Property Appraisal. In utilizing the income
capitalization approach in connection with appraising the Rancho Margate
Property, Whitcomb first projected 12 months of income for the Property based
upon the then current rent levels. The potential gross income from the rentals
was calculated at $1,067,700 per year. Vacancy and credit loss was estimated at
7% of potential gross income, or $74,739. Additional income, based on historical
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numbers, was calculated at $167.80 per space, leaving an effective gross income
estimate of $1,035,836 for the Property. Total annual operating expenses for the
Property were estimated to be $475,847, leaving NOI of $559,989. In determining
a capitalization rate for the Rancho Margate Property, Whitcomb first looked at
capitalization rates for recently sold comparable communities, which ranged from
8.16% to 9.18%. Whitcomb determined that a capitalization rate of 8.75% for the
subject property was appropriate. Utilizing the 8.75% capitalization rate
yielded an appraised value for the Rancho Margate Property of $6,400,000.
Whitcomb also performed a debt coverage ratio analysis, as a check with respect
to the utilized capitalization rate which yielded a capitalization rate, equal
to approximately 9.1%.
In utilizing the sales comparison approach in connection with appraising
the Rancho Margate Property, Whitcomb compared the subject property against five
other manufactured home communities sold in the same general geographic area as
the subject Property within 24 months of the Appraisal date. The sales prices of
the five comparable properties ranged from a low of $3,000,000 to a high of
$5,500,000. Total spaces ranged from 170 to 255 and occupancy ranged from 88.9%
to 100%. The average price per space ranged from $17,451 to $29,891 and average
lot rent ranged from $185.74 to $328. All of the sales were fee simple
transactions, with no abnormal financing. There were no abnormal sale conditions
known to have occurred and all of the sales represented transactions that took
place in the twenty-four month period prior to the Appraisal, and traded under
similar market conditions.
Whitcomb also employed the EGIM in the sales comparison analysis. In
applying the EGIM, Whitcomb (i) determined that the EGIM for the comparable sale
properties ranged between 5.87 and 7.98. Whitcomb then determined that based on
the fact the expense ratio of the subject property was higher than all but one
of the comparable properties, an EGIM of 6.25, which was at the lower end of the
indicated range, was appropriate. Based upon the subject property's effective
gross income of $1,035,836 and an EGIM of 6.25, the fair market value of the
subject property was calculated to be $6,470,000, representing $26,408 per
space.
In reconciling the income capitalization approach and the sales comparison
approach, Whitcomb (i) reviewed each approach to ascertain the reliability of
the data, (ii) weighted the approach that best represented the actions of
typical users and investors in the marketplace, (iii) determined that in the
current instance, the availability of sufficient, reliable and supportable
historical data for the subject property made the income capitalization approach
a reliable gauge of the market value of the subject property, (iv) determined
that the sales comparison approach was reliable, (v) determined that the two
approaches reflected a narrow range of value, (vi) determined that the opinion
of value should be based on the income capitalization approach, and (viii)
concluded that the market value of the Property, based on a reasonable exposure
period of six months, as of November 20, 1997, was $6,400,000.
Summary of Winter Haven Property Appraisal. In utilizing the income
capitalization approach in connection with appraising the Winter Haven Property,
Whitcomb first projected 12 months of income for the Property based upon the
then current rent levels. The potential gross income from the rentals was
calculated at $628,320 per year. Vacancy and credit loss was estimated at 5% of
potential gross income, or $31,416. Additional income, based on historical
numbers, was calculated at $80 per space, leaving an effective gross income
estimate of $615,944 for the Property. Total annual operating expenses for the
Property were estimated to be $283,283, leaving NOI of $332,661. In determining
a capitalization rate for the Winter Haven Property, Whitcomb first looked at
capitalization rates for recently sold comparable communities, which ranged from
8.16% to 9.8%. Whitcomb noted that (i) the subject Property had a physical
vacancy rate of 1.3% and was observed to be in good overall condition, and (ii)
that the market has been competitive in recent years, indicating increased risk,
and increasing the going-in capitalization rate. Based on these considerations,
Whitcomb determined that a capitalization rate of 9.0% was appropriate.
Utilizing the 9.0% capitalization rate yielded an Appraised Value for the Winter
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Haven Property of $3,700,000. Whitcomb also performed a debt coverage ratio
analysis, as a check with respect to the utilized capitalization rate, which
yielded a capitalization rate, equal to approximately 9.1%.
In utilizing the sales comparison approach in connection with appraising
the Winter Haven Property, Whitcomb compared the subject property against four
other manufactured home communities sold in the same general geographic area as
the subject Property within thirty months of the Appraisal date. The sales
prices of the four comparable properties ranged from a low of $2,825,000 to a
high of $3,590,000. Total spaces ranged from 140 to 202 and occupancy ranged
from 98.2% to 100%. The average price per space ranged from $14,125 to $17,647
and average lot rent ranged from $156.55 to $224.20. All of the sales were fee
simple transactions, with no abnormal financing. There were no abnormal sale
conditions known to have occurred and all of the sales represented transactions
that took place in the nine month period prior to the Appraisal, and traded
under similar market conditions.
Whitcomb also employed the EGIM in the sales comparison analysis. In
applying the EGIM, Whitcomb determined that the EGIM for the comparable sale
properties ranged between 5.99 and 7.92. Whitcomb noted that (i) the subject
Property is an older, fully developed community located just south of the Winter
Haven city limits, (ii) with the exception of one comparable property, the
subject Property, and all comparable properties were fully developed, stabilized
properties and any additional potential income is available only from rent
increases, and (iii) the subject Property rents are well supported in the
marketplace. Based on these considerations, Whitcomb concluded an EGIM of 6.0,
which is at the lower end of the EGIM range for the comparable properties was
appropriate. Based upon the subject Property's effective gross income of
$615,944 and an EGIM of 6.0, the fair market value of the subject Property was
calculated to be $3,700,000, representing $15,492 per space.
In reconciling the income capitalization approach and the sales comparison
approach, Whitcomb (i) reviewed each approach to ascertain the reliability of
the data, (ii) weighted the approach that best represented the actions of
typical users and investors in the marketplace, (iii) determined that in the
current instance, the availability of sufficient, reliable and supportable
historical data for the subject property made the income capitalization approach
a reliable gauge of the market value of the subject property, (iv) determined
that the sales comparison approach was reliable, (v) determined that the two
approaches reflected a narrow range of value, (vi) determined that given the
relative homogeneity of the locations of the subject property and the
comparables, the availability of market data that it was appropriate to
emphasize the sales comparison approach, and (vii) and concluded that the market
value of the Property, based on a reasonable exposure period of six months, as
of November 17, 1997, was $3,700,000.
Appraisal of Sunset Vista and Big Country Estates Properties by Landmark
Valuation, Inc.
Information with respect to Landmark Landmark was founded in October 1995,
and currently has two full time appraisers on its staff. Each of the subject
properties was appraised by Dale E. Washburn and Tom D. Spivak. Mr. Washburn is
certified as a Master Appraiser by the Appraisal Institute, has been in the real
estate appraisal business since 1985, and has conducted in excess of a thousand
of property appraisals since that time. Mr. Washburn has extensive experience
appraising manufactured home communities in the Rocky Mountain region. Landmark
received customary and market-based fees in connection with the rendering of the
Appraisals, which were based upon arm's-length negotiations between Landmark and
the Managing General Partner. The Partnership previously utilized Landmark in
connection with the original purchase by the Partnership of Sunset Vista and Big
Country Estates. Landmark was paid usual and customary market based fees in
connection with such original appraisals and neither the General Partners, the
Partnership, nor any affiliates of the General Partners, have any material
relationship with Landmark. Landmark received $ in connection with
rendering the Appraisals. Total fees and compensation paid to Landmark by the
Partnership, the General Partners, and their respective affiliates since
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December 1, 1997 was $6,750. No additional compensation is mutually understood
to be contemplated to be paid Landmark, in connection with the Appraisals, or
otherwise.
Assumptions and Limitations of the Landmark Appraisals. Each of the
Appraisals rendered by Landmark were based upon certain assumptions and limiting
conditions including the following: (i) the valuation estimate applies only to
the property and property rights specifically identified in the Appraisal, (ii)
the subject property was appraised free and clear of any or all liens or
encumbrances unless otherwise stated, (iii) it was assumed that all information
known to the client and relative to the valuation has been accurately furnished
and that there are no undisclosed leases, agreements, liens, or other
encumbrances affecting the use of the subject property, (iv) ownership and
management are assumed to be competent and in responsible hands, (v) information
and data contained in the Appraisals furnished by others is believed to be
reliable; however, no warranty is given to its accuracy, (vi) information and
data obtained from public records, and where possible checked and verified, was
also deemed to be correct, (vii) the report and value conclusions are contingent
upon completion of any stated improvements, repairs or alterations in a
workmanlike manner and in conformance with all applicable codes, ordinances and
statutes, (viii) no responsibility beyond reasonableness was assumed by Landmark
for matters of a legal nature, whether existing or pending, (ix) the appraisers
have not performed drainage or soil tests on the subject site, nor have the
results of such tests been provided and it is assumed that there are no soil or
drainage conditions which would adversely affect the market value of the subject
property, (x) the appraisers are not engineers, and any references to physical
property characteristics in terms of quality, condition, cost, suitability, soil
conditions, flood risk, obsolescence, etc., are strictly related to their
economic impact on the property and no liability is assumed for any
engineering-related issues, (xi) the existence of potentially hazardous
materials used in construction or maintenance of the building, such as the
presence of urea formaldehyde foam insulation, asbestos, and/or existence of
toxic waste, which may or may not be present on the property, has not been
considered, the appraisers are not qualified to detect such substances, and the
valuations are subject to modification if any such potentially hazardous
materials were detected by a qualified expert in these areas, and (xii) each
Appraisal is based on the condition of local and national economies, purchasing
power of money, and financing rates prevailing at the effective date of value.
Summary of the Sunset Vista Estates Appraisal. In utilizing the income
capitalization approach, in appraising the Sunset Vista Estates Property,
Landmark first determined the per space market rent for the Property. Based upon
(i) the current rents charged at the Property, and the current rents charged at
five mobile home communities which Landmark deemed comparable to the subject
Property, Landmark determined the market rent at the Property to be $225 per
month for a single wide space and $245 per month for a double-wide space. Based
upon these figures, total gross space rental for the Property was calculated at
$574,740 per year. Additional other income was estimated at $10,058 per year.
Total operating expenses, based on historical operating expenses, were estimated
to be $256,037. Based on these estimates, NOI was $360,024. Landmark then
determined an appropriate capitalization rate for the Property. In determining
an appropriate capitalization rate, Landmark determined the capitalization rate
for comparable properties sold within three years of the Appraisal date located
in Arizona, Nevada, Wyoming and Colorado. The capitalization rates for the
comparable properties ranged from 8.7% to 11.5%, with the most comparable
properties indicating a range of 8.7% to 10.8%, with a mean of 9.5%. Based upon
these comparables, Landmark determined that a capitalization rate of 9.5% was
appropriate. Utilizing a 9.5% capitalization rate, Landmark estimated the value
of the Property to be $3,800,000
In utilizing the sales comparison approach in appraising the Sunset Vista
Estates Property, Landmark relied principally upon the EGIM. Landmark noted that
(i) it was unable to identify recent manufactured home community properties in
the same geographic area as the subject Property, (ii) that since investors
typically base their purchase decisions on criteria which is generally similar
regardless of geographic location, it expanded its search to include sales of
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comparable properties in Colorado, Arizona and Nevada. Landmark identified and
compared the subject Property against 13 comparable properties. The EGIM for
such properties ranged from 5.49 to 7.15, occupancy rates ranged from 94% to
100% and net operating income for such properties ranged from $1,491 to $2,794
per space. Landmark then (i) contrasted this against 100% occupancy and $1,739
per space for the subject Property, (ii) noted that all of the comparables had
stable occupancy, and were thus similar to the subject Property, (iii)
determined that two of the comparables, with EGIMs of 5.88, and 6.11,
respectively and NOI per space of $1,704 and $1,756 per space, respectively,
were most similar to the subject Property in amenities offered, and NOI and
expenses per space, and that three other comparables, with EGIM's of 6.59, 6.72
and 5.77, respectively, were also similar and comparable to the subject
Property. Based upon the similarity of the subject Property to these
comparables, Landmark determined that an EGIM of 6.25 was appropriate for the
subject Property, which yielded an estimated value for the Property of
$3,850,000, or $18,599 per space, which Landmark found to be consistent with the
per space value of the comparables and which further supported the chosen EGIM.
In reconciling the two approaches to value, Landmark determined that
primary emphasis should be given to the income capitalization approach, because
it is most likely that a potential investor/purchaser of the subject Property
would also base a purchase decision on the criteria in this approach. Landmark
also noted that with respect to the sales comparison approach, that recent sales
data on manufactured home communities was scarce, and that the sales comparison
approach should be given secondary consideration.
Based upon primary emphasis on the income capitalization approach, and
secondary emphasis on the sales comparison approach, Landmark determined that
the "as-is" market value of the Property, free and clear of financing, was
$3,800,000.
Summary of the Big Country Estates Appraisal. In utilizing the income
capitalization approach in appraising the Big Country Estates Property, Landmark
first determined the per space market rent for the Property. Based upon (i) the
current rents charged at the Property, and (ii) the current rents charged at
five mobile home communities which Landmark deemed comparable to the subject
Property, Landmark determined the market rent at the Property to be $190 per
month per space. Based upon these figures, total gross space rental for the
Property was calculated at $581,400 per year. Additional other income was
estimated at $6,904 per year. Combined vacancy and collection loss was estimated
to be $29,070. Total operating expenses, based on historical operating expenses,
were estimated to be $312,280. Based on these estimates, NOI was $246,954.
Landmark then determined an appropriate capitalization rate for the Property. In
determining an appropriate capitalization rate, Landmark determined the
capitalization rate for comparable properties sold within three years of the
Appraisal date located in Arizona, Nevada, Wyoming and Colorado. The
capitalization rates for the comparable properties ranged from 8.9% to 11.5%,
with the most comparable properties indicating a range of 8.9% to 10.8%, with a
mean of 9.7%. Based upon these comparables, Landmark determined that a
capitalization rate of 9.5% was appropriate. Utilizing a 9.5% capitalization
rate, Landmark estimated the value of the Property to be $2,600,000.
In utilizing the sales comparison approach in appraising the Big Country
Estates Property, Landmark relied principally upon the EGIM. Landmark was able
to identify only two sales of manufactured home communities in the subject
Property's immediate vicinity which occurred in the three years prior to the
Appraisal date. Landmark therefore expanded its search to include communities
located along the northern front range of the Rocky Mountains. Landmark
identified seven comparables, two in Cheyenne, Wyoming, two in Fort Collins, one
in Greeley, one in Loveland, and one in Lafayette, Colorado. The EGIMs for such
properties ranged from 5.07 to 6.72, occupancy rates ranged from 95% to 100% and
net operating income for such properties ranged from $1,122 to $2,112 per space.
Landmark then (i) contrasted this against 98% occupancy and $968 per space for
the subject Property, (ii) noted that all of the comparables had stable
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occupancy, and were thus similar to the subject Property, and (iii) determined
that two of the comparables, with EGIMs of 5.07 and 5.16, respectively and NOI
per space of $1,122 and $1,319 per space, respectively, were most similar to the
subject Property in age, location, and NOI. Based upon the similarity of the
subject Property to these comparables, and adjusting for relative differences,
Landmark determined that an EGIM of 5.0 was appropriate for the subject
Property, which yielded an estimated value for the Property of $2,800,000, or
$10,980 per space, which Landmark found to be consistent with the per space
value of the comparables and which further supported the chosen EGIM.
In reconciling the two approaches, Landmark gave equal emphasis to each
approach, and determined $2,700,000 as the final estimate of "as-is" market
value for the subject Property, as of November 24, 1997.
Appraisal of Apache East and Denali Park Estates Properties by Appraisal
Technology, Inc.
Information with respect to Appraisal Technology. Appraisal Technology was
founded in 1990, and currently has six full time appraisers on its staff. Each
of the subject properties was appraised by Mr. Mark Wirth. Mr. Wirth is
certified as a Master Appraiser by the Appraisal Institute, has been in the real
estate appraisal business since 1984, and has conducted in excess of a thousand
property appraisals since that time. Mr. Wirth has extensive experience
appraising manufactured home communities in the Southwest United States, having
conducted in excess of 200 such appraisals in the past ten years. Appraisal
Technology received customary and market-based fees in connection with the
rendering of the Appraisals, which were based upon arm's-length negotiations
between Appraisal Technology and the Managing General Partner. The General
Partners of the Partnership previously utilized Appraisal Technology in
connection with the original purchase by the Partnership of the Denali Park
Estates and Apache East Properties. Appraisal Technology was paid usual and
customary market based fees in connection with such original appraisals and
neither the General Partners, the Partnership, nor any affiliates of the General
Partners, have utilized Appraisal Technology in any other capacity, or has any
material relationship with Appraisal Technology. Appraisal Technology received
$ in connection with rendering the Appraisals. Total fees and
compensation paid to Appraisal Technology by the Partnership, the General
Partners, and their respective affiliates since January 1, 1997 was $2,000. No
additional compensation is mutually understood to be contemplated to be paid to
Appraisal Technology, in connection with the Appraisals, or otherwise.
Assumptions and Limitations of the Appraisal Technology Appraisals. Each of
the Appraisals rendered be Appraisal Technology were based upon certain
assumptions and limiting conditions, including the following: (i) management for
each subject Property is assumed to competent, (ii) title is assumed to be good
and marketable, (iii) the subject Property and owner are assumed to be in full
compliance with all applicable laws, including zoning and environmental laws,
(iv) it is assumed that all licenses, consents, and legislative and
administrative authority have been obtained, (v) adequate municipal services are
assumed, (vi) the legal description of the subject Property is assumed to be
correct, and it is assumed that there is no encroachment or trespass, (vii) it
is assumed that there are no hidden unapparent adverse conditions of the subject
Property, sub-soil or structures, (viii) descriptions of the physical condition
of the subject Property are descriptions only and are not warranted or
guaranteed, (ix) information provided in public records and by third parties is
assumed to be true correct and reliable, and (x) each Appraisal is an estimate
of value based on analysis of information known to the Appraiser at the time the
Appraisal was made.
Summary of the Denali Park Estates and Apache East Property Appraisals. The
Denali Park Estates and Apache East Properties are contiguous Properties with
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similar characteristics. Accordingly, the Appraisal of these Properties were
contained in a single Appraisal report rendered by Appraisal Technology.
In utilizing the sales comparison approach in connection with appraising
the Denali Park Estates and Apache East Properties, Appraisal Technology
compared the subject Property against four other manufactured home communities
sold in the same general geographic area as the subject Properties within
twenty-four months of the Appraisal date. The sales prices of the five
comparable properties ranged from a low of $2,825,000 to a high of $5,000,000.
Total spaces ranged from 108 to 201 and occupancy ranged from 88.9% to 100%. The
average price per space ranged from $17,000 to $26,157 and average NOI per space
ranged from a low of $1,705 per annum to a high of $2,511 per annum. All of the
sales were fee simple transactions, with no abnormal financing. There were no
abnormal sale conditions known to have occurred and all of the sales represented
transactions that took place in the twenty-four month period prior to the
Appraisal, and traded under similar market conditions.
After adjusting for specified economic differences, Appraisal Technology
determined that the four comparables indicated a value range of $16,150 to
$21,144 per space with an indicated mean of $19,327 per space. Additionally,
Appraisal Technology noted that (i) all four comparables utilized in the
valuation analysis are considered to be the best data available for the subject
Properties as of the date of valuation, (ii) all four sales required adjustments
for location, (iii) two of the four comparables required adjustments for
physical characteristics and (iv) that value of the subject Properties should
fall within this adjusted range.
Appraisal Technology determined that for the Denali Park Estates Property,
due to its size, condition and income potential, that the middle of the adjusted
range was indicated, and that a value of $19,500 per space was indicated. Based
upon this figure, the as-is value of the Property utilizing the sales comparison
approach was determined to be $3,485,000. Appraisal Technology determined that
for the Apache East Property, due to its size, condition and income potential,
the lower end of the adjusted range was indicated and that a value of $17,000
per space was indicated. Based upon this figure, the as-is value of this
Property utilizing the sales comparison approach was determined to be
$2,090,000.
In utilizing the income capitalization approach, based upon rentals at
properties deemed by Appraisal Technology to be comparable to the subject
Properties, Appraisal Technology determined that (i) the total effective rental
income for the Denali Park Estates Property was $384,241, and (ii) the total
effective rental income for the Apache East Property was $293,040. Appraisal
Technology then determined (i) based on historical figures that Denali Park
Estates had additional rental income of $36,409and Apache East had no other
income sources, (ii) total annual operating expenses for Denali Park Estates
were estimated at $124,195, (iii) total annual operating expenses for Apache
East were estimated at $104,961, and (iv) NOI for Denali Park Estates was
estimated to be $296,546, and NOI for Apache East was estimated to be $188,079.
Appraisal Technology then sought to determine an appropriate capitalization
rate for each subject Property. In determining these rates, Appraisal Technology
noted that (i) the overall capitalization rates, for the comparable properties
ranged from 8.9% to 10.03%, (ii) that the differences may be attributed to
variations in occupancy, age and condition of the communities, sales motivation,
cash flow potential and other factors which make each sale and/or property
unique, and (iii) that due to anticipated winter season revenue increases,
physical characteristics of the communities, economic stability and remaining
economic life that a capitalization rate of 9.5% was an appropriate
capitalization rate. Based upon such rate, the market value utilizing the income
capitalization approach of the Denali Park Estates Property was calculated to be
$3,121,537 and for Apache East was calculated to be $1,980,000. Appraisal
Technology then added the value of the excess undeveloped land included in the
Denali Park Estates Property, estimated to be $325,000, giving a final rounded
value for Denali Park Estates of $3,445,000.
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Reconciliation. In reconciling the market values of the subject properties
determined by each method, Appraisal Technology determined the weight to be
accorded each method and based on such weighting concluded that, as of November
10, 1997, the as-is market value of the Denali Park Estates Property was
$3,445,000, and that the as-is market value of Apache East Property was
$1,980,000.
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SUMMARY OF SELECTED TERMS OF THE PARTNERSHIP AGREEMENT
The rights and obligations of the partners in the Partnership are governed
by the Partnership Agreement which is set out in its entirety in Appendix B
beginning at Page B-1. The following statements and other statements in this
solicitation concerning the Partnership Agreement and related matters are merely
a selected summary, do not purport to be complete and in no way modify or amend
the Partnership Agreement.
Net Proceeds from the Sales
Pursuant to the Partnership Agreement upon the consummation of the Sales
and a liquidation of the Partnership, net proceeds from the Sales will be
distributed in the following order of priority:
(1) To the Limited Partners, an amount equal to the sum of: (i) Adjusted
Invested Capital with respect to the Units (as hereinafter defined);
and (ii) the excess, if any, of an amount equal to a 9% per annum
cumulative (but not compounded) return on adjusted invested capital,
calculated from each Limited Partner's respective date of admission to
the Partnership, over total prior distributions of cash from
operations with respect to the Units;
(2) To the General Partners, an amount equal to any unpaid subordinated
real estate commission; and
(3) To the extent of any balance remaining, 85% of the Limited Partners to
be shared on a pro rata basis in accordance with their respective
ownership of Units and 15% to the General Partners.
The above notwithstanding, the General Partners will receive at least 1% of
the distributions of net proceeds from the Sales.
Allocation of Profit or Loss on the Sales
Profit or loss in connection with the Sales and a liquidation of the
Partnership will be allocated to and among the partners as follows:
(1) The profit on the Sales first shall be allocated to each partner with
a negative capital account pro ratably in an amount equal to (or in
proportion to if less than) the amount of the negative capital account
of each partner;
(2) Profit on the Sales next shall be allocated to the capital accounts of
the Limited Partners until each Limited Partner's capital account
shall equal a positive amount equal to the sum of: (i) the Adjusted
Invested Capital attributable to each Limited Partner; and (ii) the
excess, if any, of an amount equal to a 9% per annum cumulative (but
not compounded) return on Adjusted Invested Capital, calculated from
each Limited Partner's respective date of admission to the
Partnership, over total prior distributions of cash from operations
with respect to the Units.
(3) To the extent of any balance remaining, 85% to the Limited Partners to
be shared on a pro rata basis in accordance with their respective
ownership of Units and 15% to the General Partners;
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(4) To the extent that there is a loss on the Sales, such loss on the
Sales shall be allocated among the partners with positive balances in
their capital accounts pro rata in accordance with their respective
positive balances until the aggregate positive balance of their
capital accounts is reduced to zero, and any balance shall be
allocated 99% to the Limited Partners and 1% to the General Partners;
Notwithstanding the foregoing, the General Partners shall be allocated at
least 1% of the profit or loss on the Sales, and in characterizing the allocated
profit on the Sales, that portion which constitutes ordinary income by reason of
recapture of depreciation, if any, shall be allocated among the partners such
that a partner (or successor) who realized the benefit of the deduction or
credit will bear the tax burden of the corresponding recapture.
"Adjusted Invested Capital" means the original capital contribution paid
for each Unit reduced by any return of capital (defined as a return of cash
invested; or cash distributed in excess of funds generated from operations,
should this occur) and further reduced by the total cash distributed from net
proceeds from financing and net proceeds from the sale of properties with
respect to each Unit. Thus, distributions of cash from operations do not reduce
"Adjusted Invested Capital."
Voting Rights of Limited Partners
The voting rights of the Limited Partners are set forth in Sections 2.03-2,
2.03-3(f) and 8.03 of the Partnership Agreement. The Limited Partners have the
right to vote upon the following matters:
(i) The dissolution and winding up of the Partnership;
(ii) The sale, exchange, lease, mortgage, pledge, or other transfer of
all or a substantial part of the assets of the Partnership other than in
the ordinary course of its business;
(iii) The incurrence of indebtedness by the Partnership other than in
the ordinary course of its business;
(iv) A change in the nature of the business of the Partnership;
(v) Transactions in which the General Partners have an actual or
potential conflict of interest with the Limited Partners or the
Partnership;
(vi) The removal of a General Partner, and the election of a General
Partner;
(vii) An election to continue the business of the Partnership other
than under the circumstances described in (ix) or (x) below;
(viii) The admission of a General Partner other than under the
circumstances described in (ix) or (x) below;
(ix) The admission of a General Partner or an election to continue the
business of the Partnership after a General Partner ceases to be a General
Partner other than by removal where there is no remaining or surviving
General Partner; and
(x) The admission of a General Partner or an election to continue the
business of the Partnership after the removal of a General Partner where
there is no remaining or surviving General Partner.
The voting rights in the Partnership Agreement are effected by the vote or
consent of a majority in interest of Limited Partners without the necessity for
concurrence by the General Partners.
Limitation of Liability and Indemnification of the General Partners
The Partnership Agreement provides for a limitation of liability and the
indemnification of the General Partners as follows:
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(i) the General Partners shall have no liability to the Partnership or
to any partner for any loss suffered by the Partnership which arises out of
any action or inaction of the General Partners if the General Partners, in
good faith, determined that such course of conduct was in the best
interests of the Partnership and such course of conduct did not constitute
negligence or misconduct of the General Partners;
(ii) the General Partners shall be indemnified by the Partnership
against any losses, judgments, liabilities, expenses, and amounts paid in
settlement of any claims sustained by them in connection with the
Partnership, provided that the same were not the result of negligence or
misconduct on the part of the General Partners, and provided the General
Partners, in good faith, determined that such course of action was in the
best interests of the Partnership;
(iii) notwithstanding the above, the General Partners or their
affiliates shall not be indemnified for liabilities arising under federal
and state securities laws unless (1) there has been a successful
adjudication on the merits of each count involving securities law
violations, or (2) such claims have been dismissed with prejudice on the
merits by a court of competent jurisdiction, and provided that a court
either (A) approves any settlement and finds that indemnification of the
settlement and related costs should be made, or (B) approves
indemnification of litigation costs if a successful defense is made;
(iv) the Partnership shall not indemnify any affiliates of the General
Partners, or any underwriters or any other persons for liabilities arising
under federal and state securities laws;
(v) any recovery by the General Partners pursuant to the Partnership
Agreement is recoverable only out of assets of the Partnership and not from
the Limited Partners; and
(vi) the Partnership and the General Partners undertake that any and
all parties seeking indemnification will appraise the court of the position
of the Securities and Exchange Commission and state securities
commissions/authorities with respect to indemnification for securities laws
violations before seeking court approval for indemnification.
THE PARTNERSHIP'S PROPERTIES
Nature of Ownership Interests in Properties
Properties Owned by Limited Partnerships in which the Partnership is a
Limited Partner. Each of the Rancho Margate, Winter Haven, Apache East and
Denali Park Estates Properties is owned by a limited partnership (the "Limited
Partnerships") and each of the Ownership Interests of the Partnership in such
Properties is in the form of a limited partner interest in such Limited
Partnerships. Under the agreements of limited partnership of the Limited
Partnerships, virtually all management, business and other decisions relating to
the properties owned by such Limited Partnerships are within the control and
discretion of the Managing General Partner, and the limited partners have no
control over the management of, and decisions with respect to the properties
owned by such Limited Partnership, including, without limitation, any
disposition of any such property.
Although the limited partners in each Limited Partnership (including the
Partnership) can legally sell their limited partner interests in any Limited
Partnership, the transferee of any such limited partner interest will be
entitled to the full benefits relating to the limited partner interest only if
the Managing General Partner, as general partner of such limited Partnership, in
its sole discretion, determines to admit such transferee as a limited partner of
such Limited Partnership. If the Managing General Partner fails to do so, the
transferee generally will be entitled only to the economic benefits relating to
the limited partner interest, but would not be entitled to certain other rights
(such as voting rights) conferred upon such limited partners under the
partnership agreement of such Limited Partnership and by law.
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The Rancho Margate and Winter Haven Properties are owned by Windsor Park
456 ("Windsor Park 456"), a California limited partnership. The Partnership is a
33% limited partner in Windsor Park 456. The Managing General Partner, in
addition to being the sole general partner of the Windsor Park 456 is also the
sole general partner of Windsor Park Properties 5, a California limited
partnership ("Windsor 5"), and Windsor Park Properties 6, a California limited
partnership ("Windsor 6"), which partnerships own the remaining 67% limited
partner interests in Windsor Park 456.
The Apache East and Denali Park Estates Properties are owned by Windsor
Park 345 ("Windsor Park 345"), a California limited partnership. The Partnership
is a 25% limited partner in Windsor Park 345. The Managing General Partner is
the sole general partner of Windsor Park 345, and of Windsor Park Properties 3,
a California limited partnership ("Windsor 3"), Windsor 5, Windsor 6 and Windsor
Park Properties 7, a California limited partnership ("Windsor 7"), and is the
Advisor to N' Tandem, which together own the remainder of the limited partner
interests in Windsor Park 345. N' Tandem has an 11% limited partner interest in
Windsor Park 345.
Properties Owned Pursuant to Joint Venture Agreements. The Partnership owns
(i) a 60% undivided interest in Big Country Estates as a tenant in common with
Windsor 3, which owns a 40% undivided interest in the Property; (ii) a 75%
undivided interest in Harmony Ranch, as a tenant in common with Windsor 3, which
owns the remaining 25%. Each of the Partnership's Ownership Interests in the Big
Country Estates and Harmony Ranch Properties are subject to joint venture
agreements relating to such Properties between the Partnership and Windsor 3.
Pursuant to the Purchase and Sale Agreement, the Partnership will assign its
rights under the respective joint venture agreements to N' Tandem at the
closing.
Difficulty of Selling Ownership Interests to Third Party Buyers. Given the
fact that (i) control and management of the underlying Properties are vested in
the Managing General Partner, and (ii) an owner of the Ownership Interests has
no control over the disposition of the underlying property, the General Partners
believe that finding third party buyers willing to pay full value for the
Ownership Interests based on the Appraised Values would be extremely difficult,
and believes that efforts to sell such Ownership Interests to third parties are
likely to result in purchase prices below the Purchase Prices, and substantially
higher selling expenses and would result in substantially lower liquidating
distributions to the Limited Partners.
Description of Properties, Appraised Values and Ownership Interests
Sunset Vista Estates. Sunset Vista Estates is a 208-space manufactured home
community that can accommodate 142 single-wide and 66 double-wide manufactured
homes. Amenities include an office, two playgrounds, pavilion/BBQ area, RV
storage, tennis/basketball court, and swimming pool. The Appraisal was prepared
as of December 15, 1997 by Landmark Valuation, Inc., Aurora, CO. The "as-is"
Appraised Value of the Property is $3,800,000. The Partnership has a 100%
ownership interest in this Property.
Big Country Estates. Big Country Estates is a 255-space manufactured home
community located at 3400 South Greeley Highway, Cheyenne, Wyoming. Amenities
include a clubhouse, office and playground. The Appraisal was prepared as of
November 24, 1997 by Landmark Valuation, Inc., Aurora, CO. The "as-is" Appraised
Value of the Property is $2,700,000. The Partnership has a 60% ownership
interest in this Property. There is no mortgage on this Property.
Harmony Ranch. Harmony Ranch is a fully developed 194-space manufactured
home community with a clubhouse and office, laundry and playground/recreation
area located at 10321 Main Street, Thonotosassa, FL. The Appraisal was prepared
as of November 17, 1997 by Whitcomb Real Estate, Tampa, FL. The initial "as-is"
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Appraisal Value of the Property was $2,560,000. The Property experienced
substantial flooding in 1998, and was re-appraised by Whitcomb Real Estate in
December 1998 for $2,350,000. There is an outstanding mortgage on this Property
securing $1,200,000 of indebtedness which is expected to continue following any
Sale. The Partnership has a 75% ownership interest in this Property.
Rancho Margate. Rancho Margate is a fully developed 245-space manufactured
home community, with a clubhouse, pool, laundry, shuffleboard and petangue
courts and on-site office. The Appraisal was prepared as of November 20, 1997 by
Whitcomb Real Estate, Tampa, FL. The "as-is" Appraised Value of the Property is
$6,400,000. There is a mortgage on this Property securing indebtedness of
$3,642,000 which will continue following the closing of the Sales. The
Partnership has a 33% ownership interest in this Property.
Winter Haven. Winter Haven is a fully developed 238-space manufactured home
community, with a clubhouse, pool, laundry, shuffleboard courts and an on-site
office. The Appraisal was prepared as of November 17, 1997 by Whitcomb Real
Estate, Tampa, FL. The "as-is" Appraised Value of the Property is $3,700,000.
There is a mortgage on this Property securing indebtedness of $1,601,000 which
will continue following the closing of the Sales. The Partnership has a 33%
ownership interest in this Property.
Apache East. Apache East Estate is a 123-space adult manufactured home
community located at 3800 South Tomahawk Road, Apache Junction, Arizona. The
Appraisal was prepared as of November 10, 1997 by Appraisal Technology, Inc.,
Phoenix, AZ. The "as-is" appraised value of this Property is $1,980,000. This
Property is adjacent to Denali Park Estates and there is a single mortgage
covering both properties relating to outstanding indebtedness in the amount of
$3,026,000 which will continue following the Sales. For purposes of calculating
the value of the Apache East and Denali Park Estates Ownership Interests only,
the Partnership has assumed that 36.5% of such indebtedness or $1,104,490 is
allocable to the Apache East Property and that 63.5% of such indebtedness or
$1,921,510 is allocable to the Denali Park Estates Property. This mortgage and
the related indebtedness are to continue following the Sales. The Partnership
has a 25% ownership interest in this Property.
Denali Park Estates. Denali Park Estates is a 162-space adult manufactured
home community located at 3405 South Tomahawk Road, Apache Junction, AZ. The
Appraisal was prepared as of November 10, 1997 by Appraisal Technology, Inc.,
Phoenix, AZ. The "as-is" appraised value of this Property is $3,445,000. This
Property is adjacent to Apache East and there is a single mortgage covering both
properties relating to outstanding indebtedness in the amount of $3,026,000
which will continue following the Sales. For purposes of calculating the value
of the Apache East and Denali Park Estates Ownership Interests only, the
Partnership has assumed that 36.5% of such indebtedness or $1,104,490 is
allocable to the Apache East Property and that 63.5% of such indebtedness or
$1,921,510 is allocable to the Denali Park Estates Property. This mortgage and
the related indebtedness are to continue following the Sales. The Partnership
has a 25% ownership interest in this Property.
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FEDERAL INCOME TAX CONSIDERATIONS
The following is a brief summary of certain United States federal income
tax consequences to Limited Partners arising from the Sales and liquidation of
the Partnership. This summary is based upon the Internal Revenue Code of 1986,
as amended (the "Code"), as currently in effect, applicable Treasury Regulations
adopted thereunder, reported judicial decisions and Internal Revenue Service
("IRS") rulings all as of the date hereof, all of which are subject to
prospective or retroactive change in a manner which could adversely affect
Limited Partners.
This summary is based on the assumption that Units in the Partnership are
held as capital assets and does not purport to deal with Limited Partners in
special tax situations such as insurance companies, financial institutions,
tax-exempt entities, nonresident aliens and foreign corporations. Moreover, this
summary does not address the possible consequences to Limited Partners under any
state, local or foreign tax laws of the states and localities where they reside
or otherwise do business or where the Partnership operates. AS SUCH, EACH
LIMITED PARTNER SHOULD CONSULT HIS OR HER OWN TAX ADVISOR CONCERNING THE
CONSEQUENCES TO HIM OR HER OF THE SALE OF THE PROPERTIES AND OWNERSHIP INTERESTS
AND LIQUIDATION OF THE PARTNERSHIP.
Overview
The Sales should result in the recognition of gain by the Partnership and,
therefore, should result in recognition of gain by Limited Partners. The amount
of gain recognized by the Partnership with respect to each of the Properties and
Ownership Interests will equal the difference between (i) the amount realized by
the Partnership (i.e., the amount of cash received plus the amount of
liabilities of the Partnership assumed by the Purchasers) and (ii) the
Partnership's adjusted tax basis in each of the Properties and Ownership
Interests. The aggregate gain expected to be recognized by the Partnership on
the Sales is approximately $2,965,573. This gain will be allocated among the
partners of the Partnership in accordance with the terms of the Partnership
Agreement. These provisions will result in the allocation of approximately
$2,935,917 of taxable gain on the Sales to Limited Partners (or an average of
$15.03 per Unit). Upon liquidation of the Partnership, a Limited Partner will
recognize gain or loss equal to the difference between the cash received by such
Limited Partner and the adjusted tax basis of such Limited Partner's Units. It
is expected that a Limited Partner will recognize an average of approximately
$10.80 of loss per Unit on liquidation. The gain per Unit resulting from the
Sales is primarily caused by the fact that the Partnership generated tax losses
in prior years that were allocated to Limited Partners. Limited Partners should
be aware that all of the per-Unit amounts stated above may vary for each Limited
Partner depending on the historical losses allocated and cash distributions to
such Limited Partner.
Taxation on the Sales
Tax Consequences of the Sales. The Sales should result in the recognition
of gain by the Partnership and, therefore, should result in recognition of gain
by Limited Partners. The amount of gain recognized by the Partnership with
respect to each of the Properties and Ownership Interests will equal the
difference between (i) the Partnership's amount realized (i.e., the amount of
cash received increased by the amount of liabilities of the Partnership assumed
or taken subject to by the Purchaser) and (ii) the Partnership's adjusted tax
basis in each of the Properties and Ownership Interests. The aggregate gain
expected to be recognized by the Partnership on the Sales is approximately
$2,965,573.
Allocation of Gain. The $2,965,573 gain recognized by the Partnership in
the year of Sales will be allocated among the partners in accordance with the
terms of the Partnership Agreement. These provisions will result in an
allocation of approximately $2,935,917 of taxable gain on the Sales to Limited
Partners (or an average of $15.03 per Unit). The gain per Unit resulting from
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the Sales is primarily caused by the fact that the Partnership generated tax
losses in prior years that were allocated to Limited Partners. See "-- Income
Tax Rates/Taxation of Gains and Losses," below.
Characterization of Gain or Loss. In general, gains (other than the amount
of gain attributable to certain depreciation recapture, which would be
classified as ordinary income, and gain attributable to Ownership Interests that
are partnership interests) recognized with respect to the Sales should be
treated as recognized from the sale of a "Section 1231" asset (i.e., real
property and depreciable assets used in a trade or business and held for more
than one year). A Limited Partner's share of gains from the sale of Section 1231
assets of a Partnership will be combined with any other Section 1231 gains and
losses recognized by such Limited Partner in that year. If the result is a net
loss, such loss is characterized as an ordinary loss. If the result is a net
gain, such gain is characterized as a capital gain; provided, however, that such
gain will be treated as ordinary income to the extent the Limited Partner has
"non-recaptured" Section 1231 losses. For these purposes, "non-recaptured"
Section 1231 losses means a Limited Partner's aggregate Section 1231 losses for
the five most recent prior years that have not previously been recaptured.
In general, gain or loss recognized with respect to the Sale of Ownership
Interests that are partnership interests will be gain or loss from the sale or
exchange of a capital asset. However, any amount received in exchange for a
partnership interest attributable to a partnership's "unrealized receivables"
(including certain depreciation recapture) or "inventory items" will be
considered to be gain or loss from the sale or exchange of property other than a
capital asset.
For purposes of the passive activity loss limitations of Section 469 of the
Code, gains recognized from the Sales generally will be treated as passive
activity income.
Liquidation of the Partnership
Tax Consequences of Liquidation. Upon liquidation of the Partnership, a
Limited Partner will recognize gain or loss equal to the difference between the
cash received by such Limited Partner (including the Limited Partner's share of
partnership liabilities under Section 752 of the Code assumed by the Purchaser)
and the adjusted tax basis of the Limited Partner's Units, adjusted by such
Limited Partner's allocable share of income, gain or loss arising from normal
Partnership operations for the year of liquidation and the sale of the
Properties in the year of liquidation. See "-- Taxation on Sales -- Allocation
of Gain" above. It is expected that a Limited Partner will recognize an average
of approximately $10.80 of loss per Unit on liquidation of the Partnership.
Characterization of Gain or Loss. Any gain or loss recognized by a Limited
Partner on liquidation of the Partnership should be treated as gain or loss from
the sale of a capital asset if the Units are held as a capital asset by the
Limited Partner. Such gain or loss generally will be treated as passive gain or
loss pursuant to Section 469 of the Code.
The combined effect of the Sales and the liquidation of the Partnership
should result in a net taxable gain to Limited Partners of approximately $4.23
per Unit. However, the treatment of the gains and losses recognized by the
Limited Partners (as capital or ordinary gain or loss and the ability to offset
the two) may differ depending on whether Limited Partners have any
non-recaptured Section 1231 losses as discussed above. See "Income Tax
Rates/Taxation of Capital Gains and Losses" below regarding limitations with
respect to the deductibility of capital losses against ordinary income.
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Income Tax Rates/Taxation of Gains and Losses
The Taxpayer Relief Act of 1997 and the IRS Restructuring and Reform Act of
1998 contain significant changes to the taxation of capital gains of
individuals, trusts and estates. The maximum rate of tax on net capital gains of
individuals, trusts and estates from the sale or exchange of capital assets held
for more than one year has been reduced to 20%, and the maximum rate for net
capital gains attributable to the sale of depreciable real property held for
more than one year (other than certain depreciation recapture taxable as
ordinary income) is 25% to the extent of the deductions for depreciation with
respect to such property. The current maximum tax rate on ordinary income of
individuals is 39.6%. This disparity in tax rates could be beneficial to
individual Limited Partners with suspended losses attributable to the
Partnership. Since a Limited Partner will be considered to have disposed of his
or her entire interest in the Partnership, such Limited Partner will be entitled
to deduct all suspended passive losses from the Partnership against any ordinary
income earned by such Limited Partner in the year of liquidation of the
Partnership or use such suspended losses to offset any gain allocable to such
Limited Partner on the Sales. Capital gains of individuals and corporate
taxpayers can be offset by capital losses. However, capital losses can be
deducted, in any year, only to the extent of a Limited Partner's capital gains
plus, in the case of an individual, taxable income of up to $3,000.
CONSENT PROCEDURES; TRANSACTIONS AUTHORIZED BY CONSENTS
The consents to the Proposals being solicited hereby (the "Consents") will
authorize the General Partners: (i) to complete the Sales at any time on or
prior to September 30, 1999, and to proceed with the Plan of Liquidation; and
(ii) to take all actions necessary or appropriate, as determined by the General
Partners, to complete the Sales and to proceed with the Plan of Liquidation;
provided that following approval of the Proposals by the Limited Partners, no
change or modification will be made to the Purchase and Sale Agreement.
Consents are being solicited from the Limited Partners as required by the
Partnership Agreement which provides that such transactions must be approved by
Limited Partners owning a majority of the issued and outstanding Units.
The Consents being sought are for approval of the Proposals and the Sales
and the Plan of Liquidation and not for the approval of any individual Sale. If
sufficient Consents approving the Proposals and the Sales and the Plan of
Liquidation are received, the Partnership intends to consummate the Sales and
proceed with the Plan of Liquidation. If sufficient Consents are not received,
the Partnership intends to explore such alternatives as may be available to it.
Set forth below are the procedures to be followed by Limited Partners in
order to consent to, abstain from, or deny consent to, the Proposals and the
Sales and the Plan of Liquidation. A form of Consent was mailed to Limited
Partners along with this Consent Solicitation Statement. These procedures must
be strictly followed in order for the instructions of a Limited Partners as
marked on such Consent to be effective:
1. A Limited Partner may make his or her election on the Consent only
during the solicitation period commencing upon the date of delivery of
this Consent Solicitation Statement and continuing until the earlier
of (i) May __, 1999 or such later date as may be determined by the
General Partners, and (ii) the date upon which the General Partners
determine that holders of not less than a majority of all issued and
outstanding Units have consented to the Proposals and the Sales (the
"Solicitation Period").
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2. Each Limited Partner must consent to, deny consent to, or abstain from
consenting to the Proposals with respect to all Units held by such
Limited Partner. The effect of abstaining or failing to sign and
return the consent form will be the same as denying consent.
3. All questions as to the validity, form, eligibility (including time of
receipt), acceptance and withdrawal of the Consent will be determined
by the General Partners, whose determination will be final and
binding. The General Partners reserve the absolute right to reject any
or all Consents that are not in proper form or the acceptance of
which, in the opinion of the General Partners, would be unlawful. The
General Partners also reserve the right to waive any irregularities or
conditions of the Consent as to particular Units. Unless waived, any
irregularities in connection with the Consents must be cured within
such time as the General Partners shall determine.
4. A Consent delivered by a Limited Partner may be changed or revoked
prior to the expiration of the Solicitation Period by delivering to
the Partnership a notice of revocation, or a substitute Consent,
properly completed and executed, together with a letter indicating
that the Limited Partner's prior consent has been revoked.
5. Limited Partners are encouraged to return a properly completed and
executed Consent in the enclosed envelope prior to the expiration of
the Solicitation Period.
6. A Limited Partner submitting a signed but unmarked Consent will be
deemed to have consented to the Proposals and the Sales and the Plan
of Liquidation.
Each Limited Partner is requested to complete, date and sign the
accompanying form of consent and return same to Arlen Capital, LLC, 1650 Hotel
Circle North, Suite 200, San Diego, CA 92108, which has been appointed to serve
as the solicitation agent for the proposed transaction (the "Solicitation
Agent"). If the consent solicitation period is extended, the General Partners
will give written notice of such extension to all Limited Partners. For more
information concerning this solicitation, Limited Partners may call the
Solicitation Agent at 800-553-4039. The costs of this consent solicitation,
including fees payable to the Solicitation Agent, will be borne by the
Partnership.
Solicitation of Consents
In addition to soliciting consents by mail, consents may be solicited by
directors, officers and employees of the General Partners and their affiliates,
who will not receive additional compensation therefor, by personal interview,
telephone, telegram, courier service, or similar means of communication. Arlen
Capital, LLC has been engaged as Solicitation Agent to solicit consents to the
Sales from Limited Partners, administer the delivery of information to Limited
Partners and receive and tally votes.
Under the solicitation agreement between the Partnership Arlen Capital, LLC
(the "Solicitation Agreement"), the Partnership has agreed to pay Arlen Capital
a base fee of $7,335 plus an additional per Unit fee for re-mails and incoming
and outgoing phone calls, plus expenses. The General Partners expect that the
total amount payable under the Solicitation Agreement will not exceed $15,000.
Record Date; Required Vote
The close of business on March __, 1999 has been fixed as the Record Date
for determining Limited Partners entitled to Consent to the Proposals and the
Sales and the Plan of Liquidation. As of the Record Date, there were 195,366
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Units outstanding held of record by a total of 2,424 Limited Partners. The Sales
and the Plan of Liquidation require Consents of unaffiliated Limited Partners
holding at least a majority of the outstanding Units.
As of the Record Date, the General Partners and/or their affiliates held
and are entitled to exercise voting rights with respect to an aggregate of 1,000
Units, representing approximately 0.5% of the outstanding Units of the
Partnership. The General Partners and their affiliates have agreed to abstain
from consenting to the Proposals and the Sales and the Plan of Liquidation with
respect to all Units for which they hold voting rights. Approval of Proposals by
unaffiliated Limited Partners holding 97,683 Units, representing a majority of
all outstanding Units, is required to proceed with the Sales and the Plan of
Liquidation. Neither N' Tandem nor any affiliate of N' Tandem (other than the
Managing General Partner) owns, or has voting rights, with respect to any Units.
No Appraisal or Dissenters' Rights
If Limited Partners owning the requisite number of Units in the Partnership
consent to the Proposals, the Sales and the Plan of Liquidation, all Limited
Partners of the Partnership will be bound by such Consent, including Limited
Partners who have not returned their Consents or who have abstained from or
denied consent. None of the Partnership Agreement, California law or the
proposed terms and conditions of the Sales or the Plan of Liquidation and
provide objecting Limited Partners with the right to exercise any dissenters',
appraisal or similar rights. Under California law, the general partner of a
California limited partnership owes fiduciary duties to its limited partners. To
the extent that a general partner has engaged in a transaction in breach of its
fiduciary duties to limited partners, a damages remedy may be available to such
limited partners.
Consequences If Consents Are Not Obtained
If sufficient Consents to proceed with the Sales and the Plan of
Liquidation are not obtained, the General Partners intend to proceed to explore
such alternatives as may be available to the Partnership.
FINANCIAL STATEMENTS
The financial information contained in the Partnership's Form 10-KSB for
the year ended December 31, 1998 identified in "Incorporation of Certain
Documents By Reference" below is incorporated herein by reference.
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INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents (or portions thereof) filed with the Commission by the
Partnership (File No. 0-15700) pursuant to the Exchange Act are incorporated
herein by reference:
(i) Item 6, "Management's Discussion and Analysis," contained in the
Partnership's Annual Report on Form 10-KSB for the year ended December
31, 1998; and
(ii) Item 7, "Financial Statements" contained in the Partnership's Annual
Report on Form 10-KSB for the year ended December 31, 1998.
Any statement contained in a document incorporated by reference herein
shall be deemed to be modified or superseded for the purposes of this Consent
Solicitation Statement to the extent that a statement contained herein or in any
other subsequently filed document that is incorporated by reference herein
modifies or supersedes such earlier statement. Any such statements modified or
superseded shall not be deemed, except as so modified or superseded, to
constitute a part of this Consent Solicitation Statement.
Copies of any or all of the documents specifically incorporated herein by
reference (not including the exhibits to such documents, unless such exhibits
are specifically incorporated by reference in such documents) will be furnished
without charge to each person, including any beneficial owner, to whom a copy of
this Consent Solicitation Statement is delivered upon written or oral request.
Requests should be made to: Windsor Park Properties 4 -- Investor Relations,
6430, S. Quebec St., Englewood, Colorado 80111.
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APPENDIX A
Information Concerning Officers And
Directors Of The Managing General Partner,
N' Tandem And Chateau
A. The Windsor Corporation
The Windsor Corporation is the Managing General Partner of the Partnership.
The Directors and executive officers of The Windsor Corporation are as follows:
Gary P. McDaniel, 53, became a Director of The Windsor Corporation in
September 1997. Mr. McDaniel's biographical information is set forth below under
"C. Chateau Communities, Inc."
C. G. Kellogg, 55, became a Director of The Windsor Corporation in
September 1997. Mr. Kellogg's biographical information is set forth below under
"C. Chateau Communities, Inc."
Steven G. Waite, 44, has been President of The Windsor Corporation since
September 1997. From 1990 through accepting his position at The Windsor
Corporation, Mr. Waite was Vice President/General Manager of Communities at
Clayton Homes, Inc., a company which owns and operates manufactured home
factories, sales centers, financing and insurance units and communities (NYSE:
CMH). Mr. Waite holds a B.S. from the University of Colorado and an M.B.A. from
the University of Alabama.
Each of Messrs. McDaniel, Kellogg and Waite is a United States citizen.
B. N' Tandem Trust
As an unincorporated business trust, N' Tandem Trust is managed by its
Trustees. The Trustees of N' Tandem Trust are as follows:
Gary P. McDaniel, 53, became a Trustee of the Trust in September of 1997.
Mr. McDaniel's biographical information is set forth below under "C. Chateau
Communities, Inc."
Richard B. Ray, 58, became a Trustee of the Trust in September of 1997.
Since 1995 he has been Co-Chairman of the Board and Chief Financial Officer of
21st Century Mortgage Corporation, (a lender to the manufactured home industry)
and a director of the following companies: BankFirst, Radio Systems Corporation
and Knox Housing Partnership (a not for profit developer of low income housing
in Knox County, Tennessee). Previously, he was Executive Vice President, Chief
Financial Officer, and Director of Clayton Homes Inc. (a vertically integrated
manufactured housing company) from 1982-1994 and a Director of Palm Harbor
Homes, Inc. (a national producer of manufactured homes) from 1994-1995.
Kenneth G. Pinder, 62, became a Trustee of the Trust in September of 1997.
Mr. Pinder entered the manufactured housing business in 1970 managing a
manufactured housing site rental community and formed American Living Homes
Inc., a manufactured housing dealership, in 1974. He continues to be the owner
and president of this corporation. He is also sole owner of Able Mobile Housing
Inc., a temporary housing company for fire loss victims and has developed
manufactured home sites and purchased and sold numerous communities over the
past twenty years. Mr. Pinder has been a member of the Michigan Manufactured
Housing Association for over 35 years. In 1992 he was elected to the Michigan
Manufactured Housing Board of Directors, and serves on its Executive Committee.
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Each of Messrs. McDaniel, Ray and Pinder is a United States citizen.
C. Directors and Executive Officers of Chateau Communities, Inc.
Chateau owns all of the capital stock of The Windsor Corporation, the
Managing General Partner of the Partnership, and the advisor to N' Tandem Trust.
Chateau also owns a 9.8% equity ownership interest in N' Tandem. The Directors
and executive officers of Chateau are as follows:
Gary P. McDaniel, 53, has been Chief Executive Officer and a director of
the Company since February 1997. He served as the Chairman of the Board,
President and Chief Executive Officer of ROC Communities, Inc. ("ROC"), a
publicly held real estate investment trust specializing in owning and operating
manufactured home communities since 1993 and had been a principal of ROC's
predecessors since 1979. He has been active in the manufactured home industry
since 1972. He is a Trustee of N' Tandem Trust and a Director of The Windsor
Corporation. Mr. McDaniel has been active in several state and national
manufactured home associations, including associations in Florida and Colorado.
In 1996, he was named "Industry Person of the Year" by the National Manufactured
Housing Industry Association. Mr. McDaniel is on the Board of Directors of the
Manufactured Housing Institute. He is a graduate of the University of Wyoming
and served as a Captain in the United States Air Force.
Gebran S. Anton, Jr., 65, first became a director of the Company in 1993.
He is the owner of Gebran Anton Development Co. and Anton, Zorn & Associates,
Inc., a commercial and industrial real estate broker and former owner of
Anton's, a men's retail chain. He is an incorporator and Director of Community
Central Bank, and a former Chairman of the Board for First National Bank, St.
Joseph Hospital, and Downtown Development Committee.
James M. Lane, 68, first became a director of the Company in 1993. He
retired as the Senior Vice President and Chief Investment Officer of the
Investment Management Division, NBD Bank, Detroit, where he served for
approximately thirteen years. Mr. Lane was associated with the Chase Manhattan
Corporation from 1953 to 1978, attaining the position of Executive Vice
President while also serving as President and Chief Executive Officer of Chase
Investors Management Corporation. He has a B.A. degree in economics from Wheaton
College and an MBA in finance from the University of Chicago.
Rhonda G. Hogan, 45, has served as director of the Company since March
1997. Ms. Hogan is presently a partner of Tishman Speyer Properties. She
recently served on the Board of Directors and as President of The Water Club
Condominium Association, Inc. and is on the Silver Council of the Urban Land
Institute. In addition, she served on the Board of Directors of Barnett Bank of
South Florida, N.A. from 1986 to 1996. Ms. Hogan has also served or currently
serves on several other Boards of Directors and as a member of several councils
or institutes, including appointments to State Boards by the Governor and
Cabinet of the State of Florida. Ms. Hogan received her B.B.A. from the
University of Iowa.
C.G. Kellogg, 54, has been President and a director of the Company since
its inception, and was Chief Executive Officer of the Company from its inception
to February 1997. For the five years preceding the formation of the Company, Mr.
Kellogg was President and Chief Operating Officer of Chateau Estates. Mr.
Kellogg is a Director of The Windsor Corporation. He is extremely active in
local and national industry associations, often in leadership positions. Mr.
Kellogg is a past President of the Michigan Manufactured Housing Association and
served on the Manufactured Housing Institute's Community Operations Committee.
He is a graduate of Michigan Technological University with a B.S. in Civil
Engineering. Mr. Kellogg is the husband of Tamara D. Fischer, who is the
Company's Executive Vice President and Chief Financial Officer.
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Edward R. Allen, 57, has served as a director of the Company since 1993. He
was, for the five years preceding the formation of the Company, Chairman and
Chief Executive Officer of InterCoastal Communities, Inc., a Florida corporation
which was engaged in operating seven manufactured home communities in Florida.
Prior to joining InterCoastal, Mr. Allen developed a chain of steak houses which
he and his partner sold in 1977 to Green Giant Corporation. He remained as
President for two years, and expanded the chain nearly doubling the number of
restaurants. Mr. Allen is a graduate of Cornell University.
James M. Hankins, 63, served as a director of ROC from August 1993 until
ROC's merger with the Company on February 11, 1997 (the "Merger"). Since the
Merger, he has served as a director of the Company. He is managing general
partner of a partnership which owns and operates destination RV resorts in
Arizona. Prior to organizing the partnership in 1985, Mr. Hankins was a founder
of Mobile Home Communities, Inc. in 1969, and served as President and Chief
Executive Officer from 1973 to 1984. He holds a B.S. from the University of
South Carolina and an MBA from Harvard University, and has served as a Captain
in the United States Air Force.
Donald E. Miller, 67, served as a director of ROC from August 1993 to
February 1997, and has served as a director of the Company since February 1997.
In May 1994, Mr. Miller was appointed Vice Chairman of the Board of Directors of
The Gates Corporation. Form 1987 to May 1994, he was President, Chief Operating
Officer and director of The Gates Corporation and The Gates Rubber Company,
which engage in the production and manufacture of rubber products, primarily for
automotive needs. Mr. Miller is a graduate of the Colorado School of Mines.
John A. Boll, 68, has been Chairman of the Board of Directors of the
Company since its inception in 1993. Prior to the formation of the Company, Mr.
Boll was the co-founder, partner and Chief Executive Officer of Chateau Estates,
which was formed in 1966. He was inducted in the MH/RV Hall of Fame in 1992 for
his outstanding contributions to the manufactured housing industry. Mr. Boll was
appointed by the Governor of the State of Michigan to become the first Chairman
of the Michigan Mobile Home Commission, which is the principal Michigan
authority regulating manufactured housing, a position he held for six years.
James L. Clayton, 64, served as a director of ROC from August 1993 until
February 1997 and as a director of the Company since February 1997. He is the
founder, and since 1966 has been the Chairman of the Board and Chief Executive
Officer of, Clayton Homes, Inc. ("Clayton Homes"), a company which owns and
operates manufactured home factories, sales centers, financing and insurance
units and communities (NYSE: CMH). Mr. Clayton is a director of Dollar General
Stores and Chairman of the Board of BankFirst. In 1992, Mr. Clayton was inducted
into the MH/RV Hall of Fame. Mr. Clayton received an undergraduate degree in
electrical engineering and a law degree from the University of Tennessee.
Steven G. Davis, 48, has served as a director of the Company since February
1997. He is currently the owner of East Silent Advisors, a real estate
consulting firm. He served as Chief Financial Officer, Executive Vice President
and a director of ROC from 1993 to 1997. From 1990 to 1993, Mr. Davis served as
an officer and director of The Windsor Group, an owner/operator of 42
manufactured home communities, and, from 1991 through March 1993, as that
company's President. Mr. Davis served as a director of ASR Investments, a REIT
owning apartments in the Southwest, and is currently on the advisory boards of
Arlen Capital Advisors and Leroc Partners, Inc. Mr. Davis is a Certified Public
Accountant and is a graduate of the University of San Diego.
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EXECUTIVE OFFICERS OF CHATEAU COMMUNITIES, INC.
The following information is presented with respect to the current
executive officers of Chateau Communities, Inc.:
Gary P. McDaniel is the Chief Executive Officer and a director of the
Company. Biographical information of Mr. McDaniel is set forth above.
C.G. ("Jeff") Kellogg is President and a director of the Company.
Biographical information on Mr. Kellogg is set forth above.
James B. Grange, 41, is Chief Operating Officer of the Company, having
served in such capacity since February 1997. He served as Executive Vice
President and Chief Operating Officer of ROC from 1993 to February 1997. Mr.
Grange served as Executive Vice President, Chief Operating Officer and a
director for ROC's predecessors from 1986 to 1993. He is currently active in The
Manufactured Housing Institute. Mr. Grange is a graduate of the University of
Montana.
Tamara D. Fischer, 42, is Executive Vice President, Chief Financial Officer
of the Company, having served in these roles since the Company's formation.
Prior to joining the Company, Ms. Fischer was employed by Coopers & Lybrand for
11 years. Ms. Fischer is a CPA and a graduate of Case Western Reserve
University. Ms. Fischer is the wife of Mr. Kellogg who is the President and a
Director of the Company.
Rees F. Davis, Jr., 39, is Executive Vice President-Acquisitions of the
Company, having served in such capacity since February 1997. He served as
Executive Vice President of Acquisitions and Sales for ROC from 1993 to February
1997. Prior to that, Mr. Davis previously served as Vice President of
Acquisitions and Sales and a director for ROC's predecessors since 1986. Mr.
Davis is a two-term past officer of the Colorado Manufactured Housing
Association. He is also an active member of The Manufactured Housing Institute.
Mr. Davis is a graduate of Colorado State University.
Each of the officers and directors of Chateau is a United States Citizen.
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APPENDIX B
Agreement of Limited Partnership of the Partnership
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APPENDIX B
AGREEMENT OF LIMITED PARTNERSHIP
OF
WINDSOR PARK PROPERTIES 4,
A California Limited Partnership
<PAGE>
TABLE OF CONTENTS
(continued)
Page
iii
I. FORMATION OF LIMITED PARTNERSHIP..............................1
1.01 Formation and Agreement of Limited Partnership..............1
1.02 Name and Principal Place of Business........................1
1.03 Term of Partnership.........................................1
1.04 Definitions.................................................2
1.05 Purpose of Partnership and Investment Objectives............3
1.06 General and Limited Partners................................4
(a) General Partners...................................4
(b) General Partners Capital Contribution..............4
(c) General Partners Purchase of Units.................4
(d) Authorized Units and Original and Additional
Limited Partners...................................4
(e) Admission of Limited Partners......................4
II. MANAGEMENT OF THE PARTNERSHIP.................................5
2.01 Powers and Duties of the General Partners...................5
2.02 Indemnification.............................................6
2.03-1 POWERS AND DUTIES OF THE LIMITED PARTNERS.....................7
2.03-2 ACTS NOT DEEMED "PARTICIPATION IN CONTROL\....................7
2.03-3 THE RIGHTS AND DUTIES OF THE PARTNERS IN RELATIONSHIP
TO THE PARTNERSHIP SHALL BE DETERMINED BY THE
FOLLOWING RULES...............................................8
2.04 Compensation of General Partners and Affiliates.............9
2.05 Investment in Properties...................................10
2.06 Certain Mortgaging.........................................10
2.07 Reinvestment...............................................10
III. FINANCING OF THE PARTNERSHIP.................................10
3.01 Capital Contributions of the General Partners..............11
3.02 Capital Contributions of the Limited Partners..............11
3.03 Additional Contributions...................................11
3.04 Interest...................................................11
3.05 Time for Return of Contributions...........................11
3.06 Loans by the Partners......................................11
3.07 Allocation of Net Profits and Net Losses and
Distributions From Cash Available For Distribution.........11
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3.08 Conditions and Consent to Allocations and
Distributions..............................................13
3.09 Partnership Expenses.......................................14
IV. BOOKS OF ACCOUNT, FINANCIAL STATEMENTS AND FISCAL
MATTERS......................................................15
4.01 Books of Account...........................................15
4.02 Reports and Financial Statements...........................15
4.03 Tax Returns and Records....................................17
4.04 Fiscal Year................................................17
4.05 Bank Accounts, Funds and Assets............................17
4.06 Adjustment of Tax Basis....................................17
4.07 Insurance..................................................17
4.08 Appraisals.................................................18
4.09 Tax Matters Partner........................................18
V. ASSIGNABILITY OF LIMITED PARTNERS' INTERESTS.................18
5.01 Limited Partners' Interest.................................18
5.02 Further Restriction on Transfers...........................19
5.03 Substituted Partners.......................................19
5.04 Additional Restrictions....................................19
5.05 Withdrawal of Limited Partner..............................19
5.06 Death of Limited Partner...................................19
5.07 Recognition of Substituted and Assignee Limited
Partners...................................................19
VI. REPURCHASE OF UNITS..........................................20
VII. RIGHT OF LIMITED PARTNERS TO RECEIVE PROPERTY
OTHER THAN CASH..............................................20
VIII. TERMINATION OF A GENERAL PARTNER.............................20
8.01 Ceasing to be a General Partner............................20
8.02 Continuation of Business of Remaining General
Partner....................................................21
8.03 Removal of a General Partner...............................21
8.04 Dissolution of Partnership and Continuance of
Partnership Business.......................................21
8.05 Payment to Terminated General Partner......................21
8.06 Termination of Executory Contracts.........................22
IX. DISTRIBUTION ON TERMINATION..................................22
9.01 Events of Dissolution......................................22
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9.02 Gain and Loss on Dissolution and Order of Distribution.....22
9.03 Eminent Domain.............................................23
9.04 Period of Liquidation......................................23
X. CERTIFICATES AND OTHER DOCUMENTS.............................23
10.01 General Partners Attorneys for Limited Partners............23
10.02 Making, Filing, Etc. of Certificates, Etc..................24
XI. NOTICES......................................................24
XII. CONVEYANCES, CONTRACTS AND DOCUMENTS.........................24
XIII. DISPUTES AND ARBITRATION.....................................25
XIV. MEETINGS OF, OR ACTIONS BY, THE LIMITED PARTNERS.............25
XV. CAPTIONS-PRONOUNS............................................27
XVI. BINDING EFFECT AND EXHIBITS..................................28
XVII. AMENDMENT OF THE AGREEMENT...................................28
XVIII. ENTIRE AGREEMENT.............................................28
XIX. TAX CONTROVERSIES............................................29
XX. COUNTERPARTS AND EXECUTION...........................................29
XXI. INVESTMENT IN OTHER PROGRAMS OF SPONSOR..............................29
XXII. PROCEEDS FROM FINANCING PROPERTIES..................................30
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AGREEMENT OF LIMITED PARTNERSHIP
OF
WINDSOR PARK PROPERTIES 4,
A California Limited Partnership
This Agreement of Limited Partnership is made June 6, 1986, as amended to
the date stated on the signature page, by and among The Windsor Corporation, a
California corporation (Corporate General Partner) and John A. Coseo, Jr.
(Individual General Partner), as General Partners and Patricia Ann Coseo as the
original Limited Partner.
The original Limited Partner and each other person, partnership,
corporation, trust or other entity who or which shall thereafter be admitted to
the Partnership as a limited partner as hereinafter provided, are referred to
collectively as the "Limited Partners" and individually as a "Limited Partner."
I.
FORMATION OF LIMITED PARTNERSHIP
1.01 Formation and Agreement of Limited Partnership. The parties hereby form a
limited partnership (the "Partnership") pursuant to the provisions of the
California Revised Limited Partnership Act as set forth in Title 2, Chapter 3,
of the California Corporation Code, upon the terms and conditions set forth
herein. On the execution of this Agreement (the "Agreement"), the parties will
execute, acknowledge and file a Certificate of Limited Partnership pursuant to
the provisions of Section 15,621 of the California Corporations Code.
1.02 Name and Principal Place of Business. The name of the Partnership is
Windsor Park Properties 4, A California Limited Partnership, and the office and
principal place of business shall be 120 West Grand Avenue, Escondido,
California 92025, and hereafter such other place or places as the General
Partners may from time to time determine.
1.03 Term of Partnership. The Partnership shall commence as of the date of this
Agreement (the "effective date") and shall continue for a period ending the
earlier of:
(a) Six months after the commencement of its public offering registered with the
Securities and Exchange Commission, provided that on said date the Partnership
has not received a minimum of $1,250,000 of capital contributions from Limited
Partners;
(b) December 31, 1997;
(c) The date on which all of the assets acquired by the Partnership are sold or
otherwise disposed of;
(d) The date on which the Partnership is voluntarily dissolved by the agreement
of the Partners;
(e) The date on which the Partnership is dissolved by operation of law or
judicial decree; or
(f) The date on which the last remaining original General Partner retires, dies,
becomes legally incapacitated, dissolves, withdraws, is adjudicated bankrupt or
is removed, unless a majority in interest of the Limited Partners by written
consent or vote elect one or more new General Partners to continue the
Partnership business.
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1.04 Definitions. The following terms used in this Agreement shall (unless
otherwise expressly provided herein or unless the context otherwise requires)
have the following respective meanings:
(a-1) "Acquisition Fees" shall mean the total of all fees and commissions paid
by any party, including any sponsor, in connection with the purchase or
development of any property by the Partnership, whether designated as a real
estate commission, acquisition fee, development fee, nonrecurring management fee
or any fee of a similar nature (except a development fee paid to a person
non-affiliated with the sponsors in connection with the actual development of a
project after acquisition of the land by the partnership), and including the fee
described in (a-2) next. "Development Fee" means a fee for the packaging of a
Partnership property, including negotiating and approving plans and undertaking
to assist in obtaining zoning and necessary variances and necessary financing
for the specific property, either initially or at a later date.
(a-2) "Affiliate Acquisition Fees" mean the acquisition fee paid to the General
Partners for their services in the acquisition of partnership properties. This
fee shall not exceed 6% of the public offering proceeds.
(b) "Affiliate" shall include (i) any person directly or indirectly controlling,
controlled by or under common control with another person, (ii) a person owning
or controlling 10% or more of the outstanding voting securities of such other
persons, (iii) any officer, director, partner, general trustee or anyone acting
in a substantially similar capacity as to such person, and (iv) any person who
is an officer, director, general partner, trustee, or holder of 10% or more of
the voting securities or beneficial interests of any of the foregoing.
(c) "Appraised Value" means value according to an appraisal made by an
independent appraiser who is a member in good standing of a professional
appraisal association.
(d) "Cash Available For Distribution" means the cash funds provided from
Partnership operations, including lease payments on net leases from builders and
sellers, without deduction for depreciation, but after deducting cash funds used
to pay all other expenses, debt payments, capital improvements, amounts set
aside for restoration or creation of reserves, and replacements.
(e) "Capital Contributions" means the total investment and contribution to the
capital of the Partnership in cash by Limited or General Partners without
deduction of selling, organization or other expenses.
(f) "Distributions" shall mean any cash or other property distributed to the
Limited and General Partners arising from their interests in the Partnership,
but shall not include any payments to the General Partners under the provisions
of Section 2.04.
(g) "Expenses of Acquisition" includes, but is not limited to, legal fees and
expenses, travel and communication expense, costs of appraisals, non-refundable
option payments on property not acquired, accounting fees and expenses, title
insurance, and miscellaneous expenses related to selection and acquisition of
properties, whether or not acquired.
(h) "Invested Capital" means General or Limited Partner's original capital
contribution.
(i) "Net Profits and Net Losses" means the profits or losses of the Partnership
in accordance with accounting method followed for federal income tax purposes.
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(j) "Person" means any natural person, partnership, corporation, association or
other legal entity.
(k) "Purchase Price" means the price paid upon the purchase or sale of a
particular property, including the amount of acquisition fees and all liens and
mortgages on the property, but excluding points and prepaid interest.
(l) "Sponsor" shall mean any person directly or indirectly instrumental in
organizing, wholly or in part, the Partnership, or any person who will manage or
participate in the management of the Partnership, including the General Partners
and any affiliate of such person, excluding any person whose only relation with
the Partnership is that of independent property manager and whose only
compensation is as such. Sponsor shall not include wholly independent third
parties such as attorneys, accountants, and underwriters whose only compensation
is for professional services rendered in connection with the offering of
Partnership interest.
(m) "Units" shall mean the partnership interests of the Limited and General
Partners, and each unit shall represent a capital contribution of $100 to the
Partnership and entitle the holder thereof to the rights and interests of
Limited or General Partners as herein provided.
(n) "Adjusted Invested Capital" means the original capital contribution paid for
each Unit reduced by the total cash distributed from net proceeds from
refinancing and net proceeds from the sale of Properties with respect to each
Unit.
(o) "Organization and Offering Expenses" means those expenses incurred in
connection with and in preparing the Partnership for registration and
subsequently offering and distributing the offering to the public, including
sales commissions paid to broker-dealers in connection with the distribution of
the Partnership's units and all advertising expenses.
1.05 Purpose of Partnership and Investment Objectives. The principal purpose of
the Partnership is to acquire, own, operate, improve, lease and otherwise manage
for investment purposes, either alone or in association with others, a portfolio
of improved, income-producing mobile home properties as shall from time to time
be acquired by the Partnership and which offers the potential for (i) preserving
and protecting the Limited Partners' original invested capital; (ii) generating
an annual cash flow for distribution to the partners; and (iii) to engage in any
and all general business activities related to and incidental to those purposes;
provided however that the Partnership shall not own or lease property jointly in
partnership with others unless (a) such partner or joint owner is an independent
third person who is not a sponsor, (b) the management of such partnership or
joint ownership under control of the Partnership which has a majority interest
therein, (c) the Partnership, as a result of such joint ownership or partnership
ownership of an investment property, is not charged, directly or indirectly,
more than once for the same services, (d) the joint ownership or partnership
does not authorize or require the Partnership to do anything as a partner or
joint venturer with respect to the property which the Partnership or the General
Partners could not do directly because of this Agreement, and (e) the General
Partners and their affiliates are prohibited from receiving any compensation,
fee or expenses which are not permitted to be paid by this Agreement.
Until invested in properties (except for reserves), the Partnership may
temporarily invest all or a part of its capital contributions in short-term,
highly liquid investments with appropriate safety of principal, such as U.S.
Treasury Bonds or Bills, insured savings accounts, or similar investments.
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All properties are to be acquired free and clear of any encumbrances.
Properties may later be financed, see Article XXII. Unimproved or non income
producing property will not be acquired. Investment in junior trust deeds or
similar obligations shall be prohibited.
In the event the General Partners or an Affiliate of the General
Partners are presented with a potential investment which might be made by more
than one investment entity which it advises or manages, the decision as to the
suitability of the property for investment by a particular entity will be based
upon a review of the investment portfolio of each entity and upon factors such
as cash flow, the effect of the acquisition on diversification of each entity's
portfolio, the estimated income tax effects of the purchase on each entity, the
policies of each entity relating to leverage, the funds of each entity available
for investment and the length of time such funds have been available for
investment. To the extent that a particular property might be determined to be
suitable for more than one public entity, priority will generally be given to
the public entity having uninvested funds for the longest period of time. If a
property is found to be inappropriate for any public entity then, and only then,
may it be considered for private placement. Nothing herein shall be deemed to
diminish the General Partners' overriding fiduciary obligation to the
Partnership or as a waiver of any right or remedy the Partnership or Limited
Partners may have in the event of a breach by a General Partner of such
obligation.
1.06 General and Limited Partners.
(a) General Partners. The address of the General Partners is as follows: 120
West Grand Avenue, Escondido, California 92025. The General Partners' interest
in net profits, net losses and distributions shall be allocated between them (so
long as they act as General Partners) as they determine.
(b) General Partners Capital Contribution. The General Partners may, but (except
as provided in Section 3.07.7) are not required to, contribute to the capital of
the Partnership.
(c) General Partners Purchase of Units. The General Partners will purchase
$50,000 of limited partnership units at the time the public offering terminates
and an additional $50,000 of limited partnership units within six months
thereafter.
(d) Authorized Units and Original and Additional Limited Partners. Patricia Ann
Coseo, the original Limited Partner, has contributed the sum of $1,000 cash to
the capital of the Partnership and has received 10 units for such contribution.
The Partnership intends to make a public offering of 200,000 units of limited
partnership interests ("Units") and to admit as additional Limited Partners the
persons whose subscriptions for such Units are accepted by the General Partners.
The names and places of residence of such Limited Partners will be set forth in
the Subscription Agreements and Signature Pages attached hereto. The General
Partners may admit an unlimited number of additional Limited Partners who
subscribe from time to time for Units upon such terms and conditions and in such
amount as the General Partners in their sole discretion shall deem reasonable.
No action or consent by Limited Partners shall be required in connection with
such admission of additional Limited Partners pursuant to this Section 1.06.
This Agreement shall be executed by the General Partners, and an amendment of
any Certificate of Limited Partnership, reflecting such admissions, shall be
executed by the General Partners and filed, if and when and in such
jurisdictions as may be required or appropriate. The offering period of program
interests shall cease not later than one year from the date of the partnership's
registration statement as filed with the Securities and Exchange Commission.
(e) Admission of Limited Partners. The Subscribers for Units of the Partnership
shall be admitted to the Partnership as Limited Partners within fifteen (15)
days after such subscribers' capital contributions are released by the
depository thereof to the Partnership. Thereafter, subscriptions for Units shall
be accepted or rejected by the General Partners within thirty (30) days after
their receipt by the
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General Partners, and subscribers whose subscriptions are acceptable shall be
admitted to the Partnership as additional Limited Partners on or before the last
day of the calendar month during which such subscriptions were accepted. All
moneys deposited by subscribers whose subscriptions are rejected by the General
Partners will be returned to such subscriber without any interest thereon
forthwith after such rejection.
II.
MANAGEMENT OF THE PARTNERSHIP
2.01 Powers and Duties of the General Partners. The General Partners shall have
full and complete charge of all affairs of the Partnership, and the management
and control of the Partnership's business shall rest exclusively with the
General Partners, subject to the terms and conditions of this Agreement. The
General Partners shall have a fiduciary responsibility for the safekeeping and
use of all funds of the Partnership, whether or not in the General Partners'
immediate possession or control. The General Partners shall not employ or permit
another to employ such funds or assets in any manner except for the exclusive
benefit of the Partnership. The General Partners shall have the rights, powers
and authority granted to the General Partners hereunder or by law, or both, to
obligate and bind the Partnership and, on behalf and in the name of the
Partnership, to take such action as the General Partners deem necessary or
advisable including, without limitation, making, executing and delivering
purchase and sale, management and other agreements; leases, assignments, deeds
and other transfers and conveyances; agreements to purchase, sell, lease or
otherwise deal with personal property; escrow instructions; checks, drafts and
other negotiable instruments; and all other documents and agreements which the
General Partners deem reasonable or necessary in connection with the purchase of
the Partnership's properties and the operation and management thereof. The
execution and delivery of any such instrument by the General Partners shall be
sufficient to bind the Partnership.
The General Partners or their affiliates may acquire Units from time to
time on their own behalf and for their own benefit.
The General Partners or their affiliates may from time to time employ
on behalf of the Partnership such persons, firms or corporations as they in
their sole judgment shall deem advisable in the operation of the business of the
Partnership, including accountants and attorneys, on such terms and for such
compensation as they, in their sole judgment, shall determine, provided,
however, that the Partnership shall not: (1) make any loans to any sponsor; (2)
grant an exclusive right to sell or exclusive employment to sell property for
the Partnership to a sponsor; (3) offer Limited Partnership interests in
exchange for property; (4) employ a sponsor to construct or develop Partnership
property; (5) after two years after the public offering terminates, invest any
surplus funds; (6) purchase limited partnership interests in other partnerships;
and (7) incur any indebtedness or place any loans or encumbrances against
Partnership properties (except as provided in Article XXII).
The Partnership shall not purchase or lease property in which a sponsor
has an interest. The Partnership shall not acquire property from any person in
whom a sponsor has an interest. Notwithstanding the foregoing, a sponsor may
purchase property in its own name and temporarily hold title thereto for the
purpose of facilitating the acquisition of such property, or any other purpose
related to the business of the Partnership, provided that such property is
purchased by the Partnership for a price no greater than the cost of such
property to the sponsor and provided there is no difference in interest rates of
the loans secured by the property at the time acquired by the sponsor and the
time acquired by the program, and no other benefit is provided to the sponsor
arising out of such transaction apart from compensation otherwise permitted by
this Agreement. The Partnership shall not sell or lease property to a sponsor.
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Sponsors shall not receive a rebate, give-up or similar payment or
enter into any reciprocal business arrangement which would circumvent any
provisions contained in this Agreement.
No sponsor shall: (1) commingle the Partnership funds with those of any
other person or entity; (2) operate the Partnership in such a manner as to have
the Partnership classified as an "investment company" for purposes of the
Investment Company Act of 1940; (3) cause the Partnership to enter into any
agreements with the General Partner or their affiliates which shall not be
subject to termination without penalty by either party upon not more than sixty
(60) days' written notice.
Neither the Partnership nor any sponsor shall, directly or indirectly,
pay or award any finder's fees, commissions or other compensation to any person
engaged by a potential investor for investment advice as an inducement to such
advisor to advise the potential investor to purchase Limited Partnership
interests of the Partnership, provided, however, that the Partnership shall not
be prohibited from paying the normal sales commissions payable to registered
broker dealers or other properly licensed persons for selling Units.
The General Partners may place record title to, or the right to use,
Partnership assets in, the name or names of a nominee or nominees, trustee or
trustees for any purpose convenient or beneficial to the Partnership.
The Partnership shall provide from the offering proceeds adequate
reserves for normal repair, replacements and contingencies.
2.02 Indemnification.
(a) The General Partners shall have no liability to the Partnership or to any
Partner for any loss suffered by the Partnership which arises out of any action
or inaction of the General Partners if the General Partners, in good faith,
determined that such course of conduct was in the best interests of the
Partnership and such course of conduct did not constitute negligence or
misconduct of the General Partners.
(b) The General Partners shall be indemnified by the Partnership against any
losses, judgments, liabilities, expenses, and amounts paid in settlement of any
claims sustained by them in connection with the Partnership, provided that the
same were not the result of negligence or misconduct on the part of the General
Partners, and provided the General Partners, in good faith, determined that such
course of action was in the best interests of the Partnership.
(c) Notwithstanding the above, the General Partners or their affiliates shall
not be indemnified for liabilities arising under federal and state securities
laws unless (1) there has been a successful adjudication on the merits of each
count involving securities law violations, or (2) such claims have been
dismissed with prejudice on the merits by a court of competent jurisdiction, and
provided that a court either (A) approves any settlement and finds that
indemnification of the settlement and related costs should be made, or (B)
approves indemnification of litigation costs if a successful defense is made.
(d) The Partnership shall not pay for any insurance covering liability of a
General Partner or its affiliates, agents or employees for actions or omissions
to act for which indemnification is not permitted hereunder. The Partnership may
purchase and pay for such types of insurance, including extended coverage
liability and casualty and workmen's compensation, as would be customary for any
person owning comparable property and engaged in a similar business and may name
the General Partners and their affiliates as additional insured parties
thereunder, provided that such addition does not add to the cost of premiums
payable by the Partnership.
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(e) The Partnership shall not indemnify any affiliates of the General Partners,
or any underwriters or any other persons for liabilities arising under federal
and state securities laws.
(f) Any recovery by the General Partners hereunder is recoverable only out of
assets of the Partnership and not from the Limited Partners.
(g) The Partnership and the General Partners undertake that any and all parties
seeking indemnification will appraise the court of the position of the
Securities and Exchange Commission and state securities commissions/authorities
with respect to indemnification for securities laws violations before seeking
court approval for indemnification.
2.03-1 Powers and Duties of the Limited Partners. The Limited Partners
shall not participate in the control of the business affairs of the Partnership,
transact any business on behalf of the Partnership, or have any power or
authority to bind or obligate the Partnership.
2.03-2 Acts Not Deemed "Participation in Control". A Limited Partner
does not participate in the control of the business within the meaning of
Section 2.03-1 solely by doing one or more of the following:
(1) Being a contractor for or an agent or employee of the Partnership or of a
General Partner, or an officer, director, or shareholder of the Corporate
General Partner.
(2) Consulting with and advising a General Partner with respect to the business
of the Partnership.
(3) Acting as surety for the Partnership or guaranteeing one or more specific
debts of the Partnership.
(4) Approving or disapproving an amendment to the Partnership Agreement.
(5) Voting on or calling a meeting of the partners for one or more of the
following matters:
(A) The dissolution and winding up of the Partnership.
(B) The sale, exchange, lease, mortgage, pledge, or other transfer of all or a
substantial part of the assets of the Partnership other than in
the ordinary course of its business.
(C) The incurrence of indebtedness by the Partnership other than in the ordinary
course of its business.
(D) A change in the nature of the business.
(E) Transactions in which the General Partners have an actual or potential
conflict of interest with the Limited Partners or the Partnership.
(F) The removal of a General Partner, and the election of a General Partner.
(G) An election to continue the business of the Partnership other than
under the circumstances described in subparagraph (I) or (J) of this
paragraph (5).
(H) The admission of a General Partner other than under the circumstances
described in subparagraph (I) or (J) of this paragraph (5).
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(I) the admission of a General Partner or an election to continue the
business of the Partnership after a General Partner ceases to be a General
Partner other then by removal where there is no remaining or surviving General
Partner.
(J) The admission of a General Partner or an election to continue the
business of the limited partnership after the removal of a General Partner
where there is no remaining or surviving General Partner.
(6) Winding up the partnership pursuant to Section 15683 of the California
Corporations Code.
(7) Executing and filing a certificate pursuant to Section 15633 of the
California Corporations Code or a certificate of amendment pursuant to Section
15625 of the California Corporations Code or a certificate of dissolution
pursuant to paragraph (1) of subdivision (a) of Section 15623 of the California
Corporations Code or a certificate of cancellation of certificate of limited
partnership pursuant to paragraph (1) of subdivision (b) of Section 15623 of the
California Corporations Code.
(8) Serving on an audit committee or committee performing the functions of an
audit committee.
The enumeration in this Section 2.03-2 does not mean that any other
conduct or the possession or exercise of any other power by a Limited Partner
constitutes participation by the Limited Partner in the control of the business
of the Partnership.
2.03 2.03-3 The Rights and Duties of the Partners in Relationship to the
Partnership Shall Be Determined by the Following Rules:
(a) No Limited Partner shall be required to make any additional contribution to
the Partnership.
(b) No Limited Partner shall have a priority over any other Limited Partner, as
to return of contributions or as to compensation as a Limited Partner by way of
income.
(c) The obligation of a partner to make a contribution or return money or
property distributed in violation of this chapter may be compromised only by the
written consent of all the partners.
(d) No Limited Partner shall have the right to receive property other than money
upon any distribution.
(e) A partner may not be compelled to accept a distribution of any asset in kind
from the Partnership in lieu of a proportionate distribution of money being made
to other partners.
(f) The Limited Partners shall have the right to vote on all matters specified
in subparagraphs (A) to (G), inclusive, of paragraph (5) of Section 2.03-2 and
the actions specified therein may be taken by the General Partners only with the
affirmative vote of a majority in interest of the Limited Partners, and without
the necessity of the consent of the General Partners.
(g) The Limited Partners shall also have the right to vote on matters specified
in subparagraphs (H) and (I) of paragraph (5) of Section 2.03-2. Notwithstanding
any other provision of the Partnership Agreement to the contrary, the actions
specified in such subparagraphs may only be taken by the affirmative vote of a
majority in interest of the limited partners.
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2.04 Compensation of General Partners and Affiliates.
(a) The General Partners and/or their affiliates, or any sponsor shall be
entitled to receive, as an expense of the Partnership, each and all of the
following amounts:
(1) Property Management Fee. For providing property management services
(including all rent-up, leasing and re-leasing fees and bonuses, and leasing
services paid to any person; and including bookkeeping services for property
management and fees paid to unrelated persons for property management services)
actually rendered, the General Partners will be paid a fee of 5% of actual gross
receipts collected and received from all sources; but said property management
fees shall not exceed in any event an amount which is competitive in price and
terms with other non-affiliated persons rendering comparable services which
would reasonably be made available to the Partnership. "Property Management"
means the day-to-day professional management services in connection with the
Partnership's properties. Property management fees paid by anyone to anyone may
not exceed the lesser of (i) the competitive rate, or (ii) 5% of actual gross
receipts collected and received from all sources. On site personnel for
maintenance, etc., will be paid by the Partnership. Property management services
must be rendered pursuant to a written agreement which precisely describes the
services to be rendered. Such agreement may only be modified by a majority in
interest of limited partners, and may be terminated by majority vote or consent
of the limited partners following sixty days prior notice thereof by the limited
partners.
(2) Affiliate Acquisition Fees. The General Partners may be paid an Affiliate
Acquisition Fee as defined and in the amount stated in Section 1.04 (a-2);
provided, however, that Acquisition Fees paid in connection with the purchase
and development of Partnership properties (including, but not limited to,
Affiliate Acquisition Fees paid to the General Partners and any commissions to
non-affiliated brokers) shall not exceed the lesser of the compensation
customarily charged in arms-length transactions by others rendering similar
services as an ongoing public activity in the same geographical location and for
comparable property, or an amount equal to 8% of the initial capital
contributions (less any uninvested funds returned to Limited Partners pursuant
to Section 3.05 relating to funds not invested within two years) of Limited
Partners applicable to the property which is the subject of the transaction
(adjusted to include a pro-rata amount of any selling expenses). Notwithstanding
any other provisions in this agreement, the General Partners may not be
reimbursed for their travel, communication, and miscellaneous expenses in
connection with the rendering of acquisition services.
(3) Mortgage Financing Fee. At such time as the Partnership's properties are
financed (mortgaged), see Article XXII, the General Partners shall be paid a
mortgage financing fee equal to 1% of the gross financing proceeds for their
services performed in obtaining such financing. The mortgage financing services
to be rendered by the General Partners must meet the conditions specified in
Section 3.09(b).
(4) Limitation. No sponsor shall render any service to the Partnership nor
receive any fee or other compensation from the Partnership other than those
explicitly provided in this Section 2.04, except for amounts otherwise permitted
pursuant to Sections 3.07, and 3.09 hereof.
(b) Sales commission may be paid to the General Partners upon the sale of
partnership properties; provided, however, that General Partners may receive a
portion of the commission only if the General Partners provide a substantial
amount of the services in the sales effort. Any such compensation payable to the
General Partners shall not exceed, on sale of each property, 3% of the gross
sales price or 50% of the standard real estate brokerage commission, whichever
is lesser. The total real estate brokerage commission paid on resale of each of
the Partnership's properties shall be limited to a competitive real estate
commission, not to exceed 6% of the contract price for the sale of the property.
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No such commission shall be paid, however, to the General Partners until each
Limited Partner has received an amount equal to his original invested capital
from the proceeds from the sale or refinancing of properties and cumulative
distributions (including distributed cash from operations and financing) equal
to a 9% cumulative, noncompounded, annual return, commencing at the time each
Limited Partner is admitted to the Partnership, with respect to his adjusted
invested capital.
2.05 Investment in Properties.
(a) The General Partners will commit at least 80% of the Partnership's capital
contributions toward Investment in Properties. The remaining capital
contributions may be used to pay Front-End Fees. When "Acquisition Fees" are
paid by the seller of properties, such fees shall not be included in satisfying
the required minimum Investment in Properties. Additionally, in determining the
amount committed to Investment in Properties, such calculation shall not take
into account any Front-End Fees.
(b) The following definitions apply to this section:
(1) Front-End Fees -- fees and expenses paid by any party for any services
rendered during the Partnership's organizational or acquisition phase including
Organization and Offering Expenses, Acquisition Fees, Expenses of Acquisition
(as those terms are defined in Section 1.04), and any other similar fees
(including the mortgage financing fee, Section 2.04(a)(3)), however designated
by the General Partners.
(2) Investment in Properties -- the amount of capital contributions actually
paid or allocated to the purchase, development, construction or improvement of
properties acquired by the Partnership (including the purchase of properties,
working capital reserves allocable thereto (except that working capital reserves
in excess of 5% shall not be included), and reserves for unit repurchase and
other cash payments such as interest and taxes but excluding Front-End Fees).
2.06 Certain Mortgaging. The partnership will not obtain first mortgage
financing, including wrap-around deeds of trust, containing a balloon payment
which does not contain the following provisions, unless prior approval of the
California Department of Corporations has been attained: All mortgage financing
obtained by the program or retained upon acquired properties must be fully
amortized in equal payment over not more than 30 years. All financing (including
financing to which properties were subject when purchased by the partnership)
including all-inclusive and wrap-around loans and interest-only loans must
provide that no balloon payment will become due sooner than the earlier of: (1)
ten years from the date the program acquired the property, (2) or two years
beyond the anticipated holding period of the property, but in no event sooner
than seven years from the date the program acquires the property. The foregoing
balloon payment limitation does not apply to financing representing, in the
aggregate, 25% or less of the total purchase price of the properties acquired,
or to interim financing, including construction financing, with a full take out
commitment.
2.07 Reinvestment. The partnership shall not pay, directly or indirectly, a
commission or fee to a sponsor in connection with the reinvestment of the
proceeds of the resale, exchange, or refinancing of partnership property. There
shall be no reinvestment of cash flow, cash available for distribution or
proceeds from sale or refinancing of property.
III.
FINANCING OF THE PARTNERSHIP
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3.01 Capital Contributions of the General Partners. The General Partners shall
contribute capital to the Partnership in their capacity as General Partners as
provided in Section 1.06(b), and shall purchase units as Limited Partners as
provided in Section 1.06(c).
3.02 Capital Contributions of the Limited Partners.
(a) Partnership Units. The Limited Partners shall contribute to the capital of
the Partnership, for each Unit subscribed, cash in the amount determined by the
General Partners; provided, however, that all Units subscribed for as part of
the initial public offering of such Units, as contemplated by Section 1.06(d),
shall be paid for in cash in an amount equal to One Hundred Dollars ($100) for
each Unit subscribed.
(b) Initial Subscriptions. All funds of initial subscribers will be placed in a
separate interest-bearing account in a bank or savings and loan association, or
invested in short term highly liquid investments as provided in Section 1.05,
and if not more than $1,250,000 is subscribed and contributed on or before six
months after the public offering commences, the Partnership will not be formed
and each subscriber will promptly receive his or her original investment
together with interest actually earned thereon.
3.03 Additional Contributions. In no event shall any Limited Partner be required
to make any additional contributions to the capital of the Partnership in excess
of those set forth in Section 3.02 hereof.
3.04 Interest. No interest shall be paid on the initial or any subsequent
capital contribution to the Partnership.
3.05 Time for Return of Contributions. None of the Partners, either General or
Limited, shall be entitled to a return of the capital contribution made by any
of them until the full and complete winding up and liquidation of the business
and affairs of the Partnership, except as may be permitted pursuant to Article
VI hereof; provided, however, that those portions of the proceeds of a public
offering of Units raised during the first year of such offering which have not
been invested, committed for investment (evidenced by executed written
agreements in principle or letters of understanding) in investment properties
within two (2) years of the effective date of the qualification of the sale of
Units in such offering shall be distributed to the Limited Partners who
purchased such Units in proportion to the number of such Units so purchased.
3.06 Loans by the Partners. Neither the General Partners nor the Limited
Partners shall be required to make loans to the Partnership. No financing may be
made by or obtained from any sponsor of the Partnership.
3.07 Allocation of Net Profits and Net Losses and Distributions From Cash
Available For Distribution.
3.07.1 Net Profits and Net Losses of the Partnership for each fiscal year of the
Partnership shall be allocated 99% to the Limited Partners and 1% to the General
Partner. Net Profits and Net Losses to be allocated to the Limited Partners will
be allocated to Limited Partners based on the number of Units held by each
Limited Partner and the period during the fiscal year that the Limited Partner
owned the Units. Upon the transfer of a Partnership Unit, the transferor and the
transferee shall be allocated a pro rata share of Net Profits and Net Losses
based on the portion of the fiscal year that the transferred Unit was
effectively held by the transferor and transferee, respectively.
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3.07.2 Cash Available for Distribution, if any, shall be determined for each
month and, within 30 days after the close of each month, shall be distributed
99% to the Limited Partners pro rata in accordance with their respective
ownership of Units and 1% to the General Partner. Cash Available for
Distribution shall be distributed to the persons who are Unit holders of record
as of the last day of the month for which such distribution is made.
3.07.3 Net proceeds from refinancing and net proceeds from the sale of
properties, to the extent available for distribution after the establishment of
any reserves that the General Partners may deem reasonably necessary for any
contingent or future liabilities of the Partnership or after the payment in the
discretion of the General Partners of any debts and liabilities of the
Partnership, and subject to the provisions of Section 2.04(b), shall be
distributed among the Partners in the following amounts and order of priority:
(a) To the Limited Partners, an amount equal to the sum of:
(i) The Adjusted Invested Capital attributable to each Limited Partner; and
(ii) The excess, if any, of an amount equal to 9% per annum cumulative (but
not compounded) return on Adjusted Invested Capital, calculated from
each Limited Partner's respective date of admission to the Partnership,
over total prior distributions of Cash Available For Distribution with
respect to the Units.
(b) To the extent of any balance remaining, 85% to the Limited Partners to be
shared on a pro rata basis in accordance with their respective ownership of
Units and 15% to the General Partner.
Provided, however, that notwithstanding the provisions of this Section 3.07 to
the contrary, the General Partners shall receive at least 1% of the
distributions of net proceeds from refinancing or net proceeds from the sale of
properties.
3.07.4 Except as otherwise provided by this Agreement, profit or loss on the
sale of properties shall be allocated to and among the Partners as follows:
(a) Profit on the sale of properties shall first be allocated to each Partner
with a negative Capital Account proratably in an amount equal to (or in
proportion to if less than) the amount of the negative Capital Account of each
Partner;
(b) Profit on the sale of properties shall next be allocated to the Limited
Partners until each Limited Partner's Capital Account shall be a positive amount
equal to the sum of:
(i) The Adjusted Invested Capital attributable to each Limited Partner; and
(ii) The excess, if any, of an amount equal to 9% per annum cumulative (but
not compounded) return on Adjusted Invested Capital, calculated from
each Limited Partner's respective date of admission to the Partnership,
over total prior distributions of Cash Available For Distribution with
respect to the Units.
(c) To the extent of any remaining profit on the sale of properties, 85% to the
Limited Partners to be shared on a pro rata basis in accordance with their
respective ownership of Units and 15% to the General Partners:
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(d) To the extent that there is a loss on the sale of properties arising from a
transaction, such loss on the sale of properties shall be allocated among the
Partners with positive balances in their Capital Accounts pro rata in accordance
with their respective positive balances until the aggregate positive balance of
their Capital Accounts is reduced to zero, and any balance shall be allocated in
accordance with the allocation of Net Profits and Net Loss pursuant to Section
3.07.1 hereof;
(e) The provisions of this Section 3.07.4 notwithstanding, the General Partner
shall be allocated at least 1% of the profit or loss on the sale of properties,
and, to the extent possible, in characterizing the allocated profit on the sale
of properties, that portion which constitutes ordinary income by reason of
recapture of depreciation under Sections 1245 or 1250 of the Internal Revenue
Code or investment tax credit recapture, shall be allocated among the Partners
such that a Partner (or successor) who realized the benefit of the deduction or
credit will bear the tax burden of the corresponding recapture.
3.07.5 A Capital Account shall be maintained by the Partnership on behalf of
each Partner. The Capital Account of each Partner shall be credited with the
amount of such Partner's capital contribution as such is contributed. The
Capital Account of each Partner shall be credited with the amount of Net Profits
and profit on the sale of properties of the Partnership allocated to such
Partner and shall be debited with the amount of Net Losses and loss on the sale
of properties and with the amount of any distributions or return of capital made
by the Partnership to such Partner.
3.07.6 The Capital Account of a Partner shall also be credited or debited, as
the case may be, with items of income, expense, or other adjustments which do
not enter into the calculation of Net Profits or Net Losses. The Capital Account
of a transferor Partner shall become the Capital Account of the transferee
Partner as it existed at the effective date of the transfer. Any special basis
adjustment resulting from an Internal Revenue Code Section 754 election shall
not be taken into account for purposes of establishing and maintaining Capital
Accounts pursuant to the terms of this Section 3.07.6.
3.07.7 If upon the liquidation of the Partnership, there is a deficit balance in
the Capital Account of the General Partner, after making the allocations
provided in this Agreement, then the General Partner will contribute an amount
equal to such deficit balance in its Capital Account, provided that in no event
shall the General Partner be required to contribute to the Partnership, as its
pro rata share, more than 1% of the total capital contributed by the Partners
plus four-fifths of the Cash Available For Distribution received by the General
Partner pursuant this Agreement.
3.07.8 The provisions of this Agreement notwithstanding, the General Partners
will receive at least 1% of the distributions of net proceeds from the sale of
properties and, at such time as the Partnership is to be liquidated hereunder,
such adjustments, if any, as are appropriate to properly reflect such minimum
distribution shall be made with respect to the allocation of profit or loss on
the sale of properties pursuant to Section 3.07.4 and with respect to the
Capital Accounts of the Partners. Provided, further, that any deduction which
might accrue to the Partnership and which is attributable to said 1% minimum
distribution requirement shall be specially allocated to the General Partners.
3.07.9 The General Partners shall also distribute, after the completion of each
calendar year, such amount of cash from sales or financing sufficient to allow a
Limited Partner in a 36% federal tax bracket to pay the income taxes due with
respect to net income derived by him from the disposition or financing of
Partnership properties.
3.08 Conditions and Consent to Allocations and Distributions. The methods,
hereinabove set forth, by which Net Profits and Net Losses are allocated and by
which Distributions of Cash Available For Distribution and surplus funds are
allocated and distributed, are hereby expressly consented to by each General and
Limited Partner as an express condition to becoming a General or Limited
Partner.
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All Distributions of Cash Available For Distribution and surplus funds are
subject to the payment of Partnership expenses and to the maintenance of
reasonable working capital reserves deemed sufficient for Partnership business
by the General Partners.
3.09 Partnership Expenses. (a) Reimbursement to the General Partners or their
affiliates may be made for the actual cost to the General Partners or their
affiliates of goods and materials provided by unaffiliated parties and used for
or by the Partnership. The General Partners will pay (and shall not be
reimbursed by the Partnership for): (i) salaries and other compensation of their
affiliates and their officers, directors and employees incidental to the
organization of the Partnership, the sale of Units and the acquisition of
Partnership properties; (ii) expenses incurred by the General Partners or their
affiliates in connection with the administration of the Partnership, including
the overhead expenses (including rent, utilities, capital equipment, other
administrative items, etc.) of the General Partners or their affiliates; (iii)
expenses related to the performance of those services for which the General
Partners or their affiliates are entitled to compensation (and the General
Partners shall not be reimbursed therefore except as provided in subsection (b)
next following).
(b) (1) The General Partners may be reimbursed for administrative services
necessary to the prudent operation of the Partnership. Such services include
transfer agent, legal, accounting, partner relations and similar services.
(2) The services will be provided at a price which does not exceed the lesser of
cost of such services to the General Partners or 90% of the competitive price
which would be charged by non-affiliated persons rendering similar services in
the same or comparable geographic location. Cost of services as used herein
means the pro rata cost of personnel, including an allocation of overhead
directly attributable to such personnel spent on such services, or other method
of allocation acceptable to the Partnership's independent certified public
accountant.
(3) This provision may be modified only with a vote of a majority of the limited
partnership interests. This provision may be terminated without penalty on 60
days' notice.
(4) The General Partners represent that they have adequate staff which they
utilize in the conduct of their business and are able to render such services to
the Partnership. The General Partners have been previously and are now rendering
such services to other programs as an ordinary and ongoing business.
(5) Any general or administrative overhead incurred by the General Partners in
connection with the administration of the Partnership which is not directly
attributable to the rendering of services authorized by this section 3.09(b)
shall not be charged to the Partnership. Such general or administrative overhead
includes but is not limited to salaries, rent, travel expenses and other items
generally falling under the category of overhead. Excluded from allowable
reimbursement shall be (i) rent or depreciation, utilities, capital equipment,
other administrative items, and (ii) salaries, fringe benefits, travel expenses,
and other administrative items incurred or allocated to any controlling persons
of the General Partners or their affiliates. Controlling person, for purpose of
the subsection, includes but is not limited to, any person, whatever his or her
title who performs functions for the General Partners similar to those of: (1)
chairman or member of the board of directors; (2) executive management, such as
(i) president, (ii) vice president or senior vice president, (iii) corporate
secretary, (iv) treasurer; (3) senior management, such as the vice president of
an operating division who reports directly to executive management; or (4) those
holding 5% or more equity interest in the General Partners or a person having
the power to direct or cause the direction of the General Partners whether
through the ownership of voting securities, by contract, or otherwise.
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(6) No payment will be made for services for which the General Partners or their
affiliates are entitled to compensation by way of a separate fee, other than as
specifically permitted by this Agreement.
(c) All other expenses of the Partnership shall be billed directly to and paid
by the Partnership as follows: (1) costs of taxes and assessments on Partnership
properties and other taxes applicable to the Partnership; (2) legal, audit,
accounting, and brokerage fees incurred after the offering of Units is
completed; (3) fees and expenses paid to on-site managers, real estate brokers,
and insurance brokers; (4) expenses in connection with the disposition,
replacement, alteration, repair, remodeling, refurbishment, refinancing and
operation of Partnership properties (including the costs and expenses of
foreclosures, insurance premiums, and maintenance of such properties); (5) the
cost of insurance as required in connection with the business of the
Partnership; (6) expenses of revising, amending, converting, modifying or
terminating the Partnership; (7) the costs of printing and mailing to Limited
Partners, evidences of ownership of Units and reports of meetings of the
Partnership, and of preparation of proxy statements and solicitations of proxies
in connection therewith; (8) expenses in connection with preparing and mailing
distribution checks and reports required to be furnished to Limited Partners for
tax reporting purposes; and (9) the cost of preparation and dissemination of the
informational material and documentation relating to potential sale or other
disposition of Partnership property.
IV.
BOOKS OF ACCOUNT, FINANCIAL STATEMENTS AND FISCAL MATTERS
4.01 Books of Account. The General Partners shall, for income tax purposes, keep
on an accrual or a cash basis (to be determined at their discretion upon filing
the initial federal and state tax returns of the Partnership), adequate books of
account of the Partnership wherein shall be recorded and reflected all of the
capital contributions of the Partnership and all of the expenses and
transactions of the Partnership. Such books of account shall be kept at the
principal place of business of the Partnership, and each Limited Partner and his
or her authorized representatives shall have at all times, during reasonable
business hours, free access to and the right to inspect and copy such books of
account and all records of the Partnership, including the right to obtain by
mail or to inspect a list of the names and addresses and interests owned of the
Limited Partners. All books and records of the Partnership shall be kept on the
basis of an annual accounting period ending December 31, except for the final
accounting period which shall end on the dissolution or termination of the
Partnership without reconstitution, provided, however, that the General Partners
in their sole discretion may, subject to approval by the Internal Revenue
Service and applicable state taxing authorities, at any time, without approval
of the Limited Partners, change the Partnership's accounting period and tax year
to a period to be determined by the General Partners. All references herein to a
"year of the Partnership" are to such an annual accounting period.
4.02 Reports and Financial Statements. The General Partners shall provide the
following reports and financial statements to the Limited Partners:
(a) Annual Report. Within 120 days after the end of each fiscal year, (1) a
balance sheet as of the end of such fiscal year, together with statements of
income, Partners' equity, change in financial position and a cash flow statement
for such year. The balance sheet and such statements (other than the cash flow
statement) shall be prepared in accordance with generally accepted accounting
principles and shall be accompanied by an auditor's report containing an
unqualified opinion of the independent certified public accountants preparing
such report; (2) a report of the activities of the Partnership for such year;
(3) a report on distributions to the Limited Partners for such period,
separately identifying distributions from (a) funds from operations during such
period, (b) reserved funds from operations from prior periods, (c) proceeds from
disposition of property and investments, (d) reserves from the proceeds of
public offerings of Units; (4) a detailed statement of any transactions with the
General Partners or their affiliates and fees, commissions, compensation, and
other benefits paid or accrued to the General Partners or their affiliates
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for the fiscal year completed, showing the amount paid or accrued to each
recipient and the services performed; and (5) the annual report must contain a
breakdown of the costs reimbursed to the General Partners. Within the scope of
the annual audit of the General Partner's financial statement, the independent
certified public accountants must verify the allocation of such costs to the
Partnership. The method of verification shall at minimum provide:
(1) A review of the time records of individual employees, the costs of whose
services were reimbursed;
(2) A review of the specific nature of the work performed by each such employee.
The methods of verification shall be in accordance with general
accepted auditing standards and shall accordingly include such tests of the
accounting records and such other auditing procedures which the General
Partners' independent certified public accountants consider appropriate in the
circumstance. The additional costs of such verification will be itemized by said
accountants on a Partnership by Partnership basis and may be reimbursed to the
General Partners by the Partnership in accordance with subsection 3.09 only to
the extent that such reimbursement when added to the cost for administrative
services rendered does not exceed the allowable rate as determined in subsection
3.09.
(b) Report of Fees. Within 45 days of the end of each quarter of a fiscal year
during which a sponsor received fees for services from the Partnership, a report
setting forth (i) a statement of the services rendered and (ii) the amount of
fees received. This report may generally be set forth in a footnote in the
quarterly report under section 402(c).
(c) Quarterly Reports. Within 45 days after the end of each fiscal quarter a
report for such period containing an unaudited balance sheet, statement of
income, statement of changes in financial position and a cash flow statement and
a report covering the activities of the Partnership for such quarter which
contains the information specified on Form 10-Q (if such report is required to
be filed with the Securities and Exchange Commission).
(d) Tax Information. Within 75 days after the end of each fiscal year, all
information necessary for the preparation of the Limited Partners' federal
income tax returns.
(e) Special Reports. A Special Report of real property acquisitions shall be
distributed within 45 days after the end of each quarter until the capital
contributions of the Partnership (other than retained reserves) shall be fully
invested. Such Special Report shall include:
(i) description of the properties, (ii) descriptions of the geographic
locale and of the market upon which successful operation is dependent, (iii) the
Appraised Value, (iv) date of appraisal, (v) actual purchase price and terms,
(vi) cash expended from capital contributions to acquire each property, and
(vii) the amount which then remains unexpended, stated in terms of both dollar
amount and percentage of the total amount of capital contributions. This report
may be in substance the information included in Forms 8-K (if such reports are
required to be filed with the Securities and Exchange Commission).
(f) Reports During Offering. During the offering period and until the
Partnership is fully invested, the Partnership will file any prospectus required
by Section 10(a)(3) of the Securities Act of 1933 as post-effective amendments
to the registration statement. The Partnership will additionally file after the
end of the distribution period, a current report on Form 8-K containing the
financial statements and any additional information required by Rule 3-14 of
Regulation S-X, to reflect each commitment (i.e., the signing of a binding
purchase agreement) made after the end of the distribution period involving the
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use of 10% or more (on a cumulative basis) of the net proceeds of the offering
and to provide the information contained in such report to the limited partners
at least once each quarter after the distribution period of the offering has
ended. The Partnership will also file a sticker supplement pursuant to Rule
424(c) under the Securities Act of 1933 during the offering period describing
each property not identified in the prospectus at such time as there arises a
reasonable probability that such property will be acquired (also disclosing all
compensation and fees received by the General Partners and their affiliates in
connection with such acquisition) and to consolidate all such stickers into a
post-effective amendment filed at least once every three months, with the
information contained in such amendment provided simultaneously to the existing
Limited Partners. Lastly, the Partnership will provide the Limited Partners the
Financial Statements required by Form 10-K for the first full fiscal year of
operations of the Partnership.
(g) Filing of Reports. The Partnership will file with the Commissioner of
Corporations of the State of California and any other appropriate federal or
state regulatory agency requiring the same a copy of each report made pursuant
to subdivisions (a), (b), (c) and (d) of this Section 4.02, concurrently with
their transmittal to the Limited Partners, if the filing is required by any such
state.
4.03 Tax Returns and Records. The General Partners, at Partnership expense,
shall cause income tax returns for the Partnership to be prepared and timely
filed with the appropriate authorities. The General Partners, at Partnership
expense, shall cause to be prepared and timely filed, with appropriate federal
and state regulatory and administrative bodies, all reports required to be filed
with such entities under then current applicable laws, rules and regulations.
Such reports shall be prepared on the accounting or reporting basis required by
such regulatory bodies. Any Limited Partner shall be provided with a copy of any
such report upon request without expense to him or her. The General Partners, at
Partnership expense, shall maintain a record of the information obtained to
indicate that a Limited Partner meets the suitability standards set forth in the
Prospectus.
4.04 Fiscal Year. The fiscal year of the Partnership shall begin with the first
day of January and end on the thirty-first day of December in each year,
provided, however, that the General Partners in their sole discretion may,
subject to approval by the Internal Revenue Service and the applicable state
taxing authorities, at any time without approval of the Limited Partners change
the Partnership's fiscal year to a period to be determined by the General
Partners.
4.05 Bank Accounts, Funds and Assets. The funds of the Partnership shall be
deposited in such bank or banks as the General Partners shall deem appropriate.
Subject to the provisions of Article XII, such funds shall be withdrawn only by
the General Partners or their duly authorized agents. Sponsors shall have a
fiduciary responsibility for the safekeeping and use of all funds of the
Partnership, whether or not in their immediate possession or control, and they
shall not employ or permit another to employ such funds or assets in any manner
except for the exclusive benefit of the Partnership. Sponsors shall not
commingle or permit the commingling of the funds of the Partnership with the
funds of any other person or entity.
4.06 Adjustment of Tax Basis. Upon the transfer of an interest in the
Partnership, the Partnership may, at the sole discretion of the General
Partners, elect, pursuant to Section 754 of the Internal Revenue Code of 1954,
as amended, to adjust the basis of the Partnership property as allowed by
Section 734(b) and 743(b) thereof. The election, if made, will be filed with the
Partnership information income tax return for the first taxable year to which
the election applies.
4.07 Insurance. The Partnership shall at all times maintain public liability
insurance in amounts determined by the General Partners for the protection of
the Partnership and each of its members. In addition, the Partnership shall
carry appropriate Workmen's Compensation Insurance and
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such other insurance with respect to the real property owned by it as shall be
customary for similar property, similarly located, from time to time (for
purposes hereof losses catastrophic in nature, e.g., war, earthquakes and
floods, shall not be deemed customary insurance coverages and shall not be
required). No sponsor or affiliate of a sponsor shall receive an insurance
brokerage fee or commission or write any insurance policy covering the
Partnership or any of the property of the Partnership. The Partnership shall not
pay for any insurance covering liability of a General Partner or its affiliates,
agents or employees for actions or omissions to act for which indemnification is
not permitted hereunder. The Partnership may purchase and pay for such types of
insurance, including extended coverage liability and casualty and workmen's
compensation, as would be customary for any person owning comparable property
and engaged in a similar business and may name the General Partners and their
affiliates as additional insured parties thereunder, provided that such addition
does not add to the cost of premiums payable by the Partnership.
4.08 Appraisals.
(a) An appraisal by an independent qualified appraiser shall be obtained for
each investment property. Such qualification may be demonstrated by membership
in a nationally recognized appraisal society such as Member Appraisal Institute
("M.A.I."), Society of Real Estate Appraisers ("S.R.E.A.") or their equivalent,
but is not limited thereto. The appraisal shall be maintained in the records of
the Partnership for at least five years and shall be available for inspection
and duplication by any Limited Partner.
(b) All persons retained by the Partnership to provide the Partnership reports
of their opinions of appraised values of investment properties being considered
by the Partnership for acquisition or otherwise shall be members in good
standing of a recognized professional appraisal organization and shall certify
to the Partnership as follows: (1) that he or she has no present or contemplated
future interest in the property being appraised; (2) that he or she has no
personal interest or bias with respect to the subject matter of or the parties
involved in the appraisal; and (3) that his or her employment and compensation
for rendering an opinion and report are not contingent upon the value so
determined, or on any other condition other than the delivery of the report or
opinion for a predetermined fee.
4.09 Tax Matters Partner.
JOHN A. COSEO, JR. is selected and has the right, power and authorization
to represent the Partnership and each Limited Partner as the tax matters partner
in connection with all examinations of the Partnership affairs by tax
authorities, including resulting administrative and judicial proceedings, and to
expend Partnership funds for professional services and costs connected
therewith. Each Limited Partner agrees to cooperate with JOHN A. COSEO, JR. and
to do or refrain from doing any and all things reasonably required by JOHN A.
COSEO, JR. to conduct such proceedings.
V.
ASSIGNABILITY OF LIMITED PARTNERS' INTERESTS
5.01 Limited Partners' Interest. Each of the Limited Partners, except as
provided in this Article V, shall not sell, transfer, encumber or otherwise
dispose by operation of law or otherwise of the whole or any part of his or her
interest in the Partnership except by written instrument satisfactory in form to
the General Partners, accompanied by such assurance of the genuineness and
effectiveness of each such signature and the obtaining of any federal and/or
state government approval, if any, as may be reasonably required by the General
Partners.
No less than a minimum of 25 Units (20 for certain fiduciaries) may be
transferred.
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No assignment shall be valid or effective unless in compliance with the
conditions herein contained.
5.02 Further Restriction on Transfers. No Partner shall make any assignment of
all or any part of his or her interest in the Partnership if said transfer or
assignment would, when considered with all other transfers during the same
applicable twelve (12) month period, cause a termination of the Partnership for
federal or any applicable state income tax purposes.
5.03 Substituted Partners. No assignee of the whole or any portion of a Limited
Partner's interest in the Partnership shall have the right to become a
substituted Limited Partner in place of his or her assignor, unless (i) such
assignor shall designate such intention in the instrument of assignment; (ii)
the assignment instrument shall be in form and substance satisfactory to the
General Partners; (iii) the assignor and assignee named therein shall execute
and acknowledge such other instrument or instruments as the General Partners may
deem necessary or desirable to effectuate such admission, including but not
limited to a power of attorney with provisions more fully described in this
Agreement; (iv) the assignee shall accept; adopt and approve in writing of all
of the terms and provisions of this Agreement, as the same may have been
amended; and (v) the written consent of the General Partners to the substitution
(which consent shall be given unless in the written opinion of the Partnership's
tax counsel such consent should be withheld to preserve the tax status of the
Partnership) if the substituted Limited Partner is not the transferring Limited
Partner's spouse, ancestor, lineal descendent or trust for the benefit of such
person(s).
5.04 Additional Restrictions. Any unauthorized assignment or transfer shall be
void ab initio. All documents and records evidencing a Limited Partnership
interest, whether issued originally or subsequently, owned by California
residents shall bear and be subject to legend conditions as follows:
(a) "IT IS UNLAWFUL TO CONSUMMATE A SALE OR TRANSFER OF THIS SECURITY, OR ANY
INTEREST THEREIN, OR TO RECEIVE ANY CONSIDERATION THEREFOR, WITHOUT THE PRIOR
WRITTEN CONSENT OF THE COMMISSIONER OF CORPORATIONS FOR THE STATE OF CALIFORNIA,
EXCEPT AS PERMITTED IN THE COMMISSIONER'S RULES."
(b) "Any unauthorized assignment of transfer shall be void ab initio."
(c) "Assignees of this security may become substituted Limited Partners only
with the consent of the General Partners." 5.05 Withdrawal of Limited Partner.
Except as provided in Article VI, no Limited Partner shall be entitled to
withdraw or retire from the Partnership.
5.06 Death of Limited Partner. The death of a Limited Partner shall not
terminate the Partnership. Upon the death of a Limited Partner, the personal
representative of the deceased Limited Partner shall have all the rights of the
Limited Partner in the Partnership to the extent of the deceased Limited
Partner's interest therein, subject to the terms and conditions of this
Agreement, and the estate of the deceased Limited Partner shall be liable for
all of his or her liabilities as a Limited Partner, as well as the execution of
all documents required to effect, subject to the terms of Section 5.03, the
appropriate substitution of the decedent's estate or beneficiary as a Limited
Partner hereunder.
5.07 Recognition of Substituted and Assignee Limited Partners. The Certificate
of Limited Partnership of the Partnership shall be amended and recorded pursuant
to Section 1.01 in any jurisdiction where it may be required not less often than
quarterly to recognize the admission of
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substituted Limited Partners. Assignees of Limited Partners shall be recognized
as such not later than the first of the calendar month following the General
Partners' receipt of notice of such assignment.
VI.
REPURCHASE OF UNITS
The Partnership, in its sole discretion, may repurchase Units, after
the offering of its Units has closed, at a negotiated price, if such repurchase
does not impair the capital or operations of the Partnership. The Partnership
may not reserve or apply more than an aggregate of .5% of the gross proceeds of
its offering of Units toward any such repurchases.
VII.
RIGHT OF LIMITED PARTNERS TO RECEIVE PROPERTY OTHER THAN CASH
No right is given to a Limited Partner to demand and receive property
other than cash in return for his or her contribution.
VIII.
TERMINATION OF A GENERAL PARTNER
8.01 Ceasing to be a General Partner. A person ceases to be a General Partner of
this Partnership upon the happening of any of the following events:
(a) The General Partner withdraws from this Partnership.
(b) The General Partner is removed as a General Partner.
(c) Unless otherwise provided in the partnership agreement, an order for relief
against the General Partner is entered under Chapter 7 of the federal bankruptcy
law, or the General Partner (1) makes a general assignment for the benefit of
creditors, (2) files a voluntary petition under the federal bankruptcy law, (3)
files a petition or answer seeking for that partner any reorganization,
arrangement, composition, readjustment, liquidation, dissolution or similar
relief under any statute, law, or regulation, (4) files an answer or other
pleading admitting or failing to contest the material allegations of a petition
filed against that partner in any proceeding of this nature, or (5) seeks,
consents to, or acquiesces in the appointment of a trustee, receiver, or
liquidator of the General Partner or of all or any substantial part of that
partner's properties.
(d) 60 days after the commencement of any proceeding against the General Partner
seeking reorganization, arrangement, composition, readjustment, liquidation,
dissolution or similar relief under any statute, law, or regulation, the
proceeding has not been dismissed, or if within 60 days after the appointment
without that partner's consent or acquiescence of a trustee, receiver, or
liquidator of the General Partner or of all or any substantial part of that
partner's properties, the appointment is not vacated or stayed, or within 60
days after the expiration of any such stay, the appointment is not vacated.
(e) In the case of a General Partner who is an individual, either of the
following:
(1) The death of that partner.
(2) The entry by a court of competent jurisdiction of an order adjudicating the
partner incompetent to manage the General Partner's person or estate.
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(f) In the case of a General Partner who is acting as a General Partner by
virtue of being a trustee of a trust, the termination of the trust (but not
merely the substitution of a new trustee, in which case the new trustee
automatically becomes the new General Partner).
(g) In the case of a General Partner that is a separate partnership, the
dissolution of the separate partnership.
(h) In the case of a General Partner that is a corporation, the filing of a
certificate of dissolution, or its equivalent, for the corporation.
(i) In the case of a General Partner that is an estate, the distribution by the
fiduciary of the estate's entire interest in the limited partnership.
Notwithstanding the provisions of subsections (a) and (h) above,
without the concurrence of a majority of the outstanding limited partnership
interests, a General Partner may not withdraw or retire as a General Partner or
dissolve itself or the Partnership.
8.02 Continuation of Business of Remaining General Partner. If one General
Partner ceases to be a General Partner pursuant to the provisions of Section
8.01, the remaining General Partner may elect to continue the business of the
Partnership.
8.03 Removal of a General Partner. The Limited Partners holding a majority in
interest of the Units may remove any or all of the General Partners. Written
notice of such determination setting forth the effective date of such removal
shall be served upon the General Partner or General Partners so removed and, as
of the effective date, shall terminate all of such persons' rights and powers as
a General Partner.
8.04 Dissolution of Partnership and Continuance of Partnership Business. After
the occurrence of a terminating event with respect to the last remaining General
Partner, as described in Section 8.01, the Limited Partners shall meet within
sixty (60) days of the terminating event and either:
(a) Elect one or more new General Partners to continue the Partnership business,
in which event, upon the filing of a new Certificate of Limited Partnership to
reflect the new General Partner, this Partnership shall continue in business; or
(b) Elect to terminate and liquidate the Partnership under the provisions of
Article IX hereof.
8.05 Payment to Terminated General Partner. Upon the occurrence of a terminating
event, if such terminating event relates to a General Partner who is the last
remaining original General Partner and if the business of the Partnership is
continued, as aforesaid, the Terminated General Partner shall be entitled to
receive from the Partnership the then present fair market value of his allocated
interest in Net Profits, Net Losses, Distributions of Cash Available for
Distribution, surplus Funds upon liquidation, determined by agreement of the
Terminated General Partner and the Partnership, or, if they cannot agree, by
arbitration in accordance with the then current rules of the American
Arbitration Association. The expense of such arbitration shall be borne equally
by the Partnership and the General Partners. For this purpose, the fair market
value of the interest of the Terminated General Partner shall be deemed to be
the amount the Terminated General Partner would receive upon dissolution and
termination of the Partnership under Section 9.02, assuming (a) such dissolution
or termination occurred on the date of the dissolving event specified above, and
(b) the assets of the Partnership were sold for their then fair market value
without compulsion of the Partnership to sell such assets. The Partnership
forthwith shall execute
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and deliver to the Terminated General Partner a promissory note of the
Partnership, payable to the order of the Terminated General Partner, which
promissory note shall include the following provisions: (i) be in a principal
amount equal to the present fair market value of the interest so determined;
(ii) bearing interest at a rate per annum which is the lesser of two percent
over the prime rate of the Bank of America, NT&SA or ten percent per annum,
principal and all unpaid accrued interest payable in equal annual installments
with the remaining unpaid principal balance and unpaid accrued interest on the
promissory note to be due and payable five years from the date of such
terminating event, and (iii) such other provisions as would be usual and
customary in a commercial promissory note, including the right of the holder
upon default to accelerate otherwise unmatured installments and to recover costs
of collection including reasonable attorney's fees. Notwithstanding the
foregoing, where the termination is voluntary, the method of payment will be by
a noninterest bearing unsecured promissory note with principal payable, if at
all, from distributions which the Terminated General Partner otherwise would
have received under the partnership agreement had the General Partner not
terminated.
8.06 Termination of Executory Contracts. Upon removal of a General Partner, all
executory contracts between the Partnership and the terminating General Partner
or any affiliate thereof (unless such affiliate is also an affiliate of a
continuing General Partner) may be terminated by the Partnership effective upon
written notice to the party so terminated. The terminating General Partner or
any affiliate (unless such affiliate is also an affiliate of a continuing
General Partner) thereof may also terminate and cancel any such executory
contract effective upon sixty (60) days' prior written notice of such
termination and cancellation given to the new General Partner, if any, or to the
Partnership.
IX.
DISTRIBUTION ON TERMINATION
9.01 Events of Dissolution. The Partnership shall be terminated and dissolved,
prior to the end of its term, in accordance with any other provision of this
Agreement, or upon the happening of any of the following events:
(a) The Limited Partners holding a majority of all the Units of the Partnership
determine, by written consent or approving vote, that the Partnership should be
dissolved; or
(b) The Partnership is adjudicated insolvent or bankrupt.
9.02 Gain and Loss on Dissolution and Order of Distribution.
(a) In the event of the dissolution or termination of the Partnership, unless
the remaining Partners elect to continue the business of the Partnership as
provided in this Agreement, the General Partners or the liquidator of the
Partnership shall proceed with the winding up of the affairs and the liquidation
of the Partnership. The General Partners, who shall be the liquidators of the
Partnership, shall cause to be prepared a statement setting forth the assets and
liabilities of the Partnership as of the date of dissolution, and such statement
shall be furnished to all of the Partners (General and Limited). The assets of
the Partnership, which the General Partners determine should be liquidated, then
shall be liquidated as promptly as possible, but in an orderly and businesslike
manner so as not to involve undue sacrifice.
(b) The aggregate net profit and net loss realized by the Partnership upon the
sale or other disposition of its assets shall be credited or charged to the
accounts of the General Partners and Limited Partners in accordance with the
provisions of Section 3.07 hereof after providing for the debts and liabilities
of the Partnership.
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(c) The proceeds of such liquidation shall be applied and distributed in the
order of priority and in the same manner as provided in Section 3.07 hereof
after providing for the debts and liabilities of the Partnership.
(d) All distributions under Section 9.02(c) shall be made in money arising from
the sale of assets of the Partnership.
9.03 Eminent Domain. A taking of all or substantially all of the Partnership's
property and assets in condemnation or by eminent domain shall be treated in all
respects as a sale of the Partnership's property and assets upon the dissolution
and liquidation of the Partnership, pursuant to this Article IX. In such event
any portion of the property and assets of the Partnership not so taken shall be
sold and/or distributed, together with the condemnation award, in the manner
provided for in this Article IX.
9.04 Period of Liquidation. A reasonable time shall be allowed for the orderly
liquidation of the assets of the Partnership, so as to enable the General
Partners or the liquidator to minimize the normal losses attendant upon
liquidation.
X.
CERTIFICATES AND OTHER DOCUMENTS
10.01 General Partners Attorneys for Limited Partners. Each Limited Partner, by
becoming a Limited Partner, hereby constitutes and appoints each of the General
Partners and his successors the true and lawful attorneys of, and in the name,
place and stead of said Limited Partner, from time to time:
(a) To make all agreements amending this Agreement, as now or hereafter amended,
that may be appropriate to reflect solely:
(i) A change of the name or the location of the principal place of
business of the Partnership;
(ii) The disposal by a Limited Partner of his or her interest in the
Partnership, in any manner permitted by this Agreement and any return
of the capital contribution of a Limited Partner (or any part thereof),
if any, provided for by this Agreement;
(iii) A person becoming a Limited Partner of the Partnership as permitted
by this Agreement;
(iv) A change in any provision of this Agreement or the exercise by any
person of any right or rights thereunder not requiring the consent of
said Limited Partner; and
(v) The exercise by any person of any right or rights under this Agreement
requiring the consent or approval of a majority or a specified
percentage of the Limited Partners and the required consent or approval
has been given.
(b) To make such certificates, instruments and documents, including Fictitious
Business Name Statements, as may be required by, or may be appropriate under,
the laws of any state or other jurisdiction in which the Partnership is doing or
intends to do business in connection with the use of the name of the Partnership
by the Partnership; and
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(c) To make such certificates, instruments and documents, including amendments
to this Agreement and the Certificate of Limited Partnership, as said Limited
Partner may be required or as may be appropriate for said Limited Partner to
make, by the laws of any state or other jurisdiction solely to reflect:
(i) A change of address of said Limited Partner;
(ii) Any changes in or amendments to this Agreement, or pertaining to the
Partnership, of any kind referred to in paragraph (a) of this
subsection; and
(iii) Any other changes in or amendments to this Agreement but only if and
when said Limited Partner has agreed to such other changes or
amendments by signing, either personally or by duly appointed attorney,
an agreement amending this Agreement.
Each of said agreements, certificates, instruments and documents shall
be in such form as said attorney and counsel for the Partnership shall deem
appropriate. The powers hereby conferred to make agreements, certificates,
instruments and documents shall be deemed to include the powers to sign,
execute, acknowledge, swear to, verify, deliver, file, record and publish the
same.
Each Limited Partner authorizes said attorney to take any further
action which said attorney shall consider necessary or convenient in connection
with any of the foregoing and hereby gives said attorney full power and
authority to do and perform each and every act and thing whatsoever requisite
and necessary to be done in and about the foregoing as fully as said Limited
Partner might or could do if personally present, and hereby ratifies and
confirms all that said attorney shall lawfully do or cause to be done by virtue
hereof.
The powers hereby conferred shall continue from the date said Limited
Partner becomes a Limited Partner in the Partnership until said Limited Partner
shall cease to be such a Limited Partner and, being coupled with an interest,
shall be irrevocable.
10.02 Making, Filing, Etc. of Certificates, Etc. The General Partners agree,
when authorized pursuant to Section 10.01, or otherwise, to make, file or record
with the appropriate public authority and (if required) publish the Certificate,
any amendments thereof, and such other certificates, instruments and documents
as may be required or appropriate in connection with the business and affairs of
the Partnership.
XI.
NOTICES
All notices (except notices required under Section XIV hereof),
requests and other communications provided for herein shall be in writing and,
unless otherwise specified, shall be forwarded by first class mail, directed to
the parties at the addresses set forth in the Subscription Agreement and
Signature Pages attached hereto or to such other addresses as any party may from
time to time designate in writing, and given in accordance with the provisions
of this Article XI. Notices or communications given, as set forth herein, shall
be conclusively deemed to have been received by the party to whom addressed
three business days after the same are deposited in the United States mail.
XII.
CONVEYANCES, CONTRACTS AND DOCUMENTS
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Any deed, bill of sale, mortgage, deed of trust, lease, contract of
sale, or other commitment purporting to convey or encumber the interest of the
Partnership in all or in any portion of any real or personal property at any
time held in its name, and any other contract, check, draft, document,
communication or notice to which the Partnership is a party, may be signed by
any one of the General Partners acting alone or on behalf of the Partnership.
XIII.
DISPUTES AND ARBITRATION
Any dispute or controversy arising under, out of, or in connection with
or in relation to this Agreement and any amendments thereof, or the breach
thereof, or in connection with the dissolution of the Partnership, shall be
determined and settled by arbitration to be held in the city where the office of
the Partnership is located, in accordance with the rules then applicable of the
American Arbitration Association. Any award rendered therein shall be final and
binding on each and all of the Partners, and judgment may be entered thereon in
a court of appropriate jurisdiction. Arbitration of alleged securities
violations is not allowed.
XIV.
MEETINGS OF, OR ACTIONS BY, THE LIMITED PARTNERS
(a) Meetings of partners may be held at any place within or without this state
as may be fixed by the General Partners. If no other place is so fixed,
partners' meetings shall be held at the principal executive office of the
Partnership.
(b) A meeting of the partners may be called by any of the General Partners or by
Limited Partners representing more than 10 percent of the interests of Limited
Partners for any matters on which the Limited Partners may vote.
(c) (1) Whenever partners are required or permitted to take any action at a
meeting, a written notice of the meeting shall be given, within ten days after
receipt of a request, not less than 15, nor more than 60, days before the date
of the meeting to each partner entitled to vote at the meeting. The notice shall
state the place, date, and hour of the meeting and the general nature of the
business to be transacted, and no other business may be transacted.
(2) Notice of a Partners' meeting or any report shall be given either personally
or by mail or other means of written communication, addressed to the partner at
the address of the partner appearing on the books of the Partnership or given by
the partner to the Partnership for the purpose of notice, or, if no address
appears or is given, at the place where the principal executive office of the
partnership is located or by publication at least once in a newspaper of general
circulation in the county in which the principal executive office is located.
The notice or report shall be deemed to have been given at the time when
delivered personally or deposited in the mail or sent by other means of written
communication. An affidavit of mailing of any notice or report in accordance
with the provisions of this article, executed by a General Partner, shall be
prima facie evidence of the giving of the notice or report. Included with the
notice shall be a detailed statement of the action proposed, including a
verbatim statement of the wording of any resolution proposed for adoption by the
limited partners and of any proposed amendment to the partnership agreement.
If any notice or report addressed to the partner at the address of the
partner appearing on the books of the Partnership is returned to the Partnership
by the United States Postal Service marked to indicate that the United States
Postal Service is unable to deliver the notice or report to the partner at the
address, all future notices or reports shall be deemed to have been duly given
without further mailing if
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they are available for the partner at the principal executive office of the
Partnership for a period of one year from the date of the giving of the notice
or report to all other partners.
(3) Upon written request to the General Partners by any person entitled to call
a meeting of partners, the General Partners shall, within ten days after receipt
of a request, cause notice to be given to the partners entitled to vote that a
meeting will be held at a time requested by the person calling the meeting, not
less than 15, nor more than 60, days after the receipt of the request. If the
notice is not given within 20 days after receipt of the request, the person
entitled to call the meeting may give the notice or, upon the application of
such person, the superior court of the county in which the principal executive
office of the Partnership is located, or if the principal executive office is
not in this state, the county in which the Partnership's address in this state
is located, shall summarily order the giving of the notice, after notice to the
Partnership giving it an opportunity to be heard. The procedure provided in
subdivision (c) of Section 305 of the California Corporations Code shall apply
to the application. The court may issue any order as may be appropriate,
including, without limitation, an order designating the time and place of the
meeting, the record date for determination of partners entitled to vote, and the
form of notice.
(d) When a partners' meeting is adjourned to another time or place, unless the
Partnership Agreement otherwise requires and, except as provided in this
subdivision, notice need not be given of the adjourned meeting if the time and
place thereof are announced at the meeting at which the adjournment is taken. At
the adjourned meeting the Partnership may transact any business which might have
been transacted at the original meeting. If the adjournment is for more than 45
days or if after the adjournment a new record date is fixed for the adjourned
meeting, a notice of the adjourned meeting shall be given to each partner of
record entitled to vote at the meeting.
(e) The transactions of any meeting of partners, however called and noticed, and
wherever held, are as valid as though had at a meeting duly held after regular
call and notice, if a quorum is present either in person or by proxy, and if,
either before or after the meeting, each of the persons entitled to vote, not
present in person or by proxy, signs a written waiver of notice or a consent to
the holding of the meeting or an approval of the minutes thereof. All waivers,
consents, and approvals shall be filed with the Partnership records or made a
part of the minutes of the meeting. Attendance of a person at a meeting shall
constitute a waiver of notice of the meeting, except when the person objects, at
the beginning of the meeting to the transaction of any business because the
meeting is not lawfully called or convened and except that attendance at a
meeting is not a waiver of any right to object to the consideration of matters
required by this chapter to be included in the notice but not so included, if
the objection is expressly made at the meeting. Neither the business to be
transacted at nor the purpose of any meeting of partners need be specified in
any written waiver of notice, unless otherwise provided in the partnership
agreement, except as provided in subdivision (f).
(f) Any partner approval at a meeting, other than unanimous approval by those
entitled to vote, pursuant to paragraph (5) of subdivision (b) of Section 15632
of the California Corporations Code shall be valid only if the general nature of
the proposal so approved was stated in the notice of meeting or in any written
waiver of notice.
(g) (1) A majority in interest of the Limited Partners represented in person or
by proxy shall constitute a quorum at a meeting of partners.
(2) The partners present at a duly called or held meeting at which a quorum is
present may continue to transact business until adjournment notwithstanding the
withdrawal of enough partners to leave less than a quorum, if any action taken
(other than adjournment) is approved by the requisite percentage of interests of
Limited Partners specified in California Revised Limited Partnership Act or in
the Partnership Agreement.
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(3) In the absence of a quorum, any meeting of partners may be adjourned from
time to time by the vote of a majority of the interests represented either in
person or by proxy, but no other business may be transacted, except as provided
in paragraph (2).
(h) Unless otherwise provided in the Partnership Agreement, any action which may
be taken at any meeting of the partners may be taken without a meeting if a
consent in writing, setting forth the action so taken, shall be signed by
partners having not less than the minimum number of votes that would be
necessary to authorize or take that action at a meeting at which all entitled to
vote thereon were present and voted. In the event the Limited Partners are
requested to consent on a matter without a meeting, each partner shall be given
notice of the matter to be voted upon in the same manner as described in
subdivision (c). In the event any General Partner, or Limited Partners
representing more than 10 percent of the interests of the Limited Partners,
request a meeting for the purpose of discussing or voting on the matter, the
notice of a meeting shall be given in accordance with subdivision (c) and no
action shall be taken until the meeting is held. Unless delayed in accordance
with the provisions of the preceding sentence, any action taken without a
meeting will be effective 15 days after the required minimum number of voters
have signed the consent, however, the action will be effective immediately if
all General Partners and Limited Partners representing at least 90 percent of
the interests of the Limited Partners have signed the consent.
(i) The use of proxies in connection with this section will be governed in the
same manner as in the case of corporations formed under the General Corporation
Law of California. The Partnership will provide for proxies or written consents
which specify a choice between approval and disapproval of each matter to be
acted upon at the meeting.
(j) In order that the Partnership may determine the partners of record entitled
to notices of any meeting or to vote, or entitled to receive any distribution or
to exercise any rights in respect of any other lawful action, the General
Partners, or Limited Partners representing more than 10 percent of the interests
of Limited Partners, may fix, in advance, a record date, which is not more than
60 or less than 15 days prior to the date of the meeting and not more than 60
days prior to any other action. If no record date is fixed:
(1) The record date for determining partners entitled to notice of or to vote at
a meeting of partners shall be at the close of business on the business day next
preceding the day on which notice is given or, if notice is waived, at the close
of business on the business day next preceding the day on which the meeting is
held.
(2) The record date for determining partners entitled to give consent to
Partnership action in writing without a meeting shall be the day on which the
first written consent is given.
(3) The record date for determining partners for any other purpose shall be at
the close of business on the day on which the general partners adopt it, or the
60th day prior to the date of the other action, whichever is later.
(4) The determination of partners of record entitled to notice of or to vote at
a meeting of partners shall apply to any adjournment of the meeting unless the
general partners, or the limited partners who called the meeting, fix a new
record date for the adjourned meeting, but the general partners, or the limited
partners who called the meeting, shall fix a new record date if the meeting is
adjourned for more than 45 days from the date set for the original meeting.
XV.
CAPTIONS-PRONOUNS
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Any titles or captions of articles or paragraphs contained in this
Agreement are for convenience only and shall not be deemed part of the context
of this Agreement. All pronouns and any variations thereof shall be deemed to
refer to the masculine, feminine, neuter, singular or plural, as the
identification of the person or persons, firm or firms, corporation or
corporations may require.
XVI.
BINDING EFFECT AND EXHIBITS
Except as otherwise herein provided, this Agreement shall be binding
upon and inure to the benefit of the parties hereto, their heirs, executors,
administrators, successors and all persons hereafter having or holding an
interest in this Partnership, whether as assignees, substituted Limited
Partners, or otherwise. All exhibits hereto are by this reference incorporated
herein.
XVII.
AMENDMENT OF THE AGREEMENT
Except as provided by this Article XVII, this Agreement may be modified
or amended only by a vote of a majority in interest of the Limited Partners;
provided, however, this Agreement may be amended from time to time by the
General Partners, without the consent of any of the Limited Partners, but only
if such amendment does not affect the rights of the limited partners, (i) to add
to the representations, duties or obligations of the General Partners or their
Affiliates or to surrender any right or power granted to the General Partners or
their Affiliates herein, for the benefit of the Limited Partners; (ii) to cure
any ambiguity, to correct or supplement any provision which may be inconsistent
with any other provision, or to make any other provisions with respect to
matters or questions arising under this Agreement which will not be inconsistent
with the provisions of this Agreement; (iii) to reflect reductions in the
capital contributions of the Limited Partners resulting from the return of
capital to the Limited Partners in accordance with the requirements of this
Agreement; (iv) to delete or add any provision of this Agreement required to be
so deleted or added by the Staff of the Securities and Exchange Commission or by
a State "Blue Sky" Administrator or similar official, which addition or deletion
is deemed by the Administrator or official to be for the benefit or protection
of the Limited Partners; (v) to elect for the Partnership to be governed by any
successor California statute governing limited partnerships; (vi) to effect
changes to substantially comply with Internal Revenue Service Regulations
Section 1.704-1; and (vii) as otherwise provided for pursuant to this
Partnership Agreement. The General Partner shall notify the Limited Partners
within a reasonable time of the adoption of any amendment. Notwithstanding
anything to the contrary contained in this Agreement this Agreement may not be
amended without the consent of all Partners to be adversely affected by the
amendment that:
(a) Converts a Limited Partner into a general partner;
(b) Modifies the limited liability of a Limited Partner;
(c) Alters the interest of the General Partner or Limited Partners in net income
or net loss or distributions from the Partnership; or
(d) Adversely affects the status of the Partnership as a partnership for federal
income tax purposes.
XVIII.
ENTIRE AGREEMENT
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This Agreement contains the entire understanding and agreements between
the parties hereto respecting the within subject matter, and there are no
representations, agreements, arrangements or understandings, oral or written,
between and among the parties hereto relating to the subject matter of this
Agreement which are not fully expressed herein. This Agreement shall be governed
by and construed in accordance with the laws of the State of California and,
unless expressly or by necessary implication contravened by any provision
hereof, the provisions of the California Revised Limited Partnership Act shall
apply.
XIX.
TAX CONTROVERSIES
Should there be any controversy with the Internal Revenue Service or
any other taxing authority involving the Partnership or an individual Partner or
Partners, the outcome of which may adversely affect the Partnership, either
directly or indirectly, the Partnership may incur expenses it deems necessary
and advisable in the interest of the Partnership to oppose such proposed
deficiency, including, without being limited thereto, legal and accounting fees.
XX.
COUNTERPARTS AND EXECUTION
This Agreement may be executed in multiple counterparts, each of which
shall be deemed an original Agreement, and all of which shall constitute one
Agreement, by each of the parties hereto on the dates respectively indicated in
the signatures of said parties, notwithstanding that all of the parties are not
signatories to the original or to the same counterpart, to be effective as of
the day and year hereinabove set forth.
XXI.
INVESTMENT IN OTHER PROGRAMS OF SPONSOR
21.01 The provisions of this Article are effective notwithstanding anything to
the contrary in Sections 1.05 and 2.01.
21.02 Investments in limited partnership interests of another program shall be
prohibited; however, nothing herein shall preclude the investment in general
partnerships or ventures which own and operate a particular property provided
this partnership acquires a controlling interest in such other ventures or
general partnerships (except as permitted by subsection 21.03). In such event,
duplicate property management or other fees shall not be permitted.
21.03 This partnership shall be permitted to invest in joint venture
arrangements with another program formed by the sponsor if all the following
conditions are met.
(a) The two programs have substantially identical investment objectives.
(b) There are no duplicate property management or other fees.
(c) The sponsor compensation should be substantially identical in each program.
(d) The partnership must have a right of first refusal to buy if the other
program wishes to sell property held in the joint venture.
(e) The investment of each program is on substantially the same terms and
conditions.
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(f) The prospectus must disclose the potential risk of impasse on joint venture
decisions since neither program controls and the potential risk that while one
program may buy the property from the other joint venturer, in the event of a
sale, it may not have the resources to do so.
XXII.
PROCEEDS FROM FINANCING PROPERTIES
22.01 After the Partnership has owned a property for two years or more, the
Partnership may borrow money and mortgage such property subject to the
following:
(a) A mortgage may be a lien on one or more properties owned by the Partnership.
(b) The holder of the note evidencing the borrowing may have recourse only to
the property(ies) secured by the mortgage for payment of the note; no recourse
may be had against any other property owned by the Partnership, or against any
General or Limited Partner personally.
(c) All net financing proceeds must be distributed to the Limited and General
Partners as provided in this Agreement.
(d) The net financing proceeds should return substantially all of the Limited
Partner's invested capital.
(e) The financing will assist in the sale of all of the Partnership's
properties.
(f) In the General Partner's judgment, the financing should increase the
economic return to the Limited Partners, and should not substantially increase
the risk of investment in the property(ies).
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In witness whereof, the parties have signed this agreement on the dates
indicated below:
Original Limited Partner: PATRICIA ANN COSEO June 6, 1986
------------------- as amended to
Patricia Ann Coseo September 19, 1986
Individual General JOHN A. COSEO, JR June 6, 1986
------------------- as amended to
Partner: John A. Coseo, Jr. September 19, 1986
Corporate General
Partner: The Windsor Corporation
By JOHN A. COSEO, JR. June 6, 1986
------------------- as amended to
John A. Coseo, Jr. September 19, 1986
1
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THIS CONSENT IS SOLICITED BY THE GENERAL PARTNERS
OF
WINDSOR PARK PROPERTIES 4
The undersigned represents that he or she is the holder of Units. The
undersigned acknowledges receipt from the General Partner of the Consent
Solicitation Statement dated April __, 1999. The General Partners request that
the Limited Partners vote "FOR" the Following Proposals:
Proposal 1 -- Proposal 1 is for the General Partners to proceed to sell the
Partnership's assets and to liquidate and dissolve the Partnership in accordance
with the terms of the Partnership Agreement of the Partnership, generally.
___ FOR ___ AGAINST ___ ABSTAIN
Proposal 2 -- Proposal 2 is for the General Partners to proceed with the Sales
to N' Tandem pursuant to the Purchase and Sale Agreement, and to proceed with
the Plan of Liquidation following such Sales.
___ FOR ___ AGAINST ___ ABSTAIN
Each of Proposal 1 and Proposal 2 is conditioned upon approval of the other
Proposal by the Limited Partners. Accordingly, any Limited Partner desiring to
have the General Partners proceed with the Sales and the Plan of Liquidation
needs to vote for both Proposal 1 and Proposal 2.
PLEASE FILL IN THE APPROPRIATE BOX ABOVE WITH RESPECT TO EACH PROPOSAL.
Dated:
---------------------------------------
Signature
---------------------------------------
Print Name
---------------------------------------
Signature (if held jointly)
---------------------------------------
Print Name
---------------------------------------
Title
Please sign exactly as name appears hereon. When Units are held by joint
tenants, both should sign. When signing as an attorney, as executor,
administrator, trustee or guardian, please give full title of such. If a
corporation, please have this consent signed by a President or other authorized
officer. If a partnership, please have this consent signed by a general partner.
PLEASE FILL IN THE DATE OF THIS CONSENT AS CONSENTS MUST BE DATED TO BE VALID.
PLEASE FILL OUT, SIGN AND RETURN THIS FORM BY 5:00 P.M.
(NEW YORK CITY TIME) ON MAY __, 1999.
2
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