<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------------------
SCHEDULE 14D-1
TENDER OFFER STATEMENT PURSUANT TO SECTION 14(D)(1)
OF THE SECURITIES EXCHANGE ACT OF 1934
------------------------------------
MULTI-BENEFIT REALTY FUND '87-1
(Name of Subject Company)
MADISON RIVER PROPERTIES, L.L.C.
INSIGNIA PROPERTIES, L.P.
INSIGNIA PROPERTIES TRUST
INSIGNIA FINANCIAL GROUP, INC.
(Bidders)
CLASS B UNITS OF LIMITED PARTNERSHIP INTEREST
(Title of Class of Securities)
NONE
(Cusip Number of Class of Securities)
------------------------------------
JEFFREY P. COHEN
SENIOR VICE PRESIDENT
INSIGNIA FINANCIAL GROUP, INC.
375 PARK AVENUE, SUITE 3401
NEW YORK, NEW YORK 10152
(212) 750-6070
(Name, Address and Telephone Number of Person Authorized
to Receive Notices and Communications on Behalf of Bidders)
COPY TO:
JOHN A. HEALY, ESQ.
ROGERS & WELLS
200 PARK AVENUE
NEW YORK, NEW YORK 10166
(212) 878-8000
------------------------------------
CALCULATION OF FILING FEE
- -------------------------------------------------------------------------------
Transaction Valuation*: $575,000 Amount of Filing Fee: $115
- -------------------------------------------------------------------------------
* For purposes of calculating the fee only. This amount assumes the
purchase of 23,000 Class B units of limited partnership interest
("Class B Units") of the subject partnership for $25 per Class B 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.
o 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: Not Applicable Filing Party: Not Applicable
Form or Registration No.: Not Applicable Date Filed: Not Applicable
- -------------------------------------------------------------------------------
<PAGE>
ITEM 1. SECURITY AND SUBJECT COMPANY.
(a) The name of the subject company is Multi-Benefit Realty Fund
'87-1, a California limited partnership (the "Partnership"). The address of the
Partnership's principal executive offices is One Insignia Financial Plaza,
Greenville, South Carolina 29602.
(b) This Statement relates to an offer by Madison River Properties,
L.L.C., a Delaware limited liability company (the "Purchaser"), to purchase up
to 23,000 of the outstanding Class B units of limited partnership interest
("Class B Units") of the Partnership at a purchase price of $25 per Class B
Unit, net to the seller in cash, upon the terms and subject to the conditions
set forth in the Offer to Purchase dated December 23, 1997 (the "Offer to
Purchase") and the related Assignment of Partnership Interest (which, together
with any supplements or amendments, collectively constitute the "Offer"),
copies of which are filed as Exhibits (a)(1) and (a)(2) hereto, respectively.
The information set forth in the Offer to Purchase under "Introduction" is
incorporated herein by reference.
(c) The information set forth in the Offer to Purchase in Section 13
("Background of the Offer") is incorporated herein by reference.
ITEM 2. IDENTITY AND BACKGROUND.
(a)-(d), (g) This Statement is being filed by the Purchaser, Insignia
Properties, L.P., a Delaware limited partnership ("IPLP"), Insignia Properties
Trust, a Maryland real estate investment trust ("IPT") and Insignia Financial
Group, a Delaware corporation ("Insignia") (collectively, the "Bidders"). The
information set forth in the Offer to Purchase under "Introduction," in Section
11 ("Certain Information Concerning the Purchaser, IPLP, IPT and Insignia") and
in Schedules I, II and III to the Offer to Purchase is incorporated herein by
reference.
(e)-(f) During the last five years, none of the Bidders nor, to the
best of their knowledge, any of the persons listed in Schedules I, II and III
to the Offer to Purchase (i) has been convicted in a criminal proceeding
(excluding traffic violations or similar misdemeanors) or (ii) was 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 with respect to
such laws.
ITEM 3. PAST CONTACTS, TRANSACTIONS OR NEGOTIATIONS WITH THE SUBJECT COMPANY.
(a)-(b) The information set forth in the Offer to Purchase under
"Introduction," in Section 10 ("Conflicts of Interest and Transactions with
Affiliates") and in Section 13 ("Background of the Offer") is incorporated
herein by reference.
ITEM 4. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
(a) The information set forth in the Offer to Purchase in Section 10
("Conflicts of Interest and Transactions with Affiliates") and in Section 12
("Source of Funds") is incorporated herein by reference.
(b)-(c) Not applicable.
ITEM 5. PURPOSE OF THE TENDER OFFER AND PLANS OR PROPOSALS OF THE BIDDER.
(a)-(b), (e) The information set forth in the Offer to Purchase under
"Introduction" and in Section 8 ("Future Plans of Insignia, IPT and the
Purchaser") is incorporated herein by reference.
(c) The information set forth in the Offer to Purchase in Section 8
("Future Plans of Insignia, IPT and the Purchaser"), in Section 10 ("Conflicts
of Interest and Transactions with Affiliates") and in Section 13 ("Background
of the Offer") is incorporated herein by reference.
(d) Not applicable.
2
<PAGE>
(f)-(g) The information set forth in the Offer to Purchase in Section
7 ("Effects of the Offer") is incorporated herein by reference.
ITEM 6. INTEREST IN SECURITIES OF THE SUBJECT COMPANY.
(a)-(b) The information set forth in the Offer to Purchase under
"Introduction," in Section 11 ("Certain Information Concerning the Purchaser,
IPLP, IPT and Insignia") is incorporated herein by reference.
ITEM 7. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT
TO THE SUBJECT COMPANY'S SECURITIES.
The information set forth in the Offer to Purchase under
"Introduction," in Section 7 ("Effects of the Offer"), Section 10 ("Conflicts
of Interest and Transactions with Affiliates"), Section 11 ("Certain
Information Concerning the Purchaser, IPLP, IPT and Insignia") and Section 13
("Background of the Offer") is incorporated herein by reference.
ITEM 8. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED.
The information set forth in the Offer to Purchase under
"Introduction" and in Section 16 ("Fees and Expenses") is incorporated herein
by reference.
ITEM 9. FINANCIAL STATEMENTS OF CERTAIN BIDDERS.
The information set forth in the Offer to Purchase in Section 11
("Certain Information Concerning the Purchaser, IPLP, IPT and Insignia") is
incorporated herein by reference. In addition, the following are expressly
incorporated in this Statement by reference: (i) the audited financial
statements of Insignia set forth at Part I-Item 8 of Insignia's Annual Report
on Form 10-K for the year ended December 31, 1996, which is on file with the
Commission; and (ii) the unaudited financial statements of Insignia set forth
at Part I-Item 1 of Insignia's Quarterly Report on Form 10-Q/A for the period
ended September 30, 1997, which is on file with the Commission.
ITEM 10. ADDITIONAL INFORMATION.
(a) Not applicable.
(b)-(d) The information set forth in the Offer to Purchase in Section
15 ("Certain Legal Matters") is incorporated herein by reference.
(e) None.
(f) The information set forth in the Offer to Purchase and the related
Assignment of Partnership Interest, copies of which are filed as Exhibits
(a)(1) and (a)(2) hereto, respectively, is incorporated herein by reference in
its entirety.
3
<PAGE>
ITEM 11. MATERIAL TO BE FILED AS EXHIBITS.
(a)(1) Offer to Purchase, dated December 23, 1997.
(a)(2) Assignment of Partnership Interest and Related Instructions.
(a)(3) Guidelines for Certification of Taxpayer Identification
Number on Substitute Form W-9.
(a)(4) Cover Letter, dated December 23, 1997, from the Purchaser
to the Limited Partners of the Partnership.
(b) Not applicable.
(c) Not applicable.
(d) Not applicable.
(e) Not applicable.
(f) Not applicable.
(z)(1) Summaries of appraisals referred to in the Offer to
Purchase in Section 13 ("Background of the Offer")
4
<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.
Dated: December 23, 1997
MADISON RIVER PROPERTIES, L.L.C.
By: /s/ JEFFREY P. COHEN
-------------------------------
Jeffrey P. Cohen
Manager
INSIGNIA PROPERTIES, L.P.
By: /s/ JEFFREY P. COHEN
-------------------------------
Jeffrey P. Cohen
Senior Vice President
INSIGNIA PROPERTIES TRUST
By: /s/ JEFFREY P. COHEN
-------------------------------
Jeffrey P. Cohen
Senior Vice President
INSIGNIA FINANCIAL GROUP, INC.
By: /s/ FRANK M. GARRISON
-------------------------------
Frank M. Garrison
Executive Managing Director
5
<PAGE>
EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION
----------- -----------
(a)(1) Offer to Purchase, dated December 23, 1997.
(a)(2) Assignment of Partnership Interest and Related
Instructions.
(a)(3) Guidelines for Certification of Taxpayer
Identification Number on Substitute Form W-9.
(a)(4) Cover Letter, dated December 23, 1997, from the
Purchaser to the Limited Partners of the Partnership.
(z)(1) Summaries of appraisals referred to in the Offer to
Purchase in Section 13 ("Background of the Offer").
6
<PAGE>
Offer to Purchase for Cash
Up to 23,000 Class B Units of Limited Partnership Interest
in
MULTI-BENEFIT REALTY FUND '87-1,
a California limited partnership
for
$25 Net Per Class B Unit
by
MADISON RIVER PROPERTIES, L.L.C.
- -------------------------------------------------------------------------------
THE OFFER, WITHDRAWAL RIGHTS AND PRORATION PERIOD WILL
EXPIRE AT 12:00 MIDNIGHT, NEW YORK TIME, ON JANUARY 23,
1998, UNLESS THE OFFER IS EXTENDED.
- -------------------------------------------------------------------------------
IMPORTANT
Madison River Properties, L.L.C., a Delaware limited liability company
(the "Purchaser"), is offering to purchase up to 23,000 of the outstanding
Class B units of limited partnership interest ("Class B Units") in
Multi-Benefit Realty Fund '87-1, a California limited partnership (the
"Partnership"), at a purchase price of $25 per Class B Unit (the "Purchase
Price"), net to the seller in cash, without interest, upon the terms and
subject to the conditions set forth in this Offer to Purchase and in the
related Assignment of Partnership Interest (which, together with any
supplements or amendments, collectively constitute the "Offer"). The Purchase
Price is subject to adjustment under certain circumstances, as described
herein. Holders of Class B Units (each, a "Limited Partner") who tender their
Class B Units in response to the Offer will not be obligated to pay any
commissions or partnership transfer fees. The Purchaser is an affiliate of
ConCap Equities, Inc., which is the general partner of the Partnership (the
"General Partner").
Limited Partners are urged to consider the following factors:
o The Purchaser and the General Partner are both affiliates of
and controlled by Insignia Properties Trust ("IPT"), which is
controlled by Insignia Financial Group, Inc. ("Insignia").
IPT, through its operating partnership Insignia Properties,
L.P. ("IPLP"), currently owns 210 Class B Units.
o The net liquidation value per Class B Unit (the "Estimated
Liquidation Value") estimated by the Purchaser (which is an
affiliate of the General Partner) in connection with the
Offer is $48.79. The Purchaser does not believe, however,
that the Estimated Liquidation Value represents a fair
estimate of the market value of a Class B Unit, primarily due
to the fact that such estimate does not take into account
timing considerations, market uncertainties and legal and
other expenses that would be incurred in connection with a
liquidation of the Partnership. See Section 13. Accordingly,
the Purchaser does not believe that the Estimated Liquidation
Value should be viewed as representative of the amount a
Limited Partner can realistically expect to obtain on a sale
of a Class B Unit in the near term.
o The Purchaser will have the right to vote all Class B Units
acquired pursuant to the Offer. Accordingly, if the Purchaser
(which is an affiliate of the General Partner) is successful
in acquiring a significant number of Class B Units, it will
be able to significantly influence all voting decisions with
respect to the Partnership, including decisions regarding
liquidation, amendments to the Limited Partnership Agreement,
removal and replacement of the General Partner and mergers,
consolidations and other extraordinary transactions.
<PAGE>
o The Purchaser (which is an affiliate of the General Partner)
is making the Offer with a view to making a profit.
Accordingly, there is a conflict between the desire of the
Purchaser (which is an affiliate of the General Partner) to
purchase Class B Units at a low price and the desire of the
Limited Partners to sell their Class B Units at a high price.
THE OFFER IS NOT CONDITIONED ON FINANCING OR UPON ANY MINIMUM
AGGREGATE NUMBER OF CLASS B UNITS BEING TENDERED.
----------------------------------------
Any Limited Partner desiring to tender Class B Units should complete
and sign the Assignment of Partnership Interest in accordance with the
Instructions to the Assignment of Partnership Interest and mail or deliver the
signed Assignment of Partnership Interest to the Depositary. A Limited Partner
may tender any or all of the Class B Units owned by that Limited Partner.
Tenders of fractional Class B Units will not be permitted, except by a Limited
Partner who is tendering all of the Class B Units owned by that Limited
Partner.
Questions and requests for assistance or for additional copies of this
Offer to Purchase and the Assignment of Partnership Interest may be directed to
the Information Agent at the address and telephone numbers set forth below and
on the back cover of this Offer to Purchase. No soliciting dealer fees or other
payments to brokers for tenders are being paid by the Purchaser (which is an
affiliate of the General Partner).
----------------------------------------
For More Information or for Further Assistance Please Call:
Beacon Hill Partners, Inc.
at
(800) 854-9486
December 23, 1997
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
INTRODUCTION.................................................................................................... 1
The Purchaser; Affiliation with the General Partner..................................................... 1
Classes of Units........................................................................................ 1
Some Factors to Be Considered by Limited Partners....................................................... 1
Reasons for and Effects of the Offer.................................................................... 3
Certain Tax Considerations.............................................................................. 4
Originally Anticipated Term of the Partnership; General Policy Regarding Sales
and Refinancings of Partnership Properties; Alternatives......................................... 4
Conditions.............................................................................................. 4
Distributions........................................................................................... 4
Outstanding Class B Units............................................................................... 4
THE OFFER....................................................................................................... 5
Section 1. Terms of the Offer; Expiration Date; Proration.............................................. 5
Section 2. Acceptance for Payment and Payment for Class B Units........................................ 6
Section 3. Procedure for Tendering Class B Units....................................................... 6
Valid Tender..................................................................................... 6
Signature Requirements........................................................................... 6
Delivery of Assignment of Partnership Interest................................................... 7
Appointment as Proxy; Power of Attorney.......................................................... 7
Assignment of Interest in Future Distributions................................................... 7
Determination of Validity; Rejection of Class B Units; Waiver of Defects; No Obligation
to Give Notice of Defects.................................................................... 8
Backup Federal Income Tax Withholding............................................................ 8
FIRPTA Withholding............................................................................... 8
Binding Obligation............................................................................... 8
Section 4. Withdrawal Rights........................................................................... 8
Section 5. Extension of Tender Period; Termination; Amendment.......................................... 9
Section 6. Certain Federal Income Tax Matters.......................................................... 9
General.......................................................................................... 9
Gain or Loss Generally........................................................................... 10
Unrealized Receivables and Certain Inventory..................................................... 10
Passive Activity Loss Limitation................................................................. 11
Partnership Termination.......................................................................... 11
Backup Withholding and FIRPTA Withholding........................................................ 11
Section 7. Effects of the Offer........................................................................ 12
Limitations on Resales........................................................................... 12
Effect on Trading Market; Registration Under Section 12(g) of the Exchange Act................... 12
Control of Limited Partner Voting Decisions by Purchaser; Effect of Relationship
with General Partner......................................................................... 12
Section 8. Future Plans of Insignia, IPT and the Purchaser............................................. 13
Section 9. Certain Information Concerning the Partnership.............................................. 14
General.......................................................................................... 14
Class A Units and Class B Units.................................................................. 14
Originally Anticipated Term of Partnership; Alternatives......................................... 14
General Policy Regarding Sales and Refinancings of Partnership Properties........................ 14
Selected Financial and Property-Related Data..................................................... 15
Cash Distributions History....................................................................... 17
Operating Budgets of the Partnership............................................................. 17
i
<PAGE>
Section 10. Conflicts of Interest and Transactions with Affiliates..................................... 17
Conflicts of Interest with Respect to the Offer.................................................. 17
Voting by the Purchaser.......................................................................... 18
Financing Arrangements........................................................................... 18
Transactions with Affiliates..................................................................... 18
Section 11. Certain Information Concerning the Purchaser, IPLP, IPT and Insignia....................... 19
The Purchaser.................................................................................... 19
IPT and IPLP..................................................................................... 19
Insignia......................................................................................... 21
Section 12. Source of Funds............................................................................ 23
Section 13. Background of the Offer.................................................................... 23
Affiliation with the General Partner............................................................. 23
Determination of Purchase Price.................................................................. 23
Section 14. Conditions of the Offer.................................................................... 27
Section 15. Certain Legal Matters...................................................................... 28
General.......................................................................................... 28
Antitrust........................................................................................ 29
Margin Requirements.............................................................................. 29
Section 16. Fees and Expenses.......................................................................... 29
Section 17. Miscellaneous.............................................................................. 29
SCHEDULE I - Information Regarding the Managers of the Purchaser......................................S-1
SCHEDULE II - Information Regarding the Trustees and Executive Officers of IPT.........................S-2
SCHEDULE III - Information Regarding the Directors and Executive Officers of Insignia...................S-4
SCHEDULE IV - IPT Partnerships.........................................................................S-7
</TABLE>
ii
<PAGE>
TO THE LIMITED PARTNERS HOLDING CLASS B UNITS OF
MULTI-BENEFIT REALTY FUND '87-1
INTRODUCTION
Madison River Properties, L.L.C. (the "Purchaser"), which is a
Delaware limited liability company and an affiliate of the General Partner,
hereby offers to purchase up to 23,000 of the outstanding Class B units of
limited partnership interest ("Class B Units"), representing approximately 30%
of the Class B Units outstanding in Multi- Benefit Realty Fund '87-1, a
California limited partnership (the "Partnership"), at a purchase price of $25
per Class B Unit (the "Purchase Price"), net to the seller in cash, without
interest, upon the terms and subject to the conditions set forth in this Offer
to Purchase and in the related Assignment of Partnership Interest (which,
together with any supplements or amendments, collectively constitute the
"Offer"). The Offer is not conditioned on any aggregate minimum number of Class
B Units being tendered. A Limited Partner may tender any or all of the Class B
Units owned by that Limited Partner. Tenders of fractional Class B Units will
not be permitted, except by a Limited Partner who is tendering all of the Class
B Units owned by that Limited Partner. The Purchaser (which is an affiliate of
the General Partner) will pay all charges and expenses of Beacon Hill Partners,
Inc., who will serve as the Purchaser's information agent for the Offer (the
"Information Agent"), and Harris Trust Company of New York, who will act as
depositary for the Offer (the "Depositary").
The Purchaser; Affiliation with the General Partner. ConCap Equities,
Inc., which is the general partner of the Partnership (the "General Partner"),
is a wholly-owned subsidiary of Insignia Properties Trust, a Maryland real
estate investment trust ("IPT"). The Purchaser is a newly-formed, wholly-owned
subsidiary of Insignia Properties, L.P., a Delaware limited partnership
("IPLP"), which is the operating partnership of IPT. IPT is the sole general
partner of IPLP (owning approximately 66% of the total equity interests in
IPLP), and Insignia Financial Group, Inc., a Delaware corporation ("Insignia"),
is the sole limited partner of IPLP (owning approximately 34% of the total
equity interests in IPLP). Insignia and its affiliates also own approximately
67% of the outstanding common shares of IPT. Since late December 1994, Insignia
Residential Group, L.P. ("IRG"), which is an affiliate of the Purchaser and the
General Partner, has provided property management services to the Partnership,
and Insignia (directly or through affiliates) has performed asset management,
partnership administration and investor relations services for the Partnership.
By reason of these relationships, the General Partner has conflicts of interest
in considering the Offer. The General Partner has indicated in a Statement on
Schedule 14D-9 (the "Schedule 14D-9") filed with the Securities and Exchange
Commission (the "Commission") that it is remaining neutral and making no
recommendation as to whether Limited Partners should tender their Class B Units
in response to the Offer. LIMITED PARTNERS ARE URGED TO READ THIS OFFER TO
PURCHASE AND THE RELATED MATERIALS AND THE SCHEDULE 14D-9 CAREFULLY AND IN
THEIR ENTIRETY BEFORE DECIDING WHETHER TO TENDER THEIR CLASS B UNITS. See
Sections 10 and 13.
Classes of Units. Upon the Partnership's formation, the Partnership's
Limited Partnership Agreement (the "Limited Partnership Agreement") established
two classes of units, the Class B Units and Class A units of limited
partnership interest ("Class A Units," and together with the Class B Units, the
"Units"), each of which is entitled to different rights and priorities in
respect of allocations and distributions by the Partnership to Limited
Partners. The Limited Partnership Agreement entitles holders of Class A Units
to an annual, non-compounded cumulative return (currently 10%) on their
invested capital in the Partnership (the "Priority Return"). See Section 9 for
a discussion of the allocations and priorities of cash distributions between
Class A Units and Class B Units.
Some Factors to Be Considered by Limited Partners. In considering the
Offer, Limited Partners may wish to consider the following factors:
Potential Adverse Aspects of the Offer for Limited Partners
o 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)
<PAGE>
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 Class B Units, the Purchaser (which
is an affiliate of the General Partner) may have incentives
to seek to maximize the value of its ownership of Class B
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 General
Partner also may have a conflict of interest in considering
the Offer because, concurrently with the Offer, the Purchaser
(which is an affiliate of the General Partner) is offering to
purchase approximately 25% of the outstanding Class A Units
of the Partnership. In the event that the Purchaser (which is
an affiliate of the General Partner) acquires a
disproportionate amount of the Class A Units, the Purchaser
(which is an affiliate of the General Partner) may seek to
maximize the value of its the Class A Units, which in turn
may result in a conflict for the General Partner in
reconciling the interests of the Purchaser (which is an
affiliate of the General Partner) with the interests of the
holders of Class B Units. See Sections 9 and 10.
o The net liquidation value per Class B Unit (the "Estimated
Liquidation Value") estimated by the Purchaser (which is an
affiliate of the General Partner) in connection with the
Offer is $48.79. See Section 13 for a discussion of why the
Purchaser (which is an affiliate of the General Partner)
believes that the Estimated Liquidation Value is not
necessarily indicative of the fair market value of a Class B
Unit. THE PURCHASER (WHICH IS AN AFFILIATE OF THE GENERAL
PARTNER) MAKES NO REPRESENTATION AND EXPRESSES NO OPINION AS
TO THE FAIRNESS OR ADEQUACY OF THE PURCHASE PRICE.
o As with any rational investment decision, the Purchaser
(which is an affiliate of the General Partner) is making the
Offer with a view to making a profit. Accordingly, there is a
conflict between the desire of the Purchaser (which is an
affiliate of the General Partner) to purchase Class B Units
at a low price and the desire of the Limited Partners to sell
their Class B Units at a high price.
o If the Purchaser is successful in acquiring a significant
number of Class B Units pursuant to the Offer, the Purchaser
(which is an affiliate of the General Partner) will have the
right to vote those Class B Units and thereby significantly
influence all voting decisions with respect to the
Partnership, including decisions concerning liquidation,
amendments to the Limited Partnership Agreement, removal and
replacement of the General Partner and mergers,
consolidations and other extraordinary transactions. This
means that (i) non-tendering Limited Partners could be
prevented from taking action they desire but that IPT (which
is an affiliate of the General Partner) opposes and (ii) IPT
(which is an affiliate of the General Partner) may be able to
take action desired by IPT but opposed by the non-tendering
Limited Partners.
Potentially Beneficial Aspects of the Offer for Limited Partners
o Although there are some limited resale mechanisms available
to Limited Partners wishing to sell their Class B Units,
there is no formal trading market for Class B Units.
Moreover, the Purchaser understands that the operations of
the Chicago Partnership Board, one of the leading partnership
interest "auction" intermediaries, have been suspended by
securities regulators. Accordingly, THE OFFER AFFORDS LIMITED
PARTNERS AN OPPORTUNITY TO DISPOSE OF THEIR CLASS B UNITS FOR
CASH WHICH OTHERWISE MIGHT NOT BE AVAILABLE TO THEM.
o THE OFFER MAY BE ATTRACTIVE TO LIMITED PARTNERS WHO HAVE AN
IMMEDIATE NEED FOR CASH. The Purchase Price is approximately
25% greater than the highest reported secondary market sales
price of any Class B Unit during the past six months (based
on information provided by the General Partner). However,
reported secondary market sales prices do not take into
account commissions and transfer fees typically payable by a
Limited Partner in connection with a
2
<PAGE>
secondary market sale. Therefore, the actual proceeds
received by a Limited Partner who sells Class B Units in the
secondary market are typically significantly less than the
reported sales prices.
o LIMITED PARTNERS WHO SELL CLASS B UNITS PURSUANT TO THE OFFER
WILL NOT BE CHARGED ANY SALES COMMISSIONS (WHICH GENERALLY
RANGE FROM 3% TO 10% OF THE SALES PRICE) OR PARTNERSHIP
TRANSFER FEES (WHICH ARE TYPICALLY $100 PER TRANSFER). The
Purchaser will pay all transfer fees imposed by the
Partnership in connection with sales of Class B Units
pursuant to the Offer.
o Real estate markets in the United States generally have
recovered and experienced an upward trend since the end of
the last recession. That recovery and upward trend might
continue. On the other hand, those markets also may be
adversely affected by a variety of factors, including
possible fluctuations in interest rates, economic slowdowns
and overbuilding. Accordingly, ownership of Class B Units
continues to be a speculative investment. THE OFFER MAY
PROVIDE LIMITED PARTNERS WITH THE OPPORTUNITY TO LIQUIDATE
THEIR INTERESTS IN THE PARTNERSHIP AND REPLACE THEM WITH
INVESTMENTS THAT ARE LESS SPECULATIVE.
o The Offer may be attractive to Limited Partners who wish to
avoid in the future the expenses, delays and complications in
filing personal income tax returns which may be caused by
ownership of Class B Units. In addition, A LIMITED PARTNER
WHO SELLS 100% OF ITS CLASS B UNITS PURSUANT TO THE OFFER
WILL NO LONGER BE SUBJECT TO THE PASSIVE ACTIVITY LOSS
LIMITATION WITH RESPECT TO "SUSPENDED" LOSSES ATTRIBUTABLE TO
THOSE CLASS B UNITS AND, THEREFORE, WILL BE ABLE TO UTILIZE
FULLY ANY SUCH LOSSES.
o The Offer may be attractive to those Limited Partners who
have become disenchanted with real estate investments
generally, and in particular with the perceived illiquidity
of investments made through limited partnerships, because it
may afford an immediate opportunity for those Limited
Partners to liquidate their investments in the Partnership.
On the other hand, Limited Partners who tender their Class B
Units will be giving up the opportunity to participate in any
potential future benefits represented by the ownership of
those Class B Units, including, for example, the right to
participate in any future distributions of cash or property,
whether from operations, the proceeds of a sale or
refinancing of one or more of the Partnership's properties or
in connection with any future liquidation of the Partnership.
Instead, any such distributions of cash or property with
respect to Class B Units tendered in the Offer and purchased
by the Purchaser will be paid to the Purchaser.
The Purchaser (which is an affiliate of the General Partner) makes no
recommendation to any Limited Partner as to whether to tender or refrain from
tendering Class B Units and has been advised by the General Partner that the
General Partner also expects to make no recommendation. Each Limited Partner
must make its own decision, based on the Limited Partner's particular
circumstances, as to whether to tender Class B Units and, if so, how many Class
B Units to tender. Limited Partners should consult with their respective
advisors regarding the financial, tax, legal and other implications of
accepting the Offer. LIMITED PARTNERS ARE URGED TO READ THIS OFFER TO PURCHASE
AND THE RELATED MATERIALS CAREFULLY AND IN THEIR ENTIRETY BEFORE DECIDING
WHETHER TO TENDER THEIR CLASS B UNITS.
Reasons for and Effects of the Offer. The Purchaser's purpose in
making the Offer is to increase IPT's equity interest in the Partnership,
primarily for investment purposes and with a view to making a profit. Although
the number of Class B Units sought in the Offer will not give the Purchaser
(which is an affiliate of the General Partner) absolute control over the
Partnership, if the Purchaser is successful in acquiring all or a substantial
portion of the Class B Units it is tendering for, it will be in a position to
exercise significant influence over the outcome of any vote by Limited
Partners. See Sections 8, 10 and 13.
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Certain Tax Considerations. A sale by a Limited Partner pursuant to
the Offer will result in taxable gain (or loss) equal to the excess (deficit)
of the amount realized by the Limited Partner for the Class B Units sold over
such Limited Partner's adjusted tax basis in those Class B Units which may be
taxable as ordinary income, capital gain or gain from real estate depreciation
recapture. If a Limited Partner has suspended "passive losses" from the
Partnership or other passive activity investments, such Limited Partner
generally may deduct these losses up to the amount of any gain from the sale. A
sale pursuant to the Offer of all of a Limited Partner's Class B Units will
terminate his or her investment in the Partnership and, commencing with the
year following the year of sale, the Limited Partner will no longer receive
Partnership tax information or have to report the complicated tax information
currently required of Limited Partners. See Section 6.
Originally Anticipated Term of the Partnership; General Policy
Regarding Sales and Refinancings of Partnership Properties; Alternatives.
According to the Partnership's Prospectus dated December 10, 1986, the then
general partner (predecessor to the current General Partner) anticipated that
the Partnership would sell and/or refinance its properties five to eight years
after their acquisition, depending upon the then current real estate and
capital markets, economic climate and income tax consequences to the Limited
Partners. In general, the General Partner regularly evaluates the Partnership's
properties by considering various factors, such as the Partnership's financial
position and real estate and capital market conditions. The General Partner
monitors each property's specific locale and sub-market conditions evaluating
current trends, competition, new construction and economic changes. The General
Partner oversees each asset's operating performance and continuously evaluates
the physical improvement requirements. In addition, the financing structure for
each property, tax implications and the investment climate are all considered.
Any of these factors, and possibly others, could potentially contribute to any
decision of the General Partner to sell, refinance, upgrade with capital
improvements or hold a particular Partnership property. The Purchaser (which is
an affiliate of the General Partner) has been advised by the General Partner
that the Partnership received an unsolicited offer by an unaffiliated third
party to purchase Shadow Brook Apartments in West Valley City, Utah, for
$16,200,000. Based on the foregoing considerations, however, the General
Partner has determined that it is not in the best interest of Limited Partners
to sell or refinance that or any other property at the present time. Under the
Limited Partnership Agreement the term of the Partnership will continue until
December 31, 2036, unless sooner terminated as provided in the Limited
Partnership Agreement or by law. Limited Partners could, as an alternative to
tendering their Class B Units, take a variety of possible actions, including
voting to liquidate the Partnership or causing the Partnership to merge with
another entity or engage in a "roll-up" or similar transaction.
Conditions. The Offer is not conditioned on any aggregate minimum
number of Class B Units being tendered. Certain other conditions do apply,
however. See Section 14.
Distributions. In total, original investors in the Partnership who
purchased Class B Units have not received any cash distributions in respect of
their original $100 investment made in 1983. However, the Partnership is
currently generating positive cash flow from operations, and the Purchaser
(which is an affiliate of the General Partner) believes that the Partnership
will continue to generate positive cash flow from operations. The potential for
future distributions was considered by the Purchaser (which is an affiliate of
the General Partner) when establishing the Purchase Price. Limited Partners who
tender their Class B Units in response to the Offer will retain any
distributions made through December 23, 1997, and will be entitled to receive
and retain any subsequent distributions made by the Partnership prior to the
date on which the Purchaser pays for tendered Class B Units pursuant to the
Offer, although any such subsequent distribution will result in a reduction of
the Purchase Price. See Section 1. However, tendering Limited Partners will not
be entitled to receive or retain any distributions in respect of tendered Class
B Units which are made on or after the date on which the Purchaser pays for
such Class B Units pursuant to the Offer, regardless of the fact that the
record date (as opposed to the payment date) for any such distribution may be a
date prior to the date of purchase. See Section 3.
Outstanding Class B Units. According to information supplied by the
Partnership, as of December 1, 1997 there were 75,152 Class B Units issued and
outstanding, which were held of record by 1,003 Limited Partners. IPLP
currently owns 210 Class B Units.
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THE OFFER
SECTION 1. TERMS OF THE OFFER; EXPIRATION DATE; PRORATION. Upon the
terms and subject to the conditions of the Offer, the Purchaser (which is an
affiliate of the General Partner) will accept for payment (and thereby
purchase) up to 23,000 Class B Units that are validly tendered on or prior to
the Expiration Date and not withdrawn in accordance with the procedures set
forth in Section 4. For purposes of the Offer, the term "Expiration Date" shall
mean 12:00 midnight, New York City time, on January 23, 1998, unless the
Purchaser (which is an affiliate of the General Partner) in its sole discretion
shall have extended the period of time for which the Offer is open, in which
event the term "Expiration Date" shall mean the latest time and date on which
the Offer, as extended by the Purchaser, shall expire. See Section 5 for a
description of the Purchaser's right to extend the period of time during which
the Offer is open and to amend or terminate the Offer.
THE PURCHASE PRICE WILL AUTOMATICALLY BE REDUCED BY THE AGGREGATE
AMOUNT OF DISTRIBUTIONS PER CLASS B UNIT, IF ANY, MADE BY THE PARTNERSHIP TO
LIMITED PARTNERS ON OR AFTER DECEMBER 23, 1997 AND PRIOR TO THE DATE ON WHICH
THE PURCHASER PAYS FOR CLASS B UNITS PURCHASED PURSUANT TO THE OFFER.
If, prior to the Expiration Date, the Purchaser (which is an affiliate
of the General Partner) increases the consideration offered to Limited Partners
pursuant to the Offer, the increased consideration will be paid for all Class B
Units accepted for payment pursuant to the Offer, regardless of whether the
Class B Units were tendered prior to the increase in the consideration offered.
If more than 23,000 Class B Units are validly tendered prior to the
Expiration Date and not properly withdrawn prior to the Expiration Date in
accordance with the procedures specified in Section 4, the Purchaser (which is
an affiliate of the General Partner) will, upon the terms and subject to the
conditions of the Offer, accept for payment and pay for an aggregate of 23,000
of the Class B Units so tendered, pro rata according to the number of Class B
Units validly tendered by each Limited Partner and not properly withdrawn on or
prior to the Expiration Date, with appropriate adjustments to avoid purchases
of fractional Class B Units. If the number of Class B Units validly tendered
and not properly withdrawn on or prior to the Expiration Date is less than or
equal to 23,000 Class B Units, the Purchaser (which is an affiliate of the
General Partner) will purchase all Class B Units so tendered and not withdrawn,
upon the terms and subject to the conditions of the Offer.
If proration of tendered Class B Units is required, then, subject to
the Purchaser's obligation under Rule 14e-1(c) under the Securities Exchange
Act of 1934 (the "Exchange Act") to pay Limited Partners the Purchase Price in
respect of Class B Units tendered or return those Class B Units promptly after
the termination or withdrawal of the Offer, the Purchaser (which is an
affiliate of the General Partner) does not intend to pay for any Class B Units
accepted for payment pursuant to the Offer until the final proration results
are known. NOTWITHSTANDING ANY SUCH DELAY IN PAYMENT, NO INTEREST WILL BE PAID
ON THE PURCHASE PRICE.
The Offer is conditioned on satisfaction of certain conditions. See
Section 14, which sets forth in full the conditions of the Offer. The Purchaser
(which is an affiliate of the General Partner) reserves the right (but in no
event shall be obligated), in its sole discretion, to waive any or all of those
conditions. If, on or prior to the Expiration Date, any or all of the
conditions have not been satisfied or waived, the Purchaser reserves the right
to (i) decline to purchase any of the Class B Units tendered and terminate the
Offer, (ii) waive all of the unsatisfied conditions and, subject to complying
with applicable rules and regulations of the Commission, purchase all Class B
Units validly tendered, (iii) extend the Offer and, subject to the right of
Limited Partners to withdraw Class B Units until the Expiration Date, retain
the Class B Units that have been tendered during the period or periods for
which the Offer is extended, and/or (iv) amend the Offer.
This Offer to Purchase and the related Assignment of Partnership
Interest are being mailed by the Purchaser (which is an affiliate of the
General Partner) to the persons shown by the Partnership's records to have been
Limited Partners or (in the case of Class B Units owned of record by Individual
Retirement Accounts ("IRAs") and qualified plans) beneficial owners of Class B
Units as of December 1, 1997.
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SECTION 2. ACCEPTANCE FOR PAYMENT AND PAYMENT FOR CLASS B UNITS. Upon
the terms and subject to the conditions of the Offer, the Purchaser (which is
an affiliate of the General Partner) will accept for payment (and thereby
purchase) and will pay for all Class B Units validly tendered and not withdrawn
in accordance with the procedures specified in Section 4, as promptly as
practicable following the Expiration Date. A tendering beneficial owner of
Class B Units whose Class B Units are owned of record by an IRA or other
qualified plan will not receive direct payment of the Purchase Price; rather,
payment will be made to the custodian of such account or plan. In all cases,
payment for Class B Units purchased pursuant to the Offer will be made only
after timely receipt by the Depositary of a properly completed and duly
executed Assignment of Partnership Interest and any other documents required by
the Assignment of Partnership Interest. See Section 3. UNDER NO CIRCUMSTANCES
WILL INTEREST BE PAID ON THE PURCHASE PRICE BY REASON OF ANY DELAY IN MAKING
SUCH PAYMENT.
For purposes of the Offer, the Purchaser (which is an affiliate of the
General Partner) will be deemed to have accepted for payment pursuant to the
Offer, and thereby purchased, validly tendered Class B Units if, as and when
the Purchaser (which is an affiliate of the General Partner) gives verbal or
written notice to the Depositary of the Purchaser's acceptance of those Class B
Units for payment pursuant to the Offer. Upon the terms and subject to the
conditions of the Offer, payment for Class B Units accepted for payment
pursuant to the Offer will be made by deposit of the Purchase Price with the
Depositary, which will act as agent for tendering Limited Partners for the
purpose of receiving payments from the Purchaser and transmitting those
payments to Limited Partners whose Class B Units have been accepted for
payment.
If any tendered Class B Units are not purchased for any reason, the
Assignment of Partnership Interest with respect to such Class B Units will be
destroyed by the Purchaser (which is an affiliate of the General Partner). If
for any reason acceptance for payment of, or payment for, any Class B Units
tendered pursuant to the Offer is delayed or the Purchaser is unable to accept
for payment, purchase or pay for Class B Units tendered pursuant to the Offer,
then, without prejudice to the Purchaser's rights under Section 14, the
Depositary may, nevertheless, on behalf of the Purchaser (which is an affiliate
of the General Partner) retain tendered Class B Units, and those Class B Units
may not be withdrawn except to the extent that the tendering Limited Partners
are entitled to withdrawal rights as described in Section 4; subject, however,
to the Purchaser's obligation under Rule 14e-1(c) under the Exchange Act to pay
Limited Partners the Purchase Price in respect of Class B Units tendered or
return those Class B Units promptly after termination or withdrawal of the
Offer.
The Purchaser (which is an affiliate of the General Partner) reserves
the right to transfer or assign, in whole or from time to time in part, to one
or more of the Purchaser's affiliates, the right to purchase Class B Units
tendered pursuant to the Offer, but any such transfer or assignment will not
relieve the Purchaser of its obligations under the Offer or prejudice the
rights of tendering Limited Partners to receive payment for Class B Units
validly tendered and accepted for payment pursuant to the Offer.
SECTION 3. PROCEDURE FOR TENDERING CLASS B UNITS.
Valid Tender. In order for a tendering Limited Partner to participate
in the Offer, its Class B Units must be validly tendered and not withdrawn on
or prior to the Expiration Date. To validly tender Class B Units, a properly
completed and duly executed Assignment of Partnership Interest and any other
documents required by the Assignment of Partnership Interest must be received
by the Depositary, at its address set forth on the back cover of this Offer to
Purchase, on or prior to the Expiration Date. A Limited Partner may tender any
or all of the Class B Units owned by that Limited Partner. Tenders of
fractional Class B Units will not be permitted, except by a Limited Partner who
is tendering all of the Class B Units owned by that Limited Partner. No
alternative, conditional or contingent tenders will be accepted.
Signature Requirements. If the Assignment of Partnership Interest is
signed by the registered holder of the Class B Units and payment is to be made
directly to that holder, then no signature guarantee is required on the
Assignment of Partnership Interest. Similarly, if the Class B Units are
tendered for the account of a member firm of a registered national securities
exchange, a member of the National Association of Securities Dealers, Inc. or a
commercial bank, savings bank, credit union, savings and loan association or
trust company having an office,
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branch or agency in the United States (each an "Eligible Institution"), no
signature guarantee is required on the Assignment of Partnership Interest.
HOWEVER, IN ALL OTHER CASES, ALL SIGNATURES ON THE ASSIGNMENT OF PARTNERSHIP
INTEREST MUST BE GUARANTEED BY AN ELIGIBLE INSTITUTION. Please contact the
Information Agent for assistance in obtaining a signature guarantee.
Delivery of Assignment of Partnership Interest. The method of delivery
of the Assignment of Partnership Interest and all other required documents is
at the option and risk of the tendering Limited Partner, and delivery will be
deemed made only when actually received by the Depositary. In all cases,
sufficient time should be allowed to assure timely delivery.
Appointment as Proxy; Power of Attorney. By executing an Assignment of
Partnership Interest, a tendering Limited Partner irrevocably appoints the
Purchaser (which is an affiliate of the General Partner), and its managers and
designees as the Limited Partner's proxies, in the manner set forth in the
Assignment of Partnership Interest, each with full power of substitution, to
the full extent of the Limited Partner's rights with respect to the Class B
Units tendered by the Limited Partner and accepted for payment by the Purchaser
(which is an affiliate of the General Partner). Each such proxy shall be
considered coupled with an interest in the tendered Class B Units. Such
appointment will be effective when, and only to the extent that, the Purchaser
(which is an affiliate of the General Partner) accepts the tendered Class B
Units for payment. Upon such acceptance for payment, all prior proxies given by
the Limited Partner with respect to the Class B Units will, without further
action, be revoked, and no subsequent proxies may be given (and if given will
not be effective). The Purchaser (which is an affiliate of the General Partner)
and its managers and designees will, as to those Class B Units, be empowered to
exercise all voting and other rights of the Limited Partner as they in their
sole discretion may deem proper at any meeting of Limited Partners, by written
consent or otherwise. The Purchaser (which is an affiliate of the General
Partner) reserves the right to require that, in order for Class B Units to be
deemed validly tendered, immediately upon the Purchaser's acceptance for
payment of the Class B Units, the Purchaser must be able to exercise full
voting rights with respect to the Class B Units, including voting at any
meeting of Limited Partners then scheduled or acting by written consent without
a meeting.
By executing an Assignment of Partnership Interest, a tendering
Limited Partner also irrevocably constitutes and appoints the Purchaser and its
managers and designees as the Limited Partner's attorneys-in-fact, each with
full power of substitution, to the full extent of the Limited Partner's rights
with respect to the Class B Units tendered by the Limited Partner and accepted
for payment by the Purchaser. Such appointment will be effective when, and only
to the extent that, the Purchaser accepts the tendered Class B Units for
payment. The tendering Limited Partner agrees not to exercise any rights
pertaining to the tendered Class B Units without the prior consent of the
Purchaser. Upon such acceptance for payment, all prior powers of attorney
granted by the Limited Partner with respect to such Class B Units will, without
further action, be revoked, and no subsequent powers of attorney may be granted
(and if granted will not be effective). Pursuant to such appointment as
attorneys-in-fact, the Purchaser and its managers and designees each will have
the power, among other things, (i) to transfer ownership of such Class B Units
on the Partnership books maintained by the General Partner (and execute and
deliver any accompanying evidences of transfer and authenticity any of them may
deem necessary or appropriate in connection therewith), (ii) upon receipt by
the Depositary (as the tendering Limited Partner's agent) of the Purchase
Price, to become a substituted Limited Partner, to receive any and all
distributions made by the Partnership on or after the date on which the
Purchaser purchases such Class B Units, and to receive all benefits and
otherwise exercise all rights of beneficial ownership of such Class B Units in
accordance with the terms of the Offer, (iii) to execute and deliver to the
General Partner a change of address form instructing the General Partner to
send any and all future distributions to which the Purchaser is entitled
pursuant to the terms of the Offer in respect of tendered Class B Units to the
address specified in such form, and (iv) to endorse any check payable to or
upon the order of such Limited Partner representing a distribution to which the
Purchaser is entitled pursuant to the terms of the Offer, in each case in the
name and on behalf of the tendering Limited Partner.
Assignment of Interest in Future Distributions. By executing an
Assignment of Partnership Interest, a tendering Limited Partner irrevocably
assigns to the Purchaser (which is an affiliate of the General Partner) and its
assigns all of the right, title and interest of the Limited Partner in and to
any and all distributions made by the
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Partnership on or after the date on which the Purchaser purchases such Class B
Units, in respect of the Class B Units tendered by such Limited Partner and
accepted for payment by the Purchaser, regardless of the fact that the record
date for any such distribution may be a date prior to the date of such
purchase. The Purchaser will seek to be admitted to the Partnership as a
substituted Limited Partner upon consummation of the Offer.
Determination of Validity; Rejection of Class B Units; Waiver of
Defects; No Obligation to Give Notice of Defects. All questions as to the
validity, form, eligibility (including time of receipt) and acceptance for
payment of any tender of Class B Units pursuant to the Offer will be determined
by the Purchaser (which is an affiliate of the General Partner), in its sole
discretion, which determination shall be final and binding. The Purchaser
(which is an affiliate of the General Partner) reserves the absolute right to
reject any or all tenders of any particular Class B Units determined by it not
to be in proper form or if the acceptance of or payment for those Class B Units
may, in the opinion of the Purchaser's counsel, be unlawful. The Purchaser
(which is an affiliate of the General Partner) also reserves the absolute right
to waive or amend any of the conditions of the Offer that it is legally
permitted to waive as to the tender of any particular Class B Units and to
waive any defect or irregularity in any tender with respect to any particular
Class B Units of any particular Limited Partner. The Purchaser's interpretation
of the terms and conditions of the Offer (including the Assignment of
Partnership Interest and the Instructions thereto) will be final and binding.
No tender of Class B Units will be deemed to have been validly made until all
defects and irregularities have been cured or waived. None of the Purchaser
(which is an affiliate of the General Partner), the Information Agent, the
Depositary or any other person will be under any duty to give notification of
any defects or irregularities in the tender of any Class B Units or will incur
any liability for failure to give any such notification.
Backup Federal Income Tax Withholding. To prevent the possible
application of backup federal income tax withholding of 31% with respect to
payment of the Purchase Price, each tendering Limited Partner must provide the
Purchaser (which is an affiliate of the General Partner) with the Limited
Partner's correct taxpayer identification number by completing the Substitute
Form W-9 included in the Assignment of Partnership Interest. See the
Instructions to the Assignment of Partnership Interest and Section 6.
FIRPTA Withholding. To prevent the withholding of federal income tax
in an amount equal to 10% of the amount of the Purchase Price plus Partnership
liabilities allocable to each Class B Unit purchased, each tendering Limited
Partner must complete the FIRPTA Affidavit included in the Assignment of
Partnership Interest certifying the Limited Partner's taxpayer identification
number and address and that such Limited Partner is not a foreign person. See
the Instructions to the Assignment of Partnership Interest and Section 6.
Binding Obligation. A tender of Class B Units pursuant to and in
accordance with the procedures described in this Section 3 and the acceptance
for payment of such Class B Units will constitute a binding agreement between
the tendering Limited Partner and the Purchaser (which is an affiliate of the
General Partner) on the terms set forth in this Offer to Purchase and in the
Assignment of Partnership Interest.
SECTION 4. WITHDRAWAL RIGHTS. Tenders of Class B Units pursuant to the
Offer are irrevocable, except that Class B Units tendered pursuant to the Offer
may be withdrawn at any time prior to the Expiration Date and, unless already
accepted for payment as provided in this Offer to Purchase, may also be
withdrawn at any time after February 20, 1998. For withdrawal to be effective,
a written or facsimile transmission notice of withdrawal must be timely
received by the Depositary at its address set forth on the back cover of this
Offer to Purchase. Any such notice of withdrawal must specify the name of the
person who tendered the Class B Units to be withdrawn and must be signed by the
person(s) who signed the Assignment of Partnership Interest in the same manner
as the Assignment of Partnership Interest was signed (including signature
guarantees by an Eligible Institution). Class B Units properly withdrawn will
be deemed not to be validly tendered for purposes of the Offer. Withdrawn Class
B Units may be re-tendered, however, by following the procedures described in
Section 3 at any time prior to the Expiration Date.
If payment for Class B Units is delayed for any reason or if the
Purchaser (which is an affiliate of the General Partner) is unable to pay for
Class B Units for any reason, then, without prejudice to the Purchaser's rights
under the Offer, tendered Class B Units may be retained by the Depositary and
may not be withdrawn except to the extent that tendering Limited Partners are
entitled to withdrawal rights as set forth in this Section 4; subject,
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however, to the Purchaser's obligation, pursuant to Rule 14e-1(c) under the
Exchange Act, to pay Limited Partners the Purchase Price in respect of Class B
Units tendered or return those Class B Units promptly after termination or
withdrawal of the Offer.
All questions as to the validity and form (including time of receipt)
of notices of withdrawal will be determined by the Purchaser (which is an
affiliate of the General Partner), in its sole discretion, which determination
shall be final and binding. None of the Purchaser, the Information Agent, the
Depositary or any other person will be under any duty to give notification of
any defects or irregularities in any notice of withdrawal or incur any
liability for failure to give any such notification.
SECTION 5. EXTENSION OF TENDER PERIOD; TERMINATION; AMENDMENT. The
Purchaser (which is an affiliate of the General Partner) expressly reserves the
right, in its sole discretion, at any time and from time to time, (i) to extend
the period of time during which the Offer is open and thereby delay acceptance
for payment of, and the payment for, validly tendered Class B Units, (ii) to
terminate the Offer and not accept for payment any Class B Units not already
accepted for payment or paid for, (iii) upon the occurrence of any of the
conditions specified in Section 14, to delay the acceptance for payment of, or
payment for, any Class B Units not already accepted for payment or paid for,
and (iv) to amend the Offer in any respect (including, without limitation, by
increasing the consideration offered, increasing or decreasing the number of
Class B Units being sought, or both). Notice of any such extension, termination
or amendment will be disseminated promptly to Limited Partners in a manner
reasonably designed to inform Limited Partners of such change in compliance
with Rule 14d-4(c) under the Exchange Act. In the case of an extension of the
Offer, the extension will be followed by a press release or public announcement
which will be issued no later than 9:00 a.m., New York City time, on the next
business day after the then scheduled Expiration Date, in accordance with Rule
14e-1(d) under the Exchange Act.
If the Purchaser (which is an affiliate of the General Partner)
extends the Offer, or if the Purchaser (whether before or after its acceptance
for payment of Class B Units) is delayed in its payment for Class B Units or is
unable to pay for Class B Units pursuant to the Offer for any reason, then,
without prejudice to the Purchaser's rights under the Offer, the Depositary may
retain tendered Class B Units and those Class B Units may not be withdrawn
except to the extent tendering Limited Partners are entitled to withdrawal
rights as described in Section 4; subject, however, to the Purchaser's
obligation, pursuant to Rule 14e-1(c) under the Exchange Act, to pay Limited
Partners the Purchase Price in respect of Class B Units tendered or return
those Class B Units promptly after termination or withdrawal of the Offer.
If the Purchaser (which is an affiliate of the General Partner) makes
a material change in the terms of the Offer or the information concerning the
Offer or waives a material condition of the Offer, the Purchaser will extend
the Offer and disseminate additional tender offer materials to the extent
required by Rules 14d-4(c) and 14d-6(d) under the Exchange Act. The minimum
period during which an offer must remain open following a material change in
the terms of the offer or information concerning the offer will depend upon the
facts and circumstances, including the relative materiality of the change in
the terms or information. In the Commission's view, an offer should remain open
for a minimum of five business days from the date the material change is first
published, sent or given to securityholders, and if material changes are made
with respect to information that approaches the significance of price or the
percentage of securities sought, a minimum of ten business days may be required
to allow for adequate dissemination to securityholders and investor response.
As used in this Offer to Purchase, "business day" means any day other than a
Saturday, Sunday or a federal holiday, and consists of the time period from
12:01 a.m. through 12:00 midnight, New York City time.
SECTION 6. CERTAIN FEDERAL INCOME TAX MATTERS.
General. The following summary is a general discussion of certain of
the federal income tax consequences of a sale of Class B Units pursuant to the
Offer. This summary is based on the Internal Revenue Code of 1986, as amended
(the "Code"), applicable Treasury regulations thereunder, administrative
rulings, practice and procedures and judicial authority, all as of the date of
the Offer. All of the foregoing are subject to change, and any such change
could affect the continuing accuracy of this summary. This summary does not
discuss all aspects
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of federal income taxation that may be relevant to a particular Limited Partner
in light of such Limited Partner's specific circumstances or to certain types
of Limited Partners subject to special treatment under the federal income tax
laws (for example, foreign persons, dealers in securities, banks, insurance
companies and tax-exempt organizations), nor (except as otherwise expressly
indicated) does it describe any aspect of state, local, foreign or other tax
laws. Sales of Class B Units pursuant to the Offer will be taxable transactions
for federal income tax purposes, and also may be taxable transactions under
applicable state, local, foreign and other tax laws. EACH LIMITED PARTNER
SHOULD CONSULT ITS OWN TAX ADVISOR AS TO THE PARTICULAR TAX CONSEQUENCES TO
SUCH LIMITED PARTNER OF SELLING CLASS B UNITS PURSUANT TO THE OFFER.
Gain or Loss Generally. In general, a Limited Partner will recognize
gain or loss on a sale of Class B Units pursuant to the Offer equal to the
difference between (i) the Limited Partner's "amount realized" on the sale and
(ii) the Limited Partner's adjusted tax basis in the Class B Units sold.
Generally, a Limited Partner's adjusted tax basis with respect to a Class B
Unit equals its cost, increased by the amount of income and the amount of
Partnership liabilities (as determined under Code Section 752) allocated to the
Class B Unit, and decreased by (i) any distributions made with respect to such
Class B Unit, (ii) the amount of deductions or losses allocated to the Class B
Unit and (iii) any decrease in the amount of Partnership liabilities (as
determined under Code Section 752) allocated to the Class B Unit. Thus, the
amount of a Limited Partner's adjusted tax basis in tendered Class B Units will
vary depending upon the Limited Partner's particular circumstances. The "amount
realized" with respect to a Class B Unit will be a sum equal to the amount of
cash received by the Limited Partner for the Class B Unit pursuant to the
Offer, plus the amount of the Partnership's liabilities allocable to the Class
B Unit (as determined under Code Section 752).
A portion of the gain or loss recognized by a Limited Partner on a
sale of a Class B Unit pursuant to the Offer generally will be treated as a
capital gain or loss, if (as is generally expected to be the case) the Class B
Unit was held by the Limited Partner as a capital asset. Under the Taxpayer
Relief Act of 1997, the capital gains rate for individuals and other
non-corporate taxpayers is reduced to 20% for sales of capital assets after
July 28, 1997 if such assets were held for more than 18 months. However, any
gain from the sale of such assets attributable to the recapture of depreciation
with respect to real property (as defined in Code Section 1250) is taxed at a
maximum rate of 25%. The 28% rate continues to apply to individual and
noncorporate taxpayers who sell a capital asset held for more than one year but
not more than 18 months. Corporate taxpayers are taxed at a maximum marginal
rate of 35% for both capital gains and ordinary income. The maximum marginal
federal income tax rate for ordinary income of individuals and other
noncorporate taxpayers is 39.6%. Capital losses are deductible only to the
extent of capital gains, except that, subject to the passive activity loss
limitations discussed below, non-corporate taxpayers may deduct up to $3,000 of
capital losses in excess of the amount of their capital gains against ordinary
income. Excess capital losses generally can be carried forward to succeeding
years (a corporation's carryforward period is five years and a non-corporate
taxpayer can carry forward such losses indefinitely); and a corporation is
permitted to carry back excess capital losses to the three preceding taxable
years, provided the carryback does not increase or produce a net operating loss
for any of those years.
A tendering Limited Partner will be allocated a pro rata share of the
Partnership's taxable income or loss for the year of sale with respect to the
Class B Units sold in accordance with the provisions of the Limited Partnership
Agreement concerning transfers of Class B Units. Such allocation and any cash
distributed by the Partnership to the Limited Partner for that year will affect
the Limited Partner's adjusted tax basis in Class B Units and, therefore, the
amount of such Limited Partner's taxable gain or loss upon a sale of Class B
Units pursuant to the Offer.
Unrealized Receivables and Certain Inventory. If any portion of the
amount of gain realized by a Limited Partner is attributable to "unrealized
receivables" (which includes depreciation recapture) or "substantially
appreciated inventory" as defined in Code Section 751, then a portion of the
Limited Partner's gain or loss may be ordinary rather than capital and, in
addition, a portion of such gain may be taxed at the 25% rate discussed above.
A portion, if not all, of the gain upon the sale of Class B Units is expected
to be attributable to unrealized receivables. A Limited Partner who tenders
Class B Units which are purchased pursuant to the Offer must file an
information statement with such Limited Partner's federal income tax return for
the year of the sale which provides
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<PAGE>
the information specified in Treasury Regulation ss. 1.751-1(a)(3). A selling
Limited Partner also must notify the Partnership of the date of the transfer
and the names, addresses and tax identification numbers of the transferor(s)
and transferee within 30 days of the date of the transfer (or, if earlier, by
January 15 of the following calendar year).
Passive Activity Loss Limitation. Under Code Section 469, a
non-corporate taxpayer or personal service corporation generally can deduct
"passive losses" in any year only to the extent of the person's passive income
for that year. Closely held corporations (other than personal service
corporations) may offset such losses against active income as well as passive
activity income for that year. Substantially all post-1986 losses of Limited
Partners from the Partnership are believed to be passive losses. Thus, Limited
Partners may have "suspended" passive losses from the Partnership (i.e.,
post-1986 net taxable losses in excess of statutorily permitted "phase-in"
amounts which have not been used to offset income from other passive
activities). Substantially all gain or loss from a sale of Class B Units
pursuant to the Offer will be passive income or loss.
If a Limited Partner sells less than all of its Class B Units pursuant
to the Offer, suspended passive losses, if any (including a portion of any loss
recognized on the sale of Class B Units) can be currently deducted (subject to
other applicable limitations) to the extent of the Limited Partner's passive
income from the Partnership for that year (including any gain recognized on the
sale of Class B Units) plus any other passive income for that year. If, on the
other hand, a Limited Partner sells 100% of its Class B Units pursuant to the
Offer, any "suspended" losses and any losses recognized upon the sale of the
Class B Units will be offset first against any other net passive gain to the
Limited Partner from the sale of the Class B Units and any other net passive
activity income from other passive activity investments, and the balance of any
"suspended" net losses from the Class B Units will no longer be subject to the
passive activity loss limitation and, therefore, will be deductible by such
Limited Partner from its other income (subject to any other applicable
limitations), including ordinary income. A tendering Limited Partner must sell
all of its Class B Units to receive these tax benefits. If more than 23,000 of
the outstanding Class B Units are tendered, some tendering Limited Partners may
not be able to sell 100% of their Class B Units pursuant to the Offer because
of proration of the number of Class B Units to be purchased by the Purchaser.
See Section 1.
Partnership Termination. Section 708(b) of the Code provides that a
partnership terminates for income tax purposes if there is a sale or exchange
of 50% or more of the total interest in partnership capital and profits within
a twelve-month period (although successive transfers of the same interest
within a twelve-month period will be treated as a single transfer for this
purpose). In the event of a termination, the Partnership's tax year would close
and the Partnership would be treated for income tax purposes as if it had
contributed all of its assets and liabilities to a "new" partnership in
exchange for an interest in the "new" partnership. The Partnership would then
be treated as making a distribution of the interests in the "new" partnership
to the new partners and the remaining partners, followed by the liquidation of
the Partnership. Because the "new" partnership would be treated as having
acquired its assets on the date of the deemed contribution, a new depreciation
recovery period would begin on such date, the Partnership's annual depreciation
deductions over the next few years would be substantially reduced, and the
Partnership would have greater taxable income (or less tax loss) than if no tax
termination occurred. In addition, depreciation may be required to be allocated
to those Limited Partners that have a higher tax basis. A tax termination of
the Partnership would also terminate any partnership in which the Partnership
holds a majority interest (50% or more).
The Limited Partnership Agreement prohibits transfers of Class B Units
if a transfer, when considered with all other transfers during the same
applicable twelve-month period, would cause a termination of the Partnership
for tax purposes. The Purchaser believes that even if the maximum number of
Class B Units is purchased pursuant to the Offer, those transfers will not
cause a tax termination of the Partnership.
Backup Withholding and FIRPTA Withholding. Limited Partners (other
than tax-exempt persons, corporations and certain foreign individuals) who
tender Class B Units may be subject to 31% backup withholding unless those
Limited Partners provide a taxpayer identification number ("TIN") and certify
that the TIN is correct or properly certify that they are awaiting a TIN. A
Limited Partner may avoid backup withholding by properly completing and signing
the Substitute Form W-9 included as part of the Assignment of Partnership
Interest. If a
11
<PAGE>
Limited Partner who is subject to backup withholding does not properly complete
and sign the Substitute Form W-9, the Purchaser will withhold 31% from payments
to such Limited Partner.
Gain realized by a foreign Limited Partner on the sale of a Class B
Unit pursuant to the Offer will be subject to federal income tax. Under Code
Section 1445, the transferee of an interest held by a foreign person in a
partnership which owns United States real property generally is required to
deduct and withhold a tax equal to 10% of the amount realized on the
disposition. In order to comply with this requirement, the Purchaser will
withhold 10% of the amount realized by a tendering Limited Partner unless the
Limited Partner properly completes and signs the FIRPTA Affidavit included as
part of the Assignment of Partnership Interest certifying the Limited Partner's
TIN and address, and that such Limited Partner is not a foreign person. Amounts
withheld would be creditable against a foreign Limited Partner's federal income
tax liability and, if in excess thereof, a refund could be obtained from the
Internal Revenue Service by filing a U.S. income tax return.
SECTION 7. EFFECTS OF THE OFFER.
Limitations on Resales. The Limited Partnership Agreement prohibits
transfers of Class B Units if a transfer, when considered with all other
transfers during the same applicable twelve-month period, would cause a
termination of the Partnership for federal or any applicable state income tax
purposes. This provision may limit sales of Class B Units in the secondary
market and in private transactions for the twelve-month period following
completion of the Offer. The General Partner has advised the Purchaser that the
Partnership will not process any requests for recognition of substitution of
Limited Partners upon a transfer of Class B Units during such twelve-month
period which the General Partner believes may cause a tax termination in
contravention of the Limited Partnership Agreement. In determining the number
of Class B Units for which the Offer is made (representing approximately 30% of
the outstanding Class B Units if 23,000 Class B Units are tendered), the
Purchaser (which is an affiliate of the General Partner) took this restriction
into account so as to permit normal historical levels of transfers to occur
following the transfers of Class B Units pursuant to the Offer without
violating this restriction.
Effect on Trading Market; Registration Under Section 12(g) of the
Exchange Act. If a substantial number of Class B Units are purchased pursuant
to the Offer, the result will be a reduction in the number of Limited Partners.
In the case of certain kinds of equity securities, a reduction in the number of
security-holders might be expected to result in a reduction in the liquidity
and volume of activity in the trading market for the security. In this case,
however, there is no established public trading market for the Class B Units
and, therefore, the Purchaser (which is an affiliate of the General Partner)
does not believe a reduction in the number of Limited Partners will materially
further restrict the Limited Partners' ability to find purchasers for their
Class B Units through secondary market transactions. See Section 13 for certain
limited information regarding recent secondary market sales of the Class B
Units.
The Class B Units are registered under Section 12(g) of the Exchange
Act, which means, among other things, that the Partnership is required to file
periodic reports with the Commission and to comply with the Commission's proxy
rules. The Purchaser (which is an affiliate of the General Partner) does not
expect or intend that consummation of the Offer will cause the Class B Units to
cease to be registered under Section 12(g) of the Exchange Act. If the Class B
Units were to be held by fewer than 300 persons, the Partnership could apply to
de-register the Class B Units under the Exchange Act. Because the Class B Units
are widely held, however, the Purchaser (which is an affiliate of the General
Partner) believes that, even if it purchases the maximum number of Class B
Units in the Offer, after that purchase the Class B Units will be held of
record by more than 300 persons.
Control of Limited Partner Voting Decisions by Purchaser; Effect of
Relationship with General Partner. The Limited Partnership Agreement provides
that the General Partner has absolute discretion as to whether to admit an
assignee of Class B 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 Class B Unit
purchased pursuant to the Offer. Even if the Purchaser (which is an affiliate
of the General Partner) is not admitted to the Partnership as a substituted
Limited Partner, however, the Purchaser may have the right to vote each Class B
Unit purchased
12
<PAGE>
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 Class B Units tendered by such Limited Partners and accepted for
payment by the Purchaser. See Section 3. 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. In general,
IPLP and the Purchaser (which are affiliates of the General Partner) will vote
the Class B Units owned by them in whatever manner they deem to be in the best
interest of IPT, which, because of their relationship with the General Partner,
also may be in the interest of the General Partner, but may not be in the
interest of other Limited Partners. This could (i) prevent non-tendering
Limited Partners from taking action they desire but that IPT opposes and (ii)
enable IPT to take action desired by IPT but opposed by non-tendering Limited
Partners. 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 and in certain circumstances
election of new or successor general partners; dissolution of the Partnership;
the sale of all or substantially all of the assets of the Partnership; and most
types of amendments to the Limited Partnership Agreement.
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 Class B Units purchased pursuant to the Offer.
SECTION 8. FUTURE PLANS OF INSIGNIA, IPT AND THE PURCHASER. IPT,
through the Purchaser (which is an affiliate of the General Partner), is
seeking to acquire Class B Units pursuant to the Offer in order to increase its
equity interest in the Partnership, primarily for investment purposes and with
a view to making a profit. Following the completion of the Offer, IPT and/or
persons related to or affiliated with it may acquire additional Class B Units.
Any such acquisition may be made through private purchases, through one or more
future tender or exchange offers or by any other means deemed advisable. Any
such acquisition may be at a price higher or lower than the price to be paid
for the Class B Units purchased pursuant to the Offer, and may be for cash or
other consideration. Insignia and IPT (which are affiliates of the General
Partner) also may consider disposing of some or all of the Class B Units the
Purchaser acquires pursuant to the Offer, either directly or by a sale or other
disposition of one or more interests in IPT or IPLP, depending among other
things on the requirements from time to time of Insignia, IPT and their
affiliates in light of liquidity, strategic, tax and other considerations.
Neither IPT nor the Purchaser (which are affiliates of the General
Partner) has any present plans or intentions with respect to a liquidation of
the Partnership or a sale of assets or refinancing of any of the Partnership's
properties. However, IPT and the Purchaser expect that consistent with the
General Partner's fiduciary obligations, the General Partner will seek and
review opportunities (including opportunities identified by IPT and the
Purchaser) to engage in transactions which could benefit the Partnership, such
as sales or refinancings of assets or a combination of the Partnership with one
or more other entities, with the objective of seeking to maximize returns to
Limited Partners.
IPT and the Purchaser (which are affiliates of the General Partner)
have been advised that the possible future transactions the General Partner
expects to consider on behalf of the Partnership include (i) payment of
extraordinary distributions; (ii) refinancing, reducing or increasing existing
indebtedness of the Partnership; (iii) sales of assets, individually or as part
of a complete liquidation; and (iv) mergers or other consolidation transactions
involving the Partnership. Any such merger or consolidation transaction could
involve other limited partnerships in which the General Partner or its
affiliates serve as general partners, or a combination of the Partnership with
one or more existing, publicly traded entities (including, possibly, affiliates
of IPT (which is an affiliate of the General Partner) or IPT itself), in any of
which Limited Partners might receive cash, common stock or other securities or
consideration. There is no assurance, however, as to when or whether any of the
transactions referred to above might occur. If any such transaction is effected
by the Partnership and financial benefits accrue to the Limited Partners of the
Partnership, the Purchaser (and thus IPT) will participate in those benefits to
the extent of its ownership of Class B Units. A merger or other consolidation
transaction and certain kinds of other extraordinary transactions would require
a vote of the Limited Partners, and if the Purchaser is successful in acquiring
a significant number of Class B Units pursuant to the Offer (or otherwise), IPT
will be able to
13
<PAGE>
significantly influence the outcome of any such vote. IPT's primary objective
in seeking to acquire the Class B Units through the Purchaser pursuant to the
Offer is not, however, to influence the vote on any particular transaction, but
rather to generate a profit on the investment represented by those Class B
Units.
SECTION 9. CERTAIN INFORMATION CONCERNING THE PARTNERSHIP. Except as
otherwise indicated, information contained in this Section 9 is based upon
documents and reports publicly filed by the Partnership with the Commission.
Although the Purchaser has no information that any statements contained in this
Section 9 are untrue, the Purchaser cannot take responsibility for the accuracy
or completeness of any information contained in this Section 9 which is derived
from such public documents, or for any failure by the Partnership to disclose
events which may have occurred and may affect the significance or accuracy of
any such information but which are unknown to the Purchaser.
General. The Partnership was organized on September 8, 1986 under the
laws of the State of California. Its principal executive offices are located at
One Insignia Financial Plaza, Greenville, South Carolina 29602, and its
telephone number at that address is (864) 239-2747.
The Partnership's primary business is real estate ownership and
related operations. The Partnership was formed to invest in low or moderately
leveraged commercial and residential properties in order to generate current
income and capital appreciation.
The Partnership's investment portfolio currently consists of three
residential apartment complexes: a 278- unit complex in Columbus, Ohio; a
200-unit complex in Indianapolis, Indiana; and a 300-unit complex in West
Valley City, Utah.
Class A Units and Class B Units. Upon its formation, the Partnership
issued two classes of units of limited partnership interest, the Class A Units
and Class B Units. The Class A Units and the Class B Units are entitled to
different rights and priorities as to cash distributions and partnership
allocations, as follows. Both distributable cash from operations and cash from
surplus funds (i.e., net sale and refinancing proceeds) are allocated 1% to the
General Partner and 99% to the Limited Partners. Until such time as the holders
of Class A Units have received their Priority Return, all cash distributions to
Limited Partners are made to the holders of Class A Units; thereafter, the
allocation of cash distributions ("Non-Priority Return Distributions") to
Limited Partners depends on whether a distribution is comprised of
distributable cash from operations or cash from surplus funds. A Non-Priority
Return Distribution of distributable cash from operations is allocated equally
among the holders of Class A Units and Class B Units. A Non-Priority Return
Distribution of cash from surplus funds, on the other hand, is allocated pro
rata (based on relative initial capital contributions) among the holders of
Class A Units and Class B Units until such time as each has received a return
of 100% of their initial invested capital, and thereafter (based on current
circumstances) 90% to the holders of Class B Units, 9% to the General Partner
and 1% to the holders of Class A Units.
Originally Anticipated Term of Partnership; Alternatives. According to
the Partnership's Prospectus dated December 10, 1986, the then general partner
(predecessor to the current General Partner) anticipated that the Partnership
would sell and/or refinance its properties five to eight years after their
acquisition, depending upon the then current real estate and money markets,
economic climate and income tax consequences to the Limited Partners. Under the
Limited Partnership Agreement, the term of the Partnership will continue until
December 31, 2036, unless sooner terminated as provided in the Limited
Partnership Agreement or by law. Limited Partners could, as an alternative to
tendering their Class B Units, take a variety of possible actions including
voting to liquidate the Partnership or causing the Partnership to merge with
another entity or engage in a "roll-up" or similar transaction.
General Policy Regarding Sales and Refinancings of Partnership
Properties. In general, the General Partner regularly evaluates the
Partnership's properties by considering various factors, such as the
Partnership's financial position and real estate and capital market conditions.
The General Partner monitors each property's specific locale and sub-market
conditions evaluating current trends, competition, new construction and
economic changes. The General Partner oversees each asset's operating
performance and continuously evaluates the physical improvement
14
<PAGE>
requirements. In addition, the financing structure for each property, tax
implications and the investment climate are all considered. Any of these
factors, and possibly others, could potentially contribute to any decision of
the General Partner to sell, refinance, upgrade with capital improvements or
hold a particular Partnership property. The Purchaser (which is an affiliate of
the General Partner) has been advised by the General Partner that the
Partnership received an unsolicited offer by an unaffiliated third party to
purchase Shadow Brook Apartments in West Valley City, Utah, for $16,200,000.
Based on the foregoing considerations, however, the General Partner has
determined that it is not in the best interest of Limited Partners to sell or
refinance that or any other property at the present time.
Selected Financial and Property-Related Data. Set forth below is a
summary of certain financial and statistical information with respect to the
Partnership and its properties, all of which has been excerpted or derived from
the Partnership's Annual Reports on Form 10-KSB for the years ended December
31, 1996 and 1995 and on Form 10-K for the years ended December 31, 1994, 1993
and 1992 and the Partnership's Quarterly Reports on Form 10-QSB for the periods
ended September 30, 1997 and 1996. More comprehensive financial and other
information is included in such reports and other documents filed by the
Partnership with the Commission, and the following summary is qualified in its
entirety by reference to such reports and other documents and all the financial
information and related notes contained therein.
MULTI-BENEFIT REALTY FUND '87-1
SELECTED FINANCIAL DATA
(in thousands, except Class B Unit data)
<TABLE>
<CAPTION>
NINE MONTHS ENDED FISCAL YEAR ENDED
SEPTEMBER 30, DECEMBER 31,
1997 1996 1996 1995 1994 1993 1992
---------- ------------ ----------- ----------- ----------- ---------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
Statements of Operations Data:
Rental Income................. $ 3,528 $ 3,441 $ 4,595 $ 4,312 $ 4,216 $ 4,185 $ 3,997
Other Income.................. $ 244 $ 198 $ 266 $ 960 $ 132 $ 177 $ 194
Total Revenues............. $ 3,772 $ 3,639 $ 4,861 $ 5,272 $ 4,348 $ 4,362 $ 4,191
Income (Loss) from Operations
(before extraordinary item) $ (12) $ 84 $ 46 $ 383 $ (1,452) $ (350) $ (498)
Net Income (Loss)(1).......... $ (12) $ 84 $ 46 $ 383 $ (1,396) $ (350) $ (498)
Net Income (Loss) per Class B
Unit(1).................... $ (.07) $ .49 $ .27 $ 2.21 $ (8.06) $ (2.01) $ (2.86)
AS OF AS OF
SEPTEMBER 30, DECEMBER 31,
1997 1996 1996 1995 1994 1993 1992
---------- ------------ ----------- ----------- ----------- ---------- ----------
(UNAUDITED)
Balance Sheets Data:
Total Assets.................. $ 15,202 $ 15,601 $ 16,612 $ 16,334 $ 16,688 $ 18,688 $ 19,986
Total Liabilities............. $ 13,115 $ 12,087 $ 13,136 $ 12,445 $ 12,264 $ 12,363 $ 12,453
Limited Partners' Equity
(Deficit)(2) ............... $ 3,827 $ 3,848 $ 3,832 $ 3,812 $ 3,646 $ 4,252 $ 4,403
Class B Units Outstanding .... 75,152 75,152 75,152 75,152 75,152 75,152 75,152
Book Value per Class B Unit... $ 50.92 $ 51.20 $ 50.99 $ 50.72 $ 48.52 $ 56.58 $ 58.41
</TABLE>
-------------------------
(1) Net income or loss is allocated equally among holders of Class A Units
and Class B Units.
(2) Limited Partners' Equity (Deficit) is calculated only with respect to
Class B Units.
15
<PAGE>
Description of Properties. Set forth below is a table showing the
location, the date of purchase, the nature of the Partnership's ownership
interest in and the use of each of the Partnership's properties.
<TABLE>
<CAPTION>
DATE OF
PROPERTY PURCHASE TYPE OF OWNERSHIP USE
-------- -------- ----------------- ---
<S> <C> <C> <C>
Carlin Manor Apartments 11/87 Fee ownership Residential Apartments
Columbus, Ohio (subject to first mortgage) (278 units)
Hunt Club Apartments 05/87 Fee ownership Residential Apartments
Indianapolis, Indiana (subject to first mortgage) (200 units)
Shadow Brook Apartments 05/87 Fee ownership Residential Apartments
West Valley City, Utah (subject to first mortgage) (300 units)
</TABLE>
Accumulated Depreciation Schedule. Set forth below is a table showing
the gross carrying value, accumulated depreciation and federal tax basis of
each of the Partnership's properties as of December 31, 1996 ($ amounts in
thousands).
<TABLE>
<CAPTION>
GROSS
CARRYING ACCUMULATED FEDERAL
PROPERTY VALUE DEPRECIATION RATE METHOD TAX BASIS
---------- -------------- ------------- ---------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Carlin Manor Apartments $ 6,561 $ 3,307 5-30 yrs. S/L $ 5,471
Hunt Club Apartments 6,796 3,239 5-30 yrs. S/L 4,309
Shadow Brook Apartments 10,197 3,457 5-30 yrs. S/L 6,692
-------- ---------- ----------
TOTALS $ 23,554 $ 10,003 $ 16,472
======== ========== ==========
</TABLE>
Schedule of Mortgages. Set forth below is a table showing certain
information regarding the outstanding mortgages encumbering each of the
Partnership's properties as of December 31, 1996 ($ amounts in thousands).
<TABLE>
<CAPTION>
PRINCIPAL PRINCIPAL
BALANCE AT STATED BALANCE
DECEMBER 31, INTEREST PERIOD MATURITY DUE AT
PROPERTY 1996 RATE AMORTIZED DATE MATURITY
---------- --------------- ---------- ------------ ------------ -----------
<S> <C> <C> <C> <C> <C>
Carlin Manor Apartments $ 2,500 7.33% (a) 11/2003 $ 2,500
Hunt Club Apartments 3,850 8.30% 20 yrs. 10/2000 3,575
Shadow Brook Apartments 6,000 7.33% (a) 11/2003 6,000
-------- ------------
TOTALS $ 12,350 $ 12,075
======== ============
</TABLE>
- ---------
(a) Interest only.
Average Annual Rental Rate and Occupancy. Set forth below is a table
showing the average annual rental rates and occupancy percentages for each of
the Partnership's properties during the past two years.
<TABLE>
<CAPTION>
PROPERTY AVERAGE ANNUAL RENTAL RATE AVERAGE ANNUAL OCCUPANCY
-------- -------------------------- ------------------------
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Carlin Manor Apartments $5,497/unit $5,359/unit 90% 86%
Hunt Club Apartments $7,074/unit $6,893/unit 94% 91%
Shadow Brook Apartments $6,511/unit $5,763/unit 97% 98%
</TABLE>
16
<PAGE>
Schedule of Real Estate Taxes and Rates. Set forth below is a table
showing the real estate taxes and rates for 1996 for each of the Partnership's
properties.
1996 1996
PROPERTY BILLING RATE
---------- --------- ------
Carlin Manor Apartments $ 107,000 5.4%
Hunt Club Apartments $ 149,000 9.2%
Shadow Brook Apartments $ 81,000 1.4%
Other Information. The Partnership is subject to the information reporting
requirements of the Exchange Act and accordingly is required to file reports
and other information with the Commission relating to its business, financial
results and other matters. Such reports and other documents may be inspected at
the Commission's Public Reference Section, Room 1024, 450 Fifth Street, N.W.,
Washington, D.C. 20549, where copies may be obtained at prescribed rates, and
at the regional offices of the Commission located in the Citicorp Center, 500
West Madison Street, Suite 1400, Chicago, Illinois 60661, and 7 World Trade
Center, New York, New York 10048. Copies should be available by mail upon
payment of the Commission's customary charges by writing to the Commission's
principal offices at 450 Fifth Street, N.W., Washington, D.C. 20549. The
Commission also maintains a web site that contains reports, proxy and other
information filed electronically with the Commission, the address of which is
http://www.sec.gov.
Cash Distributions History. In total, original investors in the
Partnership who purchased Class B Units have not received any cash
distributions in respect of their original $100 investment made in 1983.
Operating Budgets of the Partnership. A summary of the fiscal 1996 and
1997 operating budgets and the audited results of operations for fiscal 1996 of
the Partnership are set forth in the table below. The budgeted amounts provided
below are figures that were not computed in accordance with generally accepted
accounting principles ("GAAP"). Historically, budgeted operating results of
operations for a particular fiscal year have differed significantly in certain
respects from the audited operating results for that year. In particular, items
that are categorized as capital expenditures for purposes of preparing the
operating budgets are often re-categorized as expenses when the financial
statements are audited and presented in accordance with GAAP. Therefore, the
summary operating budgets presented for fiscal 1997 should not necessarily be
considered as indicative of what the audited operating results for fiscal 1997
will be. Furthermore, any estimate of the future performance of a business,
such as the Partnership's business, is forward-looking and based on numerous
assumptions, some of which inevitably will prove to be incorrect. For this
reason, it is probable that the Partnership's future operating results will
differ from those projected in the operating budget, and those differences may
be material. Therefore, such information should not be relied on by Limited
Partners.
<TABLE>
<CAPTION>
FISCAL 1996 FISCAL 1996 FISCAL 1997
BUDGETED AUDITED BUDGETED
-------- ------- --------
<S> <C> <C> <C>
Total Revenues from Property Operations................. $ 4,794,403 $ 4,595,000 $ 5,020,380
Total Operating Expenses................................ $ 2,415,319 $ 2,541,000 $ 2,569,016
Net Operating Income.................................... $ 2,379,084 $ 2,054,000 $ 2,451,364
Capital Expenditures.................................... $ 761,746 $ 506,000 $ 605,711
</TABLE>
SECTION 10. CONFLICTS OF INTEREST AND TRANSACTIONS WITH AFFILIATES.
The General Partner and its affiliates have conflicts of interest with respect
to the Offer as set forth below.
Conflicts of Interest with Respect to the Offer. The General Partner
has conflicts of interest with respect to the Offer, including conflicts
resulting from its affiliation with IPT and the Purchaser. The General Partner
also would have a conflict of interest (i) as a result of the fact that a sale
or liquidation of the Partnership's assets would result in a decrease or
elimination of the fees paid to the General Partner and/or its affiliates and
(ii) as a consequence of the Purchaser's ownership of Class B Units, because
the Purchaser (which is an affiliate of the General Partner) may have
incentives to seek to maximize the value of its ownership of Class B Units,
which in turn may result in a conflict for the General Partner in attempting to
reconcile the interests of the Purchaser (which
17
<PAGE>
is an affiliate of the General Partner) with the interests of the other Limited
Partners. In addition, the Purchaser (which is an affiliate of the General
Partner) is making the Offer with a view to making a profit. Accordingly, there
is a conflict between the desire of the Purchaser (which is an affiliate of the
General Partner) to purchase Class B Units at a low price and the desire of the
Limited Partners to sell their Class B Units at a high price. The General
Partner also may have a conflict of interest in considering the Offer because,
concurrently with the Offer, the Purchaser (which is an affiliate of the
General Partner) is offering to purchase approximately 25% of the outstanding
Class A Units of the Partnership. In the event that the Purchaser (which is an
affiliate of the General Partner) acquires a disproportionate amount of the
Class A Units, the Purchaser (which is an affiliate of the General Partner) may
seek to maximize the value of its Class A Units, which in turn may result in a
conflict for the General Partner in reconciling the interests of the Purchaser
(which is an affiliate of the General Partner) with the interests of the
holders of Class B Units. The General Partner has indicated in the Schedule
14D-9 that it is remaining neutral and making no recommendation as to whether
Limited Partners should tender their Class B Units pursuant to the Offer.
LIMITED PARTNERS ARE URGED TO READ THIS OFFER TO PURCHASE AND THE SCHEDULE
14D-9 AND THE RELATED MATERIALS CAREFULLY AND IN THEIR ENTIRETY BEFORE DECIDING
WHETHER TO TENDER THEIR CLASS B UNITS.
Voting by the Purchaser. The Limited Partnership Agreement provides
that the General Partner has absolute discretion as to whether to admit an
assignee of Class B 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 Class B Unit
purchased pursuant to the Offer. Even if the Purchaser (which is an affiliate
of the General Partner) is not admitted to the Partnership as a substituted
Limited Partner, however, the Purchaser may have the right to vote each Class B
Unit purchased in the Offer pursuant to the irrevocable appointment by
tendering Limited Partners of the Purchaser (which is an affiliate of the
General Partner) and its managers and designees as proxies with respect to the
Class B Units tendered by such Limited Partners and accepted for payment by the
Purchaser. See Section 3. As a result, if the Purchaser (which is an affiliate
of the General Partner) is successful in acquiring a significant number of
Class B Units pursuant to the Offer, the Purchaser will have the right to vote
those Class B Units and thereby significantly influence all voting decisions
with respect to the Partnership. In general, IPLP and the Purchaser (which are
affiliates of the General Partner) will vote the Class B Units owned by them in
whatever manner they deem to be in IPT's best interest, which, because of their
relationship with the General Partner, also may be in the interest of the
General Partner, but may not be in the interest of other Limited Partners. This
could (i) prevent non-tendering Limited Partners from taking action they desire
but that IPT opposes and (ii) enable IPT to take action desired by IPT but
opposed by non-tendering Limited Partners. Under the Limited Partnership
Agreement, Limited Partners holding a majority of the Units are entitled to
take action with respect to a variety of matters, including: removal of a
general partner and in certain circumstances election of new or successor
general partners; dissolution of the Partnership; the sale of all or
substantially all of the assets of the Partnership; and most types of
amendments to the Limited Partnership Agreement. See Section 7.
Financing Arrangements. The Purchaser (which is an affiliate of the
General Partner) expects to pay for the Class B 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. See Section 12. It
is possible, however, that in connection with its future financing activities,
IPT or IPLP may cause or request the Purchaser (which is an affiliate of the
General Partner) to pledge the Class B 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 Class B Units. This could be the case, for example, if a loan
has a "balloon" maturity after a relatively short time or bears a high or
increasing interest rate. In such a situation, the General Partner may
experience a conflict of interest in seeking to reconcile the best interests of
the Partnership with the need of its affiliates for cash flow from the
Partnership's activities.
Transactions with Affiliates. Under the Limited Partnership Agreement,
the General Partner holds an interest in the Partnership and is entitled to
participate in certain cash distributions made by the Partnership to its
partners. The General Partner received from the Partnership in respect of its
interest in the Partnership cash distributions of $14,000 to date in 1997,
$5,000 in 1996 and $9,000 in 1995. In late December 1994, IRG (an affiliate of
the Purchaser and the General Partner) assumed day-to-day property management
responsibilities for the
18
<PAGE>
Partnership's properties. The Partnership paid IRG property management fees for
property management services in the amounts of approximately $240,000 and
$223,000 for the years ended December 31, 1996 and 1995, respectively, and has
paid IRG property management fees equal to $185,000 during the first nine
months of 1997. The Partnership reimbursed the General Partner and its
affiliates (including Insignia) for expenses incurred in connection with asset
management and partnership administration services performed by them for the
Partnership during 1996 and 1995 in the amounts of $178,000 and $120,000,
respectively, and has reimbursed them in the amount of $91,000 through
September 30, 1997 (including reimbursements paid to an affiliate of the
General Partner in the amounts of $54,000 and $10,500 for the year ended
December 31, 1996 and the nine months ended September 30, 1997, respectively,
for costs incurred in connection with construction oversight services).
Pursuant to the Limited Partnership Agreement, the General Partner is entitled
to receive a fee for executive and administrative management services equal to
9% of the Partnership's adjusted cash from operations, as and when cash from
operations is distributed to the Limited Partners. The fees paid to the General
Partner pursuant to this provision were approximately $41,000 and $82,000 for
the years ended December 31, 1996 and 1995, respectively, and approximately
$123,000 for the nine months ended September 30, 1997. On July 1, 1995, the
Partnership began insuring its properties under a master policy through an
agency and insurer unaffiliated with the General Partner. An affiliate of the
General Partner acquired, in the acquisition of a business, certain financial
obligations from an insurance agency which was later acquired by the agent who
placed the current year's master policy. The current agent assumed the
financial obligations to the affiliate of the General Partner who receives
payments on these obligations from the agent. Insignia and the General Partner
believe that the aggregate financial benefit derived by Insignia and its
affiliates from the arrangement described in the three preceding sentences has
been immaterial.
SECTION 11. CERTAIN INFORMATION CONCERNING THE PURCHASER, IPLP, IPT
AND INSIGNIA.
The Purchaser. The Purchaser (which is an affiliate of the General
Partner) is a newly formed entity controlled by IPT and organized for the
purpose of making the Offer. The Purchaser is a wholly-owned subsidiary of
IPLP. The Purchaser (which is an affiliate of the General Partner) has not
engaged in any business activity other than in connection with the Offer and
certain other tender offers for units of limited partnership interests in other
IPT Partnerships (as defined below) being made contemporaneously with the
Offer, and has no significant assets or liabilities at the present time. Upon
consummation of the Offer and such other offers, the Purchaser's only
significant assets will be the Class B Units it acquires pursuant to the Offer
and the other limited partnership units it acquires pursuant to such other
offers.
The principal executive offices of the Purchaser (which is an
affiliate of the General Partner) are located at One Insignia Financial Plaza,
P.O. Box 19059, Greenville, South Carolina 29602, and its telephone number is
(864) 239-1300. For certain information concerning the managers of the
Purchaser (which is an affiliate of the General Partner), see Schedule I to
this Offer to Purchase.
IPT and IPLP. IPT was formed by Insignia in May 1996 for the purpose
of acquiring and owning interests in multifamily residential properties,
principally through ownership of limited and general partner interests in real
estate limited partnerships (including the Partnership). IPT has been organized
and operates in a manner that will qualify it to be taxed as a real estate
investment trust ("REIT") under the Code. Substantially all of IPT's
investments are held through IPLP, which is the operating partnership of IPT.
IPT is presently the sole general partner and Insignia is presently the sole
limited partner of IPLP.
In forming IPT, Insignia and its affiliates (i) transferred to IPT
equity interests in entities comprising or controlling the general partners of
36 public real estate limited partnerships (including the Partnership) (the
"IPT Partnerships") in exchange for common shares of beneficial interest of IPT
and (ii) transferred to IPLP limited partner interests in the IPT Partnerships
(or equity interests in entities owning limited partner interests in the IPT
Partnerships) in exchange for units of limited partner interest in IPLP. The
IPT Partnerships own, in the aggregate, 184 properties containing approximately
42,000 residential apartment units and approximately 4.2 million square feet of
commercial space. See Schedule IV for a list of the IPT Partnerships.
19
<PAGE>
IPT does not currently operate as a self-administered and self-managed
REIT, but rather has engaged Insignia to act as advisor to IPT and IPLP. In
such capacity, Insignia and its affiliates provide a broad range of services to
IPT and IPLP, including executive advisory, investment advisory, acquisition,
administrative, financial and accounting services, including in connection with
the Offer.
On July 18, 1997, IPT, Insignia, MAE GP Corporation (which is an
affiliate of Insignia) and Angeles Mortgage Investment Trust, an unincorporated
California business trust ("AMIT"), entered into a definitive merger agreement
(the "AMIT Merger Agreement"), pursuant to which AMIT is to be merged with and
into IPT, with IPT being the surviving entity, in a stock for stock transaction
(the "AMIT Merger"). AMIT is a public company whose Class A shares trade on the
American Stock Exchange under the symbol ANM. Insignia and its affiliates
currently own 96,800 (or approximately 3.7%) of the 2,617,000 outstanding AMIT
Class A shares and all of the 1,675,113 outstanding AMIT Class B shares. If the
AMIT Merger is consummated, IPT will become a publicly traded company (IPT
presently intends to apply for listing of its shares on the New York Stock
Exchange, which listing would be subject to completion of the AMIT Merger), and
it is anticipated that Insignia and its affiliates will own approximately 56%
of post-merger IPT, the former AMIT shareholders (other than Insignia and its
affiliates) will own approximately 17% of post-merger IPT, and the current
unaffiliated shareholders of IPT will own the remaining 27% of post-merger IPT.
The AMIT Merger is expected to be completed in the first quarter of
1998. Consummation of the AMIT Merger is subject to several conditions,
including approval of the AMIT Merger Agreement and the AMIT Merger by the
respective shareholders of IPT and AMIT and the receipt by AMIT of a fairness
opinion from its financial advisor to the effect that the AMIT Merger is fair
to AMIT's shareholders from a financial point of view. Accordingly, there can
be no assurance as to when the AMIT Merger will occur, or that it will occur at
all.
IPT's principal executive offices are located at One Insignia
Financial Plaza, P.O. Box 19059, Greenville, South Carolina 29602, and its
telephone number is (864) 239-1300. For certain information concerning the
trustees and executive officers of IPT, see Schedule II to this Offer to
Purchase. IPLP does not have any officers or employees.
20
<PAGE>
Set forth below is certain consolidated financial information with
respect to IPT and IPLP.
INSIGNIA PROPERTIES TRUST SELECTED
CONSOLIDATED FINANCIAL INFORMATION
(in thousands, except share and unit data)
<TABLE>
<CAPTION>
NINE MONTHS
ENDED YEAR ENDED
SEPTEMBER 30, DECEMBER 31,
1997 1996
------------- ------------
(unaudited) (audited)
<S> <C> <C>
Statements of Operations Data:
Revenues.............................................. $ 11,144 $ 9,705
Income Before Extraordinary Item...................... $ 2,930 $ 3,557
Net Income............................................ $ 2,930 $ 2,425
Supplemental Data:
Funds From Operations(1).............................. $ 14,324 $ 12,563
IPT Common Shares Outstanding......................... 17,573,151 11,168,036
IPLP Units Outstanding................................ 8,399,499 8,399,499
---------- ----------
IPT Common Shares and IPLP Units Outstanding(2)....... 25,972,650 19,567,535
========== ==========
Balance Sheets Data:
Cash.................................................. $ 53,897 $ 4,928
Investments in IPT Partnerships(3).................... $ 126,505 $ 118,741
Long-Term Debt........................................ $ 19,300 $ 19,730
Shareholders' Equity(4)............................... $ 138,710 $ 121,068
</TABLE>
- ---------
(1) Funds from Operations represent income or loss from real estate operations,
which is net income or loss in accordance with GAAP, excluding gains or
losses from debt restructuring or sales of property, plus depreciation and
provision for impairment.
(2) Assumes all outstanding IPLP units are exchanged for IPT Common Shares.
(3) Represents IPT's investment in 26 of the 36 IPT Partnerships which IPT
accounts for using the equity method. Of the remaining ten IPT
Partnerships, IPT accounts for nine using the cost method and one using the
consolidation method.
(4) Includes Insignia's investments in predecessor entities.
Insignia. Insignia is a fully integrated real estate services
organization. Insignia is the largest manager of multi-family residential
properties in the United States and is among the largest managers of commercial
properties. Insignia's real estate services include property management,
providing all of the day-to-day services necessary to operate a property,
whether residential or commercial; asset management, including long-term
financial planning, monitoring and implementing capital improvement plans, and
development and execution of refinancings and dispositions; real estate leasing
and brokerage; maintenance and construction services; marketing and
advertising; investor reporting and accounting; and investment banking,
including assistance in workouts and restructurings, mergers and acquisitions,
and debt and equity securitizations.
Insignia provides property and/or asset management services for
approximately 2,600 properties, which include approximately 290,000 residential
units (including cooperative and condominium units), and in excess of 150
million square feet of retail, commercial and industrial space, located in over
500 cities in 48 states. Insignia currently provides partnership administration
services to approximately 900 limited partnerships having approximately 330,000
limited partners. Insignia is a public company whose stock is traded on the New
York Stock Exchange under the symbol IFS.
Insignia is subject to the information and reporting requirements of
the Exchange Act and in accordance therewith is required to file periodic
reports, proxy statements and other information with the Commission relating to
its business, financial condition and other matters. Certain information, as of
particular dates, concerning Insignia's business, principal properties, capital
structure, material pending legal proceedings, operating results, financial
condition, directors and officers (including their remuneration and stock
options granted to them), the principal holders of Insignia's securities, any
material interests of such persons in transactions with Insignia and
21
<PAGE>
certain other matters is required to be disclosed in proxy statements and
annual reports distributed to Insignia's shareholders and filed with the
Commission. Such reports, proxy statements and other information may be
inspected and copied at the Commission's public reference facilities and should
also be available for inspection in the same manner as set forth with respect
to the Partnership in Section 9.
Insignia's principal executive offices are located at One Insignia
Financial Plaza, Greenville, South Carolina 29602, and its telephone number is
(864) 239-1000. For certain information concerning the directors and executive
officers of Insignia, see Schedule III to this Offer to Purchase.
Set forth below is certain consolidated financial information with
respect to Insignia and its consolidated subsidiaries for its fiscal years
ended December 31, 1996, 1995 and 1994 and the nine-month periods ended
September 30, 1997 and 1996. More comprehensive financial and other information
is included in Insignia's Annual Report on Form 10-K for the year ended
December 31, 1996 (including management's discussion and analysis of financial
condition and results of operations) and in other reports and documents filed
by Insignia with the Commission. The financial information set forth below is
qualified in its entirety by reference to such reports and documents filed with
the Commission and the financial statements and related notes contained
therein. These reports and other documents may be examined and copies thereof
may be obtained in the manner set forth above.
INSIGNIA FINANCIAL GROUP, INC.
SELECTED CONSOLIDATED FINANCIAL INFORMATION
(in thousands, except per share data)
<TABLE>
<CAPTION>
NINE MONTHS ENDED YEAR ENDED
SEPTEMBER 30, DECEMBER 31,
------------------ ------------------------------
1997 1996 1996 1995 1994
---- ---- ---- ---- ----
(unaudited)
<S> <C> <C> <C> <C> <C>
Statements of Operations Data:
Total Revenues.................................. $ 254,630 $ 149,204 $ 227,074 $ 123,032 $ 75,453
Income Before Taxes and Extraordinary Item...... $ 7,879 $ 8,097 $ 14,946 $ 10,093 $ 12,101
Net Income...................................... $ 4,727 $ 5,020 $ 8,564 $ 5,806 $ 7,261
Earnings Per Share.............................. $ 0.15 $ 0.15 $ 0.27 $ 0.20 $ 0.35
AS OF AS OF
SEPTEMBER 30, DECEMBER 31,
------------------ ------------------------------
1997 1996 1996 1995 1994
---- ---- ---- ---- ----
(unaudited)
Balance Sheets Data:
Cash and Cash Equivalents....................... $ 89,427 $ 60,131 $ 54,614 $ 49,846 $ 36,596
Receivables..................................... $ 73,657 $ 14,292 $ 46,040 $ 26,445 $ 13,572
Total Assets................................ $ 568,768 $ 471,889 $ 492,402 $ 245,409 $ 174,272
Accounts Payable................................ $ 8,767 $ 2,602 $ 1,711 $ 1,497 $ 3,478
Commissions Payable............................. $ 30,841 $ 9,257 $ 18,736 $ 602 --
Accrued and Sundry Liabilities.................. $ 50,893 $ 24,604 $ 40,741 $ 25,619 $ 18,790
Long-Term Debt.................................. $ 58,417 $ 205,590 $ 69,140 $ 42,996 $ 73,198
Total Liabilities........................... $ 148,918 $ 255,714 $ 130,328 $ 70,714 $ 95,466
Redeemable Convertible Preferred Stock.......... -- -- -- $ 15,000 --
Redeemable Convertible Preferred Securities
of Subsidiary Trust........................... $ 143,993 -- $ 144,169 -- --
Minority Interest in Consolidated Subsidiaries.. $ 52,778 $ 2,762 -- $ 2,682 --
Shareholders' Equity........................ $ 223,079 $ 213,413 $ 217,905 $ 157,013 $ 78,806
</TABLE>
Except as otherwise set forth herein, none of the Purchaser (which is
an affiliate of the General Partner), IPLP, IPT, Insignia or, to the best of
the Purchaser's knowledge, any of the persons listed on Schedules I, II or III
hereto, or any affiliate of the foregoing, (i) beneficially owns or has a right
to acquire any Class B Units, (ii) has effected any transaction in the Class B
Units in the last 60 days, or (iii) has any contract, arrangement,
understanding or relationship with any other person with respect to any
securities of the Partnership, including, but
22
<PAGE>
not limited to, contracts, arrangements, understandings or relationships
concerning the transfer or voting thereof, joint ventures, loan or option
arrangements, puts or calls, guarantees of loans, guarantees against loss or
the giving or withholding of proxies. Andrew L. Farkas, who is the Chairman of
the Board, Chief Executive Officer and President of Insignia and a trustee of
IPT, beneficially owns approximately 28% of Insignia's outstanding common stock
and, as a result, may be deemed to beneficially own the Class B Units owned by
IPLP.
SECTION 12. SOURCE OF FUNDS. The Purchaser (which is an affiliate of
the General Partner) expects that approximately $750,000 will be required to
purchase 23,000 Class B Units, if tendered, and to pay related fees and
expenses. The Purchaser (which is an affiliate of the General Partner) expects
to obtain all of those funds from IPLP, which in turn intends to use its cash
on hand.
SECTION 13. BACKGROUND OF THE OFFER.
Affiliation with the General Partner. Upon the Partnership's formation
in 1986, Consolidated Capital Equities Corporation ("CCEC"), a Colorado
corporation, was the sole general partner and Multi-Benefit '87-1 Depositary
Corporation, a wholly-owned subsidiary of CCEC, was the sole limited partner.
As a result of a succession of agreements, CCEC became the managing general
partner. In 1988, through a series of transactions, Southmark Corporation
acquired control of CCEC. In December 1988, CCEC filed for reorganization under
Chapter 11 of the United States Bankruptcy Code. In 1990, as part of CCEC's
reorganization plan, the General Partner acquired CCEC's interest as managing
general partner of the Partnership and its general partner interests in the
Partnership and in 15 other affiliated public limited partnerships (the
"Affiliated Partnerships") and the General Partner replaced CCEC as the general
partner of the Partnership (and as the general partner of each of the
Affiliated Partnerships). The selection of the General Partner as the general
partner of the Partnership (and of each of the Affiliated Partnerships) was
approved by a majority of the Limited Partners in the Partnership (and by a
majority of the limited partners in each of the Affiliated Partnerships)
pursuant to solicitations commenced in August 1990. Insignia acquired the stock
of the General Partner through two transactions in December 1994 and October
1995, and contributed that stock to IPT in December 1996 in connection with
IPT's formation.
Determination of Purchase Price. In establishing the Purchase Price,
the Purchaser (which is an affiliate of the General Partner) reviewed certain
publicly available information and certain information made available to it by
the General Partner and its other affiliates, including among other things: (i)
the Limited Partnership Agreement, as amended to date; (ii) the Partnership's
Annual Report on Form 10-KSB for the year ended December 31, 1996 and the
Partnership's Quarterly Report on Form 10-QSB for the period ended September
30, 1997; (iii) unaudited results of operations of the Partnership's properties
for the period since the beginning of the Partnership's current fiscal year;
(iv) the operating budgets prepared by IRG with respect to the Partnership's
properties for the year ending December 31, 1997; (v) independent appraisals of
two of the Partnership's properties; and (vi) other information obtained by
IRG, Insignia and other affiliates in their capacities as providers of property
management, asset management and partnership administration services to the
Partnership. Based on that information, the Purchaser (which is an affiliate of
the General Partner) considered several factors, as discussed below.
Trading History of Class B Units. Secondary market sales activity for
the Class B Units, including privately negotiated sales, has been limited and
sporadic. The Purchaser (which is an affiliate of the General Partner) is not
aware of any secondary market activity other than those trades reported by the
General Partner. According to information obtained from the General Partner,
from October 1, 1995 to September 30, 1997 an aggregate of 1,551 Class B Units
(representing less than 2.1% of the total outstanding Class B Units) were
transferred in sale transactions. Set forth in the table below are the high and
low sales prices of Class B Units for the quarterly periods from October 1,
1995 to September 30, 1997, as reported by the General Partner. The transfer
paperwork submitted to the General Partner often does not include the requested
price information or contains conflicting information as to the actual sales
price; accordingly, Limited Partners should not rely upon this information as
being completely accurate.
23
<PAGE>
MULTI-BENEFIT REALTY FUND '87-1
REPORTED SALES PRICES OF PARTNERSHIP CLASS B UNITS
<TABLE>
<CAPTION>
AS REPORTED BY AS REPORTED BY
THE GENERAL PARTNER(A) THE PARTNERSHIP SPECTRUM
----------------------------------- -----------------------------------
LOW SALES HIGH SALES LOW SALES HIGH SALES
PRICE PRICE PRICE PRICE
PER CLASS B UNIT PER CLASS B UNIT PER CLASS B UNIT PER CLASS B UNIT
---------------- ---------------- ---------------- ----------------
<S> <C> <C> <C> <C>
Fiscal Year Ended December 31, 1997:
Third Quarter......................... $20 $20 (b) (b)
Second Quarter........................ 20 20 (b) (b)
First Quarter ........................ (c) (c) (b) (b)
Fiscal Year Ended December 31, 1996:
Fourth Quarter ....................... 1 10 (b) (b)
Third Quarter......................... 8 10 (b) (b)
Second Quarter........................ 10 10 (b) (b)
First Quarter......................... 6 18 (b) (b)
Fiscal Year Ended December 31, 1995:
Fourth Quarter........................ 8 8 (b) (b)
</TABLE>
- ---------
(a) Although the General Partner requests and records information on the
prices at which Class B Units are sold, it does not regularly receive or
maintain information regarding the bid or asked quotations of secondary
market makers, if any. The General Partner processes transfers of Class B
Units only 12 times per year - on the first day of each month. The prices
in the table are based solely on information provided to the General
Partner by sellers and buyers of Class B Units transferred in sale
transactions (i.e., excluding transactions believed to result from the
death of a Limited Partner, rollover to an IRA account, establishment of a
trust, trustee to trustee transfers, termination of a benefit plan,
distributions from a qualified or non-qualified plan, uniform gifts,
abandonment of Class B Units or similar non-sale transactions).
(b) No Class B Units were reported by The Partnership Spectrum as having been
sold during the quarter. (c) No Class B Units were reported by the General
Partner as having been sold during the quarter.
The Purchaser (which is an affiliate of the General Partner) believes
that, although secondary market sales information probably is not a reliable
measure of value because of the limited and inefficient nature of the market
for Class B Units, this information may be relevant to a Limited Partner's
decision as to whether to tender its Class B Units pursuant to the Offer. At
present, privately negotiated sales and sales through intermediaries (e.g.,
through the trading system operated by American Partnership Board, Inc., which
publishes sell offers by holders of Class B Units) are the only means available
to a Limited Partner to liquidate an investment in Class B Units (other than
the Offer) because the Class B Units are not listed or traded on any exchange
or quoted on NASDAQ.
Appraisals. Two of the Partnership's properties were appraised in 1996
by an independent, third party appraiser, Koeppel Tener Real Estate Services,
Inc. ("KTR"), in connection with an initial financing of one property and a
refinancing of the other property. According to the appraisal reports, the
scope of the appraisals included an inspection of each property and an analysis
of the respective surrounding markets. In each case, KTR relied principally on
the income capitalization approach to valuation and secondarily on the sales
comparison approach, and represented that its report was prepared in accordance
with the Code of Professional Ethics and Standards of Professional Appraisal
Practice of the Appraisal Institute and the Uniform Standards of Professional
Appraisal Practice, and in compliance with the Appraisal Standards set forth in
the Financial Institutions Reform, Recovery and Enforcement Act of 1989 (known
as "FIRREA"). The estimated market value of the fee simple estate of each of
the Partnership's properties specified in those appraisal reports for the two
properties which were appraised in 1996 are set forth in the table below, and
copies of the summaries of those appraisals have been filed as exhibits to the
Purchaser's Tender Offer Statement on Schedule 14D-1 filed with the Commission.
APPRAISED DATE OF
PROPERTY NAME VALUE APPRAISAL
- ------------- --------------- ---------
Carlin Manor $ 4,750,000 04/12/96
Shadow Brook $ 11,750,000 04/25/96
24
<PAGE>
Purchaser's Estimate of Gross Real Estate Value. In estimating the
gross real estate value of the Partnership's properties, the Purchaser utilized
the capitalization of income approach. The estimate of the gross real estate
value of the Partnership's properties prepared by the Purchaser does not
purport to be an estimate of the aggregate fair market value of the Class B
Units themselves, nor should it be viewed as such by Limited Partners. Neither
the Purchaser nor any of its affiliates prepared any estimates of the values of
the Partnership's properties based upon any other valuation method.
The following is a description of the methodology employed by the
Purchaser in preparing such estimates (as used below, "net operating income" is
calculated before depreciation, amortization, debt service payments and certain
capital expenditure items):
CARLIN MANOR APARTMENTS. In estimating the value of this property, the
Purchaser reviewed the income ($1,231,480) generated by the property for the
ten months ended October 31, 1997 (comprised of $1,157,876 of gross rental
income and $73,604 of other income), and then deducted from this amount the
total operating expenses of the property for the first ten months of 1997
($660,503), resulting in the Purchaser's estimate of net operating income for
the first ten months of 1997 ($570,977). The Purchaser then annualized this
amount, resulting in estimated annual net operating income of $685,172, and
then reduced that annualized net operating income amount by $400 per apartment
unit, representing the Purchaser's estimate of the adjustment that would be
imputed by a third party purchaser in underwriting the operating expenses,
including normal replacement reserves, of the property for valuation purposes.
Finally, the Purchaser capitalized its estimated adjusted net operating income
amount ($573,972) at an 11.5% capitalization rate, resulting in an estimated
gross property value of $4,991,061.
HUNT CLUB APARTMENTS. In estimating the value of this property, the
Purchaser reviewed the income ($1,156,456) generated by the property for the
ten months ended October 31, 1997 (comprised of $1,103,140 of gross rental
income and $53,316 of other income), and then deducted from this amount the
total operating expenses of the property for the first ten months of 1997
($740,244), resulting in the Purchaser's estimate of net operating income for
the first ten months of 1997 ($416,212). The Purchaser then annualized this
amount, resulting in estimated annual net operating income of $499,454, and
then increased that annualized net operating income amount by $300 per
apartment unit, representing the Purchaser's estimate of the adjustment that
would be imputed by a third party purchaser in underwriting the operating
expenses, including normal replacement reserves, of the property for valuation
purposes. Finally, the Purchaser capitalized its estimated adjusted net
operating income amount ($559,454) at a 10% capitalization rate, resulting in
an estimated gross property value of $5,594,540.
SHADOW BROOK APARTMENTS. In estimating the value of this property, the
Purchaser reviewed the income ($1,748,615) generated by the property for the
ten months ended October 31, 1997 (comprised of $1,653,980 of gross rental
income and $94,635 of other income), and then deducted from this amount the
total operating expenses of the property for the first ten months of 1997
($664,459), resulting in the Purchaser's estimate of net operating income for
the first ten months of 1997 ($1,084,156). The Purchaser then annualized this
amount, resulting in estimated annual net operating income of $1,300,987 and
then reduced that amount by $300 per apartment unit, representing the
Purchaser's estimate of the adjustment that would be imputed by a third party
purchaser in underwriting the operating expenses, including normal replacement
reserves, of the property for valuation purposes. Finally, the Purchaser
capitalized its estimated adjusted net operating income amount ($1,210,987) at
a 9.5% capitalization rate, resulting in an estimated gross property value of
$12,747,232.
Based on the individual estimates of the gross values of the
Partnership's properties described above, the Purchaser estimated that the
current aggregate gross real estate value of the Partnership's properties is
$23,332,833 (the "Gross Real Estate Value Estimate"). The property-specific
capitalization rates used by the Purchaser in the valuation estimates described
above were based upon the Purchaser's, IPT's and Insignia's general knowledge
of the revenues and expenses associated with operating multi-family properties
in the markets in which the Partnership's properties are located, their general
knowledge of property values in those markets and their experience in the real
estate market in general.
Although there are several other methods of estimating the value of
real estate of this type, the Purchaser believes that this approach represents
a reasonable method of estimating the aggregate gross value of the
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Partnership's properties (without taking into account the costs of disposing of
the properties), subject to the substantial uncertainties inherent in any
estimate of value. The use of other assumptions, however, particularly as to
the applicable capitalization rate, could produce substantially different
results. None of the Purchaser, IPT or Insignia solicited any offers or
inquiries from prospective buyers of the Partnership's properties in connection
with preparing the Purchaser's estimates of the fair market values of those
properties, and the actual amounts for which the Partnership's properties might
be sold could be significantly higher or significantly lower than the
Purchaser's estimates.
The Gross Real Estate Value Estimate does not take into account (i)
the debt encumbering the Partnership's properties or the other liabilities of
the Partnership, (ii) cash and other assets held by the Partnership, (iii) real
estate transaction costs that would be incurred on a sale of the Partnership's
properties, such as brokerage commissions and other selling and closing
expenses, (iv) timing considerations or (v) costs associated with winding up
the Partnership. For this reason, the Purchaser considers the Gross Real Estate
Value Estimate to be less meaningful in evaluating the Purchase Price offered
by the Purchaser than its pro forma estimate of the net liquidation value per
Class B Unit described below.
Purchaser's Pro Forma Estimate of Net Liquidation Value per Class B
Unit. The Purchaser is offering to purchase Class B Units, which are a
relatively illiquid investment, and is not offering to purchase the
Partnership's underlying assets or assume any of its liabilities. Consequently,
the Purchaser does not believe that the per-Class B Unit amount which might be
distributed to Limited Partners following a future sale of all the
Partnership's properties necessarily reflects the present fair value of a Class
B Unit. Conversely, the realizable value of the Partnership's assets clearly is
a relevant factor in determining the price a prudent purchaser would offer for
Class B Units. In considering this factor, the Purchaser made a pro forma
calculation of the amount each Limited Partner might receive in a theoretical
orderly liquidation of the Partnership (which may not be realistically
possible, particularly in the near term, due to real estate market conditions,
the general difficulty of disposing of real estate in a short period of time,
and other general economic factors), based on the Gross Real Estate Value
Estimate described above and the other considerations described below. The
Purchaser based its pro forma liquidation analysis on the Gross Real Estate
Value Estimate (and thus on the Purchaser's estimates of the values of the
Partnership's properties described above), as opposed to the appraised values
of the Partnership's properties or the values estimated in connection with the
formation of IPT (as described above), because the Purchaser believes that the
Gross Real Estate Value Estimate represents the best estimate, based on
currently available information, of the values of the Partnership's properties.
In estimating the pro forma net liquidation value per Class B Unit,
the Purchaser adjusted its Gross Real Estate Value Estimate of $23,332,833 to
reflect the Partnership's other assets and liabilities (excluding prepaid and
deferred expenses and security deposits). Specifically, the Purchaser added the
amounts of cash, accounts receivable and escrow deposits shown on the
Partnership's unaudited balance sheet at September 30, 1997 ($1,568,000), and
subtracted the mortgage debt encumbering the Partnership's properties
($12,302,000) and all other liabilities shown on that balance sheet ($690,000).
The Purchaser then deducted from that amount $933,313, representing a reserve
equal to 4% of the Gross Real Estate Value Estimate (which represents the
Purchaser's estimate of the probable costs of brokerage commissions, real
estate transfer taxes and other disposition expenses). The result, $10,975,520,
represents the Purchaser's pro forma estimate of the aggregate net liquidation
proceeds (before provision for the costs described in the following sentence)
which could be realized on an orderly liquidation of the Partnership, based on
the assumptions implicit in the calculations described above. The Purchaser did
not, however, deduct any amounts in respect of the legal and other costs which
the Purchaser expects would be incurred in a liquidation, including costs of
negotiating purchase and sale contracts, possibly conducting a consent
solicitation in order to obtain the Limited Partners' approvals for the sales
as may be required by the Limited Partnership Agreement, and winding up the
Partnership, because of the difficulty of estimating those amounts.
To complete its pro forma estimate of the amount of the theoretical
liquidation proceeds that would be distributable per Class B Unit, the
Purchaser then deducted 1%, which is the percentage allocable to the General
Partner in respect of its non-subordinated interest in the Partnership. Of the
remaining $10,865,765, Limited Partners holding the Class A Units are entitled
to $2,532,269 ($26.30 per Class A Unit), which represents the
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amount of the unpaid Priority Return as of September 30, 1997. The remaining
$8,333,496 is then allocated pro rata among the holders of Class B Units and
Class A Units based on their relative initial capital contributions
(approximately 44% for the Class B Units and 56% for the Class A Units).
Limited Partners holding Class B Units are entitled to receive $3,666,737,
representing the aggregate net liquidation proceeds payable to holders of Class
B Units, which the Purchaser then divided by the 75,152 Class B Units reported
as outstanding by the General Partner as of December 1, 1997. The resulting
estimated pro forma liquidation value was $48.79 per Class B Unit (the
"Estimated Liquidation Value"), before provision for the legal and other costs
of liquidating the Partnership described in the last sentence of the preceding
paragraph.
The Purchaser's pro forma liquidation analysis described above is
merely theoretical and does not itself reflect the value of the Class B Units
because (i) there is no assurance that any such liquidation in fact will occur
in the foreseeable future and (ii) any liquidation in which the estimated fair
market values described above might be realized would take an extended period
of time (at least a year, and quite possibly significantly longer), during
which time the Partnership and its partners would continue to be exposed to the
risk of fluctuations in asset values because of changing market conditions and
other factors. For any property sales in which the Partnership is required to
indemnify the buyer for matters arising after the closing, a portion of the
sales proceeds could be held by the Partnership until all possible claims were
satisfied, further extending the delay in the receipt by the Limited Partners
of liquidation proceeds. In light of these factors, the Purchaser (which is an
affiliate of the General Partner) believes the actual current value of the
Class B Units is substantially less than its estimate of the Estimated
Liquidation Value. Conversely, there is a substantial possibility that the
per-Class B Unit value realized in an orderly liquidation could be greater than
the Estimated Liquidation Value. A reduction in either operating expenses or
capital expenditures from the levels reflected in the property operating
statements for the ten months ending October 31, 1997 would result in a higher
liquidation value under the method described above. Similarly, a higher
liquidation value would result if a buyer applied lower capitalization rates
(reflecting a willingness to accept a lower rate of return on its investment)
to the applicable net operating income generated by the Partnership's
properties than the capitalization rates applied by the Purchaser. For example,
a 5% increase or decrease in the value of the Partnership's properties would
produce a corresponding increase or decrease in the Estimated Liquidation Value
of approximately $6.45 per Class B Unit. Furthermore, the analysis described
above is based on a series of assumptions, some of which may not be correct.
Accordingly, this analysis should be viewed merely as indicative of the
Purchaser's approach to valuing Class B Units and not as any way predictive of
the likely result of any future transactions.
SECTION 14. CONDITIONS OF THE OFFER. Notwithstanding any other term of
the Offer, the Purchaser (which is an affiliate of the General Partner) will
not be required to accept for payment or to pay for any Class B Units tendered
if all authorizations, consents, orders or approvals of, or declarations or
filings with, or expirations of waiting periods imposed by, any court,
administrative agency or commission or other governmental authority or
instrumentality, domestic or foreign, necessary for the consummation of the
transactions contemplated by the Offer shall not have been filed, occurred or
been obtained prior to the Expiration Date. Furthermore, notwithstanding any
other term of the Offer and in addition to the Purchaser's right to withdraw
the Offer at any time before the Expiration Date, the Purchaser (which is an
affiliate of the General Partner) will not be required to accept for payment or
pay for any Class B Units not theretofore accepted for payment or paid for and
may terminate or amend the Offer as to such Class B Units if, at any time on or
after the date of the Offer and before the Expiration Date, any of the
following conditions exists:
(a) a preliminary or permanent injunction or other order of any
federal or state court, government or governmental authority or agency shall
have been issued and shall remain in effect which (i) makes illegal, delays or
otherwise directly or indirectly restrains or prohibits the making of the Offer
or the acceptance for payment, purchase of or payment for any Class B Units by
the Purchaser (which is an affiliate of the General Partner), (ii) imposes or
confirms limitations on the ability of the Purchaser effectively to exercise
full rights of ownership of any Class B Units, including without limitation the
right to vote any Class B Units acquired by the Purchaser pursuant to the Offer
or otherwise on all matters properly presented to the Partnership's Limited
Partners, (iii) requires divestiture by the Purchaser of any Class B Units,
(iv) causes any material diminution of the benefits to be derived by the
Purchaser as a result of the transactions contemplated by the Offer, or (v)
might materially
27
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adversely affect the business, properties, assets, liabilities, financial
condition, operations, results of operations or prospects of the Purchaser or
the Partnership;
(b) there shall be any action taken, or any statute, rule, regulation
or order proposed, enacted, enforced, promulgated, issued or deemed applicable
to the Offer by any federal or state court, government or governmental
authority or agency, which might, directly or indirectly, result in any of the
consequences referred to in clauses (i) through (v) of paragraph (a) above;
(c) any change or development shall have occurred or been threatened
since the date of the Offer to Purchase, in the business, properties, assets,
liabilities, financial condition, operations, results of operations or
prospects of the Partnership, which is or may be materially adverse to the
Partnership, or the Purchaser (which is an affiliate of the General Partner)
shall have become aware of any fact that does or may have a material adverse
effect on the value of the Class B Units;
(d) there shall have occurred (i) any general suspension of trading
in, or limitation on prices for, securities on any national securities exchange
or in the over-the-counter market in the United States, (ii) a declaration of a
banking moratorium or any suspension of payments in respect of banks in the
United States, (iii) any limitation by any governmental authority on, or other
event which might affect, the extension of credit by lending institutions or
result in any imposition of currency controls in the United States, (iv) a
commencement of a war or armed hostilities or other national or international
calamity directly or indirectly involving the United States, (v) a material
change in United States or other currency exchange rates or a suspension of, or
imposition of a limitation on, the markets thereof, or (vi) in the case of any
of the foregoing existing at the time of the commencement of the Offer, a
material acceleration or worsening thereof; or
(e) it shall have been publicly disclosed or the Purchaser (which is
an affiliate of the General Partner) shall have otherwise learned that (i) more
than ten percent of the outstanding Class B Units have been or are proposed to
be acquired by another person (including a "group" within the meaning of
Section 13(d)(3) of the Exchange Act), or (ii) any person or group that prior
to such date had filed a Statement with the Commission pursuant to Section
13(d) or (g) of the Exchange Act has increased or proposes to increase the
number of Class B Units beneficially owned by such person or group as disclosed
in such Statement by two percent or more of the outstanding Class B Units.
The foregoing conditions are for the sole benefit of the Purchaser
(which is an affiliate of the General Partner) and may be asserted by the
Purchaser regardless of the circumstances giving rise to such conditions or may
be waived by the Purchaser in whole or in part at any time and from time to
time in its sole discretion. Any determination by the Purchaser (which is an
affiliate of the General Partner) concerning the events described above will be
final and binding upon all parties.
SECTION 15. CERTAIN LEGAL MATTERS.
General. The Purchaser (which is an affiliate of the General Partner)
is not aware of any filings, approvals or other actions by any domestic or
foreign governmental or administrative agency that would be required prior to
the acquisition of Class B Units by the Purchaser (which is an affiliate of the
General Partner) pursuant to the Offer, other than the filing of a Tender Offer
Statement on Schedule 14D-1 with the Commission (which has already been filed)
and any required amendments thereto. Should any such approval or other action
be required, it is the Purchaser's present intention that such additional
approval or action would be sought. Although there is no present intent to
delay the purchase of Class B Units tendered pursuant to the Offer pending
receipt of any such additional approval or the taking of any such action, there
can be no assurance that any such additional approval or action, if needed,
would be obtained without substantial conditions or that adverse consequences
might not result to the Partnership's business, or that certain parts of the
Partnership's business might not have to be disposed of or other substantial
conditions complied with in order to obtain such approval or action, any of
which could cause the Purchaser (which is an affiliate of the General Partner)
to elect to terminate the Offer without purchasing Class B Units thereunder.
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Antitrust. The Purchaser (which is an affiliate of the General
Partner) does not believe that the Hart-Scott- Rodino Antitrust Improvements
Act of 1976, as amended, is applicable to the acquisition of Class B Units
contemplated by the Offer.
Margin Requirements. The Class B Units are not "margin securities"
under the regulations of the Board of Governors of the Federal Reserve System
and, accordingly, those regulations generally are not applicable to the Offer.
SECTION 16. FEES AND EXPENSES. Except as set forth in this Section 16,
the Purchaser (which is an affiliate of the General Partner) will not pay any
fees or commissions to any broker, dealer or other person for soliciting
tenders of Class B Units pursuant to the Offer. The Purchaser (which is an
affiliate of the General Partner) has retained Beacon Hill Partners, Inc. to
act as Information Agent and Harris Trust Company of New York to act as
Depositary in connection with the Offer. The Purchaser (which is an affiliate
of the General Partner) will pay the Information Agent and the Depositary
reasonable and customary compensation for their respective services in
connection with the Offer, plus reimbursement for out-of-pocket expenses, and
has agreed to indemnify the Information Agent and the Depositary against
certain liabilities and expenses in connection therewith, including liabilities
under the federal securities laws. The Purchaser (which is an affiliate of the
General Partner) will also pay all costs and expenses of printing and mailing
the Offer and its legal fees and expenses.
SECTION 17. MISCELLANEOUS. The Purchaser (which is an affiliate of the
General Partner) is not aware of any jurisdiction in which the making of the
Offer is not in compliance with applicable law. If the Purchaser (which is an
affiliate of the General Partner) becomes aware of any jurisdiction in which
the making of the Offer would not be in compliance with applicable law, the
Purchaser will make a good faith effort to comply with any such law. If, after
such good faith effort, the Purchaser (which is an affiliate of the General
Partner) cannot comply with any such law, the Offer will not be made to (nor
will tenders be accepted from or on behalf of) Limited Partners residing in
such jurisdiction. In those jurisdictions whose securities or blue sky laws
require the Offer to be made by a licensed broker or dealer, the Offer will be
deemed to be made on behalf of the Purchaser (which is an affiliate of the
General Partner) by one or more registered brokers or dealers licensed under
the laws of that jurisdiction.
No person has been authorized to give any information or to make any
representation on behalf of the Purchaser (which is an affiliate of the General
Partner) not contained in this Offer to Purchase or in the Assignment of
Partnership Interest and, if given or made, such information or representation
must not be relied upon as having been authorized.
The Purchaser (which is an affiliate of the General Partner), IPLP,
IPT and Insignia have filed with the Commission a Tender Offer Statement on
Schedule 14D-1, pursuant to Rule 14d-3 under the Exchange Act, furnishing
certain additional information with respect to the Offer, and may file
amendments thereto. The Schedule 14D-1 and any amendments thereto, including
exhibits, may be inspected and copies may be obtained at the same places and in
the same manner as set forth in Section 9 (except that they will not be
available at the regional offices of the Commission).
MADISON RIVER PROPERTIES, L.L.C.
DECEMBER 23, 1997
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SCHEDULE I
INFORMATION REGARDING THE MANAGERS OF THE PURCHASER
Set forth in the table below are the name and the present principal occupations
or employment and the name, principal business and address of any corporation
or other organization in which such occupation or employment is conducted, and
the five-year employment history of each of the managers of the Purchaser. Each
person identified below is employed by Insignia and is a United States citizen.
The principal business address of the Purchaser and, unless otherwise
indicated, the business address of each person identified below, is One
Insignia Financial Plaza, Greenville, South Carolina 29602.
PRESENT PRINCIPAL OCCUPATION
OR EMPLOYMENT AND
NAME FIVE-YEAR EMPLOYMENT HISTORY
- ---- ----------------------------
Jeffrey P. Cohen Jeffrey P. Cohen has been a Manager of the Purchaser
375 Park Avenue since its inception in December 1997. For additional
Suite 3401 information regarding Mr. Cohen, see Schedule II.
New York, NY 10152
John K. Lines John K. Lines has been a Manager of the Purchaser
since its inception in December 1997. For additional
information regarding Mr. Lines, see Schedules II
and III.
Ronald Uretta Ronald Uretta has been a Manager of the Purchaser
since its inception in December 1997. For additional
information regarding Mr. Uretta, see Schedules II
and III.
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SCHEDULE II
INFORMATION REGARDING THE
TRUSTEES AND EXECUTIVE OFFICERS OF IPT
Set forth in the table below are the name and the present principal occupations
or employment and the name, principal business and address of any corporation
or other organization in which such occupation or employment is conducted, and
the five-year employment history of each of the trustees and executive officers
of IPT. Each person identified below is employed by Insignia and is a United
States citizen. The principal business address of IPT and, unless otherwise
indicated, the business address of each person identified below, is One
Insignia Financial Plaza, Greenville, South Carolina 29602. Trustees are
identified by an asterisk.
PRESENT PRINCIPAL OCCUPATION
OR EMPLOYMENT AND
NAME FIVE-YEAR EMPLOYMENT HISTORY
- ---- ----------------------------
Andrew L. Farkas* Andrew L. Farkas has served as a Trustee of IPT
since December 1996, and has served as Chairman of
the Board of Trustees and Chief Executive Officer
of IPT since January 1997. For additional
information regarding Mr. Farkas, see Schedule III.
James A. Aston* James A. Aston has served as a Trustee and
President of IPT since its inception in May 1996.
For additional information regarding Mr. Aston,
see Schedule III.
Frank M. Garrison* Frank M. Garrison has served as a Trustee of IPT
102 Woodmont Boulevard since December 1996. Mr. Garrison also served as
Suite 400 an Executive Managing Director of IPT from January
Nashville, TN 37205 1997 to April 1997. For additional information
regarding Mr. Garrison, see Schedule III.
Jeffrey P. Cohen Jeffrey P. Cohen has served as a Senior Vice
375 Park Avenue President of IPT since August 1997, and served as
Suite 3401 a Vice President of IPT from June 1997 until
New York, NY 10152 August 1997. Since April 1997, Mr. Cohen's
principal occupation has been to serve as a Senior
Vice President -- Investment Banking of Insignia.
Prior to April 1997, Mr. Cohen's principal
occupation was as an attorney with the law firm
of Rogers & Wells, New York, New York.
William D. Falls William D. Falls has served as the Controller of
IPT since August 1997. Since April 1995,
Mr. Falls' principal occupation has been to serve
as an accountant with Insignia. Prior to
April 1995, Mr. Falls' principal occupation was as
a senior auditor with the accounting firm of
Ernst & Young LLP.
William H. Jarrard, Jr. William H. Jarrard, Jr. has served as a Senior
Vice President of IPT since August 1997, and
served as Vice President and Director of
Operations of IPT from December 1996 until
August 1997. Mr. Jarrard's principal employment
has been with Insignia for more than the past
five years. From January 1994 to September 1997,
Mr. Jarrard served as Managing Director --
Partnership Administration of Insignia.
S-2
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John K. Lines John K. Lines has served as Secretary of IPT since
December 1996, and has served as a Senior Vice
President of IPT since August 1997. Mr. Lines
served as a Vice President IPT from May 1996 until
August 1997. For additional information regarding
Mr. Lines, see Schedule III.
Ronald Uretta Ronald Uretta has served as Treasurer of IPT since
December 1996, and has served as a Senior Vice
President of IPT since August 1997. Mr. Uretta
served as a Vice President of IPT from December
1996 until August 1997 and as Chief Financial
Officer of IPT from May 1996 until December 1996.
For additional information regarding Mr. Uretta,
see Schedule III.
Carroll D. Vinson Carroll D. Vinson has served as Chief Operating
Officer of IPT since May 1997. Since August 1994,
Mr. Vinson's principal occupation has been to
serve as President of the various corporate
general partners of partnerships controlled by
Metropolitan Asset Enhancement, L.P., which is an
affiliate of Insignia.
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SCHEDULE III
INFORMATION REGARDING THE
DIRECTORS AND EXECUTIVE OFFICERS OF INSIGNIA
Set forth in the table below are the name and the present principal occupations
or employment and the name, principal business and address of any corporation
or other organization in which such occupation or employment is conducted, and
the five-year employment history of each of the directors and executive
officers of Insignia. Unless otherwise indicated, each person identified below
is employed by Insignia and is a United States citizen. The principal business
address of Insignia and, unless otherwise indicated, the business address of
each person identified below, is One Insignia Financial Plaza, Greenville,
South Carolina 29602. Directors are identified by an asterisk.
PRESENT PRINCIPAL OCCUPATION
OR EMPLOYMENT AND
NAME FIVE-YEAR EMPLOYMENT HISTORY
- ---- ----------------------------
Andrew L. Farkas* Andrew L. Farkas has been a Director and Chairman,
President and Chief Executive Officer of Insignia
since its inception in January 1991. Mr. Farkas
has also been President of Metropolitan Asset
Group, Ltd. ("MAG"), a real estate investment
banking firm, since 1983.
Robert J. Denison* Robert J. Denison has been a Director of Insignia
1212 North Summit Drive since May 1996. For more than the past five years,
Santa Fe, NM 87501 Mr. Denison's principal occupation has been as a
General Partner of First Security Company II,
L.P., an investment advisory firm.
Robin L. Farkas* Robin L. Farkas has been a Director of Insignia
730 Park Avenue since August 1993. Mr. Farkas is the retired
New York, NY 10021 Chairman of the Board and Chief Executive Officer
of Alexander's Inc., a real estate company. He
also serves as a director of Refac Technology
Development Corporation, Noodle Kiddoodle, and
Containerways International Ltd.
Merril M. Halpern* Merril M. Halpern has been a Director of Insignia
535 Madison Avenue since August 1993. For more than the past five
New York, NY 10022 years, Mr. Halpern's principal occupation has been
as Chairman of the Board of Directors and Co-Chief
Executive Officer of Charterhouse Group
International, Inc., a privately-owned investment
firm which, among other things, actively engages
in making private equity investments in a broad
range of industrial and service companies located
primarily in the United States. Mr. Halpern is
also a director of American Disposal Services,
Inc., Designer Holdings Ltd. and Microwave Power
Devices, Inc.
Robert G. Koen* Robert G. Koen has been a Director of Insignia
125 West 55th Street since August 1993. Since February 1996, Mr. Koen
New York, NY 10019 has been a partner in the law firm of Akin, Gump,
Strauss, Hauer & Feld, which represents Insignia
and certain of its affiliates from time to time.
From January 1991 to February 1996, Mr. Koen was a
partner in the law firm LeBoeuf, Lamb, Greene &
MacRae.
Michael I. Lipstein* Michael I. Lipstein has been a Director of
110 East 59th Street Insignia since August 1993. For more than the past
New York, NY 10022 five years, Mr. Lipstein's principal occupation
has been as a self-employed consultant in the real
estate business, including ownership, management
and lending.
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<PAGE>
Buck Mickel* Buck Mickel has been a Director of Insignia since
301 N. Main Street August 1993. For more than the past five years,
Greenville, SC 29601 Mr. Mickel's principal occupation has been to
serve as Chairman of the Board and Chief Executive
Officer of RSI Holdings, a company which
distributes outdoor equipment. Mr. Mickel is
also a director of Fluor Corporation, The Liberty
Corporation, NationsBank Corporation, Emergent
Group, Inc., Delta Woodside Industries, Inc., Duke
Power Company, and Textile Hall Corporation.
James A. Aston James A. Aston's principal employment has been
with Insignia for more than the past five years.
Mr. Aston currently serves as Chief Financial
Officer of Insignia (since August 1996) and with
the Office of the Chairman (since July 1994).
Albert J. Frazia Albert Frazia has been a Senior Vice President --
Human Resources of Insignia since August 1997.
Prior to August 1997, Mr. Frazia's principal
employment for more than the prior five years was
as Director -- Human Resources of E&Y Kenneth
Leventhal Real Estate Group, New York, New York.
Frank M. Garrison Frank M. Garrison's principal employment has been
102 Woodmont Boulevard with Insignia for more than the past five years.
Suite 400 Mr. Garrison currently serves as an Executive
Nashville, TN 37205 Managing Director of Insignia (since July 1994)
and as President of Insignia Financial Services, a
division of Insignia (since July 1994).
Jeffrey L. Goldberg Jeffrey L. Goldberg's principal employment has
375 Park Avenue been with Insignia for more than the past five
Suite 3401 years. Mr. Goldberg currently serves as a
New York, NY 10152 Managing Director -- Investment Banking of
Insignia (since July 1994).
Edward S. Gordon Edward S. Gordon has been with the Office of the
200 Park Avenue Chairman of Insignia since July 1996. Prior to
New York, NY 10166 July 1996, Mr. Gordon's principal employment for
more than the prior five years was as a founder
and Chairman of Edward S. Gordon Company,
Incorporated ("ESG"), a commercial property
management and brokerage firm located in New York,
New York that was acquired by Insignia in
June 1996.
Albert H. Gossett Albert H. Gossett's principal employment has been
with Insignia for more than the past five years.
Mr. Gossett currently serves as a Senior Vice
President of Insignia (since July 1994) and as
Chief Information Officer of Insignia (since
January 1991).
Henry Horowitz Henry Horowitz's principal employment has been
with Insignia since January 1993. Mr. Horowitz
currently serves as an Executive Managing Director
of Insignia (since June 1994) and Chief Operating
Officer of Insignia Commercial Group (since
January 1997). From January 1987 to January 1993,
Mr. Horowitz's principal employment was as Chief
Executive Officer of First Resource Realty, Inc.,
a commercial property management organization
located in Oklahoma that Insignia acquired in
January 1993.
S-5
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Neil Kreisel Neil Kreisel has been an Executive Managing
909 Third Avenue Director of Insignia since September 1995 and
New York, NY 10022 President of Insignia Residential Group since
September 1997. Prior to September 1995,
Mr. Kreisel's principal occupation was to serve as
President and Chief Executive Officer of Kreisel
Company, Inc., a residential property management
firm located in New York, New York which Insignia
acquired in September 1995.
John K. Lines John K. Lines has been General Counsel of Insignia
since June 1994 and Secretary since July 1994.
From May 1993 until June 1994, Mr. Lines'
principal employment was as Assistant General
Counsel and Vice President of Ocwen Financial
Corporation, a thrift holding company located in
West Palm Beach, Florida. From October 1991 until
April 1993, Mr. Lines' principal employment was as
Senior Attorney of Banc One Corporation, a bank
holding company in Columbus, Ohio.
Martha Long Martha Long has been a Senior Vice President --
Finance of Insignia since January 1997 and
Controller of Insignia since June 1994. Prior to
June 1994, Ms. Long was Senior Vice President and
Controller of The First Savings Bank located in
Greenville, South Carolina.
Mauro Keller Sarmiento Mauro Keller Sarmiento has been Managing Director
375 Park Avenue and Chief Strategic Officer for European
New York, NY 10152 Operations of Insignia since June 1997. From
November 1993 until June 1997, Mr. Sarmiento's
principal employment was as Manager of YPF, a
petroleum company located in Buenos Aires,
Argentina. From May 1991 until October 1993,
Mr. Sarmiento's principal employment was as a
partner of MCA, an advisory company in Madrid,
Spain.
Thomas R. Shuler Thomas R. Shuler's principal employment has been
with Insignia for more than the past five years.
Mr. Shuler currently serves as Chief Operating
Officer of Insignia Residential Group (since
January 1997).
Stephen B. Siegel Stephen B. Siegel has been an Executive Managing
200 Park Avenue Director of Insignia since July 1996 and President
New York, NY 10166 of Insignia Commercial Group since January 1997.
From February 1992 until July 1996, Mr. Siegel's
principal employment was as President of ESG.
Ronald Uretta Ronald Uretta's principal employment has been with
Insignia for more than the past five years.
Mr. Uretta currently serves as Chief Operating
Officer (since August 1996) and Treasurer (since
January 1992) of Insignia.
Joseph T. Aveni Joseph T. Aveni's principal employment has been
6000 Rockside Woods Blvd. with Realty One, Inc., a wholly-owned subsidiary
Cleveland, OH 44131 of Insignia ("Realty One"), for more than the past
five years. Mr. Aveni currently serves as a
Director and Chief Executive Officer of Realty One
(since October 1997).
Anthony M. Ciepiel Anthony M. Ciepiel's principal employment has been
6000 Rockside Woods Blvd. with Realty One for more than the past five years.
Cleveland, OH 44131 Mr. Ciepiel currently serves as Director,
President, Chief Operating Officer and Treasurer
of Realty One (since October 1997).
S-6
<PAGE>
SCHEDULE IV
IPT PARTNERSHIPS
Consolidated Capital Growth Fund
Consolidated Capital Institutional Properties
Consolidated Capital Institutional Properties/2
Consolidated Capital Institutional Properties/3
Consolidated Capital Properties III
Consolidated Capital Properties IV
Consolidated Capital Properties V
Consolidated Capital Properties VI
Shelter Properties I Limited Partnership
Shelter Properties II Limited Partnership
Shelter Properties III Limited Partnership
Shelter Properties IV Limited Partnership
Shelter Properties V Limited Partnership
Shelter Properties VI Limited Partnership
Shelter Properties VII Limited Partnership
National Property Investors III
National Property Investors 4
National Property Investors 5
National Property Investors 6
National Property Investors 7
National Property Investors 8
Century Properties Fund XIV
Century Properties Fund XV
Century Properties Fund XVI
Century Properties Fund XVII
Century Properties Fund XVIII
Century Properties Fund XIX
Century Properties Fund XX
Century Properties Growth Fund XXII
Century Pension Income Fund XXIII
Century Pension Income Fund XXIV
Johnstown/Consolidated Income Partners
Davidson Growth Plus, L.P.
Multi-Benefit Realty Fund `87-1
U.S. Realty Partners, L.P.
Fox Strategic Housing Income Partners
S-7
<PAGE>
Manually signed facsimile copies of the Assignment of Partnership
Interest will be accepted. The Assignment of Partnership Interest and any other
required documents should be sent or delivered by each Limited Partner or such
Limited Partner's broker, dealer, bank, trust company or other nominee to the
Depositary as set forth below.
The Depositary for the Offer is:
HARRIS TRUST COMPANY OF NEW YORK
<TABLE>
<CAPTION>
By Mail: By Facsimile: To Confirm: By Hand/Overnight Delivery:
<S> <C> <C> <C>
Wall Street Station (212) 701-7636 (212) 701-7624 Wall Street Plaza
P.O. Box 1023 88 Pine Street, 19th Floor
New York, New York 10268-1023 New York, New York 10005
</TABLE>
Questions and requests for assistance or for additional copies of this
Offer to Purchase and the Assignment of Partnership Interest may be directed to
the Information Agent at its telephone number and address listed below. You may
also contact your broker, dealer, bank, trust company or other nominee for
assistance concerning the Offer.
The Information Agent for the Offer is:
BEACON HILL PARTNERS, INC.
90 Broad Street
20th Floor
New York, New York 10004
(800) 854-9486
(Toll Free)
(212) 843-8500
(Call Collect)
<PAGE>
ASSIGNMENT OF PARTNERSHIP INTEREST
FOR THE TENDER OF CLASS B UNITS OF LIMITED PARTNERSHIP INTEREST IN
MULTI-BENEFIT REALTY FUND '87-1
PURSUANT TO THE OFFER TO PURCHASE DATED DECEMBER 23, 1997
- -------------------------------------------------------------------------------
THE OFFER, WITHDRAWAL RIGHTS AND PRORATION PERIOD WILL EXPIRE AT
12:00 MIDNIGHT, NEW YORK TIME, ON JANUARY 23, 1998 UNLESS THE OFFER IS EXTENDED
- -------------------------------------------------------------------------------
The Depositary for the Offer is:
HARRIS TRUST COMPANY OF NEW YORK
<TABLE>
<CAPTION>
By Mail: By Facsimile: To Confirm: By Hand/Overnight Delivery:
<S> <C> <C> <C>
Wall Street Station (212) 701-7636 (212) 701-7624 Receive Window
P.O. Box 1023 Wall Street Plaza
New York, New York 10268-1023 88 Pine Street, 19th Floor
New York, New York 10005
IF YOU HAVE ANY QUESTIONS OR NEED ASSISTANCE IN COMPLETING THIS ASSIGNMENT
OF PARTNERSHIP INTEREST, PLEASE CALL OUR INFORMATION AGENT, BEACON HILL
PARTNERS, TOLL FREE AT (800) 854-9486.
DELIVERY OF THIS ASSIGNMENT OF PARTNERSHIP INTEREST (OR A FACSIMILE COPY)
OR ANY OTHER REQUIRED DOCUMENTS TO AN ADDRESS OR FACSIMILE NUMBER OTHER THAN AS
SET FORTH ABOVE DOES NOT CONSTITUTE VALID DELIVERY.
PLEASE CAREFULLY READ THE ACCOMPANYING INSTRUCTIONS
Ladies and Gentlemen:
The undersigned hereby tenders to Madison River Properties, L.L.C., a
Delaware limited liability company (the "Purchaser"), the number of the
undersigned's units of limited partnership interest ("Class B Units") in
Multi-Benefit Realty Fund '87-1, a California limited partnership (the
"Partnership"), specified below, at a price of $25 per Class B Unit (the
"Purchase Price"), net to the seller in cash, upon the terms and subject to the
conditions set forth in the offer to purchase dated December 23, 1997 (the
"Offer to Purchase"), receipt of which is hereby acknowledged, and in this
Assignment of Partnership Interest (which, together with any supplements or
amendments, collectively constitute the "Offer"). The undersigned understands
and agrees that the Purchase Price will automatically be reduced by the
aggregate amount of distributions per Class B Unit, if any, made by the
Partnership on or after December 23, 1997 and prior to the date on which the
Purchaser pays for the Class B Units purchased pursuant to the Offer. Holders
of Class B Units ("Limited Partners") who tender their Class B Units will not
be obligated to pay any commissions or Partnership transfer fees, which
commissions and Partnership transfer fees, if any, will be borne by the
Purchaser. The Purchaser reserves the right to transfer or assign, in whole or
from time to time in part, to one or more of its affiliates, the right to
purchase Class B Units tendered pursuant to the Offer.
Subject to and effective upon acceptance for payment of and payment for the
Class B Units tendered hereby, the undersigned hereby sells, assigns and
transfers to or upon the order of the Purchaser all right, title and interest
in and to all of the Class B Units tendered hereby. The undersigned understands
that upon acceptance for payment of and payment for the tendered Class B Units,
the Purchaser will be entitled to seek admission to the Partnership as a
substituted Limited Partner in substitution for the undersigned as to all the
tendered Class B Units.
The undersigned irrevocably appoints the Purchaser and its managers and
designees as the attorneys-in-fact and proxies of the undersigned, each with
full power of substitution, to exercise all voting and other rights with
respect to the Class B Units tendered by the undersigned and purchased by the
Purchaser. Such power of attorney and proxy shall be considered coupled with an
interest in the tendered Class B Units and is irrevocable. When the Class B
Units tendered hereby are accepted for payment pursuant to the Offer, all prior
proxies and powers given by the undersigned with respect to the Class B Units
will, without further action, be revoked, and no subsequent proxies or powers
may be given (and if given will not be effective). The Purchaser and its
managers and designees will, with respect to the Class B Units, be empowered to
exercise all voting and other rights of the undersigned as they in their sole
discretion may deem proper, whether at any meeting of the Partnership's Limited
Partners, by written consent or otherwise, subject to the restrictions in the
Limited Partnership Agreement of the Partnership. The foregoing proxy and power
may be exercised by the Purchaser or any of the other persons referred to above
acting alone.
In addition to and without limiting the generality of the foregoing, the
undersigned hereby irrevocably (a) appoints the Purchaser and its managers and
designees (each an "Agent") as the undersigned's attorneys-in-fact, each with
full power of substitution, with an irrevocable instruction to each Agent to
execute all or any instrument of transfer and/or other documents in the Agent's
discretion in relation to the Class B Units tendered hereby and accepted for
payment by the Purchaser, and to do all such other acts and things as may in
the opinion of the Agent be necessary or expedient for the purpose of, or in
connection with, the undersigned's acceptance of the Offer and to vest in the
Purchaser, or as it may direct, those Class B Units, effective when, and only
to the extent that, the Purchaser accepts the tendered Class B Units for
payment; (b) authorizes and requests the Partnership and general partner (the
"General Partner") to take any and all acts as may be required to effect the
transfer of the undersigned's Class B Units to the Purchaser (or its designee)
and admit the Purchaser (or its designee) as a substituted Limited Partner in
the Partnership; (c) assigns to the Purchaser and its assigns all of the right,
title and interest of the undersigned in and to any and all distributions made
by the Partnership from and after the expiration of the Offer in respect of the
Class B Units tendered by the undersigned; (d) grants to the Purchaser and its
assigns the right to receive any and all distributions made by the Partnership
on or after the date on which the Purchaser pays for the Class B Units tendered
by the undersigned (regardless of the record date for any such distribution),
and to receive all benefits and otherwise exercise all rights of beneficial
ownership of such Class B Units; (e) empowers the Purchaser and the Agent to
execute and deliver to the General Partner a change of address form instructing
the General Partner to send any and all future distributions to the address
specified in the form, and to endorse any check payable to or upon the order of
such Limited Partner representing a distribution to which the Purchaser is
entitled pursuant to the terms of the Offer, in each case in the name and on
behalf of the tendering Limited Partner; and (f) agrees not to exercise any
rights pertaining to the Class B Units without the prior consent of the
Purchaser.
The undersigned hereby represents and warrants that the undersigned owns
the Class B Units tendered hereby and has full power and authority to validly
tender, sell, assign and transfer the Class B Units tendered hereby and that
when the same are purchased by the Purchaser, the Purchaser will acquire good,
marketable and unencumbered title thereto, free and clear of all liens,
restrictions, charges, encumbrances, conditional sales agreements or other
obligations relating to the sale or transfer thereof, and such Class B Units
will not be subject to any adverse claims. The undersigned will, upon request,
execute and deliver any additional documents deemed by the Purchaser to be
necessary or desirable to complete the sale, assignment and transfer of the
Class B Units tendered hereby.
The undersigned understands that a tender of Class B Units pursuant to the
procedures described in the Offer to Purchase and in the Instructions to this
Assignment of Partnership Interest will constitute a binding agreement between
the undersigned and the Purchaser upon the terms and subject to the conditions
of the Offer. All authority herein conferred or agreed to be conferred shall
survive the death or incapacity of the undersigned, and any obligation of the
undersigned hereunder shall be binding upon the heirs, personal
representatives, successors and assigns of the undersigned.
THIS TENDER IS IRREVOCABLE, EXCEPT THAT CLASS B UNITS TENDERED PURSUANT TO
THE OFFER MAY BE WITHDRAWN AS DESCRIBED IN SECTION 4 OF THE OFFER TO PURCHASE.
<PAGE>
PLEASE COMPLETE ALL LETTERED AREAS
SIGN HERE TO TENDER YOUR CLASS B UNITS
B
O
X
A
- -------------------------------------------------------------------------------
The undersigned hereby tenders the number of Class B Units specified below
pursuant to the terms of the Offer. The undersigned hereby certifies, under
penalties of perjury, that the information and representations provided in
Boxes A, B and C of this Assignment of Partnership Interest, which have been
duly completed by the undersigned, are true and correct as of the date hereof.
X
- ---------------------------------------
X
- ---------------------------------------
SIGNATURE(S) OF LIMITED PARTNER (A)
DATE (B):
-------------------------------
(MUST BE SIGNED BY REGISTERED LIMITED PARTNER EXACTLY AS NAME(S)
APPEAR(S) IN THE PARTNERSHIP'S RECORDS. IF SIGNATURE IS BY AN OFFICER OF A
CORPORATION, ATTORNEY-IN-FACT, AGENT, EXECUTOR, ADMINISTRATOR, TRUSTEE,
GUARDIAN OR OTHER PERSON(S) ACTING IN FIDUCIARY OR REPRESENTATIVE CAPACITY,
PLEASE COMPLETE THE LINE CAPTIONED "CAPACITY (FULL TITLE)" AND SEE INSTRUCTION
5.)
PRINT NAME(S) (H):
---------------------------------------
CAPACITY (FULL TITLE) (I):
--------------------------------
ADDRESS (C):
----------------------------------------------
- ------------------------------------------------------------------------------
(INCLUDE ZIP CODE)
(THE ADDRESS PROVIDED ABOVE MUST BE THE REGISTERED ADDRESS OF THE LIMITED
PARTNER)
- ------------------------------- ------------------------------------
AREA CODE AND SOCIAL SECURITY NUMBER
TELEPHONE NUMBER (D) OR TAXPAYER IDENTIFICATION (E)
NUMBER OF CLASS B NUMBER OF CLASS B
UNITS TENDERED (F): UNITS OWNED (G):
------------ -----------------
(If no indication is given, all Class B Units owned of record by the Limited
Partner will be deemed tendered.)
- -------------------------------------------------------------------------------
GUARANTEE OF SIGNATURE(S)
(SEE INSTRUCTIONS - SECTION 1)
AUTHORIZED SIGNATURE: NAME OF FIRM:
--------------- ---------------------------
NAME: ADDRESS:
------------------------------ --------------------------------
DATE: AREA CODE AND TEL. NO.:
------------------------------- ----------------
- -------------------------------------------------------------------------------
IMPORTANT!
LIMITED PARTNERS MUST ALSO COMPLETE LINES A THROUGH F BELOW.
<PAGE>
B
O
X
B
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------------------
SUBSTITUTE PART 1-- PLEASE PROVIDE YOUR TIN IN THE BOX AT RIGHT AND ----------------------------------
Form W-9 CERTIFY BY SIGNING AND DATING BELOW Social Security Number(s) or
Department of Employer Identification Number (A)
the Treasury
Internal Revenue
Service
----------------------------------------------------------------------------------------------------------------
PAYER'S PART 2-- Certification-- Under penalties of perjury, I certify that: (1) The number shown on this form is my
REQUEST FOR correct Taxpayer Identification Number (or I am waiting for a number to be issued to me) and (2) I am not
TAXPAYER subject to back-up withholding either. because I have not been notified by the Internal Revenue Service ("IRS")
IDENTIFICATION that I am subject to back-up withholding as a result of failure to report all interest or dividends, or the
NUMBER (TIN) IRS has notified me that I am no longer subject to back-up withholding.
----------------------------------------------------------------------------------------------------------------
Certification Instructions -- You must cross out item (2) above if you have been notified by PART 3 --
the IRS that you are subject to back-up withholding because of underreporting interest or AWAITING TIN [ ]
dividends on your tax return. However, if after being notified by the IRS that you were
subject to back-up withholding you received another notification from the IRS that you are no
longer subject to back-up withholding, do not cross out item (2).
SIGNATURE (B): DATE (C):
---------------------------- ----------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER
*(TO BE COMPLETED ONLY IF THE BOX IN PART 3 ABOVE IS CHECKED)
I certify under penalties of perjury that a taxpayer identification number
has not been issued to me, and either (a) I have mailed or delivered an
application to receive a taxpayer identification number to the appropriate
Internal Revenue Service Center or Social Security Administration Office, or
(b) I intend to mail or deliver an application in the near future. I
understand that if I do not provide a taxpayer identification number within
sixty days, 31 percent of all reportable payments made to me thereafter will
be withheld until I provide a number.
- ----------------------------- --------------------------------
SIGNATURE SIGNATURE
B
O
X
C
- -------------------------------------------------------------------------------
FIRPTA AFFIDAVIT -- CERTIFICATE OF NON-FOREIGN STATUS
Section 1445 of the Internal Revenue Code provides that a transferee of
a U.S. real property interest must withhold tax if the transferor is a foreign
person. To inform the Purchaser that withholding of tax is not required upon
this disposition of a U.S. real property interest, the undersigned hereby
certifies the following on behalf of the tendering Limited Partner named
above:
1. The Limited Partner, if an individual, is not a nonresident alien for
purposes of U.S. income taxation, and if not an individual, is not a
foreign corporation, foreign partnership, foreign trust, or foreign
estate (as those terms are defined in the Internal Revenue Code and
Income Tax Regulations);
2. The Limited Partner's Social Security Number (for individuals) or
Employer Identification Number (for non-individuals) is (D): ; and
------
3. The Limited Partner's address is (E): .
--------------------------------
I understand that this certification may be disclosed to the Internal
Revenue Service by the transferee and that any false statement I have made
here could be punished by fine, imprisonment, or both.
Under penalties of perjury I declare that I have examined this
certification and to the best of my knowledge and belief it is true, correct
and complete.
- ---------------------------------------- ------------------------------------
Signature (F) Signature
Title: Title:
------------------------------- --------------------------------
- -------------------------------------------------------------------------------
<PAGE>
INSTRUCTIONS
TO
ASSIGNMENT OF PARTNERSHIP INTEREST
FOR
MULTI-BENEFIT REALTY FUND '87-1
FORMING PART OF TERMS AND CONDITIONS OF THE OFFER
- -------------------------------------------------------------------------------
IF YOU HAVE ANY QUESTIONS OR NEED ASSISTANCE COMPLETING THE ASSIGNMENT OF
PARTNERSHIP INTEREST, PLEASE CALL BEACON HILL PARTNERS TOLL FREE AT
(800) 854-9486 OR COLLECT AT (212) 843-8500
- -------------------------------------------------------------------------------
1. GUARANTEE OF SIGNATURES. If the Assignment of Partnership Interest
is signed by the registered holder of the Class B Units and payment is to be
made directly to that holder, then no signature guarantee is required on the
Assignment of Partnership Interest. Similarly, if the Class B Units are
tendered for the account of a member firm of a registered national securities
exchange, a member of the National Association of Securities Dealers, Inc. or a
commercial bank, savings bank, credit union, savings and loan association or
trust company having an office, branch or agency in the United States (each an
"Eligible Institution"), no signature guarantee is required on the Assignment
of Partnership Interest. HOWEVER, IN ALL OTHER CASES, ALL SIGNATURES ON THE
ASSIGNMENT OF PARTNERSHIP INTEREST MUST BE GUARANTEED BY AN ELIGIBLE
INSTITUTION. A notarization is not the same thing as a signature guarantee, and
a notarization of the Assignment of Partnership Interest will not be
sufficient. IN THE MAJORITY OF CASES, THE LOCAL BANK AT WHICH YOU DO YOUR DAY
TO DAY BANKING IS AN ELIGIBLE INSTITUTION AND WILL BE ABLE TO PROVIDE YOU WITH
THE REQUIRED MEDALLION GUARANTEE.
2. DELIVERY OF ASSIGNMENT OF PARTNERSHIP INTEREST. The Assignment of
Partnership Interest is to be completed by all Limited Partners who wish to
tender Class B Units in response to the Offer. For a Limited Partner validly to
tender Class B Units, a properly completed and duly executed Assignment of
Partnership Interest (or a facsimile copy), along with the required signature
guarantees by an Eligible Institution and any other required documents, must be
received by the Depositary at one of its addresses set forth on the Assignment
of Partnership Interest on or prior to the Expiration Date (as defined in the
Offer to Purchase).
THE METHOD OF DELIVERY OF THE ASSIGNMENT OF PARTNERSHIP INTEREST AND
ALL OTHER REQUIRED DOCUMENTS IS AT THE OPTION AND RISK OF THE TENDERING LIMITED
PARTNER AND DELIVERY WILL BE DEEMED MADE ONLY WHEN ACTUALLY RECEIVED BY THE
DEPOSITARY. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ASSURE TIMELY
DELIVERY.
No alternative, conditional or contingent tenders will be accepted,
and no fractional Class B Units will be purchased (except from a Limited
Partner who is tendering all of the Class B Units owned by that Limited
Partner). All tendering Limited Partners, by execution of the Assignment of
Partnership Interest, waive any right to receive any notice of the acceptance
of their Class B Units for payment.
3. INADEQUATE SPACE. If the space provided herein is inadequate,
additional information may be provided on a separate signed schedule attached
hereto.
4. MINIMUM TENDERS. A Limited Partner may tender any or all of his
or her Class B Units. Tenders of fractional Class B Units will be permitted
only by a Limited Partner who is tendering all Class B Units owned by that
Limited Partner.
5. SIGNATURES ON ASSIGNMENT OF PARTNERSHIP INTEREST. If the Assignment
of Partnership Interest is signed by the registered Limited Partner(s), the
signature(s) must correspond exactly with the name(s) as shown on the records
of the Partnership, without alteration, enlargement or any change whatsoever.
If any of the Class B Units tendered hereby are held of record by two
or more joint Limited Partners, each such Limited Partner must sign the
Assignment of Partnership Interest.
If the Assignment of Partnership Interest is signed by trustees,
executors, administrators, guardians, attorneys-in-fact, agents, officers of
corporations or others acting in a fiduciary or representative capacity, such
persons should so indicate when signing, and proper evidence satisfactory to
the Depositary of their authority to so act must be submitted.
6. WAIVER OF CONDITIONS. The Purchaser expressly reserves the
absolute right, in its sole discretion, to waive any of the specified
conditions of the Offer, in whole or in part, in the case of any Class B Units
tendered.
7. REQUESTS FOR ASSISTANCE AND ADDITIONAL COPIES. Questions or
requests for assistance may be directed to Beacon Hill Partners, the
Information Agent, at its address and telephone number set forth on the back
cover of the Offer to Purchase. Copies of the Offer to Purchase and the
Assignment of Partnership Interest may be obtained from the Information Agent.
(Continued on Reverse Side)
<PAGE>
8. SUBSTITUTE FORM W-9. Each tendering Limited Partner is required to
provide the Depositary with a correct taxpayer identification number ("TIN"),
generally the Limited Partner's social security or federal employer's
identification number, on Substitute Form W-9, which is provided under
"Important Tax Information" below. You must cross out item (2) in the
Certification box on Substitute Form W-9 if you are subject to back-up
withholding. Failure to provide the information on the form may subject the
tendering Limited Partner to 31% federal income tax withholding on the payments
made to the Limited Partner with respect to Class B Units purchased pursuant to
the Offer. The box in Part 3 of the form may be checked if the tendering
Limited Partner has not been issued a TIN and has applied for a TIN or intends
to apply for a TIN in the near future. If the box in Part 3 is checked and the
Depositary is not provided with a TIN within sixty (60) days, thereafter the
Depositary will withhold 31% on all such payments of the Purchase Price until a
TIN is provided to the Depositary.
9. FIRPTA AFFIDAVIT. To avoid potential withholding of tax pursuant to
Section 1445 of the Internal Revenue Code in an amount equal to 10% of the
purchase price for Class B Units purchased pursuant to the Offer, plus the
amount of any liabilities of the Partnership allocable to such Class B Units,
each Limited Partner who or which is a United States person must complete the
FIRPTA Affidavit contained in the Assignment of Partnership Interest stating,
under penalties of perjury, such Limited Partner's TIN and address, and that
such Limited Partner is not a foreign person. Tax withheld under Section 1445
of the Internal Revenue Code is not an additional tax. If withholding results
in an overpayment of tax, a refund may be obtained from the IRS.
IMPORTANT: THE ASSIGNMENT OF PARTNERSHIP INTEREST (OR A FACSIMILE COPY)
(TOGETHER WITH ALL OTHER REQUIRED DOCUMENTS) MUST BE RECEIVED BY THE DEPOSITARY
ON OR PRIOR TO THE EXPIRATION DATE.
----------------
IMPORTANT TAX INFORMATION
To prevent backup withholding on payments made to a Limited Partner or
other payee with respect to Class B Units purchased pursuant to the Offer, the
Limited Partner is required to notify the Depositary of the Class B Units of
the Limited Partner's correct TIN by completing the form below, certifying that
the TIN provided on Substitute Form W-9 is correct (or that such Limited
Partner is awaiting a TIN) and that (1) the Limited Partner has not been
notified by the Internal Revenue Service that the Limited Partner is subject to
backup withholding as a result of failure to report all interest or dividends
or (2) the Internal Revenue Service has notified the Limited Partner that the
Limited Partner is no longer subject to backup withholding. If backup
withholding applies, the Depositary is required to withhold 31% of any payments
made to the Limited Partner. Backup withholding is not an additional tax.
Rather, the federal income tax liability of persons subject to backup
withholding will be reduced by the amount of tax withheld. If withholding
results in an overpayment of taxes, a refund may be obtained from the Internal
Revenue Service.
The Limited Partner is required to give the Depositary the TIN (e.g.,
social security number or employer identification number) of the record owner
of the Class B Units. If the Class B Units are in more than one name or are not
in the name of the actual owner, consult the enclosed "Guidelines for
Certification of Taxpayer Identification Number on Substitute Form W-9" for
additional guidance on which number to report.
Certain Limited Partners (including, among others, all corporations
and certain foreign individuals) are not subject to these backup withholding
and reporting requirements. In order for a foreign individual to qualify as an
exempt recipient, that Limited Partner must submit to the Depositary a properly
completed Internal Revenue Service Form W-8, signed under penalties of perjury,
attesting to that Limited Partner's exempt status. A Form W-8 can be obtained
from the Depositary. See the enclosed "Guidelines for Certification of Taxpayer
Identification Number on Substitute Form W-9" for additional institutions.
----------------
INDIVIDUAL RETIREMENT ACCOUNT (IRAS)
PLEASE NOTE THAT A TENDERING BENEFICIAL OWNER OF CLASS B UNITS WHOSE
CLASS B UNITS ARE OWNED OF RECORD BY AN INDIVIDUAL RETIREMENT ACCOUNT (IRA) OR
OTHER QUALIFIED PLAN WILL NOT RECEIVE DIRECT PAYMENT OF THE PURCHASE PRICE,
RATHER, PAYMENT WILL BE MADE TO THE CUSTODIAN OF SUCH ACCOUNT OR PLAN. IF THE
CLASS B UNITS ARE HELD IN AN IRA ACCOUNT, THE CUSTODIAN OF THE ACCOUNT MUST
SIGN THE ASSIGNMENT OF PARTNERSHIP INTEREST.
<PAGE>
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
GUIDELINES FOR DETERMINING THE PROPER IDENTIFICATION NUMBER TO GIVE THE
PAYER--Social Security numbers have nine digits separated by two hyphens:
i.e. 000-00-0000. Employer identification numbers have nine digits separated
by only one hyphen: i.e., 00-0000000. The table below will help determine the
number to give the payer.
<TABLE>
<CAPTION>
GIVE THE
TAXPAYER
FOR THIS TYPE OF ACCOUNT: IDENTIFICATION
NUMBER OF--
- --------------------------------------- ------------------------------
<S> <C>
1. An individual's account The individual
2. Two or more individuals The actual owner of
(joint account) the account or, if
combined funds, the first
individual on the account(1)
3. Husband and wife The actual owner of
(joint account) the account or, if joint
funds, either person(1)
4. Custodian account of a minor The minor(2)
(Uniform Gift to Minors Act)
5. Adult and minor (joint account) The adult or, if the
minor is the only
contributor, the
minor(1)
6. Account in the name of guardian or The ward, minor, or
committee for a designated ward, incompetent(3)
minor, or incompetent person(3)
7. a. The usual revocable savings trust The grantor-trustee(1)
account (grantor is also trustee)
b. So-called trust account that is not The actual owner(1)
a legal or valid trust under State
law
8. Sole proprietorship account The owner(4)
- --------------------------------------- ------------------------------
</TABLE>
<TABLE>
<CAPTION>
GIVE THE
TAXPAYER
FOR THIS TYPE OF ACCOUNT: IDENTIFICATION
NUMBER OF--
- -------------------------------------- ----------------------------------
<S> <C>
9. A valid trust, estate or pension The legal entity (Do not furnish
trust the identifying number of the
personal representative or trustee
unless the legal entity itself is
not designated in the account
title.)(5)
10. Corporate account The corporation
11. Religious, charitable, or The organization
educational organization account
12. Partnership account held in the The partnership
name of the business
13. Association, club, or other The organization
tax-exempt organization
14. A broker or registered nominee The broker or nominee
15. Account with the Department of The public entity
Agriculture in the name of a public
entity (such as a State or local
government, school district, or
prison) that receives agricultural
program payments
- -------------------------------------- ----------------------------------
</TABLE>
(1) List first and circle the name of the person whose number you furnish.
(2) Circle the minor's name and furnish the minor's social security number.
(3) Circle the ward's, minor's or incompetent person's name and furnish such
person's social security number or employer identification number.
(4) Show your individual name. You may also enter your business name. You
may use your social security number or employer identification number.
(5) List first and circle the name of the legal trust, estate, or pension
trust.
NOTE: If no name is circled when there is more than one name, the number will
be considered to be that of the first name listed.
<PAGE>
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
PAGE 2
OBTAINING A NUMBER
If you do not have a taxpayer identification number or you do not know your
number, obtain Form SS-5, Application for a Social Security Number Card (for
individuals), or Form SS-4, Application for Employer Identification Number
(for businesses and all other entities), at the local office of the Social
Security Administration or the Internal Revenue Service and apply for a
number.
PAYEES EXEMPT FROM BACKUP WITHHOLDING
Payees specifically exempted from backup withholding on
ALL payments include the following:
o A corporation.
o A financial institution.
o An organization exempt from tax under section 501(a) of the Internal
Revenue Code of 1986, as amended (the "Code"), or an individual
retirement plan.
o The United States or any agency or instrumentality thereof.
o A State, the District of Columbia, a possession of the United States, or
any subdivision or instrumentality thereof.
o A foreign government, a political subdivision of a foreign government,
or any agency or instrumentality thereof.
o An international organization or any agency or instrumentality thereof.
o A registered dealer in securities or commodities registered in the U.S.
or a possession of the U.S.
o A real estate investment trust.
o A common trust fund operated by a bank under section 584(a) of the Code.
o An exempt charitable remainder trust, or a non-exempt trust described in
section 4947(a)(1).
o An entity registered at all times under the Investment Company Act of
1940.
o A foreign central bank of issue.
o A futures commission merchant registered with the Commodity Futures
Trading Commission.
Payments of dividends and patronage dividends not generally subject to backup
withholding include the following:
o Payments to nonresident aliens subject to withholding under section 1441
of the Code.
o Payments to partnerships not engaged in a trade or business in the U.S.
and which have at least one nonresident partner.
o Payments of patronage dividends where the amount received is not paid in
money.
o Payments made by certain foreign organizations.
o Payments made to an appropriate nominee.
o Section 404(k) payments made by an ESOP.
Payments of interest not generally subject to backup withholding include the
following:
o Payments of interest on obligations issued by individuals.
NOTE: You may be subject to backup withholding if this interest is $600
or more and is paid in the course of the payer's trade or business and
you have not provided your correct taxpayer identification number to the
payer.
o Payments of tax-exempt interest (including exempt-interest dividends
under section 852 of the Code).
o Payments described in section 6049(b)(5) of the Code to nonresident
aliens.
o Payments on tax-free covenant bonds under section 1451 of the Code.
o Payments made by certain foreign organizations.
o Payments of mortgage interest to you.
o Payments made to an appropriate nominee.
Exempt payees described above should file substitute Form W-9 to avoid
possible erroneous backup withholding. FILE THIS FORM WITH THE PAYER. FURNISH
YOUR TAXPAYER IDENTIFICATION NUMBER, WRITE "EXEMPT" ON THE FACE OF THE FORM,
AND RETURN IT TO THE PAYER. IF THE PAYMENTS ARE INTEREST, DIVIDENDS, OR
PATRONAGE DIVIDENDS, ALSO SIGN AND DATE THE FORM. IF YOU ARE A NONRESIDENT
ALIEN OR A FOREIGN ENTITY NOT SUBJECT TO BACKUP WITHHOLDING, FILE WITH PAYER
A COMPLETED INTERNAL REVENUE FORM W-8 (CERTIFICATE OF FOREIGN STATUS).
Certain payments other than interest, dividends, and patronage dividends,
that are not subject to information reporting are also not subject to backup
withholding. For details, see the regulations under sections 6041, 6041A(a),
6045, and 6050A.
PRIVACY ACT NOTICE--Section 6109 requires most recipients of dividend,
interest, or other payments to give correct taxpayer identification numbers
to payers who must report the payments to the IRS. The IRS uses the numbers
for identification purposes. Payers must be given the numbers whether or not
recipients are required to file a tax return. Payers must generally withhold
31% of taxable interest, dividend, and certain other payments to a payee who
does not furnish a correct taxpayer identification number to a payer. Certain
penalties may also apply.
PENALTIES
(1) PENALTY FOR FAILURE TO FURNISH TAXPAYER IDENTIFICATION NUMBER--If you
fail to furnish your correct taxpayer identification number to a payer, you
are subject to a penalty of $50 for each such failure unless your failure is
due to reasonable cause and not to willful neglect.
(2) FAILURE TO REPORT CERTAIN DIVIDEND AND INTEREST PAYMENTS--If you fail to
include any portion of an includible payment for interest, dividends, or
patronage dividends in gross income, such failure will be treated as being
due to negligence and will be subject to a penalty of 20% on any portion of
an underpayment attributable to that failure unless there is clear and
convincing evidence to the contrary.
(3) CIVIL PENALTY FOR FALSE INFORMATION WITH RESPECT TO WITHHOLDING--If you
make a false statement with no reasonable basis that results in no imposition
of backup withholding, you are subject to a penalty of $500.
(4) CRIMINAL PENALTY FOR FALSIFYING INFORMATION--Willfully falsifying
certifications or affirmations may subject you to criminal penalties
including fines and/or imprisonment.
FOR ADDITIONAL INFORMATION CONTACT YOUR TAX CONSULTANT OR THE INTERNAL
REVENUE SERVICE
<PAGE>
EXHIBIT (a)(4)
MADISON RIVER PROPERTIES, L.L.C
One Insignia Financial Plaza
P.O. Box 19059
Greenville, South Carolina 29602
December 23, 1997
To: The Limited Partners of
Multi-Benefit Realty Fund '87-1
Enclosed for your review and consideration are documents relating to
an offer by Madison River Properties, L.L.C. ("Madison River") to purchase your
Class B units of limited partnership interest in Multi-Benefit Realty Fund
'87-1 for $25 in cash per unit. This offer will expire midnight, New York City
time on January 23, 1998 (unless extended by Madison River).
Madison River is an affiliate of the General Partner of the
Partnership.
THE ENCLOSED DOCUMENTS CONTAIN IMPORTANT INFORMATION AND SHOULD BE
READ CAREFULLY AND IN THEIR ENTIRETY BEFORE YOU DECIDE WHETHER TO SELL YOUR
UNITS TO MADISON RIVER PURSUANT TO THIS OFFER.
If you have any questions concerning the terms of the offer, or need
assistance in completing the forms necessary to tender your units, please
contact our Information Agent, Beacon Hill Partners, at (800) 854-9486.
Thank you.
Sincerely,
Madison River Properties, L.L.C.
<PAGE>
Multi-Benefit Realty Fund '87-1
Summary of Appraisals
<PAGE>
(a)
Carlin Manor Apartments
Columbus, Ohio
<PAGE>
Carlin Manor Apartments April 12, 1996
Columbus, Ohio Page 1
SUMMARY OF SALIENT FACTS AND CONCLUSIONS
<TABLE>
<CAPTION>
<S> <C>
PROPERTY NAME: Carlin Manor Apartments
LOCATION OF PROPERTY: 1900 Sunny Court, City of Columbus, Franklin County, Michigan.
PURPOSE OF THE APPRAISAL: To estimate the Market Value of the subject.
PROPERTY RIGHTS APPRAISED: Fee Simple Estate
HIGHEST AND BEST USE: As Vacant - To develop for multi-family use.
As Improved - Considered to be that of the existing improvements.
SITE DATA AND ZONING: The subject parcel is approximately 15.0 acres, irregular in shape.
It is accessible from both Heaton Road and Carahan Road, which bisects
the site. The site is level and appears to be free from adverse
easements and encroachments. The site is zoned AR1 Multiple-Family
Residential District.
IMPROVEMENT DATA: The subject property consists of 278 dwelling units situated within
18, two-story buildings constructed on slab. The property was
constructed in two phases between 1966 and 1970 and contains 277,480
square feet of rentable area. Currently, the improvements are in
good condition with no major repairs in progress or planned. The
parking lot is asphalt paved with approximately 417 open spaces.
TENANT DATA: The Carlin Manor Apartments cater primarily to adults and families
in the surrounding area. Leases are typically signed for 12-month
terms. As of the date of inspection, the subject was 88% occupied.
DATE OF VALUE ESTIMATE: March 28, 1996
</TABLE>
<PAGE>
Carlin Manor Apartments April 12, 1996
Columbus, Ohio Page 2
SUMMARY OF SALIENT FACTS AND CONCLUSIONS (CONTINUED)
SUMMARY OF STABILIZED PRO FORMA:
<TABLE>
<CAPTION>
TOTALS PER UNIT
------------ ----------
<S> <C> <C>
Potential Gross
Income $1,566,140 $5,634
Vacancy & Credit Loss (156,614) (563)
Employee discounts (18,540) (67)
------------ ----------
Effective Gross
Income $1,390,986 $5,003
Operating Expenses 890,210 3,202
------------ ----------
Net Operating Income $ 500,766 $1,801
</TABLE>
VALUE CONCLUSIONS
<TABLE>
<CAPTION>
<S> <C>
The Income Capitalization Approach: $4,750,000
The Sales Comparison Approach: $4,850,000
FINAL VALUE ESTIMATE: $4,750,000
</TABLE>
<PAGE>
(b)
Shadow Brook Apartments
West Valley City, Utah
<PAGE>
Shadowbrook Apartments April 25, 1996
West Valley City, Utah Page 1
SUMMARY OF SALIENT FACTS AND CONCLUSIONS
<TABLE>
<CAPTION>
<S> <C>
PROPERTY NAME: Shadowbrook Apartments
LOCATION OF PROPERTY: 3860 S. Redwood Road, West Valley City, Salt Lake County, Utah
PURPOSE OF THE APPRAISAL: To estimate the Market Value of the subject.
PROPERTY RIGHTS APPRAISED: Fee Simple Estate
HIGHEST AND BEST USE: As Vacant - To develop for multifamily use.
As Improved - Considered to be that of the existing improvements.
SITE DATA AND ZONING: The subject parcel is irregular in shape and contains approximately
14.78 acres of land predominantly zoned R-M residential, with
a minor piece of C-2 commercial frontage.
IMPROVEMENT DATA: The subject consists of 300 units totaling 263,850 square feet
of net rentable area. The structural improvements consist of 14
residential buildings and an office/clubhouse building. Exterior
finish consists of painted stucco siding and ceramic tile roofs.
Additional amenities include a swimming pool, lighted tennis courts,
indoor jacuzzi, fitness room, pool table, one covered parking
space per unit with additional surface spaces, 11 mini-storage
units, concrete walkways, wood perimeter privacy fence, and other
landscaping. The improvements were completed in 1984.
TENANT DATA: The Shadowbrook Apartments cater primarily to adults and families
employed in the surrounding area. Leases are typically signed
for six or 12-month terms. The subject is reported 99% occupied
as of the date of inspection.
DATE OF VALUE ESTIMATE: March 29, 1996
</TABLE>
<PAGE>
SUMMARY OF SALIENT FACTS AND CONCLUSIONS (CONTINUED)
Shadowbrook Apartments April 25, 1996
West Valley City, Utah Page 2
SUMMARY OF STABILIZED PRO FORMA:
<TABLE>
<CAPTION>
TOTALS PER UNIT
------------ ----------
<S> <C> <C>
Potential Gross
Income $2,018,070 $6,727
Vacancy & Credit Loss (100,904) (336)
------------ ----------
Effective Gross
Income $1,917,166 $6,390
Operating Expenses 770,858 2,569
------------ ----------
Net Operating Income $1,146,308 $3,821
</TABLE>
VALUE CONCLUSIONS
<TABLE>
<CAPTION>
<S> <C>
The Sales Comparison Approach: $11,600,000
The Income Capitalization Approach: $11,750,000
FINAL VALUE ESTIMATE: $11,750,000
</TABLE>
NOTE: Market value estimate assumes $111,500 of deferred maintenance has been
cured.
