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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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SCHEDULE 14D-9
Solicitation/Recommendation Statement
Pursuant to Section 14(d)(4) of the
Securities Exchange Act of 1934
FREEDOM TAX CREDIT PLUS L.P.
(Name of Subject Company)
FREEDOM TAX CREDIT PLUS L.P.
(Name of Person(s) Filing Statement)
BENEFICIAL ASSIGNMENT CERTIFICATES
(Title of Class of Securities)
35644P 10 2
(CUSIP Number of Class of Securities)
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J. Michael Fried Doreen D. Odell
Related Freedom Associates L.P. Freedom GP Inc.
625 Madison Avenue 3 World Financial Center
New York, NY 10022 29th Floor
(212) 421-5333 New York, NY 10285
(212) 526-7000
(Name, Address and Telephone Number of
Persons Authorized to Receive Notices and Communications
on Behalf of the Person(s) Filing Statement)
Copies to:
Peter M. Fass, Esq. Patrick J. Foye, Esq.
Battle Fowler LLP Skadden, Arps, Slate, Meagher
75 East 55th Street & Flom LLP
New York, NY 10022 919 Third Avenue
(212) 856-7000 New York, NY 10022
(212) 735-3000
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Item 1. Security and Subject Company.
The name of the subject company is Freedom Tax Credit Plus L.P., a Delaware
limited partnership (the "Partnership"), which has its principal executive
offices at 625 Madison Avenue, New York, New York 10022. The general partners of
the Partnership are Related Freedom Associates L.P. ("RFA"), a Delaware limited
partnership with principal executive offices at 625 Madison Avenue, New York,
New York 10022, and Freedom GP Inc. ("Freedom GP"), a Delaware corporation with
principal executive offices at 3 World Financial Center, 29th Floor, New York,
New York 10285. The title of the class of equity securities to which this
statement relates is the Partnership's Beneficial Assignment Certificates
("BACs") representing assignments of limited partnership interests in the
Partnership.
Item 2. Tender Offer of the Bidder.
This Schedule 14D-9 relates to the offer by Lehigh Tax Credit Partners
L.L.C. (the "Purchaser"), a Delaware limited liability company and an affiliate
of RFA, disclosed in a Tender Offer Statement on Schedule 14D-1 dated August 27,
1997 (the "Schedule 14D-1"), to purchase up to 18,224 issued and outstanding
BACs at a purchase price of $530 per BAC, net to the seller in cash (the
"Purchase Price"), without interest thereon, upon the terms and subject to the
conditions set forth in the Offer to Purchase dated August 27, 1997 and the
related Letter of Transmittal, as each may be supplemented, modified or amended
from time to time (which collectively constitute the "Lehigh Offer" and are
contained within the Schedule 14D-1).
The address of the Purchaser's principal executive offices is 625 Madison
Avenue, New York, New York 10022.
Item 3. Identity and Background.
(a) The name and business address of the Partnership, which is the person
filing this statement, are set forth in Item 1 above.
(b)(1) The Partnership does not have any employees, directors or executive
officers. All decisions with respect to the management of the Partnership and
its affairs are made only with the consent of its general partners (the "General
Partners"), Freedom GP and RFA. Except as described below, there are no material
contracts, agreements, arrangements or understandings or any actual or potential
conflicts of interest between the General Partners or their affiliates and the
Partnership and its affiliates.
The General Partners and their affiliates have received or will receive
certain types of compensation, fees or other distributions in connection with
the operations of the Partnership. The arrangements for payment of compensation
and fees, as set forth in the Partnership's Amended and Restated Agreement of
Limited Partnership, dated as of July 31, 1990 (the "Partnership Agreement"),
the Partnership's prospectus and other publicly filed documents, were not
determined in arm's-length negotiations with the Partnership.
Pursuant to the Partnership Agreement, the General Partners are entitled to
a fee (the "Partnership Management Fee") for their services in connection with
the administration of the affairs of the Partnership (including, without
limitation, coordination of communications between the Partnership and BACs
holders and with the partnerships (the "Local Partnerships") in which the
Partnership has acquired a partnership interest). The Partnership Management Fee
is payable annually and is determined by the General Partners based on their
review of the Partnership's investments, up to a maximum of 0.5% of the
Partnership's Invested Assets (as defined below); provided, however, the
Partnership Management Fee is a minimum of $2,500 per $1 million of Invested
Assets up to Invested Assets of $20 million and $5,000 per $1 million of
Invested Assets above $20 million to $100 million. "Invested Assets" means the
purchase price paid upon the acquisition by the Partnership of properties and
interests in Local Partnerships, including (i) the total of all fees and
commissions paid in connection with the selection or purchase by the Partnership
or Local Partnerships of properties or interests in Local Partnerships, and (ii)
the amount of all liens and mortgages on properties acquired by the Partnership.
For the three months ended June 30, 1997 and the three years ended March 31,
1997, 1996 and 1995, the General Partners earned aggregate Partnership
Management Fees of $169,000, $676,000, $400,000 and $241,163, respectively.
According to the Partnership Agreement, the General Partners are also
entitled to receive a disposition fee (the "Disposition Fee") for services
rendered in connection with the sale of a property or the sale of the
Partnership's interest in a Local Partnership. Payment of such fee shall be
subordinated to the return to Limited Partners and BACs holders of their capital
contribution and other items as set forth in the Partnership Agreement. Each
Disposition Fee is equal to the lesser of one-half the competitive real estate
commission or 3% of the sale price in
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respect of any such sale (including the principal amount of any mortgage loans
and any related seller financing with respect to a property to which such sale
is subject). In no event, however, shall the Disposition Fee and all other fees
payable to the General Partners and any of their affiliates and any unrelated
parties arising out of any given sale exceed in the aggregate the lesser of the
competitive rate or 6% of the gross proceeds from such sale. For the three
months ended June 30, 1997 and the three years ended March 31, 1997, 1996 and
1995, the General Partners did not earn any Disposition Fee.
The General Partners serve as the co-general partners of Freedom SLP L.P.
("Freedom SLP"). Freedom SLP is entitled to receive up to $2,500 per year as a
fee (the "Local Administrative Fee") from each Local Partnership of which it is
a special limited partner; provided, however, the sum of the aggregate Local
Administrative Fee and the Partnership Management Fee for any year shall not
exceed 0.5% of Invested Assets. Freedom SLP, as special limited partner of the
Local Partnerships, earned Local Administrative Fees of $17,000, $67,503,
$65,683 and $66,150 from the Local Partnerships for the three months ended June
30, 1997 and the three years ended March 31, 1997, 1996 and 1995, respectively.
RFA and Freedom GP, as General Partners, and their respective officers and
directors, are each entitled to indemnification under certain circumstances from
the Partnership pursuant to provisions of the Partnership Agreement. Generally,
the General Partners are also entitled to reimbursement of expenditures made on
behalf of the Partnership. An affiliate of the General Partners performs asset
monitoring services for the Partnership. These services include site visits and
evaluations of the Local Partnerships' performance. For the three months ended
June 30, 1997 and the three years ended March 31, 1997, 1996 and 1995, the
Partnership incurred, in the aggregate, $57,563, $143,694, $125,835 and
$127,756, respectively, to the General Partners and their affiliates as
reimbursement of expenditures and asset monitoring services performed by the
General Partners' affiliate on behalf of the Partnership.
In addition, under the terms of the Partnership Agreement, upon the removal
of the General Partners by the limited partners of the Partnership (the "Limited
Partners") or upon the occurrence of a "Removal Event", as defined below, the
General Partners may be entitled to receive compensating payments, which will be
payable with interest for a term not less than five years. The amount of such
payments shall be the fair market value of the removed General Partner's
interest as determined by two independent appraisers, which amount could be
substantial. The Partnership Agreement deems a "Removal Event" to have occurred
if the business of the Partnership is continued after the bankruptcy, death,
adjudication of incompetence or removal of a General Partner (subject to certain
exceptions pursuant to the Partnership Agreement). A majority in interest of the
Limited Partners may approve the removal of any General Partner without the
concurrence of any General Partner at a meeting of the Partnership.
(2) Except as described below, there are no material contracts, agreements,
arrangements or understandings or any actual or potential conflicts of interest
between the General Partners or their affiliates and the Purchaser, its
executive officers, directors or affiliates. The Purchaser is an affiliate of
RFA, one of the two General Partners of the Partnership. The executive officers
and directors of the Purchaser also serve as executive officers and directors of
the general partner of RFA. Therefore, the Purchaser and RFA, subject to its
fiduciary duties, may have a conflict of interest with respect to certain
matters involving the Partnership, its partners and its investors.
The Partnership, the Purchaser and RFA entered into a letter agreement,
dated August 26, 1997 (the "Standstill Agreement") (a copy of which has been
filed as Exhibit (c)(1) hereto), pursuant to which the Purchaser agreed that,
prior to August 26, 2007 (the "Standstill Expiration Date"), it will not and it
will cause certain affiliates not to (i) acquire, attempt to acquire or make a
proposal to acquire, directly or indirectly, more than 45% (including BACs
acquired through all other means) of the outstanding BACs, (ii) seek to propose
to enter into, directly or indirectly, any merger, consolidation, business
combination, sale or acquisition of assets, liquidation, dissolution or other
similar transaction involving the Partnership, (iii) make, or in any way
participate, directly or indirectly, in any "solicitation" of "proxies" or
"consents" (as such terms are used in the proxy rules of the Securities and
Exchange Commission) to vote any voting securities of the Partnership, (iv)
form, join or otherwise participate in a "group" (within the meaning of Section
13(d)(3) of the Securities Exchange Act of 1934, as amended) with respect to any
voting securities of the Partnership, except that those affiliates bound by the
Standstill Agreement will not be deemed to have violated it and formed a "group"
solely by acting in accordance with the Standstill Agreement, (v) disclose in
writing to any third party any intention, plan or arrangement inconsistent with
the terms of the Standstill Agreement, or (vi) loan money to, advise, assist or
encourage any person in connection with any action inconsistent with the terms
of the Standstill Agreement. In addition, the Purchaser has agreed that until
the Standstill Expiration Date
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it will not sell any BACs acquired by it unless the buyer of such BACs agrees to
be bound by the Standstill Agreement; provided, however, the Purchaser may make
transfers in the secondary market to any purchaser which represents that
following such sale it will not own three (3%) percent or more of the BACs
outstanding. By the terms of the Standstill Agreement, the Purchaser has also
agreed to vote its BACs in the same manner as a majority of all voting BACs
holders; provided, however, the Purchaser is entitled to vote its BACs as it
determines with regard to any proposal (i) to remove RFA as a General Partner of
the Partnership or (ii) concerning the reduction of any fees, profits,
distributions or allocations for the benefit of RFA or its affiliates. The
Purchaser, RFA and Related Capital Company also agreed to indemnify and hold
harmless the Partnership, Freedom GP and certain associated parties against any
claims or damages arising from a breach of the Standstill Agreement or from a
tender offer or acquisition of BACs by the Purchaser or its affiliates. The
foregoing discussion of the Standstill Agreement is subject to and qualified in
its entirety by reference to such agreement, which is incorporated herein by
reference.
The Partnership has been informed that the Purchaser expects to purchase
all of the BACs tendered pursuant to the Lehigh Offer (other than BACs purchased
by Everest Properties, Inc. or its affiliates ("Everest") pursuant to the
Everest Option (as defined according to the Lehigh Offer)) with funds borrowed
from one of its members pursuant to a promissory note dated as of August 26,
1997, containing substantially the same terms and conditions that such member
borrows such funds under an existing credit facility it has available to it with
BankBoston, National Association (formerly known as The First National Bank of
Boston) and Fleet National Bank (the "Lenders"). The existing credit agreement
is among the Lenders and RCC Credit Facility, L.L.C., Related Capital Company
and The Related Companies, L.P. All of the BACs tendered pursuant to the Lehigh
Offer and all of the Purchaser's membership interests will be pledged to the
Lenders to secure the loan. Additionally, Related Capital Company will guarantee
all amounts borrowed under such credit facility.
Item 4. The Solicitation or Recommendation.
(a) Following receipt of the terms of the Lehigh Offer, the General
Partners reviewed and considered the Lehigh Offer. The General Partners are
expressing no opinion and are remaining neutral with respect to the Lehigh
Offer.
(b) Although the General Partners are not making a recommendation with
respect to the Lehigh Offer, the General Partners believe that BACs holders
should carefully consider the following factors in making their own decisions of
whether to accept or reject the Lehigh Offer:
[bullet] An independent third party has estimated that the Fair Value (as
defined below) of the BACs as of May 31, 1997 is between $528.84 and
$576.88 per BAC. The tender offer price of $530 is at the low end of
such range. However, BACs holders should note that the BACs become less
valuable with the passage of time as fewer tax credits remain. "Fair
Value" is defined as "the amount for which a BAC would change hands
between a willing buyer and a willing seller neither under compulsion
to act, with equity to both, each having reasonable knowledge of all
relevant facts, and within a commercially reasonable period of time."
[bullet] BACs holders should note that the weighted average selling price for
BACs reported in the limited and sporadic secondary market during the
two-month period ended March 31, 1997 is $570.74. However, the
Purchaser states its belief in the Lehigh Offer that such secondary
market selling prices do not take into account commissions charged by
secondary market makers effectuating such sales and the fact that the
BACs become less valuable with the passage of time as fewer tax credits
remain.
[bullet] The Lehigh Offer will provide BACs holders with an immediate
opportunity to liquidate their investment in the Partnership. BACs
holders who have a present or future need for the tax credits and/or
tax losses from the BACs may, however, prefer to retain their BACs and
not tender them pursuant to the Lehigh Offer.
[bullet] In July 1997, the General Partners sought an explanation from the
Purchaser justifying the Purchase Price. The Purchaser explained its
pricing model to the General Partners, including its belief that the
position of BACs holders who sold their BACs pursuant to the Lehigh
Offer would compare favorably to the position of BACs holders who chose
to remain in the Partnership. The General Partners expressed their
preference that the Purchase Price be higher but no further discussions
regarding increasing the Purchase Price occurred.
[bullet] As stated by the Purchaser in the Lehigh Offer, there may be a conflict
of interest between the Purchaser's desire to purchase the BACs at a
low price and a BACs holder's desire to sell its BACs at a high price.
Therefore, BACs holders might receive greater value if they hold their
BACs, rather than tender. Furthermore, BACs holders should be aware
that a secondary market exists for the BACs.
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[bullet] BACs HOLDERS WILL NO LONGER RECEIVE THE TAX CREDITS AND/OR TAX LOSSES
FROM THE BACs SHOULD THEY TENDER PURSUANT TO THE LEHIGH OFFER.
[bullet] BACs holders who tender their BACs will lose the right to receive any
future distributions from the Partnership, including distributions from
any refinancing or sale. The Partnership has made no distributions to
BACs holders in the past, and there can be no assurance as to the
timing, amount or occurrence of any future distributions.
[bullet] BACs holders should consult with their respective advisors about the
financial, tax, legal and other consequences of the Lehigh Offer.
Item 5. Persons Retained, Employed or to Be Compensated.
Neither the Partnership nor any person acting on its behalf has employed,
retained or compensated, or intends to employ, retain or compensate, any person
to make solicitations or recommendations to BACs holders on its behalf
concerning the Lehigh Offer.
Item 6. Recent Transactions and Intent With Respect to Securities.
(a) Neither the Partnership nor the General Partners have effected any
transactions in the BACs during the past 60 days. The General Partners are not
aware of any transactions in the BACs during the past 60 days by any of its
executive officers, directors, affiliates or subsidiaries. According to the
Lehigh Offer materials, the Purchaser, an affiliate of RFA (a General Partner),
effected three secondary market transactions, each effective as of March 1,
1997, to acquire a total of 169 BACs at a price per BAC of approximately
$546.20, not including commissions. Also effective as of March 1, 1997, the
Purchaser effected a private transaction and acquired an additional 20 BACs at a
price per BAC of $588.
(b) Neither the General Partners nor, to the knowledge of the General
Partners, any of their executive officers, directors, affiliates or subsidiaries
own any BACs and, therefore, cannot tender BACs to the Purchaser pursuant to the
Lehigh Offer.
Item 7. Certain Negotiations and Transactions by the Subject Company.
(a) No negotiation is being undertaken or is underway by the Partnership
in response to the Lehigh Offer which relates to or would result in: (1) an
extraordinary transaction such as a merger or reorganization, involving the
Partnership or any subsidiary of the Partnership; (2) a purchase, sale or
transfer of a material amount of assets by the Partnership or any subsidiary;
(3) a tender offer for or other acquisition of securities by or of the
Partnership; or (4) any material change in the present capitalization or
dividend policy of the Partnership.
(b) Except as described above or in Item 3(b), there are no transactions,
board resolutions, agreements in principle or signed contracts in response to
the Lehigh Offer which relate to or would result in one or more of the matters
referred to in Item 7(a).
Item 8. Additional Information to Be Furnished.
In May 1997, at the request of the General Partners, the Purchaser retained
Valuation Research Corporation to independently determine the value of the BACs
for the Partnership. On June 30, 1997, Valuation Research Corporation delivered
its valuation opinion (a copy of which has been filed as Exhibit (c)(2) hereto).
Subject to the terms, conditions and assumptions set forth therein and based
upon various valuation methods, Valuation Research Corporation concluded that
the estimated Fair Value (as defined below) of the BACs, effective as of May 31,
1997, is between $528.84 and $576.88 per BAC. For purposes of the valuation
opinion, "Fair Value" is defined as "the amount for which a BAC would change
hands between a willing buyer and a willing seller neither under compulsion to
act, with equity to both, each having reasonable knowledge of all relevant
facts, and within a commercially reasonable period of time."
Item 9. Material to be Filed as Exhibits.
(a)(1) Letter from Freedom Tax Credit Plus L.P. to BACs holders, dated
September 11, 1997.
(b) None.
(c)(1) Letter Agreement, dated August 26, 1997, among Freedom Tax Credit
Plus L.P., Lehigh Tax Credit Partners L.L.C. and Related Freedom
Associates L.P.
(c)(2) Valuation opinion, dated June 30, 1997, delivered to Freedom Tax
Credit Plus L.P. by Valuation Research Corporation.
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SIGNATURES
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete and
correct.
Dated: September 11, 1997
FREEDOM TAX CREDIT PLUS L.P.
By: FREEDOM GP INC.
By: /s/ Doreen D. Odell
--------------------------------------------
Name: Doreen D. Odell
Title: President
By: RELATED FREEDOM ASSOCIATES L.P.
By: Related Freedom Associates Inc., its general
partner
By: /s/ Alan P. Hirmes
---------------------------------------------
Name: Alan P. Hirmes
Title: Vice President
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EXHIBIT INDEX
EXHIBIT
NO. TITLE
(a)(1) Letter from Freedom Tax Credit Plus L.P. to BACs holders, dated
September 11, 1997.
(c)(1) Letter Agreement, dated August 26, 1997, among Freedom Tax Credit
Plus L.P., Lehigh Tax Credit Partners L.L.C. and Related Freedom
Associates L.P.
(c)(2) Valuation opinion, dated June 30, 1997, delivered to Freedom Tax
Credit Plus L.P. by Valuation Research Corporation.
FREEDOM TAX CREDIT PLUS L.P.
625 Madison Avenue
New York, New York 10022
September 11, 1997
Dear BACs holder:
As you are by now aware, Lehigh Tax Credit Partners L.L.C., a Delaware
limited liability company (the "Purchaser"), has made an offer (the "Lehigh
Offer") to purchase Beneficial Assignment Certificates representing assignments
of limited partnership interests ("BACs") of Freedom Tax Credit Plus L.P. (the
"Partnership") for a cash purchase price of $530 per BAC. THE PURCHASER IS AN
AFFILIATE OF RELATED FREEDOM ASSOCIATES L.P., A GENERAL PARTNER OF THE
PARTNERSHIP (A "GENERAL PARTNER" AND, TOGETHER WITH FREEDOM GP INC., THE
"GENERAL PARTNERS").
The General Partners are expressing no opinion and are remaining neutral
with respect to the Lehigh Offer. Although the General Partners are not making a
recommendation with respect to the Lehigh Offer, the General Partners believe
that BACs holders should carefully consider the following factors in making
their own decision of whether to accept or reject the Lehigh Offer:
[bullet] An independent third party has estimated that the Fair Value of the
BACs as of May 31, 1997 is between $528.84 and $576.88 per BAC. The
tender offer price of $530 is at the low end of such range. However,
BACs holders should note that the BACs become less valuable with the
passage of time as fewer tax credits remain.
[bullet] BACs holders should note that the weighted average selling price for
BACs reported in the limited and sporadic secondary market during the
two-month period ended March 31, 1997 is $570.74. However, the
Purchaser states its belief in the Lehigh Offer that such secondary
market selling prices do not take into account commissions charged by
secondary market makers effectuating such sales and the fact that the
BACs become less valuable with the passage of time as fewer tax credits
remain.
[bullet] The Lehigh Offer will provide BACs holders with an immediate
opportunity to liquidate their investment in the Partnership. BACs
holders who have a present or future need for the tax credits and/or
tax losses from the BACs may, however, prefer to retain their BACs and
not tender them pursuant to the Lehigh Offer.
[bullet] As stated by the Purchaser in the Lehigh Offer, there may be a conflict
of interest between the Purchaser's desire to purchase the BACs at a
low price and a BACs holder's desire to sell its BACs at a high price.
Therefore, BACs holders might receive greater value if they hold their
BACs, rather than tender. Furthermore, BACs holders should be aware
that a secondary market exists for the BACs.
[bullet] BACs HOLDERS WILL NO LONGER RECEIVE THE TAX CREDITS AND/OR TAX LOSSES
FROM THE BACs SHOULD THEY TENDER PURSUANT TO THE LEHIGH OFFER.
Enclosed is a copy of the Partnership's Statement on Schedule 14D-9 which
has been filed with the Securities and Exchange Commission and sets forth the
Partnership's response to the Lehigh Offer. BACs holders are advised to
carefully read the Schedule 14D-9 and consult with their advisors about the
financial, tax, legal and other implications of accepting the Lehigh Offer.
Please do not hesitate to call Brenda Abuaf, c/o Related Capital Company,
at (800) 600-6422 (ext. 2090) for assistance in any Partnership matter.
FREEDOM TAX CREDIT PLUS L.P.
FREEDOM TAX CREDIT PLUS L.P.
625 Madison Avenue
New York, NY 10022
August 26, 1997
Personal and Confidential
- -------------------------
Related Freedom Associates L.P.
Lehigh Tax Credit Partners L.L.C.
625 Madison Avenue
New York, NY 10022
Gentlemen:
As you requested, the purpose of this letter is to set forth our
understanding with regard to any proposed acquisition of beneficial assignment
certificates ("BACs") of Freedom Tax Credit Plus L.P., a Delaware limited
partnership (the "Partnership"), from holders of BACs (each a "BACs holder" and
collectively, "BACs holders") by Related Freedom Associates L.P. ("RFA"), Lehigh
Tax Credit Partners L.L.C. ("Lehigh") or any person who is their Affiliate (as
defined below) (collectively, "you").
In response to your proposal to commence a tender offer for BACs and in
consideration of the agreements set forth in this letter agreement, the
Partnership agrees to mail your tender offer materials, at your expense, subject
to the terms set forth below and whether or not such tender offer is subject to
the provisions of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"). Nothing in this letter agreement shall be construed as requiring the
Partnership to provide you with a current list of the names and addresses of the
BACs holders. The Partnership will not be obligated to mail your tender offer
materials until it has received from you an amount of cash equal to $10,000,
representing the estimated cost of such mailing together with the Partnership's
other expenses, including, without limitation, reasonable attorney fees. You
agree that you may only acquire up to 45% (including BACs acquired through all
other means) of the Partnership's outstanding BACs.
You represent and warrant that on the date hereof you beneficially own
not more than one hundred eighty nine (189) BACs. You also agree that prior to
the tenth anniversary of the date of this letter agreement, neither you nor any
person who is your Affiliate (as defined under Rule 405 of the Securities Act of
1933, as amended) will, without the prior written consent of the Partnership,
which may be withheld for any reason, directly or indirectly, (i) in any manner
including, without limitation, by tender offer (whether or not pursuant to a
filing made with
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the Securities and Exchange Commission), acquire, attempt to acquire or make a
proposal to acquire, directly or indirectly, more than 45% (including BACs
acquired through all other means) of the outstanding BACs of the Partnership
from any BACs holder, BACs holders or otherwise, (ii) seek or propose to enter
into, directly or indirectly, any merger, consolidation, business combination,
sale or acquisition of assets, liquidation, dissolution or other similar
transaction involving the Partnership, (iii) make, or in any way participate,
directly or indirectly, in any "solicitation" of "proxies" or "consents" (as
such terms are used in the proxy rules of the Securities and Exchange
Commission) to vote any voting securities of the Partnership, (iv) form, join or
otherwise participate in a "group" (within the meaning of Section 13(d)(3) of
the Exchange Act) with respect to any voting securities of the Partnership,
except that those Affiliates bound by this letter agreement will not be deemed
to have violated this letter agreement and formed a "group" solely by acting in
accordance with this letter agreement, (v) disclose in writing to any third
party any intention, plan or arrangement inconsistent with the terms of this
letter agreement or (vi) loan money to, advise, assist or encourage any person
in connection with any action inconsistent with the terms of this letter
agreement. Notwithstanding the foregoing restrictions, nothing in this letter
agreement shall apply to, govern, restrict or limit any sales, purchases,
transfers or assignments of interests in Lehigh.
You agree that any tender offer commenced by you will be at a price per
BAC not less than the value per BAC determined by an independent third party,
approved by the Partnership, in a report delivered to and approved by the
Partnership, completed or updated not more than three months prior to the
commencement of your tender offer. We hereby agree that the report by Valuation
Research Corporation, dated June 30, 1997, satisfies this requirement and is
approved by the Partnership. Notwithstanding any other provision of this letter
agreement, you agree that you shall not commence any tender offer for BACs of
the Partnership unless, prior to the commencement of such tender offer, the
Partnership's general partners agree to the response to be made by the
Partnership in connection with such tender offer.
You also agree during such ten year period, any proposal or request,
directly or indirectly, to amend, waive or terminate any provision of this
letter agreement shall be granted only upon the unanimous consent of the
Partnership's general partners. In addition, you (excluding your affiliate which
serves as a general partner of the Partnership while acting in its capacity as
general partner) agree that you will notify the Partnership in writing at least
five days (one day if such communication is a press release or is sent in
response to a prior communication made to BACs holders by the Partnership or its
general partners which is not seeking to advise or influence any person with
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respect to the voting of any voting securities of the Partnership) before
mailing or disseminating any communication with BACs holders and provide us a
copy of such communication (if written) with such notice.
You have advised us that, if requested by us, you (excluding your
affiliate which serves as a general partner of the Partnership while acting in
its capacity as general partner) will incorporate in any communication with BACs
holders a statement as to the valuation per BAC as determined by an independent
third party appraisal. In addition, if you commence a tender offer for less than
5% of the outstanding BACs, you will include verbatim the following language in
any such communication:
"TENDER OFFERS OF THIS NATURE ARE NOT REQUIRED TO COMPLY WITH CERTAIN
RULES AND REGULATIONS OF THE SECURITIES AND EXCHANGE COMMISSION.
Accordingly, this tender offer does not need to comply with certain
disclosure requirements and rules governing tender offers set forth in
the Securities Exchange Act of 1934."
In addition, you hereby represent, warrant and covenant to the
Partnership that any tender offer to purchase BACs commenced by you will be
conducted in compliance with Section 14(e) (misleading statements), Rule 14d-7
(additional withdrawal rights), Rule 14d-8 (pro rata requirements), Rule 14e-1
(unlawful tender offer practices) and Rule 14e-3 (non-public information) of the
Exchange Act, notwithstanding that such tender offer may be for less than 5.0%
of the outstanding BACs.
You understand that the general partners of the Partnership may
consider from time to time selling all or substantially all of the assets of the
Partnership or entering into any other transaction determined by the general
partners to be in the best interests of the BACs holders and the Partnership.
The result of any such transaction, if approved by a majority vote of the BACs
holders, might be the dissolution and liquidation of the Partnership in
accordance with the partnership agreement. Accordingly, in order to avoid
disrupting any possible sale of all or substantially all of the Partnership's
assets or any other transaction determined by the general partners to be in the
best interests of the BACs holders and the Partnership and any required vote of
BACs holders, you agree that, prior to the ten-year anniversary of the date of
this letter agreement, all BACs obtained by you pursuant to any means will be
voted by you on all issues in the same manner as by the majority of all other
BACs holders who vote on such proposal. Notwithstanding the
3
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foregoing, you may vote all BACs in the manner you determine, in your sole and
absolute discretion, on proposals (i) concerning the removal of RFA as general
partner of the Partnership or (ii) seeking to reduce any fees, profits,
distributions or allocations attributable to RFA or its Affiliates.
If at any time during such ten year period you (excluding your
affiliate which serves as a general partner of the Partnership while acting in
its capacity as general partner) are contacted in writing by, or have meaningful
negotiations with, any third party concerning participation in any transaction
involving the assets, businesses or securities of the Partnership or involving
any action inconsistent with the terms of this letter agreement, you will
promptly inform the Partnership of the nature of any such meaningful
negotiations and the parties thereto or forward a copy of such writing, as the
case may be, and you may inform such third party that this letter agreement
requires you to so notify the Partnership, provided however, this paragraph
shall not apply to any transaction or proposed transaction involving all or
substantially all of the assets, businesses or securities of Related Capital
Company and/or its Affiliates (other than the Partnership and RFA).
You will not sell any BACs owned by you prior to the tenth anniversary
of the date of this letter agreement, unless each buyer or transferee agrees in
writing with the Partnership to be bound by the terms and conditions of this
letter agreement until such tenth anniversary, provided however, that this
paragraph shall not apply to transfers made in the secondary market to any
purchaser which represents that following such sale, it shall not own 3% or more
of the BACs outstanding; provided further, however, that nothing in this letter
agreement shall apply to, govern, restrict or limit any sales, purchases,
transfers or assignments of interests in Lehigh. Notwithstanding the immediately
preceding sentence, Lehigh shall remain bound by this letter agreement
notwithstanding that any interests in Lehigh have been sold, purchased,
transferred or assigned.
Lehigh, RFA and Related Capital Company agree to indemnify and hold
harmless, to the fullest extent permitted by law, the Partnership, Freedom GP
Inc., and each of their partners, directors, officers, employees,
representatives and agents (the "Indemnified Parties") against any losses,
claims, damages, liabilities, costs, expenses (including reasonable attorney's
fees and expenses in advance of the final disposition of any claim, suit,
proceeding or investigation to each Indemnified Party to the fullest extent
permitted by law), judgments, fines
4
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and amounts (collectively, "Damages") paid in connection with any threatened or
actual claim, action, suit, proceeding or investigation which arises out of or
is the result of a breach of this letter agreement, any tender offer commenced
by you (regardless of whether such tender offer is subject to the provisions of
the Exchange Act) or the actual or proposed acquisition of BACs by you by any
other means; provided however, that if such claim, action, suit, proceeding or
investigation is threatened but not actual, your obligation to indemnify the
Indemnified Parties shall apply only if such threat is in writing and only with
respect to any legal fees incurred in connection with such threat. If such
threat becomes an actual claim, action, suit, proceeding or investigation, you
shall then be responsible for the full indemnification provided for in this
paragraph. If an Indemnified Party intends to seek indemnification pursuant to
this paragraph, it shall promptly notify you of such claim, in writing,
describing such claim in reasonable detail; provided, that the failure to
provide such notice shall not affect your obligations herein unless you are
materially prejudiced by the failure to provide such notice. Counsel for the
Indemnified Party shall be chosen at your discretion and shall be directed by
you. We both agree that you will be materially prejudiced if, due to the failure
of an Indemnified Party to provide the notice required above, you were not given
the opportunity to obtain the counsel of your choice or direct such counsel. You
may participate at your own expense in the defense of any such action; provided,
that counsel for the Indemnified Party shall not (except with the consent of the
Indemnified Party) also serve as your counsel. You shall not, without first
obtaining a general release from liability for the Indemnified Parties in a form
satisfactory to such Indemnified Parties, settle or compromise or consent to the
entry of any judgment with respect to any threatened or actual claim, action,
suit, proceeding or investigation involving an Indemnified Party which seeks
indemnity under this paragraph. If the indemnification provided in this
paragraph is for any reason unavailable to or insufficient to hold harmless an
Indemnified Party in respect of any Damages referred to above, then you and each
party seeking indemnification shall contribute to the aggregate amount of such
Damages incurred by such Indemnified Party in such proportion as is appropriate
to reflect the relative benefits received by each party from the act which gives
rise to the indemnification claim. You agree that the amount of such economic
benefit received by each Indemnified Party shall be $1 and the amount of such
economic benefit received by you shall be computed by multiplying your per BAC
offer price by the total number of BACs which were sought in your tender offer.
Both you
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and the Indemnified Parties each hereby agree to cooperate fully in all aspects
of any investigation, defense, pre-trial activities, trial, compromise,
settlement or discharge of any claim in respect of which indemnity is sought
pursuant to this paragraph, including, but not limited to, by providing the
other party reasonable access upon reasonable notice to employees and officers
and other information during reasonable business hours. Nothing in this
paragraph is intended to limit your ability to obtain indemnification from the
Partnership if such indemnification is available to you pursuant to the
Partnership's partnership agreement and applicable law, provided however, that
your obligations herein shall not be affected by your ability or inability to
obtain such indemnification. We each hereby agree that the provisions of this
paragraph shall have no effect on any other partnership which you or Freedom GP
Inc. or any of our respective Affiliates may be a partner.
Notwithstanding the immediately preceding paragraph, we acknowledge
that you may engage a third party lender(s) to finance your proposed acquisition
of BACs. We hereby acknowledge and agree for the benefit of such third party
lender(s) that the indemnification provisions in the immediately preceding
paragraph are not intended to apply to or obligate, and in no event shall be
binding upon, such third party lender(s) or any of its assignees or successors
in interest to any of the BACs acquired by you.
We each hereby acknowledge that we are aware, and that we will advise
our respective Affiliates, of our respective responsibilities under the
securities laws. We each agree that the other of us or our respective
Affiliates, as the case may be, shall be entitled to equitable relief, including
injunctive relief and specific performance, in the event of any breach of the
provisions of this letter agreement, in addition to all other remedies available
at law or in equity.
In case any provision in or obligation under this letter agreement
shall be invalid, illegal or unenforceable in any jurisdiction, the validity,
legality and enforceability of the remaining provisions or obligations, or of
such provision or obligation in any other jurisdiction, shall not in any way be
affected or impaired thereby.
This letter agreement shall be governed by the laws of the State of New
York without giving effect to principles of
6
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conflicts of law thereof. This letter agreement may be executed in counterparts,
each of which shall be deemed an original, but all of which together constitute
one and the same instrument.
* * *
7
<PAGE>
If you agree with the foregoing, please sign and return two copies of
this letter agreement, which will constitute our agreement with respect to the
subject matter of this letter agreement.
Very truly yours,
FREEDOM TAX CREDIT PLUS L.P.
By: Liberty GP, Inc.,
its general partner
By: /s/ Paul L. Abbott
------------------
Name: Paul L. Abbott
Title: President
Confirmed and agreed to as of
the date first above written
LEHIGH TAX CREDIT PARTNERS L.L.C.
By: /s/ Alan P. Hirmes
------------------
Name: Alan P. Hirmes
Title: Vice President
RELATED FREEDOM ASSOCIATES L.P.
By: Related Freedom Associates, Inc.,
its general partner
By: /s/ Alan P. Hirmes
------------------
Name: Alan P. Hirmes
Title: Vice President
June 30, 1997
Freedom Tax Credit Plus L.P.
c/o Related Freedom Assoicates L.P.
625 Madison Avenue
New York, NY 10022
Ladies and Gentlemen:
Valuation Research Corporation ("VRC") has been retained by Freedom Tax Credit
Plus L.P., a Delaware limited partnership (the "Partnership"), to express our
opinion as of May 31, 1997, as to the fair value of the issued and outstanding
Beneficial Assignment Certificates ("BACs") representing assignments of Limited
Partnership Interests ("Limited Partnership Interests") in the Partnership in
connection with a proposed tender offer (the "Offer to Purchase") for BACs by
Lehigh Tax Credit Partners L.L.C., a Delaware limited liability company ("the
Purchaser"). We understand that under the terms of the Offer to Purchase, the
Purchaser would purchase up to 18,224 BACs and thus, with the BACs already owned
by the Purchaser and its affiliates, control approximately 25% of the
outstanding BACs of the Partnership.
Fair value is defined for purposes of this report as:
The amount for which a BAC would change hands between a willing buyer
and a willing seller neither under compulsion to act, with equity to
both, each having reasonable knowledge of all relevant facts, and
within a commercially reasonable period of time.
After employment of the valuation processes and methodology described in the
attached report and subject to the assumptions and factors discussed in the
attached report, we have estimated a Fair Value per BAC, effective as of May 31,
1997, of $528.84 to $576.88 per BAC.
The Partnership is a limited partnership formed in 1989, under the laws of the
State of Delaware. It was formed to invest, as a limited partner, in other
limited partnerships (referred to herein as "Local Partnerships" or "Subsidiary
Partnerships") each of which owns one or more leveraged low-income multifamily
residential complexes ("Apartment Complexes" or "Properties") that are eligible
for the low-income housing tax credit ("Housing Tax Credit") enacted in the Tax
Reform Act of 1986, some of which are eligible for the historic rehabilitation
tax credit ("Historic
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June 30, 1997
Page 2
Rehabilitation Tax Credit", "Rehabilitation Projects", and together with the
Apartment Complexes or "Properties"). Some of the Apartment Complexes benefit
from one or more other forms of federal or state housing assistance. The
Partnership's investment in each Local Partnership represents from 98% to 99% of
the partnership interests in the Local Partnership. According to the Form 10-Q,
as of December 31, 1996, all of the net proceeds from the original offering of
BACs was invested in 42 Local Partnerships.
During the course of our study, discussions were held with management and we
became familiar with the limited partnership agreement of Freedom Tax Credit
Plus L.P. In addition, VRC has examined extensive data provided by Related
Freedom Associates L.P. ("Related General Partner"), a General Partner of the
Partnership and the published market data pertaining to the Apartment Complexes
which form the underlying assets of the Partnership. This includes, but is not
limited to, the following:
o Selected financial data for the Partnership as reported in
the Form 10-K and Form 10-Q of the Securities and Exchange
Commission.
o Unaudited financial statement and other internal financial
analysis for the 42 Local Partnerships that comprise the
underlying assets of Freedom Tax Credit Plus L.P.
o Trading data pertaining to the current secondary trading
market for BACs of the Partnership.
o A draft of the Offer to Purchase.
o The original Prospectus dated February 9, 1990.
o Projected tax credits and tax losses for each of the 42
Limited Partnerships of the Partnership.
o Projected tax credits and tax losses for the Partnership.
o Federal U.S. Partnership Tax Returns.
In addition, certain assumptions regarding the Partnership and the 42 Local
Partnerships are made. These include, but are not limited to, the following:
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June 30, 1997
Page 3
o Each of the Local Partnerships will continue to qualify for
low-income housing tax credits and that there will not be a
forfeiture or recapture of these credits.
o There will be no future change in the Internal Revenue Code
that would change the tax status of the Partnership or the
Local Partnerships.
o All debt related to the Properties is for a term of 15 years
and thus there is no risk of refinancing within the
projection period.
The basis of our opinion of the value per BAC is the annual tax losses and tax
credits that flow through to the BAC owner in addition to any cash distribution
or tax loss which would flow to the BAC holder upon a sale of the Properties
owned or invested in by the Local Partnerships, net of any debt or tax liability
associated with the Property.
To determine the value of the BACs, an income capitalization appraisal technique
known as a discounted cash flow analysis was used. The result of this technique
was then verified by using a second technique known as the market approach. The
basic premise of the income approach is that the earning power of an investment
is the critical element affecting its value, and value is often defined as the
present worth of anticipated future income. The basic premise of the market
approach is the comparing of recently sold investments and their sales price
with the subject investment.
INCOME ANALYSIS
The first step in the income approach is the determination of a proper revenue
stream that one would expect to be able to obtain from the subject investment
based on actual historical operations and future projections. A similar analysis
of typical operating expenses aids in constructing an operating statement that
results in a net operating income (loss), (NOI), for the first and subsequent
years. The estimated future net income or tax losses and tax credits can be
converted into an indicated value by discounting those individual annual amounts
to a present value.
The discount rates used to convert these tax losses and tax credits to a present
value are derived from market expectations of returns commensurate with the risk
of the subject investment.
Our analysis began with an estimate of each of the 42 Local Partnerships' income
or loss potential based on an analysis of current and historical operating
results. Using this information and incorporating current economic and market
forecasts for each of the 42 locations of the subject
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June 30, 1997
Page 4
Local Partnerships' Apartment Complexes, a potential gross income estimate was
made. This estimated potential gross income was then projected to grow over the
course of the projectionperiod, 11 years, at 3 percent based on current and
forecasted economic conditions in each of the subject areas.
Secondly, a similar procedure was used to estimate and project the expenses
associated with the operation of the subject Properties.
The estimate of the operating expenses, including real estate taxes, was based
on a combination of historical expenses of the subject Properties and published
market surveys. These operating expenses were projected to grow at an estimated
2.5% inflation rate per year over the course of the 11-year projection period.
Finally, the mortgage payments and depreciation expense associated with each
Property was subtracted to arrive at the net pretax income (loss) which is
allocated to each of the BAC holders.
The second element addressed is the tax credits associated with each Property.
Each Property has been awarded tax credits under the Tax Credit for Low-Income
Rental Housing (LIHTC) Program, established under Section 42 of the Internal
Revenue Code of 1986. We have assumed that these credits are fixed and will
continue for the duration of the original 10-year compliance period.
The following table sets forth the estimated aggregate revenues, expenses,
pretax income (loss) and tax credits of the 42 Consolidated Local Partnerships
which form the underlying investment of the Partnership for each of the
twelve-month periods ending December 31, 1998 through December 31, 2007 and the
abbreviated seven-month 1997 fiscal year that were included in the financial
forecasts used by VRC in connection with the preparation of the valuation
opinion.
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June 30, 1997
Page 5
(In Thousands of Dollars)
Year 1997 1998 1999 2000 2001
Revenue 5,552 13,658 13,999 14,349 14,708
Expenses 7,646 18,588 18,832 19,084 19,343
Net Income (Loss) (2,094) (4,930) (4,833) (4,735) (4,635)
Tax Credits 5,604 11,209 11,209 11,113 6,812
Year 2002 2003 2004 2005 2006 2007
Revenue 15,076 15,453 15,839 16,235 16,641 17,057
Expenses 19,611 19,886 20,169 20,461 20,761 21,071
Net Income (4,535) (4,433) (4,330) (4,226) (4,120) 4,014
Tax Credits 1,716 0 0 0 0 0
In rendering this valuation opinion, VRC relied, without assuming responsibility
for independent verification, on the accuracy and completeness of all financial
and operating data, financial analyses, reports and other information that were
publicly available, compiled or approved by or otherwise furnished or
communicated to VRC by or on behalf of the Partnership. With respect to the
financial forecasts utilized by VRC, VRC believes that the assumptions
underlying the forecasts are reasonable and that consequently there is a
reasonable probability that the projections would prove to be substantially
correct. However, readers of this valuation opinion should be aware that actual
revenues, expenses and net operating income of the 42 Local Partnerships which
serve as the underlying assets of the subject Partnership will depend to a large
extent on a number of factors that cannot be predicted with certainty or which
may be outside of the control of the general partners, including general
business, market and economic conditions, supply and demand for rental
properties in the areas in which the properties owned by the 42 Local
Partnerships are located, future operating expense and capital expenditure
requirements for the properties, future occupancy rates, the ability of the
general partners and property managers for the properties to maintain the
attractiveness of the properties to tenants, real estate tax rates, changes in
tax laws and other factors. As a result, actual results could differ
significantly from the forecasted results.
The following paragraphs summarize the significant quantitative and qualitative
analyses performed by VRC in arriving at the valuation opinion. VRC considered
all such quantitative and qualitative analyses in connection with its valuation
analysis, and no one method of analysis was given particular emphasis.
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June 30, 1997
Page 6
Discounted Cash Flow Analysis - VRC preformed a discounted analysis of (i) the
present value of the forecasted net after tax income (loss) and tax credit
benefits from future operations of the 42 Local Partnerships which are the
underlying assets of the Partnership, and (ii) the present value of the
estimated net after tax proceeds or tax benefits (losses) of a sale of the
Properties at the conclusion of the forecast period. In completing its analysis,
VRC utilized financial and operating forecasts of each Properties' estimated net
pretax net income (loss) for the seven-month period ending December 31, 1997 and
each of the twelve-month periods ending December 31, 1998 to December 31, 2007.
From this amount, annual expenses associated with the management of the
Partnership were deducted. The resulting income (loss) was then adjusted to
reflect the income (loss) to the BAC holders. Finally, the resulting loss was
adjusted for taxes and the composite tax credits added. The resulting net
investor benefits, along with the forecasted net after tax residual value of the
Properties, were then discounted to a present value using market derived
discount rates (IRR) of 12% and 15%. Using this methodology, the fair value of
the 72,896 partnership BACs is $528.84 to $576.88 per BAC.
MARKET ANALYSIS
Valuation Research has analyzed and has given consideration to the trading
history of the subject Partnership's BACs on the Chicago Partnership Board from
May 31, 1996 to May 31, 1997. During that period of time there were seven
transactions and the total number of BACs traded is approximately 483. The high
was priced at $623 per BAC and the low was $500. On March 12, 1997, a 25-unit
trade took place at a recorded price of $564 per BAC.
The preparation of a valuation opinion involves various determinations as to the
most appropriate and relevant quantitative and qualitative methods of financial
analyses and the application of those methods to the particular circumstances
and therefore such an opinion is not readily susceptible to partial analyses or
summary description. Accordingly, VRC believes its analyses must be considered
as a whole and that considering any portion of such analyses and of the factors
considered, without considering all analyses and factors, could create a
misleading or incomplete view of the process underlying the valuation opinion.
Any estimates contained in these analyses are not necessarily indicative of
actual values or predictive of future results or values, which may be
significantly more or less than as set forth herein.
VRC's valuation opinion was based solely upon the information available to it
and the economic market and other circumstances that existed as of the date
hereof. Events occurring after such date could materially affect the assumptions
and conclusions contained in the valuation opinion. VRC has not undertaken to
reaffirm or revise this valuation opinion or otherwise comment upon any events
occurring after the date hereof.
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June 30, 1997
Page 7
VRC has relied without independent verification on the accuracy and completeness
of all of the financial and other information reviewed by us for purposes of
this opinion. Nothing came to our attention, for purposes of this opinion, which
causes us to question their accuracy or their representation of the operations
of the assets under review. We have not verified the title to ownership of these
assets, nor have we made an independent valuation or appraisal of the reported
current assets or any of the liabilities reported by the Partnership on its
financial statements. Our opinion necessarily is based on conditions as they
exist and can be valued only as of May 31, 1997.
Based on and subject to the foregoing and based on such other matters as we
consider relevant, it is our opinion that as of the date hereof, the fair value
per BAC is $528.84 to $576.88.
This letter is solely for the information of and assistance to the parties to
whom it is addressed in conducting their investigation with regard to the
upcoming tender offer for 18,224 of the BACs of the Partnership. The Partnership
may include this letter as a part of the information statement filed with the
Securities and Exchange Commission. Any other uses are expressly prohibited and
neither this letter nor any of its parts may be circulated, quoted, or otherwise
referred to for any other purpose without the written consent of VRC, the
exercise of which will be at the sole discretion of VRC, not unreasonably
withheld. If given, such consent shall not be without sufficient review by VRC
as to the precise language of such disclosure and the time and place of its
potential release.
The above limitations do not apply to interested parties as defined herein.
However, in such instances, this opinion must be provided to such parties in its
entirety. The term "interested parties" shall include the Partnership's auditors
and attorneys, participants and assignees, regulators, or appropriate parties
involved in this transaction.
VRC has no responsibility to update the opinion stated herein for events and
circumstances occurring after the date of this letter.
This opinion is subject to the assumptions and limiting conditions contained
herein. VRC has not investigated the title to, nor the liabilities against, the
Partnership or the Properties of the 42 Local Partnerships and assumes no
responsibility concerning these matters. Neither Valuation Research Corporation
nor any of its personnel have any present or contemplated financial interest in
the Partnership or the assets of the Partnership, and we certify that the
compensation received for this opinion letter is not contingent on the
conclusions stated. Additionally, the assignment was not based on a requested
minimum valuation, a specific valuation, or the approval of a loan.
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June 30, 1997
Page 8
Valuation Research Corporation does not conduct or provide environmental
liability assessments of any kind in performing its valuations so that our
opinion of the fairness of the Offer does not reflect any actual or contingent
environmental liabilities associated with the owned residential property that
constitutes the underlying assets of the Partnership.
Respectfully submitted,
VALUATION RESEARCH CORPORATION
/s/ Valuation Research Corporation
Engagement Number: 04-2749-00
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June 30, 1997
Page 9
LIMITING FACTORS AND ASSUMPTIONS
In accordance with recognized professional ethics, the professional fee for this
service is not contingent upon our conclusion of value, and neither Valuation
Research Corporation nor any of its employees have a present or intended
material financial interest in the subject company.
The opinion expressed herein is valid only for the stated purpose as of the date
of the valuation opinion.
Financial statements and other related information provided by the subject
company or its representatives in the course of this investigation have been
accepted, without further verification, as fully and correctly reflecting the
company's business conditions and operating results for the respective periods,
except as specifically noted herein.
Public information and industry and statistical information has been obtained
from sources we deem to be reliable; however, we make no representation as to
the accuracy or completeness of such information, and have accepted the
information without further verification.
The conclusions of value are based upon the assumption that the current level of
management expertise and effectiveness would continue to be maintained and that
the character and integrity of the Partnership and/or the 42 Local Partnerships
through any sale, reorganization, exchange, or diminution of the owners'
participation would not be materially or significantly changed.
This letter and the conclusions arrived at herein are for the exclusive use of
our client for the sole and specific purposes as noted herein. Furthermore, the
letter and conclusions are not intended by the author, and should not be
construed by the reader, to be investment advice in any manner whatsoever. The
conclusions reached herein represent the considered opinion of Valuation
Research Corporation, based upon information furnished to them by the
Partnership and other sources.
Related Freedom Associates L.P., a General Partner of Freedom Tax Credit Plus
L.P., has assured VRC that there will be no material change in the proposed
tender offer or any documents in VRC's possession as of May 31, 1997.
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June 30, 1997
Page 10
Except as provided above, neither all nor any part of the contents of this
letter (especially any conclusions as to value, the identity of any appraiser or
appraisers, or the firm with which such appraisers are connected, or any
reference to any of their professional designations) should be disseminated to
the public through advertising media, public relations, news media, sales media,
mail, direct transmittal, or any other public means of communication, without
the prior written consent and approval of Valuation Research Corporation.
Future services regarding the subject matter of this letter, including, but not
limited to, testimony or attendance in court, shall not be required of Valuation
Research Corporation, unless previous arrangements have been made in writing.
Valuation Research Corporation is not an environmental consultant or auditor,
and it takes no responsibility for any actual or potential environmental
liabilities. Any person entitled to rely on this letter wishing to know whether
such liabilities exist, or their scope, and the effect on the value of the
property is encouraged to obtain a professional environmental assessment.
Valuation Research Corporation does not conduct or provide environmental
assessments and has not performed one for the subject property.
Valuation Research Corporation has asked the Partnership whether it is subject
to any present or future liability relating to environmental matters (including
but not limited to CERCLA/Superfund liability). Valuation Research Corporation
has not determined independently whether the Partnership is subject to any such
liabilities, nor the scope of any such liabilities. Valuation Research
Corporation's appraisal takes no such liabilities into account except as they
have been reported expressly to Valuation Research Corporation by the
Partnership, or by an environmental consultant working for the Partnership and
then only to the extent that the liability was reported to us in an actual or
estimated dollar amount. To the extent such information has been reported to us,
Valuation Research Corporation has relied on it without verification and offers
no warranty or representation as to its accuracy or completeness.
We have not made a specific compliance survey or analysis of the subject
properties to determine whether it is subject to or in compliance with the
Americans with Disabilities Act of 1990 (ADA) and this opinion does not consider
the impact, if any, of noncompliance in estimating the value of the Units.
