SECURITIES AND EXCHANGE COMMISSION
Washington 20549
____________________
SCHEDULE 14D-9
____________________
Solicitation/ Recommendation Statement Pursuant to
Section 14(d)(4) of the Securities Exchange Act of 1934
(Amendment No. 3)
___________________
PROMETHEUS INCOME PARTNERS,
a California Limited Partnership
(Name of Subject Company)
____________________
PROMETHEUS INCOME PARTNERS,
a California Limited Partnership
(Name of Person(s) Filing Statement)
____________________
Units of Limited Partnership Interest
(Title of Class of Securities)
____________________
742941 10 7
(CUSIP Number of Class of Securities)
____________________
Vicki R. Mullins
Chief Financial Officer
Prometheus Development Co., Inc.
350 Bridge Parkway
Redwood City, California 94065-1517
(415) 596-5300
(Name, address and telephone number of person authorized to
receive notice and communications on behalf of the person(s)
filing statement)
Copy to:
Gary Apfel, Esq.
Kaye, Scholer, Fierman, Hays & Handler, LLP
1999 Avenue of the Stars, Suite 1600
Los Angeles, California 90067
(310) 788-1000
This Amendment amends and supplements the
Solicitation/Recommendation Statement on Schedule 14D-9 (the
"Schedule 14D-9") filed with the Securities and Exchange
Commission on November 4, 1996, as amended and supplemented on
November 15, 1996, as further amended and supplemented on
December 12, 1996, by Prometheus Income Partners, a California
Limited Partnership (the "Partnership"). Unless otherwise
indicated, capitalized terms used herein have the same meaning as
set forth in the originally filed Schedule 14D-9.
Item 2. Tender Offer of the Bidder
Item 2(a) of the Schedule 14D-9 is amended to add the following
information:
On December 13, 1996, Apollo further amended the Apollo Tender
Offer. According to Amendment No. 5 to the Apollo Schedule 14D-
1, the Amended Apollo Tender Offer has been amended to (1)
increase the Apollo Purchase Price to $495 per Unit, net to the
seller in cash, without interest thereon, less the aggregate
amount of any distributions per Unit declared or made by the
Partnership after October 18, 1996 and the date of payment of the
Apollo Purchase Price for the Units by Apollo, upon the terms and
subject to the conditions set forth in the Apollo Offer to
Purchase and the related Letter of Transmittal and (2) extend the
expiration date under the Amended Apollo Tender Offer to 12:00
midnight, New York City time, on December 30, 1996, unless
further extended.
Item 2(b) of the Schedule 14D-9 is amended to add the following
information:
On December 18, 1996, PIP General, pursuant to Amendment No. 4 to
the PIP General Schedule 14D-1 dated December 18, 1996, further
amended the Amended PIP General Tender Offer to increase the PIP
General Purchase Price to $495 per unit, net to the seller in
cash, without interest thereon, less the aggregate amount of any
distributions per Unit declared or made by the Partnership after
November 8, 1996 and the date of payment of the PIP General
Purchase Price for the Units by PIP General, upon the terms and
subject to the conditions set forth in the PIP General Offer to
Purchase, and the related Letter of Transmittal.
Item 4. The Solicitation or Recommendation
Item 4(b) of the Schedule 14D-9 is amended by adding the
following information:
On December 17, 1996 after receiving the Amended Apollo Tender
Offer, the Special Committee met to review and discuss the
Amended Apollo Tender Offer. Thereafter, the Special Committee
inquired of PIP General whether it would amend the PIP General
Tender Offer to increase the PIP Purchase Price. The Special
Committee urged PIP General to increase the PIP Purchase Price to
$500 per Unit. On December 17, 1996, a representative of PIP
General informed the Special Committee that PIP General would
amend the PIP General Tender Offer to increase the PIP Purchase
Price to $495 per Unit. On December 17, 1996, the Special
Committee met to review and discuss the Amended Apollo Tender
Offer and the proposed amended PIP General Tender Offer and
determined, for the reasons set forth in this Item 4(b), to
reiterate the recommendations set forth in Item 4(a) above. On
December 18, 1996, the Partnership sent a letter to PIP General
consenting to and approving the amended PIP General Tender Offer.
On December 20, 1996, the Partnership sent a letter to the
Limited Partners in which it reiterated its recommendations set
forth in this Schedule 14D-9 and summarized the reasons
therefore. Such letter, which is filed as Exhibit (a)(6) hereto,
is hereby incorporated herein by reference thereto.
Item 7. Certain Negotiations and Transactions by the Subject
Company
Item 7(a) of the Schedule 14D-9 is amended by incorporating the
information contained under Item 4 of this Amendment by this
reference thereto.
Item 9. Material to be Filed as Exhibits.
Item 9 of the Schedule 14D-9 is amended to add the following
Exhibits:
(a)(9) Form of Letter to Limited Partners, dated December 20,
1996
(a)(10) Letter regarding Agreement to Make Tender Offer, dated
December 18, 1996
SIGNATURE
After reasonable inquiry and to the best of my knowledge and
belief, I certify that the information set forth in this
statement is true, complete and correct.
PROMETHEUS INCOME PARTNERS,
A CALIFORNIA LIMITED PARTNERSHIP
By: Prometheus Development Co., Inc.,
a California corporation
By:______________________________
Name: Vicki R. Mullins
Title: Chief Financial Officer
Dated: December 20, 1996
Exhibit (a)(9)
PROMETHEUS INCOME PARTNERS
350 Bridge Parkway
Redwood City, CA 94065-1517
(415) 596-5393
December 20, 1996
Dear Limited Partners:
We know you have received a significant amount of information
from different sources over the past two months. In an effort to
keep you informed, the Special Committee would like to take this
opportunity to further explain and reinforce its recommendation:
THOSE LIMITED PARTNERS WITH A CURRENT OR ANTICIPATED NEED OR
DESIRE FOR LIQUIDITY SHOULD TENDER THEIR UNITS TO PIP PARTNERS-
GENERAL, LLC, AN AFFILIATE OF THE GENERAL PARTNER, PURSUANT TO
ITS INCREASED OFFER. ALL LIMITED PARTNERS SHOULD REJECT THE
APOLLO TENDER OFFER, AND THOSE LIMITED PARTNERS WHO DO NOT HAVE A
CURRENT OR ANTICIPATED NEED OR DESIRE FOR LIQUIDITY SHOULD HOLD
ONTO THEIR UNITS UNTIL THE PARTNERSHIP'S HARDBOARD SIDING PROBLEM
HAS BEEN RESOLVED.
The Special Committee believes that your investment is a good
one. Consider these important points:
* Since 1994, total revenue for our properties, Alderwood and
Timberleaf Apartments, has increased 13.0% and net operating
income has increased 23.5% as reflected in the attached graph.
This significant growth in net operating income translates into a
substantial increase in the value of these apartment complexes.
* As you probably know, Silicon Valley, where your apartments are
located, is experiencing significant growth. Silicon Valley is
one of the technological capitals of the world and is the home of
many fortune 500 companies including Intel, Hewlett Packard,
Oracle and Sun-Microsystems to name a few. In the opinion of the
Special Committee, due to the rapid growth of the Silicon Valley,
a housing/jobs imbalance currently exists which has driven up
demand and rents for our apartments.
* The last quarterly distribution made by the Partnership was
$375,000 in February 1996. Assuming that the Partnership would
have continued making distributions at that level, it would have
resulted in annualized distributions of approximately $1,500,000,
representing approximately $79 per unit, were it not for the
reserves we are building because of the hardboard siding problem.
Based on the $495 tender offer price this would have represented
a 16% return, annualized. If you were to sell your units now and
reinvest the proceeds what yield would you get?
* As you are aware, there is a hardboard siding problem at
Alderwood and Timberleaf which we hope will be resolved favorably
to us, although there are no guarantees. Because of this
problem, after February 1996, we stopped quarterly cash
distributions while we work toward resolving it. After the
siding issue is resolved, it is our intention to resume quarterly
distributions while holding normal reserves.
* While each Limited Partner should consult his, her or its tax
advisor as to the particular tax consequences of selling Units
pursuant to either of the tender offers, generally the federal
income tax consequences of such a sale at $495 per unit would
result in a gain of approximately $350 and a tax of $98, assuming
a 28% federal tax rate and an average tax basis of $145 as of
September 30, 1996.
* When the tender offers are over, your Partnership will still
own Alderwood and Timberleaf and we will still have to deal with
the hardboard siding problem. We believe that your General
Partner and Mr. Sanford N. Diller's other affiliates have the
experience and know-how that your Partnership needs to deal with
the problem. We urge you to tender your units to PIP Partners-
General, LLC if you have a current or anticipated need or desire
for liquidity; do not tender your units to Apollo and give them
the leverage to possibly affect how your General Partner deals
with the hardboard siding problem. If you have already tendered
to Apollo, you can still withdraw that tender by delivering a
completed and executed NOTICE OF WITHDRAWAL by midnight, New York
City time, December 30, 1996, to the Herman Group, Inc., at: 2121
San Jacinto Street, 26th Floor, Dallas, Texas 75201. If you need
an additional withdrawal form you may call Georgeson & Company
Inc. at (800) 223-2064.
The Special Committee
Prometheus Income Partners
1994 1995 1996
Total Revenues 3,988,781 4,287,680 4,505,606
Net Operating Income 2,559,290 2,811,713 3,161,540
Note: Above is a tabular representation of the graph referred to
in the letter to Limited Partners dated December 20, 1996.
Exhibit (a)(10)
PROMETHEUS INCOME PARTNERS
350 Bridge Parkway
Redwood City, CA 94065-1517
(415) 596-5393
December 18, 1996
Mr. Sanford N. Diller
PIP Partner-General, LLC
350 Bridge Parkway
Redwood City, CA 94065-1517
Re: PIP Partners-General, LLC Tender Offer
Dear Sanford:
We hereby consent to and approve the amended tender offer of
PIP Partners-General, LLC described in its Amended Offer to
Purchase, dated December 18, 1996, and confirm that the terms of
the agreement to Make Tender Offer, dated as of November 4, 1996,
are applicable to such amended offer.
Sincerely,
PROMETHEUS INCOME PARTNERS, a California limited partnership
By: PROMETHEUS DEVELOPMENT CO., INC., a
California corporation, its general partner
By: /s/ Vicki R. Mullins
Vicki R. Mullins, Chief Financial Officer
