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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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SCHEDULE 14D-9
Solicitation/Recommendation Statement
Pursuant to Section 14(d)(4) of the
Securities Exchange Act of 1934
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FOX STRATEGIC HOUSING INCOME PARTNERS
(Name of Subject Company)
FOX STRATEGIC HOUSING INCOME PARTNERS
(Name of Person Filing Statement)
LIMITED PARTNERSHIP UNITS
(Title of Class of Securities)
N/A
(CUSIP Number of Class of Securities)
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WILLIAM H. JARRARD, JR.
President
Fox Capital Management Corporation
One Insignia Financial Plaza
Greenville, South Carolina 29602
(864) 239-2854
(Name, Address, and Telephone Number of Person
Authorized to Receive Notices and Communications
on Behalf of the Person(s) filing Statement)
Copy to:
ARNOLD S. JACOBS, ESQ.
Proskauer Rose LLP
1585 Broadway
New York, New York 10036
(212) 969-3210
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ITEM 1. SECURITY AND SUBJECT COMPANY.
The name of the subject partnership is Fox Strategic Housing
Income Partners, a California limited partnership (the "Partnership"), and the
address of its principal executive offices is One Insignia Financial Plaza,
Greenville, South Carolina 29602. The title of the class of equity securities
to which this statement relates is the Partnership's Limited Partnership Units
("Units").
ITEM 2. TENDER OFFER OF THE BIDDER.
This statement relates to an offer by IPLP Acquisition I
LLC, a Delaware limited liability company (the "Purchaser"), Insignia
Properties, L.P., a Delaware limited partnership ("IPLP"), Insignia Properties
Trust, a Maryland real estate investment trust ("IPT") and Insignia Financial
Group, Inc., a Delaware corporation ("Insignia," and together with IPT and the
Purchaser, the "Bidders"), disclosed in a Tender Offer Statement on Schedule
14D-1 dated August 28, 1997 (the "Schedule 14D-1"), to purchase up to 11,750
outstanding Units at a purchase price of $260 per Unit, net to the seller in
cash, upon the terms and subject to the conditions set forth in the Offer to
Purchase dated August 28, 1997 (the "Offer to Purchase"), and the related
Assignment of Partnership Interest (which collectively constitute the "Offer"
and are contained within the Schedule 14D-1).
The address of the Purchaser's principal executive offices
is One Insignia Financial Plaza, Greenville, South Carolina 29602.
ITEM 3. IDENTITY AND BACKGROUND.
(a) The name and business address of the Partnership, which
is the person filing this statement, are set forth in Item 1 above.
(b)(i) The Partnership's sole general partner is Fox
Partners VIII, a California general partnership (the "General Partner") and an
affiliate of the Bidders.
Fox Partners VIII has two general partners: Fox Capital
Management Corporation, a California corporation ("FCMC"), which is the
managing general partner of the General Partner and Fox Realty Investors, a
California general partnership ("FRI"), which is the other general partner of
the General Partner.
In January 1996, IFGP Corporation, a wholly-owned subsidiary
of Insignia, acquired all of the outstanding stock of National Property
Investors, Inc. ("NPI"), which (prior to December 1996) was the parent
corporation of NPI Equity Investments II ("NPI Equity"), the managing general
partner of FRI (thus acquiring all of the outstanding stock of NPI Equity and
the managing general partner interest in FRI). In June 1996, Insignia
Properties Corporation ("IPC"), which at the time was a wholly-owned
subsidiary of Insignia, acquired all of the outstanding stock of FCMC. In
December 1996, as part of the formation of IPT, NPI contributed all of the
outstanding stock of NPI Equity to IPT and IPC was merged with and into IPT.
As a result of the foregoing transactions, each of FCMC and NPI Equity is now
a wholly-owned subsidiary of IPT, and IPT controls the General Partner.
NPI-AP, which is the property manager for the Partnership's properties, is
currently an indirect, wholly-owned subsidiary of Insignia. Insignia acquired
NPI-AP Management, L.P. ("NPI-AP") in January 1996 in connection with the
foregoing transactions. The Purchaser is a newly-formed, wholly-owned
subsidiary of IPLP, which is the operating partnership of IPT. IPT is the sole
general partner of IPLP (owning approximately 68% of the total equity
interests in IPLP), and Insignia is the sole limited partner of IPLP (owning
approximately 32% of the total equity interests in IPLP). Insignia
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and its affiliates also own approximately 70% of the outstanding common shares
of beneficial interest of IPT. NPI-AP, which since mid-January 1996 has been
an affiliate of Insignia and is an affiliate of IPT and the Purchaser, has
provided property management services to the Partnership, and since
mid-January 1996 Insignia (directly or through its affiliates) has performed
asset management and partnership administration services for the Partnership.
By reason of these relationships, the General Partner has conflicts of
interest in considering the Offer.
The Partnership, the General Partner and NPI-AP were not
affiliates of Insignia prior to midJanuary 1996. Accordingly, this section
only discusses transactions between the Partnership, on the one hand, and
Insignia and its affiliates (including the General Partner and NPI-AP), on the
other hand, which have occurred since mid-January 1996.
Under the Limited Partnership Agreement, the General Partner
holds an interest in the partnership and is entitled to participate in certain
cash distributions made by the Partnership to its partners. No distributions
were made to the General Partner in respect of its interest in the Partnership
in 1996 or to date in 1997. The Partnership paid NPI-AP property management
fees for property management services in the aggregate amounts of $150,000 for
the year ended December 31, 1996 and $76,000 for the six-month period ended
June 30, 1997. The Partnership reimbursed the General Partner and its
affiliates for expenses incurred in connection with asset management and
partnership administration services performed by them for the Partnership
during 1996 in the amount of $161,000, and has reimbursed them in the amount
of $35,000 during the first six months of 1997. In January 1996, the
Partnership began insuring its properties under a master policy through an
agency and insurer unaffiliated with the General Partner. An affiliate of the
General Partner acquired, in the acquisition of a business, certain financial
obligations from an insurance agency which was later acquired by the agent who
placed the current year's master policy. The current agent assumed the
financial obligations to the affiliate of the General Partner who receives
payments on these obligations from the agent. Insignia and the General Partner
believe that the aggregate financial benefit derived by Insignia and its
affiliates from the arrangement described in the three preceding sentences has
been immaterial.
The Purchaser and the General Partner are affiliates of and
controlled by IPT, which is controlled by Insignia. The General Partner has
conflicts of interest in considering the Offer, including (i) as a result of
the fact that a sale or liquidation of the Partnership's assets would result
in a decrease or elimination of the fees paid to the General Partner and/or
its affiliates and (ii) the fact that as a consequence of the Purchaser's
ownership of Units, the Purchaser (which is an affiliate of the General
Partner) may have incentives to seek to maximize the value of its ownership of
Units, which in turn may result in a conflict for the General Partner in
attempting to reconcile the interests of the Purchaser (which is an affiliate
of the General Partner) with the interests of the other Limited Partners.
The Purchaser (which is an affiliate of the General Partner)
expects to pay for the Units it purchases pursuant to the Offer with funds
provided by IPLP as capital contributions. IPLP in turn intends to use its
cash on hand to make such contributions. It is possible, however, that in
connection with its future financing activities, IPT or IPLP may cause or
request the Purchaser (which is an affiliate of the General Partner) to pledge
the Units as collateral for loans, or otherwise agree to terms which provide
IPT, IPLP and the Purchaser with incentives to generate substantial near-term
cash flow from the Purchaser's investment in the Units. This could be the
case, for example, if a loan has a "bullet" maturity after a relatively short
time or bears a high or increasing interest rate. In such a situation, the
General Partner may experience a conflict of interest in seeking to reconcile
the best interests of the Partnership with the need of its affiliates for cash
flow from the Partnership's activities.
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If the Purchaser is successful in acquiring a significant
number of Units pursuant to the Offer, the Purchaser (which is an affiliate of
the General Partner) will have the right to vote those Units and thereby
significantly influence all voting decisions with respect to the Partnership,
including decisions concerning liquidation, amendments to the Limited
Partnership Agreement, removal and replacement of the General Partner and
mergers, consolidations and other extraordinary transactions. This means that
(i) nontendering Limited Partners could be prevented from taking action they
desire but that the Purchaser (which is an affiliate of the General Partner)
opposes (ii) the Purchaser (which is an affiliate of the General Partner) may
be able to take action desired by the Purchaser but opposed by the
non-tendering Limited Partners.
The Limited Partnership Agreement provides that the General
Partner has absolute discretion as to whether to admit an assignee of Units to
the Partnership as a substituted Limited Partner. The Purchaser (which is an
affiliate of the General Partner) will seek to be admitted to the Partnership
as a substituted Limited Partner upon consummation of the Offer and, if
admitted, will have the right to vote each Unit purchased pursuant to the
Offer. Even if the Purchaser (which is an affiliate of the General Partner) is
not admitted to the Partnership as a Substitute Limited Partner, however, the
Purchaser nonetheless will have the right to vote each Unit purchased in the
Offer pursuant to the irrevocable appointment by tendering Limited Partners of
the Purchaser and its managers and designees as proxies with respect to the
Units tendered by such Limited Partners and accepted for payment by the
Purchaser. As a result, the Purchaser (which is an affiliate of the General
Partner) could be in a position to significantly influence all voting
decisions with respect to the Partnership. This could (i) prevent
non-tendering Limited Partners from taking action they desire but that the
Purchaser (which is an affiliate of the General Partner) opposes and (ii)
enable the Purchaser to take action desired by the Purchaser but opposed by
non-tendering Limited Partners. Under the Limited Partnership Agreement,
Limited Partners holding a majority of the Units are entitled to take action
with respect to a variety of matters, including: removal of a general partner;
dissolution of the Partnership; and most types of amendments to the Limited
Partnership Agreement. When voting on those matters, the Purchaser (which is
an affiliate of the General Partner) will vote the Units owned by it in
whatever manner it deems to be in the Purchaser's best interests, which,
because of its relationship with the General Partner, also may be in the
interest of the General Partner.
The Offer will not result in any change in the compensation
payable to the General Partner or its affiliates. However, as a result of the
Offer, the Purchaser (which is an affiliate of the General Partner) will
participate, in its capacity as a Limited Partner, in any subsequent
distributions to Limited Partners to the extent of the Units purchased
pursuant to the Offer.
(b)(ii) To the best knowledge of the General Partner, except
as described in this Schedule 14D-9, there are no other material agreements,
arrangements, understandings or any actual or potential conflicts of interest
between the Partnership, the General Partner and their affiliates and the
Bidders, their executive officers, directors or affiliates.
ITEM 4. THE SOLICITATION OR RECOMMENDATION.
Because of the existing and potential future conflicts of
interest described in Item 3 above, the Partnership and the General Partner
are remaining neutral and making no recommendation as to whether Unit holders
should tender their Units in response to the Offer.
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ITEM 5. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED.
Neither the Partnership nor any person acting on its behalf
has employed, retained or compensated, or intends to employ, retain or
compensate, any person or class of persons to make solicitations or
recommendations to Unit holders on its behalf concerning the Offer.
ITEM 6. RECENT TRANSACTIONS AND INTENT WITH RESPECT TO SECURITIES.
(a) No transactions in the Units have been effected during
the past 60 days by the Partnership or the General Partner or, to the
knowledge of the General Partner, by any of its current or former executive
officers, directors or affiliates.
(b) To the knowledge of the Partnership, neither the General
Partner nor any of its current or former executive officers, directors or
affiliates intends to tender pursuant to the Offer any Units beneficially
owned by them.
ITEM 7. CERTAIN NEGOTIATIONS AND TRANSACTIONS BY THE SUBJECT COMPANY.
None.
ITEM 8. ADDITIONAL INFORMATION TO BE FURNISHED.
None.
ITEM 9. MATERIAL TO BE FILED AS EXHIBITS.
(a) Form of cover letter to Unit holders from the
Partnership dated August 28, 1997.
(b) None.
(c) None.
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SIGNATURE
After reasonable inquiry and to the best of my knowledge and
belief, I certify that the information set forth in this statement is true,
complete and correct.
Dated: August 28, 1997
FOX STRATEGIC HOUSING INCOME PARTNERS
By: FOX PARTNERS VIII
Its General Partner
By: FOX CAPITAL MANAGEMENT CORPORATION
Its General Partner
By: /s/ William H. Jarrard, Jr.
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William H. Jarrard, Jr.
President and Director
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EXHIBIT INDEX
Exhibit Description
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(a) Form of cover letter to Unit holders from the
Partnership dated August 28, 1997.
(b) None.
(c) None.
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Exhibit (a)
Fox Strategic Housing Income Partners
August 28, 1997
Dear Limited Partner:
Enclosed is the Schedule 14D-9 which was filed by Fox
Strategic Housing Income Partners (the "Partnership") with the Securities and
Exchange Commission in connection with an offer (the "Offer") by IPLP
Acquisition I LLC, a Delaware limited liability company (the "Purchaser"),
Insignia Properties, L.P., a Delaware limited partnership ("IPLP"), Insignia
Properties Trust, a Maryland real estate investment trust ("IPT"), and
Insignia Financial Group, Inc., a Delaware corporation ("Insignia," and
together with IPLP, IPT and the Purchaser, the "Bidders"), to purchase limited
partnership units ("Units") of the Partnership.
The Partnership's sole general partner (the "General
Partner") is Fox Partners VIII, a California general partnership and an
affiliate of the Bidders. Due to the affiliation between the General Partner
of the Partnership and the Bidders, the General Partner is subject to certain
conflicts of interest in connection with the response to the Offer.
AS A RESULT OF THE EXISTING AND POTENTIAL CONFLICTS OF
INTEREST, NEITHER THE PARTNERSHIP NOR THE GENERAL PARTNER EXPRESSES ANY
OPINION AS TO THE OFFER AND EACH IS REMAINING NEUTRAL AND MAKING NO
RECOMMENDATION AS TO WHETHER UNIT HOLDERS SHOULD TENDER THEIR UNITS IN
RESPONSE TO THE OFFER.
Limited partners are advised to carefully read the enclosed
Schedule 14D-9.
Fox Strategic Housing Income Partners
