Exhibit (a)(1)(A)
Offer to Purchase for Cash
Up to 451,235 Units of Limited Partnership Interest
in
SECURED INCOME L.P.,
a Delaware limited partnership,
for
$15.75 Per Unit
by
WEST PUTNAM HOUSING INVESTORS II LLC
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THE OFFER TO PURCHASE, WITHDRAWAL RIGHTS
AND PRORATION PERIOD WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY
TIME, ON JULY 25, 2000, UNLESS THE OFFER IS EXTENDED.
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West Putnam Housing Investors II LLC, a Delaware limited liability
company (the "Purchaser"), is offering to purchase up to 45.84% of the
outstanding units of limited partnership interest ("Units") in Secured Income
L.P., a Delaware limited partnership (the "Partnership"), at a purchase price of
$15.75 per 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 (the "Offer to Purchase") and in the related Letter of Transmittal
and Assignment of Partnership Interest (the "Letter of Transmittal") (which,
together with any supplements or amendments, collectively constitute the
"Offer").
The price per Unit payable in the Offer will be reduced by the
aggregate amount of distributions per Unit made by the Partnership after the
date of the Offer and on or prior to the Expiration Date of the Offer. By the
tender of Units, a Unit Holder also irrevocably assigns to Purchaser the right
to receive any distributions on the Units that Purchaser accepts for payment
with a record date occurring after the date of the Offer and a distribution date
occurring after the Expiration Date of the Offer. The Partnership has announced
that it expects to make a distribution of $8.35 per Unit on or about July 31,
2000 to Holders of Units (each, a "Unit Holder") as of June 30, 2000 (the
"Anticipated Distribution"). The Anticipated Distribution will be subject to the
foregoing provisions on assignment and reduction.
Unit Holders who tender their Units in response to the Offer will
not be obligated to pay any commissions or partnership transfer fees.
This Offer is not conditioned upon any minimum number of Units being
tendered but is subject to certain other conditions. See Section 14, "Conditions
of the Offer."
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IMPORTANT
Any Unit Holder desiring to tender all or any portion of such Unit
Holder's Units should either (a)(i) complete and sign the Letter of Transmittal
or a facsimile thereof in accordance with the Instructions to the Letter of
Transmittal and mail or deliver his or her certificates representing the Units
being tendered, together with the signed Letter of Transmittal, to MMS Escrow
and Transfer Agency, Inc. ("MMS"), the depositary for the Offer (the
"Depositary"), or (ii) tender such Units pursuant to the procedures for
book-entry transfer set forth in Section 3 of this Offer to Purchase or (b)
request such Unit Holder's broker, dealer, commercial bank, trust company or
other nominee to effect the transaction for the Unit Holder. Unit Holders having
Units registered in the name of a broker, dealer, commercial bank, trust company
or other nominee must contact such entity if they desire to tender such Units. A
Unit Holder who desires to tender Units and whose certificates are not
immediately available, or who cannot comply with the procedures for book-entry
transfer on a timely basis, may tender such Units by following the
<PAGE>
procedures for guaranteed delivery set forth in Section 3 of this Offer to
Purchase. A Unit Holder who wishes to tender but whose Unit Certificate has been
lost, stolen, mutilated or destroyed, must complete an affidavit of lost
certificate in the form provided by the Depositary.
A Unit Holder may tender any or all of the Units owned by that Unit
Holder; provided, however, in order for a partial tender of a Unit Holder's
Units to be valid, after the sale of Units pursuant to the Offer, a Unit Holder
must continue to hold a minimum of 250 Units (or, in the case of Unit Holders
who hold Units in an Individual Retirement Account, Keogh or other qualified
plans, at least 100 Units. See Section 1.).
Questions and requests for assistance or for additional copies of
this Offer to Purchase, the Letter of Transmittal, Notice of Guaranteed Delivery
may be directed to the Information Agent at the address and telephone numbers
set forth 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.
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The Information Agent for the Offer is:
GEORGESON SHAREHOLDER COMMUNICATIONS INC.
1-800-223-2064
June 26, 2000
<PAGE>
TABLE OF CONTENTS
<TABLE>
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PAGE
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SUMMARY TERM SHEET...............................................................................................1
INTRODUCTION.....................................................................................................4
Some Factors to Be Considered by Unit Holders...........................................................4
Reasons for and Effects of the Offer....................................................................6
Certain Tax Considerations..............................................................................6
Outstanding Units.......................................................................................6
THE OFFER........................................................................................................7
SECTION 1. TERMS OF THE OFFER; EXPIRATION DATE; DISTRIBUTIONS; PRORATION.........................7
Refinancing of Westmont; Assignment of Right to Distributions;
Reduction of Purchase Price ........................................................7
Proration ............................................................................7
Certain Limitations on Tenders and Proration .........................................7
General ..............................................................................8
SECTION 2. ACCEPTANCE FOR PAYMENT AND PAYMENT FOR UNITS..........................................8
SECTION 3. PROCEDURE FOR TENDERING UNITS.........................................................9
Valid Tender..........................................................................9
Signature Requirements................................................................9
Book-Entry Transfer...................................................................9
Guaranteed Delivery..................................................................10
Lost, Destroyed or Stolen Certificates...............................................10
Delivery of Letter of Transmittal....................................................10
Appointment as Proxy; Power of Attorney..............................................10
Assignment of Interest in Future Distributions.......................................11
Determination of Validity; Rejection of Units; Waiver of Defects;
No Obligation to Give Notice of Defects..............................................11
Backup Federal Income Tax Withholding................................................11
FIRPTA Withholding...................................................................11
Binding Obligation...................................................................11
SECTION 4. WITHDRAWAL RIGHTS....................................................................11
SECTION 5. EXTENSION OF TENDER PERIOD; TERMINATION; AMENDMENT...................................12
SECTION 6. CERTAIN FEDERAL INCOME TAX MATTERS...................................................13
General..............................................................................13
Gain or Loss Generally...............................................................13
Unrealized Receivables and Certain Inventory.........................................13
Passive Activity Loss Limitation.....................................................13
Partnership Termination..............................................................14
Backup Withholding and FIRPTA Withholding............................................15
SECTION 7. EFFECTS OF THE OFFER.................................................................15
Limitations on Resales...............................................................15
Effect on Trading Market.............................................................15
Control of Unit Holder Voting Decisions by Purchaser; Effect of
Relationship with the General Partners...............................................15
SECTION 8. FUTURE PLANS OF PURCHASER............................................................16
SECTION 9. CERTAIN INFORMATION CONCERNING THE PARTNERSHIP.......................................16
General..............................................................................16
Originally Anticipated Holding Period for Partnership Investments;
Alternatives ........................................................................17
Selected Financial and Property-Related Data.........................................18
Schedule of Mortgages................................................................19
Schedule of Real Estate Taxes and Rates..............................................19
</TABLE>
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Cash Distributions History and Columbia Partnership Refinancing......................20
Recent Operating Results.............................................................20
Results of Operations Improved in 1999 as Compared to 1998 ..........................20
Other Information....................................................................20
SECTION 10. CONFLICTS OF INTEREST AND TRANSACTIONS WITH AFFILIATES...............................21
Purchaser Affiliation with General Partners; Conflicts of Interest
with Respect to the Offer............................................................21
Voting by the Purchaser..............................................................22
Financing Arrangements...............................................................22
Transactions with Affiliates.........................................................22
SECTION 11. CERTAIN INFORMATION CONCERNING THE PURCHASER........................................22
The Purchaser........................................................................22
SECTION 12. SOURCE OF FUNDS......................................................................23
SECTION 13. BACKGROUND OF THE OFFER..............................................................23
General Background...................................................................23
Determination of Purchase Price......................................................23
Trading History of Units.............................................................23
Prior Tender Offers..................................................................24
Purchaser's Pro Forma Estimate of Net Liquidation Value per Unit.....................24
SECTION 14. CONDITIONS OF THE OFFER..............................................................25
SECTION 15. CERTAIN LEGAL MATTERS................................................................26
General..............................................................................26
Antitrust............................................................................26
Margin Requirements..................................................................26
State Takeover Laws..................................................................26
SECTION 16. FEES AND EXPENSES....................................................................26
SECTION 17. MISCELLANEOUS........................................................................26
SCHEDULE I Information Regarding the Managing Member of the Purchaser...........................28
</TABLE>
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<PAGE>
SUMMARY TERM SHEET
The following are some of the questions that you, as a unit holder of
Secured Income L.P., may have and answers to those questions. We urge you to
carefully read the remainder of this Offer to Purchase and the accompanying
Letter of Transmittal because the information in this summary is not complete
and additional important information is contained in the remainder of this Offer
to Purchase and the accompanying Letter of Transmittal.
o WHO IS OFFERING TO BUY MY UNITS?
The offer to purchase is being made by West Putnam Housing Investors II LLC, a
newly formed entity and a Delaware limited liability company. West Putnam II is
controlled by West Putnam Housing Investors LLC, of which Richard P. Richman
owns 75% of the membership interests and Robert H. Wilder, Jr. owns the
remaining 25%. Mr. Richman is the sole managing member of West Putnam Housing
Investors LLC. Mr. Richman, Mr. Wilder and other affiliates of West Putnam II
control two of the three general partners of Secured Income. Mr. Richman and Mr.
Wilder also control one of the general partners of the Carrollton Partnership.
See "THE OFFER -- SECTION 11 CERTAIN INFORMATION CONCERNING THE PURCHASER" for
more detailed information about West Putnam II.
o WHAT IS THE NUMBER OF UNITS SOUGHT IN THE OFFER?
We are offering to purchase up to 451,235 units of limited partnership
interest in Secured Income L.P., representing approximately 45.84% of the
outstanding units. This number may be reduced, however, if necessary, so that
the number of units purchased in the offer when added to the number of all other
units transferred within the 12 months preceding the closing of the offer would
not equal or exceed 50% of the outstanding units. Purchase of units in excess of
this amount would result in the termination of Secured Income for tax purposes
and may be prohibited under Secured Income's limited partnership agreement. See
"THE OFFER -- SECTION 1 TERMS OF THE OFFER; EXPIRATION DATE; DISTRIBUTIONS;
PRORATION" for a more detailed discussion of the maximum number of units that
can be purchased in the offer.
o HOW MUCH ARE YOU OFFERING TO PAY AND WHAT IS THE FORM OF PAYMENT?
We are offering to pay $15.75 per unit, net to you in cash. See "THE
OFFER -- SECTION 1 TERMS OF THE OFFER; EXPIRATION DATE; DISTRIBUTIONS;
PRORATION" for a more detailed discussion of the purchase price.
o HOW WILL THE PURCHASE PRICE BE AFFECTED BY PARTNERSHIP DISTRIBUTIONS?
Secured Income has announced that it expects to make a distribution of
approximately $8.35 per unit from the proceeds of the refinancing of one of the
properties in which it is invested. The distribution will be made to unit
holders of record as of June 30, 2000 and is expected to be paid on or about
July 31, 2000. If the offer closes as expected prior to July 31, 2000, tendering
holders will receive $15.75 per unit in the offer and will assign to West Putnam
II the right to receive the distribution. If the offer does not close before the
distribution is made, the purchase price will be reduced by the per unit amount
of the distribution. See "THE OFFER -- SECTION 1 TERMS OF THE OFFER; EXPIRATION
DATE; DISTRIBUTIONS; PRORATION" for a more detailed discussion of the purchase
price.
o DO YOU HAVE THE FINANCIAL RESOURCES TO MAKE PAYMENT?
Yes. See "THE OFFER -- SECTION 12 SOURCE OF FUNDS" for a more detailed
discussion of the source of funds.
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<PAGE>
o HOW LONG DO I HAVE TO DECIDE WHETHER TO TENDER IN THE OFFER?
You will have at least until 12:00 midnight, New York City time, on July
25, 2000, to tender your units in the offer. Further, if you cannot deliver
everything that is required in order to make a valid tender by that time, you
may be able to use a guaranteed delivery procedure, which is described later in
this Offer to Purchase. See "THE OFFER -- SECTION 3 PROCEDURE FOR TENDERING
UNITS" for a more detailed discussion of the expiration of the offer.
o CAN THE OFFER BE EXTENDED, TERMINATED OR AMENDED AND UNDER WHAT
CIRCUMSTANCES?
Yes. We can extend, terminate or amend the offer in our sole discretion in
certain circumstances. See "THE OFFER -- SECTION 5 EXTENSION OF TENDER PERIOD;
TERMINATION; AMENDMENT" for a description of these circumstances.
o HOW WILL I BE NOTIFIED IF THE OFFER IS EXTENDED?
If we extend the offer, we will issue a press release or make a public
announcement no later than 9:00 a.m., New York City time, on the next business
day after the day on which the offer was scheduled to expire. See "THE OFFER --
SECTION 5 EXTENSION OF TENDER PERIOD; TERMINATION; AMENDMENT" for a more
detailed discussion of the notification procedure.
o ARE THERE ANY CONDITIONS TO THE OFFER?
Yes. Our obligation to accept for payment, purchase or pay for any units
tendered is subject to customary conditions. See "THE OFFER -- SECTION 14
CONDITIONS OF THE OFFER" for these conditions. The offer is not subject to any
minimum number of units being tendered or to any financing condition.
o HOW DO I TENDER MY UNITS?
If your units are registered in your name you must either (1) complete and
sign the letter of transmittal or a facsimile of the letter of transmittal
following the Instructions to the letter of transmittal and mail or deliver your
certificates representing the units being tendered, with the signed letter of
transmittal, to MMS Escrow and Transfer Agency, Inc., the depositary for the
offer or (2) tender your units pursuant to the procedures for book-entry
transfer.
If your units are held in street name (that is, through a broker, dealer,
or other nominee) you must instruct your nominee to tender your units on your
behalf. Your nominee will execute the letter of transmittal on your behalf.
If you are unable to deliver any item that is required to the depositary
by the expiration of the offer, you may nevertheless tender your units, provided
that the tender is made by or through an eligible institution, the depositary
receives, prior to the expiration date of the offer, a properly completed and
duly executed notice of guaranteed delivery and the depositary receives, within
three New York Stock Exchange, Inc. trading days after the date of such notice
of guaranteed delivery, the certificates representing all tendered units, a
properly completed and duly executed letter of transmittal and any other missing
items. See "THE OFFER -- SECTION 3 PROCEDURE FOR TENDERING UNITS" for a more
detailed discussion of the tendering procedure.
o WHAT TENDERED UNITS WILL BE PURCHASED? WILL TENDERED UNITS BE PRORATED?
We will purchase all units from unit holders who validly tender and do not
properly withdraw their units prior to the expiration date of the offer up to
451,235 units. If more than 451,235 units are validly tendered and are not
properly withdrawn by the expiration date of the offer, then we will purchase
the units tendered pro rata based on the number of units validly tendered by
each unit holder and not properly withdrawn prior to the expiration date of the
offer. If there is proration, all of the units that you tender in the offer may
not be purchased even if they are validly tendered and not withdrawn prior to
the expiration date of the offer. See "THE OFFER -- SECTION 1
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<PAGE>
TERMS OF THE OFFER; EXPIRATION DATE; DISTRIBUTIONS; PRORATION" for a more
detailed discussion of proration.
o ARE THERE ANY RESTRICTIONS ON THE NUMBER OF UNITS THAT I CAN TENDER OR CAN BE
PURCHASED?
Yes. The limited partnership agreement of Secured Income provides that
a unit holder may not own less than 250 units. Therefore, you cannot tender less
than all of your units if the total number of units that you would own after
tendering is less than 250 units. Also, if the offer is oversubscribed and units
are accepted on a pro rata basis, we will not purchase from you an amount of
units that would leave you with less than 250 units. For example, if you own 500
units, all of which are tendered, and the proration factor is 75%, we will only
purchase from you 250 units, not 375 units. See "THE OFFER -- SECTION 1
TERMS OF THE OFFER; EXPIRATION DATE; DISTRIBUTIONS, PRORATION" for a more
detailed discussion of this limitation.
o UNTIL WHAT TIME CAN I WITHDRAW PREVIOUSLY TENDERED UNITS?
You can withdraw previously tendered units at any time prior to the
expiration date of the offer. Also, unless the units have been accepted for
payment, you can withdraw them at any time after August 22, 2000. See "THE OFFER
-- SECTION 4 WITHDRAWAL RIGHTS" for a more detailed discussion of withdrawal
rights.
o HOW DO I WITHDRAW PREVIOUSLY TENDERED UNITS?
To withdraw units you must deliver a written notice of withdrawal, or a
facsimile of one, with the required information to the depositary while you
still have the right to withdraw the units. See "THE OFFER -- SECTION 4
WITHDRAWAL RIGHTS" for a more detailed discussion of the withdrawal procedure.
o WHAT ARE THE PLANS OF WEST PUTNAM II FOR SECURED INCOME FOLLOWING THE
OFFER?
If we acquire 451,235 units in the offer, we and our affiliates will own a
majority of the total outstanding units of Secured Income. We will then have the
ability to control most voting decisions of the unit holders with respect to
Secured Income. Also, our affiliates will continue to serve as general partners
of Secured Income, general partners of the Carrollton Partnership and the
Columbia Partnership, and the limited partners of the Columbia Partnership. At
this time, we and our affiliates have no plans to change the business of Secured
Income, as described in its public filings with the SEC. See "THE OFFER --
SECTION 10 CONFLICTS OF INTEREST AND TRANSACTIONS WITH AFFILIATES."
o DOES SECURED INCOME RECOMMEND THAT I TENDER IN THE OFFER?
Secured Income is making no recommendation concerning the offer. See Item
4, "The Solicitation or Recommendation" in the accompanying Schedule 14D-9
prepared by Secured Income.
o WHO CAN I TALK TO IF I HAVE QUESTIONS ABOUT THE TENDER OFFER?
You can call Georgeson Shareholder Communications Inc. toll free at
1-800-223-2064. Georgeson Shareholder Communications Inc. is acting as the
information agent for our offer.
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<PAGE>
TO THE UNIT HOLDERS OF SECURED INCOME L.P.
INTRODUCTION
West Putnam Housing Investors LLC II (the "Purchaser"), a
newly formed Delaware limited liability company which is an affiliate of two of
the three general partners of Secured Income L.P., a Delaware limited
partnership (the "Partnership") and an affiliate of the general partner of
Carrollton X Associates Limited Partnership (the "Carrollton Partnership") which
owns the Fieldpointe apartment complex in Frederick, Maryland (the "Fieldpointe
Property") and the general and certain limited partners of Columbia Westmont
Associates L.P. (the "Columbia Partnership") which owns the Westmont apartment
complex in New York City (the "Westmont Property" or the "Westmont"), hereby
offers to purchase up to 451,235 units of limited partnership interest in the
Partnership (the "Units"), representing approximately 45.84% of the outstanding
Units, at a purchase price of $15.75 per Unit, subject to reduction as provided
herein (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 Letter of Transmittal (which, together with any supplements or
amendments, collectively constitute the "Offer"). The Offer is subject to
certain terms and conditions set forth in Section 14.
A registered holder of Units (a "Unit Holder") may tender any
or all of the Units owned by that Unit Holder; provided, however, that because
of restrictions in the Partnership's Amended and Restated Agreement of Limited
Partnership (the "Limited Partnership Agreement"), in order for a partial tender
to be valid, after the sale of Units pursuant to the Offer, the Unit Holder must
continue to hold a minimum of 250 Units, (or, in the case of Unit Holders who
hold Units in an Individual Retirement Account ("IRA"), a Keogh or other
qualified plan, at least 100 Units). Tenders of fractional Units will not be
permitted, except by a Unit Holder who is tendering all of the Units owned by
that Unit Holder. The Purchaser will pay all charges and expenses of Georgeson
Shareholder Communications Inc., which will serve as the Purchaser's information
agent for the Offer (the "Information Agent"), and MMS Escrow and Transfer
Agency, Inc.("MMS"), which will act as depositary for the Offer (the
"Depositary").
Some Factors to Be Considered by Unit Holders. In considering the
Offer, Unit Holders should consider the following factors:
o The Purchaser is 33-1/3% indirectly owned by Richard P.
Richman and Robert H. Wilder. Messrs. Richman and Wilder and
certain other affiliates of the Purchaser control Wilder
Richman Resources Corporation, a Delaware corporation ("WRRC")
and WRC 87A Corporation, a Delaware corporation ("WRC 87A"),
two of the three general partners of the Partnership (the
"Affiliated General Partners"). The Purchaser is also 33-1/3%
indirectly owned by Michael J. Levitt, who has direct and
indirect ownership interests in MJL Westmont, L.L.C., one of
the general partners of the Columbia Partnership ("MJL
Westmont"), and by Joel I. Picket, who has direct and indirect
beneficial ownership interests in Columbus Development
Associates, a limited partner in the Columbia Partnership. See
Section 10.
o As with any rational investment decision, the Purchaser is
making the Offer with a view to making a profit. Accordingly,
there is a conflict between the desire of the Purchaser to
purchase Units at a low price and the desire of the Unit
Holders to sell their Units at a high price.
o A Unit Holder that does not tender will in any event receive a
distribution of approximately $8.35 per Unit from the proceeds
of the refinancing of the Westmont Property in which the
Partnership is indirectly invested. This compares with an
amount per Unit of $15.75 that will be received in the Offer
by tendering Unit Holders. Tendering Unit Holders will not
receive both the Offer price and the distribution. If the
distribution is made prior to the closing of the Offer, the
amount of the distribution will be deducted from the Offer
price.
o Although it is not possible to predict the timing or amounts
of any future distributions from the Partnership, it is
possible that future distributions, for example on sale of the
Westmont and Fieldpointe properties in which the Partnership
is indirectly invested through the Columbia Partnership and
the Carrollton Partnership, respectively, could exceed the
amount of the purchase price in excess of the Anticipated
Distribution.
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<PAGE>
o If the Purchaser is successful in acquiring all or nearly all
of the maximum number of Units under the Offer, the Purchaser,
together with an affiliate and one of the managing members of
the Purchaser owning 4.2% of the outstanding Units, will
collectively own a majority of the Units. As a result, the
Purchaser and its affiliates will have the ability to make
most voting decisions with respect to the Partnership,
including decisions concerning dissolution, amendments to the
Limited Partnership Agreement, removal and replacement of the
General Partners and mergers, consolidations and other
extraordinary transactions involving the Partnership without
the vote of any other Unit Holder. This means that (i) other
Unit Holders could be prevented from taking action that the
Purchaser and its affiliates oppose and (ii) the Purchaser and
its affiliates may be able to take action opposed by the other
Unit Holders. See Section 7.
o The Limited Partnership Agreement currently prohibits
transfers of Units that would result in a termination of the
Partnership pursuant to Section 708 of the Internal Revenue
Code of 1986, as amended (the "Code"). Absent special
circumstances, transfers of Units within any twelve-month
period of 50% or more of the outstanding Units (not counting
successive transfers of the same Units within such period)
would result in a termination of the Partnership pursuant to
Section 708 of the Code. Accordingly, if the maximum number of
Units are tendered pursuant to the Offer, future transfers of
Units may be limited for a period of time. See Section 1.
o A Unit Holder should not be currently taxed upon the receipt
of the Anticipated Distribution with respect to Units that are
not tendered (or that are not purchased in the tender due to
proration). In contrast, the amount of the Anticipated
Distribution will be taken into account in determining gain or
loss from the sale of Units in the Offer (whether or not the
Anticipated Distribution precedes the Expiration Date of the
Offer).
Unit Holders may also wish to consider the following factors:
o The Offer is greater than the tender offer that Bond Purchase,
L.L.C. recently made, which was scheduled to expire on June
16, 2000.
o The Offer may be attractive to Unit Holders who have an
immediate wish for cash. The Offer is greater than the highest
reported sales price of a Unit during the past 12 months
(based on published information and information provided by
the Partnership). In addition, reported secondary market sales
prices do not take into account commissions and transfer fees
typically payable by a Unit Holder in connection therewith.
Therefore, the net proceeds received by a Unit Holder who
sells Units in the secondary market are typically
significantly less than the reported sales prices.
o Although there are some limited resale options available to
Unit Holders wishing to sell their Units, there is no formal
trading market for Units. Accordingly, the Offer affords Unit
Holders an opportunity to dispose of their Units for a cash
price which otherwise might not be available to them. See
Section 13.
o The Purchase Price in the Offer substantially exceeds the
price offered in all previous tender offers for Units, which
were also effectively made on a pre-distribution basis. The
purchase price exceeds by approximately $7.40 the amount per
Unit expected to be distributed from the proceeds of the
Westmont refinancing, which Unit Holders will receive for
Units not tendered in the Offer.
o A Unit Holder who sells 100% of his or her Units pursuant to
the Offer will no longer be subject to the passive activity
loss limitation with respect to "suspended" losses
attributable to those Units for federal income tax purposes
and, therefore, will be able to utilize fully any such losses.
Unit Holders should be aware, however, that if the Offer is
over subscribed and tenders are accepted on a prorated basis,
even Holders who tender all of their Units in the Offer will
not be able to dispose of 100% of their Units in the Offer.
o Unit Holders who sell Units pursuant to the Offer will not be
charged any sales commissions or partnership transfer fees
(which may be up to $150 per transfer). The Purchaser will pay
all transfer fees imposed by the Partnership in connection
with sales of Units pursuant to the Offer.
o Real estate markets in the eastern United States (where the
properties indirectly owned by the Partnership are located)
generally have recovered and experienced an upward trend
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<PAGE>
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 over-building. Accordingly, ownership of 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 and more liquid.
o The Offer may be attractive to Unit Holders who wish to avoid
in the future the expenses, delays and complications in
reflecting ownership of Units on personal income tax returns.
However, if the number of Units tendered in response to the
Offer exceeds the maximum number of Units that the Purchaser
is willing to purchase, the number of Units accepted from each
tendering Unit Holder will be prorated. Accordingly, Unit
Holders tendering all of their Units may still be left holding
Units following consummation of the Offer due to such
proration. See Section 1.
o There is not likely to be another distribution of refinancing
proceeds from either the Columbia Partnership or the
Carrollton Partnership for an extended period of time.
Unit Holders should consult with their respective advisors regarding
the financial, tax, legal and other implications of accepting the Offer. UNIT
HOLDERS ARE URGED TO READ THIS OFFER TO PURCHASE AND THE RELATED MATERIALS IN
THEIR ENTIRETY BEFORE DECIDING WHETHER TO TENDER THEIR UNITS.
Reasons for and Effects of the Offer. The Purchaser's purposes in
making the Offer are to acquire Units for investment purposes, with a view to
realizing a profit, and possibly to acquire, together with its affiliates, a
majority interest in the Partnership. If the Purchaser (which is an affiliate of
the Affiliated General Partners) is successful in acquiring all or a substantial
portion of the Units for which it is tendering, it will be in a position to
exercise significant influence over the outcome of any vote by Unit Holders. An
affiliate of the Purchaser currently holds 4.2% of the outstanding Units.
Accordingly, if the Purchaser acquires the maximum amount of 451,235 Units, or
45.84% of the outstanding Units that may be purchased in the Offer, it together
with its affiliate will have a majority vote on all matters on which the Unit
Holders are entitled to vote under the Limited Partnership Agreement and
applicable law. See Sections 7, 8 and 13.
Certain Tax Considerations. A sale by a Unit Holder pursuant to the
Offer will result in taxable gain (or loss) equal to the excess (deficit) of the
amount realized by the Unit Holder for the Units sold, which will include the
amount of Partnership liabilities allocated to the Units, over such Unit
Holder's adjusted tax basis in those Units, which reflects, in part, the amount
of Partnership liabilities allocated to the Units. If a Unit Holder has
suspended "passive losses" from the Partnership or other passive activity
investments, such Unit Holder generally may deduct these losses up to the amount
of any gain from the sale and may deduct such losses in excess of such gain if
the Unit Holder sells 100% of its interest in the Partnership. A sale pursuant
to the Offer of all of a Unit Holder's Units will terminate such Units Holder's
investment in the Partnership and, commencing with the year following the year
of sale, the Unit Holder will no longer receive Partnership tax information or
have to report the complicated tax information currently required of Unit
Holders. See Section 6.
Outstanding Units. According to information supplied by the
Partnership, as of June 26, 2000, there were 984,369 Units issued and
outstanding, which were held of record by approximately 1,165 Unit Holders. An
affiliate of the Purchaser currently holds 40,961 Units, representing
approximately 4.2% of the issued and outstanding Units.
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THE OFFER
SECTION 1. TERMS OF THE OFFER; EXPIRATION DATE; DISTRIBUTIONS;
PRORATION. Upon the terms and subject to the conditions of the Offer and subject
to the following paragraph, the Purchaser will accept for payment (and
thereafter purchase) up to 451,235 Units, representing approximately 45.84% of
the Units outstanding, that are validly tendered prior to the Expiration Date
(as defined hereinafter) 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 July 25, 2000, unless the Purchaser
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. If,
prior to the Expiration Date, the Purchaser increases the consideration offered
to Unit Holders pursuant to the Offer, the increased consideration will be paid
for all Units accepted for payment pursuant to the Offer, regardless of whether
the Units were tendered prior to the increase in the consideration offered.
Under Section 7.1(b)(1) of the Limited Partnership Agreement, a Unit
Holder may not effect a transfer of Units as a result of which the Partnership
would be considered to have terminated under Section 708 of the Code with
adverse tax consequences to the Limited Partners. Such a termination would be
deemed to occur if 50% or more of the outstanding Units were transferred in any
twelve-month period, not counting successive transfers of the same Units during
such period (the "Partnership Termination Criteria"). The maximum number of
Units accepted for payment in the Offer will be reduced to the extent necessary
so as not to exceed the Partnership Termination Criteria upon the consummation
of the Offer (such maximum number of Units being referred to as the "Maximum
Unit Number"). Following consummation of the Offer, the Purchaser will consult
with the Partnership to determine the Maximum Unit Number.
Refinancing of Westmont; Assignment of Right to Distributions;
Reduction of Purchase Price. The Partnership is invested in the Westmont
apartment complex through its limited partnership interest in the Columbia
Partnership. The Partnership has announced that as a result of the refinancing
of the Westmont Property, the Partnership expects to make a distribution of
approximately $8.35 per Unit on or about July 31, 2000 to Unit Holders of record
as of June 30, 2000. By the tender of Units, a Seller irrevocably assigns to
Purchaser the right to receive any distributions on the Units that Purchaser
accepts for payment if the record date occurs after the date of the Offer or the
distribution date occurs after the Expiration Date of the Offer. The price per
Unit payable in the Offer will be reduced by the aggregate amount of
distributions per Unit made by the Partnership after the date of the Offer and
on or prior to the Expiration Date of the Offer. This distribution would be
subject to the foregoing provisions on assignment and reduction.
Proration. If more Units than the Maximum Unit Number 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 will, upon the terms and subject to the conditions of the Offer,
accept for payment and pay for a number of Units so tendered equal to the
Maximum Unit Number, pro rata according to the number of Units validly tendered
by each Unit Holder and not properly withdrawn prior to the Expiration Date. If
the number of Units validly tendered and not properly withdrawn prior to the
Expiration Date is less than or equal to the Maximum Unit Number, the Purchaser
will purchase all Units so tendered and not withdrawn, upon the terms and
subject to the conditions of the Offer.
Subject to the Purchaser's obligation under Rule 14e-1(c) under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), to pay Unit
Holders the Purchase Price in respect of Units tendered or return those Units
promptly after the termination or withdrawal of the Offer, the Purchaser does
not intend to pay for any Units accepted for payment pursuant to the Offer until
the Maximum Unit Number is known and, if proration of tendered Units is
required, the final proration results are known. NOTWITHSTANDING ANY SUCH DELAY
IN PAYMENT, NO INTEREST WILL BE PAID ON THE PURCHASE PRICE.
Certain Limitations on Tenders and Proration. Section 7.1(b)(iii) of
the Limited Partnership Agreement provides that a transfer of Units is not
effective if as a result the transferor would hold Units constituting less than
250 Units (100 Units in the case of an IRA or Keogh or other qualified
retirement plan). Accordingly, a Unit Holder may not tender less than all of the
Holder's Units if the Holder's untendered Units are less than 250 (100 in the
case of an IRA or Keogh or other qualified retirement plan). Also, if as a
result of proration, a Holder would own, following consummation of the Offer,
less than 250 Units (100 Units in the case of an IRA or Keogh or other qualified
retirement plan), the Purchaser will only accept for payment the number of Units
that would leave the
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Holder with the required minimum number of Units. Units not purchased from
Holders because of the minimum holding limitation will be allocated pro rata
among all other tendering Holders for whom this limitation is not implicated.
For example, assume that the Maximum Unit Number is 451,235 and
601,647 Units are tendered. The proration factor would then be 75%. In this
case, for Unit Holders other than IRAs, Keoghs and other qualified plans,
o No Units would be accepted for purchase from any Unit Holder
that owned 250 or fewer Units;
o Unit Holders owning more than 250 Units but less than 1,000
Units and who tendered all of their Units will have an amount
of Units purchased equal to the difference between the Units
tendered and 250 Units;
o Unit Holders owing more than 250 Units but less than 1,000
Units and who tender only a portion of their Units will have
fewer than 75% of their tendered Units purchased if the number
of untendered Units when added to 25% of the tendered Units is
less than 250 Units; and
o Unit Holders owing 1,000 or more Units will in all events have
75% of their tendered Units purchased.
General. The Offer is conditioned on satisfaction of certain
conditions. See Section 14, which sets forth in full the conditions of the
Offer. The Purchaser reserves the right (but in no event shall be obligated), in
its sole discretion, to waive any or all of those conditions. If, 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 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 Units validly tendered, (iii) extend the Offer and,
subject to the right of Unit Holders to withdraw Units until the Expiration
Date, retain the 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 Letter of Transmittal are
being mailed by the Purchaser to the persons shown by the Partnership's records
to have been Unit Holders as of June 15, 2000.
SECTION 2. ACCEPTANCE FOR PAYMENT AND PAYMENT FOR UNITS. Upon the
terms and subject to the conditions of the Offer (including any amendments or
extensions), the Purchaser will accept for payment (and thereby purchase) and
will pay the Purchase Price for all Units validly tendered and not withdrawn
(subject, if necessary, to proration or reduction to the Maximum Unit Number) in
accordance with the procedures specified in Section 4 on or prior to the
Expiration Date, as promptly as practicable following the latest to occur of (a)
the Expiration Date and (b) subject to compliance with Rule 14e-1(c) under the
Exchange Act, the satisfaction or waiver of the conditions of the Offer set
forth in Section 14. A tendering beneficial owner of Units whose Units are owned
of record by an IRA, Keogh plan 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 Units purchased pursuant to the
Offer will be made only after timely receipt by the Depositary of (i)
certificates representing tendered Units (or a timely confirmation of a
book-entry transfer of such Units into the Depositary's account at the
Book-Entry Transfer Facility, as described in Section 3), (ii) a properly
completed and duly executed Letter of Transmittal (or in connection with a
book-entry transfer, an Agent's Message) and (iii) any other documents required
by the Letter of Transmittal. 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 will be deemed to have
accepted for payment pursuant to the Offer, and thereby purchased, validly
tendered Units if, as and when the Purchaser gives oral or written notice to the
Depositary, as agent for the tendering Unit Holders, of the Purchaser's
acceptance of those Units for payment pursuant to the Offer. Upon the terms and
subject to the conditions of the Offer, payment for Units accepted for payment
pursuant to the Offer will be made by deposit of the Purchase Price with respect
to such Units with the Depositary, which will act as agent for tendering Unit
Holders for the purpose of receiving payments from the Purchaser and
transmitting those payments to Unit Holders whose Units have been accepted for
payment.
If any tendered Units are not accepted for payment and paid for any
reason, the certificates representing such Units will be returned to the Unit
Holder (or in the case of Units delivered by book-entry transfer, such Units
will be credited to an account maintained with the Book-Entry Transfer Facility)
without expense to the tendering Unit Holder as promptly as practicable
following the expiration or termination of the Offer and the Letter of
Transmittal with respect to such Units will be destroyed by the Depositary or
the Purchaser. If for any reason acceptance for payment of, or payment for, any
Units tendered pursuant to the Offer is delayed or the Purchaser is
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unable to accept for payment, purchase or pay for 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 retain tendered Units,
but such Units may be withdrawn to the extent that the tendering Unit Holders
are entitled to withdrawal rights as described in Section 4. The foregoing is
subject, however, to the Purchaser's obligation under Rule 14e-1(c) under the
Exchange Act to pay Unit Holders the Purchase Price in respect of Units tendered
or return those Units promptly after termination or withdrawal of the Offer.
The Purchaser 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 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 Unit Holders to receive the Purchase Price for
Units validly tendered and accepted for payment pursuant to the Offer.
SECTION 3. PROCEDURE FOR TENDERING UNITS.
Valid Tender. In order for a tendering Unit Holder to participate in
the Offer, its Units must be validly tendered and not withdrawn prior to the
Expiration Date. Except as set forth below, to validly tender Units,
certificates representing such tendered Units, a properly completed and duly
executed Letter of Transmittal or an Agent's Message (as hereinafter defined) in
connection with a book-entry transfer of Units and any other documents required
by the Letter of Transmittal 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, and either (i) certificates representing tendered Units must be
received by the Depositary, or such Units must be tendered pursuant to the
procedure for book-entry transfer set forth below (and confirmation of receipt
of such delivery must be received by the Depositary), in each case on or prior
to the Expiration Date, or (ii) the guaranteed delivery procedures set forth
below must be complied with. A Unit Holder may tender any or all of the Units
owned by that Unit Holder; provided, however, that because of restrictions in
the Limited Partnership Agreement, in order for a partial tender to be valid,
after the tender of Units pursuant to the Offer, the Unit Holder must continue
to hold a minimum of 250 Units, (or, in the case of Unit Holders who hold Units
in an IRA, Keogh plan or other qualified plans at least 100 Units). Tenders of
fractional Units will not be permitted, except by a Unit Holder who is tendering
all of the Units owned by that Unit Holder. No alternative, conditional or
contingent tenders will be accepted.
In connection with the Offer, the Partnership has provided or will
provide the Purchaser with the names and addresses of all record holders of
Units and security position listings of Units held in securities depositories.
This Offer to Purchase, the related Letter of Transmittal and other relevant
materials will be mailed to registered holders of Units and will be furnished to
brokers, dealers, commercial banks, trust companies and similar persons whose
names, or the names of whose nominees, appear on the Unit Holder list or, if
applicable, who are listed as participants in a clearing agency's security
position listing, for subsequent transmittal to beneficial owners of Units.
Signature Requirements. No signature guarantee is required on the
Letter of Transmittal (i) if such Letter of Transmittal is signed by the
registered holder of the Units tendered therewith, unless such holder has
completed either the box entitled "Special Delivery Instructions" or the box
entitled "Special Payment Instructions" in the Letter of Transmittal, or (ii) if
Units are tendered for the account of a firm that is a member in good standing
of the Security Transfer Agent's Medallion Program, the New York Stock Exchange
Medallion Signature Program or the Stock Exchange Medallion Program (such a firm
being referred to as an "Eligible Institution"). Any required signature guaranty
must be executed by a firm that is an Eligible Institution.
If a certificate representing Units is registered in the name of a
person other than the person(s) signing the Letter of Transmittal (or a
facsimile thereof), or if payment is to be made, or Units not accepted for
payment or not tendered are to be returned, to a person other than the
registered holder, the certificate must be endorsed or accompanied by an
appropriate stock power, in either case signed exactly as the name(s) of the
registered holder(s) appears on the certificate, with the signature(s) on the
certificate or stock power guaranteed by an Eligible Institution. If the Letter
of Transmittal or stock powers are signed or any certificate is endorsed by
trustees, executors, administrators, guardians, attorneys-in-fact, officers of
corporations or others acting in a fiduciary or representative capacity, such
persons should so indicate when signing and, unless waived by the Purchaser,
proper evidence satisfactory to the Purchaser of their authority so to act must
be submitted.
Book-Entry Transfer. The Depositary will establish accounts with
respect to the Units at The Depository Trust Company (the "Book-Entry Transfer
Facility") for purposes of the Offer within two business days after the date of
this Offer to Purchase and any financial institution that is a participant in
the Book-Entry Transfer Facility's system may make book-entry delivery of the
Units by causing the Book-Entry Transfer Facility to transfer such Units into
the Depositary's account in accordance with the Book-Entry Transfer Facility's
procedure
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for such transfer. However, although delivery of Units may be effected through
book-entry transfer at the Book-Entry Transfer Facility, a properly completed
and duly executed Letter of Transmittal (or facsimile thereof), with any
required signature guarantees, or an Agent's Message and any other required
documents, must, in any case, be transmitted to and received by the Depositary
at its address set forth on the back cover of this Offer to Purchase prior to
the Expiration Date, or the guaranteed delivery procedures described below must
be complied with. The term "Agent's Message" means a message transmitted through
electronic means by the Book-Entry Transfer Facility to, and received by, the
Depositary and forming a part of a book-entry confirmation, which states that
the Book-Entry Transfer Facility has received an express acknowledgement from
the participant in the Book-Entry Transfer Facility tendering the Units that
such participant has received, and agrees to be bound by, the terms of the
Letter of Transmittal. Delivery of documents to the Book-Entry Transfer Facility
in accordance with the Book-Entry Transfer Facility's procedures does not
constitute delivery to the Depositary.
Guaranteed Delivery. If a Unit Holder desires to tender Units
pursuant to the Offer and such Unit Holder's certificates representing Units are
not immediately available (or the procedures for book-entry transfer cannot be
completed on a timely basis) or time will not permit all required documents to
reach the Depositary prior to the Expiration Date, such Units may nevertheless
be tendered, provided that all of the following conditions are satisfied:
(a) such tender is made by or through an Eligible Institution;
(b) the Depositary receives, prior to the Expiration Date, a
properly completed and duly executed Notice of Guaranteed Delivery,
substantially in the form provided by Purchaser; and
(c) the certificates representing all tendered Units in proper form
for transfer (or confirmation of a book-entry transfer of such Units into the
Depositary's account at the Book-Entry Transfer Facility), together with a
properly completed and duly executed Letter of Transmittal (or facsimile
thereof) with any required signature guarantees (or, in connection with a
book-entry transfer, an Agent's Message) and any other documents required by the
Letter of Transmittal are received by the Depositary within three trading days
after the date of such Notice of Guaranteed Delivery. A "trading day" is any day
on which the New York Stock Exchange is open for business.
The Notice of Guaranteed Delivery may be delivered by hand, or may
be transmitted by telegram, telex, facsimile transmission or mail, to the
Depositary and must include a guarantee by an Eligible Institution in the form
set forth in such Notice of Guaranteed Delivery.
In all cases, payment for Units tendered and accepted for payment
pursuant to the Offer will be made only after timely receipt by the Depositary
of (i) certificates representing such Units (or timely confirmation of a
book-entry transfer of such Units into the Depositary's account at the
Book-Entry Transfer Facility), (ii) properly completed and duly executed
Letter(s) of Transmittal (or facsimile(s) thereof), together with any required
signature guarantees (or, in connection with a book-entry transfer, an Agent's
Message) and (iii) any other documents required by the Letter of Transmittal.
Lost, Destroyed or Stolen Certificates. If any Unit certificate has
been lost, mutilated, destroyed, or stolen, the Unit Holder should promptly
notify the Depositary at the address provided on the back cover of this Offer to
Purchase. The Unit Holder will then be instructed as to the steps that must be
taken in order to replace the certificates and tender in the Offer.
Delivery of Letter of Transmittal. The method of delivery of the
certificates representing tendered Units and the Letter of Transmittal and all
other required documents is at the option and risk of the tendering Unit Holder,
and delivery will be deemed made only when actually received by the Depositary.
If delivery is by mail, registered mail return receipt requested, properly
insured is recommended. In all cases, sufficient time should be allowed to
assure timely delivery by the Expiration Date.
Appointment as Proxy; Power of Attorney. By executing a Letter of
Transmittal, a tendering Unit Holder irrevocably appoints the Purchaser and its
managing member and designees as the Unit Holder's proxies, in the manner set
forth in the Letter of Transmittal, each with full power of substitution, to the
full extent of the Unit Holder's rights with respect to the Units tendered by
the Unit Holder and accepted for payment by the Purchaser. Each such proxy shall
be considered coupled with an interest in the tendered Units. Such appointment
will be effective when, and only to the extent that, the Purchaser accepts the
tendered Units for payment. Upon such acceptance for payment, all prior proxies
given by the Unit Holder with respect to the Units will, without further action,
be revoked, and no subsequent proxies may be given (and if given will not be
effective). The Purchaser and its managing member, officers and designees will,
as to those Units, be empowered to exercise all voting and other rights of the
Unit Holder as they in their sole discretion may deem proper at any meeting of
Unit Holders, by written consent or otherwise. The Purchaser reserves the right
to require that, in order for Units to be deemed validly tendered simultaneous
with the Purchaser's acceptance for payment of the Units, the Purchaser must be
able to
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exercise full voting rights with respect to the Units, including voting at any
meeting of Unit Holders then scheduled or acting by written consent without a
meeting.
Pursuant to such appointment as attorneys-in-fact, the Purchaser and
its managing member and designees each will have the power, among other things,
(i) to transfer ownership of such Units on the partnership books maintained by
the Partnership (and execute and deliver any accompanying evidences of transfer
and authenticity any General Partner may deem necessary or appropriate in
connection therewith), (ii) upon receipt by the Depositary (as the tendering
Unit Holder's agent) of the Purchase Price, to become a substituted Unit Holder,
to receive any and all distributions made by the Partnership on or after the
date on which the Purchaser purchases such Units, and to receive all benefits
and otherwise exercise all rights of beneficial ownership of such Units in
accordance with the terms of the Offer, (iii) to execute and deliver to the
Partnership a change of address form instructing the Partnership to send to the
Purchaser any and all future distributions (including the Anticipated
Distribution) to which the Purchaser is entitled pursuant to the terms of the
Offer in respect of tendered Units to the address specified in such form, and
(iv) to endorse any check payable to or upon the order of such Unit Holder
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 Unit
Holder.
Assignment of Interest in Future Distributions. By executing a
Letter of Transmittal, a tendering Unit Holder irrevocably assigns to the
Purchaser and its assigns all of the right, title and interest of the Unit
Holder in and to any and all distributions made by the Partnership on or after
the date on which the Purchaser accepts such Units for payment, in respect of
the Units tendered by such Unit Holder 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 Unit Holder upon consummation of
the Offer.
Determination of Validity; Rejection of 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 Units pursuant to the Offer will be determined by the Purchaser, in its sole
discretion, which determination shall be final and binding. The Purchaser
reserves the absolute right to reject any or all tenders of any particular Units
determined by it not to be in proper form or if the acceptance of or payment for
those Units may, in the opinion of the Purchaser's counsel, be unlawful. The
Purchaser 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 Units and to waive any defect or irregularity in any tender
with respect to any particular Units of any particular Unit Holder. The
Purchaser's interpretation of the terms and conditions of the Offer (including
the Letter of Transmittal and the Instructions thereto) will be final and
binding. No tender of Units will be deemed to have been validly made until all
defects and irregularities have been cured or waived to the satisfaction of the
Purchaser. 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 the tender of any Units nor shall any of them 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 Unit Holder must provide the
Purchaser with the Unit Holder's correct taxpayer identification number by
completing the Substitute Form W-9 included in the Letter of Transmittal. See
the Instructions to the Letter of Transmittal and Section 6.
FIRPTA Withholding. To prevent the withholding of federal income tax
in an amount equal to 10% of the amount realized in the sale, each tendering
Unit Holder must complete the FIRPTA Affidavit included in the Letter of
Transmittal certifying the Unit Holder's taxpayer identification number and
address and that such Unit Holder is not a foreign person. See the Instructions
to the Letter of Transmittal and Section 6.
Binding Obligation. A tender of Units pursuant to and in accordance
with the procedures described in this Section 3 and the acceptance for payment
of such Units will constitute a binding agreement between the tendering Unit
Holder and the Purchaser on the terms set forth in this Offer to Purchase and in
the Letter of Transmittal.
SECTION 4. WITHDRAWAL RIGHTS. Tenders of Units pursuant to the Offer
are irrevocable, except that 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 herein, may also be withdrawn at any time after August
22, 2000. For a withdrawal of Units 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 Units
to be withdrawn, the number of Units to be withdrawn, and must be signed by the
person(s) who signed the Letter of Transmittal in the same manner as the Letter
of Transmittal was signed (including any signature guarantees by an Eligible
Institution). Units
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properly withdrawn will be deemed not to be validly tendered for purposes of the
Offer. If Units have been tendered pursuant to the procedures for book-entry
transfer set forth in Section 3, any notice of withdrawal must specify the name
and number of the account of the Book-Entry Transfer Facility to be credited
with such withdrawn Units and must otherwise comply with the Book-Entry Transfer
Facility's procedures. Withdrawn 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 Units is delayed for any reason or if the Purchaser is
unable to pay for Units for any reason, then, without prejudice to the
Purchaser's rights under the Offer, tendered Units may be retained by the
Depositary, but such Units may be withdrawn to the extent that tendering Unit
Holders are entitled to withdrawal rights as set forth in this Section 4. The
foregoing is subject, however, to the Purchaser's obligation, pursuant to Rule
14e-1(c) under the Exchange Act, to pay Unit Holders the Purchase Price in
respect of Units tendered or return those 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, 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 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 Units, (ii) to terminate the Offer and not accept for payment any Units
not already accepted for payment or paid for, (iii) upon the occurrence or
nonoccurrence, as the case may be, of any of the conditions specified in Section
14, to terminate the Offer or delay the acceptance for payment of, or payment
for, any Units not already accepted for payment or paid for, (iv) waive any or
all unsatisfied conditions, and subject to any required extension, purchase all
Units validly tendered by the Expiration Date and not withdrawn, and (v) to
amend the Offer in any respect (including, without limitation, by increasing the
consideration offered, increasing or decreasing the number of Units being
sought, or both). Notice of any such extension, termination or amendment will be
disseminated promptly to Unit Holders in a manner reasonably designed to inform
Unit Holders 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 extends the Offer, or if the Purchaser is delayed in its
payment for Units or is unable to pay for Units pursuant to the Offer for any
reason, then, without prejudice to the Purchaser's rights under the Offer, the
Depositary may retain tendered Units but such Units may be withdrawn to the
extent tendering Unit Holders are entitled to withdrawal rights as described in
Section 4. The foregoing is subject, however, to the Purchaser's obligation,
pursuant to Rule 14e-1(c) under the Exchange Act, to pay Unit Holders the
Purchase Price in respect of Units tendered or return those Units promptly after
termination or withdrawal of the Offer. Any such delay will be accompanied by an
extension of the Offer to the extent required by law.
If the Purchaser 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 security holders, 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 security
holders and investor response. With respect to a change in price or, subject to
certain limitations, a change in the percentage of securities sought or
inclusion of or change to a dealer's soliciting fee, a minimum ten business day
period from the date of such change is generally required to allow for adequate
dissemination to security holders. Accordingly, if, prior to the Expiration
Date, the Purchaser decreases the number of Units being sought or increases or
decreases the consideration offered pursuant to the Offer, and if the Offer is
scheduled to expire at any time earlier than the period ending on the tenth
business day from the date that notice of such increase or decrease is first
published, sent or given to holders of Units, the Offer will be extended at
least until the expiration of such ten business day period. 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.
-12-
<PAGE>
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 Units pursuant to the Offer.
This summary is based on 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. The following
discussion assumes that the Partnership is, and has always been, treated as a
partnership, and not a corporation, for federal income tax purposes. This
summary does not discuss all aspects of federal income taxation that may be
relevant to a particular Unit Holder in light of such Unit Holder's specific
circumstances or to certain types of Unit Holders subject to special treatment
under the federal income tax laws (for example, foreign persons, dealers in
securities, banks, insurance companies, tax exempt trusts or accounts 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 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 UNIT HOLDER SHOULD CONSULT SUCH UNIT HOLDER'S
OWN TAX ADVISOR AS TO THE PARTICULAR TAX CONSEQUENCES TO SUCH UNIT HOLDER OF
SELLING UNITS PURSUANT TO THE OFFER.
Gain or Loss Generally. In general, a Unit Holder will recognize
gain or loss on a sale of Units pursuant to the Offer equal to the difference
between (i) the Unit Holder's "amount realized" on the sale and (ii) the Unit
Holder's adjusted tax basis in the Units sold. Generally, a Unit Holder's
adjusted tax basis with respect to a 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 Unit, and decreased by (i) any distributions
made with respect to such Unit, (ii) the amount of deductions or losses
allocated to the Unit and (iii) any decrease in the amount of Partnership
liabilities (as determined under Code Section 752) allocated to the Unit. Thus,
the amount of a Unit Holder's adjusted tax basis in tendered Units will vary
depending upon the Unit Holder's particular circumstances. The "amount realized"
with respect to a Unit will be a sum equal to the amount of cash received by the
Unit Holder for the Unit pursuant to the Offer, plus the amount of the
Partnership's liabilities allocable to the Unit at the time of the sale (as
determined under Code Section 752). The amount realized by a Unit Holder upon
the sale of Units pursuant to the Offer should be the same whether the sale
occurs before or after the Anticipated Distribution.
Except as set forth below, gain or loss recognized by a Unit Holder
on a sale of a 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 Unit was held by
the Unit Holder as a capital asset, and will be long term capital gain or loss
if the Unit Holder's holding period for the Units was more than one year. A Unit
Holder may have different holding periods for Units acquired at different times.
Long term capital gain is generally taxed at a maximum rate of 20%. However, the
maximum rate of any such long term gain from the sale or other disposition of a
Unit will be 25% to the extent attributable to the recapture of depreciation
deductions taken with respect to real property held by the Partnership. 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 Unit Holder will be allocated a pro rata share of the
Partnership's taxable income or loss for the year of the sale with respect to
the Units sold in accordance with the provisions of the Limited Partnership
Agreement and the Code concerning transfers of Units. Such allocation and any
cash distributed by the Partnership to the Unit Holder for that year will affect
the Unit Holder's adjusted tax basis in Units and, therefore, the amount of such
Unit Holder's taxable gain or loss upon a sale of Units pursuant to the Offer.
Unrealized Receivables and Certain Inventory. If any portion of the
amount of gain realized by a Unit Holder is attributable to "unrealized
receivables" or "inventory" as defined in Code Section 751, then a portion of
the Unit Holder's gain or loss may be ordinary rather than capital. A Unit
Holder who tenders Units which are purchased pursuant to the Offer must file an
information statement with such Unit Holder's federal income tax return for the
year of the sale which provides the information specified in Treasury Regulation
ss. 1.751-1(a)(3).
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. In certain circumstances, individuals with adjusted gross incomes
of less than $150,000 may also deduct a portion of such losses against
non-passive income. A closely held C corporation (generally, a C corporation of
which more than 50% in value of its outstanding stock is directly or indirectly
owned by not more than five individuals) (other than personal service
corporations) may offset such losses against active income as well
-13-
<PAGE>
as passive activity income for that year. Virtually all of any losses of Unit
Holders from the Partnership would have been passive losses. Thus, Unit Holders
may have "suspended" passive losses from the Partnership (i.e., net taxable
passive losses which have not been used to offset income from other passive
activities or from the Partnership or, to the extent permitted, from non-passive
activities). Substantially all of the gain or loss from a disposition of Units
pursuant to the Offer will be passive income or loss.
If a Unit Holder sells 100% of his or her Units pursuant to the
Offer, any "suspended" losses and any losses recognized upon the sale or other
disposition of the Units will be offset first against any net passive gain to
the Unit Holder from the sale of the Units and any net passive activity income
from other passive activity investments. The balance of any "suspended" net
losses from the Units will no longer be subject to the passive activity loss
limitation and, therefore, will be deductible by such Unit Holder against its
other income (subject to any other applicable limitations), including ordinary
income. However, if a Unit Holder sells less than all of such Unit Holder's
Units pursuant to the Offer, suspended passive losses, if any (including a
portion of any loss recognized on the sale of Units), may only be currently
deducted (subject to other applicable limitations) to the extent of the Unit
Holder's passive income from the Partnership for that year (including any gain
recognized on the sale of Units) plus any other passive income for that year.
Thus, if a tendering Unit Holder has suspended passive losses from the
Partnership in excess of gain from the sale and any other passive income in the
year of sale, such Unit Holder must sell all of its Units to currently deduct
such excess. If a number of Units exceeding the Maximum Unit Number are
tendered, none of the tendering Unit Holders would be able to sell 100% of their
Units pursuant to the Offer because of proration of the number of Units to be
purchased by the Purchaser. See Section 1.
Summarized below is a hypothetical example of the potential after
tax results of a sale of Units pursuant to this Offer. This is only an
illustration, based on certain assumptions and subject to certain qualifications
including those discussed in this Section 6. Actual tax consequences to any Unit
Holder may vary, and Unit Holders should consult their own tax advisors. Under
the following example, a Unit Holder who holds 1,000 Units (a $20,000 original
investment) and who now sells all of its Units at a price of $15.75 per Unit,
would receive approximately $16,729, after tax, calculated as follows:
Cash on Sale $ 15,750
Capital Gain (1) 18,070
x25%
Tax Liability @ 25% Rate (4,518)
Suspended Losses through 12/31/99 15,268
x36%
Tax Savings @ 36% Rate 5,496
Net After Tax Benefit (2) 979
Total Benefit on Sale $ 16,729
----------
(1) Capital gain was estimated to equal the sale price in the Offer of
$15,500 plus negative capital account balance as of December 31,
1999 of $2,320. The actual capital gain may vary.
(2) The estimated tax results are based on a $20,000 original investment
for a Unit Holder admitted in the first closing of the Partnership.
Capital account balances would vary for Unit Holders admitted to the
Partnership in the second or third partnership closings, or later.
The estimates do not reflect potential tax results for 2000 up to
the time of sale. The estimate assumes that no passive losses from
the Units are utilized prior to the date of sale. It also assumes a
36% federal ordinary income tax rate and a 25% capital gains rate,
and that the Unit Holder is not subject to the alternative minimum
tax. No consideration is given to state and local taxes. The
foregoing discussion is based on the Purchaser's understanding of
current federal tax laws, which (particularly as they relate to
passive losses) are complex and subject to change.
Partnership Termination. Section 708(b) of the Code provides
that a partnership "terminates" for federal income tax purposes if there is a
sale or exchange of 50% or more of the total interests in partnership capital
-14-
<PAGE>
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 federal 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. A tax termination of the Partnership
would also terminate any partnership in which the Partnership holds a more than
50% interest. As a result, a new depreciation recovery period would begin on
such date with respect to property held by such lower tier partnership (without
an increase in the depreciable basis of such property), 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. To avoid a tax termination of the Partnership, the
number of Units that the Purchaser will purchase pursuant to the Offer will not
exceed the Maximum Unit Number.
Backup Withholding and FIRPTA Withholding. Unit Holders who tender
Units may be subject to 31% backup withholding unless those Unit Holders provide
a taxpayer identification number ("TIN") and certify that the TIN is correct or
properly certify that they are awaiting a TIN or otherwise establish an
exemption from such withholding. A Unit Holder may avoid backup withholding by
properly completing and signing the Substitute Form W-9 included as part of the
Letter of Transmittal or otherwise establish an exemption. If a Unit Holder who
is subject to backup withholding does not properly complete and sign the
Substitute Form W-9 or otherwise establish an exemption, the Purchaser may
withhold 31% from payments to such Unit Holder.
Gain realized by a foreign Unit Holder on the sale of a 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 Unit Holder unless the Unit Holder properly completes
and signs the FIRPTA Affidavit included as part of the Letter of Transmittal
certifying the Unit Holder's TIN and address, and that such Unit Holder is not a
foreign person, or unless the Unit Holder otherwise establishes an exemption
from such withholding (which may be possible, for example, if no gain is
recognized). Amounts withheld would be creditable against a foreign Unit
Holder'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. federal income
tax return.
SECTION 7. EFFECTS OF THE OFFER.
Limitations on Resales. The Limited Partnership Agreement prohibits
transfers of 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 income tax purposes. As explained above, a termination
of a partnership occurs if there is a sale or exchange of 50% or more of the
total interests in the partnership's capital and profits within a twelve-month
period. If the number of Units purchased in the Offer is at or close to the
Maximum Unit Number, Unit Holders would be prohibited or severely restricted
from selling Units for the twelve-month period following consummation of the
pursuant to the Offer.
Effect on Trading Market. If a substantial number of Units are
purchased pursuant to the Offer and there is no proration, the result could be a
reduction in the number of Unit Holders. Reducing the number of security holders
in certain kinds of equity securities might be expected to result in a reduction
in the liquidity and volume of activity in the trading market for the security.
However, there is no established public trading market for the Units and,
therefore, the Purchaser does not believe a reduction in the number of Unit
Holders will materially further restrict the Unit Holders' ability to find
purchasers for their Units through secondary market transactions. See Section 13
for certain limited information regarding recent secondary market sales of the
Units.
Control of Unit Holder Voting Decisions by Purchaser; Effect of
Relationship with the General Partners. The Limited Partnership Agreement
provides that the General Partners have the discretion (which must be
reasonable) as to whether to admit an assignee of Units to the Partnership as a
substituted Unit Holder. The Purchaser will seek to be admitted to the
Partnership as a substituted Unit Holder upon consummation of the Offer and, if
admitted, will have the right to vote each Unit purchased pursuant to the Offer.
Even if the Purchaser is not admitted to the Partnership as a substituted Unit
Holder, it nonetheless will have the right to vote each Unit purchased in the
Offer pursuant to the irrevocable appointment by tendering Unit Holders of the
Purchaser and its managing member and designees as proxies with respect to the
Units tendered by such Unit Holders and accepted for payment by the Purchaser.
See Section 3. As a result, the Purchaser may have significant influence and
may, together with its affiliate owning 4.2% of the outstanding Units, have
majority control or effective majority control over all voting decisions with
respect to the Partnership. In general, the Purchaser (which is an affiliate of
(i) two of the General Partners of the Partnership, (ii) the general partner of
the Carrollton Partnership, (iii) MJL
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<PAGE>
Westmont, and (iv) a limited partner of the Columbia Partnership) will vote the
Units owned by it in whatever manner it deems to be in its best interests,
which, because of its relationship with such Affiliated General Partners, also
may be in the interest of such Affiliated General Partners, but may not be in
the interest of other Unit Holders. This could, and, if the Purchaser acquires
Units constituting a majority when aggregated with the Units held by its
affiliate, would (i) prevent other Unit Holders from taking action they desire
but that the Purchaser opposes and (ii) enable the Purchaser to take action
desired by it but opposed by other Unit Holders. Under the Limited Partnership
Agreement, Unit Holders holding a majority of the Units are entitled to take
action (without concurrence of the General Partners) 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;
mergers, the sale of all or substantially all of the assets of the Partnership
and other extraordinary transactions involving 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 Affiliated General Partners or their affiliates. However, as a result of
the Offer, the Purchaser will participate, in its capacity as a Unit Holder, in
any subsequent distributions to Unit Holders to the extent of the Units
purchased pursuant to the Offer. In particular, if the distribution of the
proceeds of the refinancing of the Westmont Property occurs subsequent to the
consummation of the Offer, the Purchaser will receive such distribution in
respect of the Units that it purchases in the Offer.
SECTION 8. FUTURE PLANS OF PURCHASER. The Purchaser is seeking to
acquire Units pursuant to the Offer for investment purposes, with a view to
realizing a profit, and possibly to acquiring, together with its affiliate, a
majority interest in the Partnership.
Except as otherwise set forth in this Offer to Purchase, it is
expected that initially following the consummation of the Offer, the business
and operations of the Partnership will be continued substantially as they are
currently being conducted. The Purchaser has no present plans or proposals that
would relate to or result in (i) any extraordinary event, such as a merger,
reorganization or liquidation involving the Partnership or either of the two
operating partnerships, the Columbia Partnership and the Carrollton Partnership,
in which the Partnership owns a limited partnership interest; (ii) a sale or
transfer of a material amount of the assets of the Partnership; (iii) any change
in the Partnership's General Partners; or (iv) any material change in the
Partnership's capitalization.
The Partnership presently has the right to require the general
partner of the Columbia Partnership to obtain an offer for the sale of the
Westmont Property and following such a sale to liquidate the Partnership's
investment in the Columbia Partnership. Sale of the Westmont would require the
consent of the New York City Housing Development Corporation, the consent of
WRC-87A, an Affiliated General Partner, and in certain circumstances the consent
of a majority of the Unit Holders of the Partnership. The Purchaser does not
expect that a decision whether to exercise the Partnership's right with respect
to the Columbia Partnership would be affected by the purchase of Units in the
Offer.
SECTION 9. CERTAIN INFORMATION CONCERNING THE PARTNERSHIP. Except as
otherwise indicated, information contained in this Section 9, including
financial information, is based upon documents and reports publicly filed by the
Partnership with the Commission and other information received from the
Partnership. Although the Purchaser has no knowledge that would indicate that
the statements contained herein based on such information are untrue, the
Purchaser does not take any responsibility for the accuracy or completeness of
the information concerning the Partnership furnished by the Partnership
contained in such documents and records or for any failure by the Partnership to
disclose events or information which may have occurred or may affect the
significance or accuracy of any such information but which are unknown to the
Purchaser.
General. The Partnership was organized as a limited partnership on
October 10, 1986 under the laws of the State of Delaware. Its principal
executive offices are located at c/o Wilder Richman Resources Corporation, 599
W. Putnam Avenue, Greenwich, CT 06830, and its telephone number at that address
is (203) 869-0900.
The Partnership's primary business is real estate ownership and
related operations. The Partnership was organized to invest in luxury
multi-family residential complexes which offer the potential for appreciation in
value and cash distributions to the Unit Holders from operations.
The Partnership owns 99% of the limited partnership interests in two
operating limited partnerships (the "Operating Partnerships"), one of which, the
Carrollton Partnership, owns a 252 unit apartment complex in Frederick, Maryland
known as the Fieldpointe and the other of which, the Columbia Partnership, owns
a 163 unit apartment complex in New York City known as the Westmont (each, a
"Complex").
Fieldpointe Apartments, which is owned by the Carrollton
Partnership, is located in Frederick, Maryland. It is comprised of 252 apartment
units totaling approximately 235,000 square feet with approximately
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<PAGE>
500 parking spaces. On-site amenities include a clubhouse building with locker
room and on-site management office, a swimming pool and two tennis courts.
Monthly rentals range from $577 for a one-bedroom apartment to $918 for a
three-bedroom apartment. Based on information known to the Purchaser or its
affiliates, the occupancy rate for this Complex was 97% as of December 31,
1999. The Partnership acquired its interest in the Carrollton Partnership in
October 1987.
The Westmont, which is owned by the Columbia Partnership, is located
in New York City. It contains 163 apartment units, 9,415 square feet of
commercial space, 46 garage spaces and a penthouse with an exercise center and
health club offering exercise equipment, steam room, sauna, jacuzzi and a large
terrace. Monthly rentals range from $1,718 for a studio apartment to $4,300 for
a three-bedroom apartment (with the exception of certain units rented for low
and moderate income rental rates). Based on information known to the Purchaser
or its affiliates, the occupancy rate for this Complex was approximately 98.9%
as to residential units and 100% as to commercial space as of December 31, 1999.
The Partnership acquired its interest in the Columbia Partnership in December
1988.
Originally Anticipated Holding Period for Partnership Investments;
Alternatives. According to the Partnership's Prospectus dated March 5, 1987 (the
"Partnership Prospectus"), the Partnership anticipated that the holding period
with respect to the Partnership's interests in the Operating Partnerships would
be approximately ten years from the date of acquisition of such interests or, if
longer, ten years from the date of commencement of operation of the Complexes.
However, the Partnership indicated that the precise holding period for the
interests in the Operating Partnerships would depend upon the financial and
operating circumstances of the Complexes (in the case of the Carrollton
Partnership), opportunities to take advantage of capital appreciation in the
Complexes, the objectives of the general partners of the Operating Partnerships
and other circumstances particular to each investment. The Partnership
Prospectus also stated the then current intention of the Partnership that its
investments in an Operating Partnership would be liquidated and the proceeds
distributed in accordance with the Partnership Agreement between 8-12 years
after the initial acquisition of such Operating Partnership interest. This
intention was modified by the real estate recession in the Northeast which
occurred in the early 1990's. The priority of the management of the Partnership
("Management") was to refinance the properties in order to reduce mortgage
interests rates. In 1993, with respect to the Westmont Property (which
represents the major part of the Columbia Partnership's assets and therefore the
Partnership's assets as a condition to reduction of the interest rate on the
Westmont's mortgages from approximately 9-1/8% to a lower floating rate,
Citicorp, the letter of credit enhancer, required covenants of the Partnership
that in turn required the utilization of all cash flow to fund certain reserves
and redeem bonds. In light of such covenants and restrictions, Management
believed that refinancing the Westmont at an appropriate time was one of the
most important objectives of the Partnership. Such a refinancing has now been
completed. Management also believes that any sale of the Fieldpointe Property
should be undertaken roughly simultaneously with the sale of the Westmont, given
the relatively small size of the Fieldpointe Property. The Partnership presently
has the right in the case of the Columbia Partnership to commence the process of
liquidating its investment in the Westmont and, in connection therewith, require
the general partner of such to obtain an offer for sale of the Complex
acceptable to the Partnership. Sale of the Westmont would require, among other
things, the consent of the New York City Housing Development Corporation, the
consent of WRC-87A, an Affiliated General Partner, the special limited partner
of the Columbia Partnership, and in certain instances, the consent of a majority
of the Unit Holders of the Partnership. It is Management's understanding that it
may take approximately nine to twelve months to successfully market the
Westmont. Under the terms of the operating partnership agreement of the Columbia
Partnership, the Columbia Partnership's general partners would have nine
additional months to match any offer. Management anticipates that in today's New
York City market, it would take three to six additional months to close a sale
and liquidate the Partnership. Accordingly, Management intends to explore a
process to market the Westmont in the near future. However, even if an
acceptable offer were received, there is a reasonable likelihood based on the
foregoing that the actual closing of the sale and liquidation of the Partnership
would not occur for at least fifteen months. In addition, there can be no
assurance what price might be offered or whether closing at an acceptable price
will even occur, given the trend of increasing interest rates and the negative
impact this trend has had in certain past periods on the sale price of real
estate assets.
Factors that could contribute to a decision of the General Partners
to seek to liquidate the Partnership's investment in one or both of the
Operating Partnerships or to seek to effect a sale or refinancing of one or both
of the Complexes that could result in distributions to the Unit Holders include
cash flow and other aspects of the financial condition of the Operating
Partnerships, the ability to refinance or otherwise modify the terms of the
existing mortgage financing for the Complexes, tax considerations, and general
conditions in the real estate and capital markets.
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<PAGE>
This Offer is intended to offer Unit Holders whose tenders are
accepted the ability to immediately liquidate their investments for
consideration, together with prior distributions made to Unit Holders, in excess
of the initial investments of such Unit Holders rather than wait for a
liquidation of the Partnership investments which, due to the terms of the new
financing documents and the partnership agreements of the Operating
Partnerships, would be unlikely to occur for at least fifteen months.
Under the Limited Partnership Agreement, the term of the Partnership
will continue until December 31, 2036, unless sooner dissolved as provided in
the Limited Partnership Agreement or by law. A majority in interest of Unit
Holders could, as an alternative to tendering their Units and without the
concurrence of the General Partners, take a variety of possible actions,
including voting to dissolve the Partnership or causing the Partnership to
remove or replace any or all of the General Partners, direct WRC-87A, as special
limited partner of the Operating Partnerships, to remove any general partner of
the Operating Partnerships, with or without cause, or to sell all or
substantially all of its assets.
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 Report on Form 10-K for the year ended December 31,
1999 (the "Form 10-K") and the Partnership's Quarterly Report on Form 10-Q for
the period ended March 31, 2000 (the "Form 10-Q"). This information is not
necessarily indicative of the financial performance to be expected of the
Partnership in the future. 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. Such reports and other documents may be
inspected and copies may be obtained from the offices of the Commission in the
manner set forth under "Other Information," below.
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<PAGE>
SECURED INCOME L.P.
SELECTED FINANCIAL DATA
(in thousands, except per Unit data)
<TABLE>
<CAPTION>
FISCAL
YEAR ENDED
DECEMBER 31,
1999 1998 1997 1996 1995
Statement of Operations Data:
<S> <C> <C> <C> <C> <C>
Total Revenues $ 7,501 $ 7,078 $ 6,787 $ 6,435 $ 6,093
Net Earnings (Loss) 121 (216) (596) (70) (398)
Net Loss per Unit(1) -- -- -- -- --
Balance Sheet Data:
Total Assets 36,803 36,958 38,149 39,322 40,459
Total Liabilities 38,316 38,592 39,566 40,144 41,210
Unit Holders' Equity
(Deficit) -- -- -- -- --
</TABLE>
----------
In accordance with generally accepted accounting principles (GAAP),
since the Unit Holders' equity is zero as a result of cumulative losses, future
losses are allocated to the General Partner for financial reporting purposes.
Schedule of Mortgages. Set forth below is a table showing certain
information regarding the outstanding mortgages encumbering each of the
Complexes as of December 31, 1999 ($ amounts in thousands). The information is
provided based on information known to the Purchaser or its affiliates.
<TABLE>
<CAPTION>
PRINCIPAL PRINCIPAL
BALANCE AT STATED PERIOD BALANCE DUE
December 31, 1999 INTEREST RATE AMORTIZED MATURITY DATE AT MATURITY
<S> <C> <C> <C> <C> <C>
Westmont 23,648 4.66%(1) (1) February, 2007 (1)
Fieldpointe 9,832 9.5% 40 Years February, 2028 0
</TABLE>
----------
(1) The 4.66% stated interest rate is subject to low floater interest rate
which averaged 3.40% during 1999, plus a letter of credit fee of 2.5%.
Monthly payments were therefore subject to such rates plus fixed monthly
principal payments of approximately $29,500. The principal balance due at
maturity will be subject to optional prepayments under the terms of the
financing. For further details, refer to Note 6 to the Partnership's
audited financial statements included in the Form 10-K.
Schedule of Real Estate Taxes and Rates. Set forth below is a table
showing the real estate taxes and rates for 1999 for each of the Complexes.
EXPENSE INCURRED FOR THE RATE FOR THE
YEAR ENDED YEAR ENDED
PROPERTY DECEMBER 31, 1999 DECEMBER 31, 1999
--------------------------------------------------------------------------------
Westmont 89,086 (1)
Fieldpointe 17,458 4.26 per $100 of assessed value
----------
(1) Real estate taxes for Westmont have historically been determined pursuant
to special tax programs of the City of New York.
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<PAGE>
Cash Distributions History and Columbia Partnership Refinancing. In
order to provide Unit Holders with 7% guaranteed cash distributions required to
be made through December 31, 1993 and to pay investor services fees, the
Partnership purchased guaranteed investment contracts. The last such cash
distributions were made in 1995. In total, original investors in the Partnership
have received distributions of $468.50 per $1,000 investment since 1987,
virtually all of which were generated by payments under the guaranteed
investment contracts.
According to the Partnership's recent public filing dated June 8,
2000 on Form 8-K (the "8-K"), on June 7, 2000, the Columbia Partnership
refinanced the mortgages on the Westmont apartment complex. In connection with
such refinancing, the Columbia Partnership caused Freddie Mac to replace
Citibank as the credit enhancer, modified the structure and utilization of the
mortgage escrows, and eliminated cash distribution restrictions. The Partnership
indicated in the 8-K that after the payment of costs related to the refinancing
of the Columbia Partnership mortgages and the establishment of certain reserves,
the Columbia Partnership is expected to have cash available for distribution of
approximately $11.8 million. The 8-K further noted the Partnership's
understanding that the Columbia Partnership intends to use such amount to (a)
make a distribution to the Partnership of approximately $8.3 million, (b) repay
operating deficit loans and other advances that the general partners of the
Columbia Partnership have provided (including interest) of approximately
$3,246,000, and (c) pay accrued investor service fees of approximately $160,000.
The Partnership stated in the 8-K that it anticipates making a distribution on
or about July 31, 2000 to Unit Holders of record as of June 30, 2000 in the
amount of approximately $8.35 per Unit.
In establishing the Purchase Price, the Purchaser took into account
the amount of the anticipated per-Unit distribution from the proceeds of the
refinancing of the Westmont Property. The Purchaser understands that the higher
level of borrowings under the refinancing of the Westmont Property will decrease
cash flow from the property. The Purchaser further understands that any future
distributions will depend on future interest rates and the real estate market
going forward.
Recent Operating Results. The Partnership's results of operations
improved immediately upon the refinancing of the respective mortgages of each of
the Complexes during 1993, and have continued to improve primarily due to
increased rental revenues. During 1999, the Columbia Partnership and the
Carrollton Partnership generated income from operating activities of
approximately $3,265,000 and approximately $1,001,000, respectively. Mortgage
principal payments during 1999 for the Columbia Partnership and the Carrollton
Partnership were approximately $366,000 and approximately $128,000,
respectively. Deposits to required mortgage escrow accounts pursuant to the
Columbia Partnership's mortgages amounted to approximately $709,000 during 1999.
During 1999, the Columbia Partnership paid approximately $624,000 as a credit
enhancement fee. After the respective mandatory mortgage principal payments,
required deposits to mortgage escrows, accelerated principal payments on the
Columbia Partnership's mortgages and payments for the credit enhancement fee,
among other things, the Complexes generated combined cash flow of approximately
$763,000 during 1999. Savings realized on the difference between the initial
note rate on the Columbia Partnership's mortgages of 4.66% and the actual lower
floater rate (approximately 3.04% weighted average rate during 1999) were
deposited into mortgage escrow accounts including a mortgage escrow account
designated for making additional mortgage principal payments. There can be no
assurance that the level of cash flow generated by the Complexes in 1999 will
continue in future years. Cash flows may decrease as a result of increased
interest expense following the refinancing of the Westmont Property, as noted
above.
Results of Operations Improved in 1999 as Compared to 1998.
Financial expenses decreased as a result of savings realized from the decrease
in the weighted average interest rate on the Columbia Partnership's mortgages
from approximately 3.23% in 1998 to approximately 3.04% in 1999. Operating and
maintenance expenses were higher during the year ended December 31, 1999
primarily due to scheduled maintenance. Interest revenue for the year ended
December 31, 1999 was comparable to the year ended December 31, 1998 and was
generated primarily from Partnership deposits and escrows established in
connection with the Columbia Partnership's mortgages.
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
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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.
SECTION 10. CONFLICTS OF INTEREST AND TRANSACTIONS WITH AFFILIATES.
The Affiliated General Partners and their affiliates have conflicts
of interest with respect to the Offer as set forth below.
Purchaser Affiliation with General Partners; Conflicts of Interest
with Respect to the Offer. The Purchaser has three members: West Putnam Housing
Investors LLC, its sole managing member (the "Purchaser Managing Member"), MJL
Westmont, L.L.C., and Columbus Development Associates, L.P. The Purchaser
Managing Member, MJL Westmont, L.L.C. and Columbus Development Associates, L.P.
each own 33-1/3% of the Purchaser. The Purchaser Managing Member's sole managing
member is Mr. Richard P. Richman. Approximately 75% of the equity interest in
the Purchaser Managing Member is beneficially owned by Mr. Richman, and the
remaining approximately 25% equity interest in the Purchaser Managing Member is
beneficially owned by Mr. Robert H. Wilder, Jr. The sole member of MJL Westmont,
L.L.C. is Mr. Michael J. Levitt. Mr. Joel Picket has direct and indirect
beneficial ownership interests in Columbus Development Associates, L.P., a
limited partner in the Columbia Partnership. The Purchaser Managing Member owns
40,961 Units, or 4.2% of the outstanding Units, which it acquired in a tender
offer consummated in August 1998.
Wilder Richman Resources Corporation, a Delaware corporation
("WRRC"), WRC-87A Corporation, a Delaware corporation ("WRC-87A"), and Real
Estate Equity Partners L.P., a Delaware limited partnership ("REEP") (WRRC and
WRC-87A are together referred to as the "Affiliated General Partners," and the
Affiliated General Partners and REEP are collectively referred to as the
"General Partners"), are the three general partners of the Partnership. Mr.
Richman beneficially owns approximately 50% of the equity interest in WRRC and
is president and a director of that corporation. Mr. Wilder beneficially owns
approximately 50% of the equity interest in WRRC and is executive vice president
and a director of that corporation. WRC-87A is owned one-half by WRRC and
one-half by Real Estate Equity Partners Inc. ("REEPI"), the corporate general
partner of REEP. Mr. Richman is executive vice president, secretary, treasurer
and a director of WRC-87A. Mr. Richman, Mr. Wilder and the other holders of
equity interests in the Purchaser are collectively referred to as the "Purchaser
Affiliates." REEP, until recently, was an affiliate of Lehman Brothers Inc. and
is now controlled by an affiliate of Apartment Investment and Management Company
(together with its successors and assigns, "Aimco"). Since the commencement of
operations of the Partnership, Wilder Richman Management Corp. ("WRMC"), an
affiliate of the Purchaser and the Affiliated General Partners, has provided
property management services to the Carrollton Partnership and has been
compensated for those services. WRC-87A is also a special limited partner of the
Carrollton and Columbia Partnerships in which the Partnership has invested.
By reason of these relationships, the Affiliated General Partners
have conflicts of interest with respect to the Offer resulting from their
affiliation with the Purchaser. In the case of WRC-87A, this conflict is limited
to the interests of Messrs. Richman and Wilder in WRRC, which owns 50% of
WRC-87A, since Aimco, which owns (through its interest in REEPI) half of the
equity interest in WRC-87A, has no interest in the Purchaser or in the Offer.
The Purchaser is making the Offer with a view towards realizing a profit for the
benefit of the Purchaser Affiliates, which collectively own 100% of the equity
of the Purchaser. Messrs. Richman and Wilder, who together also control the
Affiliated General Partners, and the other Purchaser Affiliates may indirectly
be expected to realize a greater profit on the Purchaser's investment in the
Units to the extent that the Purchaser is able to acquire the Units in an offer
with a lower price. It is in the interest of the Unit Holders desiring to sell
their Units to receive the highest possible price for such Units available in
the circumstances. This may result in a conflict between the fiduciary
obligations of the Affiliated General Partners to act in the best interests of
the holders of Units and the desire of the persons controlling the Affiliated
General Partners to further their own economic interests.
If the Offer is consummated, the Purchaser, together with the
Purchaser Managing Member, may own a majority interest and voting power in the
Partnership. Because of different financial, tax and other circumstances of
affiliates of the Purchaser and the other Unit Holders, it may be in the
interest the Purchaser to cause the liquidation of the Partnership, or the sale
or refinancing of the assets in which the Partnership is invested through the
Operating Partnerships, at a time when such action is not in the best interest
of the other Unit Holders, or vice versa. This could result in a conflict for
the Affiliated General Partners in attempting to reconcile the interests of the
Purchaser and the Purchaser Affiliates and the interests of the other Unit
Holders.
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Voting by the Purchaser. The Purchaser will seek to be admitted to
the Partnership as a substituted Unit Holder upon consummation of the Offer and,
when admitted, will have the right to vote each Unit purchased in the Offer.
Even if the Purchaser is not admitted to the Partnership as a substituted Unit
Holder, the Purchaser will have the right to vote each Unit purchased in the
Offer pursuant to the irrevocable appointment by tendering Unit Holders of the
Purchaser and the Purchaser Managing Member and its designees as proxies with
respect to the Units tendered by such Unit Holders and accepted for payment by
the Purchaser. See Section 3. As a result, if the Purchaser is successful in
acquiring a significant number of Units pursuant to the Offer, the Purchaser,
together with the Purchaser Managing Member, will have the ability to
significantly influence or control most voting decisions of the Unit Holders. In
general, the Purchaser will vote the Units owned by it in whatever manner it
deems to be in its and the Purchaser Affiliates' best interests, which, because
of their relationship with the Affiliated General Partners, also may be in the
interest of the Affiliated General Partners, but may not be in the interest of
other Unit Holders. This could (i) prevent other Unit Holders from taking action
that the Purchaser opposes, and (ii) enable the Purchaser to take action opposed
by other Unit Holders. Under the Limited Partnership Agreement, Unit Holders
holding a majority of the Units are entitled to take action (without concurrence
of the General Partners) 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, or other extraordinary
transactions involving the Partnership; and most types of amendments to the
Limited Partnership Agreement. See Section 7.
Financing Arrangements. The Purchaser expects to pay for the Units
it purchases in the Offer with its own funds which it will attain from its
affiliates. See Section 12. It is possible, however, that in connection with its
current and future financing activities, the Purchaser may pledge the Units as
collateral for loans, or otherwise agree to terms which provide the Purchaser
with incentives to generate substantial near-term cash flow from the Purchaser's
investment in the Units. This could be the case, for example, if a loan has a
"balloon" maturity after a relatively short time or bears a high or increasing
interest rate. In such a situation, the Affiliated General Partners 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. See "Conflicts of Interest with Respect to the Offer"
above.
Transactions with Affiliates. WRMC, an affiliate of the Purchaser,
is the management agent for the Fieldpointe Complex owned by the Carrollton
Partnership. The Carrollton Partnership paid or accrued fees for property
management and other services provided by WRMC in the amounts of approximately
$92,468 and $89,958 for the years ended December 31, 1999 and 1998,
respectively. WRMC was owed by the Carrollton Partnership accrued fees in the
amount of $36,779 at December 31, 1999. In addition, at December 31, 1999, WRMC
was owed by the Carrollton Partnership $166,000 for past years' operating
advances.
The management agent for the Westmont Property is Interstate Realty
Management Company ("Interstate"), which is wholly owned by Mr. Levitt and his
family members. The Columbia Partnership paid or accrued fees for property
management and other services provided by Interstate in the amounts of $156,343
and $146,837 for the years ended December 31, 1999 and 1998, respectively.
WRC-87A, a General Partner and an affiliate of the Purchaser, is
entitled to an annual investor services fee, to the extent that such investor
services are not provided by an independent third party. Investor services
include maintenance of Partnership books and records and the preparation and
distribution to Unit Holders of reports and other information. The Partnership
and/or the Operating Partnerships paid or accrued fees for investor services
provided by WRC-87A during 1999 and 1998 in the amounts of $87,072 and $84,349,
respectively.
SECTION 11. CERTAIN INFORMATION CONCERNING THE PURCHASER.
The Purchaser. The Purchaser, a newly formed entity and a Delaware
limited liability company, was organized for the purpose of acquiring Units in
the Partnership and making the Offer. The Purchaser's sole managing member is
the Purchaser Managing Member, the sole managing member of which is Mr. Richman.
Since the Purchaser has not engaged in any business activity other than in
connection with the Offer and has no significant assets or liabilities at the
present time, other than amounts it received from Purchaser Affiliates as a
capital contribution, no meaningful financial information is available. Upon
consummation of the Offer, the Purchaser's only significant assets will be the
Units it acquires pursuant to the Offer and cash remaining from the Purchaser
Affiliates' Capital contributions, if any. See Section 12.
The principal executive offices of the Purchaser are located at 599
W. Putnam Avenue, Greenwich, Connecticut 06830, and its telephone number is
(203) 869-0900. For certain information concerning the members of the Purchaser,
see Section 10 and Schedule I to this Offer to Purchase.
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Except as otherwise set forth herein, none of the Purchaser,
Purchaser Affiliates or, to the best of the Purchaser's knowledge, any of the
persons listed on Schedule I hereto, or any affiliate of the foregoing, (i)
beneficially owns or has a right to acquire any Units, (ii) has effected any
transaction in the 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 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.
SECTION 12. SOURCE OF FUNDS. The Purchaser expects that
approximately $3,350,000 plus fees and expenses will be required to purchase up
to 451,235 Units if tendered, and to pay related fees and expenses. Members of
Purchaser will make capital contributions aggregating $3,500,000 using funds
provided by the individuals controlling such members, who collectively have an
aggregate net worth in excess of $25 million.
SECTION 13. BACKGROUND OF THE OFFER.
General Background. The Partnership was organized by the General
Partners in 1987 to invest in luxury multi-family residential complexes.
Pursuant to the Partnership Prospectus, as supplemented, the Partnership offered
up to $50 million of Units at an offering price of $20 per Unit. The offering of
Units was terminated in February 1988 after raising $19,687,380 from the sale of
984,369 Units. With the proceeds of the offering the Partnership purchased its
interests in the Operating Partnerships. In order to provide Unit Holders with
7% guaranteed cash distributions required to be made through December 31, 1993,
the Partnership utilized a portion of the proceeds of the offering to purchase
guaranteed investment contracts. The last such cash distributions were made in
January 1995. In total, original investors in the Partnership have received
distributions of $468.50 per $1,000 investment since 1987, virtually all of
which were generated by payments under the guaranteed investment contracts. The
guaranteed investment contracts have also been used for the payment of investor
services fees. It is currently anticipated that a distribution in the
approximate amount of $8.35 per Unit will be made to Unit Holders in July 2000
from the proceeds of the refinancing of the Westmont Complex. Following such
refinancing, due to increased debt service costs and increased management costs,
it is anticipated that cash flow will decrease and that the Partnership's
ability to make further distributions will depend on future interest rates and
the real estate market going forward.
The Units are highly illiquid. The Units do not trade on any
securities exchange or in any other organized trading market, and the secondary
market sales activity for the Units has been limited and sporadic. See "Trading
History of Units" below. The trading prices for the Units in the secondary
market has been steeply discounted compared to the offering price of the Units
and the other measures of value discussed below, particularly after the
expiration of the Partnership's obligation to pay to Unit Holders an annual 7%
return through December 31, 1993. The Purchaser believes that these steeply
discounted trading prices do not reflect the value of the underlying investment
interests of the Partnership in the Operating Partnerships, especially in light
of the improved operations of the Operating Partnerships following the
refinancing of their mortgage indebtedness in 1993.
The Purchaser believes that an offer for the Units at the Purchase
Price affords those Unit Holders who do not wish to continue to bear the
investment risk of the ownership of Units or who otherwise desire to dispose of
their Units at this time an opportunity to sell their Units at a price that is
substantially above recent trading prices for the Units. The Purchaser hopes to
realize a profit at a later time on its purchase of Units in the Offer through
future cash flow or liquidating distributions from the Partnership, through a
future disposition of the Units or otherwise. Other than as set forth in this
Offer to Purchase, the Purchaser has no current plans to cause the Partnership
to effect any distributions or to dispose of or otherwise transfer any Units
acquired by the Purchaser in the Offer.
Determination of Purchase Price. The Purchase Price represents the
price the Purchaser is willing to pay for the Units. In establishing the
Purchase Price, the Purchaser reviewed certain publicly available information
and certain information known to it and its affiliates, including among other
things: (i) the Limited Partnership Agreement of the Partnership, as amended to
date, and the limited partnership agreements of the Operating Partnerships, each
as amended to date; (ii) the Partnership's Form 10-K; (iii) the operating
results with respect to the Complexes for 1999; (iv) the appraisal prepared for
the recent financing for the Westmont; (v) an unsolicited third party offer for
the Fieldpointe Property of $13,104,000 dated April 5, 2000; and (vi) other
information obtained by the affiliates of the Purchaser in their capacities as
providers of property management, asset management and partnership
administration services to the Partnership. Based on that information, the
Purchaser considered the factors discussed below.
Trading History of Units. Secondary market sales activity for the
Units, including privately negotiated sales, has been limited and sporadic.
According to information obtained from the Partnership, from
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May 1, 1999 to April 30, 2000 an aggregate of 47,348 Units (representing
approximately 4.8% of the total weighted outstanding Units) were transferred in
sale transactions. Gross sales prices during this period, as reported by the
Partnership, ranged from $1.63 per Unit to $8.60 per Unit. The gross sales
prices do not necessarily reflect the net sales proceeds received by sellers of
Units, which typically are reduced by commissions and other secondary market
transaction costs to amounts less than the reported prices. Moreover, the
transfer documentation submitted to the General Partners often does not include
the requested price information or contains conflicting information as to the
actual sales price. Accordingly, Unit Holders should not rely upon the accuracy
of this information.
The Purchaser believes that, although secondary market sales
information may not be a reliable measure of value because of the limited and
inefficient nature of the market for Units, this information may be relevant to
a Unit Holder's decision as to whether to tender its Units pursuant to the
Offer. At present, privately negotiated sales, tender offers for Units and sales
through intermediaries (e.g., through the trading system operated by American
Partnership Board, Inc., which publishes sell offers by Unit Holders) are the
only means available to a Unit Holder to liquidate an investment in Units (other
than the Offer) because the Units are not listed or traded on any exchange or
quoted on The Nasdaq Stock Market.
The most recent price in a sale of Units quoted to the Purchaser by
the American Partnership Board was $6.53 per Unit in a sale occurring on May 25,
2000. Unit Holders are urged to obtain a current quotation for the Units.
Prior Tender Offers. In August 1998, West Putnam Housing Investors
LLC, an affiliate of the Affiliated General Partners, acquired 40,961 Units
representing approximately 4.2% of the outstanding Units at a purchase price of
$7.00 per Unit in a tender offer (the "West Putnam Offer"). On March 26, 1998,
Everest Management LLC announced a tender offer to purchase up to 42,234 Units
for a purchase price of $3.50 per Unit (the "Everest Offer"). On June 29, 1998,
MacKenzie Partners, Inc. offered to purchase 196,875 Units for a price of $5.00
per Unit (the "MacKenzie Offer"). On October 6, 1999, Everest Investors 12, LLC
announced a tender offer to purchase up to 25,593 Units for a purchase price of
$8.00 per Unit (the "Everest 12 Offer"). On March 6, 2000, Sutter Opportunity
Fund, together with certain other parties, announced a tender offer to purchase
up to 19,000 Units for a purchase price of $8.25 per Unit (the "Sutter Offer").
On May 4, 2000, Bond Purchase, L.L.C. announced a tender offer to purchase up to
49,000 Units for a purchase price of $7.27 per Unit (the "Bond Offer"). The
present Offer by the Purchaser affords Unit Holders an opportunity to dispose of
their Units at a significantly higher price on a pre-distribution basis than the
price offered in the West Putnam Offer, the MacKenzie Offer, the Everest Offer,
the Everest 12 Offer, the Sutter Offer and the Bond Offer. The above information
obtained from the Partnership refers to certain tender offers of which the
Purchaser is aware. Inclusion of such information should not be construed as
indicating that there may not have been other tender offers or negotiated
purchases which were completed at other prices which may include substantially
higher prices than those of the tender offers identified above.
Purchaser's Pro Forma Estimate of Net Liquidation Value per Unit.
The Purchaser is offering to purchase 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-Unit amount which might be distributed to Unit Holders following a
future sale of the Complexes necessarily reflects the present fair value of a
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
Units. In considering this factor, the Purchaser made a calculation of the
amount each Unit Holder might receive in a theoretical orderly liquidation of
the Partnership, based upon an unsolicited third-party purchase offer for the
Fieldpointe Property and a third-party appraisal utilized in the recent
financing of the Westmont Property (the "Gross Real Estate Value Estimate"). The
Purchaser based its liquidation analysis on the Gross Real Estate Value Estimate
because the Purchaser believes that the Gross Real Estate Value Estimate
represents a reasonable estimate, based on currently available information, of
the values of the Complexes.
In estimating the net liquidation value per Unit, the Purchaser
adjusted its Gross Real Estate Value Estimate of approximately $56,100,000 by
(I) adding (i) the $8,259,000 expected to be available for distribution to Unit
Holders from the proceeds of the Westmont Property and (ii) $1,500,000 in cash
and distributable reserves and (II) deducting (i) mortgages payable of
approximately $42,500,000, (ii) amounts due to General Partners and affiliates
from the Partnership of approximately $500,000, (iii) assumed closing costs and
brokerage expenses of approximately $1,965,000 (3.5% of the Gross Real Estate
Value Estimate) and $250,000 in estimated liquidation expenses, and (iv)
$385,000 in distributions that would be payable to the general partners and the
other limited partners of the Columbia Partnership and to the General Partners
of the Partnership upon liquidation. The resulting amount of $20,359,000 or
$20.68 per Unit, represents the Purchaser's estimate of the aggregate net
liquidation proceeds which could be realized on an orderly liquidation of the
Partnership, before distribution of the proceeds of
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the Westmont refinancing based on the assumptions implicit in the calculations
described above. Assuming no reduction in the Purchase Price as set forth in
Section 1, the Purchase Price represents approximately 76% of liquidation value.
Net of the proceeds available from the refinancing of the Westmont
Property, the Purchaser's estimated liquidation value is $12,139,519 or $12.33
per Unit. The Purchase Price of the Offer less the expected per-Unit
distribution from the proceeds of the Westmont refinancing is $7.40 per Unit.
The Purchaser's liquidation analysis described above is merely
theoretical and does not itself necessarily reflect the value of the Units
because (i) there is no assurance that any such liquidation in fact will occur
in the foreseeable future, (ii) any liquidation in which the estimated fair
market values described above might be realized would take a period of time,
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, (iii) the Westmont Property owned by the Columbia
Partnership is subject to certain restrictions on immediate sale, and the
Fieldpointe Property owned by the Carrollton Partnership is subject to Federal
Housing Administration regulations and (iv) interest rates have trended higher
in 2000 and may cause a prospective purchaser to utilize higher capitalization
rates due to such increases. In light of these factors, the Purchaser believes
the actual current value of the Units is less than its estimate of the
Partnership's liquidation value. Conversely, there is a meaningful possibility
that the per-Unit value realized in an orderly liquidation could be greater than
the Purchaser's estimated liquidation value. For example, the Westmont Property
is now financed with a floating interest rate, subject to an interest rate cap
contract limiting the interest rate to a maximum of 6.54%. A purchaser may
believe that short-term tax-exempt interest rate instruments will trend downward
in the future and therefore ascribe greater value to the Westmont Property.
Accordingly, this analysis should be viewed merely as indicative of the
Purchaser's approach to valuing 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 will not be required to accept for payment or to pay
for any 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 will not be required
to accept for payment or pay for any Units not theretofore accepted for payment
or paid for and may terminate or amend the Offer as to such 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 Units by the
Purchaser, (ii) imposes or confirms limitations on the ability of the Purchaser
effectively to exercise full rights of ownership of any Units, including without
limitation the right to vote any Units acquired by the Purchaser pursuant to the
Offer or otherwise on all matters properly presented to the Partnership's Unit
Holders, (iii) requires divestiture by the Purchaser of any 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
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 this 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 shall have become aware of any fact that does or may have a
material adverse effect on the value of the 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,
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(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 shall
have otherwise learned that, (i) more than five percent of the outstanding 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 Units beneficially owned by such person or group as
disclosed in such Statement by two percent or more of the outstanding Units.
The foregoing conditions are for the sole benefit of the Purchaser
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 concerning the events described above will be final and binding upon
all parties.
SECTION 15. CERTAIN LEGAL MATTERS.
General. The Purchaser is not aware of any filings with, or
approvals or other actions by, any domestic or foreign governmental or
administrative agency that would be required prior to the acquisition of Units
by the Purchaser pursuant to the Offer, other than the filing of a Tender Offer
Statement on Schedule TO with the Commission by the Purchaser and the filing of
a Solicitation Recommendation on Schedule 14D-9 with the Commission by the
Partnership (both of which have 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, except as described below under "State Takeover Laws." Although there is
no present intent to delay the purchase of 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 to elect to terminate the Offer without
purchasing Units thereunder. If certain types of adverse action are taken with
respect to the matters discussed below, the Purchaser may decline to accept for
payment or pay for any Units. See Section 14.
Antitrust. The Purchaser does not believe that the consummation of
the Offer will result in violation of any applicable antitrust laws, including
without limitation the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended.
Margin Requirements. The 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.
State Takeover Laws. The Partnership is organized under the State of
Delaware. The Delaware Unified Limited Partnership Act does not have any
takeover provisions. The Purchaser has not determined whether any other state
takeover laws and regulations will by their terms apply to the Offer, and the
Purchaser has not presently sought to comply with any state takeover statute or
regulation. The Purchaser reserves the right to challenge the applicability or
validity of any state law or regulation purporting to apply to the Offer, and
neither anything in this Offer nor any action taken in connection herewith is
intended as a waiver of such right. In the event it is asserted that one or more
state takeover statutes is applicable to the Offer and an appropriate court does
not determine that such statute is inapplicable or invalid as applied to the
Offer, the Purchaser might be required to file certain information with, or to
receive approval from, the relevant state authorities, and the Purchaser might
be unable to accept for payment for Units tendered pursuant to the Offer, or be
delayed in consummating the Offer.
SECTION 16. FEES AND EXPENSES. Except as set forth in this Section
16, the Purchaser will not pay any fees or commissions to any broker, dealer or
other person for soliciting tenders of Units pursuant to the Offer. The
Purchaser has retained Georgeson Shareholder Communications Inc. to act as
Information Agent and MMS to act as Depositary in connection with the Offer. The
Purchaser 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 will also pay all costs and expenses of printing
and mailing the Offer and its legal fees and expenses.
SECTION 17. MISCELLANEOUS. The Offer is being made to all Unit
Holders. The Purchaser is not aware of any jurisdiction in which the making of
the Offer is not in compliance with applicable law. If the Purchaser becomes
aware of any jurisdiction in which the making of the Offer would not be in
compliance
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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 cannot comply with
any such law, the Offer will not be made to (nor will tenders be accepted from
or on behalf of) Unit Holders 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 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 not contained in this Offer to
Purchase or in the Letter of Transmittal and, if given or made, such information
or representation must not be relied upon as having been authorized.
The Purchaser has filed with the Commission a Tender Offer Statement
on Schedule TO, 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 TO 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).
West Putnam Housing Investors II LLC
June 26, 2000
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SCHEDULE I
INFORMATION REGARDING THE MANAGING MEMBER OF THE PURCHASER
The Purchaser is a Delaware limited liability company that is
managed by West Putnam Housing Investors LLC, its sole managing member (the
"Purchaser Managing Member"). The Purchaser Managing Member is a Delaware
limited liability company formed for the purpose of acquiring Units in a tender
offer conducted in 1998. The sole business of the Purchaser Managing Member is
the ownership of Units acquired in the 1998 tender offer and serving as managing
member of the Purchaser. The sole managing member of the Purchaser Managing
Member is Mr. Richard P. Richman. The Purchaser Managing Member is owned 75% by
Mr. Richman and 25% by Mr. Robert H. Wilder, Jr. The business address of both
Purchaser and the Purchaser Managing Member is c/o Wilder Richman Resources
Corporation, 599 West Putnam Avenue, Greenwich, CT 06830.
Set forth 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 Messrs. Richman, Wilder, Picket, and Levitt.
Each person identified below is a United States citizen.
NAME, PRESENT PRINCIPAL OCCUPATION OR
EMPLOYMENT AND FIVE-YEAR EMPLOYMENT HISTORY
Mr. Richman graduated from the Columbia University Law School with a
Juris Doctor degree, the Columbia University Graduate School of Business
Administration with a Master of Business Administration degree and Syracuse
University with a Bachelor of Arts degree in Political Science. Mr. Richman has
over twenty years of extensive experience in the syndication, development and
management of residential properties. From March 1988 to date, Mr. Richman has
been the President and a Director and a shareholder of Wilder Richman
Corporation, also an affiliate of WRRC. From 1986 to date, Mr. Richman has been
the President and a director of WRRC. From 1973 until 1979, Mr. Richman
practiced law in New York City. Mr. Richman is the President and a member of the
Board of Directors of the Affordable Housing Tax Credit Coalition and has been a
member of the National Advisory Board of the Housing and Development Reporter, a
bi-weekly publication, a frequent speaker on real estate syndication, a member
of the National Leased Housing Association, and has appeared on National Public
Radio and American Broadcasting Company's "Nightline" program. Mr. Richman's
business address is c/o Wilder Richman Resources Corporation, 599 West Putnam
Avenue, Greenwich, CT 06830.
Robert H. Wilder, Jr., is the Executive Vice President and a
Director of WRRC. Mr. Wilder received an M.B.A. degree form the Columbia
University Graduate School of Business Administration, and a B.A. degree in
economics from University of Michigan. For nearly 25 years, Mr. Wilder has been
one of the leading developers of affordable housing in suburban and upstate New
York. From 1979 to date Mr. Wilder has been the Chairman of the Board and a
Director and a shareholder of Wilder Richman Corporation, an affiliate of WRRC.
From 1988 through 1995, Mr. Wilder was the President and sole shareholder of
Wilder Property Companies, Inc. Mr. Wilder is currently a Managing Member of
Wilder Balter Partners, L.L.C. and his principal business address is 570 Taxter
Road, Elmsford, NY 10523. Mr. Wilder is a licensed real estate broker in New
York and Connecticut.
Joel I. Picket is Chairman of Gotham Construction Company, LLC. Mr.
Picket took charge of Gotham Organization Inc. in 1965, leading the evolution of
the now 67-year old company from what was strictly a general contracting
business to a multi-dimensional, full service real estate firm active in general
contracting, construction management, and development management, both of its
own and third party properties. Mr. Picket is responsible for the unusual
diversity of Gotham's portfolio which includes construction and/or development
of residential, commercial, medical, educational, and hotel properties in the
New York metropolitan area. Gotham has been consistently ranked over the past 25
years as one of the 400 largest contractors in the country and has been
responsible for the construction of more than 20,000 residential units. Mr.
Picket is a board member of numerous civic and educational organizations. He is
a past member of the Board of Directors of the Building Contractors Association,
and currently serves on the Member Board of Governors of the Real Estate Board
of New York and is a Member and Director of the National Housing Conference. Mr.
Picket holds a Bachelor of Arts and Science degree from Cornell University, and
attended Graduate School of Business Administration at New York University.
Mr. Levitt has been one of the major developers in the housing
industry over the past thirty-five years. He is the founder and sole owner of a
group of companies involved in the production, management and financing of
rental apartments. The Michaels Development Company has developed, acquired and
rehabilitated over 22,000 apartments since 1963. Interstate Realty Management
Company has more than 1,000 employees and
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