SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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SCHEDULE 14D-1
TENDER OFFER STATEMENT PURSUANT TO SECTION 14(D)(1)
OF THE SECURITIES EXCHANGE ACT OF 1934
(Amendment No. 4)
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FOX STRATEGIC HOUSING INCOME PARTNERS
(Name of Subject Company)
AIMCO PROPERTIES, L.P.
APARTMENT INVESTMENT AND MANAGEMENT COMPANY
(Bidders)
UNITS OF LIMITED PARTNERSHIP INTEREST
(Title of Class of Securities)
NONE
(Cusip Number of Class of Securities)
------------------------------------
Patrick Foye
Executive Vice President
AIMCO-GP, Inc.
1873 South Bellaire Street, 17th Floor
Denver, Colorado 80222
(303) 757-8101
(Name, Address and Telephone Number of Person Authorized
to Receive Notices and Communications on Behalf of Bidders)
------------------------------------
CALCULATION OF FILING FEE
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Transaction Valuation*: $2,350,000 Amount of Filing Fee: $470.00
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* For purposes of calculating the fee only. This amount assumes the purchase of
11,750 units of limited partnership interest ("Units") of the subject
partnership for $200 per Unit. The amount of the filing fee, calculated in
accordance with Section 14(g)(3) and Rule 0-11(d) under the Securities Exchange
Act of 1934, as amended, equals 1/50th of one percent of the aggregate of the
cash offered by the bidders.
(cover page 1 of 2)
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(cover page 2 of 2)
[ ] 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: 470.00
Form or Registration No.: Schedule 14D-1
Filing Party: AIMCO Properties, L.P. and Apartment Investment and Management
Company
Date Filed: April 30, 1999
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CUSIP No. NONE 14D-1 AND 13D/A Page 3
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1. Name of Reporting Persons; I.R.S. Identification Nos. of Above Persons
AIMCO PROPERTIES, L.P.
84-1275621
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2. Check the Appropriate Box if a Member of a Group
(a) [ ]
(b) [X]
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3. SEC Use Only
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4 Sources of Funds
WC
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5. Check if Disclosure of Legal Proceedings is Required Pursuant
to Items 2(e) or 2(f) [ ]
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6. Citizenship or Place of Organization
Delaware
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7. Aggregate Amount Beneficially Owned by Each Reporting Person
None
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8. Check if the Aggregate Amount in Row 7 Excludes Certain Shares [ ]
- --------------------------------------------------------------------------------
9. Percent of Class Represented by Amount in Row 7
N/A
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10. Type of Reporting Person
PN
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CUSIP No. NONE 14D-1 AND 13D/A Page 4
- --------------------------------------------------------------------------------
1. Name of Reporting Persons; I.R.S. Identification Nos. of Above Persons
APARTMENT INVESTEMENT AND MANAGEMENT COMPANY
84-1259577
- --------------------------------------------------------------------------------
2. Check the Appropriate Box if a Member of a Group
(a) [ ]
(b) [X]
- --------------------------------------------------------------------------------
3. SEC Use Only
- --------------------------------------------------------------------------------
4 Sources of Funds
N/A
- --------------------------------------------------------------------------------
5. Check if Disclosure of Legal Proceedings is Required Pursuant
to Items 2(e) or 2(f) [ ]
- --------------------------------------------------------------------------------
6. Citizenship or Place of Organization
Maryland
- --------------------------------------------------------------------------------
7. Aggregate Amount Beneficially Owned by Each Reporting Person
4,132
- --------------------------------------------------------------------------------
8. Check if the Aggregate Amount in Row 7 Excludes Certain Shares [ ]
- --------------------------------------------------------------------------------
9. Percent of Class Represented by Amount in Row 7
15.83%
- --------------------------------------------------------------------------------
10. Type of Reporting Person
CO
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AMENDMENT NO. 3 TO SCHEDULE 14D-1
This Amendment No. 3 amends the Tender Offer Statement on Schedule
14D-1 (the "Statement") filed with the Securities and Exchange Commission on
April 30, 1999 by AIMCO Properties, L.P., a Delaware limited partnership (the
"Purchaser"), and Apartment Investment and Management Company, a Maryland real
estate investment trust, as amended on May 5, 1999, and as further amended on
May 27, 1999, and as further amended on June 14, 1999 relating to the tender
offer by the Purchaser to purchase up to 11,750 outstanding units of limited
partnership interest ("Units") of Fox Strategic Income Housing Partners (the
"Partnership"), at a purchase price of $200 per Unit, net to the seller in cash,
upon the terms and subject to the conditions set forth in the Offer to Purchase
dated April 30, 1999, as amended on May 5, 1999, as further amended on May 27,
1999 and as further amended on June 14, 1999 (the "Offer to Purchase") and the
related Letter of Transmittal (which, together with any supplements or
amendments, collectively constitute the "Offer"), to extend the expiration date
to July 30, 1999.
ITEM 11. MATERIAL TO BE FILED AS EXHIBITS.
Item 11 is hereby amended to add the following:
(a)(7) Press Release dated July 1, 1999
(a)(8) Supplement No. 3 to Offer to Purchase dated July 1, 1999
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SIGNATURES
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.
Dated: July 1, 1999
AIMCO PROPERTIES, L.P.
By: AIMCO-GP, Inc.
By: Patrick J. Foye
--------------------
Patrick J. Foye
Executive Vice President
APARTMENT INVESTMENT AND
MANAGEMENT COMPANY
By: Patrick J. Foye
--------------------
Patrick J. Foye
Executive Vice President
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EXHIBIT INDEX
Exhibit Description
(a)(7) Press Release dated July 1, 1999
(a)(8) Supplement No. 3 to Offer to Purchase, dated July 1, 1999
Exhibit (a)(7)
CONTACT: River Oaks Partnership Services, Inc.
(888) 349-2005 (toll free)
FOR IMMEDIATE RELEASE
DENVER, COLORADO, July 1, 1999-As previously announced, AIMCO
Properties, L.P. has commenced a tender offer for limited partnership interests
in Fox Strategic Housing Income Partners. AIMCO Properties today announced that
it has extended the expiration date of its outstanding offer for limited
partnership interests in Fox Strategic Housing Income Partners. The expiration
date for each tender offer has been extended to 12:00 midnight, New York time,
on Friday, July 30, 1999. The offer was previously scheduled to expire at 12:00
midnight on Wednesday, June 30, 1999.
Based on information provided by the Information Agent for the
offer, as of the close of business on June 28, 1999, approximately 869 interests
had been tendered pursuant to the offer.
For further information, please contact River Oaks Partnership
Services, Inc. at (888) 349-2005 (toll free), which is acting as the Information
Agent for the offers.
Exhibit (a)(8)
Supplement No. 3 to
Offer to Purchase by
AIMCO Properties, L.P.
of up to 11,750 units of limited partnership interest of
Fox Strategic Housing Income Partners
for $200 per unit in CASH
We will accept a maximum 11,750 units in response to our As extended, our offer
and your withdrawal rights will offer. If more units are tendered to us, we will
expire at 5:00 p.m., New York City time, on July 30, generally accept units on a
pro rata basis according to 1999, unless we extend the deadline.
the number of units tendered by each person.
Our offer price will be reduced for any distributions made by your partnership
since the date of the Purchase and prior to the expiration of our offer.
As extended, our offer and your withdrawal rights will expire at 5:00 p.m., New
York City time, on July 30, 1999, unless we extend the deadline.
You will not pay any fees or commissions if you tender your units.
Our offer is not subject to any minimum number of units being tendered.
See "Risk Factors" beginning on page 2 herein for a description of risk
factors that you should consider in connection with our offer, including the
following:
o We determined the offer price of $200 per unit without any arms-length
negotiations. Accordingly, our offer price may not reflect the fair
market value of your units.
o Your general partner and the property manager of the residential
property are affiliates of ours and, therefore, the general partner has
substantial conflicts of interest with respect to our offer.
o We are making this offer with a view to making a profit and, therefore,
there is a conflict between our desire to purchase your units at a low
price and your desire to sell your units at a high price.
o Continuation of your partnership will result in our affiliates
continuing to receive management fees from your partnership. Such fees
would not be payable if your partnership was liquidated.
o It is possible that we may conduct a subsequent offer at a higher
price.
o For any units that we acquire from you, you will not receive any future
distributions from operating cash flow of your partnership or upon a
sale or refinancing of property owned by your partnership.
o If we acquire a substantial number of units, we will increase our
ability to influence voting decisions with respect to your partnership
and may control such voting decisions, including but not limited to the
removal of the general partner, most amendments to the partnership
agreement and the sale of all or substantially all of your
partnership's assets.
If you desire to accept our offer, you should complete and sign the Letter
of Transmittal in accordance with the instructions thereto and mail or deliver
the signed Letter of Transmittal and any other required documents to River Oaks
Partnership Services, Inc., which is acting as Information Agent in connection
with our offer, at one of its addresses set forth on the back cover of this
Supplement. Questions and requests for assistance or for additional copies of
the Offer to Purchase, this Supplement or the Letter of Transmittal may also be
directed to the Information Agent at (888) 349-2005.
July 1, 1999
We are offering to purchase up to 11,750 units, representing
approximately 45% of the outstanding units of limited partnership interest in
your partnership, for the purchase price of $200 per unit, net to the seller in
cash, without
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interest, less the amount of distributions, if any, made by your partnership in
respect of any unit from April 30, 1999 until the expiration date. Our offer is
made upon the terms and subject to the conditions set forth in the Offer to
Purchase, dated April 30, 1999, Supplement No. 1 to the Offer to Purchase, dated
May 27, 1999, and Supplement No. 2 to the Offer to Purchase, dated June 14,
1999, this Supplement and in the accompanying letter of transmittal.
If you tender your units in response to our offer you will not be
obligated to pay any commissions or partnership transfer fees but will be
obligated to pay any transfer taxes (see Instruction 8 to the letter of
transmittal). We have retained River Oaks Partnership Services, Inc. to act as
the Information Agent in connection with our offer. We will pay all charges and
expenses in connection with the services of the Information Agent. The offer is
not conditioned on any minimum number of units being tendered. However, certain
other conditions do apply. See "The Offer - Section 14. Conditions of the
Offer," in the Offer to Purchase.
Our offer will expire at 5:00 P.M., New York City time, on July 30,
1999, unless extended. We will pay for units tendered pursuant to the offer
within ten business day of our acceptance of such units for payment. If you
desire to accept our offer, you must complete and sign the letter of transmittal
in accordance with the instructions contained therein and forward or hand
deliver it, together with any other required documents, to the Information
Agent. You may withdraw your tender of units pursuant to the offer at any time
prior to the expiration date of our offer and, if we have not accepted such
units for payment, on or after August 29, 1999.
Our Offer to Purchase is amended and supplemented as follows:
1. By adding the following immediately following the Introduction:
RISK FACTORS
Before deciding whether or not to tender any of your units, you should
consider carefully the following risks and disadvantages of the offer:
No Third Party Valuation or Appraisal; No Arms-Length Negotiation
We did not base our valuation of the properties owned by your
partnership on any third-party appraisal or valuation. We established the terms
of our offer without any arms-length negotiation. The terms of the offer could
differ if they were subject to independent third party negotiations. It is
uncertain whether our offer price reflects the value which would be realized
upon a sale of your units to a third party.
No Fairness Opinion From a Third Party
We did not obtain an opinion from a third party that our offer price is
fair from a financial point of view.
Offer Price May Not Represent Fair Market Value
There is no established or regular trading market for your units, nor
is there another reliable standard for determining the fair market value of the
units. Our offer price does not necessarily reflect the price that you would
receive in an open market for your units. Such prices could be higher than our
offer price.
Offer Price Does Not Reflect Future Prospects
Our offer price is based on your partnership's historical property
income. It does not ascribe any value to potential future improvements in the
operating performance of your partnership's properties.
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Offer Price Based on Our Estimate of Liquidation Proceeds
The offer price represents only our estimate of the amount you would
receive if we liquidated the partnership. In determining the liquidation value,
we used the direct capitalization method to estimate the value of your
partnership's properties because we think a prospective purchaser of the
properties would value the properties using this method. In doing so, we applied
a capitalization rate to your partnership's property income for the year ended
December 31, 1998. If property income for a different period or a different
capitalization rate was used, a higher valuation could result. Other methods of
valuing your units could also result in a higher valuation.
Offer Price May Not Represent Liquidation Value
The actual proceeds obtained from a liquidation are highly uncertain
and could be more than our estimate. Accordingly, our offer price could be less
than the net proceeds that you would realize upon an actual liquidation of your
partnership.
Continuation of the Partnership; No Time Frame Regarding Sale of Properties
Your general partner (which is our subsidiary) is proposing to continue
to operate your partnership and not to attempt to liquidate it at the present
time. Thus, our offer does not satisfy any expectation that you would receive
the return of your investment in the partnership through a sale of any property.
It is not known when the properties owned by your partnership may be sold. There
may be no way to liquidate your investment in the partnership in the future
until the properties are sold and the partnership is liquidated. The general
partner of your partnership continually considers whether a property should be
sold or otherwise disposed of after consideration of relevant factors, including
prevailing economic conditions, availability of favorable financing and tax
considerations, with a view to achieving maximum capital appreciation for your
partnership. At the current time the general partner of your partnership
believes that a sale of the properties would not be advantageous given market
conditions, the condition of the properties and tax considerations. In
particular, the general partner considered the changes in the local rental
market, the potential for appreciation in the value of the properties and the
tax consequences to you and your partners on a sale of the properties. We cannot
predict when any property will be sold or otherwise disposed of.
Holding Units May Result in Greater Future Value
You might receive more value if you retain your units until your
partnership is liquidated.
Conflicts of Interest With Respect to the Offer; No General Partner
Recommendation
The general partner of your partnership is our subsidiary and,
therefore, has substantial conflicts of interest with respect to our offer. We
are making this offer with a view to making a profit. There is a conflict
between our desire to purchase your units at a low price and your desire to sell
your units at a high price. We determined our offer price without negotiation
with any other party, including any general or limited partner. Because of our
affiliation with the general partner of your partnership, your general partner
makes no recommendation as to whether you should tender your units.
Conflicts of Interest Relating to Management Fees
Since our subsidiaries receive fees for managing your partnership and
its properties, a conflict of interest exists between our continuing the
partnership and receiving such fees, and the liquidation of the partnership and
the termination of such fees. Another conflict is the fact that a decision of
the limited partners of your partnership to remove, for any reason, the general
partner of your partnership or the property manager of any property owned by
your partnership would result in a decrease or elimination of the substantial
fees paid to them for services provided to your partnership.
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Possible Subsequent Offer at a Higher Price
It is possible that we may conduct a subsequent offer at a higher
price. Such a decision will depend on, among other things, the performance of
the partnership, prevailing economic conditions, and our interest in acquiring
additional limited partnership interests.
Recognition of Taxable Gain on a Sale of Your Units
Your sale of units for cash will be a taxable sale, with the result that you
will recognize taxable gain or loss measured by the difference between the
amount realized on the sale and your adjusted tax basis in the units of limited
partnership interest of your partnership you transfer to us. The "amount
realized" with respect to a unit of limited partnership interest of your
partnership you transfer to us will be equal to the sum of the amount of cash
received by you for the unit sold pursuant to the offer plus the amount of
partnership liabilities allocable to the unit. The particular tax consequences
for you of our offer will depend upon a number of factors related to your tax
situation, including your tax basis in your units of limited partnership
interest of your partnership you transfer to us, whether you dispose of all of
your units and whether you have available suspended passive losses, credits or
other tax items to offset any gain recognized as a result of your sale of your
units of limited partnership interest of your partnership. Therefore, depending
on your basis in the units and your tax position, your taxable gain and any tax
liability resulting from a sale of units to us pursuant to the offer could
exceed our offer price. Because the income tax consequences of tendering units
will not be the same for everyone, you should consult your own tax advisor to
determine the tax consequences of the offer to you.
Loss of Future Distributions from Your Partnership
If you tender your units in response to our offer, you will transfer to
us all right, title and interest in and to all of the units we accept, and the
right to receive all distributions in respect of such units on and after the
date on which we accept such units for purchase. Accordingly, for any units that
we acquire from you, you will not receive any future distributions from
operating cash flow of your partnership or upon a sale or refinancing of
properties owned by your partnership.
Possible Increase in Control of Your Partnership by Us
Decisions with respect to the day-to-day management of your partnership are the
responsibility of the general partner. Because the general partner of your
partnership is our affiliate, we control the management of your partnership.
Under your partnership's agreement of limited partnership, limited partners
holding a majority of the outstanding units must approve certain extraordinary
transactions, including the removal of the general partner, the addition of a
new general partner, most amendments to the partnership agreement and the sale
of all or substantially all of your partnership's assets. If we acquire all the
units we are tendering for we will own a majority of the outstanding units and
will have the ability to control any vote of the limited partners.
Recognition of Gain Resulting from Possible Future Reduction in Your Partnership
Liabilities
Generally, a decrease in your share of partnership liabilities is
treated, for Federal income tax purposes, as a deemed cash distribution.
Although no general partner of your partnership has any current plan or
intention to reduce the liabilities of your partnership, it is possible that
future economic, market, legal, tax or other considerations may cause a general
partner to reduce the liabilities of your partnership. If you retain all or a
portion of your units of limited partnership interest of your partnership and
the liabilities of your partnership were to be reduced, you will be treated as
receiving a hypothetical distribution of cash resulting from a decrease in your
share of the liabilities of the partnership. Any such hypothetical distribution
of cash would be treated as a nontaxable return of capital to the extent of your
adjusted tax basis in your units and thereafter as gain.
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Possible Termination of Your Partnership for Federal Income Tax Purposes
If there is a sale or exchange of 50% or more of the total interest in
capital and profits of your partnership within any 12-month period, including
sales or exchanges resulting from our offer, your partnership will terminate for
Federal income tax purposes. Any such termination may, among other things,
subject the assets of your partnership to longer depreciable lives than those
currently applicable to the assets of your partnership. This would generally
decrease the annual average depreciation deductions allocable to you if you do
not tender all of your interests of your partnership (thereby increasing the
taxable income allocable to your interests of your partnership each year), but
would have no effect on the total depreciation deductions available over the
useful lives of the assets of your partnership. Any such termination may also
change (and possibly shorten) your holding period with respect to your interests
of your partnership that you choose to retain.]
2. The first sentence under "The Offer - Section 5. Extension of Tender
Period; Termination; Amendment" is hereby amended to read as follows:
We expressly reserve the right, in our reasonable discretion, at any
time and from time to time, (i) to extend the period of time during which our
offer is open and thereby delay acceptance for payment of, and payment for, any
unit, (ii) to terminate the offer and not accept any units not theretofore
accepted for payment or paid for if any of the conditions to the offer are not
satisfied or if any event occurs that might reasonably be expected to result in
a failure to satisfy such conditions, (iii) upon the occurrence of any of the
conditions specified in "The Offer - Section 14," to delay the acceptance for
payment of, or payment for, any units not already accepted for payment or paid
for, and (iv) to amend our offer in any respect (including, without limitation,
by increasing the consideration offered, increasing or decreasing the units
being sought, or both).
3. The following is added to the end of "The Offer-Section 7. Effects of the
Offer-Effect on Trading Market; Reporting Requirements under the Exchange
Act of 1934":
Your partnership currently has 1,311 unitholders of record. While we
believe that, even if we purchase the maximum number of units pursuant to the
offer, the units will be held by more than 300 persons. If units are tendered
which would result in less than 320 unitholders, we will purchase no more than
99% of the units tendered by each unitholder. See "The Offer-Section 1. Terms of
the Offer; Expiration Date; Proration."
4. "The Offer - Section 7. Effects of the Offer-Control of Limited Partner
Voting Decisions by Purchaser; Effect of Relationship with General Partner"
is hereby amended by adding the following at the end thereof:
Decisions with respect to the day-to-day management of your partnership
are the responsibility of the general partner. Because the general partner of
your partnership is our affiliate, we control the management of your
partnership. Under your partnership's agreement of limited partnership, limited
partners holding a majority of the outstanding units must approve certain
extraordinary transactions, including the removal of the general partner, the
addition of a new general partner, most amendments to the partnership agreement
and the sale of all or substantially all of your partnership's assets. If we
acquire all the units we are offering to purchase, we will own a majority of the
outstanding units and will have the ability to control any vote of the limited
partners.
5. The text under "The Offer - Section 12. Source of Funds" is hereby replaced
in its entirety by inserting the following in lieu thereof:
We expect that approximately $2,350,000 will be required to purchase
all of the 11,750 limited partnership units that we are seeking in this offer
(exclusive of fees and expenses estimated to be $10,000). For more information
regarding fees and expenses, see "The Offer - Section 16. Fees and Expenses" in
the Offer to Purchase.
In addition to this offer, we are concurrently making offers to acquire
interests in approximately 100 other limited partnerships. If all such offers
were fully subscribed for cash, we would be required to pay approximately $260
million for all such units. If for some reason we did not have such funds
available we might extend this offer for a period of time sufficient for us to
obtain additional funds, or we might terminate this offer. However, based on our
past experience with similar offers, we do not expect all such offers to be
fully subscribed. Also, in some offers, investors have been offered a choice of
cash or securities. As a result, we expect that the funds that will be necessary
to consummate all the offers will be substantially less than $200 million. We
believe that we have sufficient cash on hand and available sources of financing
to pay such amounts. As of March 31, 1999, we had $38,000,000 of cash on hand
and $145,000,000 available for borrowing under our existing lines of credit.
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Under our $145 million revolving credit facility with Bank of America
National Trust and Savings Association ("Bank of America") and BankBoston, N.A.,
AIMCO Properties, L.P. is the borrower and all obligations thereunder are
guaranteed by AIMCO and certain of its subsidiaries. The annual interest rate
under the credit facility is based on either LIBOR or Bank of America's
reference rate, at our election, plus, an applicable margin. We elect which
interest rate will be applicable to particular borrowings under the credit
facility. The margin ranges between 2.25% and 2.75% in the case of LIBOR-based
loans and between 0.75% and 1.25% in the case of base rate loans, depending upon
a ratio of our consolidated unsecured indebtedness to the value of certain
unencumbered assets. The credit facility matures on September 30, 1999 unless
extended, at the discretion of the lenders. The credit facility provides for the
conversion of the revolving facility into a three year term loan. The
availability of funds to us under the credit facility is subject to certain
borrowing base restrictions and other customary restrictions, including
compliance with financial and other covenants thereunder. The financial
covenants require us to maintain a ratio of debt to gross asset value of no more
than 0.55 to 1.0, an interest coverage ratio of 2.25 to 1.0 and a fixed charge
coverage ratio of at least 1.7 to 1.0 from January 1, 1999 through June 30,
1999, and 1.8 to 1.0 thereafter. In addition, the credit facility limits us from
distributing more than 80% of our Funds From Operations (as defined) to holders
of our units, imposes minimum net worth requirements and provides other
financial covenants related to certain unencumbered assets.
6. By adding the following under "The Offer - Section 13. Background of the
Offer" immediately after the subsection entitled "Affiliated with the
General Partner."
Background and Reasons for the Offer.
General. We are in the business of acquiring direct and indirect
interests in apartment properties such as the properties owned by your
partnership. Our offer provides us with an opportunity to increase our ownership
interest in your partnership's properties while providing you and other
investors with an opportunity to liquidate your current investment.
On October 1, 1998, AIMCO merged (the "Insignia Merger") with Insignia
Financial Group, Inc. ("Insignia"). As a result of the Insignia Merger, AIMCO
acquired approximately 51% of the outstanding common shares of beneficial
interest of Insignia Properties Trust ("IPT"). The general partner of your
partnership is a wholly owned subsidiary of IPT. Through the Insignia Merger,
AIMCO also acquired a majority ownership interest in the entity that manages the
properties owned by your partnership. On October 31, 1998, IPT and AIMCO entered
into an agreement and plan of merger, dated as of October 1, 1998, pursuant to
which IPT merged with AIMCO on February 26, 1999 (the "IPT Merger"). Together
with its subsidiaries, AIMCO currently owns, in the aggregate, approximately
15.83% of the outstanding limited partnership units of your partnership.
One of the reasons we chose to acquire Insignia is that we would be
able to make the tender offers to acquire limited partnership interests of some
of the limited partnerships formerly controlled or managed by Insignia (the
"Insignia Partnerships"). Such offers would provide liquidity for the limited
partners of the Insignia Partnerships, and would provide AIMCO Properties, L.P.
with a larger asset and capital base and increased diversification. As of the
date of this offering, AIMCO Properties, L.P. proposes to make offers to
approximately 90 of the Insignia Partnerships, including your partnership.
During our negotiations with Insignia in early 1998, we decided that if
the merger with Insignia were consummated, we could also benefit from making
offers for limited partnership interests in the Insignia Partnerships. While
some of the Insignia Partnerships are public partnerships and information is
publicly available on such partnerships for weighing the benefits of making a
tender offer, many of the partnerships are private partnerships and information
about such partnerships comes principally from the general partner. Our control
of the general partner makes it possible to obtain access to such information.
Further, such control also means that we control the operations of the
partnerships and their properties. Insignia did not propose that we conduct such
tender offers, rather we initiated the offers on our own. We determined in June
of 1998 that if the merger with Insignia were consummated, we would offer to
limited partners of certain of the Insignia Partnerships limited partnership
units of AIMCO Properties, L.P. and/or cash.
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Prior Tender Offers. We are aware that tender offers may have been made
by unaffiliated third parties to acquire units in your partnership in exchange
for cash. We are unaware of the amounts offered, terms, tendering parties or
number of units involved in these tender offers. In connection with tender
offers made by Insignia affiliates with respect to partnerships for which we are
making offers, some limited partners filed lawsuits. We are not aware of any
merger, consolidation or other combination involving any of the Insignia
Partnerships, or any acquisitions of any of such partnerships or a material
amount of the assets of such partnerships.
Certain Litigation. On March 24, 1998, certain persons claiming to own
limited partner interests in certain of the limited partnerships for which our
subsidiaries act as general partner (including your partnership) filed a
purported class and derivative action in California Superior Court in the County
of San Mateo against AIMCO, Insignia, the general partners of the partnerships,
certain persons and entities who purportedly formerly controlled the general
partners, and additional entities affiliated with and individuals who are
officers, directors and/or principals of several of the defendants. The
complaint contains allegations that, among other things, (i) the defendants
breached fiduciary duties owed to the plaintiffs, or aided and abetted in those
purported breaches, by selling or agreeing to sell their "fiduciary positions"
as stockholders, officers and directors of the general partners for a profit and
retaining said profit rather than distributing it to the plaintiffs; (ii) the
defendants breached fiduciary duties, or aided and abetted in those purported
breaches, by mismanaging the partnerships and misappropriating assets of the
partnerships by (a) manipulating the operations of the partnerships to depress
the trading price of limited partnership units of the partnerships; (b) coercing
and fraudulently inducing unitholders to sell units to certain of the defendants
at depressed prices; and (c) using the voting control obtained by purchasing
units at depressed prices to entrench certain of the defendants' positions of
control over the partnerships; and (iii) the defendants breached their fiduciary
duties to the plaintiffs by (a) selling assets of the partnerships such as
mailing lists of unitholders and (b) causing the general partners to enter into
exclusive arrangements with their affiliates to sell goods and services to the
general partners, the unitholders and tenants of properties owned by the
partnerships. The complaint also alleges that the foregoing allegations
constitute violations of various California securities, corporate and
partnership statutes, as well as conversion and common law fraud. The complaint
seeks unspecified compensatory and punitive damages, an injunction blocking the
sale of control of the general partners and a court order directing the
defendants to discharge their fiduciary duties to the plaintiffs. On June 25,
1998, the defendants filed motions seeking dismissal of the action. In lieu of
responding to the motion, plaintiffs have filed an amended complaint. On October
14, 1998, the AIMCO and Insignia defendants filed demurrers to the amended
complaint. The demurrers (which are requests to dismiss the action as a matter
of law) were heard on February 8, 1999, but no decision has been reached by the
Court. While no assurances can be given, we believe that the ultimate outcome of
this litigation will not have a material adverse effect on us.
Alternatives Considered by Your General Partner. Before we commenced
this offer, your general partner (which is our subsidiary) considered a number
of alternative transactions. The following is a brief discussion of the
advantages and disadvantages of the alternatives considered by your general
partner.
Liquidation. One alternative would be for the partnership to sell its
assets, distribute the net liquidation proceeds to its partners in accordance
with the agreement of limited partnership, and thereafter dissolve. Partners
would be at liberty to use the net liquidation proceeds after taxes for
investment, business, personal or other purposes, at their option. If your
partnership were to sell its assets and liquidate, you and your partners would
not need to rely upon capitalization of income or other valuation methods to
estimate the fair market value of partnership assets. Instead, such assets would
be valued through negotiations with prospective purchasers (in many cases
unrelated third parties).
However, in the opinion of your general partner (which is our
subsidiary), the present time may not be the most desirable time to sell the
residential real estate assets of your partnership in a private transaction, and
the proceeds realized from any such sale would be uncertain. Your general
partner believes it currently is in the best interest of your partnership to
continue holding its residential real estate assets. Although there might be a
prepayment penalty of approximately 1 to 2% of the outstanding balance of the
mortgages depending on when and under what circumstances they are prepaid, such
prepayment penalties are not a significant factor in determining when a property
may be sold. See "The Offer - Section 13. Certain Information Concerning Your
Partnership - Investment Objectives and Policies; Sale or Financing of
Investments."
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Continuation of the Partnership Without the Offer A second alternative
would be for your partnership to continue as a separate legal entity, with its
own assets and liabilities and continue to be governed by its existing agreement
of limited partnership, without our offer. A number of advantages could result
from the continued operation of your partnership. Given improving rental market
conditions, the level of distributions might increase over time. It is possible
that the private resale market for properties could improve over time, making a
sale of the partnership's properties in a private transaction at some point in
the future a more attractive option than it is currently. The continuation of
your partnership will allow you to continue to participate in the net income and
any increases in revenue of your partnership and any net proceeds from the sale
of any property owned by your partnership. However, no assurance can be given as
to future operating results or as to the results of any attempts to sell any
property owned by your partnership.
There are several risks and disadvantages that result from continuing
the operations of your partnership without our offer. If your partnership were
continue operating as presently structured, your partnership could be forced to
borrow on terms that could result in net losses from operations. In addition,
continuation of your partnership without our offer would deny you and your
partners the benefits of our offer. For example, you would have no opportunity
for liquidity unless you were to sell your units in a private transaction. Any
such sale would likely be at a discount from your pro rata share of the fair
market value of the properties owned by your partnership.
Sale of Assets. Your partnership could sell the properties it owns and
not liquidate. Your general partner (which is our subsidiary) considers the sale
of partnership properties from time to time. However, any such sale would likely
be a taxable transaction and, without a liquidating distribution, would not
provide limited partners with any cash to pay any tax liabilities arising as a
result thereof.
Alternative Transactions Considered by Us. Before we decided to make
our offer, we considered a number of alternative transactions, including
purchasing some or all of your partnership's properties or merging your
partnership with us. However, both of these alternatives would require a vote of
all the limited partners. If the transaction was approved, all limited partners,
including those who wish to continue to participate in the ownership of your
partnership's properties, would be forced to participate in the transaction. If
the transaction was not approved, all limited partners, including those who
would like to dispose of their investment in your partnership's properties,
would be forced to retain their investment. We also considered an offer to
exchange units in your partnership for units of AIMCO Properties, L.P. However
because of the expense and delay associated with making such an exchange offer,
we decided to make an offer for cash only. In addition, our historical
experience has been that most holders of limited partnership units, when given a
choice, prefer cash.
7. The following is added to "The Offer - Section 13. Background of the Offer
- Trading History of Units ":
Tender offers for your units were made by us or our affiliates or
affiliates of Insignia in August 1997 for $260 per unit.
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The letter of transmittal and any other required documents should be
sent or delivered by each unitholder or such unitholder's broker, dealer, bank,
trust company or other nominee to the Information Agent at one of its addresses
set forth below.
THE INFORMATION AGENT FOR THE OFFER IS:
RIVER OAKS PARTNERSHIP SERVICES, INC.
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By Mail: By Overnight Courier: By Hand:
<S> <C> <C>
P.O. Box 2065 111 Commerce Road 111 Commerce Road
S. Hackensack, N.J. 07606-2065 Carlstadt, N.J. 07072 Carlstadt, N.J. 07072
Attn.: Reorganization Dept. Attn.: Reorganization Dept.
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For information, please call:
TOLL FREE: (888) 349-2005
