<PAGE>
As filed with the Securities and Exchange Commission on September 26, 1997
Registration No. 33-________
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------------------------
FORM S-3
Registration Statement
Under
The Securities Act of 1933
---------------------------------
1999 BROADWAY ASSOCIATES LIMITED PARTNERSHIP
(Exact name of registrant as specified in its charter)
---------------------------------
Delaware 04-6613783
------------------------------- --------------------------------
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
---------------------------------
Five Cambridge Center, 9th Floor
Cambridge, Massachusetts 02142-1493
(617) 330-8600
---------------------------------
(Address and telephone number of registrant's principal executive offices)
---------------------------------
Peter Braverman Copy to:
Winthrop Financial Associates Joseph L. Getraer, Esq.
Five Cambridge Center, 9th Floor Rosenman & Colin LLP
Cambridge, Massachusetts 02142-1493 575 Madison Avenue
Telephone: (617) 330-8600 New York, New York 10022
(Name, address and telephone Telephone: (212) 940-8800
number of agent for service)
---------------------------------
Approximate date of commencement of proposed sale to the public: As soon as
practicable after the effective date of this Registration Statement.
If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box [ ]
---------------------------------
If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. [X]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
[cover page continued]
<PAGE>
If this form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
=========================================================================================================================
Proposed Proposed
Title of units Amount to be maximum aggregate maximum Amount of
to be registered registered price per unit aggregate offering registration fee
price
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Cumulative Preferred
Units representing
Limited Partnership
Interests.... 460 units $23,250 $10,695,000 $3,688
=========================================================================================================================
</TABLE>
---------------------------------
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant shall
file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until this Registration Statement shall become
effective on such date as the Securities and Exchange Commission, acting
pursuant to said Section 8(a), may determine.
================================================================================
<PAGE>
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A PROXY
STATEMENT AND REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED
WITH THE SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD
NOR MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE PROXY STATEMENT AND THE
REGISTRATION STATEMENT BECOMES EFFECTIVE. THIS PROXY STATEMENT AND PROSPECTUS
SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY NOR
SHALL THERE BE ANY SALE OF THESE SECURITIES IN ANY STATE IN WHICH SUCH OFFER,
SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION
UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
Preliminary Consent Material
Subject to Completion
dated ____ __, 1997
PROXY STATEMENT AND PROSPECTUS
460 Units representing
Preferred Limited Partnership Interests
1999 BROADWAY ASSOCIATES LIMITED PARTNERSHIP
This Proxy Statement and Prospectus is furnished to holders (the
"Unitholders") of limited partnership interests (the "Units") of 1999 Broadway
Associates Limited Partnership (the "Partnership"), a Delaware limited
partnership. The Partnership is hereby soliciting the consent (the "Consent") of
Unitholders to a proposal (the "Proposal") which, if adopted, would result in
the creation of a class of 12% cumulative, non-compounded preferred units (each,
a "Preferred Unit") representing a limited partnership interest in the
Partnership. This Proxy Statement and Prospectus also serves as a Prospectus
under the Securities Act of 1933 (the "Act") for the issuance by the
Partnership, subject to the receipt of the Consent, of the Preferred Units. The
Partnership is issuing to the Unitholders of record as of the close of
business on ___________, 1997 (the "Record Date") one subscription right (each,
a "Right") for each Unit held. Each Right entitles the Unitholder to purchase,
subject to the receipt of the Consent, at any time prior to 5:00 p.m., New York
City time, on ____________, 1997 (as such date may be extended as herein
provided, the "Expiration Date"), at a subscription price of $23,250 (the
"Subscription Price"), one Preferred Unit. The Rights are evidenced by
subscription certificates (the "Subscription Certificates") which are being
mailed to Unitholders herewith. The Rights are not transferable. Each
Unitholder who exercises his Right will be entitled to exercise an
over-subscription privilege (the "Over-Subscription Privilege") for all or any
of the Preferred Units that are not purchased by other Unitholders. If all
Rights are exercised, there will be no Over-Subscription Privilege. There is no
limit on the number of Preferred Units for which a Unitholder who exercises his
Right may seek to subscribe pursuant to the Over-Subscription Privilege.
Available Preferred Units will be allocated pro rata among those Unitholders who
exercise the Over-Subscription Privilege. See "The Offering."
EXERCISING UNITHOLDERS WILL HAVE NO RIGHT TO RESCIND A PURCHASE AFTER
THE PARTNERSHIP HAS RECEIVED A COMPLETED SUBSCRIPTION CERTIFICATE. IF THE
PARTNERSHIP DOES NOT RECEIVE THE CONSENT, ALL SUBSCRIPTIONS SHALL BE DEEMED NULL
AND VOID, AND ALL PAYMENTS RECEIVED BY THE PARTNERSHIP IN RESPECT THEREFOR WILL
BE RETURNED TO THE EXERCISING UNITHOLDERS. ALL EXERCISING UNITHOLDERS MUST REMIT
PAYMENT IN FULL WITH THEIR COMPLETED SUBSCRIPTION CERTIFICATES FOR ALL PREFERRED
UNITS SUBSCRIBED THROUGH THE EXERCISE OF THE RIGHTS AND THE OVER-SUBSCRIPTION
PRIVILEGE.
Bronco, L.L.C. (the "Guarantor"), a Unitholder and an affiliate of
Winthrop Financial Associates, A Limited Partnership (the "General Partner"),
the general partner of the Partnership, has agreed (i) to exercise its Right
as a Unitholder and (ii) to subscribe for all unsubscribed Preferred Units
(the "Subscription Guaranty"). Accordingly, subject to receipt of the Consent,
the Partnership is assured of receiving gross proceeds from this offering (the
"Offering") in an amount equal to approximately $10.695 million. No fee is
being paid to the Guarantor in connection with the Subscription Guaranty.
Each Preferred Unit will entitle the holder thereof to receive from the
available cash flow of the Partnership an amount in cash equal to a cumulative,
non-compounded preferred annual return of 12% (the "Annual Return") on his
preferred invested capital of $23,250. In addition, each Preferred Unit will
entitle the holder thereof to receive an aggregate cumulative cash distribution
(prior to any distribution to Unitholders and to the General Partner on account
of the Units and the general partnership interests held by them) equal to the
greater of (i) $46,500 (200% of such investor's preferred invested capital) or
(ii) an amount equal to the Subscription Price together with a cumulative,
compounded annual return thereon of 15%, in each case exclusive of the Annual
Return, from the net cash proceeds, if any, received by the Partnership from
capital transactions or upon liquidation of the Partnership. See "Description of
Securities." For a discussion of certain tax consequences to Unitholders who
exercise their Rights, see "Certain Income Tax Considerations."
There is no existing market for the Preferred Units and it is
anticipated that a market for the Preferred Units will not develop. The
Partnership does not intend to apply to list the Preferred Units on any
securities exchange.
The Offering is subject to withdrawal and cancellation at any time,
without notice, and is subject to the receipt of the Consent.
The General Partner believes that the adoption of the Proposal is in
the best long-term interests of the Partnership and the Unitholders and
recommends that Unitholders vote in favor of the Proposal. The Consent will be
deemed obtained and the Proposal will be adopted unless Unitholders owning a
majority of the outstanding Units vote against the Proposal by ______, 1997 (the
"Approval Date"). Unitholders are urged to return the enclosed Consent form
within one week after receipt, but in no event later than the Approval Date. The
General Partner recommends that you vote FOR the Proposal set forth herein by
signing, dating and promptly returning the enclosed Consent form in the postage
pre-paid, self-addressed envelope enclosed for your convenience. If the Proposal
is adopted, the Partnership will then have sufficient funds to enable it to
distribute $10,000 per Unit to all Unitholders on a pro rata basis. The Proposal
is more particularly described under "Description of the Proposal" in this Proxy
Statement and Prospectus.
----------------------------------------------------
PROSPECTIVE PURCHASERS OF THE PREFERRED UNITS SHOULD CONSIDER THE SPECIFIC
INVESTMENT CONSIDERATIONS SET FORTH UNDER "INVESTMENT CONSIDERATIONS" ON
PAGES 11 TO 17
<PAGE>
----------------------------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION NOR HAS THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
---------------------------------------------------
THE ATTORNEY GENERAL OF THE STATE OF NEW YORK HAS NOT PASSED ON OR
ENDORSED THE MERITS OF THIS OFFERING. ANY REPRESENTATION TO THE
CONTRARY IS UNLAWFUL.
---------------------------------------------------
Subscription Price Proceeds to the
Partnership(1)
Per Unit $23,250 $23,250
Total $10,695,000 $10,695,000
---------------------------------------------------
(1) Before deducting expenses payable by the Partnership estimated at
$200,000. No underwriting discount or commission will be paid in
connection with the Offering.
The approximate date on which this Proxy Statement and
Prospectus and the enclosed form of Consent were first
sent or given to the Unitholders was ____________, 1997.
The date of this Proxy Statement and Prospectus is _________, 1997
<PAGE>
AVAILABLE INFORMATION
The Partnership is subject to the informational requirements of the
Securities Exchange Act of 1934 (the "Exchange Act") and, in accordance
therewith, files reports and other information with the Securities and Exchange
Commission (the "Commission"). Such reports and other information can be
inspected and copied at the public reference facilities maintained by the
Commission at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington,
D.C. 20549 and at the Commission's regional offices at 7 World Trade Center,
13th floor, New York, New York 10048 and 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661-2511. Copies of such material can be obtained from the
Public Reference Section of the Commission, 450 Fifth Street, N.W., Washington,
D.C. 20549, at prescribed rates. The Commission maintains a Web site that
contains reports, proxy and information statements and other information
regarding issuers, such as the Partnership, that file electronically with the
Commission and the address of such Web site is http://www.sec.gov.
The Partnership has filed with the Commission a proxy statement and
registration statement on Form S-3 (herein, together with all amendments and
exhibits, referred to as the "Proxy and Registration Statement") under the
Securities Act of 1933 (the "Securities Act") with respect to the registration
of the securities offered hereby. This Proxy Statement and Prospectus does not
contain all the information set forth in the Proxy and Registration Statement,
certain parts of which are omitted in accordance with the rules and regulations
of the Commission. Statements contained herein concerning the contents of any
documents are not necessarily complete and, in each instance, reference is made
to the copy of such document filed as an exhibit to the Proxy and Registration
Statement. Each such statement is qualified in its entirety by such reference.
The Proxy and Registration Statement, as well as items of information omitted
from this Proxy Statement and Prospectus but contained in the Proxy and
Registration Statement and reports and other information filed by the
Partnership, may be inspected without charge at the public reference facilities
referred to above and copies of all or any part thereof may be obtained from the
Commission upon request and payment of the prescribed fee.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by the Partnership with the Commission
pursuant to the Exchange Act are incorporated herein by reference:
(a) The Partnership's Annual Report on Form 10-KSB for the fiscal year
ended December 31, 1996, filed on March 31, 1997 (File No. 0-20273)
(the "Form 10-K");
(b) The Partnership's Quarterly Report on Form 10-QSB for the fiscal
quarter ended March 31, 1997, filed on May 14, 1997 (File No. 0-20273)
(the "March 1997 Form 10-Q"); and
(c) The Partnership's Quarterly Report on Form 10-QSB for the fiscal
quarter ended June 30, 1997, filed on August 13, 1997 (File No.
0-20273) (together with the March 1997 Form 10-Q, the "Form 10-Qs").
-2-
<PAGE>
All documents filed by the Partnership with the Commission pursuant to
Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act subsequent to the date of
this Proxy Statement and Prospectus and prior to the termination of the offering
of the securities described herein shall be deemed to be incorporated by
reference into this Proxy Statement and Prospectus and to be a part hereof from
the respective dates of the filings of such documents.
Any statement contained herein or in a document incorporated or deemed
to be incorporated by reference herein shall be deemed to be modified or
superseded for purposes of this Proxy Statement and Prospectus to the extent
that a statement contained herein or in any subsequently filed document which
also is or is deemed to be incorporated herein by reference modifies or
supersedes such statement. Any such statement so modified or superseded shall
not be deemed, except as so modified or superseded, to constitute a part of this
Proxy Statement and Prospectus.
The Partnership undertakes to provide, without charge, to each person,
including any beneficial owner, to whom this Proxy Statement and Prospectus is
delivered, upon the written or oral request of such person, a copy of any and
all of the documents incorporated herein by reference (other than exhibits to
such documents unless such exhibits are specifically incorporated by reference
herein). Requests for such documents should be directed to the Partnership at
Five Cambridge Center, 9th Floor, Cambridge, Massachusetts 02142-1493,
Attention: Carolyn Tiffany. Telephone requests for such copies should be
directed to the Partnership at (617) 330-8600.
-3-
<PAGE>
SUMMARY
The following summary is qualified in its entirety by reference to the
more detailed information and financial statements appearing elsewhere or
incorporated by reference in this Proxy Statement and Prospectus.
The Partnership and Purpose of the Offering
1999 Broadway Associates Limited Partnership (the "Partnership"), a
Delaware limited partnership, is a general partner of, and owns a 99.9% general
partnership interest in, 1999 Broadway Partnership (the "Operating
Partnership"), a Delaware general partnership. The Operating Partnership
beneficially owns and operates a 42-story Class A office tower located at 1999
Broadway, Denver, Colorado (the "Office Tower") and a parking garage located one
and one-half blocks northeast of the Office Tower at 2099 Welton Street (the
"Parking Garage", and together with the Office Tower, the "Property"). See "The
Partnership" and "The Property."
During the fall of 1995, leases relating to approximately 138,000
square feet at the Office Tower expired and were not renewed by vacating
tenants. As a result of such nonrenewals, the occupancy rate at the Office Tower
and the Property's operating revenue significantly declined, thereby impairing
the Operating Partnership's ability to meet its obligations, including, amounts
payable to the holder (the "Lender") of the mortgage loan (the "Loan")
encumbering the Property. In response to the Lender's efforts to appoint a
receiver to manage the Property, the Operating Partnership commenced a voluntary
petition for relief under Chapter 11 of the United States Bankruptcy Code. In
November, 1996, the Lender and the Operating Partnership entered into an
agreement pursuant to which the Lender agreed to vote in favor of a Plan of
Reorganization (the "Plan") submitted by the Operating Partnership. The Plan
modified the Loan and was confirmed by the Bankruptcy Court. See "The
Reorganization."
Following the confirmation of the Plan, the Operating Partnership
commenced a comprehensive leasing program for the Property. To that end, the
Operating Partnership recently entered into leases (the "New Leases") for
approximately 166,000 square feet of office space (the "Newly Leased Space") at
the Office Tower, thereby increasing the Office Tower's occupancy rate from 63%
at the time the Plan was confirmed to approximately 90%. Capital improvement
obligations both with respect to the New Leases and 57,000 square feet of
existing leased space expected to be renewed in the next 12 months, together
with attendant leasing commissions (such capital improvements and leasing
commissions are collectively referred to herein as the "Tenant Improvements"),
are anticipated to require the Operating Partnership to expend approximately
$7.5 million in 1997 and 1998. For a more complete description of the New
Leases, see "Purpose of the Offering."
At present, the Operating Partnership does not have sufficient funds or
revenues to complete the expected $7.5 million of Tenant Improvements and to
satisfy its debt service
-4-
<PAGE>
payments under the Loan. During 1996, the Operating Partnership had a negative
debt service coverage ratio of approximately .4:1. As a result, the Operating
Partnership was required to utilize a part of its capital reserve to make
current debt service payments. Winthrop Financial Associates, A Limited
Partnership, the general partner of the Partnership (the "General Partner"),
believes that the failure to consummate the Offering will, in all likelihood,
cause the Operating Partnership to default under the New Leases and/or the
Loan, as well as hinder its ability to renew existing leases. If the Operating
Partnership were to default under the Loan either prior to or at its maturity,
the Operating Partnership would risk losing the Property through foreclosure.
Further, if the Tenant Improvements are not completed and/or the occupancy
level at the Property remains low, the value of the Property will be impaired
which will make it difficult to refinance the Loan or to obtain sufficient
proceeds upon a sale of the Property to repay the Loan. However, if the
Offering is consummated, the General Partner believes that the Operating
Partnership will have sufficient funds to complete the Tenant Improvements.
Increased revenues from the New Leases will enable the Operating Partnership to
meet its debt service obligations and increase the likelihood that the Loan can
be refinanced at or prior to its maturity. Upon consummation of the Offering or
as soon as practical thereafter, the Operating Partnership will seek to reduce
its interest expense by refinancing the Loan with a new loan having a reduced
principal balance and a lower interest rate. There can be no assurance,
however, that the Operating Partnership will be able to refinance the Loan on
favorable terms.
Accordingly, the General Partner has determined, subject to receipt of
the Consent (as herein defined), to raise additional capital and increase the
Partnership's equity by means of the offering (the "Offering") being made by
this Proxy Statement and Prospectus. The Partnership will utilize the proceeds
of the Offering to complete the Tenant Improvements and to reduce the
outstanding principal indebtedness of the Operating Partnership at the time of
the refinancing of the Loan. In addition, if the Offering is completed, the
Partnership will distribute approximately $4.6 million, previously held by the
Partnership as a working capital reserve, to Unitholders on a pro rata basis.
Deemed Consent to the Proposal
The Partnership's Amended and Restated Partnership Agreement (the
"Partnership Agreement") provides that the Partnership may not issue equity
interests in the Partnership, other than Units, without the consent of holders
("Unitholders") of its limited partnership interests owning in excess of 50%
of the aggregate number of Units owned by all Unitholders. The Partnership
Agreement further provides that consent of Unitholders shall be deemed to be
granted if the General Partner makes a written request for the consent of the
Unitholders to a particular action, unless the General Partner receives
written refusal to consent within 30 days of the request from Unitholders
owning in the aggregate 50% or more of the Units owned by all Unitholders.
Accordingly, if the General Partner does not receive on or prior to the
Approval Date written refusals to consent to the issuance of the Preferred
Units from Unitholders owning in the aggregate 50% or more of the Units
-5-
<PAGE>
owned by all Unitholders, the Unitholders shall be deemed to have consented to
the issuance of the Preferred Units.
The General Partner recommends that each Unitholder use the attached
Proxy Card to vote in favor of the creation and issuance of the Preferred Units
and the amendments to the Partnership Agreement required to reflect the rights
and preferences of the Preferred Units as described in this Proxy Statement and
Prospectus.
The Offering
The Partnership is issuing to the holders (the "Unitholders") of its
limited partnership interests (the "Units") of record as of the close of
business on ___________, 1997 (the "Record Date") one subscription right
(each, a "Right") for each Unit held. Each Right entitles the Unitholder
to purchase, conditioned upon the receipt of the consent (the
"Consent") of the Unitholders to permit the creation and issuance of a
class of 12% cumulative, non-compounded preferred units (each, a
"Preferred Unit") representing limited partnership interests in the
Partnership, at any time prior to 5:00 p.m., New York City time, on
___________, 1997 (as such date may be extended by the General Partner
as herein provided, the "Expiration Date"), one Preferred Unit at a
subscription price of $23,250 (the "Subscription Price'), per Preferred
Unit. The Rights are evidenced by subscription certificates (the
"Subscription Certificates") which are being mailed to Unitholders
herewith. The Rights are not transferable. See "The Offering."
Subject to the receipt of the Consent, the subscription period shall
commence on _____________ __, 1997 and, unless extended by the General Partner,
will terminate at 5:00 p.m. New York time on the Expiration Date.
Rights may be exercised by completing a Subscription Certificate and
delivering it, together with payment, by means of a check, to the Partnership.
Each Unitholder who desires to exercise its Right shall be required to
subscribe for a minimum number of Preferred Units equal to the number of Units
held by such Unitholder as of the Record Date. Each Unitholder who exercises his
Right will be entitled to exercise an over-subscription privilege (the
"Over-Subscription Privilege") for all or any of the Preferred Units that are
not purchased by other Unitholders. If all Rights are exercised, there will be
no Over-Subscription Privilege. There is no limit on the number of Preferred
Units for which a Unitholder who exercises his Right may seek to subscribe
pursuant to the Over-Subscription Privilege. Any Over-Subscription Privilege may
only be exercised with respect to whole (and not fractional) Preferred Units.
Available Preferred Units will be allocated pro rata among those Unitholders who
exercise the Over-Subscription Privilege. See "The Offering -- Payment for
Securities."
Bronco, L.L.C. (the "Guarantor"), an affiliate of the General Partner
and a Unitholder, has agreed to (i) exercise its Right as a Unitholder and (ii)
subscribe for all unsubscribed Preferred Units (the "Subscription Guaranty")
which will ensure
-6-
<PAGE>
full subscription of the Offering. If no Rights are exercised by Unitholders
other than the Guarantor, the Guarantor would purchase and own all 460 Preferred
Units. As a result of the Subscription Guaranty, subject to receipt of the
Consent, the Partnership is assured of receiving gross proceeds from the
Offering in an amount equal to approximately $10.695 million. No fee is being
paid to the Guarantor on account of the Subscription Guaranty.
There is no existing market for the Preferred Units and it is
anticipated that a market for the Preferred Units will not develop. The
Partnership does not intend to apply to list the Preferred Units on any
securities exchange.
Each Preferred Unit will entitle the holder thereof to receive from the
available cash flow of the Partnership an amount in cash equal to a cumulative,
non-compounded preferred annual return of 12% (the "Annual Return") on his
preferred invested capital of $23,250. In addition, each Preferred Unit will
entitle the holder thereof to receive an aggregate cumulative cash distribution
(prior to any distribution to Unitholders and to the General Partner on account
of the Units and the general partnership interests held by them) equal to the
greater of (i) $46,500 (or 200% of an investor's preferred invested capital, on
a per Preferred Unit basis) or (ii) an amount equal to the Subscription Price
paid by an investor, together with a cumulative, compounded return thereon of
15%, in each case exclusive of any payments received with respect to the Annual
Return, from the net cash proceeds, if any, received by the Partnership from
capital transactions or upon liquidation of the Partnership. See "Description of
Securities."
For a discussion of certain tax consequences to holders who exercise
their Rights, see "Certain Income Tax Considerations."
ALL EXERCISING UNITHOLDERS MUST REMIT PAYMENT IN FULL WITH THEIR
COMPLETED SUBSCRIPTION CERTIFICATES FOR ALL PREFERRED UNITS SUBSCRIBED FOR
THROUGH THE EXERCISE OF THE RIGHTS AND THE OVER-SUBSCRIPTION PRIVILEGE.
EXERCISING UNITHOLDERS WILL HAVE NO RIGHT TO RESCIND A PURCHASE AFTER THE
PARTNERSHIP HAS RECEIVED A COMPLETED SUBSCRIPTION CERTIFICATE UNLESS THE CONSENT
IS NOT RECEIVED, IN WHICH CASE ALL SUBSCRIPTIONS SHALL BE DEEMED NULL AND VOID,
AND ALL PAYMENTS RECEIVED BY THE PARTNERSHIP IN RESPECT THEREFOR WILL BE
RETURNED TO THE EXERCISING UNITHOLDER.
Investment Considerations
See "Investment Considerations" for information that should be
considered by the Unitholders.
-7-
<PAGE>
Use of Proceeds
The estimated proceeds of the Offering (net of expenses of
approximately $200,000) will be applied approximately as follows:
Tenant Improvements .......................................... $7,500,000
Reduction of outstanding principal indebtedness
of the Partnership at the time of refinancing
of the Loan ................................................ 2,000,000
Closing and other expenses relating to the
refinancing of the Loan .................................... 500,000
Working Capital of the Partnership ........................... 495,000
----------
$10,495,000
In addition, if the Offering is completed, the Partnership intends to
distribute $10,000 per Unit, or an aggregate of approximately $4.6 million, to
Unitholders on a pro rata basis.
-8-
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
(in thousands, except per Unit information)
The selected consolidated financial data set forth below with respect
to the fiscal years ended December 31, 1992, 1993, 1994, 1995 and 1996 are
derived from the Partnership's audited consolidated financial statements. The
selected consolidated financial data for the six months ended June 30, 1996 and
1997 are derived from the Partnership's unaudited consolidated financial
statements which in the opinion of management include all normal, recurring
adjustments necessary to state fairly the data included therein in accordance
with generally accepted accounting principles for interim financial information.
Interim results are not necessarily indicative of the results to be expected for
the entire fiscal year. All of the data set forth below should be read in
conjunction with the "Management's Discussion and Analysis of Financial
Condition and Results of Operations" section and the Consolidated Financial
Statements and the notes thereto appearing in the Form 10-K and the Form 10-Qs
incorporated herein by reference.
<TABLE>
<CAPTION>
Six Months Ended
Year Ended December 31, June 30,
---------------------------------------------------------- ---------------------
1992 1993 1994 1995 1996 1996 1997
---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Consolidated Statement of Operations
Data:
Total revenue $ 7,907 $ 7,672 $ 8,126 $ 7,526 $ 5,281 $ 2,676 $ 2,822
Total expenses 5,364 11,664 5,423 6,260 6,000 2,911 2,974
-------- -------- -------- -------- -------- -------- --------
Income (loss) from operations 2,543 (3,992) 2,703 1,266 (719) (235) (152)
Total other income (expense), net (2,392) (1,898) (1,877) (2,208) (3,139) (1,111) (1,163)
-------- -------- -------- -------- -------- -------- --------
Net Income (Loss) $ 151 $ (5,890) $ 826 $ (942) $ (3,858) $ (1,346) $ (1,315)
======== ======== ======== ======== ======== ======== ========
Net Income (Loss) Allocated to General
Partner 5 $ (59) $ 25 $ (9) $ (39) $ (13) $ (13)
======== ======== ======== ======== ======== ======== ========
Net Income (Loss) Allocated to Limited
Partners $ 146 $ (5,831) $ 801 $ (933) $ (3,819) $ (1,333) $ (1,302)
======== ======== ======== ======== ======== ======== ========
Net Income (Loss) Per Unit of Limited
Partnership Interest Outstanding $ 318 $(12,676) $ 1,742 $ (2,028) $ (8,302) $ (2,898) $ (2,830)
======== ======== ======== ======== ======== ======== ========
Other Data:
Net Income (Loss) $ 151 $ (5,890) $ 826 $ (942) $ (3,858) $ (1,346) $ (1,315)
Depreciation and amortization 1,488 1,604 1,693 1,770 1,873 945 902
Reduction in Carrying Value of Income -- 6,256 -- -- -- -- --
Producing Properties
Total other (income) expense 2,392 1,898 1,877 2,208 3,139 1,111 1,163
-------- -------- -------- -------- -------- -------- --------
Net Operating Income $ 4,031 $ 3,868 $ 4,396 $ 3,036 $ 1,154 $ 710 $ 750
-------- ======== ======== ======== ======== ======== --------
<CAPTION>
As of December 31, As of June
30,
------------------------------------------------------------ ----------
1992 1993 1994 1995 1996 1997
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Consolidated Balance Sheet Data:
Total assets $ 53,010 $ 47,245 $ 47,602 $ 47,452 $ 40,830 $ 37,248
Total liabilities 31,936 32,061 31,593 32,385 29,621 27,354
Partners' equity (deficit):
Investor limited partners' equity, 460
units authorized, issued and
outstanding 22,422 16,591 17,392 16,459 12,640 11,338
General partners' deficit (1,348) (1,407) (1,383) (1,392) (1,431) (1,444)
Total partners' equity 21,074 15,184 16,009 15,067 11,209 9,894
Total liabilities and partners' equity 53,010 47,245 47,602 47,452 40,830 37,248
</TABLE>
-9-
<PAGE>
THE PARTNERSHIP
1999 Broadway Associates Limited Partnership (the "Partnership"), a
Delaware limited partnership, is a general partner of, and owns a 99.9% general
partnership interest in, 1999 Broadway Partnership (the "Operating
Partnership"), a Delaware general partnership. The remaining 0.1% interest in
the Operating Partnership is owned by 1999 Broadway Partners L.P., a Delaware
limited partnership and the managing general partner (the "Managing General
Partner") of the Operating Partnership. Winthrop Financial Associates, A Limited
Partnership (the "General Partner"), is the general partner of both the Managing
General Partner and the Partnership, and therefore controls the activities of
the Partnership. The Operating Partnership beneficially owns and operates a
42-story Class A office tower located at 1999 Broadway, Denver, Colorado (the
"Office Tower") containing approximately 635,000 rentable square feet plus 55
underground parking spaces and a 663 space parking garage located one and
one-half blocks northeast of the Office Tower at 2099 Welton Street (the
"Parking Garage", and together with the Office Tower, the "Property"). See "The
Property."
The Partnership is a Delaware limited partnership. The address of its
principal office is c/o Winthrop Financial Associates, A Limited Partnership,
Five Cambridge Center, 9th Floor, Cambridge, Massachusetts 02142-1493, and the
Partnership's telephone number is (617) 330-8600.
THE REORGANIZATION
During the fall of 1995, leases relating to approximately 138,000
square feet at the Office Tower expired and were not renewed by the vacating
tenants. As a result of such nonrenewals, the occupancy rate at the Office Tower
and the Property's operating revenue significantly declined, thereby impairing
the Operating Partnership's ability to meet its obligations, including, amounts
payable to the holder (the "Lender") of the mortgage (the "Mortgage")
encumbering the Property. In response to the Lender's efforts to appoint a
receiver to manage the Property, the Operating Partnership commenced a voluntary
petition for relief under Chapter 11 of the United States Bankruptcy Code.
In November, 1996, the Lender and the Operating Partnership entered
into an agreement pursuant to which the Lender agreed to vote in favor of a Plan
of Reorganization (the "Plan") submitted by the Operating Partnership, which
plan was confirmed by the Bankruptcy Court on November 13, 1996. The Plan
provided for the modification of the Loan in several respects, including the
following: (i) the maturity date of the Loan was extended by one year to
September 1999, (ii) the amortization schedule for the Loan was revised to
reflect a 25 year schedule (instead of a 30 year schedule), with a balloon
payment being due at maturity, (iii) additional principal payments of
$4,000,000 were required to be, and have been, paid and (iv) monthly interest
only payments for the period commencing on November 26, 1996 and ending
February 28, 1997, were required to be, and have been, paid.
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<PAGE>
In addition, certain covenants, including the following, have been
incorporated in the Loan as part of the Plan: (a) no distributions by the
Operating Partnership are permitted while the Loan is outstanding, (b) certain
minimum tangible net worth standards are required to be maintained by the
Partnership and the Managing General Partner of the Operating Partnership, (c)
such net worth requirements are to be used, if necessary, to fund tenant
improvements for new space leases (including related leasing commissions),
capital improvements to the Property and any debt service shortfalls. If the
Partnership obtains the Consent and the Offering is consummated, the Partnership
cannot make current payments of the Annual Return of the Preferred Units unless
it receives distributions from the Operating Partnership. Accordingly, the
Partnership will not be able to pay the Annual Return until the Loan is
refinanced or the Lender provides a waiver with respect to the prohibition on
distributions by the Operating Partnership. See "Investment Considerations --
"Risk of Non-Payment of Preferred Return" and "-- Need for Additional Capital"
and "The Offering -- Purpose of the Offering."
INVESTMENT CONSIDERATIONS
Effect of Not Exercising Rights. Upon completion of the Offering
contemplated hereby, Unitholders who do not exercise their Rights will own a
smaller proportional interest in the Partnership. Holders of the Preferred Units
will be entitled to receive distributions from the proceeds of any sale of the
Property or upon a liquidation of the Partnership on account of the Preferred
Units in an aggregate amount not less than $21,390,000 million prior to any
distribution to the Unitholders on account of the Units. In addition, holders of
the Preferred Units will be entitled to a preference in distributions from cash
flow by the Partnership. See "Description of Securities -- Distributions from
Capital Proceeds" and "Description of Securities -- Liquidation Preferences."
Accordingly, the only way a Unitholder can protect against substantial dilution
of his investment in his Units is to exercise his Rights.
In view of the priority return on the Preferred Units, other
than the distribution of $10,000 per Unit to be made upon
completion of the Offering, Unitholders who do not exercise their
Rights may not receive any further return of or on their
investment in the Units unless there is a material appreciation
in the value of the Property. See "The Property."
Dilution of Voting Rights. If the Consent is obtained and the Offering
is consummated, each Preferred Unitholder, voting together with the Unitholders
as a single class, will be entitled to two votes per Preferred Unit with respect
to any decisions to approve or disapprove the sale of all or substantially all
of the assets of the Partnership or the Operating Partnership in a single or
related series of transactions. Accordingly, Unitholders who do not subscribe
for their pro rata portion of the Preferred Units will experience substantial
dilution with respect to their voting rights in the event of the sale of all or
substantially all of the assets of the Partnership or the
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<PAGE>
Operating Partnership in a single or related series of transactions.
Risks Associated with Purchase of Preferred Units. During the year
ended December 31, 1996, the Partnership generated net operating income of
approximately $1.1 million and made debt service payments of approximately $2.9
million. The Partnership would not have been able to pay to the Preferred
Unitholders any part of the 12% cumulative, non-compounded preferred annual
return of approximately $1,280,000 (the "Annual Return") to which they would
have been entitled during fiscal 1996 if the Preferred Units had been
outstanding during fiscal 1996. See "Ratio of Earnings to Fixed Charges and
Preferred Unit Distributions." Furthermore, the General Partner believes that
the Partnership will not generate sufficient net operating income in fiscal
1997 to pay any part of the Annual Return. The Partnership's ability to pay
the Annual Return in fiscal 1998 and thereafter, as well as its ability to pay
an amount equal to the greater of (i) $46,500 (200% of an investor's preferred
invested capital, on a per Preferred Unit basis) or (ii) an amount equal to
the Subscription Price paid by an investor, together with a cumulative,
compounded return thereon of 15%, in each case exclusive of any payments
received with respect to the Annual Return, from the net cash proceeds, if any,
received by the Partnership from capital transactions or upon liquidation of
the Partnership (the "Preferred Capital Return") will be dependent, in large
part, on increasing the Partnership's net operating income, refinancing the
Loan, reducing the Partnership's debt service obligations and increasing the
value of the Property.
The General Partner believes that the Tenant Improvements intended to
be made with the proceeds of the Offering (see "Use of Proceeds") will, in the
aggregate, result in an appreciation in the value of the Property in excess of
the amount actually expended for such improvements. However, there can be no
assurance that the value of the Property will so appreciate or as to the amount
of any such appreciation in value. Accordingly, there can be no assurance that
an investor in the Preferred Units will receive the full Annual Return or the
full Preferred Capital Return on his investment in the Preferred Units. In
addition, the Preferred Units offered hereby have no preemptive rights or
anti-dilution protection.
Operating Deficits. The Operating Partnership has generated net
operating income of approximately $1.15 million, $3.0 million and $4.4 million
in the fiscal years ended December 31, 1996, 1995 and 1994, respectively. Other
than in fiscal 1996, these amounts have been sufficient to permit the Operating
Partnership to make required debt service payments of approximately $2.9
million, $3.1 million and $3.1 million in the fiscal years ended December 31,
1996, 1995 and 1994, respectively. In the fiscal year ended December 31, 1996,
the Partnership was required to utilize its working capital reserves to enable
the Operating Partnership to meet its debt service requirements under the Plan.
The Partnership has experienced a negative net cash flow in recent years
primarily due to lower occupancy rates at the Office Tower. This negative net
cash flow has necessitated greater use
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<PAGE>
of the Partnership's working capital reserves to fund the Operating
Partnership's debt service obligations under the Loan, including during the six
month period ended June 30, 1997. See "The Offering -- Purpose of the Offering."
There can be no assurance that the cost of operating the Property and making
debt service payments will not exceed the revenues available from operations in
future periods. See "Use of Proceeds" and "The Offering -- Purpose of the
Offering."
Risk of Non-Payment of Preferred Return. Holders of Preferred Units
will be entitled to a 12% cumulative, non-compounded annual return (the "Annual
Return") of $2,790 per Preferred Unit. The Loan, as modified by the Plan,
however, prohibits distributions by the Operating Partnership to its partners.
If the Partnership obtains the Consent and the Offering is consummated, the
General Partner does not believe that the Partnership can make current payments
of the Annual Return of the Preferred Units unless it receives distributions
from the Operating Partnership. Absent any distributions from the Operating
Partnership, the Partnership believes that it will not have sufficient funds to
pay the Annual Return. Accordingly, the Partnership will not be able to pay the
Annual Return unless the Loan is refinanced or the Lender waives its restriction
on the prohibition on distributions by the Operating Partnership. Even if a
waiver is obtained or the Loan is refinanced, there can be no assurance that
current debt service or reduced debt service will result in a net cash flow that
is sufficient to pay the Annual Return.
Distribution to Unitholders. If the Offering is consummated, the
Partnership intends to distribute $10,000 per Unit or approximately $4.6 million
to Unitholders on a pro rata basis. Such distribution will reduce a Unitholder's
adjusted basis in his Units, but generally should not result in a Unitholder's
recognition of taxable income or gain. It is possible that such distribution may
be recharacterized by the Internal Revenue Service for tax purposes as proceeds
received by a Unitholder in consideration for a portion of his Partnership
interest, in which event the Unitholder would be required to allocate his tax
basis in his Units and Preferred Units (if any) between the portion of his
Partnership interest deemed to have been sold and the portion retained. In such
event, a Unitholder would recognize a taxable gain or loss to the extent (if
any) that the amount deemed to have been realized by the Unitholder for the
portion sold exceeds the Unitholder's tax basis allocable to the portion sold.
Need for Additional Capital. The principal Loan balance of
approximately $26 million is due on September 30, 1999 and principal payments of
an aggregate of $291,000 are required to be amortized during 1998. Although the
General Partner believes that the entering into of the New Leases will enable
the Operating Partnership to meet its debt service obligations prior to maturity
of the Loan, the Operating Partnership may not be able to refinance the Loan
without the payment of substantial refinancing fees, a substantial increase in
the Partnership's equity and a substantial reduction in its aggregate
outstanding
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<PAGE>
indebtedness. There can be no assurance that the Operating Partnership will be
able to secure any such refinancing or whether any such refinancing will be on
terms as favorable to the Operating Partnership as its current arrangements.
In order to complete the Tenant Improvements and meet its obligations
under the Loan, the Operating Partnership requires the proceeds of the
Offering. If, however, the Consent is not obtained and the Offering is not
consummated, the current working capital of the Operating Partnership will be
insufficient to complete the Tenant Improvements and to enable the Operating
Partnership to meet its obligations under the Loan. As a result, the Operating
Partnership will be forced to default on either the New Leases or the Loan, or
both, and will have insufficient funds to retain existing tenants and attract
new tenants; all of which will have a significant adverse effect on the
Operating Partnership's ability to refinance the existing Loan on favorable
terms, if at all. See "Use of Proceeds".
In addition, the Operating Partnership's ability to sell or refinance
the Property and the terms of such a sale or refinancing will depend upon the
value of the Property at that time, which is subject to general economic
conditions and special factors affecting real estate investments. See "The
Property." If the Operating Partnership is not able to refinance the Property
prior to maturity of the Loan and is unable to meet its obligations thereunder
at maturity, the Lender may foreclose its mortgage on the Property, with
resultant potential adverse tax consequences to Unitholders. See "Certain Income
Tax Considerations -- Sale or Foreclosure of the Property."
Removal of General Partner and Redemption of Preferred Units. If at any
time the General Partner is removed as general partner of the Partnership
without its consent, all of the Preferred Units will be redeemed by the
Partnership concurrently with such removal of the General Partner for a price
equal to the liquidation preference of the Preferred Units (such right is not
triggered if the General Partner withdraws voluntarily). Accordingly, the
Offering will impose substantial limitations on the ability of the limited
partners of the Partnership to remove the General Partner without its consent.
Risks of Real Estate Ownership. The Partnership's investment in the
Operating Partnership is subject to the risks inherent in the ownership of
office property and rental property. These include the uncertainty that rental
income will be sufficient to cover operating costs and debt service due to
inability to attract or retain tenants as a result of adverse changes in general
or local economic conditions or characteristics, inadequacies of the management
agent, the possibility of unanticipated Property expenses, and other factors.
Other risks inherent in an investment in the Partnership include the possibility
of changes in the investment climate for real estate, unavailability of mortgage
funds for refinancing, changes in real estate tax rates and other operating
expenses, and other factors which are beyond the control of the General Partner.
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<PAGE>
Competition. A number of commercial office properties in Denver
compete with the Property. The commercial office market in Denver is highly
competitive and the Property competes with many other established properties as
well as other developments which may be constructed. There can be no assurance
that the Property will be able to attract and retain tenants at occupancy and
rental rates sufficient for successful operations. See "-- Operating Deficits."
Uninsured Losses. The Property is the subject of insurance coverage
customary for properties of this type. There can be no assurance, however, that
claims for any loss due to fire, natural disaster or other cause will be fully
covered under the comprehensive insurance policies for the Property. Moreover,
there are certain types of losses (generally of an unusual or catastrophic
nature, such as those that result from wars, earthquakes, floods or tornados)
which are either uninsurable or not economically insurable. Should such a
casualty occur, the Partnership would suffer a loss of the capital invested in
the Property as well as anticipated benefits from the Property.
Restrictions on Transfer. The transferability of the Preferred Units
will be restricted by the Partnership Agreement. In addition, in order to
prevent treatment of the Partnership as a publicly traded partnership for
federal income tax purposes, the Partnership Agreement will authorize the
General Partner to refuse to recognize or give effect to any transfer of a
Unit or Preferred Unit that, in the General Partner's determination, could
result in the Partnership's being treated as a "publicly traded partnership"
(as defined in section 7704(b) of the Code) unless the General Partner
determines that imposing such restrictions on transfers would not be in the
best interests of the Partnership and the partners taken as a whole. See also
"Certain Income Tax Considerations -- Partnership Classification." A Preferred
Unitholder may thus be required to retain his investment for an indefinite
period.
Absence of Market. In addition to the restrictions on transfer in the
preceding paragraph, it is not expected that there will be a market for the
resale of Preferred Units in the Partnership; therefore, a Preferred Unitholder
may be unable to sell or otherwise dispose of all or any portion of his
investment. Moreover, in the event a Preferred Unitholder were able to sell some
or all of his Preferred Units, he might receive less than the amount of his
original investment.
Conflicts of Interest. The Partnership is subject to potential
conflicts of interest arising from the other real estate activities of
affiliates of the General Partner. The officers and directors of the General
Partner and its affiliates may be actively engaged in supervising the
development, construction, rehabilitation and operation of other projects which
may be in competition with the Property. These additional activities and
investments may affect its ability to perform its obligations to the
Partnership.
-15-
<PAGE>
An affiliate of the General Partner manages the Property and receives
property management fees in respect thereof. If the Property were sold, it would
not receive such fees. In addition, an affiliate of the General Partner is
currently the exclusive leasing agent for the Property's existing tenants and
receives leasing commissions in respect of the Property. If the Property as a
whole were to be sold, it would no longer receive such fee. In addition, if the
Guarantor were to purchase a substantial number of the Preferred Units, a
conflict of interest could arise if the sale of the Property or a portion
thereof would be advantageous to the holders of the Preferred Units but not the
Unitholders. The General Partner is, however, aware of its fiduciary obligations
to the Partnership and intends to fulfill such obligations.
Tax Liability May Exceed Cash Distributions. As a partner in the
Partnership, a Preferred Unitholder will be taxed on his annual allocable share
of Partnership taxable income whether or not any cash distributions are made to
him and irrespective of the amount of such distributions, if any. Consequently,
a Preferred Unitholder's tax liability with respect to Partnership taxable
income allocated to him may exceed the cash distributed to him in one or more
years. Partnership taxable income from operations will be allocated first to
Preferred Unitholders up to the amount of their cumulative annual preferred
return, even if the Preferred Unitholders do not receive current distributions
of that amount. See "Investment Considerations -- Risk of Non-Payment of
Preferred Return," "Description of Partnership Agreement -- Allocations of Net
Income, Net Loss and Gain or Loss From a Capital Transaction" and "Certain
Income Tax Considerations --Taxation of the Partnership and the Preferred
Unitholders."
Limitations on Losses. The deductibility of any Partnership losses, as
determined for tax purposes, will be limited by the passive activity loss
limitations. There is also a risk that the IRS might seek to reallocate
Partnership items among the Preferred Unitholders and the other Limited Partners
in the event that the allocations provided for in the Partnership Agreement
are not respected. See "Certain Income Tax Considerations."
Liability of Limited Partners. Under Delaware law, a limited partner
may be liable for the debts of a partnership up to the amount of any
distribution made to such limited partner if, at the time of such distribution,
all liabilities of the partnership, other than liabilities to partners on
account of their interests in the partnership, exceed the fair value of the
partnership's assets. Additionally, a limited partner who receives the return,
in whole or in part, of his capital contribution without violation of the
partnership agreement or applicable statute may be liable to the partnership for
a period of one year for any sum, not in excess of such returned capital
contribution, necessary to discharge the partnership's liabilities to all
creditors who extended credit or whose claims arose before such return. If a
limited partner receives the return of any part of his capital contribution in
violation of
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<PAGE>
the partnership agreement or applicable statute, he is liable to the partnership
for a period of six years for the entire amount of the contribution wrongfully
returned.
Lack of Management Control. The Preferred Unitholders will have no
right or power to take part in the management or control of the business of the
Partnership, except the right to approve certain extraordinary actions. The
business of the Partnership is managed solely by the General Partner. If a
Preferred Unitholder participates in the control of the business of the
Partnership, he may be deemed under applicable laws to be a general partner of
the Partnership, with the resulting loss of his limited liability. If a
Preferred Unitholder were deemed to be liable as a general partner of the
Partnership, he would be generally liable for the Partnership's obligations,
which liability could be satisfied out of his personal assets if the
Partnership's assets were insufficient. Since the Partnership Agreement will
provide certain voting rights to the Preferred Unitholders, a creditor of the
Partnership might claim that such rights amount to participation in the
Partnership's business, which claim, if judicially sustained, could result in a
Preferred Unitholder's personal liability.
DESCRIPTION OF THE PROPOSAL
For the reasons identified in this Proxy Statement and Prospectus, the
General Partner believes that it is in the best long-term interests of the
Partnership and the Unitholders that the Partnership's Amended and Restated
Partnership Agreement be amended to reflect the creation and issuance of the
Preferred Units. If the Unitholders consent to the creation and issuance of
the Preferred Units, the Partnership Agreement will be amended and the Second
Amended and Restated Partnership Agreement, filed as an exhibit to the Proxy
and Registration Statement of which this Proxy Statement and Prospectus is a
part, will be substituted for the existing Partnership Agreement.
The Partnership Agreement provides that the Partnership may not issue
equity interests in the Partnership, other than Units, without the consent of
Unitholders owning in excess of 50% of the aggregate number of Units owned by
all Unitholders. The Partnership Agreement further provides that consent shall
be deemed to be granted if the General Partner makes a written request for the
consent of the Unitholders to a particular action, unless the General Partner
receives written refusal to consent within 30 days of the request from
Unitholders owning in the aggregate 50% or more of the Units owned by all
Unitholders. Accordingly, if the General Partner does not receive written
refusals to consent to the issuance of the Preferred Units within 30 days of
the date of the mailing this Proxy
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<PAGE>
Statement and Prospectus from Unitholders owning in the aggregate 50% or more of
the Units owned by all Unitholders, the Unitholders shall be deemed to have
consented to the creation and issuance of the Preferred Units.
THE GENERAL PARTNER RECOMMENDS THAT EACH UNITHOLDER USE THE ATTACHED
CONSENT FORM TO VOTE IN FAVOR OF THE AMENDMENTS TO THE PARTNERSHIP AGREEMENT
TO CREATE THE PREFERRED UNITS.
-18-
<PAGE>
THE OFFERING
PURPOSE OF THE OFFERING
The Operating Partnership has been engaged in a comprehensive leasing
program at the Property. To that end, the Operating Partnership recently entered
into leases (the "New Leases") for approximately 166,000 square feet of office
space (the "Newly Leased Space") at the Office Tower, thereby increasing the
Office Tower's occupancy rate from 63% at the time the Plan was confirmed to
approximately 90%. Capital improvement obligations both with respect to the New
Leases and 57,000 square feet of existing leased space expected to be renewed in
the next 12 months, together with attendant leasing commissions (such capital
improvements and leasing commissions are collectively referred to herein as the
"Tenant Improvements"), are anticipated to require the Operating Partnership to
expend approximately $7.5 million in 1997 and 1998. Neither the Operating
Partnership nor the Partnership has sufficient reserves, nor does the Property
generate sufficient cash flow, to fully fund these Tenant Improvements.
The General Partner believes that, in order to maximize the value of
the Property, it is necessary to complete the Tenant Improvements contemplated
to be made with the proceeds of the Offering. See "Use of Proceeds." The General
Partner believes that such Tenant Improvements will result in an appreciation in
the value of the Property in excess of the amount actually expended for such
improvements. However, there can be no assurance that the value of the Property
will so appreciate or as to the amount of any such appreciation in value.
At present, the Operating Partnership does not have sufficient funds or
revenues to complete the expected $7.5 million of Tenant Improvements and to
satisfy its debt service payments under the Loan. During 1996, the Operating
Partnership had a negative debt service coverage ratio of approximately .4:1.
As a result, the Operating Partnership was required to utilize a part of its
capital reserve to make current debt service payments. Winthrop Financial
Associates, A Limited Partnership, the general partner of the Partnership (the
"General Partner"), believes that the failure to consummate the Offering will,
in all likelihood, cause the Operating Partnership to default under the New
Leases and/or the Loan, as well as hinder its ability to renew existing leases.
If the Operating Partnership were to default under the Loan either prior to, or
at its maturity, the Operating Partnership would risk losing the Property
through foreclosure. Further, if the Tenant Improvements are not completed
and/or the occupancy level at the Property remains low, the value of the
Property will be impaired which will make it
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<PAGE>
difficult to refinance the Loan or to obtain sufficient proceeds upon a sale of
the Property to repay the Loan. However, if the Offering is consummated, the
General Partner believes that the Operating Partnership will have sufficient
funds to complete the Tenant Improvements. Increased revenues from the New
Leases will enable the Operating Partnership to meet its debt service
obligations and increase the likelihood that the Loan can be refinanced at or
prior to its maturity. Upon consummation of the Offering, or as soon as
practical thereafter, the Operating Partnership will seek to reduce its
interest expense by refinancing the Loan with a new loan having a reduced
principal balance and a lower interest rate. There can be no assurance, however,
that the Operating Partnership will be able to refinance the Loan on favorable
terms.
Accordingly, the General Partner has determined, subject to receipt of
the Consent (as herein defined), to raise additional capital and increase the
Partnership's equity by means of the offering (the "Offering") being made by
this Proxy Statement and Prospectus. The Partnership will utilize the proceeds
of the Offering to complete the Tenant Improvements and to reduce the
outstanding principal indebtedness of the Operating Partnership at the time of
the refinancing of the Loan. In addition, if the Offering is completed, the
Partnership will distribute approximately $4.6 million to Unitholders on a pro
rata basis. If, however, the Consent is not obtained and the Offering is not
completed, the Partnership believes that it will be required to expend
substantially all of its working capital on debt service payments in order to
avoid default on the Loan prior to its maturity and will not possess sufficient
reserves to complete the Tenant Improvements. See "Use of Proceeds." In such
event, unless the Partnership is able to locate alternative sources of equity
financing, the Operating Partnership will not be able to refinance the Loan at
or prior to its maturity and the Operating Partnership will be in default of its
obligations under the New Leases.
TERMS OF THE OFFER
The Partnership is issuing to the holders (the "Unitholders") of its
limited partnership interests (the "Units") of record as of the close of
business on ___________, 1997 (the "Record Date") one subscription right
(each, a "Right") for each Unit held. Each Right entitles the Unitholder
to purchase, conditioned upon the receipt of the consent (the
"Consent") of the Unitholders to permit the creation and issuance of a
class of 12% cumulative, non-compounded preferred units (each, a
"Preferred Unit") representing limited partnership interests in the
Partnership, at any time prior to 5:00 p.m., New York City time, on
____________, 1997 (as such date may be extended by the General Partner
as herein provided, the "Expiration Date"), one Preferred Unit at a
subscription price of $23,250 (the "Subscription Price"), per Preferred
Unit. The Rights are evidenced by subscription certificates (the
"Subscription Certificates") which are being mailed to Unitholders
herewith. The Rights are not transferable.
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<PAGE>
Completed Subscription Certificates may be delivered to the Partnership
at any time commencing on _____________ __, 1997 and terminating at 5:00 p.m.
New York time on the Expiration Date (the "Subscription Period"). If the
Partnership does not obtain the Consent, any completed Subscription
Certificates, together with any payments received by the Partnership in
connection with such completed Subscription Certificate will be returned to the
relevant Unitholder.
Rights may be exercised by completing a Subscription Certificate and
delivering it, together with payment by means of a check, to the Partnership.
See "-- Exercise of Rights" and "-- Subscription Price." Subject to the
receipt of Consent, all Rights may be exercised immediately upon receipt and
until 5:00 p.m., New York City time, on the Expiration Date.
The terms of this Offering and the Preferred Units have been determined
by the General Partner. No determination has been or will be made as to, nor has
the Partnership requested any third party to determine and/or deliver an opinion
in respect of, the fairness of the terms of the Preferred Units.
SUBSCRIPTION PRICE
The Subscription Price for each Preferred Unit is $23,250.00.
NO MODIFICATION OR REVOCATION
ONCE A HOLDER OF RIGHTS HAS PROPERLY EXERCISED HIS RIGHTS AND THE
OVER-SUBSCRIPTION PRIVILEGE, SUCH EXERCISE MAY NOT BE MODIFIED OR REVOKED UNLESS
THE PARTNERSHIP DOES NOT OBTAIN THE CONSENT, IN WHICH CASE THE SECURITIES
OFFERED HEREBY WILL BE DEREGISTERED, ALL COMPLETED SUBSCRIPTIONS FOR PREFERRED
UNITS WILL BE DEEMED NULL AND VOID, AND ALL PAYMENTS RECEIVED IN RESPECT
THEREFOR WILL BE RETURNED TO THE EXERCISING UNITHOLDER.
EXPIRATION OF THE OFFERING
This Offering will expire at 5:00 p.m. New York City time,
on the Expiration Date. The Rights expire on the Expiration Date
and thereafter may not be exercised.
OVER-SUBSCRIPTION PRIVILEGE
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<PAGE>
Any Unitholder who has exercised his Right will be entitled to exercise
an over-subscription privilege (the "Over-Subscription Privilege"), if they wish
to acquire additional Preferred Units. The Over-Subscription Privilege may be
exercised by any Unitholder who has exercised his Right. Unitholders should
indicate, on the Subscription Certificate which they submit with respect to the
exercise of their Rights, how many additional Preferred Units they are willing
to acquire pursuant to the Over-Subscription Privilege.
Within ____ business days after the Expiration Date (to allow for
clearance of the checks remitted in payment of the Subscription Price of the
Preferred Units subscribed for by the Unitholders), the Partnership will
allocate the available Preferred Units pro rata among those Unitholders who
exercise the Over-Subscription Privilege (including the Guarantor) according to
the aggregate number of Rights exercised. The percentage of remaining Preferred
Units each Unitholder may acquire may be rounded up or down to result in
delivery of whole Preferred Units. In the event a Unitholder who exercises the
Over-Subscription Privilege is allocated less than the number of Preferred Units
that such Unitholder subscribed for, excess subscription payments will be
promptly refunded. See "-- Payment for Securities."
SUBSCRIPTION GUARANTY
In order to ensure full subscription of the Offering, the Guarantor, an
affiliate of the General Partner and a limited partner in the Partnership, has
agreed (i) to exercise its Right as a Unitholder and (ii) to subscribe for all
other Preferred Units offered hereunder through the Over-Subscription Privilege
and to purchase all unsubscribed Preferred Units (the "Subscription Guaranty").
If no Rights are exercised by Unitholders other than the Guarantor, the
Guarantor would purchase and own all 460 Preferred Units. No fee is being paid
to the Guarantor on account of the Subscription Guaranty. As a result of the
Subscription Guaranty, subject to receipt of the Consent, the Partnership is
assured of receiving gross proceeds from the Offering in an amount equal to
approximately $10.695 million.
Apollo Real Estate Investment Fund III, L.P. ("Apollo"), an
affiliate of the General Partner, has agreed to provide the
Guarantor with such financing as shall be necessary to enable the
Guarantor to fulfill the Subscription Guaranty. As a result of
the Subscription Guaranty, the Partnership is assured of
receiving gross proceeds of the offering in an amount equal to
approximately $10.695 million. See "Investment Considerations --
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<PAGE>
Removal of General Partner and Redemption of Preferred Units" and
"Description of Securities -- Redemption."
EXERCISE OF RIGHTS
Rights may be exercised by filling in and signing the reverse side of
the Subscription Certificate which accompanies this Proxy Statement and
Prospectus and mailing it in the envelope provided, or otherwise delivering the
completed and signed Subscription Certificate to the Partnership, together with
payment of the Subscription Price for the Preferred Units as described in "--
Payment for Securities". Rights may also be exercised through a Unitholder's
broker or dealer, who may charge such Unitholder a servicing fee.
EXERCISE OF OVER-SUBSCRIPTION PRIVILEGE
Any Unitholder exercising his Rights may participate in the
Over-Subscription Privilege by indicating on his Subscription Certificate the
number of Preferred Units he is willing to acquire pursuant thereto. There is no
limit on the number of Preferred Units that exercising Unitholders may seek to
subscribe for pursuant to the Over-Subscription Privilege. The number of
Preferred Units issued to each Unitholder participating in the Over-Subscription
Privilege will be allocated as described above in "-- Over-Subscription
Privilege."
PAYMENT FOR SECURITIES
Payment for Preferred Units that are subscribed for by exercising
Rights and the Over-Subscription Privilege must be made by means of a check, in
United States dollars, made payable to the Partnership, along with a completed
and properly executed Subscription Certificate on or prior to the Expiration
Date. All checks received by the Partnership will be deposited in a segregated
interest-bearing account of the Partnership (the interest from which will belong
to the Partnership) pending receipt of the Consent and distribution of the
Preferred Units. Any excess funds paid by a Unitholder will be promptly returned
to such Unitholder.
If any Unitholder does not make timely and full payment for the
Preferred Units subscribed for by exercise of his Rights and/or the
Over-Subscription Privilege, the Partnership reserves the right to allow the
Guarantor to purchase the Preferred Units subscribed for by such non-paying
Unitholder.
THE METHOD OF DELIVERY OF SUBSCRIPTION CERTIFICATES AND PAYMENT OF THE
SUBSCRIPTION PRICE TO THE PARTNERSHIP WILL BE AT
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<PAGE>
THE ELECTION AND RISK OF THE HOLDERS OF THE RIGHTS. IF SENT BY MAIL, IT IS
RECOMMENDED THAT SUCH CERTIFICATES AND PAYMENTS BE SENT BY REGISTERED MAIL,
PROPERLY INSURED, WITH RETURN RECEIPT REQUESTED, AND THAT A SUFFICIENT NUMBER OF
DAYS BE ALLOWED TO ENSURE DELIVERY TO THE PARTNERSHIP AND CLEARANCE OF PAYMENT
PRIOR TO 5:00 P.M., NEW YORK CITY TIME, ON THE EXPIRATION DATE. BECAUSE
UNCERTIFIED PERSONAL CHECKS MAY TAKE AT LEAST FIVE BUSINESS DAYS TO CLEAR, YOU
ARE STRONGLY URGED TO PAY, OR ARRANGE FOR PAYMENT, BY MEANS OF CERTIFIED OR
CASHIER'S CHECK OR MONEY ORDER.
All questions concerning the timeliness, validity, form and eligibility
of any exercise of Rights will be determined by the Partnership, whose
determinations will be final and binding. The Partnership in its sole discretion
may waive any defect or irregularity or permit a defect or irregularity to be
corrected within such time as it may determine or reject the purported exercise
of any Right. Subscriptions will not be deemed to have been received or accepted
until all irregularities have been waived or cured within such time as the
Partnership shall determine in its sole discretion. The Partnership shall not
have any duty to give notification of any defect or irregularity in connection
with the submission of Subscription Certificates or incur any liability for
failure to give such notification.
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<PAGE>
THE PROPERTY
The Property is comprised of a 42-story Class A limestone and
reflective glass office tower located at 1999 Broadway, Denver, Colorado (the
"Office Tower") and a 663 space parking garage located one and one-half blocks
northeast of the Office Tower at 2099 Welton Street (the "Parking Garage"). The
Partnership acquired the Property in 1988 for an aggregate purchase price of
approximately $83 million.
In 1996, in connection with the Partnership's litigation with respect
to its reorganization under the bankruptcy laws, the Partnership obtained an
appraisal of the Property for approximately $39 million. Although the General
Partner has not obtained a more recent appraisal, it does not have any reason to
believe that the current value of the Property has changed in any substantial
amount from the value determined in 1996. In addition, in 1996 during the
Partnership's reorganization, the Partnership received two unsolicited offers to
purchase the Office Tower, each conditioned upon the completion of due
diligence: one offer was for $38 million and the other for $41 million. Neither
offer was pursued, nor was the financial ability of such bidders to consummate
any such transaction investigated, and the Operating Partnership obtained the
confirmation of the Plan.
USE OF PROCEEDS
The estimated proceeds of the Offering (net of expenses of
approximately $200,000) will be applied approximately as follows:
Tenant Improvements .......................................... $ 7,500,000
Reduction of outstanding principal indebtedness
of the Partnership at the time of refinancing
of the Loan ................................................ 2,000,000
Closing and other expenses relating to the
refinancing of the Loan .................................... 500,000
Working Capital of the Partnership ........................... 495,000
-----------
$10,495,000
===========
Pending application of the net proceeds of the Offering as indicated
above, such proceeds will be invested in interest-bearing investment grade
securities. Any net proceeds not required to be applied to capital improvements
or to refinance the Loan will be added to the Partnership's working capital. In
addition, if the
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Offering is completed, the Partnership intends to distribute $10,000 per Unit,
or an aggregate of approximately $4.6 million, to Unitholders on a pro rata
basis. See "The Offering -- Purpose of the Offering."
RATIO OF EARNINGS TO FIXED CHARGES AND
PREFERRED UNIT DISTRIBUTIONS
The following table sets forth the computation of the ratio of earnings
to fixed charges for the six month periods ended June 30, 1997 and 1996 and for
each of the years in the five-year period ended December 31, 1996. The financial
information for purposes of computing the ratio of earnings to fixed charges has
been derived from the unaudited and audited financial statements of the
Partnership incorporated by reference herein.
The following table also sets forth the pro forma computation of the
ratio of earnings to fixed charges and Preferred Unit distributions for the six
month period ended June 30, 1997 and the year ended December 31, 1996. The pro
forma ratio of earnings to fixed charges and Preferred Unit distributions has
been prepared by adjusting the historical financial statements of the
Partnership to give effect to the exercise of the Rights as of the beginning of
the period presented and does not purport to be indicative of the ratio of
earnings to fixed charges and Preferred Unit distributions which might have
occurred had the Rights been exercised at the beginning of such periods or which
might be expected to occur in the future.
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<PAGE>
<TABLE>
<CAPTION>
Period Ending June 30, For the Year Ended December 31,
---------------------- -------------------------------------------------------
(in thousands except
ratio information) 1997 1996 1996 1995 1994 1993(1) 1992
------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Earnings:
Net earnings (loss) ($1,315) ($1,346) ($3,858) ($ 942) $ 826 ($5,890) $ 151
Add back fixed charges
charged to earnings 1,305 1,464 2,909 2,936 2,957 2,980 2,999
------- ------- ------- ------- ------- ------- -------
Net (loss) Earnings before fixed
charges (10) 118 (949) 1,994 3,783 (2,910) 3,150
Depreciation and amortization of
acquisition costs 870 913 1,873 1,770 1,628 1,540 1,424
Reduction in carrying value of
income producing properties 0 0 0 0 0 6,256 0
------- ------- ------- ------- ------- ------- -------
Net earnings before fixed charges,
depreciation, amortization of
acquisition costs and reduction in
carrying value $ 860 $ 1,031 $ 924 $ 3,764 $ 5,411 $ 4,886 $ 4,574
======= ======= ======= ======= ======= ======= =======
Fixed Charges:
Interest expense as reported(4) $ 1,272 $ 1,431 $ 2,844 $ 2,871 $ 2,892 $ 2,915 $ 2,934
Amortization of debt placement
costs 33 33 65 65 65 65 65
------- ------- ------- ------- ------- ------- -------
Total fixed charges $ 1,305 $ 1,464 $ 2,909 $ 2,936 $ 2,957 $ 2,980 $ 2,999
======= ======= ======= ======= ======= ======= =======
Ratio:
Net earnings before fixed
charges/Fixed charges(1,2) (0.0) 0.1 (0.3) 0.7 1.3 (1.0) 1.1
======= ======= ======= ======= ======= ======= =======
Net earnings before fixed charges,
depreciation, amortization of
acquisition costs and reduction in
carrying value/Fixed charges(5) 0.7 0.7 0.3 1.3 1.8 1.6 1.5
======= ======= ======= ======= ======= ======= =======
Pro forma Ratio of Net Earnings
to Fixed Charges and Preferred
Unit Distributions:
Fixed charges per above $ 1,305 $ 1,464 $ 2,909
Adjustment to give effect to the
net decrease in interest expense
resulting from a refinancing (95) (90) (181)
Preferred Unit distributions(3) 642 642 1,283
------- ------- -------
Total fixed charges $ 1,852 $ 2,016 $ 4,011
======= ======= =======
Pro forma Ratio:
Net earnings (loss) before fixed
charges/Fixed Charges (0.0) 0.1 (0.2)
======= ======= =======
Net earnings before fixed charges,
depreciation, amortization of
acquisition costs and reduction of
carrying value/Fixed charges 0.5 0.5 0.2
======= ======= =======
</TABLE>
(1) Net earnings were not adequate to cover fixed charges for year ended
December 31, 1993 by $5,890,000 due to a reduction in carrying value of
approximately $6,256,000.
(2) Net earnings were not adequate to cover fixed charges for years ended
1995 and 1996 by $942,000 and $3,858,000 respectively.
(3) Assuming that $10,695,000 worth of Preferred Units are purchased at 12%
annual return.
(4) At December 31, 1995 and 1996 amortization of debt placement costs were
included in interest expense for financial reporting purposes.
(5) The ratio of net earnings before fixed charges, depreciation and
amortization of acquisition costs is presented to demonstrate that
earnings, before non cash charges, were adequate to cover fixed charges
for the years ending December 1992, 1993, 1994, and 1995.
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<PAGE>
DESCRIPTION OF SECURITIES
GENERAL
Each Right entitles the Unitholder to purchase one Preferred Unit. The
Preferred Units represent limited partnership interests in the Partnership and
have such rights and designations as are described below. The Preferred Units
will be evidenced by certificates issued by the Partnership.
The Partnership's Amended and Restated Partnership Agreement (the
"Partnership Agreement") provides that the Partnership may not issue
equity interests in the Partnership, other than Units, without the consent of
Unitholders owning in excess of 50% of the aggregate number of Units owned by
all Unitholders. The Partnership Agreement further provides that consent shall
be deemed to be granted if the General Partner makes a written request for the
consent of the Unitholders to a particular action, unless the General Partner
receives written refusal to consent within 30 days of the request from
Unitholders owning in the aggregate 50% or more of the Units owned by all
Unitholders. Accordingly, if the General Partner does not receive written
refusals to consent to the issuance of the Preferred Units within 30 days of the
date of this Proxy Statement and Prospectus from Unitholders owning in the
aggregate 50% or more of the Units owned by all Unitholders, the Unitholders
shall be deemed to have consented to the issuance of the Preferred Units.
There is no existing market for the Preferred Units. The Partnership
does not intend to list the Preferred Units on any securities exchange and it
is not anticipated that a market for the Preferred Units will develop. In
addition, the transferability of the Preferred Units will be restricted by the
Partnership Agreement. See "Investment Considerations."
CUMULATIVE, NON-COMPOUNDED PREFERRED ANNUAL RETURN
Each Preferred Unit will entitle the holder thereof to receive from the
Cash Flow of the Partnership an amount in cash equal to a cumulative,
non-compounded preferred annual return of 12% on his preferred invested capital
of $23,250. The amount of preferred invested capital on which such return will
be calculated will be reduced from time to time by distributions, if any, of
Capital Proceeds (as defined in the Partnership Agreement). See "--
Distributions from Capital Proceeds." Cash Flow, as used herein, means Net
Income (as defined in the Partnership Agreement) or Net Loss (as defined in
the Partnership Agreement) of the Partnership plus
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<PAGE>
depreciation and amortization deductions and the amount of reserve funds no
longer required, less the sum of (a) debt amortization, (b) payments to
reasonable reserve accounts established by the General Partner, (c) capital
expenditures to the extent not paid out of reserves, insurance proceeds or
condemnation proceedings, and (d) the annual partnership administration and
investor service fee. Cash Flow does not include gains or losses resulting from
a capital transaction of the Partnership. The General Partner has the right at
any time to establish reasonable reserves for the Partnership (or the Operating
Partnership) as a deduction from Cash Flow. Cash Flow, if available, is required
to be distributed at least once each year to the Partners, or more frequently at
the option of the General Partner.
Distributions of Cash Flow may be made from time to time by the
Partnership to the Preferred Unitholders until such time as the Preferred
Unitholders have received a 12% per annum cumulative, non-compounded return on
their preferred invested capital. Thereafter, Cash Flow will be distributed
99% to the Unitholders and 1% to the General Partner until such time as the
Unitholders have received a 6% per annum cumulative, non-compounded return on
their invested capital. Thereafter, Cash Flow will be distributed 97% to the
Unitholders and 3% to the General Partner until the Unitholders have received
an amount equal to their Net Invested Capital (as defined in the Partnership
Agreement). Any remaining Cash Flow will be distributed 70% to the Unitholders
and 30% to the General Partner. See "The Reorganization" for a description of
the need for distributions from the Operating Partnership to the Partnership.
The availability of Cash Flow for distribution is dependent upon the
Operating Partnership's earning more than sufficient rental and investment
income to pay all expenses of the Operating Partnership and meet the debt
service requirements of the Loan and of any other borrowings of the Partnership.
No assurance can be given that income from the Operating Partnership in any year
will be sufficient to generate Cash Flow for the Preferred Unitholders or that
there will not be cash deficits. Investors should recognize that because
operating expenses and real estate taxes are subject to increases, and increases
in rent levels may be subject to market limitations, cash distributions to the
Partnership from the Operating Partnership in any year may not be sufficient to
generate Cash Flow for distribution to the Preferred Unitholders.
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<PAGE>
DISTRIBUTIONS FROM CAPITAL PROCEEDS
In addition to a 12% cumulative, non-compounded preferred return (the
"Annual Return"), each Preferred Unit entitles the holder thereof to receive an
aggregate cash distribution (prior to any distribution to Unitholders and to the
General Partner on account of the Units and the general partnership interests
held by them) equal to the greater of (i) $46,500 (200% of an investor's
original preferred invested capital) or (ii) an amount equal to the Subscription
Price paid by an investor together with a cumulative, compounded return thereon
of 15%, in each case exclusive of any payments received with respect to the
Annual Return, from the net cash proceeds, if any, received by the Partnership
from Non-Terminating Capital Transactions (as defined in the Partnership
Agreement) or upon liquidation of the Partnership. Accordingly, prior to
dissolution of the Partnership, the net cash proceeds, if any, of a
Non-Terminating Capital Transaction that the General Partner determines is
available for distribution shall be distributed and applied generally as
follows:
(a) to discharge, to the extent required by any lender
or creditor, debts and obligations of the
Partnership (including loans made by the General
Partner);
(b) (i) to fund reserves for contingent liabilities to the extent
deemed reasonable by the General Partner and the accountants of
the Partnership or (ii) as determined by the General Partner to
fund repairs, capital improvements or the development of portions
of the Property;
(c) to each Preferred Unitholder, to the extent not theretofore paid
out of prior distributions of Cash Flow and capital proceeds, an
amount equal to a cumulative, non-compounded annual 12% return on
his preferred invested capital, as such capital may be reduced
from time to time by any prior distributions pursuant to (d)
below;
(d) to each Preferred Unitholder, an amount equal to the greater of
(i) $46,500 or (ii) an amount equal to the Subscription Price paid
by an investor together with a cumulative, compounded return
thereon of 15%, in each case exclusive of any payments received
with respect to clause (c) above, per Preferred Unit, reduced by
all prior
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<PAGE>
distributions to such Preferred Unitholder pursuant to this
clause (d);
(e) to each Unitholder, an amount equal to a annual 6% cumulative,
non-compounded return on his invested capital reduced by all prior
distributions to him out of Cash Flow and by all prior
distributions to him hereunder;
(f) to each Unitholder, an amount equal to his
invested capital, reduced by all prior
distributions to him hereunder;
(g) to the General Partner, the aggregate amount of
its capital contribution to the Partnership,
reduced by any prior distribution to it hereunder;
and
(h) the balance, 70% to the Unitholders and 30% to the
General Partner.
LIQUIDATION PREFERENCES
Upon the termination and winding up of the Partnership, the proceeds of
any Terminating Capital Transaction (as defined in the Partnership Agreement)
and/or the remaining assets of the Partnership available for distribution,
after payment of all liabilities of the Partnership (including loans made by
the General Partner), shall be distributed and applied generally as follows:
(a) to each Preferred Unitholder, an amount equal to a annual 12%
cumulative, non-compounded return on his preferred invested
capital, after taking into account all prior distributions to him
out of Cash Flow and capital proceeds;
(b) to each Preferred Unitholder, an amount equal to the greater of
(i) $46,500 or (ii) an amount equal to the Subscription Price
paid by an investor together with a cumulative, compounded return
thereon of 15%, in each case exclusive of any payments received
with respect to clause (a) above, per Preferred Unit, reduced by
any prior distributions to him in reduction thereof; and
(c) thereafter, to the Unitholders and the General Partner in
accordance with their respective capital account balances.
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<PAGE>
No assurance can be given as to the availability or feasibility of a
Non-Terminating or a Terminating Capital Transaction or the amount of net cash
proceeds, if any, therefrom.
Upon receipt by a Preferred Unitholder of an amount equal to the
liquidation preference of a Preferred Unit, he shall have no further rights to
vote or to receive distributions from the Partnership.
VOTING RIGHTS
A Preferred Unit will not entitle the holder thereof to any voting
rights, provided, however, that each Preferred Unit will entitle the holder
thereof, voting together with the Unitholders as a single class, to two votes
with respect to any decisions to approve or disapprove the sale of all or
substantially all of the assets of the Partnership or the Operating Partnership
in a single or related series of transactions. See "Description of Partnership
Agreement -- Voting Rights."
REDEMPTION
If at any time the General Partner is removed without its consent, the
Partnership will be required to redeem all of the Preferred Units at a price
equal to the liquidation preference of the Preferred Units (such right is not
triggered if the General Partner withdraws voluntarily).
Upon payment in full of the liquidation preference of the Preferred
Units, they will be redeemed in full and the holders thereof shall have no
further rights, powers or obligations.
TRANSFER OF PREFERRED UNITS
The Partnership Agreement will provide that no sale or exchange of an
interest in the Partnership may be made if the sale or exchange of the
interest, when added to the total of all other interests sold or exchanged
within the period of 12 consecutive months ending with the proposed date of the
sale or exchange, would result in the termination of the Partnership under
Section 708 of the Internal Revenue Code of 1986, as amended (the "Code").
However, the sale or exchange could be made if there has been compliance with
the requirements of the securities laws and the Partnership Agreement and if,
prior to the sale or exchange, there has been published in the Internal Revenue
Bulletin, or the Partnership has been granted upon application and at the
expense of the Preferred Unitholder desiring to transfer his Preferred Units,
a favorable ruling to
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<PAGE>
the effect that a transfer of the type proposed will not result in such a
termination.
In addition, in order to prevent treatment of the Partnership as a
publicly traded partnership for federal income tax purposes, the Partnership
Agreement will authorize the General Partner to refuse to recognize or give
effect to any transfer of a Unit or Preferred Unit that, in the General
Partner's determination, could result in the Partnership's being treated as a
"publicly traded partnership" (as defined in section 7704(b) of the Code) unless
the General Partner determines that imposing such restrictions on transfers
would not be in the best interests of the Partnership and the partners taken as
a whole.
The Partnership Agreement also will provide, with certain exceptions,
that no Preferred Unitholder may transfer his interest in the Partnership to a
minor or an incompetent or transfer any interest representing less than
one-half of a Preferred Unit (unless such interest represents the Preferred
Unitholder's entire interest).
No pledge, sale, transfer, exchange, assignment or other disposition of
a Preferred Unitholders's interest in the Partnership may be made except (a)
with the consent of the General Partner (except as otherwise provided in the
Partnership Agreement) and (b) in compliance with applicable regulations of
any governmental agency having jurisdiction over such disposition.
An assignee of a Preferred Unit may be admitted as a substitute Limited
Partner only upon: (a) delivery to the General Partner of a duly endorsed
Certificate and transfer application, (b) the General Partner's consenting to
the transfer, the granting of which consent is in the General Partner's sole
discretion, and (c) the assignee's written acceptance and adoption of all terms
and provisions of the Partnership Agreement. By executing and delivering a
transfer application, the transferee of Preferred Units (i) is an assignee
until admitted to the Partnership as a substituted limited partner, (ii)
automatically requests admission to the Partnership as a substituted limited
partner, (iii) represents that such transferee has the capacity and authority
to enter into the Partnership Agreement and (iv) grants powers of attorney to
the General Partner. On a quarterly basis, the Partnership will, on behalf of
transferees who have submitted transfer applications, request the General
Partner to admit such transferees as substituted limited partners in the
Partnership. If the General Partner consents to such substitution, a
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<PAGE>
transferee will be admitted to the Partnership as a substituted limited partner
upon the recordation of such transferee's name in the books and records of the
Partnership. Upon such admission, which is in the sole discretion of the General
Partner, he will be entitled to all of the rights of a limited partner under the
Delaware Act and pursuant to the Partnership Agreement. Except in the case of
an assignment upon death or incapacity, an assignee of a Preferred Unitholder
who does not become a substitute Limited Partner will not have any right to
share in the Net Income, Net Loss, Cash Flow or other distributions of the
Partnership.
REPLACEMENT OF LOST PREFERRED UNIT CERTIFICATES
A Preferred Unitholder or transferee who loses or has his or her
certificate for Preferred Units stolen or destroyed may obtain a replacement
certificate by furnishing an indemnity bond and by satisfying certain other
procedural requirements under the Partnership Agreement.
DESCRIPTION OF PARTNERSHIP AGREEMENT
The following is a summary of certain provisions of the Partnership
Agreement and is qualified in its entirety by reference to the text of the
amended Partnership Agreement, a copy of which has been filed as an exhibit to
the Registration Statement of which this Proxy Statement and Prospectus is a
part.
RIGHTS AND DUTIES OF THE GENERAL PARTNER
The Partnership Agreement provides that the General Partner has the
sole right to manage the business of the Partnership and that, aside from
certain rights to consent to extraordinary actions, the Unitholders and the
Preferred Unitholders (collectively, the "Limited Partners") shall not, as such,
participate in or have any control over the business of the Partnership (except
as required by law) or have any right or authority to act for or bind the
Partnership. The General Partner is responsible for the proper maintenance and
operation of the Operating Partnership and the Property. The General Partner may
not, however, except as otherwise provided in the Partnership Agreement, take
any action required to be approved or ratified by limited partners under the
Revised Uniform Limited Partnership Act of the State of Delaware (the
"Delaware Act") without the written consent of the Limited Partners.
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<PAGE>
To ensure the orderly and efficient operation of the Partnership, the
General Partner has the exclusive right to admit any person as an additional or
substitute General Partner of the Partnership upon the consent of Limited
Partners holding more than 50% of the voting rights, voting as a single class,
of the limited partnership interests and Preferred Units in the Partnership (the
"Consent of the Limited Partners"). In addition, the General Partner has the
authority, without the Consent of the Limited Partners, to increase, decrease or
refinance the Loan or any other loan entered into by the Partnership, and to
sell, exchange or develop portions of the Property (but not to sell all or
substantially all of the Property in a single or related series of
transactions).
WITHDRAWAL OF THE GENERAL PARTNER
The General Partner may voluntarily retire as the general partner of
the Partnership only if a substitute General Partner remains in the Partnership
after such voluntary withdrawal. A General Partner shall retire automatically
upon any involuntary withdrawal or an event of bankruptcy.
TERMINATION OF THE PARTNERSHIP
The Partnership will continue until December 31, 2038 unless earlier
terminated upon the occurrence of any of the following events:
(i) the retirement of the General Partner, if there is no remaining
General Partner who elects to continue the Partnership and the Limited
Partners do not elect to continue the Partnership;
(ii) the sale or other disposition of all or substantially all of the
assets of the Partnership, provided, however, that under certain
circumstances the Partnership may continue in existence solely for the
purpose of collecting any deferred installment payments of the purchase
price or any other consideration to be received for such assets; or
(iii) the election by the General Partner with the Consent of the
Limited Partners to dissolve the Partnership.
If, following the retirement of the General Partner, there is no
remaining General Partner of the Partnership or the remaining General Partner
does not elect to continue the Partnership, the Limited Partners may, within 90
days after such retirement, elect to reconstitute the Partnership and continue
the business of the Partnership by selecting a substitute General
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<PAGE>
Partner by the unanimous consent of the Limited Partners. If the Limited
Partners elect to reconstitute the Partnership and admit a substitute General
Partner, the relationship of the partners and of any person who has acquired an
interest of a partner in the Partnership shall be governed by the Partnership
Agreement.
Upon dissolution of the Partnership, the Partnership's assets will be
liquidated and the proceeds of liquidation will be applied and distributed as
described in "Description of Securities -- Liquidation Preferences."
ALLOCATIONS OF NET INCOME, NET LOSS AND GAIN OR LOSS FROM A
CAPITAL TRANSACTION
While the Preferred Units are outstanding, Net Income from the
operations of the Partnership (including the Partnership's allocable share of
net income from the operations of the Operating Partnership) will be allocated
(a) first, to the Preferred Unitholders, in an amount equal to the excess of the
Annual Return accrued on their invested capital for periods through the close of
the year just ended (see "Description of Securities -- Cumulative Preferred
Annual Return") over the cumulative amounts of Net Income and Gain from a
Capital Transaction (as defined in the Partnership Agreement) previously
allocated to them on account of such accrued Annual Return, (b) second, to the
Preferred Unitholders, to restore Net Loss previously allocated to them on
account of their Preferred Units, (c) third, to Unitholders and to the General
Partner, to restore Net Loss previously allocated to them during the period
that the Preferred Units are outstanding on account of the Units and the
general partnership interests held by them.
While the Preferred Units are outstanding, Net Loss from the operations
of the Partnership (including the Partnership's allocable share of net loss from
the operations of the Operating Partnership) will be allocated (a) first, 1% to
the General Partner and 99% to the limited partners (including the Preferred
Unitholders), in proportion to and the extent of the positive balances in their
capital accounts, and (b) the balance, if any, to the Unitholders and to the
General Partner, on account of the Units and the general partnership interests
held by them.
While the Preferred Units are outstanding, Gain or Loss from a Capital
Transaction (as defined in the Partnership
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Agreement) generally will be allocated (a) if any amounts are distributed or to
be distributed on account of such Capital Transaction, first, in such manner as
to cause the Partners' respective positive capital account balances to at least
equal, or in the case of a Terminating Capital Transaction, to most nearly
equal, the amounts to be distributed to them pursuant to and in the priority
described above in "Distributions from Capital Proceeds" on account of such
Capital Transaction (as defined in the Partnership Agreement), (b) if no
amounts are distributed or to be distributed on account of such Capital
Transaction, in the case of Gain only, to the Preferred Unitholders, first, to
restore Net Loss previously allocated to them on account of their Preferred
Units as described in the preceding paragraph, and then, in an amount equal to
the excess of the cumulative distributions previously made to them (other than
distributions made to them on account of their Annual Return) in excess of
$23,250 per Preferred Unit over the cumulative amount of Net Income and Gain
from a Capital Transaction previously allocated to them on account of such
excess distributions, and (c) the balance, if any, to the Unitholders and to the
General Partner, on account of the Units and the general partnership interests
held by them. In the event of a Terminating Capital Transaction, the Gain
therefrom will be allocated first to all Partners having negative balances in
their capital accounts, in proportion to and to the extent of such negative
balances, before making the allocations described in the preceding sentence.
ACCOUNTING BOOKS AND RECORDS
Net Income and Net Loss are determined in accordance with the
accounting methods followed by the Partnership for Federal income tax purposes.
The Partnership's fiscal year is the calendar year. The books and records of the
Partnership are maintained at its principal place of business and will be
available for inspection by the Limited Partners and their respective authorized
representatives during business hours.
TAX ELECTIONS
The Operating Partnership and the Partnership each currently have in
effect an election, pursuant to Section 754 of the Code, to adjust the basis of
its property. See "Federal Income Tax Considerations -- Partnership Tax
Elections." All other elections required or permitted to be made by the
Partnership under the Code shall be made by the General Partner in such manner
as will be most advantageous to the Limited Partners.
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REPORTS TO INVESTORS
The General Partner is required to furnish the Limited Partners with
the following information:
Information Date to be furnished
- ----------- --------------------
Audited financial statements and Within 120 days after each calendar
report of Accountants year end
All necessary tax information required Within 90 days after each calendar
for each Limited Partner to prepare year end
his individual tax return
The financial statements, which will be prepared on an accrual basis, will (a)
contain annual balance sheets, statements of operations, changes in partners'
equity (deficit) and cash flows, (b) be reported on by independent certified
public accountants (the "Accountants") chosen by the General Partner and (c)
contain an opinion by the Accountants as to the accounting methods used in the
preparation of such statements. An annual audit of the financial statements of
the Partnership is conducted by the Accountants. At the present time, the
Accountants are Imowitz Koenig & Co., LLP.
LIABILITY OF PARTNERS TO THIRD PARTIES
The General Partner is liable for all debts, liabilities and
obligations of the Partnership, except for nonrecourse indebtedness (if any) on
the Property, to the extent not paid by the Partnership. The Delaware Act
provides that, so long as a limited partner does not take part in the management
or control of the Partnership's business, his liability for the debts,
liabilities and obligations of the Partnership will be limited to the amount of
his capital contribution and his share of undistributed net income. A Limited
Partner is also liable to the Partnership for a period of one year for the full
amount of any distribution to him (plus interest) which distribution represents
a return of capital and is not made in violation of the Partnership Agreement
or the Delaware Act, to the extent necessary to discharge the Partnership's
liabilities to all creditors who extended credit to the Partnership or whose
claims arose before such distribution. Such liability will continue for six
years from the date of the distribution if the distribution is made in
violation of the Delaware Act or the Partnership Agreement.
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AMENDMENTS AND POWER OF ATTORNEY
The General Partner may utilize the power of attorney granted to it by
each Limited Partner to execute certain types of amendments to the Partnership
Agreement, including amendments to admit additional Limited Partners, to cure
ambiguities or to satisfy "Blue Sky" regulations. The General Partner may also,
without the Consent of the Limited Partners, amend the Agreement to provide for
a special allocation of depreciation and gain in connection with the admission
of tax-exempt entities as investors in the Partnership.
The Partnership Agreement may not otherwise be modified or amended
except with the consent of the Limited Partners, provided, that the written
consent of all Limited Partners will be required for any modification or
amendment which would (i) increase the amount of the capital contributions
payable by the Limited Partners, (ii) extend the termination date of the
Partnership, (iii) increase the liability of the Limited Partners, (iv) except
in connection with the offering of additional partnership interests in the
Partnership, adversely affect the rights of the Limited Partners with regard to
profits and losses and distributions or (v) alter the amendment section of the
Partnership Agreement.
VOTING RIGHTS
The Partnership Agreement provides that the consent of the Limited
Partners owning in the aggregate not more than 50% of the Units will be required
(i) to remove the General Partner, (ii) to amend the Partnership Agreement
(except as described in the foregoing paragraph) or to approve or disapprove any
material amendments thereto proposed by the General Partner, (iii) to dissolve
the Partnership and (iv) to approve or disapprove the sale of all or
substantially all of the assets of the Partnership in a single or related series
of transactions provided, however, that the Preferred Units will entitle the
holders thereof, voting together with the Unitholders as a single class, to two
votes per Preferred Unit with respect to actions described in subclause (iv) of
this sentence. These rights may be exercised only if the exercise thereof will
not impair the limited liability of the Limited Partners and will not adversely
affect the classification of the Partnership as a partnership for Federal income
tax purposes. If the Limited Partners remove the General Partner, the General
Partner will nevertheless retain the right to receive fees otherwise payable
under the Partnership Agreement, the right to allocations of Net Income, Net
Loss and Cash Flow, and the right to receive proceeds from the sale,
refinancing or other disposition of the Property. Any
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General Partner of the Partnership removed by the Limited Partners shall become
a limited partner. See also "Investment Considerations -- Removal of General
Partner and Redemption of Preferred Units" and "Description of Securities --
Redemption."
The Partnership Agreement provides that consent shall be deemed to be
granted if the General Partner makes a written request for the consent of the
Unitholders to a particular action, unless the General Partner receives
written refusal to consent within 30 days of the request from Unitholders
owning in the aggregate 50% or more of the Units owned by all Unitholders.
MANAGEMENT
Generally, the General Partner has full, exclusive and complete
responsibility and discretion in the management or control of the Partnership,
and the Limited Partners have no authority to transact business for, or
participate in the management activities and decisions of, the Partnership. The
General Partner is expressly authorized, without the consent of the Limited
Partners, to increase, decrease, or refinance the Loan or any other loan entered
into by the Partnership, and to sell, exchange or develop portions of the
Property (but not to sell all or substantially all of the assets in a single or
related series of transactions). The authority of the General Partner is subject
to certain other express restrictions set forth in the Partnership Agreement.
The General Partner is required to devote such time and effort to the
Partnership's business as may be necessary to promote adequately the interests
of the Partnership and the mutual interests of the Partners. The General Partner
is not required to devote full time to Partnership business and is specifically
permitted to engage in other business, including engaging in activities which
compete with the business of the Partnership.
INDEMNIFICATION OF THE GENERAL PARTNER
The Partnership Agreement provides that the Partnership shall
indemnify and hold harmless the General Partner and each person performing
services on behalf of the Partnership who (a) directly or indirectly controls,
is controlled by, or is under common control with, the General Partner, (b) who
owns or controls 10% or more of the outstanding voting interest in the General
Partner, and (c) any officer, director or partner of the General Partner against
any loss, damage, liability, cost or expense (including reasonable attorneys'
fees) incurred by them
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in connection with the Partnership, provided that such loss, damage, liability,
cost or expense was not the result of the negligence or misconduct of any such
person. Any such indemnity will be paid from, and only to the extent of,
available Partnership assets and no partners shall have any personal liability
on account thereof. Notwithstanding this provision, however, neither the General
Partner nor any other entity or individual entitled to indemnification pursuant
to the Partnership Agreement shall be indemnified for any loss, damage or cost
resulting from the violation of any Federal or state securities laws unless (i)
there has been a successful adjudication on the merits of each count involving
such securities law violations, (ii) such claims have been dismissed with
prejudice on the merits by a court of competent jurisdiction or (iii) a court of
competent jurisdiction approves a settlement of such claims. In any claim for
indemnification for Federal or state securities law violations, the party
seeking indemnification shall place before the court the position of the
Securities and Exchange Commission and the Massachusetts Securities Division
with respect to the issue of indemnification for securities law violations. The
Partnership shall not incur the cost of the portion of any insurance which
insures any party against any liabilities as to which such party is prohibited
from being indemnified under the Partnership Agreement.
ADDITIONAL PARTNERSHIP INTERESTS
The Partnership Agreement will provide that the Partnership may not
issue equity interests in the Partnership, other than Units or Preferred
Units, without the consent of Unitholders owning in excess of 50% of the
aggregate number of Units owned by all Unitholders. The Partnership Agreement
further provides that consent shall be deemed to be granted if the General
Partner makes a written request for the consent of the Unitholders to a
particular action, unless the General Partner receives written refusal to
consent within 30 days of the request from Unitholders owning in the aggregate
50% or more of the Units owned by all Unitholders. In such event, any
Unitholder who elects not to purchase his pro rata share of such interests will
suffer dilution of his interest in the Partnership, which may have adverse tax
consequences to such Unitholder. See "Certain Income Tax Consequences." No fees
will be payable to the General Partner or any of its affiliates from the
proceeds of the sale of such interests, except for customary brokerage
commissions on interests sold to parties who are not partners of the
Partnership. The General Partner and its affiliates may, however, be reimbursed
for any reasonable out-of-pocket expenses incurred in connection with the sale
of such additional interests.
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MEETINGS
The General Partner may at any time solicit the vote of the Limited
Partners without a meeting. The General Partner is required to call a meeting of
the Limited Partners following receipt of a written request therefor signed by
Limited Partners holding an aggregate of 10% or more of the Units in the
Partnership held by all Limited Partners. The Partnership does not intend to
hold annual meetings of Limited Partners.
CERTAIN INCOME TAX CONSIDERATIONS
The following is a summary of certain federal income tax considerations
that may be relevant to Unitholders who exercise their Rights, and is based upon
the Internal Revenue Code of 1986, as amended (the "Code"), judicial decisions,
final, temporary and proposed Treasury regulations ("Regulations") and
administrative rulings and pronouncements of the Internal Revenue Service
("IRS"). Although the material federal income tax considerations relevant to a
Unitholder who acquires Preferred Units are discussed below, no attempt has been
made to comment on all federal income tax matters affecting the Partnership or
Preferred Unitholders. Prospective investors should consult their own tax
advisors about the federal, state and local income tax consequences to them of
acquiring Preferred Units.
This summary is based on current legal authority. There is no assurance
that legislative or administrative changes or court decisions may not occur
which would significantly modify the statements and opinions expressed herein,
and any such changes may be retroactive with respect to transactions completed
or investments made prior to the date of such changes. Various aspects of
recently enacted tax legislation are subject to further interpretation and
clarification and, therefore, are not free from doubt. In addition, the General
Partner must make various federal income tax determinations that will impact
Preferred Unitholders, and there is no assurance that the IRS will agree with
the General Partner's determinations. It is therefore possible that the
allocation or treatment of tax items by the General Partner may be modified upon
audit.
LEGAL OPINION
Rosenman & Colin LLP, counsel to the Partnership
("Counsel"), has expressed its opinion as to the following
matters: (i) assuming the Partnership is classified as a
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partnership and is not a publicly traded partnership (within the meaning of
Section 7704(b) of the Code) as of the date of this Prospectus, the Partnership
will continue to be treated as a partnership for federal income tax purposes
following the issuance of the Preferred Units; and (ii) to the extent the
summary of income tax considerations set forth below involves matters of federal
income tax law, such statements of law are accurate in all material respects as
of the date of this Proxy Statement and Prospectus. Counsel has based its
opinion on applicable legal authority, the facts set forth in this Prospectus
and certain factual representations made by the General Partner, and its opinion
is conditioned on the accuracy of such facts and representations. Counsel's
opinion represents only its best legal judgment, and does not bind the IRS or
the courts. No ruling has been or will be requested from the IRS as to any tax
matters. Thus, no assurance can be provided that the opinions and statements set
forth herein will not be challenged by the IRS or sustained by a court if
litigated. Due to the factual nature of the issue, or uncertainty of the law,
Counsel is not able to opine with respect to certain issues that involve: (i)
the deductibility of Partnership fees and expenses representing amounts paid or
payable to WFA or its affiliates; (ii) the amount or timing of any tax losses or
taxable income that may be generated by the Partnership; (iii) the ability of
any particular Preferred Unitholder to currently deduct any tax losses that may
be generated by the Partnership; and (iv) whether the allocations of income and
loss of the Partnership, including amounts reported as income and loss to
holders of Preferred Units, will be respected for federal income tax purposes.
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS RELATING TO THE RIGHTS AND THE
PREFERRED UNITS
Effect of Rights Distribution
Neither the Partnership nor the Unitholders should recognize gain or
loss upon the distribution of the Rights.
Unitholder's Basis in Rights
Although not completely certain, the tax basis of Rights received by a
Unitholder from the Partnership likely will be zero and the distribution of
Rights will not change the tax basis of the existing Units. If Rights received
by a Unitholder are not exercised but are allowed to expire, no loss will be
allowed to the Unitholder.
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Effect of Exercise of Rights
No gain or loss should result to a Unitholder or the Partnership on the
purchase of Preferred Units through the exercise of Rights.
Sale of Preferred Units
Gain or loss will be recognized by a Preferred Unitholder upon the sale
of Preferred Units in an amount equal to the difference between the amount
realized on the sale and the tax basis of the Preferred Unitholder in the
Preferred Units sold (discussed below). Except to the extent attributable to
depreciation recapture and any other unrealized receivables (as determined under
Section 751 of the Code), such gain or loss will be a capital gain or loss if
the Preferred Units are capital assets in the hands of the holder thereof. If
the holder is a non-corporate taxpayer and has a holding period in the Preferred
Units of more than one year, it appears that the holder's capital gain (if any)
on a sale of Preferred Units generally will be taxable under current law at
marginal federal income tax rates of 28% if the holding period in the Preferred
Units sold is between 12 and 18 months, or, if the holding period in such Units
exceeds 18 months, 25% to the extent attributable to straight-line depreciation
deductions previously allocated to such holder with respect to real property,
and 20% as to the balance. The holding period of Preferred Units acquired
through the exercise of Rights will begin on the date of exercise.
It is the position of the IRS that a partner has a single aggregate
basis in all of the partner's partnership interests and that, to determine gain
or loss upon a sale or other taxable disposition of a part of such partnership
interests, the portion of the partner's basis allocated to the interests being
sold equals the partner's share of partnership liabilities transferred in the
sale plus the partner's aggregate tax basis (excluding basis attributable to
partnership liabilities) multiplied by the ratio of the fair market value of the
interests sold to the fair market value of all of the partner's partnership
interests. Therefore, Unitholders who exercise their Rights will be required to
determine their tax basis in, and the tax consequences to them of a sale of,
Preferred Units or Units, as the case may be, based upon their aggregate tax
basis in their Partnership Units. See "-- Preferred Unitholder's Basis in His
Preferred Units" and "-- Treatment of Cash Distributions to Preferred
Unitholders."
In the case of a corporate Preferred Unitholder, under Section
291(a)(1) of the Code, a sale or other disposition of its Preferred Units
generally will result in recapture (to the extent
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of gain) as ordinary income of a portion of its allocable share of the
depreciation deductions claimed by the Partnership.
The amount realized on the sale or disposition of a Preferred Unit will
include, among other things, an allocable share of the outstanding amount of the
Operating Partnership's nonrecourse indebtedness (including unpaid interest
accrued thereon) to the extent such amount was includable in the basis of such
Preferred Unit. Therefore, it is possible that the gain realized on the sale or
disposition of a Preferred Unit may exceed the cash proceeds of such sale or
disposition and, in some cases, the income taxes payable with respect to such
disposition may exceed such cash proceeds.
Taxability of Cash Distributions
A holder of Preferred Units generally will not be taxed on cash
distributions received with respect to such Preferred Units except to the extent
the amount of cash paid exceeds the holder's aggregate tax basis in all of his
Units (i.e., his Units and his Preferred Units). See "-- Treatment of Cash
Distributions to Preferred Unitholders." However, the holder will be allocated
Partnership taxable income on account of such distributions. See "Description of
Securities -- Allocations of Net Income, Net Loss and Gain or Loss From a
Capital Transaction."
Passive Activity Loss Limitation
A Unitholder who is a natural person, trust, estate, a personal service
company or a closely held "C" corporation generally is subject to limitations on
deducting passive activity losses. Any tax losses allocated to a Preferred
Unitholder or realized upon a sale of Preferred Units generally will be subject
to these limitations. See "-- Limitations on Deductibility of Passive Activity
Losses."
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS RELATING TO THE PARTNERSHIP AND
PREFERRED UNITHOLDERS
Taxation of the Partnership and the Preferred Unitholders
The Partnership itself is not subject to any federal income tax. The
Partnership files an annual information tax return on which it reports its
income, gain, loss, deduction and items of tax preference, if any. Each
Preferred Unitholder will be required to report on his personal income tax
return his allocable share of Partnership income, gain, loss, deduction and
items of tax preference and will be subject to tax on his allocable share of the
Partnership's taxable income, regardless
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of whether any portion of that income is, in fact, distributed to such Preferred
Unitholder. Consequently, a Preferred Unitholder's tax liability with respect to
his share of Partnership taxable income may exceed the cash actually distributed
to him in a given taxable year. Under the amended Partnership Agreement,
Preferred Unitholders will be allocated Partnership taxable income on account of
the Annual Return even if such amount is not currently distributed to them. See
"Investment Considerations -- Risk of Non-Payment of Preferred Return" and
"Description of Partnership Agreement -- Allocations of Net Income, Net Loss
and Gain or Loss From a Capital Transaction."
Partnership Classification
The availability of most of the tax benefits of the Partnership depends
upon the classification of the Partnership as a partnership for tax purposes. If
the Partnership were treated as an association taxable as a corporation in any
taxable year, the Partnership itself would be subject to corporate income tax,
and its taxable income, gains, losses, deductions and credits (if any) would not
be passed through to its partners. In addition, distributions made to Preferred
Unitholders generally would be treated as taxable dividend income (to the extent
of the Partnership's current and accumulated earnings and profits) and the
balance as a non-taxable return of capital to the extent of the partner's basis
in his Preferred Units. Also, the reclassification of the Partnership as an
association taxable as a corporation would be treated as a deemed incorporation
of such entity upon which gain could be recognized, and which could result in
additional tax. Accordingly, treatment of the Partnership as an association
taxable as a corporation would substantially reduce the Partnership's economic
income and cash resources and would also result in a material reduction of the
after-tax return to Preferred Unitholders.
The General Partner and the Partnership believe that the Partnership
has been properly classified as a partnership for federal income tax purposes
since inception. Counsel has advised the Partnership of its opinion that,
assuming the Partnership is classified as a partnership as of the date of this
Proxy Statement and Prospectus and that Partnership interests are not publicly
traded (see the discussion below), the Partnership will continue to be treated
as a partnership for federal income tax purposes following the issuance of
Preferred Units. See "-- Legal Opinion" above. In rendering such opinion,
Counsel has relied on the General Partner's representation that the Partnership
has operated in accordance with the
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Partnership Agreement and will operate in accordance with the amended
Partnership Agreement and applicable state law.
Section 7704 of the Code treats certain publicly traded partnerships as
corporations. The General Partner has represented that the Partnership has
satisfied and will continue to satisfy applicable safe harbors for avoiding
treatment as a publicly traded partnership. See "Investment Considerations
- -- Restrictions on Transfer." Satisfying such safe harbors may require the
Partnership to limit the amount of Partnership interests transferred during a
taxable year (other than pursuant to certain "exempt" transfers) to less than 5%
of the aggregate amount of outstanding interests in Partnership capital and
profits. Counsel's opinion as to partnership classification relies on such
representation. Failure of the Partnership to satisfy applicable safe harbors
for avoiding treatment as a publicly traded partnership may cause the
Partnership to be treated as a publicly traded partnership taxable as a
corporation, with the resultant adverse tax consequences discussed above.
The discussion of federal income tax consequences herein assumes that
the Partnership is treated as a partnership for federal income tax purposes.
Tax Treatment of Preferred Units
The Partnership intends to treat Preferred Units as equity of the
Partnership for federal income tax purposes. The Preferred Units have certain
characteristics in common with debt, such as a fixed return and a right to
payment senior to distributions to holders of Units. The IRS therefore may seek
to recharacterize Preferred Units as debt of the Partnership, rather than
equity. Such recharacterization could affect, among other things, the
allocations of taxable income and loss to Preferred Unitholders, the amount of
gain or loss recognized by a Preferred Unitholder on the sale of his Preferred
Units, and the tax treatment and/or timing of inclusion of income attributable
to Preferred Units, and would be adverse for Preferred Unitholders. However, the
Preferred Units have many of the significant characteristics of equity and are
intended by the Partnership to be equity of the Partnership. These equity
characteristics include: (i) the Preferred Units are limited partnership
interests under Delaware law; (ii) payment of the liquidation preference is not
secured or guaranteed and is subject to entrepreneurial risk and the
requirements and limitations of Delaware partnership law; (iii) Preferred Units
will be allocated Partnership losses, if any; (iv) there is no maturity date for
the Preferred Units; and (v) the Partnership intends to treat
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Preferred Units as equity for both financial accounting and tax reporting
purposes. Counsel believes that the Preferred Units should be treated as
partnership interests for tax purposes and not as debt obligations of the
Partnership.
The discussion below assumes that the Preferred Units will be treated
as partnership interests for federal income tax purposes.
Allocation of Income and Loss
Preferred Unitholders will receive allocations of Partnership income,
gain and loss as described in "Description of Partnership Agreement --
Allocations of Net Income, Net Loss and Gain or Loss From A Capital
Transaction."
The Partnership Agreement's allocation provisions will be respected
for federal income tax purposes if they are considered to have "substantial
economic effect" and are not retroactive allocations. If any allocation of an
item fails to satisfy the "substantial economic effect" requirement, the item
will be allocated among the Partners based on their respective "interests in
the Partnership," determined on the basis of all of the relevant facts and
circumstances. Such a determination could result in a reallocation of the
income, gains, losses or deductions allocated under the Partnership Agreement.
Such a reallocation, however, would not alter the distribution of cash under
the Partnership Agreement.
The allocation provisions of the Partnership Agreement generally
should be respected under the standards of Section 704(b) of the Code to the
extent that the Partnership's allocations are deemed consistent with the
economic arrangements between the holders of Preferred Units and the
Unitholders, respectively. Counsel is unable to opine that the Partnership's
allocations comply with Section 704(b) of the Code because the Partnership
Agreement does not comply with the "safe harbor" provisions of the Regulations,
and the issue of whether the allocations are consistent with the Partners'
actual respective economic interests in the Partnership is primarily a factual
issue.
Preferred Unitholder's Basis In His Preferred Units
A Preferred Unitholder's adjusted basis in his Preferred Units is
relevant in determining the gain or loss on the sale or other disposition of his
Preferred Units and the tax consequences of a distribution from the Partnership.
See "-- Treatment of Gain or Loss on Sale or Disposition of Preferred Units"
and "--
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Treatment of Cash Distributions to Preferred Unitholders." In addition, a
limited partner is entitled to deduct on his personal income tax return, subject
to the limitations discussed below, his distributive share of a partnership's
net loss, if any, to the extent of such partner's adjusted basis in his
partnership interest.
A Preferred Unitholder's adjusted basis in his Preferred Units will
include an allocable share of non-recourse indebtedness of the Partnership, and
will be increased by his share of items of Partnership income and gain, and
reduced, but not below zero, by his share of items of Partnership loss and
deduction, and by any cash distributions received by him from the Partnership. A
Preferred Unitholder will be considered to have a single adjusted basis in all
his Units, common and Preferred. See "-- Sale of Preferred Units" above.
Treatment of Cash Distributions to Preferred Unitholders
Cash distributions made to Preferred Unitholders will be treated as a
return of capital to the extent such distributions do not exceed the Preferred
Unitholder's basis in his Units. A return of capital generally will not result
in any recognition of gain or loss for federal income tax purposes but will
reduce a Preferred Unitholder's adjusted basis in his Units (common and
Preferred). Distributions of cash are deemed for tax purposes to include
reductions in a partner's share of nonrecourse Partnership liabilities,
including as a result of repaying such liabilities. Thus, for example, the
anticipated $2 million reduction in the outstanding principal indebtedness of
the Partnership at the time of the refinancing of the Loan will be treated for
tax purposes as a constructive cash distribution of $2 million by the Operating
Partnership, reducing each Partner's basis in his Partnership interest, but this
should not result in a Partner's recognition of taxable gain to the extent not
in excess of his adjusted basis in his Partnership interest. Cash distributions
(including constructive distributions resulting from a reduction in the
Unitholder's share of Partnership nonrecourse debt) in excess of a Preferred
Unitholder's adjusted basis in his Units will result in his recognition of gain
to the extent of such excess, as if the Preferred Unitholder sold part of his
Preferred Units. See "-- Preferred Unitholder's Basis in his Preferred Units"
and "-- Sale of Preferred Units." Dilution of a Preferred Unitholder's
Partnership interest in connection with a future sale of additional limited
partnership interests could, under certain circumstances, create a constructive
distribution to Preferred Unitholders that results in their recognition of gain.
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Limitations on Deductibility of Passive Activity Losses
Preferred Unitholders who are individuals, trusts, estates, personal
service companies and certain closely held C corporations are subject to the
passive activity loss limitation, under which Partnership losses (if any)
allocated to a Preferred Unitholder may offset only other passive activity
income of such Preferred Unitholder, including, generally, subsequent
Partnership income (other than income classified as portfolio income, such as
income from investments of reserves). Disallowed losses from passive activities
may be carried forward and treated as a deduction in the next taxable year,
subject to these limitations. Any disallowed losses from the Partnership are
allowed in full (subject to any other applicable limitations) when the taxpayer
disposes of his entire interest in the Partnership in a taxable transaction or
upon liquidation and dissolution of the Partnership. The deductibility of
interest on debt incurred in passive activities and interest on debt incurred to
purchase an interest in a passive activity is generally subject to these
limitations.
Assuming that the Preferred Units are treated as equity for federal
income tax purposes (see "- Tax Treatment of Preferred Units"), the taxable
income or loss from the Partnership allocable to a Preferred Unitholder, other
than income from investing reserves and other available cash, should be treated
as income or loss from a passive activity. Notwithstanding the foregoing, each
Preferred Unitholder should note that, under Section 469(k) of the Code,
Congress granted the Treasury broad discretion to promulgate regulations which
could, among other things, require in the future that net income or gain
allocated on account of a preferred return may not be treated as passive
activity income under certain circumstances.
At Risk Limitations
A Preferred Unitholder who is subject to the passive activity loss
limitation also will be subject to the "at risk" rules of Section 465 of the
Code. Under these rules, a Preferred Unitholder generally may not currently
deduct from taxable income his share of the Partnership's losses to the extent
that such losses exceed the amount the Unitholder is considered to have "at
risk" in the Partnership under Section 465 of the Code at the end of that year.
In addition, prior tax losses must be recaptured (as ordinary income) if the
taxpayer's amount at risk is reduced below zero. The General Partner currently
does not anticipate that the Partnership's operations will result in allocations
to Preferred Unitholders of deductions or losses in excess of their amount "at
risk" in the Partnership.
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Deductibility of Partnership Expenses
The Partnership incurs various expenses in connection with its ongoing
administration and with the operation of the Property. Payments for services
generally are deductible if the payments are ordinary and necessary expenses,
are reasonable in amount and are for services performed during the taxable year
in which paid or accrued. Payments for services related to the acquisition of an
asset having a useful life in excess of one year generally must be capitalized
into the cost basis of the acquired property. Deductions for interest paid on
mortgage loans providing for payments to the lender that are contingent on the
value or results of operation of the underlying property may be disallowed in
whole or in part, and/or the Partnership's ongoing allocations of income and
loss could be affected, if the lender is considered for tax purposes (by reason
of the contingent payment feature of the mortgage loan) to hold an equity
interest in the property. The IRS may not agree with the Partnership's
determinations as to the deductibility of fees and expenses and might disallow
such deductions or require that certain expenses be capitalized and amortized or
depreciated over a period of years. These issues are essentially questions of
fact with respect to which Counsel cannot opine. If all or a portion of
Partnership deductions were to be disallowed, the Partnership's taxable income
would be increased or its tax losses would be reduced.
Expenses of offering and issuing Preferred Units in the Partnership
("syndication expenses") are not allowable deductions to the Partnership or any
Preferred Unitholder. Syndication expenses are defined as expenditures connected
with the issuing and marketing of interests in partnerships. Registration fees,
printing costs, selling and promotional material costs and legal fees for
securities and tax advice pertaining to registration of the Preferred Units with
the Securities and Exchange Commission are syndication expenses and, therefore,
do not qualify for amortization or deduction.
Depreciation and Cost Recovery Deductions
The portion of the Property consisting of real property generally is
being depreciated over a period of 31.5 years using the straight-line method.
Improvements made to the Property generally will be subject to a 39-year
recovery period, and will be recovered using the straight-line method. If the
Partnership terminates for tax purposes, the Partnership will be required to
depreciate all of its real property under the current depreciation rules, which
are less favorable than the rules in effect when the Property was acquired. Any
personal property
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<PAGE>
acquired by the Partnership generally will be depreciated over a seven-year
recovery period using the double declining balance method (switching to
straight-line at a time to maximize the depreciation deductions). To the extent
that any tax-exempt or foreign persons hold Units, a portion of the
Partnership's depreciation deductions, corresponding to such persons' percentage
interest in the Partnership, must be depreciated over somewhat longer recovery
periods than those otherwise applicable.
Depreciation Recapture
There is generally no depreciation recapture for real property that is
depreciated pursuant to the straight-line method. (However, the portion of any
capital gain attributable to straight-line depreciation deductions is subject to
taxation at a maximum marginal federal income tax rate for non-corporate
taxpayers of 25%, rather than 20%, if the property has been held for more than
18 months. See -- "Treatment of Gain or Loss on Sale or Disposition of Preferred
Units.") If real property or capital improvements are sold or otherwise disposed
of within 12 months after they were acquired or made, all depreciation claimed
with respect to such property or improvements, as applicable, will be recaptured
as ordinary income on such disposition. All depreciation deductions attributable
to personal property are subject, to the extent of any gain recognized, to being
fully recaptured as ordinary income on a sale or other disposition of the
personal property. Amounts subject to depreciation recapture must be recognized
as ordinary income in the year of the sale even if the sale calls for payments
to be made on a deferred basis.
Under Section 291(a)(1) of the Code, which applies only to corporate
Preferred Unitholders, 20% of a corporate Preferred Unitholder's depreciation
deductions will be subject to recapture as ordinary income on such disposition
to the extent of the Preferred Unitholder's share of any gain recognized, even
though the Partnership and the Preferred Unitholder might not otherwise be
subject to general depreciation recapture on such depreciation.
Sale or Foreclosure of the Property
The Property (including improvements made thereto that are held for
more than 12 months) constitutes Section 1231 property. Gains and losses from
the sale or exchange of Section 1231 property are offset against each other on
an annual basis, and net gain is treated as capital gain, while net loss is
treated as ordinary loss. A non-corporate Unitholder's allocable share of such
net gain, if any, generally should qualify for a maximum
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<PAGE>
marginal federal income tax rate of 25% to the extent of the Unitholder's
previously claimed straight-line depreciation deductions with respect to the
Property, and 20% as to the remaining net gain, if any. Net Section 1231 gains,
must, however, be treated as ordinary income to the extent of net Section 1231
losses taken over the five most recent years, to the extent these losses have
not been thus "recaptured". In general, an involuntary transfer of the Property,
such as a mortgage foreclosure, will have the same tax consequences as those of
a sale.
If all or a portion of the Property is sold, the net cash proceeds
distributed from the sale may not be sufficient to pay a Unitholder's resulting
tax liability. Such circumstances might include (i) the sale of the Property
encumbered by any nonrecourse debt, since in determining taxable gain from such
a sale the outstanding principal amount of the loan is included along with any
cash proceeds from the sale in determining the amount realized, while the basis
of the Property (the amount subtracted from the sales price in determining gain)
may have been substantially reduced through previous depreciation deductions;
(ii) the sale or transfer of the Property pursuant to foreclosure of a mortgage,
deed of trust, or other financing instrument; (iii) the sale of the Property at
a time when all or part of the net proceeds may have to be used by the Operating
Partnership or the Partnership to meet other obligations; or (iv) under certain
circumstances, the sale or transfer of the Property pursuant to an installment
sale.
A sale by the Partnership of its interest in the Operating Partnership
would be taxed in the manner described above for the sale of all or a portion of
the Property.
Tax Considerations for Tax-Exempt Entities
Preferred Unitholders which are exempt from federal income tax
(including IRAs and tax-exempt organizations such as trusts that hold assets of
employee benefit or retirement plans) may be subject to federal income tax on
their allocable share of Partnership income to the extent that such income is
"unrelated business taxable income." A Preferred Unitholder that is otherwise
exempt from tax generally will have unrelated business taxable income with
respect to such Preferred Unitholder's allocable share of Partnership taxable
income in the proportion that the Operating Partnership's "acquisition
indebtedness," i.e., the mortgage debt on the Property, bears to the Operating
Partnership's adjusted basis for its Property. Acquisition indebtedness also
could arise from indebtedness incurred directly by a Preferred Unitholder in
connection with its acquisition of
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<PAGE>
Preferred Units or from other indebtedness incurred by (or allocable to) the
Partnership.
The receipt of unrelated business taxable income by a tax-exempt entity
generally has no effect on its status or on the exemption from tax of its other
income. However, for certain types of tax-exempt entities, the receipt of any
unrelated business taxable income may have extremely adverse consequences. For
example, the receipt of any taxable income from an unrelated business by a
charitable remainder trust (defined under Section 664 of the Code) during a
taxable year will result in the taxation of all of the trust's income from all
sources during such year.
An entity that is subject to tax on unrelated business taxable income
would be subject to tax only to the extent that the sum of its unrelated
business taxable income, if any, from the Partnership and all other sources
exceeds $1,000 in any particular year, and would be required to file federal
income tax returns for any taxable year in which it has gross income, included
in computing unrelated business taxable income, in excess of $1,000 (whether or
not any tax is due).
Partnership Tax Returns and Tax Information, Audits, Interest and
Penalties
The Partnership provides annual tax information to the Partners within
90 days after the close of each year.
Any Preferred Unitholder who sells or exchanges a Preferred Unit will
be required to notify the Partnership of such transaction in writing within 30
days of the transaction (or, if earlier, by January 25 of the calendar year
after the year in which the transaction occurs). The notification is required to
include (i) the names and addresses of the transferor and the transferee; (ii)
the taxpayer identification number of the transferor and, if known, the
transferee; and (iii) the date of the sale or exchange. Any transferor who fails
to notify the Partnership of a sale or exchange may be subject to a penalty for
each such failure. The Partnership will treat any transferor Preferred
Unitholder who provides all of the information requested of the transferor on
the certificate representing the Preferred Units and in the transfer application
as having satisfied this notification requirement.
The tax treatment of the Partnership's income, gain, loss, deductions
or credit will be determined at the partnership level in a unified partnership
proceeding, rather than in separate proceedings with Preferred Unitholders. With
respect to proposed
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<PAGE>
tax deficiency adjustments at the administrative level, in general, each partner
(other than a partner owning less than a 1% profits interest in a partnership
having more than 100 partners) whose name and address is furnished to the IRS (a
"notice partner") will receive notice of the commencement of a partnership level
audit as well as notice of the final partnership administrative adjustment. All
partners have the right to participate at their own expense in the partnership
level audit as well as receive notice of the final partnership administrative
adjustment. In general, each partner is free to negotiate his own settlement of
partnership items with the IRS. If the IRS enters into a settlement agreement
with any partner, it must offer the same settlement terms to the other parties
who request settlement.
A "tax matters partner" must be designated by the partnership who may
enter into a settlement on behalf of, and binding on, partners owning less than
a 1% profits interest in partnerships having more than 100 partners. The
Partnership Agreement designates the General Partner as the tax matters
partner. Under the Code, the tax matters partner may not settle on behalf of
partners with less than a 1% profits interest if (i) an aggregate of 5% or more
of such partners designate with the IRS a notice partner to receive notice from
the IRS on behalf of the group or (ii) such partners notify the IRS that the tax
matters partner may not settle on their behalf. Once a determination becomes
final, it is binding on all partners who are represented by the tax matters
partner. The tax matters partner may extend the statute of limitations for
assessment of a deficiency with respect to all partners. All expenses of the
General Partner in performing its duties as tax matters partner will be paid for
by the Partnership.
Because such a proceeding will control the way in which Unitholders
treat Partnership items and the allocation thereof, the chances of an audit
occurring are greater than they were before this proceeding was allowed. Any
adverse determination following an audit of the Partnership's return by a taxing
authority would result in an adjustment of the returns of Unitholders and, as
indicated, they may be precluded from separately litigating a proposed
adjustment to Partnership items. Such an adjustment could also result in an
audit of Preferred Unitholders' own tax returns and adjustments of
non-Partnership, as well as Partnership, income and loss. Audits of other
limited partnerships of which the General Partner or its affiliates are general
partners could result in an audit of the Partnership's (or a Unitholder's)
return. Interest paid on tax deficiencies by non-corporate and certain corporate
Unitholders would not be deductible by them.
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<PAGE>
Section 6111 of the Code requires a tax shelter organizer to register a
"tax shelter" with the IRS by the first day on which interests in the tax
shelter are offered for sale. The provision's definition of a "tax shelter"
applies to nearly all real estate partnerships owning leveraged property.
Accordingly, the Partnership is registered as a "tax shelter" even though it did
not expect to generate substantial tax losses that could be used to shelter the
income of Limited Partners that is not derived from the Partnership.
The Partnership will furnish its tax shelter registration number to
Preferred Unitholders, and any Preferred Unitholder claiming any deduction,
credit or other tax benefit from the Partnership must include such number in his
tax return on Form 8271. ISSUANCE OF A REGISTRATION NUMBER DOES NOT INDICATE
THAT THIS INVESTMENT OR THE CLAIMED TAX BENEFITS HAVE BEEN REVIEWED, EXAMINED OR
APPROVED BY THE IRS. Failure by a Preferred Unitholder to furnish such number on
his individual tax return when required to do so could subject him to a penalty.
Section 6662 of the Code imposes a penalty for the substantial
understatement of income tax for any taxable year. The penalty is equal to 20%
of the amount of underpayment of tax attributable to the understatement. An
understatement is defined as the difference between the tax required to be shown
on the return and the amount actually shown. The penalty is only applicable if
the understatement for a taxable year exceeds the greater of (a) 10% of the tax
required to be shown on the return for the taxable year and (b) $5,000 ($10,000
in the case of a corporation other than an S corporation or personal holding
company). Except in the case of items attributable to a "tax shelter," the
amount of understatement is reduced to the extent that the taxpayer had
substantial authority for the position taken in his tax return or there was a
reasonable basis for such position and the taxpayer disclosed the facts relevant
to the position in his tax return or in a statement attached to the return. In
the case of items attributable to "tax shelters," however, the taxpayer can
reduce the understatement only by showing that there was substantial authority
for the tax treatment and a reasonable belief that the tax treatment of the item
was more likely than not the proper treatment. It is unclear whether the
Partnership would be considered a "tax shelter" for these purposes.
Tax Elections
Pursuant to Sections 734, 743 and 754 of the Code, a partnership may
elect to have the cost basis of its assets adjusted in the event of certain
distributions of partnership
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<PAGE>
property to a partner or sale by a partner of his interest in the partnership or
the death of a partner. The Partnership and the Operating Partnership have made
such an election. The general effect of making such elections is that
transferees of Units are treated, for purposes of depreciation and taxable gain,
as though they had acquired a direct interest in the assets of the Operating
Partnership. The Partnership and the Operating Partnership would be treated for
such purposes, upon certain distributions to their respective partners, as
though they had newly acquired an interest in their respective assets and
therefore acquired a new cost basis for such assets.
STATE AND LOCAL TAXES
In addition to the federal income tax consequences described above,
prospective investors should consider potential state and local tax consequences
of an investment in Preferred Units both in their state of residence and in
Colorado, where the Property is located, and are urged to consult their
individual tax advisors in this regard. The rules of various states and
localities for computing and/or reporting taxable income differ from (and are
less favorable than) the federal income tax rules.
* * *
The summary of tax consequences set forth above is for general
information only and does not address the circumstance of any particular
Preferred Unitholder. Preferred Unitholders should consult their own tax
advisors as to the specific tax consequences to them of the ownership and
disposition of Preferred Units, including the application of state, local and
estate tax laws.
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<PAGE>
REQUIREMENTS FOR ADOPTION OF THE PROPOSAL
The Proposal
The Partnership hereby solicits from the Unitholders their written
consents to the Proposal. A vote in favor of the Proposal will constitute a vote
in favor of the creation and issuance of Preferred Units on terms more fully
described in this Proxy Statement and Prospectus.
Voting
Unitholders at the close of business on ________, 1997 will be entitled
to one vote for each Unit then held. On ___________, 1997, there were 460 Units
outstanding held by ______________ Unitholders, and no person was known by the
General Partner to be the beneficial owner of more than 5% of the Units, nor did
any officer, director or partner of the General Partner own any Units.
The Proposal will be adopted so long as Unitholders holding a majority
of the outstanding Units do not reject the Proposal prior to ____________, 1997.
A Unitholder must vote all of the Units held by him in the same way with respect
to the Proposal. He cannot vote separate Units held by him in the Partnership in
differing ways. A signed Consent which is returned without a vote will be deemed
a "yes" vote.
Each Unitholder is requested to complete and execute the enclosed
Consent in accordance with the instructions contained therein and to return the
Consent in the enclosed, self-addressed, postage pre-paid envelope within one
week after receipt, but in no event later than ____________, 1997. Such date may
be extended from time to time in the sole discretion of the General Partner
until ________, 1997. Pending the completion of the solicitation period, except
as required by operation of law, the General Partner will not effect the
transfer of any Units by Limited Partners.
A Consent may only be revoked by delivery to the Partnership of a
later-dated Consent in the form enclosed or a dated and executed revocation that
specifically refers to the Consent to be revoked. To be effective, such
revocation must be received by the Partnership prior to the earlier of (i) the
time that signed, unrevoked Consents voting in favor of the Proposal and
representing a majority of the Units outstanding have been delivered to the
Partnership or (ii) _________ __, 1997.
If Unitholders representing a majority of the Units do not reject the
Proposal, the Proposal will be deemed approved and
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<PAGE>
such approval will bind all Unitholders, including those who vote against such
Proposal or abstain from voting. As the Partnership Agreement precludes
Limited Partners from withdrawing their capital and does not grant appraisal or
similar dissenters' rights to Unitholders, a Unitholder who votes "no" with
respect to the Proposal does not have either a statutory right or contractual
right to elect to be paid the fair value of his Units.
Miscellaneous
The cost of preparing, assembling and mailing the enclosed form of
Consent, this Proxy Statement and Prospectus and other materials which may be
sent to Unitholders in connection with this solicitation shall be borne by the
Partnership. It is estimated that total expenditures relating to the
solicitation made hereby and the Offering, including legal fees, filing fees
with the Securities and Exchange Commission and printing and mailing fees, will
be approximately $200,000. Certain directors, officers and partners of the
General Partner may solicit the execution and return of Consents by mail,
telephone, telegraph and personal interview. Such directors, officers and
partners will not be additionally compensated, but may be reimbursed for
out-of-pocket expenses in connection with such solicitation.
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<PAGE>
LEGAL MATTERS
Certain legal matters in respect of the securities offered hereby will
be passed upon for the Partnership by Rosenman & Colin LLP, 575 Madison Avenue,
New York, New York 10022.
EXPERTS
The consolidated financial statements of the Partnership as of December
31, 1996 and for the year period ended December 31, 1996 incorporated by
reference in this Proxy Statement and Prospectus have been audited by Imowitz
Koenig & Co., LLP, and the consolidated financial statements of the Partnership
as of December 31, 1995 and for the year ended December 31, 1995, incorporated
by reference in this Proxy Statement and Prospectus, have been audited by Arthur
Andersen LLP, in each case independent certified public accountants, as
indicated in their reports with respect thereto, and are incorporated by
reference herein in reliance upon the authority of said firms as experts in
accounting and auditing.
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<PAGE>
- --------------------------------------------------------------------------------
No dealer, salesman or other person has been authorized to give any information
or to make any representation not contained in this Proxy Statement and
Prospectus and, if given or made, such information or representation must not be
relied upon as having been authorized by the Partnership. This Proxy Statement
and Prospectus does not constitute an offer to sell or a solicitation of an
offer to buy any of the securities offered hereby in any jurisdiction to any
person whom it is unlawful to make such an offer in such jurisdiction. Neither
the delivery of this Proxy Statement and Prospectus nor any sale made hereunder
shall, under any circumstances, create an implication that there has been no
change in the affairs of the Partnership since the date hereof or that the
information contained herein is correct as of any time subsequent to its date.
--------------------------
TABLE OF CONTENTS
Page
Available Information.................................... 2
Incorporation of Certain
Documents by Reference.................................. 2
Summary.................................................. 4
The Partnership......................................... 10
The Reorganization...................................... 10
Investment Considerations .............................. 11
Description of the Proposal ............................ 17
The Offering............................................ 19
The Property............................................ 25
Use of Proceeds......................................... 25
Ratio of Earnings To Fixed
Charges and Preferred
Unit Distributions...................................... 26
Description of Securities................................ 28
Description of Partnership Agreement..................... 34
Certain Income Tax Considerations........................ 42
Requirements for Adoption of the
Proposal................................................ 58
Legal Matters............................................ 60
Experts.................................................. 60
- --------------------------------------------------------------------------------
1999 BROADWAY
ASSOCIATES LIMITED
PARTNERSHIP
460 PREFERRED
UNITS
-------------------
PROXY STATEMENT
AND PROSPECTUS
-------------------
---------------- ---------, 1997
- --------------------------------------------------------------------------------
<PAGE>
APPENDIX A
[FORM OF SUBSCRIPTION CERTIFICATE]
SUBSCRIPTION CERTIFICATE NUMBER: ______________________
NUMBER OF RIGHTS: ______________________
1999 BROADWAY ASSOCIATES LIMITED PARTNERSHIP
SUBSCRIPTION RIGHT FOR PREFERRED UNITS
This Subscription Certificate represents the number of Rights set forth
above. Each Right held entitles the registered holder thereof (the "Holder") to
acquire one 12% cumulative, non-compounded preferred unit (the "Preferred Unit")
representing a limited partnership interest in 1999 Broadway Associates Limited
Partnership (the "Partnership").
To subscribe for Preferred Units, the Holder must present to the
Partnership, prior to 5:00 p.m., New York City time, on __________, 1997 (the
"Expiration Date") a properly completed and executed Subscription Certificate
and a check drawn on a bank located in the United States and payable to the
Partnership in the amount of the Subscription Price as calculated in Item C of
this Subscription Certificate. Any Holder exercising his Right may also
subscribe for additional Preferred Units, if any, through exercise of the
Over-Subscription Privilege described in the accompanying Proxy Statement and
Prospectus.
No later than _________ business days following the Expiration Date,
the Partnership will send to each Holder exercising his Rights a certificate
representing the Preferred Units purchased pursuant to the exercise of such
Holder's Rights and the exercise of the Over-Subscription Privilege, if any. A
Holder exercising his Rights will have no right to modify or rescind a purchase
after the Partnership has received payment of the Subscription Price by means of
a check; provided, however, that if Consent, as defined in the accompanying
Proxy Statement and Prospectus, is not received, all subscriptions will be
deemed null and void and all payments received in respect therefor will be
returned to the relevant Unitholder.
If a Holder does not make payment of the Subscription Price on or prior
to the Expiration Date, the Partnership reserves the right to treat the Holder
as not having exercised his Rights or exercised the Over-Subscription Privilege
and the Guarantor, thereafter, shall have the right to purchase any and all such
Preferred Units as to which the Holder shall not have made payment of the
Subscription Price.
1999 BROADWAY ASSOCIATES
LIMITED PARTNERSHIP
By: WINTHROP FINANCIAL ASSOCIATES,
A LIMITED PARTNERSHIP, general Partner
A-1
<PAGE>
By:_________________________
Any questions regarding this Subscription Certificate and the Offer made hereby
and in the accompanying Proxy Statement and Prospectus may be directed to the
Partnership at (617) 330-8600.
Expiration Date: _____________________, 1997
PLEASE COMPLETE ALL APPLICABLE INFORMATION
BY MAIL: BY OVERNIGHT COURIER: BY HAND:
- ------------------------- -------------------------
- ------------------------- -------------------------
- ------------------------- -------------------------
- ------------------------- -------------------------
- ------------------------- -------------------------
TO SUBSCRIBE: I hereby irrevocably subscribe for the dollar amount of Preferred
Units indicated in A and B below upon the terms and conditions specified in the
Proxy Statement and Prospectus related hereto, receipt of which is acknowledged.
I enclose a check for the Subscription Price for the number of Preferred Units
indicated in A together with the Subscription Price for the number of Preferred
Units indicated in B.
Please check (X) below:
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
[ ] A. Basic _________________ = ______________.000 x $23,250 = $____________________
Subscription (Rights Exercised) (Preferred Units
Rights Requested)
[ ] B. Over- ______________.000 x $23,250 = $____________________
Subscription
Privilege1
[ ] C. Amount of Check Enclosed (Total of A and B). = $____________________
</TABLE>
MAKE CHECK PAYABLE TO "1999 BROADWAY ASSOCIATES LIMITED PARTNERSHIP"
___________________________ Please provide your Day ( )____________
Signature of Subscriber(s) telephone number Evening ( )____________
IMPORTANT: PREFERRED UNITS WILL ONLY BE ISSUED TO HOLDERS WHO COMPLETE
THIS SUBSCRIPTION CERTIFICATE IN THE NAME OF SUCH HOLDER.
SUBSCRIPTION CERTIFICATES COMPLETED BY ASSIGNEES OF A
HOLDER WILL NOT BE ACCEPTED.
- --------
(1) Any Over-Subscription Privilege may only be exercised with respect to whole
(and not fractional) Preferred Units.
A-2
<PAGE>
APPENDIX B
1999 BROADWAY ASSOCIATES LIMITED PARTNERSHIP
FORM OF CONSENT
The undersigned, a holder of limited partnership interests (the
"Interests") in 1999 Broadway Associates Limited Partnership, a Delaware limited
partnership (the "Partnership"), does hereby vote as follows, with respect to
all Interests in the Partnership owned by the undersigned for the proposal more
fully described in the accompanying Proxy Statement and Prospectus (the
"Prospectus"), dated ___________, 1997, receipt of which is hereby acknowledged.
APPROVAL of the creation and issuance of a class of 12% cumulative
preferred limited partnership interests and the resultant amendment to
the Partnership's Amended and Restated Partnership Agreement in the
form filed as an exhibit to the Proxy and Registration Statement of
which the Prospectus is a part.
|_| FOR |_| AGAINST |_| ABSTAIN
THIS CONSENT IS SOLICITED BY WINTHROP FINANCIAL ASSOCIATES, A LIMITED
PARTNERSHIP. WHEN THIS PROXY IS PROPERLY EXECUTED, THE INTERESTS REPRESENTED
HEREBY WILL BE VOTED AS SPECIFIED. IF NO SPECIFICATION IS MADE ON THIS CARD,
THIS CONSENT WILL BE VOTED FOR THE PROPOSAL.
Dated: _____________________________________________________, 1997
-------------------------------------------------------------------
-------------------------------------------------------------------
Signature
-------------------------------------------------------------------
Signature (if held jointly)
-------------------------------------------------------------------
-------------------------------------------------------------------
Please sign exactly as name appears hereon. When Interests are held by
joint tenants, both should sign. When signing as an attorney, as
executor, administrator, trustee or guardian, please give full title as
such. If a corporation, please sign in name by President or other
authorized officer. If a partnership, please sign in partnership name
by authorized person.
PLEASE MARK, SIGN, DATE AND RETURN THIS CONSENT PROMPTLY USING THE
ENCLOSED PRE-PAID ENVELOPE TO: The Partnership at Five Cambridge Center, 9th
Floor, Cambridge, Massachusetts 02142-1493. If you have any questions, please
call the Partnership's Investor Relations Department at (617) 330-8600.
B-1
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution
The expenses of issuance and distribution of the securities are to be
paid by the Partnership. The following itemized list is an estimate of the
expenses:
SEC Registration Fee.............. $ 3,688
Legal fees and expenses........... 120,000
Accounting fees and expenses...... 15,000
Printing fees and expenses ....... 25,000
Blue Sky fees and expenses........ 30,000
Miscellaneous..................... 6,312
-----
Total................ $ 200,000
Item 15. Indemnification of Directors and Officers
The Partnership has agreed to indemnify and hold harmless the General
Partner and each person performing services on behalf of the Partnership who (a)
directly or indirectly controls, is controlled by, or is under common control
with, the General Partner, (b) who owns or controls 10% or more of the
outstanding voting interest in the General Partner, and (c) any officer,
director or partner or wholly-owned subsidiary of any entity described in (a) or
(b), against any loss, damage, liability, cost or expense (including reasonable
attorneys' fees) incurred by them in connection with the Partnership, provided
that such loss, damage, liability, cost or expense was not the result of the
negligence or misconduct of any such person. Any such indemnity will be paid
from, and only to the extent of, available Partnership assets and no partners
shall have any personal liability on account thereof. Notwithstanding this
provision, however, neither the General Partner nor any other entity or
individual entitled to indemnification pursuant to the Partnership Agreement
shall be indemnified for any loss, damage or cost resulting from the violation
of any Federal or state securities laws unless (i) there has been a successful
adjudication on the merits of each count involving such securities law
violations, (ii) such claims have been dismissed with prejudice on the merits
by a court of competent jurisdiction or (iii) a court of competent
jurisdiction approves a settlement of such claims. In any claim for
indemnification for Federal or state securities law violations, the party
seeking indemnification shall place before the court the position of the
Securities and Exchange Commission and the Massachusetts Securities Division
with respect to the issue of indemnification for securities law violations.
II - 1
<PAGE>
Item 16. Exhibits
The following documents are filed as a part of this Registration
Statement:
Exhibit No. Description
4.1* Second Amended and Restated Partnership Agreement
of the Registrant
5* Opinion of Rosenman & Colin LLP
8* Opinion of Rosenman & Colin LLP as to certain
federal income tax matters
23.1 Consent of Accountants
23.2* Consent of Rosenman & Colin LLP (included in
Exhibits 5 and 8)
24 Power of Attorney (included on page II-4)
- -----------------------
* To be filed by amendment
Item 17. Undertakings.
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made,
a post-effective amendment to this Registration Statement:
(i) to include any prospectus required by Section
10 (a)(3) of the Securities Act;
(ii) to reflect in the prospectus any facts or events
arising after the effective date of the Registration
Statement (or the most recent post-effective
amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the
information set forth in the Registration Statement;
(iii) to include any material information with respect to
the plan of distribution not previously disclosed in
the Registration Statement or any material change to
such information in the Registration Statement;
(2) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered herein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the termination of
the offering.
(4) That, for purposes of determining any liability under the
Securities Act, each filing of the Registrant's annual report pursuant
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<PAGE>
to Section 13(a) or Section 15(d) of the Exchange Act that is incorporated by
reference in the Registration Statement shall be deemed to be a new registration
statement relating to the securities offered herein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof.
Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers, and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Commission such indemnification is
against public policy as expressed in the Securities Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the Registrant of expenses incurred or
paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act, and will be governed by the final
adjudication of such issue.
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<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-3, has duly caused this Proxy Statement
and Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the County of New York and State of New York on
September 25, 1997.
1999 BROADWAY ASSOCIATES
LIMITED PARTNERSHIP
By: WINTHROP FINANCIAL ASSOCIATES,
LIMITED PARTNERSHIP, General Partner
By /s/
-----------------------------------
Michael L. Ashner
Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that each person whose signature appears
below constitutes and appoints Michael L. Ashner his true and lawful
attorney-in-fact and agent, with full power of substitution and resubstitution,
for him and in his name, place and stead, in any and all capacities, to sign any
and all amendments (including post-effective amendments) to this Proxy Statement
and Registration Statement, and to file the same, with all exhibits thereto, and
other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorney-in-fact and agent full power and
authority to do and perform each and every act and thing requisite or necessary
to be done in and about the premises as fully, to all intents and purposes, as
he might or could do in person, hereby ratifying and confirming all that said
attorney-in-fact and agent or his substitute may lawfully do or cause to be done
by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this Proxy
Statement and Registration Statement has been signed by the following persons in
the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
<S> <C> <C>
/s/ Chief Executive Officer September 25, 1997
- -------------------------- and Director of the
Michael L. Ashner general partner of the
Registrant
/s/ President & Chief Operating September 25, 1997
- -------------------------- Officer of the general
Richard J. McCready partner of the Registrant
/s/ Chief Financial Officer September 25, 1997
- -------------------------- of the general partner
Edward V. Williams of the Registrant
/s/ Senior Vice President September 25, 1997
- -------------------------- of the general partner
Peter Braverman of the Registrant
</TABLE>
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<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The Partners
1999 Broadway Associates Limited Partnership
We consent to the reference to our firm under the caption "Experts" in the
Registration Statement (Form S-3) and related Proxy Statement and Prospectus of
1999 Broadway Associates Limited Partnership for the registration of 460
Cumulative Preferred Units and to the incorporation by reference therein of our
report dated February 28, 1997 with respect to the financial statements of 1999
Broadway Associates Limited Partnership as of December 31, 1996 and for the year
then ended, filed with the Securities and Exchange Commission pursuant to the
Securities Act of 1933.
IMOWITZ KOENIG & CO., LLP
New York, New York
September 25, 1997
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<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
The Partners
1999 Broadway Associates Limited Partnership
As independent public accountants, we hereby consent to the
incorporation by reference in this proxy statement of our report
dated March 15, 1996, included in 1999 Broadway Associates Limited
Partnership's Form 10-K for the year ended December 31, 1996 and to all
references to our Firm included in this proxy statement.
ARTHUR ANDERSEN, LLP
Boston, Massachusetts
September 23, 1997
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