SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
- --------------------------------------------------------------------------------
SCHEDULE 14D-1
Tender Offer Statement Pursuant to Section 14(d)(1)
of the Securities Exchange Act of 1934
- --------------------------------------------------------------------------------
LIBERTY TAX CREDIT PLUS III L.P.
(Name of Subject Company)
LEHIGH TAX CREDIT PARTNERS L.L.C.
(Bidder)
BENEFICIAL ASSIGNMENT CERTIFICATES
(Title of Class
of Securities)
531280 30 3
(CUSIP Number of Class
of Securities)
- --------------------------------------------------------------------------------
J. Michael Fried
c/o Related Capital Company
625 Madison Avenue
New York, NY 10022
Copies to:
Peter M. Fass
Battle Fowler LLP
75 East 55th Street
New York, NY 10022
(212) 856-7000
(Name, Address and Telephone Number of
Person Authorized to Receive Notices and
Communications on Behalf of Bidder)
Calculation of Filing Fee
- --------------------------------------------------------------------------------
Transaction Amount of
Valuation* Filing Fee
- ----------- ----------
$10,293,500 $2,058.70
- --------------------------------------------------------------------------------
*For purposes of calculating the filing fee only. This amount
assumes the purchase of 17,500 Beneficial Assignment Certificates (representing
assignments of limited partnership interests) ("BACs") of the subject company
for $588.20 per BAC in cash.
[ ] Check box if any part of the fee is offset as provided by Rule 0-11(a)(2)
and identify the filing with which the offsetting fee was previously paid.
Identify the previous filing by registration statement number, or the Form or
Schedule and date of its filing.
Amount previously paid: N/A Filing party: N/A
Form or registration no.: N/A Date filed: N/A
(Continued on following pages)
(Page 1 of 8 pages)
<PAGE>
Cusip No.: 531280 30 3 14D-1 Page 2 of 8
- --------------------------------------------------------------------------------
1. Name of Reporting Person
S.S. or I.R.S. Identification No. of Above Person
LEHIGH TAX CREDIT PARTNERS L.L.C.
- --------------------------------------------------------------------------------
2. Check the Appropriate Box if a Member of a Group
(See Instructions)
(a) [ ]
(b) [X]
- --------------------------------------------------------------------------------
3. SEC Use Only
- --------------------------------------------------------------------------------
4. Sources of Funds (See Instructions)
AF; BK
- --------------------------------------------------------------------------------
5. Check Box if Disclosure of Legal Proceedings is Required
Pursuant to Item 2(e) or 2(f)
[ ]
- --------------------------------------------------------------------------------
6. Citizenship or Place of Organization
Delaware
- --------------------------------------------------------------------------------
7. Aggregate Amount Beneficially Owned by Each Reporting Person
95 Beneficial Assignment Certificates (representing assignments
of limited partnership interests)
- --------------------------------------------------------------------------------
8. Check Box if the Aggregate Amount in Row (7) Excludes
Certain Shares (See Instructions)
[ ]
- --------------------------------------------------------------------------------
9. Percent of Class Represented by Amount in Row (7)
Less than 1%
- --------------------------------------------------------------------------------
10. Type of Reporting Person (See Instructions)
OO
<PAGE>
Cusip No.: 531280 30 3 14D-1 Page 3 of 8
- --------------------------------------------------------------------------------
1. Name of Reporting Person
S.S. or I.R.S. Identification No. of Above Person
LEHIGH TAX CREDIT PARTNERS, INC.
- --------------------------------------------------------------------------------
2. Check the Appropriate Box if a Member of a Group
(See Instructions)
(a) [ ]
(b) [X]
- --------------------------------------------------------------------------------
3. SEC Use Only
- --------------------------------------------------------------------------------
4. Sources of Funds (See Instructions)
AF; BK
- --------------------------------------------------------------------------------
5. Check Box if Disclosure of Legal Proceedings is Required
Pursuant to Item 2(e) or 2(f)
[ ]
- --------------------------------------------------------------------------------
6. Citizenship or Place of Organization
Delaware
- --------------------------------------------------------------------------------
7. Aggregate Amount Beneficially Owned by Each Reporting Person
95 Beneficial Assignment Certificates (representing assignments
of limited partnership interests)
- --------------------------------------------------------------------------------
8. Check Box if the Aggregate Amount in Row (7) Excludes
Certain Shares (See Instructions)
[ ]
- --------------------------------------------------------------------------------
9. Percent of Class Represented by Amount in Row (7)
Less than 1%
- --------------------------------------------------------------------------------
10. Type of Reporting Person (See Instructions)
CO
<PAGE>
Item 1. Security and Subject Company.
(a) The name of the subject company is Liberty Tax Credit Plus
III L.P., a Delaware limited partnership (the "Partnership"), which has its
principal executive offices at 625 Madison Avenue, New York, New York 10022.
(b) This Schedule 14D-1 relates to the offer by Lehigh Tax
Credit Partners L.L.C., a Delaware limited liability company ("the Purchaser"),
to purchase up to 17,500 issued and outstanding Beneficial Assignment
Certificates ("BACs") representing assignments of limited partnership interests
in the Partnership ("Limited Partnership Interests") at $588.20 per BAC, net to
the seller in cash (the "Purchase Price"), without interest thereon, upon the
terms and subject to the conditions set forth in the Offer to Purchase dated
April 10, 1997 (the "Offer to Purchase") and the related Letter of Transmittal,
copies of which are attached hereto as Exhibits (a)(1) and (a)(2), respectively.
The Purchase Price will be automatically reduced by $10 per BAC for each month
(or part of a month) between May 31, 1997 and the date of transfer for BACs
transferred after May 31, 1997. Information concerning the number of outstanding
BACs is set forth in the Introduction to the Offer to Purchase and is
incorporated herein by reference.
(c) The information set forth in Section 13 ("Purchase Price
Considerations") of the Offer to Purchase is incorporated herein by reference.
Item 2. Identity and Background.
(a)-(d) The information set forth in Section 10 ("Certain
Information Concerning the Purchaser") and Schedule I to the Offer to Purchase
is incorporated herein by reference.
(e) and (f) During the last five years, neither the Purchaser
nor, to the best of its knowledge, any of the persons listed in Schedule I or
referred to in Section 10 ("Certain Information Concerning the Purchaser") of
the Offer to Purchase (i) have been convicted in a criminal proceeding
(excluding traffic violations or similar misdemeanors) or (ii) were a party to a
civil proceeding of a judicial or administrative body of competent jurisdiction
and as a result of such proceeding were or are subject to a judgment, decree or
final order enjoining future violations of, or prohibiting activities subject
to, Federal or state securities laws or finding any violation of such laws.
(g) The information set forth in Schedule I to the Offer to
Purchase is incorporated herein by reference.
Item 3. Past Contacts, Transactions or Negotiations With the Subject
Company.
(a) The Purchaser is an affiliate of Related Credit Properties
III L.P., a general partner of the Partnership. Accordingly, the information
contained in Section 9 ("Certain
4
<PAGE>
Information Concerning the Partnership") of the Offer to Purchase, including the
terms of the Partnership's amended and restated agreement of limited partnership
(the "Partnership Agreement"), is incorporated herein by reference.
Additionally, the information set forth in Section 10 ("Certain Information
Concerning the Purchaser") and Schedule I to the Offer to Purchase is
incorporated herein by reference.
(b) The information set forth in Section 11 ("Background of
the Offer") of the Offer to Purchase is incorporated herein by reference.
Item 4. Source and Amount of Funds or Other Consideration.
(a)-(c) The information set forth in Section 12 ("Source of
Funds") of the Offer to Purchase is incorporated herein by reference.
Item 5. Purpose of the Tender Offer and Plans or Proposals of the
Bidder.
(a)-(b) The information set forth in Section 8 ("Purpose of
the Offer; Future Plans") of the Offer to Purchase is incorporated herein by
reference.
(c)-(e) Not applicable.
(f)-(g) The information set forth in Section 7 ("Effects of
the Offer") of the Offer to Purchase is incorporated herein by reference.
Item 6. Interest in Securities of the Subject Company.
(a)-(b) The information set forth in the Introduction and
Section 10 ("Certain Information Concerning the Purchaser") of the Offer to
Purchase is incorporated herein by reference.
Item 7. Contracts, Arrangements, Understandings or Relationships
with Respect to the Subject Company's Securities.
The information set forth in Section 10 ("Certain Information
Concerning the Purchaser") and Section 11 ("Background of the Offer") of the
Offer to Purchase is incorporated herein by reference.
Item 8. Persons Retained, Employed or to be Compensated.
The information set forth in Section 16 ("Certain Fees and
Expenses") of the Offer to Purchase is incorporated herein by reference.
5
<PAGE>
Item 9. Financial Statements of Certain Bidders.
Not applicable.
Item 10. Additional Information.
(a) None.
(b)-(d) The information set forth in Section 15 ("Certain
Legal Matters") of the Offer to Purchase is incorporated herein by reference.
(e) None.
(f) The information set forth in the Offer to Purchase and the
related Letter of Transmittal is incorporated herein in its entirety by
reference.
Item 11. Material to be Filed as Exhibits.
(a)(1) Offer to Purchase, dated April 10, 1997.
(a)(2) Letter of Transmittal.
(a)(3) Cover Letter, dated April 10, 1997, from Lehigh Tax
Credit Partners L.L.C. to the holders of BACs.
(b) None.
(c)(1) Letter Agreement dated April 4, 1997 among Liberty Tax
Credit Plus III L.P., Lehigh Tax Credit Partners L.L.C.
and Related Credit Properties III L.P. (the "Standstill
Agreement").
(c)(2) Valuation opinion dated April 8, 1997 delivered to
Liberty Tax Credit Plus III L.P. by Valuation Research
Corporation.
(c)(3) Letter agreement of Liberty Tax Credit Plus III L.P.
and Valuation Research Corporation, dated April 8,
1997, consenting to use of valuation opinion by Lehigh
Tax Credit Partners L.L.C.
(c)(4) Consent to use name of Valuation Research Corporation,
dated April 8, 1997.
(d) None.
(e) Not applicable.
(f) None.
6
<PAGE>
SIGNATURES
After due inquiry and to the best of my knowledge and belief,
I certify that the information set forth in this statement is true, complete and
correct.
Dated: April 10, 1997
LEHIGH TAX CREDIT PARTNERS L.L.C.
By: Lehigh Tax Credit Partners,
Inc., its managing member
By: /s/ Alan P. Hirmes
------------------------
Name: Alan P. Hirmes
Title: Vice President
LEHIGH TAX CREDIT PARTNERS, INC.
By: /s/ Alan P. Hirmes
------------------------
Name: Alan P. Hirmes
Title: Vice President
7
<PAGE>
EXHIBIT INDEX
EXHIBIT
NO. TITLE
- ------- -----
(a)(1) Offer to Purchase, dated April 10, 1997.
(a)(2) Letter of Transmittal.
(a)(3) Cover Letter, dated April 10, 1997, from Lehigh Tax Credit Partners
L.L.C. to the holders of BACs.
(c)(1) Letter Agreement, dated April 4, 1997, among Liberty Tax Credit
Plus III L.P., Lehigh Tax Credit Partners L.L.C. and Related Credit
Properties III L.P. (the "Standstill Agreement").
(c)(2) Valuation opinion dated April 8, 1997 delivered to Liberty Tax
Credit Plus III L.P. by Valuation Research Corporation.
(c)(3) Letter agreement of Liberty Tax Credit Plus III L.P. and
Valuation Research Corporation, dated April 8, 1997, consenting to
use of valuation opinion by Lehigh Tax Credit Partners L.L.C.
(c)(4) Consent to use name of Valuation Research Corporation, dated April
8, 1997.
8
Exhibit (a)(1)
OFFER TO PURCHASE
UP TO 17,500
BENEFICIAL ASSIGNMENT CERTIFICATES
in
LIBERTY TAX CREDIT PLUS III L.P.
for
$588.20 NET PER BAC IN CASH
by
LEHIGH TAX CREDIT PARTNERS L.L.C.
- --------------------------------------------------------------------------------
THE OFFER, WITHDRAWAL RIGHTS AND PRORATION PERIOD WILL EXPIRE AT 12:00
MIDNIGHT, NEW YORK CITY TIME, ON MAY 8, 1997, UNLESS EXTENDED.
- --------------------------------------------------------------------------------
Lehigh Tax Credit Partners L.L.C., a Delaware limited liability company
("the Purchaser") and an affiliate of a general partner of the Partnership (as
defined below), hereby offers to purchase up to 17,500 of the issued and
outstanding Beneficial Assignment Certificates ("BACs") representing assignments
of limited partnership interests ("Limited Partnership Interests") in Liberty
Tax Credit Plus III L.P., a Delaware limited partnership (the "Partnership"), at
a purchase price of $588.20 per BAC, net to the seller in cash (the "Purchase
Price"), without interest thereon, 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, as each may be supplemented, modified or amended from
time to time (which together constitute the "Offer"). The Purchase Price will be
automatically reduced by $10 per BAC for each month (or part of a month) between
May 31, 1997 and the date of transfer for BACs transferred after May 31, 1997.
BACs HOLDERS WHO TENDER THEIR BACs WILL NOT BE OBLIGATED TO PAY ANY COMMISSIONS
OR PARTNERSHIP TRANSFER FEES, WHICH COMMISSIONS AND FEES WILL BE BORNE BY THE
PURCHASER. The 17,500 BACs sought pursuant to the Offer represent, to the best
knowledge of the Purchaser, approximately 12.6% of the BACs outstanding as of
the date of this Offer.
-------------------------
THE PURCHASER AND RELATED CREDIT PROPERTIES III L.P., A GENERAL PARTNER OF
THE PARTNERSHIP, ARE AFFILIATED.
-------------------------
THE OFFER IS NOT CONDITIONED UPON ANY MINIMUM NUMBER OF BACs BEING TENDERED.
SEE SECTION 14 ("CONDITIONS OF THE OFFER").
-------------------------
IN ORDER TO COMPLY WITH CERTAIN RESTRICTIONS SET FORTH IN THE PARTNERSHIP'S
AMENDED AGREEMENT OF LIMITED PARTNERSHIP, TENDERS OF LESS THAN ALL BACs OWNED
BY A BACs HOLDER THAT WOULD RESULT IN A BACs HOLDER HOLDING LESS THAN 5 BACs
WILL NOT BE ACCEPTED.
-------------------------
Before tendering, BACs holders are urged to consider the following factors:
[bullet] BACs holders who have a present or future need for the tax credits
and/or tax losses from the BACs may prefer to retain their BACs and not
tender them pursuant to the Offer, or any other tender offer.
[bullet] Although the Purchaser cannot predict the future value of the
Partnership's assets on a per BAC basis, the net after-tax benefit that
would be realized from retaining ownership of BACs together with any
cash distributions from operations and any net proceeds from a future
sale of the properties owned by the Partnership (the "Properties")
could differ significantly from the Purchase Price. See Section 13
("Purchase Price Considerations").
[bullet] If the Purchaser is successful in acquiring a significant number of
BACs pursuant to the Offer, the Purchaser could, subject to the
Standstill Agreement (as defined in the Glossary), be in a position to
significantly influence all Partnership decisions on which BACs holders
may vote, including decisions regarding removal of any General Partner,
certain amendments to the Partnership Agreement (as defined in the
Glossary) and dissolution of the Partnership.
<PAGE>
IMPORTANT
Any (i) BACs holder, (ii) beneficial owner, in the case of BACs owned by
Individual Retirement Accounts or Keogh Plans (a "Beneficial Owner"), or (iii)
person who has purchased BACs but has not yet been reflected on the
Partnership's books as a transferee of such BACs (an "Assignee"), desiring to
tender any or all of such person's BACs should either (1) complete and sign the
Letter of Transmittal, or a facsimile copy thereof, in accordance with the
instructions in the Letter of Transmittal and mail or deliver the Letter of
Transmittal, or a facsimile copy thereof, and any other required documents to
Related Capital Company (the "Information Agent/Depositary"), at the address or
facsimile number set forth below, or (2) request his or her broker, dealer,
commercial bank, trust company or other nominee to effect the transaction for
him or her. Unless the context requires otherwise, references to BACs holders in
this Offer to Purchase shall be deemed to also refer to Beneficial Owners and
Assignees. Questions or requests for assistance may be directed to the
Information Agent/Depositary at the address and telephone number set forth
below. Requests for additional copies of this Offer to Purchase, the Letter of
Transmittal and other related documents may be directed to the Information
Agent/Depositary.
NO PERSON HAS BEEN AUTHORIZED TO MAKE ANY RECOMMENDATION OR ANY
REPRESENTATION ON BEHALF OF THE PURCHASER OR TO PROVIDE ANY INFORMATION OTHER
THAN AS CONTAINED HEREIN OR IN THE LETTER OF TRANSMITTAL. NO SUCH
RECOMMENDATION, INFORMATION OR REPRESENTATION MAY BE RELIED UPON AS HAVING BEEN
AUTHORIZED.
EACH BACs HOLDER IS URGED TO READ CAREFULLY THE ENTIRE OFFER TO PURCHASE,
THE LETTER OF TRANSMITTAL AND RELATED DOCUMENTS.
For Additional Information Call:
Related Capital Company
625 Madison Avenue
New York, New York 10022
Attention: Denise Bernstein
Telephone: (800) 600-6422 (ext. 2030)
Facsimile: (212) 593-5794
ii
<PAGE>
TABLE OF CONTENTS
Page
------
INTRODUCTION ...................................................... 1
THE TENDER OFFER ................................................... 4
1. Terms of the Offer .............................. 4
2. Proration; Acceptance for Payment and
Payment for BACs ............................... 5
3. Procedures for Tendering BACs .................. 6
4. Withdrawal Rights .............................. 7
5. Extension of Tender Period; Termination;
Amendment ..................................... 8
6. Certain Federal Income Tax Consequences ......... 9
7. Effects of the Offer ........................... 11
8. Purpose of the Offer; Future Plans ............ 12
9. Certain Information Concerning the Partnership . 13
10. Certain Information Concerning the Purchaser ... 22
11. Background Of The Offer ........................ 23
12. Source Of Funds ................................. 23
13. Purchase Price Considerations .................. 24
14. Conditions of the Offer ........................ 25
15. Certain Legal Matters ........................... 26
16. Certain Fees and Expenses ..................... 27
17. Miscellaneous ................................. 27
Appendix A. Glossary ....................................... A-1
Schedule I. Information with respect to the executive
officers and directors of Lehigh Tax Credit
Partners, Inc. .................................. S-1
Schedule II. Local Partnership schedule ..................... S-2
Schedule III. Certain information concerning the Properties ... S-6
iii
<PAGE>
To the Holders of Beneficial Assignment Certificates of
Liberty Tax Credit Plus III L.P.:
INTRODUCTION
Lehigh Tax Credit Partners L.L.C., a Delaware limited liability company
("the Purchaser") and an affiliate of a general partner of the Partnership (as
defined below), hereby offers to purchase up to 17,500 of the issued and
outstanding Beneficial Assignment Certificates ("BACs") representing limited
partnership interests in Liberty Tax Credit Plus III L.P., a Delaware limited
partnership (the "Partnership"), at a purchase price of $588.20 per BAC, net to
the seller in cash (the "Purchase Price"), 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, as each may be
supplemented, modified or amended from time to time (which together constitute
the "Offer"). The Purchase Price will be automatically reduced by $10 per BAC
for each month (or part of a month) between May 31, 1997 and the date of
transfer for BACs transferred after May 31, 1997. BACs holders who tender their
BACs will not be obligated to pay any commissions or Partnership transfer fees,
which commissions and fees will be borne by the Purchaser. The 17,500 BACs
sought pursuant to the Offer represent, to the best knowledge of the Purchaser,
approximately 12.6% of the BACs issued and outstanding as of the date of this
Offer.
The Purchaser is affiliated with Related Credit Properties III L.P.
("RCP"), one of the general partners of the Partnership (the "General
Partners"). In order to comply with certain restrictions set forth in the
Partnership's Amended and Restated Agreement of Limited Partnership (the
"Partnership Agreement"), tenders of less than all BACs owned by a BACs holder
that would result in a BACs holder holding less than 5 BACs will not be
accepted.
The Purchaser is making the Offer in response to a potential tender offer
by Everest Properties, Inc. ("Everest"). Everest has sought to obtain the list
of the names and addresses of the BACs holders, but the Partnership has resisted
this request for the reasons set forth below and the matter is now in litigation
pending in Delaware. Based upon information received by the Purchaser from RCP,
its affiliate and one of the General Partners, the Purchaser reasonably believes
that Everest intends to commence a tender offer for less than 5% of the BACs
outstanding and on terms less favorable than the Purchaser's Offer, which terms
are believed to include a lower cash purchase price, no withdrawal rights and no
rights to proration. There can be no assurance, however, that Everest will
commence such a tender offer or, if commenced, that it will be on these
anticipated terms or on terms less favorable to BACs holders than the
Purchaser's Offer. The Purchaser's Offer is being made to provide BACs holders
who have a present or anticipated need for liquidity with an opportunity to sell
their BACs. See Section 11 ("Background of the Offer").
Additionally, the Purchaser is making this Offer because it believes that
the BACs represent an attractive investment at the price offered based upon, in
part, the expected remaining Tax Credits and tax losses. There can be no
assurance, however, that the Purchaser's judgment is correct, and, as a result,
ownership of BACs (either by the Purchaser or BACs holders who retain their
BACs) will remain a speculative investment. The Purchaser is acquiring the BACs
for investment purposes and does not intend to make any effort to change current
management or the operations of the Partnership. Because the Purchaser is
affiliated with RCP, one of the General Partners, the Purchaser's acquisition of
BACs may have the effect of making any future change of current management more
difficult. The Purchaser has no current plans for any extraordinary transaction
involving the Partnership.
Factors to be considered by BACs holders. In considering the Offer, BACs
holders are urged to consider the following factors:
[bullet] BACs holders who have a present or future need for the Tax Credits
and/or tax losses from the BACs may prefer to retain their BACs and not
tender them pursuant to the Offer, or any other tender offer.
[bullet] Although the Purchaser cannot predict the future value of the
Partnership's assets on a per BAC basis, the net after-tax benefit that
would be realized from retaining ownership of the BACs together with
any cash distributions from operations and any net proceeds from a
future sale of the properties owned by the Partnership (the
"Properties") could differ significantly from the Purchase Price. See
Section 13 ("Purchase Price Considerations").
[bullet] There may be a conflict between the desire of the Purchaser to acquire
the BACs at a low price and the desire of the BACs holders to sell
their BACs at a high price. Therefore, BACs holders might receive
greater value if they hold their BACs, rather than tender, continue to
be allocated Tax Credits and tax losses, and receive
<PAGE>
any distributions from operations and any proceeds, if any, from the
liquidation of the Partnership. Alternatively, BACs holders may prefer
to receive the Purchase Price now rather than wait to be allocated
future Tax Credits and tax losses and uncertain future cash
distributions. The return to BACs holders could be higher or lower than
the Purchase Price for persons who retain their BACs.
[bullet] The Purchaser has been formed and the Offer is being made in order to
acquire BACs for investment purposes. The Purchaser intends to sell
membership interests in the Purchaser to third parties with a need for
the Tax Credits and/or tax losses attributable to the tendered BACs.
The aggregate sales price of the Purchaser's membership interests to
third parties will be equal to the aggregate Purchase Price for the
tendered BACs plus the Purchaser's expenses in conducting and
consummating the Offer and financing the purchase of the tendered BACs.
Neither the Purchaser nor its current members will derive a profit from
the sale of the Purchaser's membership interests.
Affiliates of the Purchaser, however, expect to arrange the sale of
membership interests of the Purchaser to third parties upon conclusion
of the Offer. In connection with such sales and in consideration for
structuring this transaction, it is expected that those affiliates will
earn fees. These fees will be, in part, dependent on the amount third
parties are willing to pay for membership interests and the amount of
membership interests sold. There can be no assurance, however, that any
membership interests in the Purchaser will be sold or at what price.
[bullet] If the Purchaser is successful in acquiring a significant number of
BACs pursuant to the Offer, the Purchaser could, subject to the
Standstill Agreement (as defined in the Glossary), be in a position to
significantly influence all Partnership decisions on which BACs holders
may vote. Additionally, because the Purchaser is affiliated with a
General Partner, the Purchaser's acquisition of BACs may have the
effect of making any future change of the Partnership's current
management more difficult. If the maximum number of BACs sought by the
Purchaser is tendered and accepted for payment pursuant to the Offer,
the Purchaser will own approximately 12.6% of the outstanding BACs.
After April 4, 2007 (the "Standstill Expiration Date"), the ownership
of tendered BACs by the Purchaser could effectively (i) prevent
non-tendering BACs holders from taking actions they desire but that the
Purchaser opposes and (ii) enable the Purchaser to take actions desired
by it but opposed by certain non-tendering BACs holders. Under the
Partnership Agreement, Limited Partners and BACs holders holding more
than 50% of aggregate Limited Partnership Interests and BACs
representing Limited Partnership Interests are entitled, either
directly or through the Assignor Limited Partner, as the case may be,
to take action with respect to a variety of matters, including:
approving the dissolution of the Partnership; approving the removal of
any General Partner and proposing and approving a replacement therefor;
and most types of amendments to the Partnership Agreement. Although the
Purchaser does not have any current intentions with regard to any of
these matters, it will, following the Standstill Expiration Date, vote
the BACs acquired pursuant to the Offer in its interest, which may, or
may not, be in the best interest of non-tendering BACs holders. Until
the Standstill Expiration Date, the Purchaser has agreed to vote its
BACs in the same manner as the majority of all voting BACs holders;
provided, however, the Purchaser shall be entitled to vote its BACs as
it determines with regard to any proposal (i) to remove RCP as a
general partner of the Partnership or (ii) concerning the reduction of
any fees, profits, distributions or allocations for the benefit of RCP
or its affiliates.
[bullet] Substantially all of the properties owned by the Local Partnerships in
which the Partnership has an interest began to qualify for Housing Tax
Credits in 1990 and 1991. Housing Tax Credits are generally available
for 10 years. The amount of the Housing Tax Credits claimed by the
Partnership was $19,673,000 for the 1995 fiscal year, $19,765,000 for
the 1994 fiscal year, and $19,766,000 for the 1993 fiscal year.
Although there can be no assurances as to whether Housing Tax Credits
will continue to be available, the Purchaser estimates that a total of
approximately $540 Housing Tax Credits per BAC will be available during
the period beginning May 1, 1997 and ending December 31, 2002. In
addition, although there can be no assurances as to whether tax losses
will continue to be available, in recent years each BAC has been
allocated approximately $115 of tax losses and the Purchaser estimates
that each BAC will be allocated (a) approximately $115 of tax losses
per year through December 31, 2007, and (b) approximately $990 of
taxable income upon a liquidation of the Partnership, assuming no cash
distributions are made. Actual future tax benefits may differ
significantly from the foregoing estimates. Tax losses are less
valuable than tax credits because tax losses can reduce income (thereby
resulting in a savings equal to the product of the tax loss and the
taxpayer's applicable tax rate) and require a reduction in tax basis
(which may cause taxable income to be recognized in subsequent years),
2
<PAGE>
whereas tax credits result in a dollar-for-dollar reduction in tax
liability. BACs holders should consider whether the Purchase Price is
more valuable to them than the present value of anticipated future tax
benefits.
BACs holders may no longer wish to continue with their investment in the
Partnership for a number of reasons, including:
[bullet] Although there are some limited resale mechanisms available to the BACs
holders wishing to sell their BACs, there is no formal or organized
trading market for the BACs. The Partnership's Form 10-K for the fiscal
year ended March 31, 1996 (the "Form 10-K") states: "Neither the BACs
nor the Limited Partnership Interests are traded on any established
market. The Partnership does not intend to include the BACs for
quotation on NASDAQ or for listing on any national or regional stock
exchange or any other established securities market." Accordingly, BACs
holders who desire resale liquidity may wish to consider the Offer. The
Offer affords a significant number of BACs holders with an opportunity
to dispose of their BACs for cash, which alternative otherwise might
not be available to them. Although the Purchase Price exceeds the
estimated fair value of a BAC as determined by an independent valuation
(see Section 13, "Purchase Price Considerations"), the Purchase Price
is not intended to represent either the fair market value of a BAC or
the fair market value of the Tax Credits and tax losses attributable to
each BAC and the Partnership's assets on a per BAC basis.
[bullet] The Offer will provide BACs holders with an immediate opportunity to
liquidate their investment in the Partnership without the usual
transaction costs associated with market sales or partnership transfer
fees.
[bullet] Although not necessarily an indication of value, the $588.20 Purchase
Price is a premium over the $582.82 weighted average selling price for
BACs reported in the limited and sporadic secondary market during the
two-month period ended January 31, 1997. See Section 13 ("Purchase
Price Considerations"). Such secondary market selling prices do not
take into account commissions charged by secondary market makers
effectuating such sales which the Purchaser believes, based on a
typical 5 BAC sales transaction, range from 5% to 8.75% of the sales
price (which would result in a reduction of the net proceeds to the
seller of at least approximately $29.00 per BAC).
[bullet] The Offer may be attractive for BACs holders whose circumstances have
changed such that anticipated future allocation of Tax Credits and tax
losses may no longer be beneficial to them.
[bullet] Acceptance of the Offer will eliminate any future risk to the selling
BACs holder of recapture of the Tax Credits received, since such risk
will be borne by the Purchaser. The Purchaser believes, however, that
any risk of such recapture is minimal.
[bullet] General disenchantment with real estate investments and with long-term
investments in limited partnerships because of, among other things,
their illiquidity.
[bullet] The Offer may be attractive to certain BACs holders who wish in the
future to avoid the continued additional expense, delay and
complication in filing income tax returns which result from an
ownership of BACs.
[bullet] The Offer provides BACs holders with the opportunity to liquidate their
BACs and to reinvest the proceeds in other investments should they
desire to do so.
[bullet] The Purchaser believes that the BACs represent an attractive investment
at the Purchase Price based upon, in part, the expected remaining Tax
Credits and tax losses. There can be no assurance, however, that this
judgment is correct. Therefore, ownership of BACs will remain a
speculative investment.
Following the completion of the Offer and subject to the terms of the
Standstill Agreement, the Purchaser and its affiliates may acquire additional
BACs. Any such acquisitions may be made through private purchases, through one
or more future tender offers or by any other means deemed advisable, and may be
at prices higher or lower than the price to be paid for the BACs purchased
pursuant to the Offer. See Section 8 ("Purpose of the Offer; Future Plans").
The Offer is not conditioned upon any minimum number of BACs being
tendered. If, as of the Expiration Date, more than 17,500 BACs are validly
tendered and not properly withdrawn, the Purchaser will only accept for purchase
on a pro rata basis 17,500 BACs, subject to the terms and conditions herein. See
Section 14 ("Conditions of the Offer").
3
<PAGE>
BACs holders are urged to consider carefully all of the information
contained herein before accepting the Offer.
The Purchaser expressly reserves the right, in its sole discretion and for
any reason, to terminate the Offer at any time and to waive any or all of the
conditions of the Offer, although the Purchaser does not presently intend to
waive any such conditions. See Section 7 ("Effects of the Offer"). In order to
comply with certain restrictions set forth in the Partnership Agreement, tenders
of less than all BACs owned by a BACs holder that would result in a BACs holder
holding less than 5 BACs will not be accepted.
According to the Form 10-Q, there were 139,101.5 BACs issued and
outstanding, which represent 27,820.3 Limited Partnership Interests issued to
the Assignor Limited Partner. The 10-K reports that as of June 1, 1996 the
Partnership had 9,082 registered holders of the issued and outstanding BACs. The
Purchaser owns 95 BACs.
Except as otherwise indicated, information contained in this Offer to
Purchase is based upon documents and reports publicly filed by the Partnership
with the Commission. Although the Purchaser has no information that any
statements contained in this Offer to Purchase are untrue, the Purchaser does
not take responsibility for the accuracy or completeness of any information
contained in this Offer to Purchase which is derived from such public documents,
or for any failure by the Partnership to disclose events which may have occurred
and may affect the significance or accuracy of any such information but which
are unknown to the Purchaser.
Each BACs holder must make his or her own decision based on his or her
particular circumstances. BACs holders should consult with their respective
advisors about the financial, tax, legal and other implications to them of
accepting the Offer. BACs holders are urged to read this Offer to Purchase, the
related Letter of Transmittal and the other accompanying materials carefully
before deciding whether to tender their BACs.
THE TENDER OFFER
1. Terms of the Offer.
Upon the terms of the Offer (including the terms and conditions of any
extension or amendment of the Offer), the Purchaser will accept for payment and
pay for up to 17,500 BACs that are validly tendered on or prior to the
Expiration Date (as hereinafter defined) and not withdrawn in accordance with
Section 4 ("Withdrawal Rights"). The term "Expiration Date" shall mean 12:00
midnight, New York City time, on May 8, 1997, unless the Purchaser, in its sole
discretion, shall have extended the period of time during which the Offer is
open, in which event the term "Expiration Date" shall refer to the latest time
and date at which the Offer, as so extended by the Purchaser, will expire.
IF, PRIOR TO THE EXPIRATION DATE, THE PURCHASER SHALL INCREASE THE PURCHASE
PRICE OFFERED TO BACs HOLDERS, SUCH INCREASED PURCHASE PRICE SHALL BE PAID FOR
ALL BACs ACCEPTED FOR PAYMENT PURSUANT TO THE OFFER, WHETHER OR NOT SUCH BACs
WERE TENDERED PRIOR TO THE INCREASE IN CONSIDERATION.
The Offer is conditioned on satisfaction of certain conditions. See Section
14 ("Conditions of the Offer"). The Purchaser reserves the right (but shall not
be obligated), in its sole discretion, to waive any or all of such conditions.
If, on or prior to the Expiration Date, any or all of such conditions have not
been satisfied or waived, the Purchaser may (i) decline to purchase any of the
BACs tendered, terminate the Offer and return all tendered BACs to tendering
BACs holders, (ii) waive all the then unsatisfied conditions and, subject to
complying with applicable rules and regulations of the Commission, purchase all
BACs validly tendered, (iii) extend the Offer and, subject to the right of BACs
holders to withdraw BACs until the Expiration Date, retain the BACs that have
been tendered during the period or periods for which the Offer is extended, or
(iv) amend the Offer.
At the request of the Purchaser, and pursuant to Rule 14d-5 of the Exchange
Act, this Offer to Purchase, the related Letter of Transmittal and, if required,
any other relevant materials are being mailed, at the Purchaser's expense, by
the Partnership to BACs holders, Beneficial Owners and Assignees who hold BACs,
to the extent their names and addresses are reflected on the books and records
of the Partnership.
4
<PAGE>
2. Proration; Acceptance for Payment and Payment for BACs.
If more than 17,500 BACs are validly tendered on or prior to the Expiration
Date and not properly withdrawn on or prior to the Expiration Date, the
Purchaser will only accept for payment, upon the terms and subject to the
conditions of the Offer, and pay for an aggregate of 17,500 BACs so tendered,
pro rata according to the number of BACs validly tendered and not properly
withdrawn on or prior to the Expiration Date, with appropriate adjustments to
avoid purchases that would violate the transfer restrictions in Section 7.1 of
the Partnership Agreement (the "Transfer Restrictions"). If the number of BACs
validly tendered and not properly withdrawn on or prior to the Expiration Date
is less than or equal to 17,500 BACs, the Purchaser will purchase all BACs so
tendered and not properly withdrawn, upon the terms and subject to the
conditions of the Offer.
In the event that proration of tendered BACs is required, and because of
the difficulty of determining the proration results, the Purchaser may not be
able to announce the final results of such proration until at least
approximately seven business days after the Expiration Date. 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 BACs holders the Purchase Price in
respect of BACs tendered or return those BACs promptly after the termination or
withdrawal of the Offer, the Purchaser does not intend to pay for any BACs
accepted for payment pursuant to the Offer until the final proration results are
known.
Upon the terms and subject to the conditions of the Offer (including, if
the Offer is extended or amended, the terms and conditions of any such extension
or amendment), the Purchaser will purchase, by accepting for payment, and will
pay for, all BACs validly tendered and not withdrawn in accordance with Section
4 on or prior to the Expiration Date as promptly as practicable following the
Expiration Date. In addition, subject to applicable rules of the Commission, the
Purchaser expressly reserves the right to delay acceptance for payment of, or
payment for, BACs pending receipt of any regulatory or governmental approvals
specified in Section 15 ("Certain Legal Matters") or pending receipt of any
additional documentation required by the Letter of Transmittal. In all cases,
payment for BACs accepted for payment pursuant to the Offer will be made only
after timely receipt by the Information Agent/Depositary of (a) the Letter of
Transmittal properly completed and duly executed, with required medallion
signature guarantees, and (b) any other documents required by the Letter of
Transmittal.
For purposes of the Offer, the Purchaser shall be deemed to have accepted
for payment tendered BACs when, as and if the Purchaser gives oral or written
notice to the Information Agent/Depositary of the Purchaser's acceptance for
payment of such BACs pursuant to the Offer. No tender of BACs will be deemed to
have been validly made until all defects and irregularities with respect to such
tender have been cured or waived. Upon the terms and subject to the conditions
of the Offer, payment for BACs tendered and accepted for payment pursuant to the
Offer will in all cases be made by deposit of the Purchase Price with the
Information Agent/Depositary, which will act as agent for the tendering BACs
holders for the purpose of receiving payment from the Purchaser and transmitting
payment to tendering BACs holders.
The Purchase Price will be automatically reduced by $10 per BAC for each
month (or part of a month) between May 31, 1997 and the date of transfer for
BACs transferred after May 31, 1997. Under no circumstances will the Purchaser
pay interest on the Purchase Price for BACs.
If any tendered BACs are not purchased pursuant to the Offer for any
reason, the Letter of Transmittal with respect to such BACs will be destroyed by
the Information Agent/Depositary. If, for any reason whatsoever, acceptance for
payment of or payment for any BACs tendered pursuant to the Offer is delayed or
the Purchaser is unable to accept for payment, purchase or pay for BACs tendered
pursuant to the Offer, then, without prejudice to the Purchaser's rights under
Section 14 ("Conditions of the Offer"), the Information Agent/Depositary may,
nevertheless, on behalf of the Purchaser and subject to Rule 14e-1(c) under the
Exchange Act, retain tendered BACs, and such BACs may not be withdrawn except to
the extent that the tendering BACs holder is entitled to withdrawal rights as
described in Section 4 ("Withdrawal Rights").
5
<PAGE>
3. Procedures for Tendering BACs.
Valid Tender. For BACs to be validly tendered pursuant to the Offer, a
Letter of Transmittal, properly completed and duly executed, together with any
other documents required by the Letter of Transmittal, must be received by the
Information Agent/Depositary at its address on the back cover page of the Offer
to Purchase on or prior to the Expiration Date. In order to comply with certain
restrictions set forth in the Partnership Agreement, tenders of less than all
BACs owned by a BACs holder that would result in a BACs holder holding less than
5 BACs will not be accepted. See Instruction 1 to the Letter of Transmittal.
In order for a tendering BACs holder to participate in the Offer, BACs must
be validly tendered and not withdrawn on or prior to the Expiration Date, which
is 12:00 midnight, New York City time, on May 8, 1997, unless extended.
The method of delivery of the Letter of Transmittal and all other required
documents is at the option and risk of the tendering BACs holder and delivery
will be deemed made only when actually received by the Information
Agent/Depositary. If delivery is by mail, registered mail with return receipt
requested is recommended. In all cases, sufficient time should be allowed to
ensure timely delivery. See Instruction 2 to the Letter of Transmittal.
Signature Guarantees. The signature(s) on the Letter of Transmittal must be
medallion guaranteed by a commercial bank, savings bank, credit union, savings
and loan association or trust company having an office, branch or agency in the
United States, a brokerage firm that is a member firm of a registered national
securities exchange or a member of the National Association of Securities
Dealers, Inc. (the "NASD") as provided in the Letter of Transmittal. See
Instruction 2 of the Letter of Transmittal.
Backup Federal Income Tax Withholding. To prevent the possible application
of backup federal income tax withholding with respect to payment of the Purchase
Price pursuant to the offer, a tendering BACs holder must provide the Purchaser
with such BACs holder's correct taxpayer identification number or social
security number by completing the Substitute Form W-9 included in the Letter of
Transmittal. See Instruction 3 to the Letter of Transmittal.
FIRPTA Withholding. To prevent the withholding of federal income tax in an
amount equal to 10% of the sum of the Purchase Price plus the amount of
Partnership liabilities allocable to each BAC purchased, each BACs holder must
complete the FIRPTA Affidavit included in the Letter of Transmittal certifying
such BACs holder's taxpayer identification number and address and that the BACs
holder is not a foreign person. See Instruction 3 to the Letter of Transmittal.
Appointment as Proxy; Power of Attorney. By executing and delivering the
Letter of Transmittal, a tendering BACs holder irrevocably appoints the
Purchaser and the designees of the Purchaser and each of them as such BACs
holder's proxies, in the manner set forth in the Letter of Transmittal, each
with full power of substitution, to the full extent of such BACs holder's rights
with respect to the BACs tendered by such BACs holder and accepted for payment
by the Purchaser (and with respect to any and all other BACs or other securities
issued or issuable in respect of such BACs on or after the date hereof). All
such proxies shall be considered irrevocable and coupled with an interest in the
tendered BACs. Such appointment will be effective when, and only to the extent
that, the Purchaser accepts such BACs for payment. Upon such acceptance for
payment, all prior proxies given by such BACs holder with respect to such BACs
(and such other BACs and securities) will be revoked without further action, and
no subsequent proxies may be given nor any subsequent written consents executed
(and, if given or executed, will not be deemed effective). The Purchaser and its
designees will, with respect to the BACs (and such other BACs and securities)
for which such appointment is effective, be empowered to exercise all voting and
other rights of such BACs holder as it in its sole discretion may deem proper
pursuant to the Partnership Agreement or otherwise. The Purchaser may assign
such proxy and/or power of attorney to any person with or without assigning the
related BACs with respect to which such proxy and/or power of attorney was
granted. The Purchaser reserves the right to require that, in order for BACs to
be deemed validly tendered, immediately upon the Purchaser's payment for such
BACs, the Purchaser must be able to exercise full voting rights with respect to
such BACs and other securities.
In addition, pursuant to such appointment as attorneys-in-fact, the
Purchaser and its designees each will have the power, among other things, (i) to
seek to transfer ownership of such BACs on the books and records of the
Partnership maintained by the Assignor Limited Partner (and execute and deliver
any accompanying evidences of
6
<PAGE>
transfer and authenticity any of them may deem necessary or appropriate in
connection therewith, including, without limitation, any documents or
instruments required to be executed under the Partnership Agreement or a
"Transferor's (Seller's) Application for Transfer" created by the NASD, if
required), (ii) upon receipt by the Information Agent/ Depositary (as the
tendering BACs holder's agent) of the Purchase Price, to be allocated all Tax
Credits and tax losses and to receive any and all distributions made by the
Partnership after the Expiration Date, and to receive all benefits and otherwise
exercise all rights of beneficial ownership of such BACs in accordance with the
terms of the Offer, (iii) to execute and deliver to the Partnership, the General
Partners and/or the Assignor Limited Partner (as the case may be) a change of
address form instructing the Partnership to send any and all future
distributions to which the Purchaser is entitled pursuant to the terms of the
Offer in respect of tendered BACs to the address specified in such form, and
(iv) to endorse any check payable to or upon the order of such BACs holder
representing a distribution, if any, to which the Purchaser is entitled pursuant
to the terms of the Offer, in each case on behalf of the tendering BACs holder.
Assignment of Entire Interest in the Partnership. By executing and
delivering the Letter of Transmittal, a tendering BACs holder irrevocably
assigns to the Purchaser and its assigns all of the, direct and indirect, right,
title and interest of such BACs holder in the Partnership with respect to the
BACs tendered and purchased pursuant to the Offer, including, without
limitation, such BACs holder's right, title and interest in and to any and all
Tax Credits and tax losses and any and all distributions made by the Partnership
after the Expiration Date in respect of the BACs tendered by such BACs 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 Expiration
Date. The Purchaser reserves the right to transfer or assign, in whole or from
time to time in part, to any third party, the right to purchase BACs tendered
pursuant to the Offer, together with its rights under the Letter of Transmittal,
but any such transfer or assignment will not relieve the assigning party of its
obligations under the Offer or prejudice the rights of tendering BACs holders to
receive payment for BACs validly tendered and accepted for payment pursuant to
the Offer.
Determination of Validity. All questions as to the form of documents and
validity, eligibility (including time of receipt) and acceptance for payment of
any tender of BACs will be determined by the Purchaser, in its sole discretion,
whose determination shall be final and binding on all parties. The Purchaser
reserves the absolute right to reject any or all tenders determined by it not to
be in proper form, or the acceptance of or payment for which may, in the opinion
of the Purchaser's counsel, be unlawful. The Purchaser also reserves the
absolute right to waive any of the conditions of the Offer or any defect or
irregularity in any tender of BACs of any particular BACs holder whether or not
similar defects or irregularities are waived in the case of other BACs holders.
Assignee Status. Assignees must provide documentation to the Information
Agent/Depositary which demonstrates, to the satisfaction of the Purchaser, such
person's status as an assignee of a BAC.
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 BACs will be deemed to have been validly made until
all defects and irregularities with respect to such tender have been cured or
waived. None of the Purchaser, any of its affiliates or assigns, if any, the
Information Agent/Depositary or any other person will be under any duty to give
any notification of any defects or irregularities in tenders or incur any
liability for failure to give any such notification.
The Purchaser's acceptance for payment of BACs tendered pursuant to the
procedures described above will constitute a binding agreement between the
tendering BACs holder and the Purchaser upon the terms and subject to the
conditions of the Offer.
4. Withdrawal Rights.
Tenders of BACs made pursuant to the Offer are irrevocable, except that
BACs tendered pursuant to the Offer may be withdrawn at any time prior to the
Expiration Date and, unless theretofore accepted for payment as provided in this
Offer to Purchase, may also be withdrawn at any time after June 9, 1997.
For a withdrawal to be effective, a written or facsimile transmission
notice of withdrawal must be timely received by the Information Agent/Depositary
at the address set forth on the back cover of this Offer to Purchase. Any such
notice of withdrawal must specify the name(s) of the person(s) who tendered the
BACs to be withdrawn, the number of BACs to be withdrawn and the name(s) of the
registered holder(s) of the BACs, if different from that of the person(s) who
tendered such BACs. Such notice of withdrawal must also be signed by the same
person(s)
7
<PAGE>
who signed the Letter of Transmittal in the same manner as the Letter of
Transmittal was signed (including medallion signature guarantees). If the BACs
are held in the name of two or more persons, all such persons must sign the
notice of withdrawal. Any BACs properly withdrawn will be deemed not validly
tendered for purposes of the Offer, but may be re-tendered at any subsequent
time prior to the Expiration Date by following the procedures described in
Section 3 ("Procedures for Tendering BACs").
If, for any reason whatsoever, acceptance for payment of any BACs tendered
pursuant to the Offer is delayed, or the Purchaser is unable to accept for
payment or pay for BACs tendered pursuant to the Offer, then, without prejudice
to the Purchaser's rights set forth herein, the Information Agent/Depositary
may, nevertheless, on behalf of the Purchaser, retain tendered BACs and such
BACs may not be withdrawn except to the extent that the tendering BACs holder is
entitled to and duly exercises withdrawal rights as described herein. The
reservation by the Purchaser of the right to delay the acceptance or purchase of
or payment for BACs is subject to the provisions of Rule 14e-1(c) under the
Exchange Act, which requires the Purchaser to pay the consideration offered or
return BACs tendered by or on behalf of BACs holders promptly after the
termination or withdrawal of the Offer.
All questions as to the form and validity (including time of receipt) of
notices of withdrawal will be determined by the Purchaser, in its sole
discretion, whose determination shall be final and binding. None of the
Purchaser, any of its affiliates or assigns, if any, the Information
Agent/Depositary or any other person will be under any duty to give any
notification of any defects or irregularities in any notice of withdrawal or
incur any liability for failure to give any such notification.
5. Extension of Tender Period; Termination; Amendment.
The Purchaser reserves the right, in its sole discretion and regardless of
whether any of the conditions set forth in Section 14 ("Conditions of the
Offer") shall have been satisfied, 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, any BACs, (ii) to terminate the
Offer and not accept for payment any BACs not already accepted for payment or
paid for, and (iii) to amend the Offer in any respect by giving oral or written
notice of such amendment to the Information Agent/Depositary.
If the Purchaser increases or decreases either the number of the BACs being
sought or the consideration to be paid for any BACs pursuant to the Offer and
the Offer is scheduled to expire at any time before the expiration of a period
of 10 business days from, and including, the date that notice of such increase
or decrease is first published, sent or given in the manner specified below, the
Offer will be extended until, at a minimum, the expiration of such period of 10
business days. If the Purchaser makes a material change in the terms of the
Offer (other than a change in price or percentage of securities sought) or in
the information concerning the Offer, or waive a material condition of the
Offer, the Purchaser will extend the Offer, if required by applicable law, for a
period sufficient to allow BACs holders to consider the amended terms of the
Offer.
The Purchaser also reserves the right, in its sole discretion, if any of
the conditions specified under Section 14 ("Conditions of the Offer") shall not
have been satisfied and so long as BACs have not theretofore been accepted for
payment, to delay (except as otherwise required by applicable law) acceptance
for payment of or payment for BACs or to terminate the Offer and not accept for
payment or pay for BACs.
If the Purchaser extends the period of time during which the Offer is open,
delays acceptance for payment of or payment for BACs or is unable to accept for
payment or pay for BACs pursuant to the Offer for any reason, then, without
prejudice to the Purchaser's rights under the Offer, the Information
Agent/Depositary may, on behalf of the Purchaser, retain all BACs tendered, and
such BACs may not be withdrawn except as otherwise provided under Section 4
("Withdrawal Rights"). The reservation by the Purchaser of the right to delay
acceptance for payment of or payment for BACs is subject to applicable law,
which requires that the Purchaser pay the consideration offered or return the
BACs deposited by or on behalf of BACs holders promptly after the termination or
withdrawal of the Offer.
Any extension, termination or amendment of the Offer will be followed as
promptly as practicable by a public announcement thereof. Without limiting the
manner in which the Purchaser may choose to make any public announcement, the
Purchaser will have no obligation (except as otherwise required by applicable
law) to publish, advertise or otherwise communicate any such public announcement
other than by making a release to the Dow Jones News Service. In the case of an
extension of the Offer, the Purchaser will make a public announcement of such
8
<PAGE>
extension no later than 9:00 a.m., New York City time, on the next business day
after the previously scheduled Expiration Date.
6. Certain Federal Income Tax Consequences.
The following summary is a general discussion of certain federal income tax
consequences of a sale of BACs pursuant to the Offer assuming that the
Partnership is a partnership for federal income tax purposes and that it is not
a "publicly traded partnership" as defined in Section 7704 of the Internal
Revenue Code of 1986, as amended (the "Code"). This summary is based on the
Code, applicable Treasury Regulations thereunder, administrative rulings,
practice and procedures and judicial authority as of the date of the Offer. All
of the foregoing are subject to change, and any such change could affect the
continuing accuracy of this summary. This summary does not discuss all aspects
of federal income taxation that may be relevant to a particular BACs holder in
light of such BACs holder's specific circumstances or to certain types of BACs
holders subject to special treatment under the federal income tax laws (for
example, foreign persons (if any), dealers in securities, banks, insurance
companies and tax-exempt entities), nor does it discuss any aspect of state,
local, foreign or other tax laws. Sales of BACs pursuant to the Offer will be
taxable transactions for federal income tax purposes, and may also be taxable
transactions under applicable state, local, foreign and other tax laws. EACH
BACs HOLDER SHOULD CONSULT HIS OR ITS TAX ADVISOR AS TO THE PARTICULAR TAX
CONSEQUENCES TO SUCH BACs HOLDER OF SELLING BACs PURSUANT TO THE OFFER,
INCLUDING, WITHOUT LIMITATION, FEDERAL, STATE AND LOCAL TAX CONSEQUENCES.
Consequences to Tendering BACs holder. A BACs holder will recognize gain or
loss on a sale of BACs pursuant to the Offer equal to the difference between (i)
the BACs holder's "amount realized" on the sale and (ii) the BACs holder's
adjusted tax basis in the BACs sold. The "amount realized" with respect to a BAC
sold pursuant to the Offer will be a sum equal to the amount of cash received by
the BACs holder for the BAC plus the amount of Partnership liabilities allocable
to the BAC (as determined under Code Section 752). The amount of a BACs holder's
adjusted tax basis in BACs sold pursuant to the Offer will vary depending upon
the BACs holder's particular circumstances, and will be affected by allocations
of Partnership income, gain or loss, and any historic tax credits to a BACs
holder with respect to such BACs. In this regard, tendering BACs holders will be
allocated a pro rata share of the Partnership's taxable income or loss with
respect to BACs sold pursuant to the Offer through the effective date of the
sale.
A BACs holder who acquired BACs pursuant to the original offering of BACs
by the Partnership is expected to recognize a taxable gain on a sale of BACs
pursuant to the Offer. Even if the BACs holder is subject to the passive
activity loss limitation (discussed below), any unused tax losses from prior
years will generally be available provided the BACs holder sells all of his or
its BACs.
In general, the character (as capital or ordinary) of BACs holder's gain or
loss on a sale of a BAC pursuant to the Offer will be determined by allocating
the BACs holder's amount realized on the sale and his adjusted tax basis in the
BACs sold between "Section 751 items," which are "substantially appreciated
inventory" and "unrealized receivables" (including depreciation recapture) as
defined in Code Section 751, and non-Section 751 items. The difference between
the portion of the BACs holder's amount realized that is allocable to Section
751 items and the portion of the BACs holder's adjusted tax basis in the BACs
sold that is so allocable will be treated as ordinary income or loss, and the
difference between the BACs holder's remaining amount realized and adjusted tax
basis will be treated as capital gain or loss assuming the BACs were held by the
BACs holder as a capital asset. The Purchaser believes that substantially all of
any taxable gain realized on a sale of BACs pursuant to the Offer will be
treated as a capital gain under these rules, although it is possible, because a
BACs holder's adjusted tax basis in the BACs sold will be allocated to Section
751 items based on the Partnership's tax basis in these items, that a BACs
holder may recognize ordinary income with respect to the portion of the BACs
holder's amount realized on the sale of a BAC that is attributable to Section
751 items while recognizing a capital loss with respect to the balance of the
selling price.
A BACs holder's capital gain (if any) or loss on a sale of BACs pursuant to
the Offer will be treated as long-term capital gain or loss if the BACs holder's
holding period for the BACs exceeds one year. Under current law (which is
subject to change), long-term capital gains of individuals and other
non-corporate taxpayers are taxed at a maximum marginal federal income tax rate
of 28%, whereas the maximum marginal federal income tax rate for other income of
such persons is 39.6%. Capital losses are deductible only to the extent of
capital gains, except that non-
9
<PAGE>
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); in addition, corporations, but not non-corporate
taxpayers, are allowed to carry back excess capital losses to the three
preceding taxable years.
Under Code Section 469, a non-corporate taxpayer or personal service
corporation can deduct passive activity losses in any year only to the extent of
such person's passive activity income for such year, and closely held
corporations may not offset such losses against so-called "portfolio" income. If
a BACs holder is subject to these restrictions and has unused tax losses from
prior years, such tax losses will generally become available, provided the BACs
holder sells all his BACs. If a BACs holder is unable to sell all his BACs, the
deductibility of such losses would continue to be subject to the passive
activity loss limitation until the BACs holder sells his remaining BACs. See
Section 7 ("Effects of the Offer").
In certain cases, the transfer of an interest in a Partnership from which
Tax Credits were allocated can result in a recapture of the Tax Credits to the
seller (i.e., the seller would be required to pay an additional amount of tax
equal to the credit "recaptured"). A disposition by a BACs holder of his entire
interest in the Partnership within five years from the date property for which
the Historic Tax Credit was claimed was placed in service will trigger a
recapture of a portion of the Historic Tax Credits previously claimed by the
BACs holder. The Purchaser anticipates that no Historic Tax Credits will be
recaptured because all of the properties that generated Historic Tax Credits in
which the Partnership has an interest were placed in service more than five
years ago. The transfer of an interest in an entity that has generated Housing
Tax Credits generally results in a recapture of a portion of the Housing Tax
Credits. However, an exception to this rule is provided for partnerships with 35
or more partners, such as the Partnership. In order for this rule to be
applicable, within a 12-month period at least 50% (in value) of the ownership of
the Partnership must remain unchanged. The Purchaser anticipates that, as a
result of this rule, the sale of BACs will not cause a recapture of Housing Tax
Credits.
A BACs holder (other than corporations and certain foreign individuals) who
tenders BACs may be subject to 31% backup withholding unless the BACs holder
provides a taxpayer identification number ("TIN") and certifies that the TIN is
correct or properly certifies that he is awaiting a TIN. A BACs holder may avoid
backup withholding by properly completing and signing the Substitute Form W-9
included as part of the Letter of Transmittal. If a BACs holder who is subject
to backup withholding does not properly complete and sign the Substitute Form
W-9, the Purchaser will withhold 31% from payments to such BACs holder. See
Instruction 3 to the Letter of Transmittal.
Gain realized by a foreign BACs holder on a sale of a BAC pursuant to the
Offer will be subject to federal income tax. Under Section 1445 of the Code, the
transferee of a partnership interest held by a foreign person is generally
required to deduct and withhold a tax equal to 10% of the amount realized on the
disposition. The Purchaser will withhold 10% of the amount realized by a
tendering BACs holder from the Purchase Price payable to such BACs holder unless
the BACs holder properly completes and signs the FIRPTA Affidavit included as
part of the Letter of Transmittal certifying the BACs holder's TIN, that such
BACs holder is not a foreign person and the BACs holder's address. Amounts
withheld would be creditable against a foreign BACs 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. income tax return.
Consequences to a Non-Tendering BACs holder. The Purchaser does not
anticipate that a BACs holder who does not tender his or her BACs will realize
any material tax consequences as a result of the election not to tender. The
Purchaser has retained two independent law firms which will deliver opinion
letters that consummation of the Offer will not result in the Partnership being
treated as a publicly-traded partnership for federal income tax purposes. There
can be no assurance, however, that the Internal Revenue Service (the "IRS") will
agree with the conclusions reached in such opinions. There is no precedent
governing whether the Offer will cause the Partnership to be treated as a
publicly-traded partnership for federal income tax purposes. If the IRS
successfully asserted that the Partnership should be treated as a
publicly-traded partnership, investors who are subject to the passive activity
loss rules would not be able to use tax losses derived from the Partnership to
offset income from sources other than the Partnership prior to the investor's
disposition of his entire interest in the Partnership.
If as a result of the Offer there is a sale or exchange of 50% or more in
Partnership capital and profits within a 12-month period, a termination of the
Partnership for federal income tax purposes would occur, and the taxable
10
<PAGE>
year of the Partnership would close. In the case of such a sale or exchange, the
Properties (subject to related debt) of the Partnership would be treated as
distributed to the partners, and following the deemed distribution, contribution
of the same properties would be deemed to be made to a new partnership or to an
association taxable as a corporation. The consequences of a termination of the
Partnership could include changes in the methods of depreciation available to
the Partnership for tax purposes, changes in the tax basis of the Partnership's
assets, possible recognition of taxable gain resulting from any deemed cash
distribution in excess of the non-tendering Limited Partner's tax basis in his
or her BACs, and a recapture of Housing Tax Credits. In addition, a termination
of the Partnership could cause the Partnership or their assets to become subject
to unfavorable statutory or regulatory changes enacted or issued prior to the
termination but previously not applicable to the Partnership or their assets
because of protective "transitional" rules. The Purchaser has reserved the right
not to purchase BACs to the extent such purchase would cause a termination of
the Partnership for federal income tax purposes.
7. Effects of the Offer.
Certain Restrictions on Transfer of Interests. The Partnership Agreement
restricts transfers of BACs if, among other things, such transfer would cause a
termination of the Partnership for federal income tax purposes (which
termination would occur when BACs that represent 50% or more of the total
Partnership capital and profits are transferred within a twelve-month period).
Consequently, sales of BACs in the secondary market and in private transactions
during the twelve-month period following completion of the Offer may be
restricted, and requests for transfers of BACs during such twelve-month period
may not be recognized. The Purchaser does not intend to purchase BACs to the
extent such purchase would violate the transfer restrictions set forth in the
Partnership Agreement. See Section 6 ("Federal Income Tax
Considerations--Consequences to a Non-Tendering BACs holder"). Based on
information provided by the Partnership, for the period from April 1, 1996 to
April 1, 1997, approximately 2,065 BACs (representing approximately 1.5% of the
outstanding BACs) were transferred. Therefore, the Purchaser does not believe
the number of BACs sought in the Offer will violate the Transfer Restrictions.
Effect on Trading Market; Registration Under Section 12(g) of the Exchange
Act. If a substantial number of BACs are purchased pursuant to the Offer, the
result will be a reduction in the number of BACs holders. In the case of certain
kinds of equity securities like the BACs, a reduction in the number of
securityholders might be expected to result in a reduction in the liquidity and
volume of activity in the trading market for the security. The Form 10-K states:
"Neither the BACs nor the Limited Partnership Interests are traded on any
established market. The Partnership does not intend to include the BACs for
quotation on NASDAQ or for listing on any national or regional stock exchange or
any other established securities market." Therefore, the Purchaser does not
believe a reduction in the number of BACs holders will materially further
restrict the BACs holders' ability to find purchasers for their BACs through
secondary market transactions.
Partnership Profiles, Inc., which publishes the Partnership Spectrum,
tracks recent trades in certain limited partnership interests. The most recent
issue of the Partnership Spectrum (January/February 1997) indicates that 785
BACs traded in the period from December 1, 1996 through January 31, 1997 at per
BAC prices between $400 and $615.05, with a weighted average of $582.82 per BAC.
The BACs currently are registered under Section 12(g) of the Exchange Act,
which means, among other things, that the Partnership is required to file
periodic reports with the Commission and to comply with the Commission's proxy
rules. The Purchaser does not expect or intend that consummation of the Offer
will cause the BACs to cease to be registered under Section 12(g) of the
Exchange Act. If the BACs were to be held by fewer than 300 persons, the
Partnership could apply to de-register the BACs under the Exchange Act. Because
the BACs are widely held, however, the Purchaser expects that even if it
purchases the maximum number of BACs in the Offer, the BACs will continue to be
held of record by substantially more than 300 persons.
Influence Over All BACs holder Voting Decisions By Purchaser. Pursuant to
the Partnership Agreement, the Purchaser, through the Assignor Limited Partner,
will have the right to vote each BAC purchased by it pursuant to the Offer. If
the Purchaser is successful in acquiring a significant number of BACs pursuant
to the Offer, the Purchaser could, subject to the Standstill Agreement, be in a
position to significantly influence all Partnership decisions on which BACs
holders, through the Assignor Limited Partner, and Limited Partners,
collectively, may vote. If the maximum number of BACs sought by the Purchaser is
tendered and accepted for payment pursuant to the Offer, the Purchaser will own
approximately 12.6% of the outstanding BACs. After the Standstill Expiration
Date, the ownership of tendered BACs by the Purchaser could effectively (i)
prevent non-tendering BACs holders from
11
<PAGE>
taking actions they desire but that the Purchaser opposes and (ii) enable the
Purchaser to take actions desired by it but opposed by non-tendering BACs
holders. Generally, under the Partnership Agreement, holders of more than 50% of
the Limited Partnership Interests and BACs (which represent Limited Partnership
Interests) are entitled, directly or through the Assignor Limited Partner, as
the case may be, to take action with respect to a variety of matters, including:
approving the removal of any General Partner and proposing and approving a
replacement therefor; approving the dissolution of the Partnership; and most
types of amendments to the Partnership Agreement. No such votes have, however,
ever been taken and the General Partner affiliated with the Purchaser has
indicated that none are presently scheduled or expected. Although the Purchaser
does not have any current plans or intentions with regard to any of these
matters, it will, following the Standstill Expiration Date, vote the BACs
acquired pursuant to the Offer in its interest, which may, or may not, be in the
best interest of non-tendering BACs holders. Until the Standstill Expiration
Date, the Purchaser has agreed to vote its BACs in the same manner as a majority
of all voting BACs holders; provided, however, the Purchaser shall be entitled
to vote its BACs as it determines with regard to any proposal (i) to remove RCP
as a general partner of the Partnership or (ii) concerning the reduction of any
fees, profits, distributions or allocations for the benefit of RCP or its
affiliates.
It is likely that the Purchaser, which is affiliated with RCP (a General
Partner), will vote all of its BACs to continue RCP as a general partner of the
Partnership and in a manner that is otherwise consistent with the decisions and
recommendations of RCP, including as they relate to matters involving
transactions between the Partnership and affiliates of the Purchaser. Therefore,
the Purchaser's acquisition of BACs may have the effect of making any future
change of the Partnership's policies and/or current management more difficult.
8. Purpose of the Offer; Future Plans.
Purpose of the Offer. The purpose of the Offer is to enable the Purchaser
to acquire a significant interest in the Partnership for investment purposes
based on its expectation that the Partnership will continue to generate Tax
Credits and tax losses attributable to the BACs. The Purchaser intends to sell
membership interests in the Purchaser to third parties with a need for Tax
Credits and/or tax losses. The aggregate sales price of the Purchaser's
membership interests to third parties will be equal to the aggregate Purchase
Price for the tendered BACs plus the Purchaser's expenses in conducting and
consummating the Offer and financing the purchase of the tendered BACs. Neither
the Purchaser nor its current members will derive a profit from the sale of the
Purchaser's membership interests.
Another purpose of the Offer is to establish a standard against which
future tender offers for BACs can be measured. The Purchaser decided to commence
the Offer after Everest requested a list of BACs holders and representatives of
the Purchaser reviewed past tender offers by Everest or its affiliates. The
Purchaser concluded that an acceptable precedent for a tender offer for BACs, in
its opinion, needed to be given to BACs holders against which all subsequent
tender offers for BACs could be judged.
The Purchaser does not currently intend to make any effort to change
current management or the operation of the Partnership nor does it have any
current plans or intentions for any extraordinary transaction involving the
Partnership. However, the Purchaser's plans with respect to its investment in
the BACs could change at any time in the future. If such plans with respect to
the Partnership change in the future, the ability of the Purchaser to influence
actions on which BACs holders (through the Assignor Limited Partner) have a
right to vote will depend on the BACs holders' response to the Offer (i.e., the
number of BACs tendered). If the Purchaser acquires only a small number of BACs
pursuant to the Offer, it will not be in a position to influence matters over
which BACs holders have a right to vote. Conversely, if the maximum number of
BACs sought are tendered and accepted for payment pursuant to the Offer, the
Purchaser will own approximately 12.6% of the issued and outstanding BACs and,
as a result, will, subject to the Standstill Agreement, be in a position to
exert significant influence over matters on which BACs holders (through the
Assignor Limited Partner) have a right to vote. The purchase of the BACs will
allow the Purchaser to benefit from any of the following: (a) any and all Tax
Credits and tax losses attributable to such BACs; (b) any cash distributions
from Partnership operations in the ordinary course of business; (c)
distributions, if any, of net proceeds from the sale of any Properties after the
Partnership has satisfied its liabilities; and (d) any distributions of net
proceeds from the dissolution of the Partnership.
Future Plans. Following the completion of the Offer and subject to the
terms of the Standstill Agreement, the Purchaser and its affiliates may acquire
additional BACs. Any such acquisition may be made through private
12
<PAGE>
purchases, through one or more future tender offers or by any other means deemed
advisable, and may be at prices higher or lower than the price to be paid for
the BACs purchased pursuant to the Offer. Additionally, the Purchaser intends to
sell membership interests in the Purchaser to third parties with a need for Tax
Credits and/or tax losses. The aggregate sales price of the Purchaser's
membership interests to third parties will be equal to the aggregate Purchase
Price for the tendered BACs plus the Purchaser's expenses in conducting and
consummating the Offer and financing the purchase of the tendered BACs. Neither
the Purchaser nor its current members will derive a profit from the sale of the
Purchaser's membership interests. Affiliates of the Purchaser expect to arrange
the sale of membership interests of the Purchaser to third parties upon
conclusion of the Offer in order to earn fees for structuring this transaction
and arranging the sale. These fees will be, in part, dependent on the amount
third parties are willing to pay for membership interests in excess of the
Purchase Price per BAC and the amount of membership interests sold. There can be
no assurance, however, that any membership interests in the Purchaser will be
sold or at what price.
Pursuant to the Standstill Agreement (a copy of which has been filed as
Exhibit (c)(1) to the Purchaser's Tender Offer Statement on Schedule 14D-1 filed
with the Commission on April 10, 1997), the Purchaser agreed that, prior to the
Standstill Expiration Date, it will not and it will cause certain affiliates not
to (i) acquire, attempt to acquire or make a proposal to acquire, directly or
indirectly, more than 45% (including BACs acquired through all other means) of
the outstanding BACs, (ii) seek to propose to enter into, directly or
indirectly, any merger, consolidation, business combination, sale or acquisition
of assets, liquidation, dissolution or other similar transaction involving the
Partnership, (iii) make, or in any way participate, directly or indirectly, in
any "solicitation" of "proxies" or "consents" (as such terms are used in the
proxy rules of the Securities and Exchange Commission) to vote any voting
securities of the Partnership, (iv) form, join or otherwise participate in a
"group" (within the meaning of Section 13(d)(3) of the Exchange Act) with
respect to any voting securities of the Partnership, except that those
affiliates bound by the Standstill Agreement will not be deemed to have violated
it and formed a "group" solely by acting in accordance with the Standstill
Agreement, (v) disclose in writing to any third party any intention, plan or
arrangement inconsistent with the terms of the Standstill Agreement, or (vi)
loan money to, advise, assist or encourage any person in connection with any
action inconsistent with the terms of the Standstill Agreement. In addition, the
Purchaser has agreed that until the Standstill Expiration Date it will not sell
any BACs acquired by it unless the buyer of such BACs agrees to be bound by the
Standstill Agreement; provided, however, the Purchaser may make transfers in the
secondary market to any purchaser which represents that following such sale it
will not own three (3%) percent or more of the BACs outstanding. By the terms of
the Standstill Agreement, the Purchaser has also agreed to vote its BACs in the
same manner as a majority of all voting BACs holders; provided, however, the
Purchaser is entitled to vote its BACs as it determines with regard to any
proposal (i) to remove RCP as a general partner of the Partnership or (ii)
concerning the reduction of any fees, profits, distributions or allocations for
the benefit of RCP or its affiliates.
9. Certain Information Concerning the Partnership.
Information included herein concerning the Partnership is derived from the
Partnership and its publicly-filed reports. Additional financial and other
information concerning the Partnership is contained in the Partnership's Annual
Reports on Form 10-K, Quarterly Reports on Form 10-Q and other filings with the
Commission. Such reports and other documents may be examined and copies may be
obtained from the public reference facilities maintained at the principal
offices of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549, at
the regional offices of the Commission located at 7 World Trade Center, Suite
1300, New York, New York 10048 and 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661, and at the Commission's World Wide Web site at
http://www.sec.gov. 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 Purchaser disclaims any
responsibility for the information included in such reports and extracted in
this Offer to Purchase.
The Partnership's Assets and Business
The Partnership is a limited partnership formed in 1988, under the laws of
the State of Delaware. Its principal executive offices are located at 625
Madison Avenue, New York, New York 10022. Its telephone number is (212)
421-5333. The Partnership's fiscal year ends March 31st.
The Partnership was formed to invest, as a limited partner, in other
limited partnerships (referred to herein as "Local Partnerships" or "Subsidiary
Partnerships") each of which owns one or more leveraged low-income mul-
13
<PAGE>
tifamily residential complexes ("Apartment Complexes") that are eligible for the
low-income housing tax credit ("Housing Tax Credit") enacted in the Tax Reform
Act of 1986, some of which are eligible for the historic rehabilitation tax
credit ("Historic Rehabilitation Tax Credit"). Some of the Apartment Complexes
benefit from one or more other forms of federal or state housing assistance. The
Partnership's investment in each Local Partnership represents from 27% to 98% of
the partnership interests in the Local Partnership. According to the Form 10-Q,
as of December 31, 1996, all of the net proceeds from the original offering of
BACs was invested in 62 Local Partnerships. The Partnership does not anticipate
making any additional investments.
Liberty Associates is the special limited partner in all 62 Local
Partnerships and is an affiliate of each General Partner of the Partnership.
Liberty Associates has certain rights and obligations in its role as special
limited partner which permit Liberty Associates to execute control over the
management and policies of the Local Partnerships.
According to the Form 10-K, the stated investment objectives of the
Partnership are to:
1. Entitle qualified BACs holders to substantial Housing Tax Credits over
the Credit Period (as defined below) with respect to each Apartment Complex;
2. Preserve and protect the Partnership's capital;
3. Participate in any capital appreciation in value of the Apartment
Complexes and provide distributions of sale or refinancing proceeds upon the
disposition of the Apartment Complexes;
4. Provide cash distributions when available from the operations of the
Apartment Complexes, current taxes on which are expected to be substantially
deferred; and
5. Allocate passive losses to individual BACs holders to offset passive
income that they may realize from rental real estate investments and other
passive activities, and allocate passive losses to corporate BACs holders to
offset business income.
According to the Form 10-K, one of the Partnership's objectives is to
entitle qualified BACs holders to low-income Housing Tax Credits over the
period of the Partnership's entitlement to claim such Tax Credits (for each
Apartment Complex, generally ten years from the date of investment or, if later,
the date the Apartment Complex is placed in service; referred to herein as the
"Credit Period"). Each of the Local Partnerships in which the Partnership has
acquired an interest has been allocated by the relevant state credit agency the
authority to recognize Tax Credits during the Credit Period provided that the
Local Partnership satisfies the rent restriction, minimum set-aside and other
requirements for recognition of the Tax Credits at all times during the 15-year
period commencing at the beginning of the Credit Period. Once a Local
Partnership has become eligible to receive Tax Credits, it may lose such
eligibility and suffer an event of "recapture" if (i) the Partnership ceases to
meet qualification requirements, (ii) there is a decrease in the qualified basis
of the projects, or (iii) there is a reduction in the taxpayer's interest in the
project at any time during the 15-year period that began with the first tax year
of the credit period. According to the Form 10-K, none of the Local Partnerships
in which the Partnership has acquired an interest has suffered an event of
recapture.
According to the Form 10-K, the Partnership has met (a) its primary
objective of generating low-income housing tax credits; approximately
$19,673,000, $19,765,000, and $19,766,000, during the fiscal years 1995, 1994,
and 1993, respectively, and (b) its objective of allocating passive losses to
individual BACs holders to offset passive income that they may realize from
rental real estate investments and other passive activities, and allocating
passive losses to corporate BACs holders to offset business income.
According to the Form 10-K, as of March 31, 1996, there can be no assurance
that the Partnership will achieve its investment objectives. The Partnership has
not met its investment objective of providing cash distributions from the
operations of the Apartment Complexes. Cash distributions received from the
Local Partnerships have been relatively immaterial. Management of the
Partnership expects that the distributions received from the Local Partnerships
will increase, although not to a level sufficient to permit cash distributions
to BACs holders. The Partnership does not anticipate providing cash
distributions to BACs holders in circumstances other than refinancings or sales.
The Partnership holds a 98% limited partnership interest in 61 Local
Partnerships and a 26.46% limited partnership interest in 1 Local Partnership
(the other 71.54% limited partnership interest is held by an affiliate of the
Partnership with the same management); together these 62 Local Partnerships own
66 Apartment Complexes.
14
<PAGE>
Attached to this Offer to Purchase as Schedule II is a schedule of these Local
Partnerships (the "Local Partnership Schedule"), including certain information
concerning their respective Apartment Complexes. Attached to this Offer to
Purchase as Schedule III is additional information concerning these Local
Partnerships and their Apartment Complexes, including information relating to
mortgage encumbrances and accumulated depreciation.
According to the Form 10-K, the General Partners have generally required in
connection with investments in Local Partnerships that the general partners of
the Local Partnerships (the "Local General Partners") undertake an obligation to
fund operating deficits (up to a stated maximum amount) of the Local Partnership
during a limited period of time following rent stabilization and the
Partnership's investment ("Guarantee Period"). In each case the operating
deficits will be funded by Loans which will not bear interest and will be repaid
only out of 50% of available cash flow or out of available net sale or
refinancing proceeds. The gross amount of such deficit guarantees aggregate
approximately $18,700,000, of which approximately $15,600,000 expired as of
March 31, 1996. In cases where the General Partners deem it appropriate, the
obligations of a Local General Partner under these guarantees are secured by
letters of credit and/or cash escrow deposits.
The Partnership has also acquired Local Partnership Interests in which some
of the Local Partnerships owning historic complexes qualify for the Historic
Rehabilitation Tax Credit. The amount of the Historic Rehabilitation Tax Credit
is generally 20% of qualified rehabilitation expenditures and is available in
its entirety in the year the rehabilitated building is placed in service or,
under certain circumstances, in the year in which the rehabilitation expenditure
is made.
According to the Form 10-K, all leases at the Properties are generally for
periods not exceeding one to two years and no tenant occupies more than 10% of
the rentable square footage.
Rent from commercial tenants (to which average rental per square foot
applies) comprise less than 5% of the rental revenues of the Partnership. Rents
for the residential units are determined annually by HUD and reflect increases
in consumer price indexes in various geographic areas.
According to the Form 10-K, management of the Partnership continuously
reviews the physical state of the properties and budgets improvements when
required, which are generally funded from cash flow from operations or release
of replacement reserve escrows. No improvements are expected to require
additional financing.
According to the Form 10-K, management of the Partnership continuously
reviews the insurance coverage of the properties and believes such coverage is
adequate.
Real estate taxes are calculated using rates and assessed valuations
determined by the township or city in which the property is located. Such taxes
have approximated 1% of the aggregate cost of the Apartment Complexes (See
Schedule III to this Offer to Purchase).
15
<PAGE>
Selected Financial Data. Set forth below is a summary of certain financial
data for the Partnership which has been excerpted from the Form 10-K and the
Form 10-Q. 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.
Statements of Operations
For the Nine Months Ended December 31, 1996 and 1995
(unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
December 31,
-------------------------------------
1996 1995*
--------------- ----------------
<S> <C> <C>
Revenue:
Rental income .................................... $ 23,415,227 $ 22,731,306
Other ............................................. 1,588,487 1,347,495
------------ ------------
Total Revenue ................................. 25,003,714 24,078,801
------------ ------------
Expenses:
General and administrative ........................ 4,971,631 4,837,959
General and administrative--related parties ...... 2,002,260 1,964,321
Operating and other .............................. 2,775,326 2,543,208
Repairs and maintenance ........................... 3,111,625 2,899,184
Real estate taxes ................................. 1,492,376 1,388,877
Insurance ....................................... 1,140,516 1,149,154
Interest .......................................... 11,890,515 11,762,992
Depreciation and amortization ..................... 8,951,158 8,930,041
------------ ------------
Total Expenses ................................. 36,335,407 35,475,736
------------ ------------
Minority interest in loss of subsidiaries ......... 113,688 108,061
------------ ------------
Net loss .......................................... $(11,218,005) $(11,288,874)
============ ============
Net loss per BAC .................................... $(79.84) $(80.34)
======== ========
</TABLE>
*Reclassified for comparative purposes
16
<PAGE>
Summary Selected Financial Data
<TABLE>
<CAPTION>
Year Ended March 31
---------------------------------------------------------------------------------
OPERATIONS 1996 1995 1994 1993 1992
- ------------------------------------ --------------- --------------- --------------- --------------- ----------------
<S> <C> <C> <C> <C> <C>
Revenues ........................ $ 33,211,908 $ 32,437,587 $ 31,371,907 $ 30,001,314 $ 23,169,443
Operating Expenses ............... 49,134,034 47,897,186 47,729,423 46,246,686 37,360,653
------------ ------------ ------------ ------------ ------------
(Loss) income before minority
interest ........................ (15,922,126) (15,459,599) (16,357,516) (16,245,372) (14,191,210)
Minority interest in (loss) income
of subsidiary partnerships ...... 153,662 158,671 152,604 165,686 175,036
------------ ------------ ------------ ------------ ------------
Net (loss) income ............... $(15,768,464) $(15,300,928) $(16,204,912) $(16,079,686) $(14,016,174)
============ ============ ============ ============ ============
Net (loss) income per limited
partners ........................ $(15,610,779) $(15,147,919) $(16,042,863) $(15,918,890) $(13,876,012)
============ ============ ============ ============ ============
Net (loss) income per weighted
average BAC ..................... $ (112.23) $ (108.90) $ (115.33) $ (114.44) $ (99.75)
============ ============ ============ ============ ============
March 31
------------------------------------------------------------------------------
FINANCIAL POSITION 1996 1995 1994 1993 1992
- ----------------------------------- ------------ ------------ ------------ ------------ ------------
Total assets ..................... $302,121,868 $314,010,691 $324,600,042 $341,349,003 $362,692,599
============ ============ ============ ============ ============
Total liabilities .................. $257,205,366 $252,803,110 $247,840,864 $248,042,255 $249,908,505
============ ============ ============ ============ ============
Minority interest .................. $ 1,763,731 $ 2,286,346 $ 2,537,015 $ 2,879,673 $ 6,277,333
============ ============ ============ ============ ============
Total partners' capital ............ $ 43,152,771 $ 58,921,235 $ 74,222,163 $ 90,427,075 $106,506,761
============ ============ ============ ============ ============
</TABLE>
During the years ended March 31, 1992 through 1996, total assets decreased
primarily due to depreciation, partially offset by net additions to property and
equipment. During the years ended March 31, 1992 through 1994, total liabilities
decreased primarily due to payments of obligations. During the years ended March
31, 1995 through 1996, total liabilities increased primarily due to the accrual
of principal and interest payments at one of the Local Partnerships, partially
offset by payments of obligations at the remaining Local Partnerships. During
the years ended March 31, 1992 and 1993, certain minority interest limited
partners assumed building costs and debt of approximately $8,000,000 and
$2,000,000, respectively. In addition, certain Local Partnerships wrote down
property and equipment due to the withdrawal of the minority limited partners.
Such writedowns amounted to approximately $9,000,000 for the year ended March
31, 1992.
Cash Distribution
According to the Form 10-K, the Partnership has made no distributions to
the BACs holders as of March 31, 1996.
Liquidity and Capital Resources
During the fiscal years ended March 31, 1996, 1995, and 1994, the
Partnership's primary source of funds included (i) working capital reserves in
the original amount of 3.5% of gross equity raised and (ii) cash distributions
from the operations of the Local Partnerships.
According to the Form 10-Q, during the nine months ended December 31, 1996,
cash and cash equivalents of the Partnership and its 62 consolidated Local
Partnerships increased by approximately $242,000. This increase was primarily
attributable to cash flow from operations of $1,470,000 and a decrease in cash
held in escrow of $628,000 which exceeded mortgage principal payments of
$1,024,000; a decrease in capitalization of consolidated subsidiaries
attributable to minority interest of $214,000; capital improvements of $575,000;
and an increase in
17
<PAGE>
deferred costs of $44,000. Included in the adjustments to reconcile the net loss
to cash flow from operations is depreciation and amortization in the amount of
approximately $8,951,000 and an increase in due to debt guarantor in the amount
of $2,662,000 (See "Results of Operations of Certain Local
Partnerships"--"R.P.P. Limited Dividend Housing Association Limited
Partnership," below).
According to the Form 10-Q, the Partnership has working capital reserves of
approximately $3,514,000 and $4,203,000 at December 31, 1996 and March 31, 1996,
respectively.
According to the Form 10-K, the Partnership is not expected to have access
to additional sources of financing, and in particular will not have the ability
to assess BACs holders for additional capital contributions to provide capital
if needed by the Partnership. Accordingly, if circumstances arise that cause a
Local Partnership to require capital in addition to that contributed by the
Partnership and any equity of the Local General Partner, the only sources from
which such capital needs will be able to be satisfied (other than the limited
reserves available at the Partnership level) will be additional third party debt
financing (which may not be available if, as expected, the property owned by the
Local Partnership is already substantially leveraged or, as in the case of the
New York program properties, the incurrence of third party debt is not
permitted) or additional equity contributions of the Local General Partner or
other equity sources (which could adversely affect the Partnership's interest in
operating cash flow and/or proceeds of sale or refinancing of the property and
result in adverse tax consequences to the BACs holders). There can be no
assurance that any of such sources would be readily available in sufficient
proportions to fund the capital requirements of the Local Partnerships in
question, particularly if the residual value of a property is uncertain. If
sources are not available, the Local Partnership would risk foreclosure on its
property if it were unable to renegotiate the terms of its first mortgage and
any other debt with the lenders thereof. The risks associated with the need of
the Local Partnership to refinance their underlying first mortgage debt are
exacerbated by the probability that the term of certain favorable assistance
programs from which a Local Partnership may benefit will expire prior to the end
of the compliance period with respect to such Local Partnership's property.
Cash distributions received from the Local Partnerships remain relatively
immaterial. These distributions, as well as the working capital reserves
referred to above, will be used to meet the future operating expenses of the
Partnership.
Results of Operations of Certain Local Partnerships
Wade D. Mertz Elderly Housing Associates
According to the Form 10-Q, on July 29, 1996, Wade D. Mertz Elderly Housing
Associates ("Wade D. Mertz") received a notice from the Internal Revenue Service
("IRS") that they will be examining Wade D. Mertz's federal income tax return
for the year ended December 31, 1994. The IRS commenced the examination on
August 13, 1996 and completed its field work in early September; however, as of
February 13, 1997, Wade D. Mertz had not received notice that the IRS has
concluded its audit.
R.P.P. Limited Dividend Housing Association Limited Partnership
During the 1995, 1994 and 1993 fiscal years, R.P.P. Limited Dividend
Housing Association Limited Partnership ("River Place") experienced significant
losses from operations.
According to the Form 10-Q, River Place's long-term debt consists of
borrowings under two loan agreements with the Michigan State Housing Development
Authority (the "Authority") whereby the Authority issued Limited Obligation
Revenue Bonds and loaned the proceeds to River Place. The loans are nonrecourse
and are collateralized by mortgages (the "Mortgages") on River Place's
properties (the "River Place Properties"). The General Retirement System of the
City of Detroit ("GRS") has committed to purchase the loans from the Authority
if certain events occur. As of July 1, 1996, the partnership agreement for River
Place was amended and restated. Pursuant to that agreement, a new general
partner, GRS RP General Corp. (the "New GP"), which is controlled by GRS, was
admitted to River Place and the prior general partner, River Place Plaza, became
an additional limited partner. The Partnership's interest in profits and losses
and tax credits of River Place was not affected by that agreement. At the same
time, GRS executed a letter agreement which provides that it will not enter into
foreclosure proceedings on the Mortgages prior to February 1, 2006, so long as
the New GP does not meet with any interference in connection with operation of
the River Place Properties or management of River Place. In addition, the
revised partnership agreement of River Place provides that the New GP can only
cause River Place to sell the River Place Properties
18
<PAGE>
prior to February 1, 2006 to an unrelated third party on an arms-length basis.
Any other transfer of the River Place Properties prior to that date requires the
consent of the Special Limited Partner. At any time after February 1, 2006, the
New GP can make a capital call on the Partnership in an amount up to the
Partnership's share of any outstanding indebtedness of River Place. The
obligation to meet such capital call is without recourse to the Partnership,
with the sole remedy for failure to comply being seizure of the Partnership's
interest in River Place. The Partial Guaranty of Payment dated August 1, 1988 in
connection with the issuance of the Junior Bonds was fully and completely
discharged and River Place Holdings, Inc. ("Guarantor") and all of its
shareholders, directors, officers, agents and employees were fully and
completely released from any liability arising out of or in connection with the
Guaranty. In the event of foreclosure there would be substantial forgiveness of
indebtedness income since the carrying value of the property is less than the
carrying value of the mortgage and amount due to debt guarantor. In addition,
there would be no effect on liquidity since the mortgage is nonrecourse to River
Place.
According to the Form 10-Q, River Place was unable to make certain required
debt service payments during the nine months ended December 31, 1996 and the
1995, 1994 and 1993 fiscal years and as a result was declared in default under
its obligation and was required to appoint MIG Management Services, Inc.
("MMS"), an agent of GRS, as manager of the apartments. It is anticipated that
the subsidiary partnership will be unable to make the required debt service
payments in 1997.
According to the Form 10-Q, unpaid principal and interest for the 1995,
1994 and 1993 fiscal years were paid by GRS on behalf of River Place. River
Place accrues interest on the amounts paid by GRS at a rate of 15%. According to
information provided by the Partnership, River Place also did not pay certain
fees owed to GRS totaling $2,052,912 and $1,740,950 at December 31, 1996 and
March 31, 1996, respectively, which are included in accounts payable.
Williamsburg Residential II, L.P.
According to information provided by the Partnership, in January 1997, the
underlying mortgage note of Williamsburg Residential II, L.P. ("Williamsburg
II") was accelerated by the lender due to the non-payment of the required
monthly installments due for November 1996 through January 1997 and the transfer
of the general partnership interest which constituted events of default. On
January 27, 1997, Williamsburg II entered into a forbearance agreement with the
lender to temporarily forestall or postpone the further exercising of the
lender's remedies while Williamsburg II negotiates a workout agreement. The
forbearance agreement, which now expires on May 27, 1997, required a payment of
$74,674 upon execution and required payment by the fifteenth of February, 1997
and the fifteenth of March, 1997 of all net operating income for the preceding
month (with certified rent rolls and certified operating statements sent to the
lender) which will be applied to amounts due and owing under the loan documents.
At the end of the forbearance period, if Williamsburg II has not paid in full
all amounts due and owing under the loan documents or entered into a written
workout agreement with the lender, the lender may proceed with lender's remedies
without any notice or demand to Williamsburg II. According to information
provided by the Partnership, the Partnership's investment in Williamsburg II at
December 31, 1996 and March 31, 1996 was approximately $796,000 and $849,000,
respectively, and the minority interest balance was zero at each date.
Williamsburg II's net income (loss) after minority interest amounted to
approximately ($30,000) and $8,000 and ($53,000) and ($5,000) for the three and
nine months ended December 31, 1996 and 1995, respectively.
Jefferson Limited Partnership
According to information provided by the Partnership, at December 31, 1996,
current liabilities of Jefferson Limited Partnership ("Jefferson") exceed its
current assets by over $220,000. Although this condition could raise substantial
doubt about Jefferson's ability to continue as a going concern, such doubt is
alleviated as follows:
1. Under the HUD regulatory agreement, Jefferson is precluded from paying,
except from surplus cash, certain related party payables that are included
in current liabilities which at December 31, 1996 totaled $166,523.
2. In addition to the related party payables mentioned above at December 31,
1996, $47,216 of current liabilities are to related parties which do not
intend to pursue payment beyond Jefferson's ability to pay.
Accordingly, management of the Partnership believes that Jefferson has the
ability to continue as a going concern for at least one year from December 31,
1996. According to information provided by the Partnership, the Part-
19
<PAGE>
nership's investment in Jefferson was approximately $972,000 and $1,071,000 at
December 31, 1996 and March 31, 1996, respectively, and the minority interest
balance was $0 at each date. The net loss after minority interest for Jefferson
amounted to approximately $32,000 and $55,000 and $99,000 and $123,000 for the
three and nine months ended December 31, 1996 and 1995, respectively.
Jefferson Place, L.P.
According to information provided by the Partnership, Jefferson Place, L.P.
("Jefferson Place") has consistently been unable to generate sufficient cash
flow from operations to pay the interest obligation on its mortgage note payable
and has a net capital deficiency at December 31, 1996. Jefferson Place has,
however, generated cash flows sufficient to cover the cost of operations before
payment of interest on the mortgage note payable. The mortgagee has agreed not
to declare a default under the terms of the mortgage note payable through
December 2002. These items raise substantial doubt about Jefferson Place's
ability to continue as a going concern. According to information provided by the
Partnership, the Partnership's investment in Jefferson Place at December 31,
1996 and March 31, 1996 had been written down to zero by prior years' losses and
the minority interest balance was $0 at each date. The net loss after minority
interest for Jefferson Place amounted to approximately $243,000 and $281,000 and
$779,000 and $783,000 for the three and nine months ended December 31, 1996 and
1995, respectively.
The terms of the mortgage note payable provide that the difference between
the stated interest rate and the actual interest paid per month is accrued and
added to the principal balance of the note, which requires no amortization until
maturity on October 1, 2021.
Stop 22 Limited Partnership
According to the Form 10-Q, as of December 31, 1995, Stop 22 Limited
Partnership ("Stop 22") had nine months interest in arrears, totaling $540,000.
This constituted an event under which the lender may have declared the mortgage
obligation in default. According to the Form 10-Q, during April 1996, Stop 22
completed a modification of its mortgage debt, effective November 1, 1995, which
reduced the stated rate from 10% to 8% and the pay rate from 9% to 7% resulting
in a reduction of the monthly interest only payments from $60,000 to $46,666.
The interest rate on the accrued but unpaid interest (1%), which had been at 10%
was reduced to 8%. In connection with the modification the interest in arrears
was paid.
Las Camelias Limited Partnership
According to the Form 10-Q, during June 1996, Las Camelias Limited
Partnership completed a modification of its mortgage debt, effective July 1,
1996, which reduced the stated rate from 10% to 8.25%, the pay rate from 9% to
7.25%, and extended the maturity date from October 1, 2021 to June 1, 2026. The
monthly payment which had been interest only in the amount of $45,000 was
reduced to a payment of principal and interest in the amount of $40,931. The
interest rate on the accrued but unpaid interest (1%), which had been at 10%,
was reduced to 8.25%.
Other Subsidiary Partnerships
Four of the Subsidiary Partnerships are leasing the land on which their
Apartment Complexes are located for terms ranging from 28 to 99 years. According
to the Form 10-K, at December 31, 1995, the Subsidiary Partnerships were
committed to minimum annual rentals on the noncancelable leases aggregating
$155,130 for each of the next five years, and $4,803,814 in total, thereafter.
Other
The Partnership's investment in the Local Partnerships is subject to the
risks incident to management and ownership of improved real estate. The
Partnership's investments also could be adversely affected by poor economic
conditions, which could increase vacancy levels, rental payment defaults, and
operating expenses, any or all of which could threaten the financial viability
of one or more of the Local Partnerships.
There also are substantial risks associated with the operation of Apartment
Complexes receiving government assistance. These risks stem from governmental
regulations concerning tenant eligibility, which may make it more difficult to
rent apartments in the complexes; difficulties in obtaining government approval
for rent increases; limitations on the percentage of income which low- and
moderate-income tenants may pay as rent; the possibility that Congress may not
appropriate funds to enable HUD to make the rental assistance payments it has
contracted to
20
<PAGE>
make; and that when the rental assistance contracts expire there may not be
market demand for apartments at full market rents in a Local Partnership's
Apartment Complex.
The Local Partnerships are impacted by inflation in several ways. Inflation
allows for increases in rental rates generally to reflect the impact of higher
operating and replacement costs. Inflation also affects the Local Partnerships
adversely by increasing operating costs as, for example, for such items as fuel,
utilities and labor. However, continued inflation should allow for appreciated
values of the Local Partnerships' Apartment Complexes over a period of time as
rental revenues and replacement costs continue to increase.
The Partnership Agreement
The General Partners of the Partnership are RCP and Liberty GP III Inc.
("Liberty GP"). The General Partners and their affiliates have received or will
receive certain types of compensation, fees or other distributions in connection
with the operations of the Partnership. The arrangements for payment of
compensation and fees set forth in the Partnership Agreement were not determined
in arm's-length negotiations with the Partnership.
Pursuant to the Partnership Agreement, the General Partners are entitled to
a fee (the "Partnership Management Fee") for their services in connection with
the administration of the affairs of the Partnership (including, without
limitation, coordination of communications between the Partnership and BACs
holders and with the Local Partnerships). The Partnership Management Fee is
payable annually and is determined by the General Partners based on their review
of the Partnership's investments, up to a maximum of 0.5% of the Partnership's
Invested Assets (as defined below); provided, however, the Partnership
Management Fee is a minimum of $2,500 per $1 million of Invested Assets up to
Invested Assets of $20 million and $5,000 per $1 million of Invested Assets
above $20 million to $100 million. "Invested Assets" means the sum of (i) any
capital contributions made by the Partnership to the Local Partnerships, (ii)
the amounts represented by promissory notes given by the Partnership to the
sellers of interests of Local Partnerships as part of the Partnership's purchase
price, and (iii) the amount of all liens and mortgages on properties when the
Partnership acquired interests in Local Partnerships. For the nine months ended
December 31, 1996, the General Partners earned aggregate Partnership Management
Fees of $562,500.
According to the Partnership Agreement, the General Partners are also
entitled to receive a disposition fee (the "Disposition Fee") for services
rendered in connection with the sale of a property or the sale of the
Partnership's interest in a Local Partnership. Payment of such fee shall be
subordinated to the return of Limited Partners and BACs holders of their capital
contribution and other items as set forth in the Partnership Agreement. Each
Disposition Fee is equal to the lesser of one-half the competitive real estate
commission or 3% of the sale price in respect of any such sale (including the
principal amount of any mortgage loans and any related seller financing with
respect to a property to which such sale is subject). In no event, however,
shall the Disposition Fee and all other fees payable to the General Partners and
any of their affiliates and any unrelated parties arising out of any given sale
exceed in the aggregate the lesser of the competitive rate or 6% of the gross
proceeds from such sale. For the nine months ended December 31, 1996, the
General Partners did not earn any Disposition Fee.
The General Partners serve as the co-general partners of Liberty Associates
IV L.P. ("Liberty Associates"). Liberty Associates, as special limited partner
of the Local Partnerships, earned an aggregate annual fee (the "Annual Local
Administrative Fee") of $75,000 from the Local Partnerships for the nine months
ended December 31, 1996. Also, Liberty Associates received cash distributions
from the Local Partnerships of $863 during the year ended March 31, 1996.
Liberty Associates is entitled to receive up to $2,500 per year as an Annual
Local Administrative Fee from each Local Partnership of which it is a special
limited partner, but the sum of the aggregate Annual Local Administrative Fee
and the Partnership Management Fee for any year shall not exceed 0.5% of
Invested Assets.
Affiliates of the Local Partnerships' general partners incurred property
management fees, of which, for the nine months ended December 31, 1996, $19,440
was also incurred to affiliates of RCP.
RCP and Liberty GP, as General Partners, and their respective officers and
directors, are each entitled to indemnification under certain circumstances from
the Partnership pursuant to provisions of the Partnership Agreement. Generally,
the General Partners are also entitled to reimbursement of expenditures made on
behalf of the Partnership. An affiliate of the General Partners performs asset
monitoring for the Partnership. These services include site visits and
evaluations of the Local Partnerships' performance. For the nine months ended
December 31, 1996, the Partnership incurred, in the aggregate, $141,192 to the
General Partners and their affiliates as reimbursement of expenditures and asset
monitoring made on behalf of the Partnership.
21
<PAGE>
In addition, under the terms of the Partnership Agreement, upon the removal
of the General Partners by the Limited Partners or upon the occurrence of a
"Removal Event", as defined below, the General Partners may be entitled to
receive a fee, which will be payable with interest over a five-year period and
may be secured by the assets of the Partnership. The amount of such fee shall be
the fair market value of the removed General Partner's interest, which amount
could be substantial. The Partnership Agreement deems a "Removal Event" to have
occurred if the business of the Partnership is continued after the bankruptcy,
death, adjudication of incompetence or removal of a General Partner (subject to
certain exceptions pursuant to the Partnership Agreement). A majority in
interest of the Limited Partners may approve the removal of any General Partner
without the concurrence of any General Partner at a meeting of the Partnership.
10. Certain Information Concerning the Purchaser.
The Purchaser was organized for the purpose of acquiring the BACs pursuant
to the Offer. The principal executive office of the Purchaser is at 625 Madison
Avenue, New York, New York 10022. The managing member of the Purchaser (the
"Managing Member") is Lehigh Tax Credit Partners, Inc., a newly-formed Delaware
corporation. Since its inception, the directors of the Managing Member have been
J. Michael Fried, Stuart J. Boesky and Alan P. Hirmes. The business address for
each of Messrs. Fried, Boesky and Hirmes is 625 Madison Avenue, New York, New
York 10022.
For certain information concerning the executive officers and directors of
the Managing Member, see Schedule I to this Offer to Purchase. The persons set
forth on Schedule I, who effectively control the Purchaser, are also officers of
RCP, one of the two General Partners of the Partnership. Therefore, the
Purchaser and RCP, subject to its fiduciary duties, may have a conflict of
interest with respect to certain matters involving BACs holders, Limited
Partners and/or the Partnership. This potential conflict of interest, however,
may be mitigated because Section 5.1 of the Partnership Agreement provides that
all decisions with respect to the management of the Partnership and its affairs
shall be made only with the consent of both of the General Partners. As a
result, RCP does not unilaterally control the Partnership.
Except as otherwise set forth in this Offer to Purchase or Schedule I
hereto, (1) neither the Purchaser, the Managing Member and, to the best of the
Purchaser's knowledge, the persons listed on Schedule I, nor any affiliate of
the foregoing beneficially owns or has a right to acquire any BACs, (2) neither
the Purchaser, the Managing Member and, to the best of the Purchaser's
knowledge, the persons listed on Schedule I, nor any affiliate thereof or
director, executive officer or subsidiary of the Managing Member has effected
any transaction in the BACs within the past 60 days, (3) neither the Purchaser,
the Managing Member and, to the best of the Purchaser's knowledge, any of the
persons listed on Schedule I, nor any director or executive officer of the
Managing Member 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, (4) there have been no transactions or
business relationships which would be required to be disclosed under the rules
and regulations of the Commission between any of the Purchaser, the Managing
Member, or, to the best of the Purchaser's knowledge, the persons listed on
Schedule I, on the one hand, and the Partnership or its affiliates, on the other
hand, and (5) there have been no contracts, negotiations or transactions between
the Purchaser, the Managing Member or, to the best of the Purchaser's knowledge,
the persons listed on Schedule I, on the one hand, and the Partnership or its
affiliates, on the other hand, concerning a merger, consolidation or
acquisition, tender offer or other acquisition of securities, an election of
directors or a sale or other transfer of a material amount of assets.
The Purchaser owns 95 BACs, which represents less than 1% of the number of
BACs outstanding as reported in the Form 10-K (the most recently available
filing containing such information). On March 1, 1997, the Purchaser effected a
secondary market transaction to acquire 80 BACs at a price per BAC of $546.25,
not including commissions. On February 16, 1997 and March 1, 1997, the Purchaser
purchased 10 and 5 BACs, respectively, at a price per BAC of $588.20. The
Purchaser was referred to those selling BACs holders by its affiliate, Related
Capital Company, which received telephone calls from such parties requesting
information with respect to persons that may be interested in purchasing BACs.
The Purchaser did not solicit the selling BACs holders.
22
<PAGE>
11. Background Of The Offer.
Based on information provided to the Purchaser by RCP, its affiliate and
one of the General Partners, on January 31, 1997, a representative of Everest
Properties, Inc. ("Everest") requested a list of BACs holders from the
Partnership. The Partnership declined to provide the list until the Partnership
could be reasonably certain that it would not be misappropriated or used in a
manner that would be harmful to the Partnership, its partners or its investors
and that Everest had a proper purpose for its request. In particular, the
Partnership was concerned that such list would be used to commence a tender
offer that it believed may be coercive, abusive and misleading, thereby
potentially violating the securities laws, or that might, without any protection
for the Partnership and its investors, create the risk of adverse tax
consequences. During the week of February 3, 1997, representatives of Everest
and the Partnership discussed an agreement upon which the Partnership would
agree to release the list of BACs holders. In a letter dated February 7, 1997,
counsel for the Partnership outlined the Partnership's concerns, the competing
interests of all parties involved and proposed a settlement which it believed to
be fair. Everest subsequently rejected the Partnership's proposal and commenced
a lawsuit in the Chancery Court of Delaware to obtain the list. On February 19,
1997, a trial date of May 28, 1997 was set by the court and the parties were
authorized to commence discovery. The parties are engaging in discovery and
preparing for trial.
The purpose of the Offer is to allow BACs holders who have a current or
anticipated need or desire for liquidity to sell their BACs. Affiliates of the
Purchaser decided to commence the Offer after they became aware that Everest or
an affiliate contemplated a tender offer on terms that they believed would be
less favorable than the terms of the Offer, which would not be filed with the
Securities and Exchange Commission and would not include various provisions
designed to protect BACs holders when deciding whether to accept such offer
(including withdrawal rights and rights to proration). Therefore, another
purpose of the Offer is to establish a standard by which all subsequent tender
offers will be judged.
Based on discussions between the Partnership and Everest, RCP has told the
Purchaser that the Everest tender offer is expected to be at a cash offer price
of approximately $414 per BAC (which would yield the 17% internal rate of return
(if the Tax Credits and tax losses are realized) that the Partnership believes
Everest is seeking). Additionally, RCP has told the Purchaser that Everest would
not agree to include withdrawal rights and rights to proration in its tender
offer. Therefore, RCP told the Purchaser that it does not believe withdrawal
rights and rights to proration will be included in the Everest tender offer. The
Everest tender offer also presented possible adverse tax consequences to the
Partnership, with respect to which Everest refused to obtain legal opinions to
address the Partnership's concerns. The Purchaser agreed to obtain such legal
opinions and include all of these rights, which are designed to protect
tendering BACs holders, in the Offer and to offer a cash price greater than that
expected to be offered in the Everest tender offer. There can be no assurance,
however, that Everest will commence a tender offer or, if commenced, that it
will be on the terms anticipated or on terms less favorable than the Purchaser's
Offer.
In March 1997, representatives of the Purchaser met with representatives of
Liberty GP III Inc. ("Liberty GP"), a general partner of the Partnership which
is not affiliated with the Purchaser, in order to discuss the Offer. These
discussions resulted in the Purchaser entering into the Standstill Agreement.
The Partnership expressed concern that consummation of the Offer would
cause it to be classified as a "publicly-traded partnership" (a "PTP") for
federal income tax purposes and, therefor, suffer adverse tax consequences. To
address this concern, the Purchaser agreed to retain two independent law firms
to deliver legal opinions to the Partnership that consummation of the Offer will
not result in it being treated as a PTP.
The Purchaser requested that the Partnership mail this Offer to Purchase,
the related Letter of Transmittal and other relevant material. On April 10,
1997, the Purchaser was notified that such materials were mailed at the
Purchaser's expense and the Offer was commenced.
12. Source Of Funds.
The Purchaser expects that an aggregate of approximately $10,294,000
(exclusive of fees and expenses) will be required to purchase the BACs sought
pursuant to the Offer, if tendered. The Purchaser presently contemplates that it
will borrow all of such funds from one of its members, on substantially the same
economic terms and conditions that such member borrows such funds under an
existing credit facility that such member has available to it with The First
National Bank of Boston and Wells Fargo Bank (the "Lenders").
The existing credit agreement is among the Lenders and RCC Credit Facility,
L.L.C., Related Capital Company and The Related Companies, L.P. The stated
interest rate is the "Base Rate" (as publicly announced by The First
23
<PAGE>
National Bank of Boston, from time to time) plus 1%, which is presently equal to
9.5% per annum. All of the BACs tendered pursuant to the Offer and all of the
Purchaser's membership interests will be pledged to the Lenders to collateralize
the loan. Additionally, Related Capital Company will guarantee all amounts
borrowed under such credit facility.
The Purchaser expects to repay all amounts borrowed from its member by
selling additional membership interests to persons or entities that have a need
for the Tax Credits and/or tax losses from the BACs. No plans or arrangements
have been made with regard to the payment of periodic interest required by the
terms of the loan. However, it is expected that if interest payments are due and
payable, the Purchaser may borrow those funds from its affiliate(s).
13. Purchase Price Considerations.
The Purchaser has set the Purchase Price at $588.20 net per BAC (subject to
adjustment as set forth in this Offer to Purchase). The Purchaser considered the
estimated expected remaining present value of the BACs, as estimated by
Valuation Research Corporation (see below in this Section 13), and confirmed
that if the BACs are purchased at the Purchase Price then the Purchaser would
earn at least an internal rate of return equal to 14% if the Tax Credits and tax
losses are realized.
The Form 10-K states that: "Neither the BACs nor the Limited Partnership
Interests are traded on any established market. The Partnership does not intend
to include the BACs for quotation on NASDAQ or for listing on any national or
regional stock exchange or any other established securities market." At present,
privately negotiated sales and sales through intermediaries (e.g., through the
trading system operated by Chicago Partnership Board, Inc., which publishes
sales by holders of BACs) are the only means available to BACs holders to
liquidate an investment in BACs (other than the Offer) because the BACs are not
listed or traded on any exchange or quoted on any NASDAQ list or system.
According to Partnership Spectrum, an independent third-party industry
publication, for the two months ended January 31, 1997, a total of 785 BACs
traded at per BAC prices between $400 and $615.05 with a weighted average of
$582.82 per BAC. Set forth below is a schedule of the trading activity of BACs
during the year ended January 31, 1997, in two-month intervals, as reported by
The Partnership Spectrum:
Trading Activity for Year Ended January 31, 1997
- -------------------------------------------------------------------------------
Period Low/High No. of BACs Traded
- ----------------------------------- --------------- --------------------
February 1, 1996-March 31, 1996 $485/$560 126
April 1, 1996-May 31, 1996 $484/$578.95 130
June 1, 1996-July 31, 1996 $495/$540 54
August 1, 1996-September 30, 1996 $450/$520 60
October 1, 1996-November 30, 1996 $475/$530 96
December 1, 1996-January 31, 1997 $400/$615.05 785
BACs holders are advised, however, that such gross sales prices reported by The
Partnership Spectrum do not necessarily reflect the net sales proceeds received
by sellers of BACs, which typically are reduced by commissions and other
secondary market transaction costs to amounts less than the reported prices.
In March 1997, at the request of the General Partners, the Purchaser
retained Valuation Research Corporation to independently determine the value of
the BACs for the Partnership. On April 8, 1997, Valuation Research Corporation
delivered its valuation opinion (a copy of which has been filed as Exhibit
(c)(2) to the Purchaser's Tender Offer Statement on Schedule 14D-1 filed with
the Commission on April 10, 1997). Subject to the terms, conditions and
assumptions set forth therein and based upon various valuation methods,
Valuation Research Corporation concluded that the estimated "Fair Value" (as
defined below) of the BACs, effective as of March 31, 1997, is between $519.56
and $563.42 per BAC. For purposes of the valuation opinion, "Fair Value" is
defined as "the amount for which a BAC would change hands between a willing
buyer and a willing seller neither under compulsion to act, with equity to both,
each having reasonable knowledge of all relevant facts, and within a
commercially reasonable period of time." It is important to note, however, that
the value of each BAC to a tendering BACs holder depends on such BACs holder's
tax status. Therefore, this valuation may not necessarily represent the per BAC
value to each BACs holder.
The Purchase Price represents the price at which the Purchaser is willing
to purchase BACs. Other measures of the value of the BACs may be relevant to
BACs holders. BACs holders are urged to consider carefully all
24
<PAGE>
of the information contained herein and consult with their own advisors, tax,
financial or otherwise, in evaluating the terms of the Offer before deciding
whether to tender BACs.
14. Conditions of the Offer.
Notwithstanding any other provisions of the Offer and in addition to (and
not in limitation of) the Purchaser's rights to extend and amend the Offer at
any time in its sole discretion, the Purchaser shall not be required to accept
for payment, subject to Rule 14e-1(c) under the Exchange Act, any tendered BACs
and may terminate the Offer as to any BACs not then paid for if, prior to the
Expiration Date, (i) the Purchaser shall not have confirmed to its reasonable
satisfaction that, upon purchase of the BACs pursuant to the Offer, the
Purchaser will have full rights to ownership as to all such BACs and the
Purchaser will become the transferee of the purchased BACs for all purposes
under the Partnership Agreement, (ii) the Purchaser shall not have confirmed to
its reasonable satisfaction that, upon the purchase of the BACs pursuant to the
Offer, the Transfer Restrictions will have been satisfied, or (iii) 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.
Furthermore, notwithstanding any other term of the Offer, the Purchaser will not
be required to accept for payment and may terminate or amend the Offer as to
such BACs if, at any time on or after the date of the Offer and before the
Expiration Date, any of the following conditions exist:
(a) there shall have occurred (i) any general suspension of trading in, or
limitation on prices for, securities on any national securities exchange or 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 (whether or not mandatory), (iii) the commencement or escalation of a
war, armed hostilities or other national or international crisis involving the
United States, (iv) any limitation (whether or not mandatory) imposed by any
governmental authority on, or any other event that might have material adverse
significance with respect to, the nature or extension of credit by banks or
other lending institutions in the United States, or (v) in the case of any of
the foregoing, a material acceleration or worsening thereof; or
(b) any material adverse change (or any condition, event or development
involving a prospective material adverse change) shall have occurred or be
likely to occur in the business, prospects, financial condition, results of
operations, properties, assets, liabilities, capitalization, partners' equity,
licenses, franchises or businesses of the Partnership and its subsidiaries taken
as a whole; or
(c) there shall have been threatened, instituted or pending any action,
proceeding, application, audit, claim or counterclaim by any government or
governmental authority or agency, domestic or foreign, or by or before any court
or governmental, regulatory or administrative agency, authority or tribunal,
domestic, foreign or supranational, which (i) challenges the acquisition by the
Purchaser of the BACs or seeks to obtain any material damages as a result
thereof, (ii) makes or seeks to make illegal, the acceptance for payment,
purchase or payment for any BACs or the consummation of the Offer, (iii) imposes
or seeks to impose limitations on the ability of the Purchaser or any affiliate
of the Purchaser to acquire or hold or to exercise full rights of ownership of
the BACs, including, but not limited to, the right to vote (through the Assignor
Limited Partner) any BACs purchased by them on all matters with respect to which
BACs holders have the right to direct the Assignor Limited Partner on the manner
in which it will vote on matters presented to the Limited Partners and BACs
holders, (iv) may result in a material diminution in the benefits expected to be
derived by the Purchaser or any of their affiliates as a result of the Offer,
(v) requires divestiture by the Purchaser of any BACs, (vi) might materially
adversely affect the business, properties, assets, liabilities, financial
condition, operations, results of operations or prospects of the Partnership or
the Purchaser, or (vii) challenges or adversely affects the Offer; or
(d) there shall be any action taken, or any statute, rule, regulation,
order or injunction shall have been enacted, promulgated, entered, enforced or
deemed applicable to the Offer, or any other action shall have been taken, by
any government, governmental authority or court, domestic or foreign, other than
the routine application to the Offer of waiting periods that has resulted, or in
the reasonable good faith judgment of the Purchaser could be expected to result,
in any of the consequences referred to in clauses (i) through (vii) of paragraph
(c) above; or
(e) the Partnership or any of its subsidiaries shall have authorized,
recommended, proposed or announced an agreement or intention to enter into an
agreement, with respect to any merger, consolidation, liquidation or busi-
25
<PAGE>
ness combination, any acquisition or disposition of a material amount of assets
or securities, or any comparable event, not in the ordinary course of business
consistent with past practices; or
(f) the failure to occur of any necessary approval or authorization by any
federal or state authorities necessary to the consummation of the purchase of
all or any part of the BACs to be acquired hereby, which in the reasonable
judgment of the Purchaser in any such case, and regardless of the circumstances
(including any action of the Purchaser) giving rise thereto, makes it
inadvisable to proceed with such purchase or payment; or
(g) Purchaser shall become aware that any material right of the Partnership
or any of its subsidiaries under any governmental license, permit or
authorization relating to any environmental law or regulation is reasonably
likely to be impaired or otherwise adversely affected as a result of, or in
connection with, the Offer; or
(h) the Partnership or any of its General Partners shall have amended, or
proposed or authorized any amendment to, the Partnership Agreement or the
Purchaser shall have become aware that the Partnership or any of its General
Partners have proposed any such amendment.
The foregoing conditions are for the sole benefit of the Purchaser and its
affiliates and may be asserted by the Purchaser regardless of the circumstances
(including, without limitation, any action or inaction by the Purchaser or any
of its affiliates) giving rise to such condition, or may be waived by the
Purchaser, in whole or in part, from time to time in its sole discretion. The
failure by the Purchaser at any time to exercise the foregoing rights will not
be deemed a waiver of such rights, which will be deemed to be ongoing and may be
asserted at any time and from time to time. Any determination by the Purchaser
concerning the events described in this Section 14 will be final and binding
upon all parties.
15. Certain Legal Matters.
Except as set forth in this Offer to Purchase, based on its review of
publicly available filings by the Partnership with the Commission and other
publicly available information regarding the Partnership, the Purchaser is not
aware of any licenses or regulatory permits that would be material to the
business of the Partnership, taken as a whole, and that might be adversely
affected by the Purchaser's acquisition of BACs as contemplated herein, or any
filings, approvals or other actions by or with any domestic or foreign
governmental authority or administrative or regulatory agency that would be
required prior to the acquisition of BACs by the Purchaser pursuant to the Offer
as contemplated herein, other than the filing of a Tender Offer Statement on
Schedule 14D-1 (which has been filed) and any required amendments thereto.
Should any such approval or other action be required, 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 or the
Purchaser's businesses might not have to be disposed of or held separate or
other substantial conditions complied with in order to obtain such approval or
action in the event that such approvals were not obtained or such actions were
not taken.
Appraisal Rights. BACs holders will not have appraisal rights as a result
of the Offer.
State Anti-takeover Laws. A number of states have adopted anti-takeover
laws which purport, to varying degrees, to be applicable to attempts to acquire
securities of corporations or other entities which are incorporated or organized
in such states or which have substantial assets, securityholders, principal
executive offices or principal places of business therein. Although the
Purchaser has not attempted to comply with any state anti-takeover statutes in
connection with the Offer, the Purchaser reserves the right to challenge the
validity or applicability of any state law allegedly applicable to the Offer and
nothing in this Offer to Purchase nor any action taken in connection therewith
is intended as a waiver of such right. If any state anti-takeover statute is
applicable to the Offer, the Purchaser might be unable to accept for payment or
purchase BACs tendered pursuant to the Offer or be delayed in continuing or
consummating the Offer. In such case, the Purchaser may not be obliged to accept
for purchase or pay for any BACs tendered.
ERISA. By executing and returning the Letter of Transmittal, a BACs holder
will be representing that either (a) the BACs holder is not a plan subject to
Title I of the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), or Section 4975 of the Code, or an entity deemed to hold "plan
assets" within the meaning of 29.C.F.R. ss.2510.3-101 of any such plan; or (b)
the tender and acceptance of BACs pursuant to the Offer will not result in a
nonexempt prohibited transaction under Section 406 of ERISA or Section 4975 of
the Code.
26
<PAGE>
Margin Requirements. The BACs 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.
Antitrust. Under the Hart-Scott-Rodino Antitrust Improvements Act of 1976,
as amended (the "HSR Act"), and the rules and regulations that have been
promulgated thereunder by the Federal Trade Commission (the "FTC"), certain
acquisition transactions may not be consummated until certain information and
documentary material has been furnished for review by the Antitrust Division of
the Department of Justice and the FTC and certain waiting period requirements
have been satisfied. The Purchaser does not believe any filing is required under
the HSR Act with respect to its acquisition of BACs contemplated by the Offer.
16. Certain 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
BACs pursuant to the Offer. The Purchaser has retained Related Capital Company,
its affiliate and an affiliate of RCP, to act as Information Agent/Depositary in
connection with the Offer. The Purchaser will pay to the Information
Agent/Depositary reasonable and customary compensation for its services, plus
reimbursement for certain reasonable out-of-pocket expenses, and has agreed to
indemnify it against certain liabilities and expenses in connection therewith,
including certain 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.
17. Miscellaneous.
The Offer is being made to all BACs holders, Beneficial Owners and
Assignees, all to the extent their names and addresses are reflected on the
books and records of the Partnership. The Purchaser is not aware of any state in
which the making of the Offer is prohibited by administrative or judicial action
pursuant to a state statute. If the Purchaser becomes aware of any state where
the making of the Offer is so prohibited, the Purchaser will make a good faith
effort to comply with any such statute or seek to have such statute declared
inapplicable to the Offer. If, after such good faith effort, the Purchaser
cannot comply with any applicable statute, the Offer will not be made to (nor
will tenders be accepted from or on behalf of) BACs holders in such state.
Pursuant to Rule 14d-3 of the General Rules and Regulations under the
Exchange Act, the Purchaser has filed with the Commission a Tender Offer
Statement on Schedule 14D-1, together with exhibits, furnishing certain
additional information with respect to the Offer. Such statement 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 with respect to
information concerning the Partnership in Section 9 ("Certain Information
Concerning the Partnership") (except that they will not be available at the
regional offices of the Commission).
No person has been authorized to give any information or make any
representation on behalf of the Purchaser not contained herein or in the Letter
of Transmittal and, if given or made, such information or representation must
not be relied upon as having been authorized.
Lehigh Tax Credit Partners L.L.C.
April 10, 1997
27
<PAGE>
APPENDIX A
GLOSSARY OF DEFINED TERMS
"Assignee" means a person or entity who has purchased BACs but is not
recognized on the books and records of the Partnership maintained by the
Assignor Limited Partner as a registered holder of such BACs.
"Assignor Limited Partner" means Liberty Credit Assignor III Inc., a
Delaware corporation, or any successor to it which holds Limited Partnership
Interests on behalf of BACs holders.
"BACs" means the beneficial assignment certificates executed by the
Assignor Limited Partner and delivered to a purchaser of BACs in evidence of the
assignment by the Assignor Limited Partner to such BACs holder of all of the
economic and virtually all of the other rights, benefits and privileges of the
ownership of a portion of the Partnership interest of the Assignor Limited
Partner.
"BACs holder" means a holder of BACs and who is reflected as an assignee of
record of BACs on the books and records of the Partnership maintained by the
Assignor Limited Partner.
"Beneficial Owner" means a BACs holder in the case of BACs owned by
Individual Retirement Accounts or Keogh plans.
"business day" means any day other than a Saturday, Sunday or federal
holiday and consists of the time period from 12:01 a.m. through 12:00 midnight,
New York City time, and any time period of business days will be computed in
accordance with Rule 14d-1(c)(6) under the Exchange Act.
"Code" means the Internal Revenue Code of 1986, as amended.
"Commission" means the Securities and Exchange Commission.
"Credit Period" has the meaning set forth in Section 9.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"Everest" means Everest Properties, Inc.
"Exchange Act" means the Securities Exchange Act of 1934, as amended, and
the rules and regulations promulgated thereunder.
"Expiration Date" has the meaning set forth in Section 1.
"Form 10-K" means the Partnership's Form 10-K for the fiscal year ended
March 31, 1996.
"Form 10-Q" means the Partnership's Form 10-Q for the quarter ended
December 31, 1996.
"FTC" means the Federal Trade Commission.
"General Partners" means Related Credit Properties III L.P., a Delaware
limited partnership, and Liberty GP III Inc., a Delaware corporation.
"Historic Tax Credits" means any historic rehabilitation credits to tax
allowed to the Partnership and its partners under Section 47 of the Code.
"Housing Tax Credits" means any low-income housing credits to tax allowed
to the Partnership and its partners under Section 42 of the Code.
"HSR Act" means the Hart-Scott-Rodino Antitrust Improvements Act of 1976,
as amended.
"Information Agent/Depositary" means Related Capital Company, an affiliate
of the Purchaser and RCP.
"IRA" means an individual retirement account.
"Liberty Associates" means Liberty Associates IV L.P., a Delaware limited
partnership and an affiliate of each General Partner.
"Liberty GP" means Liberty GP III Inc., a Delaware corporation and a
general partner of the Partnership.
A-1
<PAGE>
"Limited Partner" means the Assignor Limited Partner, the Original Limited
Partner or any other person or entity who is admitted as a Substituted Limited
Partner, at the time of reference thereto, in such person's or entity's capacity
as a limited partner of the Partnership.
"Limited Partnership Interest" means the ownership interest of a Limited
Partner, including its interest in distributions, including liquidating
distributions, and profits and losses of the Partnership and all of its other
rights, duties and obligations under the Partnership Agreement.
"Managing Member" means Lehigh Tax Credit Partners, Inc., a Delaware
corporation and the managing member of the Purchaser.
"NASD" means the National Association of Securities Dealers, Inc.
"Offer" has the meaning set forth in the Introduction.
"Offer to Purchase" means this Offer to Purchase dated April 10, 1997.
"Partnership" means Liberty Tax Credit Plus III L.P., a Delaware limited
partnership.
"Partnership Agreement" means the Amended and Restated Agreement of Limited
Partnership of the Partnership, dated as of May 2, 1989, by and among Shearson
Liberty GP III Inc., a Delaware corporation, and Related Credit Properties III
L.P., a Delaware limited partnership, as General Partners, Liberty Associates IV
L.P., as Original Limited Partner of the Partnership and as Special Limited
Partner of Local Partnerships, Liberty Credit Assignor III Inc., as Assignor
Limited Partner, and those persons or entities admitted to the Partnership from
time to time as Limited Partners.
"Purchase Price" has the meaning set forth in the Introduction.
"Purchaser" means Lehigh Tax Credit Partners L.L.C., a Delaware limited
liability company and an affiliate of RCP.
"RCP" means Related Credit Properties III L.P., a Delaware limited
partnership and a general partner of the Partnership. RCP is affiliated with the
Purchaser.
"Securities Act" means the Securities Act of 1933, as amended, and the
rules and regulations promulgated thereunder.
"Standstill Agreement" means the letter agreement, dated April 4, 1997,
among the Partnership, the Purchaser and RCP.
"Standstill Expiration Date" means April 4, 2007.
"Substituted Limited Partner" means any person or entity admitted to the
Partnership as a Limited Partner pursuant to the provisions of Section 7.2D of
the Partnership Agreement.
"Tax Credits" means Historic Rehabilitation Tax Credits and Housing Tax
Credits.
"TIN" means taxpayer identification number.
"Transfer Restrictions" has the meaning set forth in Section 2.
"UBTI" means unrelated business taxable income.
"Unit" means a unit of limited partner interest in the Partnership,
representing a cash contribution of $1,000 to the capital of the Partnership.
Reference to a majority, or specified percentage, in the interest of the Limited
Partners means Limited Partners who, in the aggregate, own greater than 50%, or
such specified percentage, respectively, of the total number of BACs.
A-2
<PAGE>
SCHEDULE I
EXECUTIVE OFFICERS AND DIRECTORS OF LEHIGH TAX CREDIT PARTNERS, INC.
Set forth below is the name, current business address, present principal
occupation, and employment history for at least the past five years of each
executive officer and director of Lehigh Tax Credit Partners, Inc. (the
"Managing Member"). Each person listed below is a citizen of the United States.
J. Michael Fried is a director and executive officer of the Managing
Member. Mr. Fried is also the President and the Director of Related Credit
Properties III Inc., a general partner of the Partnership. Additionally, Mr.
Fried is the sole stockholder of one of the general partners of Related Capital
Company ("Related Capital"), a New York general partnership that has, directly
or indirectly, sponsored 22 public and 238 private real estate investment
programs that have raised in excess of $2.8 billion from more than 106,000
investors. In that capacity, he is generally responsible for all of syndication,
finance, acquisition and investor reporting activities of Related Capital and
its affiliates. Mr. Fried practiced corporate law in New York City with the law
firm of Proskauer Rose Goetz & Mendelsohn from 1974 until he joined Related in
1979. Mr. Fried graduated from Brooklyn Law School with a Juris Doctor Degree,
magna cum laude; from Long Island University Graduate School with a Master of
Science degree in Psychology; and from Michigan State University with a Bachelor
of Arts degree in History.
Stuart J. Boesky is a director and executive officer of the Managing
Member. Mr. Boesky is also a Vice President of Related Credit Properties III
Inc., a general partner of the Partnership. Mr. Boesky practiced real estate and
tax law in New York City with the law firm of Shipley & Rothstein from 1984
until February 1986 when he joined Related Capital. From 1983 to 1984 Mr. Boesky
practiced law with the Boston law firm of Kaye, Fialkow, Richmond & Rothstein
(which subsequently merged with Stroock & Stroock & Lavan) and from 1978 to 1980
was a consultant specializing in real estate at the accounting firm of Laventhol
& Horwath. Mr. Boesky is the sole stockholder of one of the general partners of
Related Capital. Mr. Boesky graduated from Michigan State University with a
Bachelor of Arts degree and from Wayne State School of Law with a Juris Doctor
degree. He then received a Master of Laws degree in Taxation from Boston
University School of Law.
Alan P. Hirmes is a director and executive officer of the Managing Member.
Mr. Hirmes is also the Senior Vice President of Related Credit Properties III
Inc., a general partner of the Partnership. Additionally, Mr. Hirmes has been a
Certified Public Accountant in New York since 1978. Prior to joining Related
Capital in October 1983, Mr. Hirmes was employed by Wiener & Co., certified
public accountants. Mr. Hirmes is also the sole stockholder of one of the
general partners of Related Capital. Mr. Hirmes graduated from Hofstra
University with a Bachelor of Arts degree.
S-1
<PAGE>
SCHEDULE II
Local Partnership Schedule
<TABLE>
<CAPTION>
% of Units Occupied at May 1
-------------------------------------------------
Name and Location (Number of Units) Date Acquired 1996 1995 1994 1993 1992
- ------------------------------------------------- ----------------- ------- ------- ------- ------- ------
<S> <C> <C> <C> <C> <C> <C>
C.V. Bronx Associates, L.P./Gerald Gardens June 1989 97 95 98 100 85
Bronx, NY (121)
Michigan Rural Housing Limited Partnership September 1989 89 90 95 94 93
Michigan (192)(a)
Jefferson Limited Partnership December 1989 99 96 100 100 97
Shreveport, LA (69)
Inter-Tribal Indian Village Housing Development October 1989 100 100 97 100 100
Associates, L.P.
Providence, RI (36)
RBM Associates/Spring Garden December 1989 100 100 100 100 100
Philadelphia, PA (8)
Glenbrook Associates November 1989 100 100 98 100 100
Atglen, PA (35)
Affordable Flatbush Associates December 1989 100 97 100 100 100
Brooklyn, NY (30)
Barclay Village II, LTD. November 1989 100 100 100 100 100
Chambersburg, PA (87)
1850 Second Avenue Associates, L.P. October 1989 100 100 100 100 100
New York, NY (48)
R.P.P. Limited Dividend Housing/River Place November 1989 97 99 96 92 76
Detroit, MI (301)
Williamsburg Residential II, L.P. November 1989 92 96 99 95 95
Wichita, KS (50)
West 104th Street Associates L.P. December 1989 100 98 100 100 100
New York, NY (56)
Meredith Apartments, LTD. August 1989 100 100 95 95 95
Salt Lake City, UT (22)
Ritz Apartments, LTD. August 1989 100 100 100 100 100
Salt Lake City, UT (30)
Ashby Apartments, LTD. August 1989 96 100 100 100 100
Salt Lake City, UT (27)
South Toledo Associates, LTD. January 1990 100 100 94 100 100
Toledo, OH (18)
Dunlap School Venture January 1990 92 98 100 100 100
Philadelphia, PA (35)
Philipsburg Elderly Housing Associates February 1990 99 98 100 100 100
Philipsburg, PA (103)
Franklin Elderly Housing Associates February 1990 99 99 100 100 100
Franklin, PA (89)
</TABLE>
S-2
<PAGE>
SCHEDULE II (continued)
Local Partnership Schedule
<TABLE>
<CAPTION>
% of Units Occupied at May 1
-------------------------------------------------
Name and Location (Number of Units) Date Acquired 1996 1995 1994 1993 1992
- --------------------------------------------- ---------------- ------- ------- ------- ------- ------
<S> <C> <C> <C> <C> <C> <C>
Wade D. Mertz Elderly Housing Associates February 1990 99 99 100 100 100
Sharpsville, PA (103)
Lancashire Towers Associates February 1990 100 100 100 100 100
Limited Partnership
Cleveland, OH (240)
Northwood Associates Limited Partnership February 1990 97 92 95 100 98
Toledo, OH (176)
Brewery Renaissance Associates February 1990 98 98 98 100 100
Middletown, NY (53)
Brandywine Court Associates, L.P. November 1989 94 90 96 98 94
Jacksonville, FL (52)
Art Apartments Associates March 1990 83 94 97 100 100
Philadelphia, PA (30)
The Village at Carriage Hills, LTD. March 1990 100 100 100 100 100
Clinton, TN (48)
Mountainview Apartments, LTD. March 1990 100 100 100 100 100
Newport, TN (34)
The Park Village, Limited March 1990 100 100 100 99 100
Jackson, MS (24)
River Oaks Apartments, LTD. March 1990 100 100 100 100 100
Oneonta, AL (35)
Forrest Ridge Apartments, LTD. March 1990 100 100 100 100 100
Forrest City, AR (25)
The Hearthside Limited Dividend Housing March 1990 98 100 98 98 100
Association Limited Partnership
Portage, MI (101)
Redemptorist Limited Partnership March 1990 98 95 100 97 100
New Orleans, LA (126)
Manhattan A Associates April 1990 97 98 96 98 100
New York, NY (99)
Broadhurst Willows, L.P. April 1990 96 97 98 100 100
New York, NY (129)
Weidler Associates Limited Partnership May 1990 98 98 99 100 100
Portland, OR (52)
Gentle Pines-West Columbia Associates, L.P. June 1990 99 97 100 99 100
Columbia, SC (150)
Lake Forest Estates II, LTD. June 1990 100 97 100 100 100
Livingston, AL (32)
Las Camelias Limited Partnership June 1990 100 98 100 100 99
Rio Piedras, PR (166)
</TABLE>
S-3
<PAGE>
SCHEDULE II (continued)
Local Partnership Schedule
<TABLE>
<CAPTION>
% of Units Occupied at May 1
-------------------------------------------------
Name and Location (Number of Units) Date Acquired 1996 1995 1994 1993 1992
- -------------------------------------------- ----------------- ------- ------- ------- ------- ------
<S> <C> <C> <C> <C> <C> <C>
WPL Associates XXIII July 1990 97 98 100 95 92
Portland, OR (48)
Broadway Townhouses L.P. July 1990 100 100 100 100 100
Camden, NJ (175)
Puerto Rico Historic Zone Limited August 1990 100 100 100 100 60
Dividend Partnership
San Juan, PR (67)
Citrus Meadows Apartments, LTD. July 1990 94 96 95 98 96
Brandenton, FL (200)
Sartain School Venture August 1990 89 98 100 96 100
Philadelphia, PA (35)
Driftwood Terrace Associates, LTD. September 1990 100 99 100 100 100
Ft. Lauderdale, FL (176)
Holly Hill, LTD. October 1990 100 96 100 100 100
Greenville, TN (46)
Mayfair Apartments LTD. October 1990 100 100 100 99 94
Morristown, TN (48)
Foxcroft Apartments LTD. October 1990 98 100 100 99 98
Troy, AL (48)
Canterbury Apartments, LTD. October 1990 100 100 100 100 100
Indianola, MS (48)
Cutler Canal III Associates, LTD. October 1990 95 97 98 60 97
Miami, FL (262)
Jefferson Place L.P. October 1990 93 99 98 94 85
Olathe, KS (352)
Callaway Village, LTD. November 1990 100 100 100 98 100
Clinton, TN (46)
Commerce Square Apartments Associates L.P. December 1990 95 98 100 99 95
Smyrna, DE (80)
West 132nd Development Partnership December 1990 88 95 97 100 98
New York, NY (40)
Site H Development Co. December 1990 100 100 100 100 100
Brooklyn, NY (11)
L.I.H. Chestnut Associates, L.P. December 1990 97 85 100 100 63
Philadelphia, PA (78)
Diamond Phase II Venture December 1990 91 97 94 100 100
Philadelphia, PA (32)
Bookbindery Associates December 1990 98 93 95 100 100
Philadelphia, PA (41)
</TABLE>
S-4
<PAGE>
SCHEDULE II (continued)
Local Partnership Schedule
<TABLE>
<CAPTION>
% of Units Occupied at May 1
-------------------------------------------------
Name and Location (Number of Units) Date Acquired 1996 1995 1994 1993 1992
- -------------------------------------- ---------------- ------- ------- ------- ------- ------
<S> <C> <C> <C> <C> <C> <C>
The Hamlet, LTD. December 1990 98 92 95 96 63
Boynton Beach, FL (240)
Stop 22 Limited Partnership December 1990 100 99 100 100 100
Santurce, PR (153)
Knob Hill Apartments, LTD. December 1990 100 100 100 100 100
Greenville, TN (48)
Conifer James Street Associates December 1990 92 79 100 100 100
Syracuse, NY (73)
Longfellow Heights Apartments, L.P. March 1991 98 86 98 100 30
Kansas City, MO (104)
</TABLE>
(a) Consists of five apartment complexes located throughout Michigan.
S-5
<PAGE>
SCHEDULE III
Certain Information Concerning the Properties
As of March 31, 1996
<TABLE>
<CAPTION>
Initial Cost to Partnership
------------------------------
Costs
Capitalized
Carrying Buildings Subsequent
Amount of and to Acquisition:
Description Mortgages Land Improvements Improvements
- --------------------------------- ------------ ------------- --------------- ------------------
<S> <C> <C> <C> <C>
C.V. Bronx Associates, L.P. $ 0 $1,705,800 $ 0 $4,244,915
Bronx, NY
Michigan Rural Housing 4,737,024 141,930 4,013,207 1,898,120
Limited Partnership
Michigan
Jefferson Limited Partnership 1,375,991 65,000 3,289,429 50,806
Shreveport, LA
Inter-Tribal Indian Village 1,656,275 36,643 3,290,524 77,549
Housing Development
Associates, L.P.
Providence, RI
RBM Associates 975,000 0 1,590,733 72,853
Philadelphia, PA
Glenbrook Associates 1,658,126 137,000 2,833,081 123,724
Atglen, PA
Affordable Flatbush 1,683,627 0 2,551,365 170,036
Associates
Brooklyn, NY
Barclay Village II, LTD. 2,759,662 204,825 3,249,918 466,550
Chambersburg, PA
1850 Second Avenue 0 920,472 6,262,968 (54,340)
Associates, L.P.
New York, NY
R.P.P. Limited Dividend 32,000,000 0 29,051,380 14,577,181
Housing
Detroit, MI
Williamsburg Residential II, LP 1,525,655 358,305 2,713,872 68,613
Wichita, KS
West 104th Street 0 0 0 3,008,768
Associates, L.P.
New York, NY
Meredith Apartments, LTD. 658,571 40,000 1,500,117 17,587
Salt Lake City, UT
Ritz Apartments, LTD. 320,647 59,760 592,704 77,291
Salt Lake City, UT
Ashby Apartments, LTD. 320,524 50,850 549,611 122,886
Salt Lake City, UT
South Toledo Associates, LTD. 849,711 47,571 1,411,386 44,416
Toledo, OH
<CAPTION>
Gross Amount at which Carried At Close of Period
------------------------------------------------
Year of
Buildings and Accumulated Construction/
Description Land Improvements Total Depreciation Renovation
- --------------------------------- ------------- ---------------- ------------- --------------- ----------------
<S> <C> <C> <C> <C> <C>
C.V. Bronx Associates, L.P. $1,439,504 $4,511,211 $5,950,715 $ 718,496 1990
Bronx, NY
Michigan Rural Housing 148,716 5,904,541 6,053,257 1,292,432 1989
Limited Partnership
Michigan
Jefferson Limited Partnership 71,786 3,333,449 3,405,235 642,639 1990
Shreveport, LA
Inter-Tribal Indian Village 43,429 3,361,287 3,404,716 751,994 1989
Housing Development
Associates, L.P.
Providence, RI
RBM Associates 6,786 1,656,800 1,663,586 218,470 1989
Philadelphia, PA
Glenbrook Associates 143,786 2,950,019 3,093,805 593,807 1989
Atglen, PA
Affordable Flatbush 6,787 2,714,614 2,721,401 612,367 1989
Associates
Brooklyn, NY
Barclay Village II, LTD. 211,611 3,709,682 3,921,293 835,579 1989
Chambersburg, PA
1850 Second Avenue 392,457 6,736,643 7,129,100 1,309,127 1989
Associates, L.P.
New York, NY
R.P.P. Limited Dividend 6,786 43,621,775 43,628,561 9,478,091 1989
Housing
Detroit, MI
Williamsburg Residential II, LP 362,484 2,778,306 3,140,790 367,082 1989
Wichita, KS
West 104th Street 6,787 3,001,981 3,008,768 476,933 1990
Associates, L.P.
New York, NY
Meredith Apartments, LTD. 46,787 1,510,917 1,557,704 326,594 1989
Salt Lake City, UT
Ritz Apartments, LTD. 66,547 663,208 729,755 146,109 1989
Salt Lake City, UT
Ashby Apartments, LTD. 57,637 665,710 723,347 131,685 1989
Salt Lake City, UT
South Toledo Associates, LTD. 51,677 1,451,696 1,503,373 219,594 1988
Toledo, OH
<CAPTION>
Life on Which
Depreciation in
Latest Income
Statement is
Date Computed
Description Acquired (c) (d)
- --------------------------------- ------------- -----------------
<S> <C> <C>
C.V. Bronx Associates, L.P. June 1989 15-27.5 years
Bronx, NY
Michigan Rural Housing Sept. 1989 27.5 years
Limited Partnership
Michigan
Jefferson Limited Partnership Dec. 1989 27.5 years
Shreveport, LA
Inter-Tribal Indian Village Oct. 1989 27.5 years
Housing Development
Associates, L.P.
Providence, RI
RBM Associates Dec. 1989 40 years
Philadelphia, PA
Glenbrook Associates Nov. 1989 27.5 years
Atglen, PA
Affordable Flatbush Dec. 1989 27.5 years
Associates
Brooklyn, NY
Barclay Village II, LTD. Nov. 1989 27.5 years
Chambersburg, PA
1850 Second Avenue Nov. 1989 27.5 years
Associates, L.P.
New York, NY
R.P.P. Limited Dividend Nov. 1989 27-31 years
Housing
Detroit, MI
Williamsburg Residential II, LP Nov. 1989 40 years
Wichita, KS
West 104th Street Dec. 1989 27.5 years
Associates, L.P.
New York, NY
Meredith Apartments, LTD. Aug. 1989 27.5 years
Salt Lake City, UT
Ritz Apartments, LTD. Aug. 1989 27.5 years
Salt Lake City, UT
Ashby Apartments, LTD. Aug. 1989 27.5 years
Salt Lake City, UT
South Toledo Associates, LTD. Jan. 1990 40 years
Toledo, OH
</TABLE>
S-6
<PAGE>
<TABLE>
<CAPTION>
Initial Cost to Partnership
---------------------------
Costs
Capitalized
Carrying Buildings Subsequent
Amount of and to Acquisition:
Description Mortgages Land Improvements Improvements
- -------------------------------- ------------ --------- --------------- ------------------
<S> <C> <C> <C> <C>
Dunlap School Venture 2,486,852 5,352 4,522,721 145,358
Philadelphia, PA
Philips Elderly Housing 3,336,504 45,000 4,092,500 366,272
Associates
Philipsburg, PA
Franklin Elderly Housing 2,398,750 165,000 2,594,447 135,748
Associates
Franklin, PA
Wade D. Mertz Elderly 3,600,754 65,000 4,234,049 412,492
Housing Associates
Sharpsville, PA
Lancashire Towers 3,433,142 265,000 6,871,575 318,666
Associates LP
Cleveland, OH
Northwood Associates 2,216,969 200,000 4,065,856 290,312
Limited Partnership
Toledo, OH
Brewery Renaissance 3,375,000 77,220 102,780 6,149,166
Associates
Middletown, NY
Brandywine Court 1,439,790 78,000 1,960,262 59,685
Associates, L.P.
Jacksonville, FL
Art Apartments Associates 1,161,384 13,695 2,713,615 56,237
Philadelphia, PA
The Village at Carriage Hills, 1,475,738 86,663 1,753,799 54,563
LTD.
Clinton, TN
Mountainview Apartments, 1,046,459 49,918 1,254,182 52,584
LTD, Newport, TN
The Park Village, Limited 381,864 44,102 749,940 65,870
Jackson, MS
River Oaks Apartments, LTD. 1,075,784 80,340 1,221,336 51,117
Oneonta, AL
Forrest Ridge Apartments, LTD 825,752 36,000 1,016,647 62,385
Forest City, AR
<CAPTION>
Gross Amount at which Carried At Close of Period
------------------------------------------------
Year of
Buildings and Accumulated Construction/
Description Land Improvements Total Depreciation Renovation
- -------------------------------- --------- ---------------- ------------ --------------- ----------------
<S> <C> <C> <C> <C> <C>
Dunlap School Venture 9,458 4,663,973 4,673,431 627,296 1989
Philadelphia, PA
Philips Elderly Housing 68,101 4,435,671 4,503,772 1,089,564 1990
Associates
Philipsburg, PA
Franklin Elderly Housing 169,106 2,726,089 2,895,195 729,133 1989
Associates
Franklin, PA
Wade D. Mertz Elderly 69,106 4,642,435 4,711,541 1,254,737 1989
Housing Associates
Sharpsville, PA
Lancashire Towers 269,106 7,186,135 7,455,241 1,547,897 1989
Associates LP
Cleveland, OH
Northwood Associates 204,106 4,352,062 4,556,168 935,630 1989
Limited Partnership
Toledo, OH
Brewery Renaissance 81,326 6,247,840 6,329,166 1,117,693 1990
Associates
Middletown, NY
Brandywine Court 82,106 2,015,841 2,097,947 525,774 1988
Associates, L.P.
Jacksonville, FL
Art Apartments Associates 17,801 2,765,746 2,783,547 556,756 1990
Philadelphia, PA
The Village at Carriage Hills, 90,769 1,804,256 1,895,025 379,804 1990
LTD.
Clinton, TN
Mountainview Apartments, 54,024 1,302,660 1,356,684 300,055 1990
LTD,
Newport, TN
The Park Village, Limited 48,208 811,704 859,912 185,785 1990
Jackson, MS
River Oaks Apartments, LTD. 84,446 1,268,347 1,352,793 203,478 1990
Oneonta, AL
Forrest Ridge Apartments, LTD 40,106 1,074,926 1,115,032 166,499 1990
Forest City, AR
<CAPTION>
Life on Which
Depreciation in
Latest Income
Statement is
Date Computed
Description Acquired (c) (d)
- -------------------------------- ------------ -----------------
<S> <C> <C>
Dunlap School Venture Jan. 1990 40 years
Philadelphia, PA
Philips Elderly Housing Feb. 1990 27.5 years
Associates
Philipsburg, PA
Franklin Elderly Housing Feb. 1990 27.5 years
Associates
Franklin, PA
Wade D. Mertz Elderly Feb. 1990 27.5 years
Housing Associates
Sharpsville, PA
Lancashire Towers Feb. 1990 27.5 years
Associates LP
Cleveland, OH
Northwood Associates Feb. 1990 27.5 years
Limited Partnership
Toledo, OH
Brewery Renaissance Feb. 1990 27.5 years
Associates
Middletown, NY
Brandywine Court Nov. 1990 27.5 years
Associates, L.P.
Jacksonville, FL
Art Apartments Associates Mar. 1990 27.5 years
Philadelphia, PA
The Village at Carriage Hills, Mar. 1990 25-40 years
LTD.
Clinton, TN
Mountainview Apartments, Mar. 1990 25-40 years
LTD,
Newport, TN
The Park Village, Limited Mar. 1990 40 years
Jackson, MS
River Oaks Apartments, LTD. Mar. 1990 25-40 years
Oneonta, AL
Forrest Ridge Apartments, LTD Mar. 1990 25-40 years
Forest City, AR
</TABLE>
S-7
<PAGE>
<TABLE>
<CAPTION>
Initial Cost to Partnership
----------------------------
Costs
Capitalized
Carrying Buildings Subsequent
Amount of and to Acquisition:
Description Mortgages Land Improvements Improvements
- ------------------------------- ------------ ----------- --------------- ------------------
<S> <C> <C> <C> <C>
The Hearthside Limited 2,952,393 242,550 4,667,594 61,725
Dividend Housing
Associates Limited
Partnership
Portgage, MI
Redemptorist L.P. 2,855,201 0 6,497,259 49,424
New Orleans, LA
Manhattan A Associates 4,224,156 1,092,959 5,991,888 324,273
New York, NY
Broadhurst Willows, L.P. 0 102,324 5,151,039 39,644
New York, NY
Weidler Associates Limited 1,272,963 225,000 0 2,161,912
Partnership
Portland, OR
Gentle Pines/West Columbia 3,668,420 327,650 4,276,739 136,970
Associates, L.P.
Columbia, SC
Lake Forest Estates II, LTD. 971,513 21,623 1,182,480 45,048
Livingston, AL
Las Camelias L.P. 6,000,000 249,000 6,400 9,240,637
Rio Piedras, PR
WPL Associates XIIII 2,274,922 0 3,721,763 173,781
Portland, OR
Broadway Townhouses L.P. 10,779,295 163,000 5,120,066 14,424,001
Camden, NJ
Puerto Rico Historic Zone 4,025,000 0 0 6,478,736
Limited Dividend
Partnership
San Juan, PR
Citrus Meadows Apartments, 7,350,353 610,073 0 9,377,919
LTD.
Brandenton, FL
Sartain School Venture 1,967,022 3,883 3,486,875 113,043
Philadelphia, PA
Driftwood Terrace Associates, 7,059,701 270,000 7,753,765 166,514
LTD.
Ft. Lauderdale, FL
Holly Hill, LTD. 1,396,050 50,000 1,631,820 92,745
Greenville, TN
<CAPTION>
Gross Amount at which Carried At Close of Period
------------------------------------------------
Year of
Buildings and Accumulated Construction/
Description Land Improvements Total Depreciation Renovation
- ------------------------------- ----------- ---------------- ------------ --------------- ----------------
<S> <C> <C> <C> <C> <C>
The Hearthside Limited 246,656 4,725,213 4,971,869 1,310,018 1990
Dividend Housing
Associates Limited
Partnership
Portgage, MI
Redemptorist L.P. 4,106 6,542,577 6,546,683 1,256,007 1990
New Orleans, LA
Manhattan A Associates 1,097,065 6,312,055 7,409,120 1,303,818 1990
New York, NY
Broadhurst Willows, L.P. 106,430 5,186,577 5,293,007 1,614,253 1990
New York, NY
Weidler Associates Limited 229,106 2,157,806 2,386,912 397,273 1990
Partnership
Portland, OR
Gentle Pines/West Columbia 331,756 4,409,603 4,741,359 1,213,114 1990
Associates, L.P.
Columbia, SC
Lake Forest Estates II, LTD. 25,729 1,223,422 1,249,151 183,979 1990
Livingston, AL
Las Camelias L.P. 298,878 9,197,159 9,496,037 1,638,317 1990
Rio Piedras, PR
WPL Associates XIIII 4,106 3,891,438 3,895,544 827,449 1990
Portland, OR
Broadway Townhouses L.P. 167,106 19,539,961 19,707,067 3,786,489 1990
Camden, NJ
Puerto Rico Historic Zone 156,842 6,321,894 6,478,736 1,016,251 1990
Limited Dividend
Partnership
San Juan, PR
Citrus Meadows Apartments, 812,609 9,175,383 9,987,992 1,836,005 1990
LTD.
Brandenton, FL
Sartain School Venture 7,989 3,595,812 3,603,801 481,195 1990
Philadelphia, PA
Driftwood Terrace Associates, 274,106 7,916,173 8,190,279 2,549,460 1989
LTD.
Ft. Lauderdale, FL
Holly Hill, LTD. 54,106 1,720,459 1,774,565 342,677 1990
Greenville, TN
<CAPTION>
Life on Which
Depreciation in
Latest Income
Statement is
Date Computed
Description Acquired (c) (d)
- ------------------------------- ------------- -----------------
<S> <C> <C>
The Hearthside Limited Mar. 1990 15-27.5 years
Dividend Housing
Associates Limited
Partnership
Portgage, MI
Redemptorist L.P. Mar. 1990 27.5 years
New Orleans, LA
Manhattan A Associates Apr. 1990 27.5 years
New York, NY
Broadhurst Willows, L.P. Apr. 1990 25 years
New York, NY
Weidler Associates Limited May 1990 15-27.5 years
Partnership
Portland, OR
Gentle Pines/West Columbia June 1990 27.5 years
Associates, L.P.
Columbia, SC
Lake Forest Estates II, LTD. June 1990 25-40 years
Livingston, AL
Las Camelias L.P. June 1990 27.5 years
Rio Piedras, PR
WPL Associates XIIII July 1990 27.5 years
Portland, OR
Broadway Townhouses L.P. July 1990 27.5 years
Camden, NJ
Puerto Rico Historic Zone Aug. 1990 27.5 years
Limited Dividend
Partnership
San Juan, PR
Citrus Meadows Apartments, July 1990 27.5 years
LTD.
Brandenton, FL
Sartain School Venture Aug. 1990 15-40 years
Philadelphia, PA
Driftwood Terrace Associates, Sept. 1990 27.5 years
LTD.
Ft. Lauderdale, FL
Holly Hill, LTD. Oct. 1990 25-40 years
Greenville, TN
</TABLE>
S-8
<PAGE>
<TABLE>
<CAPTION>
Initial Cost to Partnership
----------------------------
Costs
Capitalized
Carrying Buildings Subsequent
Amount of and to Acquisition:
Description Mortgages Land Improvements Improvements
- ----------------------------------- ------------ ----------- --------------- ------------------
<S> <C> <C> <C> <C>
Mayfair Apartments LTD. 1,380,401 50,000 1,614,861 54,747
Morristown, TN
Foxcroft Apartments Ltd. 1,252,673 75,000 1,382,973 86,337
Troy, AL
Canterbury Apartments, LTD. 1,436,436 33,000 1,738,871 56,072
Indianola, MS
Cutler Canal III Associates, LTD. 7,931,617 1,269,265 0 11,933,201
Miami, FL
Jefferson Place L.P. 12,800,000 531,063 13,477,553 44,416
Olathe, KS
Callaway Village, LTD. 1,410,548 66,000 1,613,920 75,949
Clinton, TN
Commerce Square 2,895,817 303,837 0 4,785,670
Apartments Associates, L.P.
Smyrna, DE
West 132nd Development 1,763,638 0 0 2,770,498
Partnership
New York, NY
Site H Development Co. 785,589 0 1,346,000 44,416
Brooklyn, NY
L.I.H. Chestnut Associates, 6,189,619 752,000 693,995 6,252,451
L.P.
Philadelphia, PA
Diamond Phase II Venture 1,899,222 0 0 3,989,774
Philadelphia, PA
Bookbindery Associates 1,532,485 0 0 3,841,162
Philadelphia, PA
The Hamlet, LTD. 8,146,693 1,180,482 0 13,320,486
Boynton, FL
Stop 22 Limited Partnership 8,411,424 0 4,025,481 6,847,588
Santurce, PR
Knob Hill Apartments, LTD. 1,482,851 75,085 0 1,822,528
Greenville, TN
Conifer James Street 2,551,107 57,034 0 4,430,532
Associates
Syracuse, NY
<CAPTION>
Gross Amount at which Carried At Close of Period
------------------------------------------------
Year of
Buildings and Accumulated Construction/
Description Land Improvements Total Depreciation Renovation
- ----------------------------------- ----------- ---------------- ------------ --------------- ----------------
<S> <C> <C> <C> <C> <C>
Mayfair Apartments LTD. 54,106 1,665,502 1,719,608 251,151 1990
Morristown, TN
Foxcroft Apartments Ltd. 79,106 1,465,204 1,544,310 219,498 1990
Troy, AL
Canterbury Apartments, LTD. 37,106 1,790,837 1,827,943 275,795 1990
Indianola, MS
Cutler Canal III Associates, LTD. 1,273,507 11,928,959 13,202,466 1,104,517 1990
Miami, FL
Jefferson Place L.P. 535,169 13,517,863 14,053,032 3,444,937 1990
Olathe, KS
Callaway Village, LTD. 70,106 1,685,763 1,755,869 252,112 1990
Clinton, TN
Commerce Square 307,943 4,781,564 5,089,507 511,484 1990
Apartments Associates, L.P.
Smyrna, DE
West 132nd Development 13,106 2,757,392 2,770,498 339,763 1990
Partnership
New York, NY
Site H Development Co. 4,106 1,386,310 1,390,416 301,547 1990
Brooklyn, NY
L.I.H. Chestnut Associates, 759,229 6,939,217 7,698,446 901,520 1990
L.P.
Philadelphia, PA
Diamond Phase II Venture 22,081 3,967,693 3,989,774 426,820 1990
Philadelphia, PA
Bookbindery Associates 29,105 3,812,057 3,841,162 415,238 1990
Philadelphia, PA
The Hamlet, LTD. 1,184,587 13,316,381 14,500,968 2,110,235 1990
Boynton, FL
Stop 22 Limited Partnership 216,918 10,656,151 10,873,069 1,752,488 1990
Santurce, PR
Knob Hill Apartments, LTD. 79,190 1,818,423 1,897,613 248,147 1990
Greenville, TN
Conifer James Street 61,139 4,426,427 4,487,566 785,057 1990
Associates
Syracuse, NY
<CAPTION>
Life on Which
Depreciation in
Latest Income
Statement is
Date Computed
Description Acquired (c) (d)
- ----------------------------------- ------------ -----------------
<S> <C> <C>
Mayfair Apartments LTD. Oct. 1990 25-40 years
Morristown, TN
Foxcroft Apartments Ltd. Oct. 1990 25-40 years
Troy, AL
Canterbury Apartments, LTD. Oct. 1990 25-40 years
Indianola, MS
Cutler Canal III Associates, LTD. Oct. 1990 40 years
Miami, FL
Jefferson Place L.P. Oct. 1990 19 years
Olathe, KS
Callaway Village, LTD. Nov. 1990 25-40 years
Clinton, TN
Commerce Square Dec. 1990 27.5-40 years
Apartments Associates, L.P.
Smyrna, DE
West 132nd Development Dec. 1990 40 years
Partnership
New York, NY
Site H Development Co. Dec. 1990 27.5 years
Brooklyn, NY
L.I.H. Chestnut Associates, L.P. Dec. 1990 35 years
Philadelphia, PA
Diamond Phase II Venture Dec. 1990 40 years
Philadelphia, PA
Bookbindery Associates Dec. 1990 40 years
Philadelphia, PA
The Hamlet, LTD. Dec. 1990 27.5 years
Boynton, FL
Stop 22 Limited Partnership Dec. 1990 27.5-31.5 years
Santurce, PR
Knob Hill Apartments, LTD. Dec. 1990 40 years
Greenville, TN
Conifer James Street Dec. 1990 15-27.5 years
Associates
Syracuse, NY
</TABLE>
S-9
<PAGE>
<TABLE>
<CAPTION>
Initial Cost to Partnership
------------------------------- Costs
Capitalized
Carrying Buildings Subsequent
Amount of and to Acquisition:
Description Mortgages Land Improvements Improvements
- -------------------- --------------- -------------- --------------- ------------------
<S> <C> <C> <C> <C>
Longfellow Heights
Apartments, L.P.
Kansas City, MO 4,161,430 0 7,739,692 194,108
------------ ----------- ------------ ------------
$201,604,094 $12,730,274 $183,175,038 $136,623,717
============ =========== ============ ============
<CAPTION>
Gross Amount at which Carried At Close of Period
------------------------------------------------
Buildings Year of
and Accumulated Construction/
Description Land Improvements Total Depreciation Renovation
- -------------------- -------------- ---------------- --------------- --------------- ----------------
<S> <C> <C> <C> <C> <C>
Longfellow Heights
Apartments, L.P.
Kansas City, MO 204 7,933,596 7,933,800 976,309 1991
----------- ------------ ------------ -----------
$12,894,634 $319,634,395 $332,529,029 $61,814,023
=========== ============ ============ ===========
<CAPTION>
Life on Which
Depreciation in
Latest Income
Statement is
Date Computed
Description Acquired (c) (d)
- -------------------- ------------ -----------------
<S> <C> <C>
Longfellow Heights
Apartments, L.P.
Kansas City, MO Mar. 1991 40 years
</TABLE>
[(a) Properties are subject to mortgage notes as shown below.]
[(b) This amount reflects construction note payable.]
(c) Personal property is depreciated primarily by the straight line method over
the estimated useful life ranging from 5 to 10 years.
(d) Since all properties were acquired as operating properties, depreciation is
computed using primarily the straight line method over the estimated useful
life determined by the Partnership date of acquisition.
<TABLE>
<CAPTION>
Cost of Property and Equipment Accumulated Depreciation
----------------------------------------------- --------------------------------------------
Year Ended March 31,
--------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1996 1995 1994 1996 1995 1994
------------ ------------ ------------ ----------- ----------- -----------
Balance at beginning of period $331,283,225 $330,297,974 $328,960,769 $49,956,736 $38,402,455 $26,799,101
Additions during period:
Improvements 1,290,504 1,003,595 1,409,856
------------ ------------
Depreciation expense 11,885,729 11,565,888 11,648,794
Reductions during period:
Dispositions 44,700 18,344 72,651 28,442 11,607 45,440
------------ ------------ ------------ ----------- ----------- -----------
Balance at end of period $332,529,029 $331,283,225 $330,297,974 $61,814,023 $49,956,736 $38,402,455
============ ============ ============ =========== =========== ===========
</TABLE>
At the time the local partnerships were acquired by the Partnership, the entire
purchase price paid by the Partnership was pushed down to the local partnerships
as property and equipment with an offsetting credit to capital. Since the
projects were in the construction phase at the time of acquisition, the capital
accounts were insignificant at the time of purchase. Therefore, there are no
material differences between the original cost basis for tax and GAAP.
S-10
<PAGE>
Facsimile copies of the Letter of Transmittal, properly completed and duly
executed, will be accepted. Questions and requests for assistance may be
directed to the Information Agent at the address and telephone number listed
below. Additional copies of this Offer to Purchase, the Letter of Transmittal
and other tender offer materials may be obtained from the Information
Agent/Depositary as set forth below, and will be furnished promptly at the
Purchaser's expense. The Letter of Transmittal and any other required documents
should be sent or delivered by each BACs holder to the Information
Agent/Depositary at its address set forth below. To be effective, a duly
completed and signed Letter of Transmittal must be received by the Information
Agent/Depositary at the address set forth below before 12:00 midnight, New York
City Time, on Thursday, May 8, 1997.
By Mail/Hand or Overnight Delivery:
Related Capital Company
625 Madison Avenue
New York, New York 10022
Attention: Denise Bernstein
For Additional Information Call:
Denise Bernstein
c/o Related Capital Company
(800) 600-6422 (ext.2030)
LETTER OF TRANSMITTAL
TO
TENDER BENEFICIAL ASSIGNMENT CERTIFICATES
IN LIBERTY TAX CREDIT PLUS III L.P.
PURSUANT TO THE OFFER TO PURCHASE DATED APRIL 10, 1997
BY LEHIGH TAX CREDIT PARTNERS L.L.C.
Number of Number of(1) Purchase Price(2)
BACs Owned BACs Tendered Per BACs
---------- ------------- -----------------
-------------------------------- $588.20
--------------------------------
--------------------------------
--------------------------------
Please print your name and address above, as they appear on the mailing label
pursuant to which you received the Offer to Purchase and this Letter of
Transmittal.
(1) If no indication is marked in the Number of BACs Tendered column, all BACs
issued to you will be deemed to have been tendered.
(2) The Purchase Price will be automatically reduced by $10 per BAC for each
month (or part of a month) between May 31, 1997 and the date of transfer for
BACs transferred after May 31, 1997.
===============================================================================
THE OFFER, PRORATION PERIOD AND WITHDRAWAL RIGHTS WILL EXPIRE AT MIDNIGHT, NEW
YORK CITY TIME, ON THURSDAY, MAY 8, 1997 (THE "EXPIRATION DATE") UNLESS SUCH
OFFER IS EXTENDED.
The undersigned hereby tender(s) to Lehigh Tax Credit Partners L.L.C., a
Delaware limited liability company (the "Purchaser"), the number of Beneficial
Assignment Certificates ("BACs") representing assignments of limited partnership
interests in Liberty Tax Credit Plus III L.P., a Delaware limited partnership
(the "Partnership"), specified above, pursuant to the Purchaser's offer to
purchase up to 17,500 of the issued and outstanding BACs at a purchase price of
$588.20 per BAC, net to the seller in cash (the "Purchase Price"), without
interest thereon, upon the terms and subject to the conditions set forth in the
Offer to Purchase dated April 10, 1997 (the "Offer to Purchase") and this Letter
of Transmittal (the "Letter of Transmittal", which, together with the Offer to
Purchase and any supplements, modifications or amendments thereto, constitute
the "Offer"), all as more fully described in the Offer to Purchase. The Purchase
Price will be automatically reduced by $10 per BAC for each month (or part of a
month) between May 31, 1997 and the date of transfer for BACs transferred after
May 31, 1997. BACs HOLDERS WHO TENDER THEIR BACS WILL NOT BE OBLIGATED TO PAY
ANY COMMISSIONS OR PARTNERSHIP TRANSFER FEES, WHICH COMMISSIONS AND FEES WILL BE
BORNE BY THE PURCHASER. Receipt of the Offer to Purchase is hereby acknowledged.
Capitalized terms used but not defined herein have the respective meanings
ascribed to them in the Offer to Purchase.
By executing and delivering this Letter of Transmittal, a tendering BACs
holder irrevocably appoints the Purchaser and the designees of the Purchaser and
each of them as such BACs holder's proxies, each with full power of
substitution, to the full extent of such BACs holder's rights with respect to
the BACs tendered by such BACs holder and accepted for payment by the Purchaser
(and with respect to any and all other BACs or other securities issued or
issuable in respect of such BACs on or after the date hereof). All such proxies
shall be considered irrevocable and coupled with an interest in the tendered
BACs. Such appointment will be effective when, and only to the extent that, the
Purchaser accepts such BACs for payment. Upon such acceptance for payment, all
prior proxies given by such BACs holder with respect to such BACs (and such
other BACs and securities) will be revoked without further action, and no
subsequent proxies may be given nor any subsequent written consents executed
(and, if given or executed, will not be deemed effective). The Purchaser and its
designees will, with respect to the BACs (and such other BACs and securities)
for which such appointment is effective, be empowered to exercise all voting and
other rights of such BACs holder as it in its sole discretion may deem proper
pursuant to the Partnership Agreement or otherwise. The Purchaser may assign
such proxy to any person with or without assigning the related BACs with respect
to which such proxy and/or power of attorney was granted. The Purchaser reserves
the right to require that, in order for BACs to be deemed validly tendered,
immediately upon the Purchaser's payment for such BACs, the Purchaser must be
able to exercise full voting rights with respect to such BACs and other
securities, including voting at any meeting of BACs holders.
By executing and delivering this Letter of Transmittal, a tendering BACs
holder also irrevocably constitutes and appoints the Purchaser and its designees
as the BACs holder's attorneys-in-fact, each with full power of substitution to
the extent of the BACs holder's rights with respect to the BACs tendered by the
BACs holder and accepted for payment by the Purchaser. Such appointment will be
effective when, and only to the extent that, the Purchaser accepts the tendered
BACs for payment. Upon such acceptance for payment, all prior powers of attorney
granted by the BACs holder with respect to such BAC will, without further
action, be revoked, and no subsequent powers of attorney may be granted (and if
granted will not be effective). Pursuant to such appointment as
attorneys-in-fact, the Purchaser and its designees each will have the power,
among other things, (i) to seek to transfer ownership of such BACs on the books
and records of the Partnership maintained by the Assignor Limited Partner (and
execute and deliver any accompanying evidences of transfer and authenticity any
of them may deem necessary or appropriate in connection therewith, including,
without limitation, any documents or instruments required to be executed under
the Partnership Agreement or a "Transferor's (Seller's) Application for
Transfer" created by the NASD, if required), (ii) upon receipt by the
Information Agent/Depositary (as the tendering BACs holder's agent) of the
Purchase Price, to be allocated all Tax Credits and tax losses and to receive
any and all distributions made by the Partnership after the Expiration Date, and
to receive all benefits and otherwise exercise all rights of beneficial
ownership of such BACs in accordance with the terms of the Offer, (iii) to
execute and deliver to the Partnership, the General Partners and/or the Assignor
Limited Partner (as the case may be) a change of address form instructing the
Partnership to send any and all future distributions to which the Purchaser is
entitled pursuant to the terms of the Offer in respect of tendered BACs to the
address specified in such form, and (iv) to endorse any check payable to or upon
the order of such BACs holder representing a distribution, if any, to which the
Purchaser is entitled pursuant to the terms of the Offer, in each case on behalf
of the tendering BACs holder. If legal title to the BACs is held through an IRA
or KEOGH or similar account, the BACs holder understands that this Letter of
Transmittal must be signed by the custodian of such IRA or KEOGH account and the
BACs holder hereby authorizes and directs the custodian of such IRA or KEOGH to
confirm this Letter of Transmittal. This power of attorney shall not be affected
by the subsequent mental disability of the BACs holder, and the Purchaser shall
not be required to post bond in any nature in connection with this power of
attorney. The Purchaser may assign such power of attorney to any person with or
without assigning the related BACs with respect to which such power of attorney
was granted.
By executing and delivering this Letter of Transmittal, a tendering BACs
holder irrevocably assigns to the Purchaser and its assigns all of the, direct
and indirect, right, title and interest of such BACs holder in the Partnership
with respect to the BACs tendered and purchased pursuant to the Offer,
including, without limitation, such BACs holder's right, title and interest in
and to any and all Tax Credits and tax losses and any and all distributions made
by the Partnership after the Expiration Date in respect of the BACs tendered by
such BACs 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
Expiration Date. The Purchaser reserves the right to transfer or assign, in
whole or from time to time in part, to any third party, the right to purchase
BACs tendered pursuant to the Offer, together with its rights under the Letter
of Transmittal, but any such transfer or assignment will not relieve the
assigning party of its obligations under the Offer or prejudice the rights of
tendering BACs holders to receive payment for BACs validly tendered and accepted
for payment pursuant to the Offer.
By executing this Letter of Transmittal, the undersigned represents that
either (a) the undersigned is not a plan subject to Title I of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA") or Section 4975 of
the Internal Revenue Code of 1986, as amended (the "Code"), or an entity deemed
to hold "plan assets" within the meaning of 29 C.F.R. [sec]2510.3-101 of any
such plan or (b) the tender and acceptance of BACs pursuant to the Offer will
not result in a nonexempt prohibited transaction under Section 406 of ERISA or
Section 4975 of the Code.
The undersigned recognizes that, if proration is required pursuant to the
terms of the Offer, the Purchaser will accept for payment from among those BACs
validly tendered on or prior to the Expiration Date and not properly withdrawn,
the maximum number of BACs permitted pursuant to the Offer on a pro rata basis,
with adjustments to avoid purchases which would violate the terms of the Offer,
based upon the number of BACs validly tendered prior to the Expiration Date and
not properly withdrawn.
The undersigned understands that a tender of BACs to the Purchaser will
constitute a binding agreement between the undersigned and the Purchaser upon
the terms and subject to the conditions of the Offer. The undersigned recognizes
that under certain circumstances set forth in Section 2 ("Proration; Acceptance
for Payment and Payment for BACs") and Section 14 ("Conditions of the Offer") of
the Offer to Purchase, the Purchaser may not be required to accept for payment
any of the BACs tendered hereby. In such event, the undersigned understands that
any Letter of Transmittal for BACs not accepted for payment will be destroyed by
the Purchaser. Except as stated in Section 4 ("Withdrawal Rights") of the Offer
to Purchase, this tender is irrevocable, provided BACs tendered pursuant to the
Offer may be withdrawn at any time prior to the Expiration Date. The undersigned
acknowledges that (i) upon acceptance of, and payment for, tendered BACs, the
undersigned shall no longer be entitled to any benefits as a BACs holder and
(ii) notwithstanding that the undersigned may retain a Beneficial Assignment
Certificate, such certificate shall not entitle the undersigned or any purported
transferees (other than the Purchaser) to any benefits as a BACs holder.
<PAGE>
- --------------------------------------------------------------------------------
SIGNATURE BOX
- --------------------------------------------------------------------------------
Please sign exactly as you printed your name above. For joint owners, each joint
owner must sign. All signatures must be medallion guaranteed by an Eligible
Institution. (See Instruction 2.) The signatory hereto hereby certifies under
penalties of per jury the Taxpayer Identification Number (i.e., the signatory's
social security number) furnished in the blank provided in this Signature Box
and the statements in Box A, Box B and, if applicable, Box C. The undersigned
hereby represents and warrants for the benefit of the Partnership and the
Purchaser that the undersigned owns (or beneficially owns) the BACs tendered
hereby and has full power and authority to validly tender, sell, assign,
transfer, convey and deliver the BACs tendered hereby and that when the same are
accepted for payment by the Purchaser, the Purchaser will acquire good,
marketable and unencumbered title thereto, free and clear of all liens,
restrictions, charges, encumbrances, conditional sales agreements or other
obligations relating to the sale or transfer thereof, such BACs will not be
subject to any adverse claims, the transfer and assignment contemplated herein
are in compliance with all applicable laws and regulations, and that upon such
transfer and assignment the undersigned will not own less than 5 BACs. All
authority herein conferred or agreed to be conferred shall survive the death or
incapacity of the undersigned and any obligations of the undersigned shall be
binding upon the heirs, personal representatives, successors and assigns of the
undersigned. Except as stated in Section 4 ("Withdrawal Rights") of the Offer to
Purchase, this tender is irrevocable.
X _____________________________________________________________________________
(Signature of Owner) (Date)
X _____________________________________________________________________________
Tax Identification Number of Owner
X _____________________________________________________________________________
(Signature of Co-Owner) (Date)
_______________________________________________________________________________
(Title)
Telephone (Day) ( )___________________ Telephone (Eve) ( )___________________
Guarantee of Signature (See Instruction 2):
Name of Eligible Institution: _________________________________________________
Authorized Signature: _________________________________________________________
- --------------------------------------------------------------------------------
TAX CERTIFICATES
- --------------------------------------------------------------------------------
BOX A
SUBSTITUTE FORM W-9
(See Instruction 3)
The person signing this Letter of Transmittal hereby certifies the following to
the Purchaser under penalties of perjury:
(i) The Taxpayer Identification Number ("TIN") furnished in the space provided
for that purpose in the Signature Box of this Letter of Transmittal is the
correct TIN of the BACs holder. If no TIN is provided above and this box [ ] is
checked, the BACs holder has applied for a TIN. If the BACs holder has applied
for a TIN, a TIN has not been issued to the BACs holder, and either (a) the BACs
holder has mailed or delivered an application to receive a TIN to the
appropriate Internal Revenue Service ("IRS") Center or Social Security
Administration Office, or (b) the BACs holder intends to mail or deliver an
application in the near future, it is hereby understood that if the BACs holder
does not provide a TIN to the Purchaser within sixty (60) days, 31% of all
reportable payments made to the BACs holder thereafter will be withheld until a
TIN is provided to the Purchaser; and
(ii) Unless this box [ ] is checked, the BACs holder is not subject to backup
withholding either because the BACs holder (a) is exempt from backup
withholding, (b) has not been notified by the IRS that the BACs holder is
subject to backup withholding as a result of a failure to report all interest or
dividends, or (c) has been notified by the IRS that such BACs holder is no
longer subject to backup withholding.
Note: Place an "X" in the box in (ii) above, if you are unable to certify that
the BACs holder is not subject to backup withholding.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
BOX B
FIRPTA AFFIDAVIT
(See Instruction 3)
Under Section 1445(c)(5) of the Code and Treas. Reg. 1.1445-IIT(d), a transferee
must withhold tax equal to 10% of the amount realized with respect to certain
transfers of an interest in a partnership if 50% or more of the value of its
gross assets consists of U.S. real property interests and 90% or more of the
value of its gross assets consists of U.S. real property interests plus cash or
cash equivalents, and the holder of the partnership interest is a foreign
person. To inform the Purchaser that no withholding is required with respect to
the BACs holder's interest in the Partnership, the person signing this Letter of
Transmittal hereby certifies the following under penalties of perjury:
(i) Unless this box [ ] is checked, the BACs holder, if an individual, is a U.S.
citizen or a resident alien for purposes of U.S. income taxation, and if other
than an individual, is not a foreign corporation, foreign partnership, foreign
trust or foreign estate (as those terms are defined in the Code and Income Tax
Regulations);
(ii) the BACs holder's U.S. social security number (for individuals) or employer
identification number (for non-individuals) is correct as furnished in the blank
provided for that purpose on the back of this Letter of Transmittal; and
(iii) the BACs holder's home address (for individuals), or office address (for
non-individuals), is correctly printed (or corrected) on the back of this Letter
of Transmittal. If a corporation, the jurisdiction of incorporation is
______________________________ .
The person signing this Letter of Transmittal understands that this
certification may be disclosed to the IRS by the Purchaser and that any false
statements contained herein could be punished by fine, imprisonment, or both.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
BOX C
SUBSTITUTE FORM W-9
(See Instruction 3)
By checking this box [ ], the person signing this Letter of Transmittal hereby
certifies under penalties of perjury that the BACs holder is an "exempt foreign
person" for purposes of the backup withholding rules under U.S. federal income
tax laws, because the BACs holder:
(i) Is a nonresident alien or a foreign corporation, partnership, estate or
trust;
(ii) If an individual, has not been and plans not to be present in the U.S. for
a total of 183 days or more during the calendar year; and
(iii) Neither engages, nor plans to engage, in a U.S. trade or business that has
effectively connected gains from transactions with a broker or barter
exchange.
- --------------------------------------------------------------------------------
For BACs to be accepted for purchase, BACs holders should complete and sign this
Letter of Transmittal in the Signature Box and return it in the self-addressed,
postage-paid envelope enclosed, or by hand or overnight courier to: Denise
Bernstein, c/o Related Capital Company, 625 Madison Avenue, New York, NY 10022,
or by Facsimile to: (212) 593-5794. Delivery of this Letter of Transmittal or
any other required documents to an address other than the one set forth above or
transmission via facsimile other than as set forth above does not constitute
valid delivery.
PLEASE CAREFULLY READ THE INSTRUCTIONS ACCOMPANYING THIS LETTER OF TRANSMITTAL
AND BOXES A, B AND C ABOVE.
<PAGE>
INSTRUCTIONS FOR COMPLETING LETTER OF TRANSMITTAL
Forming Part of the Terms and Conditions of the Offer
- --------------------------------------------------------------------------------
FOR ASSISTANCE IN COMPLETING THE LETTER OF TRANSMITTAL, CALL:
DENISE BERNSTEIN, c/o RELATED CAPITAL COMPANY, AT (800) 600-6422 (ext. 2030)
- --------------------------------------------------------------------------------
1. Delivery of Letter of Transmittal. For convenience in responding to the
Offer, a self-addressed, postage-paid envelope had been enclosed with the
Offer to Purchase. However, to ensure receipt of the Letter of Transmittal,
it is suggested that you use an overnight courier or, if the Letter of
Transmittal is to be delivered by United States mail, that you use
certified or registered mail, return receipt requested.
To be effective, a duly completed and original of the signed Letter of
Transmittal must be received by the Information Agent/Depositary at the
address (or facsimile number) set forth below before the Expiration Date,
12:00 Midnight, New York City Time on Thursday, May 8, 1997, unless
extended. Letters of Transmittal which have been duly executed, but where
no indication is marked in the "Number of BACs Tendered" column, shall be
deemed to have tendered all BACs pursuant to the Offer. Tenders of less
than all BACs owned by a BACs holder that would result in such BACs holder
holding less than 5 BACs will not be accepted.
By Mail/Hand or Overnight Delivery: RELATED CAPITAL COMPANY
625 Madison Avenue
New York, New York 10022
Attention: Denise Bernstein
By Facsimile (see note below): (212) 593-5794
For Additional Information Call: (800) 600-6422 (ext. 2030)
THE METHOD OF DELIVERY OF THE LETTER OF THE TRANSMITTAL AND ALL OTHER REQUIRED
DOCUMENTS IS AT THE OPTION AND SOLE RISK OF THE TENDERING BACS HOLDER, AND THE
DELIVERY WILL BE DEEMED MADE ONLY WHEN ACTUALLY RECEIVED BY THE INFORMATION
AGENT/DEPOSITARY. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ASSURE
TIMELY DELIVERY. IF TENDERING BY FACSIMILE, PLEASE TRANSMIT BOTH THE FRONT AND
BACK OF THE LETTER OF TRANSMITTAL AND THE TAX CERTIFICATION PAGE AND MAIL THE
ORIGINAL COPIES OF SUCH PAGES TO THE INFORMATION AGENT/DEPOSITARY AT THE ADDRESS
LISTED ABOVE PRIOR TO THE EXPIRATION OF THE OFFER. ONLY ORIGINAL LETTERS OF
TRANSMITTAL WILL BE ACCEPTED FOR PURCHASE.
All tendering holders of BACs, by execution of this Letter of Transmittal or
facsimile hereof, waive any right to receive any notice of the acceptance of
their BACs for payment.
2. Signatures. All BACs holders must sign in the Signature Box on the back of
the Letter of Transmittal. If the BACs are held in the names of two or
more persons, all such persons must sign the Letter of Transmittal. When
signing as a general partner, corporate officer, attorney-in-fact,
executor, custodian, administrator or guardian, please give full title and
send proper evidence of authority satisfactory to the Purchaser with this
Letter of Transmittal. With respect to most trusts, the Partnership will
generally require only the named trustee to sign the Letter of
Transmittal. For BACs held in a custodial account for minors, only the
signature of the custodian will be required.
For IRA custodial accounts, the beneficial owner should return the
executed Letter of Transmittal to the Information Agent/Depositary as
specified in Instruction 1 herein. Such Letter of Transmittal will then be
forwarded by the Information Agent/Depositary to the custodian for
additional execution. Such Letter of Transmittal will not be considered
duly completed until after it has been executed by the custodian.
If any tendered BACs are registered in different names, it will be
necessary to complete, sign and submit as many separate Letters of
Transmittal as there are different registrations of certificates.
All signatures on the Letter of Transmittal must be medallion guaranteed
by a commercial bank, savings bank, credit union, savings and loan
association or trust company having an office, branch or agency in the
United States, a brokerage firm that is a member firm of a registered
national securities exchange or a member of the National Association of
Securities Dealers, Inc. (each, an "Eligible Institution").
3. Documentation Requirements. In addition to information required to be
completed on the Letter of Transmittal, additional documentation may be
required by the Purchaser under certain circumstances including, but not
limited to those listed below. Questions on documentation should be
directed to Denise Bernstein, c/o Related Capital Company, at (800)
600-6422 (ext. 2030). ONLY ORIGINAL LETTERS OF TRANSMITTAL WILL BE
ACCEPTED. If tendering by fax, original copies should be sent so as to be
received on or before the Expiration Date.
Deceased Owner (Joint Tenant) Certified Copy of Death Certificate.
Deceased Owner (Others) Certified Copy of Death Certificate
(See also Executor/Administrator/Guardian
below).
Executor/Administrator/Guardian (i) Certified Copies of court
Appointment Documents for Executor
or Administrator dated within 60
days of the date of execution of the
Letter of Transmittal; OR
(ii) a copy of applicable provisions of
the Will (Title Page, Executor(s)'
powers, asset distribution); OR
(iii) Certified copy of Estate
distribution documents.
Attorney-in-Fact Current Power of Attorney.
Corporations/Partnerships Certified copy of Corporate Resolution(s)
(with raised corporate seal), or other
evidence of authority to act. Partnerships
should furnish copy of Partnership Agreement.
Trust/Pension Plans Copy of cover page of the Trust or Pension
Plan, along with copy of the section(s)
setting forth names and powers of
Trustee(s) and any amendments to such
sections or appointment of Successor
Trustee(s).
All signatures must be medallion guaranteed.
(Continued on Back)
<PAGE>
4. U.S. Persons. A BACs holder who or which is a United States citizen OR a
resident alien individual, a domestic corporation, a domestic partnership,
a domestic trust or a domestic estate (collectively, "United States
Persons") as those terms are defined in the Code and Income Tax
Regulations, should follow the instructions below with respect to
certifying Boxes A and B (on the reverse side of the Letter of
Transmittal).
Taxpayer Identification Number. To avoid 31% federal income tax backup
withholding, the BACs holder must furnish his, her or its TIN in the blank
provided for that purpose in the Signature Box on the back of the Letter of
Transmittal and certify under penalties of perjury Box A, B and, if
applicable, Box C. In the case of an individual person, such person's
social security number is his or her TIN.
WHEN DETERMINING THE TIN TO BE FURNISHED, PLEASE REFER TO THE FOLLOWING
NOTE AS A GUIDELINE:
NOTE: Individual Accounts should reflect their own TIN. Joint Accounts
should reflect the TIN of the person whose name appears first. Trust
Accounts should reflect the TIN assigned to the Trust. Custodial
accounts for the benefit of minors should reflect the TIN of the
minor. Corporations or other business entities should reflect the TIN
assigned to that entity. If you need additional information, please
see the enclosed copy of the Guidelines for Certification of Taxpayer
Identification Number on Substitute Form W-9.
Substitute Form W-9--Box A.
(i) In order to avoid 31% federal income tax backup withholding, the BACs
holder must provide to the Purchaser in the blank provided for that purpose
in the Signature Box on the back of the Letter of Transmittal the BACs
holder's correct TIN and certify, under penalties of perjury, that such
BACs holder is not subject to such backup withholding. The TIN being
provided on the Substitute Form W-9 is that of the registered BACs holder
as indicated in the Signature Box on the back of the Letter of Transmittal.
If a correct TIN is not provided, penalties may be imposed by the IRS, in
addition to the BACs holder being subject to backup withholding. Certain
BACs holders (including, among others, all corporations) are not subject to
backup withholding. Backup withholding is not an additional tax. If
withholding results in an overpayment of taxes, a refund may be obtained
from the IRS.
(ii) DO NOT CHECK THE BOX IN BOX A, PART (ii), UNLESS YOU HAVE BEEN NOTIFIED BY
THE IRS THAT YOU ARE SUBJECT TO BACKUP WITHHOLDING.
FIRPTA Affidavit-Box B. To avoid withholding of tax pursuant to Section
1445 of the Code, each BACs holder who or which is a United States Person
(as defined in Instruction 3 above) must certify, under penalties of
perjury, the BACs holder's TIN and address, and that the BACs holder is not
a foreign person. Tax withheld under Section 1445 of the Internal Revenue
Code is not an additional tax. If withholding results in an overpayment of
tax, a refund may be obtained from the IRS. CHECK THE BOX IN BOX B, PART
(ii) ONLY IF YOU ARE NOT A U.S. PERSON, AS DESCRIBED THEREIN.
5. Foreign Persons-Box C. In order for a BACs holder who is a foreign person
(i.e., not a United States Person as defined in Instruction 3 above) to
qualify as exempt from 31% backup withholding, such foreign BACs holder
must certify, under penalties of perjury, the statement in Box C of this
Letter of Transmittal attesting to that foreign person's status by checking
the box in such statement. UNLESS SUCH BOX IS CHECKED, SUCH FOREIGN PERSON
WILL BE SUBJECT TO 31% WITHHOLDING OF TAX UNDER SECTION 1445 OF THE CODE.
6. Conditional Tenders. No alternative, conditional or contingent tenders will
be accepted.
7. Validity of Letter of Transmittal. All questions as to the validity, form,
eligibility (including time of receipt) and acceptance of a Letter of
Transmittal will be determined by the Purchaser and such determination will
be final and binding. The Purchaser's interpretation of the terms and
conditions of the Offer (including these instructions for the Letter of
Transmittal) also will be final and binding. The Purchaser will have the
right to waive any irregularities or conditions as to the manner of
tendering. Any irregularities in connection with tenders must be cured
within such time as the Purchaser shall determine unless waived by them.
The Letter of Transmittal will not be valid unless and until any
irregularities have been cured or waived. Neither the Purchaser nor the
Information Agent/Depositary is under any duty to give notification of
defects in a Letter of Transmittal and will incur no liability for failure
to give such notification.
8. Assignee Status. Assignees must provide documentation to the Information
Agent/Depositary which demonstrates, to the satisfaction of the Purchaser,
such person's status as an assignee.
9. Inadequate Space. If the space provided herein is inadequate, the numbers
of BACs and any other information should be listed on a separate schedule
attached hereto and separately signed on each page thereof in the same
manner as this Letter of Transmittal is signed.
Questions and requests for assistance may be directed to the Information
Agent/Depositary at its address and telephone number listed below. Additional
copies of the Offer to Purchase, the Letter of Transmittal and other tender
offer materials may be obtained from the Information Agent as set forth below,
and will be furnished promptly at the Purchaser's expense. You may also contact
your broker, dealer, commercial bank, trust company or other nominee for
assistance concerning the Offer.
The Information Agent/Depositary for the Offer is:
RELATED CAPITAL COMPANY
625 Madison Avenue
New York, New York 10022
Attention: Denise Bernstein
or
Call Toll-Free (800) 600-6422 (ext. 2030)
LEHIGH TAX CREDIT PARTNERS L.L.C.
625 Madison Avenue
New York, New York 10022
April 10, 1997
$588.20 PER BAC OFFER TO PURCHASE
To BACs holders in Liberty Tax Credit Plus III L.P.:
Lehigh Tax Credit Partners L.L.C., a Delaware limited liability company
(the "Purchaser"), is offering to purchase up to 17,500 of the outstanding
Beneficial Assignment Certificates ("BACs") representing assignments of limited
partnership interests of Liberty Tax Credit Plus III L.P. (the "Partnership")
for a cash purchase price of $588.20 per BAC, net to the seller in cash, upon
the terms and subject to the conditions in the attached Offer to Purchase, dated
April 10, 1997, and the related Letter of Transmittal (which together constitute
the "Offer"). The Purchase Price will be automatically reduced by $10 per BAC
for each month (or part of a month) between May 31, 1997 and the date of
transfer for BACs transferred after May 31, 1997. THE PURCHASER AND RELATED
CREDIT PROPERTIES III L.P., A GENERAL PARTNER OF THE PARTNERSHIP, ARE
AFFILIATED.
Unless extended by the Purchaser, the Offer will expire at midnight, New
York City time, on May 8, 1997. The Offer is not conditioned upon any minimum
number of BACs being tendered; however, tenders of less than all BACs owned by a
BACs holder that would result in a BACs holder holding less than 5 BACs will not
be accepted.
The materials included in this package include important information
concerning the Purchaser, the terms and conditions to the Offer, tax
implications and instructions for tendering your BACs. It is important that you
take some time to read carefully the enclosed Offer to Purchase, the Letter of
Transmittal and other accompanying materials in order to evaluate the Offer
being made by the Purchaser.
The Offer is being made to provide BACs holders that have a current or
anticipated need or desire for liquidity with an opportunity to sell their BACs.
Such BACs holders may feel that their circumstances have changed such that
anticipated future allocation of tax credits and tax losses will no longer be
beneficial to them. The Offer is also being made to establish a standard for
tender offers for BACs by which any future tender offers might be judged. The
Purchaser's review of past tender offers in the real estate limited partnership
market led the Purchaser to conclude that an acceptable precedent for a tender
offer for BACs needed to be given to BACs holders.
You must decide whether to tender your BACs based on your own particular
circumstances. YOU SHOULD CONSULT WITH YOUR ADVISORS ABOUT THE FINANCIAL, TAX,
LEGAL AND OTHER IMPLICATIONS TO YOU OF ACCEPTING THE OFFER.
If you need additional information regarding the Offer or need assistance
in tendering your BACs, please do not hesitate to call Denise Bernstein, c/o
Related Capital Company, at (800) 600-6422 (ext. 2030).
LEHIGH TAX CREDIT PARTNERS L.L.C.
LIBERTY TAX CREDIT PLUS III L.P.
625 Madison Avenue
New York, NY 10022
April 4, 1997
Personal and Confidential
Related Credit Properties III L.P.
Lehigh Tax Credit Partners L.L.C.
625 Madison Avenue
New York, NY 10022
Gentlemen:
As you requested, the purpose of this letter is to set forth our
understanding with regard to any proposed acquisition of beneficial assignment
certificates ("BACs") of Liberty Tax Credit Plus III L.P., a Delaware limited
partnership (the "Partnership"), from holders of BACs (each a "BACs holder" and
collectively, "BACs holders") by Related Credit Properties III L.P. ("RCP"),
Lehigh Tax Credit Partners L.L.C. ("Lehigh") or any person who is their
Affiliate (as defined below) (collectively, "you").
In response to your proposal to commence a tender offer for BACs and in
consideration of the agreements set forth in this letter agreement, the
Partnership agrees to mail your tender offer materials, at your expense, subject
to the terms set forth below and whether or not such tender offer is subject to
the provisions of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"). Nothing in this letter agreement shall be construed as requiring the
Partnership to provide you with a current list of the names and addresses of the
BACs holders. The Partnership will not be obligated to mail your tender offer
materials until it has received from you an amount of cash equal to $15,000,
representing the estimated cost of such mailing together with the Partnership's
other expenses, including, without limitation, reasonable attorney fees. You
agree that you
<PAGE>
may only acquire up to 45% (including BACs acquired through all other means) of
the Partnership's outstanding BACs.
You represent and warrant that on the date hereof you beneficially own
not more than ninety-five (95) BACs. You also agree that prior to the tenth
anniversary of the date of this letter agreement, neither you nor any person who
is your Affiliate (as defined under Rule 405 of the Securities Act of 1933, as
amended) will, without the prior written consent of the Partnership, which may
be withheld for any reason, directly or indirectly, (i) in any manner including,
without limitation, by tender offer (whether or not pursuant to a filing made
with the Securities and Exchange Commission), acquire, attempt to acquire or
make a proposal to acquire, directly or indirectly, more than 45% (including
BACs acquired through all other means) of the outstanding BACs of the
Partnership from any BACs holder, BACs holders or otherwise, (ii) seek or
propose to enter into, directly or indirectly, any merger, consolidation,
business combination, sale or acquisition of assets, liquidation, dissolution or
other similar transaction involving the Partnership, (iii) make, or in any way
participate, directly or indirectly, in any "solicitation" of "proxies" or
"consents" (as such terms are used in the proxy rules of the Securities and
Exchange Commission) to vote any voting securities of the Partnership, (iv)
form, join or otherwise participate in a "group" (within the meaning of Section
13(d)(3) of the Exchange Act) with respect to any voting securities of the
Partnership, except that those Affiliates bound by this letter agreement will
not be deemed to have violated this letter agreement and formed a "group" solely
by acting in accordance with this letter agreement, (v) disclose in writing to
any third party any intention, plan or
<PAGE>
arrangement inconsistent with the terms of this letter agreement or (vi) loan
money to, advise, assist or encourage any person in connection with any action
inconsistent with the terms of this letter agreement. Notwithstanding the
foregoing restrictions, nothing in this letter agreement shall apply to, govern,
restrict or limit any sales, purchases, transfers or assignments of interests in
Lehigh.
You agree that any tender offer commenced by you will be at a price per
BAC not less than the value per BAC determined by an independent third party,
approved by the Partnership, in a report delivered to and approved by the
Partnership, completed or updated not more than three months prior to the
commencement of your tender offer. We hereby agree that the report by Valuation
Research Corporation, dated March 31, 1997, satisfies this requirement and is
approved by the Partnership. Notwithstanding any other provision of this letter
agreement, you agree that you shall not commence any tender offer for BACs of
the Partnership unless, prior to the commencement of such tender offer, the
Partnership's general partners agree to the response to be made by the
Partnership in connection with such tender offer.
You also agree during such ten year period, any proposal or request,
directly or indirectly, to amend, waive or terminate any provision of this
letter agreement shall be granted only upon the unanimous consent of the
Partnership's general partners. In addition, you (excluding your affiliate which
serves as a general partner of the Partnership while acting in its capacity as
general partner) agree that you will notify the Partnership in writing at least
five days (one day if such communication is a press release or is sent in
response to a prior communication made to BACs holders by the Partnership or its
general partners which is not seeking to advise or influence any person with
respect to the voting of any voting securities of the Partnership)
<PAGE>
before mailing or disseminating any communication with BACs holders and provide
us a copy of such communication (if written) with such notice.
You have advised us that, if requested by us, you (excluding your
affiliate which serves as a general partner of the Partnership while acting in
its capacity as general partner) will incorporate in any communication with BACs
holders a statement as to the valuation per BAC as determined by an independent
third party appraisal. In addition, if you commence a tender offer for less than
5% of the outstanding BACs, you will include verbatim the following language in
any such communication:
"TENDER OFFERS OF THIS NATURE ARE NOT REQUIRED TO COMPLY WITH CERTAIN
RULES AND REGULATIONS OF THE SECURITIES AND EXCHANGE COMMISSION.
Accordingly, this tender offer does not need to comply with certain
disclosure requirements and rules governing tender offers set forth in
the Securities Exchange Act of 1934."
In addition, you hereby represent, warrant and covenant to the
Partnership that any tender offer to purchase BACs commenced by you will be
conducted in compliance with Section 14(e) (misleading statements), Rule 14d-7
(additional withdrawal rights), Rule 14d-8 (pro rata requirements), Rule 14e-1
(unlawful tender offer practices) and Rule 14e-3 (non-public information) of the
Exchange Act, notwithstanding that such tender offer may be for less than 5.0%
of the outstanding BACs.
You understand that the general partners of the Partnership may
consider from time to time selling all or substantially all of the assets of the
Partnership or entering into any other transaction determined by the general
partners to be in the best interests of the BACs holders and the Partnership.
The result of any such transaction, if approved by a majority vote of the BACs
<PAGE>
holders, might be the dissolution and liquidation of the Partnership in
accordance with the partnership agreement. Accordingly, in order to avoid
disrupting any possible sale of all or substantially all of the Partnership's
assets or any other transaction determined by the general partners to be in the
best interests of the BACs holders and the Partnership and any required vote of
BACs holders, you agree that, prior to the ten-year anniversary of the date of
this letter agreement, all BACs obtained by you pursuant to any means will be
voted by you on all issues in the same manner as by the majority of all other
BACs holders who vote on such proposal. Notwithstanding the foregoing, you may
vote all BACs in the manner you determine, in your sole and absolute discretion,
on proposals (i) concerning the removal of RCP as general partner of the
Partnership or (ii) seeking to reduce any fees, profits, distributions or
allocations attributable to RCP or its Affiliates.
If at any time during such ten year period you (excluding your
affiliate which serves as a general partner of the Partnership while acting in
its capacity as general partner) are contacted in writing by, or have meaningful
negotiations with, any third party concerning participation in any transaction
involving the assets, businesses or securities of the Partnership or involving
any action inconsistent with the terms of this letter agreement, you will
promptly inform the Partnership of the nature of any such meaningful
negotiations and the parties thereto or forward a copy of such writing, as the
case may be, and you may inform such third party that this letter agreement
requires you to so notify the Partnership, provided however, this paragraph
shall not apply to any transaction or proposed transaction involving all or
substantially all of the assets, businesses or securities of Related Capital
Company and/or its Affiliates (other than the Partnership and RCP).
<PAGE>
You will not sell any BACs owned by you prior to the tenth anniversary
of the date of this letter agreement, unless each buyer or transferee agrees in
writing with the Partnership to be bound by the terms and conditions of this
letter agreement until such tenth anniversary, provided however, that this
paragraph shall not apply to transfers made in the secondary market to any
purchaser which represents that following such sale, it shall not own 3% or more
of the BACs outstanding; provided further, however, that nothing in this letter
agreement shall apply to, govern, restrict or limit any sales, purchases,
transfers or assignments of interests in Lehigh. Notwithstanding the immediately
preceding sentence, Lehigh shall remain bound by this letter agreement
notwithstanding that any interests in Lehigh have been sold, purchased,
transferred or assigned.
Lehigh, RCP and Related Capital Company agree to indemnify and hold
harmless, to the fullest extent permitted by law, the Partnership, Liberty
Associates IV, L.P., Liberty GP III, Inc., and each of their partners,
directors, officers, employees, representatives and agents (the "Indemnified
Parties") against any losses, claims, damages, liabilities, costs, expenses
(including reasonable attorney's fees and expenses in advance of the final
disposition of any claim, suit, proceeding or investigation to each Indemnified
Party to the fullest extent permitted by law), judgments, fines and amounts
(collectively, "Damages") paid in connection with any threatened or actual
claim, action, suit, proceeding or investigation which arises out of or is the
result of a breach of this letter agreement, any tender offer commenced by you
(regardless of whether such tender offer is subject to the provisions of the
Exchange Act) or the actual or proposed acquisition of BACs by you by any other
means; provided however, that if such claim, action, suit, proceeding or
investigation is threatened but not actual, your obligation to indemnify the
Indemnified Parties shall apply only if such threat is in
<PAGE>
writing and only with respect to any legal fees incurred in connection with such
threat. If such threat becomes an actual claim, action, suit, proceeding or
investigation, you shall then be responsible for the full indemnification
provided for in this paragraph. If an Indemnified Party intends to seek
indemnification pursuant to this paragraph, it shall promptly notify you of such
claim, in writing, describing such claim in reasonable detail; provided, that
the failure to provide such notice shall not affect your obligations herein
unless you are materially prejudiced by the failure to provide such notice.
Counsel for the Indemnified Party shall be chosen at your discretion and shall
be directed by you. We both agree that you will be materially prejudiced if, due
to the failure of an Indemnified Party to provide the notice required above, you
were not given the opportunity to obtain the counsel of your choice or direct
such counsel. You may participate at your own expense in the defense of any such
action; provided, that counsel for the Indemnified Party shall not (except with
the consent of the Indemnified Party) also serve as your counsel. You shall not,
without first obtaining a general release from liability for the Indemnified
Parties in a form satisfactory to such Indemnified Parties, settle or compromise
or consent to the entry of any judgment with respect to any threatened or actual
claim, action, suit, proceeding or investigation involving an Indemnified Party
which seeks indemnity under this paragraph. If the indemnification provided in
this paragraph is for any reason unavailable to or insufficient to hold harmless
an Indemnified Party in respect of any Damages referred to above, then you and
each party seeking indemnification shall contribute to the aggregate amount of
such Damages incurred by such Indemnified Party in such proportion as is
appropriate to reflect the relative benefits received by each party from the act
which gives rise to the indemnification claim. You agree that the amount of such
economic benefit received by each Indemnified Party shall be $1 and the
<PAGE>
amount of such economic benefit received by you shall be computed by multiplying
your per BAC offer price by the total number of BACs which were sought in your
tender offer. Both you and the Indemnified Parties each hereby agree to
cooperate fully in all aspects of any investigation, defense, pre-trial
activities, trial, compromise, settlement or discharge of any claim in respect
of which indemnity is sought pursuant to this paragraph, including, but not
limited to, by providing the other party reasonable access upon reasonable
notice to employees and officers and other information during reasonable
business hours. Nothing in this paragraph is intended to limit your ability to
obtain indemnification from the Partnership if such indemnification is available
to you pursuant to the Partnership's partnership agreement and applicable law,
provided however, that your obligations herein shall not be affected by your
ability or inability to obtain such indemnification. We each hereby agree that
the provisions of this paragraph shall have no effect on any other partnership
which you or Liberty III, Inc. or any of our respective Affiliates may be a
partner.
We each hereby acknowledge that we are aware, and that we will advise
our respective Affiliates of our respective responsibilities under the
securities laws. We each agree that the other of us or our respective
Affiliates, as the case may be, shall be entitled to equitable relief, including
injunctive relief and specific performance, in the event of any breach of the
provisions of this letter agreement, in addition to all other remedies available
at law or in equity.
In case any provision in or obligation under this letter agreement
shall be invalid, illegal or unenforceable in any jurisdiction, the validity,
legality and enforceability of the remaining provisions or obligations, or of
such provision or obligation in any
<PAGE>
other jurisdiction, shall not in any way be affected or impaired thereby.
This letter agreement shall be governed by the laws of the State of New
York without giving effect to principles of conflicts of law thereof. This
letter agreement may be executed in counterparts, each of which shall be deemed
an original, but all of which together constitute one and the same instrument.
<PAGE>
If you agree with the foregoing, please sign and return two copies of
this letter agreement, which will constitute our agreement with respect to the
subject matter of this letter agreement.
Very truly yours,
LIBERTY TAX CREDIT PLUS III, L.P.
By: Liberty GP III, Inc.,
its general partner
By: /s/ Paul L. Abbott
----------------------
Name: Paul L. Abbott
Title: President
Confirmed and agreed to as of
the date first above written
LEHIGH TAX CREDIT PARTNERS L.L.C.
By: /s/ Alan P. Hirmes
-------------------------
Name: Alan P. Hirmes
Title: Vice President
RELATED CREDIT PROPERTIES III L.P.
By: Related Credit Properties III, Inc.,
its general partner
By: /s/ Alan P. Hirmes
-------------------------
Name: Alan P. Hirmes
Title: Vice President
April 8, 1997
Liberty Tax Credit Plus III L.P.
c/o Related Credit Properties III L.P.
625 Madison Avenue
New York, NY 10022
Ladies and Gentlemen:
Valuation Research Corporation ("VRC") has been retained by Liberty Tax Credit
Plus III L.P., a Delaware limited partnership (the "Partnership"), to express
our opinion as of March 31, 1997, as to the fair value of the issued and
outstanding Beneficial Assignment Certificates ("BACs") representing assignments
of Limited Partnership Interests ("Limited Partnership Interests") in the
Partnership in connection with a proposed tender offer (the "Offer to Purchase")
for BACs by Lehigh Tax Credit Partners L.L.C., a Delaware limited liability
company ("the Purchaser"). We understand that under the terms of the Offer to
Purchase, the Purchaser would purchase up to 42,500 BACs and thus, with the 10
BACs already owned by the Purchaser and its affiliates, control approximately
30.5% of the outstanding BACs of the Partnership.
Fair value is defined for purposes of this report as:
The amount for which a BAC would change hands between a willing buyer
and a willing seller neither under compulsion to act, with equity to
both, each having reasonable knowledge of all relevant facts, and
within a commercially reasonable period of time.
After employment of the valuation processes and methodology described in the
attached report and subject to the assumptions and factors discussed in the
attached report, we have estimated a Fair Value per BAC, effective as of March
31, 1997, of $519.56 to $563.42 per BAC.
The Partnership is a limited partnership formed in 1988, under the laws of the
State of Delaware. It was formed to invest, as a limited partner, in other
limited partnerships (referred to herein as "Local Partnerships" or "Subsidiary
Partnerships") each of which owns one or more leveraged low-income multifamily
residential complexes ("Apartment Complexes" or "Properties") that are eligible
for the low-income housing tax credit ("Housing Tax Credit") enacted in the Tax
Reform Act of 1986, some of which are eligible for the historic rehabilitation
tax credit ("Historic Rehabilitation Tax Credit", "Rehabilitation Projects", and
together with the
<PAGE>
April 8, 1997
Page 2
Apartment Complexes or "Properties"). Some of the Apartment Complexes benefit
from one or more other forms of federal or state housing assistance. The
Partnership's investment in each Local Partnership represents from 27% to 98% of
the partnership interests in the Local Partnership. According to the Form 10-Q,
as of December 31, 1996, all of the net proceeds from the original offering of
BACs was invested in 62 Local Partnerships.
During the course of our study, discussions were held with management and we
became familiar with the limited partnership agreement of Liberty Tax Credit
Plus III, L.P. In addition, VRC has examined extensive data provided by Related
Credit Properties III L.P. ("RCPLP III"), a General Partner of the Partnership,
and the published market data pertaining to the Apartment Complexes which form
the underlying assets of the Partnership. This includes, but is not limited to,
the following:
[bullet] Selected financial data for the Partnership as reported in the
Form 10-K and Form 10-Q of the Securities and Exchange
Commission.
[bullet] Unaudited financial statement and other internal financial
analysis for the 62 Limited Partnerships that comprise the
underlying assets of Liberty Tax Credit Plus III L.P.
[bullet] Trading data pertaining to the current secondary trading market
for BACs of the Partnership.
[bullet] A draft of the Offer to Purchase.
[bullet] The original Prospectus dated February 20, 1989.
[bullet] Projected tax credits and tax losses for each of the 62 Limited
Partnerships of the Partnership.
[bullet] Projected tax credits and tax losses for the Partnership.
[bullet] Federal U.S. Partnership Tax Returns.
In addition, certain assumptions regarding the Partnership and the 62 Local
Partnerships are made. These include, but are not limited to, the following:
<PAGE>
April 8, 1997
Page 3
[bullet] Each of the Local Partnerships will continue to qualify for
low-income housing tax credits and that there will not be a
forfeiture or recapture of these credits.
[bullet] There will be no future change in the Internal Revenue Code that
would change the tax status of the Partnership or the Local
Partnerships.
[bullet] All debt related to the Properties is for a term of 15 years and
thus there is no risk of refinancing within the projection
period.
The basis of our opinion of the value per BAC is the annual tax losses and tax
credits that flow through to the BAC owner in addition to any cash distribution
or tax loss which would flow to the BAC holder upon a sale of the Properties
owned or invested in by the Local Partnerships, net of any debt or tax liability
associated with the Property, or sale of the Property.
To determine the value of the BACs, an income capitalization appraisal
techniques known as a discounted cash flow analysis was used. The result of this
techniques was then verified by using a second technique known as the market
approach. The basic premise of the income approach is that the earning power of
an investment is the critical element affecting its value, and value is often
defined as the present worth of anticipated future income. The basic premise of
the market approach is the comparing of recently sold investments and their
sales price with the subject investment.
INCOME ANALYSIS
The first step in the income approach is the determination of a proper revenue
stream that one would expect to be able to obtain from the subject investment
based on actual historical operations and future projections. A similar analysis
of typical operating expenses aids in constructing an operating statement that
results in a net operating income (loss), (NOI), for the first and subsequent
years. The estimated future net income or tax losses and tax credits can be
converted into an indicated value by discounting those individual annual amounts
to a present value.
The discount rates used to convert these tax losses and tax credits to a present
value are derived from market expectations of returns commensurate with the risk
of the subject investment.
Our analysis began with an estimate of each of the 62 Local Partnerships' income
or loss potential based on an analysis of current and historical operating
results. Using this information and incorporating current economic and market
forecasts for each of the 62 locations of the subject Local Partnerships'
Apartment Complexes, a potential gross income estimate was made.
<PAGE>
April 8, 1997
Page 4
This estimated potential gross income was then projected to grow over the course
of the projection period 11 years at 3 percent based on current and forecasted
economic conditions in each of the subject areas.
Secondly, a similar procedure was used to estimate and project the expenses
associated with the operation of the subject Properties.
The estimate of the operating expenses, including real estate taxes, was based
on a combination of historical expenses of the subject Properties and published
market surveys. These operating expenses were projected to grow at an estimated
2.5% inflation rate per year over the course of the 11-year projection period.
Finally, the mortgage payments and depreciation expense associated with each
Property was subtracted to arrive at the net pretax income (loss) which is
allocated to each of the BAC holders.
The second element addressed is the tax credits associated with each Property.
Each Property has been awarded tax credits under the Tax Credit for Low-Income
Rental Housing (LIHTC) Program, established under Section 42 of the Internal
Revenue Code of 1986. We have assumed that these credits are fixed and will
continue for the duration of the original 10-year compliance period.
The following table sets forth the estimated aggregate revenues, expenses,
pretax income (loss) and tax credits of the 62 Consolidated Local Partnerships
which form the underlying investment of the Partnership for each of the
twelve-month periods ending December 31, 1997 through December 31, 2007 that
were included in the financial forecasts used by VRC in connection with the
preparation of the valuation opinion.
<PAGE>
April 8, 1997
Page 5
LIBERTY TAX CREDIT PLUS III L.P.
(In Thousands of Dollars)
Year 1997 1998 1999 2000 2001
Revenue 34,053 35,065 36,107 37,181 38,287
Expenses 46,637 46,927 47,272 47,699 48,129
Net Income (Loss) (12,584) (11,862) (11,165) (10,518) (9,842)
Tax Credits 19,645 19,645 18,530 15,492 7,935
Year 2002 2003 2004 2005 2006 2007
Revenue 39,425 40,597 41,804 43,047 44,327 45,646
Expenses 48,554 49,017 49,482 49,733 50,349 53,982
Net Income (9,129) (8,420) (7,678) (6,686) (6,022) (5,336)
Tax Credits 1,191 0 0 0 0 0
In rendering this valuation opinion, VRC relied, without assuming responsibility
for independent verification, on the accuracy and completeness of all financial
and operating data, financial analyses, reports and other information that were
publicly available, compiled or approved by or otherwise furnished or
communicated to VRC by or on behalf of the Partnership. With respect to the
financial forecasts utilized by VRC, VRC believes that the assumptions
underlying the forecasts are reasonable and that consequently there is a
reasonable probability that the projections would prove to be substantially
correct. However, readers of this valuation opinion should be aware that actual
revenues, expenses and net operating income of the 62 Local Partnerships which
serve as the underlying assets of the subject Partnership will depend to a large
extent on a number of factors that cannot be predicted with certainty or which
may be outside of the control of the general partners, including general
business, market and economic conditions, supply and demand for rental
properties in the areas in which the properties owned by the 62 Local
Partnerships are located, future operating expenses and capital expenditure
requirements for the properties, future occupancy rates, the ability of the
general partners and property managers for the properties to maintain the
attractiveness of the properties to tenants, real estate tax rates, changes in
tax laws and other factors. As a result, actual results could differ
significantly from the forecasted results.
The following paragraphs summarize the significant quantitative and qualitative
analyses performed by VRC in arriving at the valuation opinion. VRC considered
all such quantitative and qualitative analyses in connection with its valuation
analysis, and no one method of analysis was given particular emphasis.
<PAGE>
April 8, 1997
Page 6
Discounted Cash Flow Analysis - VRC preformed a discounted analysis of (i) the
present value of the forecasted net after tax income (loss) and tax credit
benefits from future operations of the 62 Local Partnerships which are the
underlying assets of the Partnership, and (ii) the present value of the
estimated net after tax proceeds or tax benefits (losses) of a sale of the
Properties at the conclusion of the forecast period. In completing its analysis,
VRC utilized financial and operating forecasts of each Properties' estimated net
pretax net income (loss) for the nine month period ending December 31, 1997 and
each of the twelve-month periods ending December 31, 1998 to December 31, 2007.
From this amount, annual expenses associated with the management of the
Partnership were deducted. The resulting income (loss) was then adjusted to
reflect the income (loss) to the BAC holders. Finally, the resulting loss was
adjusted for taxes and the composite tax credits added. The resulting net
investor benefits, along with the forecasted net after tax residual value of the
Properties, were then discounted to a present value using market derived
discount rates (IRR) of 12% and 15%. Using this methodology, the fair value of
the 139,101.5 partnership BACs is $519.56 to $563.42 per BAC.
MARKET ANALYSIS
Valuation Research has analyzed and has given consideration to the trading
history of the subject Partnership's BACs on the Chicago Partnership Board from
March 15, 1996 to March 15, 1997. During that period of time there were 24
transactions and the total number of BACs traded is approximately 1,000. The
high was priced at $560 per BAC and the low was $478. On March 13, 1997, a trade
took place at a recorded price of $485 per BAC.
It should be noted that as of March 15, 1997, based on the trading prices of the
Partnership's BACs over the past 52 weeks, the consideration offered in the
Offer to Purchase to the BAC Holders of Liberty Tax Credit Plus III L.P.
represents a premium over the average market price of the BACs.
The preparation of a valuation opinion involves various determinations as to the
most appropriate and relevant quantitative and qualitative methods of financial
analyses and the application of those methods to the particular circumstances
and therefore such an opinion is not readily susceptible to partial analyses or
summary description. Accordingly, VRC believes its analyses must be considered
as a whole and that considering any portion of such analyses and of the factors
considered, without considering all analyses and factors, could create a
misleading or incomplete view of the process underlying the valuation opinion.
Any estimates contained in these analyses are not necessarily indicative of
actual values or predictive of future results or values, which may be
significantly more or less than as set forth herein.
VRC's valuation opinion was based solely upon the information available to it
and the economic market and other circumstances that existed as of the date
hereof. Events occurring after such date could materially affect the assumptions
and conclusions contained in the valuation opinion.
<PAGE>
April 8, 1997
Page 7
VRC has not undertaken to reaffirm or revise this valuation opinion or otherwise
comment upon any events occurring after the date hereof.
VRC has relied without independent verification on the accuracy and completeness
of all of the financial and other information reviewed by us for purposes of
this opinion. Nothing came to our attention, for purposes of this opinion, which
causes us to question their accuracy or their representation of the operations
of the assets under review. We have not verified the title to ownership of these
assets, nor have we made an independent valuation or appraisal of the reported
current assets or any of the liabilities reported by the Partnership on its
financial statements. Our opinion necessarily is based on conditions as they
exist and can be valued only as of March 31, 1997.
Based on and subject to the foregoing and based on such other matters as we
consider relevant, it is our opinion that as of the date hereof, the fair value
per BAC is $519.56 to $563.42.
This letter is solely for the information of and assistance to the parties to
whom it is addressed in conducting their investigation with regard to the
upcoming tender offer for 42,500 of the BACs of the Partnership. The Partnership
may include this letter as a part of the information statement filed with the
Securities and Exchange Commission. Any other uses are expressly prohibited and
neither this letter nor any of its parts may be circulated, quoted, or otherwise
referred to for any other purpose without the written consent of VRC, the
exercise of which will be at the sole discretion of VRC, not unreasonably
withheld. If given, such consent shall not be without sufficient review by VRC
as to the precise language of such disclosure and the time and place of its
potential release.
The above limitations do not apply to interested parties as defined herein.
However, in such instances, this opinion must be provided to such parties in its
entirety. The term "interested parties" shall include the Partnership's auditors
and attorneys, participants and assignees, regulators, or appropriate parties
involved in this transaction.
VRC has no responsibility to update the opinion stated herein for events and
circumstances occurring after the date of this letter.
This opinion is subject to the assumptions and limiting conditions contained
herein. VRC has not investigated the title to, nor the liabilities against, the
Partnership or the Properties of the 62 Local Partnerships and assumes no
responsibility concerning these matters. Neither Valuation Research Corporation
nor any of its personnel have any present or contemplated financial interest in
the Partnership or the assets of the Partnership, and we certify that the
compensation received for this opinion letter is not contingent on the
conclusions stated. Additionally, the
<PAGE>
April 8, 1997
Page 8
assignment was not based on a requested minimum valuation, a specific valuation,
or the approval of a loan.
Valuation Research Corporation does not conduct or provide environmental
liability assessments of any kind in performing its valuations so that our
opinion of the fairness of the Offer does not reflect any actual or contingent
environmental liabilities associated with the owned residential property that
constitutes the underlying assets of the Partnership.
Respectfully submitted,
VALUATION RESEARCH CORPORATION
/s/ Valuation Research Corporation
Engagement Number: 04-2716-00
<PAGE>
April 8, 1997
Page 9
LIMITING FACTORS AND ASSUMPTIONS
In accordance with recognized professional ethics, the professional fee for this
service is not contingent upon our conclusion of value, and neither Valuation
Research Corporation nor any of its employees have a present or intended
material financial interest in the subject company.
The opinion expressed herein is valid only for the stated purpose as of the date
of the valuation opinion.
Financial statements and other related information provided by the subject
company or its representatives in the course of this investigation have been
accepted, without further verification, as fully and correctly reflecting the
company's business conditions and operating results for the respective periods,
except as specifically noted herein.
Public information and industry and statistical information has been obtained
from sources we deem to be reliable; however, we make no representation as to
the accuracy or completeness of such information, and have accepted the
information without further verification.
The conclusions of value are based upon the assumption that the current level of
management expertise and effectiveness would continue to be maintained and that
the character and integrity of the Partnership and/or the 62 Local Partnerships
through any sale, reorganization, exchange, or diminution of the owners'
participation would not be materially or significantly changed.
This letter and the conclusions arrived at herein are for the exclusive use of
our client for the sole and specific purposes as noted herein. Furthermore, the
letter and conclusions are not intended by the author, and should not be
construed by the reader, to be investment advice in any manner whatsoever. The
conclusions reached herein represent the considered opinion of Valuation
Research Corporation, based upon information furnished to them by the
Partnership and other sources.
Related Credit Properties III L.P., a General Partner of Liberty Tax Credit Plus
III L.P., has assured VRC that there will be no material change in the proposed
tender offer or any documents in VRC's possession as of March 31, 1997.
Except as provided above, neither all nor any part of the contents of this
letter (especially any conclusions as to value, the identity of any appraiser or
appraisers, or the firm with which such
<PAGE>
April 8, 1997
Page 10
appraisers are connected, or any reference to any of their professional
designations) should be disseminated to the public through advertising media,
public relations, news media, sales media, mail, direct transmittal, or any
other public means of communication, without the prior written consent and
approval of Valuation Research Corporation.
Future services regarding the subject matter of this letter, including, but not
limited to, testimony or attendance in court, shall not be required of Valuation
Research Corporation, unless previous arrangements have been made in writing.
Valuation Research Corporation is not an environmental consultant or auditor,
and it takes no responsibility for any actual or potential environmental
liabilities. Any person entitled to rely on this letter wishing to know whether
such liabilities exist, or their scope, and the effect on the value of the
property is encouraged to obtain a professional environmental assessment.
Valuation Research Corporation does not conduct or provide environmental
assessments and has not performed one for the subject property.
Valuation Research Corporation has asked the Partnership whether it is subject
to any present or future liability relating to environmental matters (including
but not limited to CERCLA/Superfund liability). Valuation Research Corporation
has not determined independently whether the Partnership is subject to any such
liabilities, nor the scope of any such liabilities. Valuation Research
Corporation's appraisal takes no such liabilities into account except as they
have been reported expressly to Valuation Research Corporation by the
Partnership, or by an environmental consultant working for the Partnership and
then only to the extent that the liability was reported to us in an actual or
estimated dollar amount. To the extent such information has been reported to us,
Valuation Research Corporation has relied on it without verification and offers
no warranty or representation as to its accuracy or completeness.
We have not made a specific compliance survey or analysis of the subject
properties to determine whether it is subject to or in compliance with the
Americans with Disabilities Act of 1990 (ADA) and this opinion does not consider
the impact, if any, of noncompliance in estimating the value of the Units.
[Liberty Tax Credit Plus III Letterhead]
April 8, 1997
Mr. William H. Schoenecker, MAI ASA
Vice President
Valuation Research
330 E. Kilbourn Avenue
Milwaukee, WI 53202-3142
Dear Mr. Schoenecker:
Liberty Tax Credit Plus III L.P. hereby consents to the use of the report
prepared by Valuation Research Corporation dated April 8, 1997 by Lehigh Tax
Credit Partners L.L.C. for all uses permitted for Liberty Tax Credit
Plus III L.P.
Please indicate your acceptance of the above rights for Lehigh Tax Credit
Partners
L.L.C. by signing in the space provided below.
Very truly yours,
Liberty Tax Credit Plus III L.P.
By: Related Credit Properties III L.P.,
general partner
By: Related Credit Properties III Inc.,
general partner
By: /s/ Alan P. Hirmes
--------------------
Alan P. Hirmes
Vice President
AGREED TO AND ACCEPTED:
Valuation Research Corporation
By: /s/ William H. Schoenecker
----------------------------
William H. Schoenecker
Vice President
CONSENT OF VALUATION RESEARCH CORPORATION
Valuation Research Corporation ("VRC"), an independent appraisal firm, hereby
consents to the reference to VRC and the opinion of VRC with respect to the
value of the BACs, subject to agreement in writing by Liberty Tax Credit Plus
III L.P. to such use and further subject to VRC's final review and approval of
such specific references, to be contained in the:
Lehigh Tax Credit Partners L.L.C.
Offer to Purchase
of
Beneficial Assignment Certificates
in
Liberty Tax Credit Plus III L.P.
Valuation Research Corporation
By: /s/ William H. Schoenecker
--------------------------
William H. Schoenecker
Vice President
Milwaukee, Wisconsin
April 8, 1997
