SCHEDULE 14A INFORMATION
CONSENT SOLICITATION STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[x] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to ss.240.14a-11(c) or ss.240.14a-12
Historic Preservation Properties 1990 L.P. Tax Credit Fund
(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[ ] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4)
and 0-11.
1) Title of each class of securities to which transaction applies:
Units of Limited Partnership Interest
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2) Aggregate number of securities to which transaction applies:
16,361
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3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11. (Set forth the
amount on which the filing fee is calculated and state
how it was determined):
The filing fee of $1,471.38 has been calculated in accordance
with Rule 0-11 under the Exchange Act and is equal to 1/50 of
1% of $7,356,925 (the aggregate amount of cash to be distributed
to Unit holders).
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4) Proposed maximum aggregate value of transaction:
$7,356,925
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5) Total fee paid: $1,472
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[x] Fee paid previously with preliminary materials.
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[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
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2) Form, Schedule or Registration Statement No.:
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3) Filing Party:
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4) Date Filed:
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HISTORIC PRESERVATION PROPERTIES
1990 L.P. TAX CREDIT FUND
45 Broad Street Third Street
Boston, Massachusetts 02109
CONSENT SOLICITATION STATEMENT
This Consent Solicitation Statement ("Solicitation Statement") is being
furnished to limited partners ("Limited Partners") holding units of limited
partnership interest ("Units") in Historic Preservation Properties 1990 L.P.
Tax Credit Fund, a Delaware limited partnership (the "Partnership"), in
connection with the solicitation of written consent ("Consent") by Boston
Historic Partners II Limited Partnership (the "General Partner") to a proposal
(the "Proposal") for:
o Approval of the sale of substantially all the assets (the "Sale") of the
Partnership
There is no assurance that the Sale will be consummated. However, assuming
the Sale is consummated, it is anticipated that an initial distribution to
Limited Partners of net proceeds from the Sale, together with certain cash from
operations, will aggregate approximately $475.00 per $1,000 Unit, which will
include $450.00 per $1,000 Unit within 30 days after the closing date of the
Sale, a required deposit of $6.00 per $1,000 Unit as a withholding for Maryland
non-residents for state taxes due, and a final distribution of cash from
contingent reserves of up to $19.00 per $1,000 Unit upon the liquidation of the
Partnership, approximately six months after consummation of the Sale and
related Partnership liquidation transactions. See "SUMMARY-Description of the
Partnership."
As with most sales of real estate, the Partnership expects to recognize
taxable gain from the Sale. The Partnership estimates that the net taxable gain
will equal approximately $113.00 per Unit, which will result in federal and
Maryland taxes payable, assuming a blended mid-range federal tax rate, of
approximately $30.00 and $6.00 per Unit, respectively, for Limited Partners who
acquired their Units in the public offering and have utilized all of the
passive losses previously allocated to them. Limited Partners who purchased
their Units after the historic rehabilitation tax credit placed in service date
will have a different result. Limited Partners who have not utilized any of
their suspended passive losses since inception may have a net after tax benefit
of approximately $112.00 per Unit from the Sale and final liquidation, assuming
a blended mid-range federal tax rate. LIMITED PARTNERS SHOULD CONSULT THEIR OWN
TAX ADVISORS REGARDING THE SPECIFIC INCOME TAX CONSEQUENCES OF THE SALE TO
THEM. See "CERTAIN FEDERAL AND STATE INCOME TAX CONSEQUENCES OF THE SALE."
This Solicitation Statement and the accompanying consent card are first
being mailed to Limited Partners on or about August 4, 1999.
THIS TRANSACTION HAS NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION, NOR HAS THE COMMISSION PASSED UPON THE FAIRNESS OR
MERITS OF SUCH TRANSACTION NOR UPON THE ACCURACY OR ADEQUACY OF THE INFORMATION
CONTAINED IN THIS DOCUMENT. ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL.
THE DATE OF THIS CONSENT SOLICITATION IS AUGUST 2, 1999.
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TABLE OF CONTENTS
CONSENT SOLICITATION STATEMENT...............................................i
SUMMARY......................................................................1
The Partnership............................................................1
The Purchaser..............................................................2
The Proposal...............................................................2
Fairness of the Sale and Certain Conflicts of Interest.....................2
Security Ownership and Voting Thereof......................................4
Consummation of the Sale...................................................4
No Appraisal Rights........................................................4
Certain Federal and State Income Tax Consequences..........................4
Distributions of Net Sale Proceeds.........................................4
Action by Consent..........................................................5
Solicitation Agent.........................................................5
Vote Required..............................................................5
ACTION BY CONSENT............................................................6
General....................................................................6
Matters To Be Considered...................................................6
Record Date................................................................8
Action by Consent..........................................................8
SPECIAL FACTORS..............................................................9
THE PROPOSAL.................................................................9
ABSENCE OF HISTORIC REHABILITATION TAX CREDIT RECAPTURE.....................15
CERTAIN FEDERAL AND STATE INCOME TAX CONSEQUENCES OF THE SALE...............15
General...................................................................15
Capital Gains.............................................................18
Passive Loss Limitations..................................................18
Certain State Income Tax Considerations...................................18
Tax Conclusions...........................................................19
DISTRIBUTIONS...............................................................19
NO APPRAISAL RIGHTS.........................................................19
LACK OF ESTABLISHED MARKET FOR THE UNITS....................................19
VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF.............................20
YEAR 2000 INFORMATION.......................................................20
VOTING PROCEDURES...........................................................20
AVAILABLE INFORMATION.......................................................20
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SUMMARY
THE FOLLOWING IS A SUMMARY OF CERTAIN INFORMATION CONTAINED ELSEWHERE IN
THIS SOLICITATION STATEMENT. REFERENCES ARE MADE TO, AND THIS SUMMARY IS
QUALIFIED IN ITS ENTIRETY BY, THE MORE DETAILED INFORMATION CONTAINED IN THIS
SOLICITATION STATEMENT. UNLESS OTHERWISE DEFINED HEREIN, TERMS USED IN THIS
SUMMARY HAVE THE RESPECTIVE MEANINGS ASCRIBED TO THEM ELSEWHERE IN THIS
SOLICITATION STATEMENT. LIMITED PARTNERS ARE URGED TO READ THIS SOLICITATION
STATEMENT IN ITS ENTIRETY.
The Partnership.
The Partnership owns interests, as general and limited partner, in two
Delaware limited partnerships (collectively, the "Ventures"): (i) Henderson's
Wharf Baltimore, L.P. (the "Building Venture") (a 99% interest) and (ii)
Henderson's Wharf Marina, L.P. (the "Marina Venture") (a 98% interest).
Henderson's Wharf Development Corp., a Delaware corporation that is 100% owned
by the Partnership, owns the remaining interests in the Building Venture and
the Marina Venture. As a result, the Partnership owns 100% of the beneficial
interests of both the Building Venture and the Marina Venture. The
Partnership's interests in the Building Venture and the Marina Venture
represent its sole investments in operating real estate. The principal offices
of the Partnership are located at 45 Broad Street, Boston, Massachusetts 02109,
and its telephone number is 617-422-5815. The general partner (the "General
Partner") of the Partnership is Boston Historic Partners II Limited
Partnership, a Delaware limited partnership. The general partner of the General
Partner is BHP II Advisors Limited Partnership, a Delaware limited partnership
("Advisors"). The general partners of Advisors are Terrence P. Sullivan and
Portfolio Advisory Services II, Inc., a Massachusetts corporation ("PAS II"),
of which Mr. Sullivan is the president and sole stockholder.
The Building Venture. The Building Venture owns approximately 1.5 acres of
land at 1000 Fell Street, Baltimore, Maryland and the seven-story building
located thereon (the "Building"). The Building contains 137 residential
apartment units, each of which constitutes a condominium unit (the "Residential
Units"), a 38 room inn (the "Inn"), which constitutes a separate condominium
unit, and a five-level parking garage (the "Garage") containing 160 parking
spaces, each of which constitutes a condominium parking space. Eight of the
Residential Units and seven of the Garage parking spaces are currently owned by
unaffiliated third parties. The remaining 129 Residential Units, 153 Garage
parking spaces and the Inn are all owned by the Building Venture.
The Marina Venture. The Marina Venture owns 1.92 acres of adjacent land at
1001 Fell Street, Baltimore, Maryland, together with a 256 slip marina (the
"Marina"). The land owned by the Marina Venture (the "Marina Land") is subject
to an easement, which gives the owner of the adjacent land on which the
Building stands the right to use 84 parking spaces located on the Marina Land.
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Together, the properties owned by the Building Venture and the Marina
Venture are referred to herein as the "Property." The proposed transaction (the
"Sale") contemplates the sale of the Property by the Building Venture and the
Marina Venture. Since the Property represents the only assets owned by those
two Ventures, and the interests in the two Ventures represent the Partnership's
only investments in operating real estate, the Sale of the Property will
constitute the sale of substantially all the assets of the Partnership, and the
General Partner anticipates liquidating the Partnership within six months after
consummation of the Sale.
The Purchaser.
If the Proposal is approved, Henderson's Wharf Baltimore, LLC and
Henderson's Wharf Marina Corporation (collectively, the "Purchaser") will be
formed as a limited liability company and a corporation, respectively, which
will be owned 90% by Robert W. Gunn and/or his affiliates and 10% by Charles S.
Intravaia. Robert W. Gunn is the principal of Gunn Financial, Incorporated
("GFI"), a Massachusetts corporation unaffiliated with the Partnership or its
General Partner. GFI was engaged by the Partnership on July 1, 1998, to provide
asset management, accounting and investor services to the Partnership. Since
July 1, 1998, the Partnership has shared office space with GFI. Charles S.
Intravaia is an employee of GFI who has been actively involved in the asset
management of the Property. The principal offices of the Purchaser are located
at 45 Broad Street, Boston, Massachusetts 02109.
The Proposal.
This Solicitation Statement contains the following proposal:
Approval of the Sale of Substantially All the Assets of the Partnership.
Under the terms of the Partnership Agreement, the sale of all or substantially
all of the assets of the Partnership requires the approval of a majority in
interest of the Limited Partners. The Sale of the Property described herein
will constitute a sale of substantially all of the assets of the Partnership
for a total purchase price of $13,550,000 as described under "THE PROPOSAL -
Terms of the Purchase Agreement." After the payment of the outstanding
indebtedness and expenses of the Sale, there will be approximately $7,775,000
available for distribution of net proceeds from the Sale and net Partnership
cash reserves.
Fairness of the Sale and Certain Conflicts of Interest.
The General Partner has carefully considered the Sale and has concluded
that the Sale is in the best interests of the Partnership and the Limited
Partners. This conclusion is supported by:
Capital Needs Analysis. The Partnership recently commissioned a capital
needs analysis of the Property, which concluded that the Marina Land, which is
encumbered by an easement providing 84 parking spaces for use by the Inn, will
require a substantial investment within the next ten (10) years of over
$3,500,000 for significant repairs including the replacement of the existing
bulkhead which supports the Marina Land from Baltimore Harbor. If the bulkhead
is not replaced, the Marina Land could become unavailable for use as parking,
thereby adversely affecting the operations of both the Marina and the Inn. In
order to protect the future operations of the Inn and the Marina, the General
Partner had determined to set aside essentially all net cash from operations of
the Property in a reserve fund for ultimate use in replacing the bulkhead.
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Further, the capital needs analysis also determined that the Building Venture
would require approximately $1,600,000 of capital improvements for various
items over the next ten (10) years. As a result, if the Partnership retains its
investment in the Ventures, the Limited Partners can reasonably expect that no
distributions of cash will be available for the foreseeable future.
Independent Appraisals. Upon obtaining the preliminary results of the
capital needs analysis described above, the Partnership commissioned an
appraisal of the Property to determine its value. The Partnership was then able
to evaluate potential options, including retaining ownership of the Property by
investing the required capital to maintain operations or considering a sale of
the Property. It received an appraisal dated as of March 1, 1999 from the
independent appraisal firm of R.H. Nichols & Associates appraising the value of
the Property at $13,500,000. It received a second independent appraisal of the
Property dated as of April 16, 1999 from Lipman Frizzell & Mitchell LLC, a firm
unaffiliated with either the General Partner or R.H. Nichols & Associates,
appraising the value of the Property at $13,540,000. The substantially
identical results of the two appraisals, together with the prospect of having
no distributions of cash to Limited Partners for the next several years, led
the General Partner to conclude that it would be in the best interest of the
Limited Partners for the Partnership to sell the Property rather than to
continue to hold it.
Fairness Opinion. Upon receiving the offer to purchase the Property from
the Purchaser, the Partnership engaged The Valuations Group, Inc., an
unaffiliated business valuation consultant specializing in partnership
interests, to evaluate whether the terms of the Sale are fair with respect to
the Limited Partners. On July 16, 1999, The Valuations Group Inc. provided a
fairness opinion concluding that the purchase price offered to the Partnership
for the Property pursuant to the Sale is fair to the Limited Partners from a
financial point of view.
Benefits of Sale to Purchaser. Having concluded that a sale of the
Property was in the best interests of the Limited Partners, the General Partner
also concluded that a sale to the Purchaser provided certain benefits that may
not be available from a sale to any other buyer. First, no brokerage commission
will be required to be paid in connection with the sale of the Property to the
Purchaser. Second, the financing contingency in the Purchase Agreement has been
satisfied. Third, the principals of the Purchaser are familiar with the
Property and will not require extensive time to perform due diligence, nor will
they require burdensome representations or warranties from the Partnership, in
order to close the sale of the Property. The Property has a complicated legal
title. The two Ventures each own a portion of the overall Property; the Marina
Land is subject to an easement for the benefit of the Building owner; the
Building is divided into 137 residential condominium units, 160 parking space
condominium units and a separate Inn condominium unit; fifteen of the
condominium units (8 residential and 7 parking) are currently owned by
unrelated third parties resulting in a fractured ownership in the Building; and
the usage of the Building itself is divided between apartment units and an
operating Inn. Due to this unusual structure, an unfamiliar buyer can
reasonably be expected to require an extraordinary amount of time to perform
due diligence before reaching a binding commitment.
Purchase Price Exceeds Appraised Values. Finally, the purchase price to be
paid by the Purchaser exceeds the appraised values established by the two
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independent appraisers, and the Purchaser is prepared to close the purchase of
the Property within thirty days of the approval of the Proposal by the Limited
Partners.
Security Ownership and Voting Thereof.
As of the Record Date, other than trust accounts for the benefit of Mr.
Sullivan's two minor children owning a total of twenty-three (23) Units, the
General Partner and its affiliates owned no Units. See "VOTING SECURITIES AND
PRINCIPAL HOLDERS THEREOF."
Consummation of the Sale.
The material terms of the agreements with the Building Venture and the
Marina Venture for the Purchase and Sale of the Property (the "Purchase
Agreement") have been negotiated between the Purchaser and the General Partner.
Assuming the requisite approval of the Limited Partners is obtained promptly,
the consummation of the Sale is expected to occur during September 1999 and is
required to occur no later than September 30, 1999, unless extended by the
mutual agreement of the parties (the "Closing Date"). See "THE PROPOSAL - Terms
of the Purchase Agreement."
No Appraisal Rights.
If the Sale is approved by Limited Partners owning a majority in interest
of the outstanding Units, dissenting Limited Partners will not have appraisal
rights in connection with the Sale. See "NO APPRAISAL RIGHTS."
Certain Federal and State Income Tax Consequences.
The General Partner expects that the Limited Partners will recognize
taxable gains of approximately $113.00 per Unit from the Sale and liquidation
of the Partnership. The Sale proceeds distributed to the Limited Partners,
together with certain distributions from cash reserves, are expected to exceed
the Limited Partners' income tax liability attributable thereto. The
Partnership estimates that these taxable gains will result in federal and
Maryland taxes payable of approximately $30.00 and $6.00 per Unit,
respectively, for Limited Partners who, assuming a blended mid-range federal
tax rate, acquired their Units in the public offering and have previously
utilized the passive losses and rehabilitation tax credits allocated to them.
Limited Partners who purchased their Units after the rehabilitation tax credit
placed in-service date will have a different result. Limited Partners who have
not utilized all of their suspended passive losses will have more favorable tax
consequences. Limited Partners who have not utilized any of their suspended
passive losses since inception may have a net after tax benefit of $112.00 per
Unit from the Sale and final liquidation, assuming a blended mid-range federal
tax rate. See "CERTAIN FEDERAL AND STATE INCOME TAX CONSEQUENCES OF THE SALE."
Distributions of Net Sale Proceeds.
Net proceeds from the Sale, together with certain cash from operations,
aggregating approximately $475.00 per $1,000 Unit, are expected to be
distributed to the Limited Partners. This will include (i) $450.00 per $1,000
Unit within 30 days after the Closing Date of the Sale, (ii) $6.00 per $1,000
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required to be deposited to Maryland for non-residents as a withholding for
state taxes due and (iii) final distribution of cash from contingent reserves
of up to $19.00 per $1,000 Unit upon liquidation of the Partnership,
approximately six months after the consummation of the Sale.
The General Partner intends to waive any right it may have to receive
distributions of net proceeds from the Sale.
Action by Consent.
Termination of the Consent Solicitation. Consent must be received by mail,
facsimile, telephone or internet before August 31, 1999, at 5:00 P.M. Eastern
Time, unless such date or time is extended for an aggregate of up to an
additional sixty (60) days in the sole discretion of the General Partner or
unless the necessary vote to approve the Proposal is received earlier.
Record Date; Units Entitled to Consent. Limited Partners of record at the
close of business on June 30, 1999 (the "Record Date") are entitled to approve
the Proposal by written Consent. At such date there were outstanding 16,361
Units, each of which will entitle the record owner thereof to one vote.
Purpose of the Action. Written Consent is being solicited to approve the
Proposal.
Solicitation Agent.
The Partnership has retained Georgeson & Company Inc. (the "Solicitation
Agent") to assist in the solicitation of the Consent. Completed, signed consent
cards must be returned to the Solicitation Agent by mail or facsimile before
the Expiration Date. If you have any questions, please call the Solicitation
Agent at 1-800-223-2064.
Vote Required.
The Proposal must be approved by Limited Partners holding a majority in
interest of all outstanding Units.
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ACTION BY CONSENT
General.
This Solicitation Statement is being furnished on behalf of the
Partnership to the Limited Partners of the Partnership in connection with the
solicitation of a Consent by Boston Historic Partners II Limited Partnership,
as the General Partner.
This Solicitation Statement and accompanying consent card are first being
mailed to Limited Partners on or about August 4, 1999.
Matters To Be Considered.
Consent is being solicited for the following Proposal:
o The approval of the sale of substantially all the assets of the
Partnership (the "Sale").
If the Limited Partners approve the Proposal and the Sale is consummated, there
will be approximately $7,775,000 of net proceeds from the Sale, after the
payment of outstanding indebtedness and expenses of the Sale. The following
table sets forth the calculations used in determining the estimated initial
distribution from the net proceeds from the Sale, together with certain cash
from operations, assuming a closing date as of September 30, 1999:
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Net Proceeds Net Cash
From Sale From Total
Operations
Gross Purchase Price $13,550,000
Estimated Transaction Costs (1)
257,750
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Net Sale Proceeds $13,292,250
Repayment of Existing Debt,
including accrued interest (5,518,250)
Estimated Prepayment Penalty (2) (417,075)
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Net Distributable Proceeds from
Sale $ 7,356,925 $ 7,356,925
Estimated Other Available Cash (3) 418,075 418,075
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Net Cash Available Before
State Tax Withholding and
Contingent Reserves $ 7,775,000
Less: State Tax Withholding (SWT) (98,166)
Contingent Reserves (CR) (310,859)
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Net Cash Available After
STW and CR $ 7,365,975
Net Cash Available After
STW and CR, Per Unit 450
Estimated Projected Initial Distribution to Limited Partners
Total Per Unit
Net Cash Available Before State Tax Withholding
and Contingent Reserves (from above) $7,775,000 $475
Less: State Tax Withholding (4) (98,166) (6)
Contingent Reserves (5) (310,859) (19)
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Net Initial Distribution to Limited Partner $7,365,975 $450
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(1) Includes estimated costs of consent solicitations and Sale, which are
anticipated to be paid prior to the initial distribution.
(2) Calculated based on estimate provided by current lender.
(3) Includes Partnership and Property operating cash and cash reserves.
(4) Calculated based on estimate of Maryland taxes due from Limited Partners.
(5) Represents a reserve for costs related to the consent solicitations not
paid prior to the initial distribution and for unanticipated costs related to
the Sale and liquidation of the Partnership. Any unused portion of this reserve
will be distributed upon liquidation of the Partnership.
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Of the $475.00 total potential distribution per $1,000 Unit, approximately
$450.00 per Unit will be distributed within 30 days of the consummation of the
Sale, at closing approximately $6.00 per $1,000 Unit will be required to be
deposited with the State of Maryland as withholding for Maryland non-residents
for state taxes due, and the remaining $19.00 per $1,000 Unit will be retained
to cover contingencies related to the Sale and expenses of the Partnership's
winding up and liquidation. This reserve of up to $19.00 per $1,000 Unit will
be distributed to Limited Partners, to the extent available, upon liquidation
of the Partnership, which is expected to occur within six months of the
consummation of the Sale.
Record Date.
Because the Partnership processes transfers of Units on a quarterly basis,
the close of business on June 30, 1999 has been fixed by the General Partner as
the Record Date for determining the Limited Partners entitled to receive notice
of the solicitation of Consent and to give their Consent to the Proposal. As of
the Record Date, there were 16,361 issued and outstanding Units entitled to
vote held of record by 1,393 holders.
Action by Consent.
Under the terms of the Partnership Agreement, the sale at one time of all
or substantially all of the Partnership's assets requires the approval of a
majority in interest of the Limited Partners. The proposed Sale represents a
sale of substantially all the assets of the Partnership, and therefore requires
such approval. The approval of the sale of substantially all the assets will be
obtained through this solicitation of written Consent of the Limited Partners,
and no meeting of the Limited Partners will be held to vote on these matters.
Consent must be received by August 31, 1999, at 5:00 p.m. Eastern Time,
unless such date or time is extended for an aggregate of up to an additional
sixty (60) days in the sole discretion of the General Partner, or unless the
necessary vote to approve the Proposal is received earlier (the "Expiration
Date"). A vote "for" or "against" the Proposal may be revoked by the person
giving it at any time before the Expiration Date by sending a written notice of
revocation or a later-dated Consent containing different instructions to the
Solicitation Agent before such date. Any written notice of revocation or
subsequent Consent should be sent to the Solicitation Agent at the address that
appears on the back cover of this Solicitation Statement.
In addition to the solicitation by use of the mail, officers, directors
and employees of the General Partner or its affiliates, or the Solicitation
Agent, may solicit Consent in person or by telephone, facsimile or other means
of communication. Such officers, directors and employees will not receive
additional compensation for such services but may be reimbursed for reasonable
out-of-pocket expenses in connection with such solicitation. Arrangements have
been made with custodians, nominees and fiduciaries for the forwarding of
Consent Solicitation materials to beneficial owners of Units held of record by
such custodians, nominees and fiduciaries and the Partnership will reimburse
such custodians, nominees and fiduciaries for reasonable expenses incurred in
connection therewith.
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In addition, the Partnership has hired the Solicitation Agent to assist in
the solicitation of the Consent and will pay an estimated fee of approximately
$27,000. All costs and expenses of the solicitation of Consent, including the
costs of preparing and mailing this Solicitation Statement, will be borne by
the Partnership, whether or not the required Consent is received and the Sale
is consummated. The aggregate expenses anticipated to be incurred by the
Partnership relating to this Solicitation are expected to be approximately
$72,250 and are detailed in the following table:
Filing Fees $ 1,472
Legal Fees 25,000
Accounting Fees 9,000
Solicitation Fees 27,000
Printing and Mailing Fees 9,778
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$ 72,250
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SPECIAL FACTORS
The Purchase Price was negotiated by the General Partner without the
benefit of an independent representative to negotiate on behalf of the Limited
Partners. The General Partner believes that it has fulfilled its fiduciary
obligations to the Partnership and that the Sale is fair and reasonable to the
Limited Partners. Factors for the Limited Partners to consider include:
(i) The Purchase Price was negotiated by the General Partner without the
benefit of an independent committee or representative to negotiate
the terms of the Sale on behalf of the Limited Partners.
(ii) The Property has not been offered for sale on the open market,
resulting in a purchase price that may be lower than could be
obtained from other third party purchasers. Further, the sale of the
separate parcels of the Property together may not result in as high
an aggregate gross sales price as if they were sold individually.
(iii) If the Property is sold, the Partnership will not benefit from
improvements in economic and market conditions, if any, which might
be expected to produce increased cash flow and potentially enhance
the sales price of the Property.
(iv) Limited Partners will not be afforded appraisal rights or
dissenters' rights in connection with the Sale.
THE PROPOSAL
Description of the Partnership
The Partnership was formed on September 29, 1989, for the primary purpose
of acquiring and operating a diversified portfolio of real properties, the
rehabilitation expenses relating to which would qualify as qualified
rehabilitation expenditures under Section 48 of the Internal Revenue Code. The
Partnership currently owns directly and indirectly, 100% of the partnership
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interests in the Building Venture and the Marina Venture. The Partnership
will retain no interests in real property after the Sale. See "SUMMARY - The
Partnership."
The Partnership was structured as a self-liquidating partnership with a
finite life, which would distribute its cash flow during its operating stage
and its proceeds of sale during its liquidating stage, whereupon the
Partnership would be liquidated and dissolved. It was originally anticipated
that the Partnership's properties would be held for approximately seven to ten
years after their acquisition although, depending on economic and market
factors, they could have been held for shorter or longer periods in the
complete discretion of the General Partner. The interests in the Property were
purchased during 1990.
The Purchaser
The Purchaser is a Massachusetts limited liability company and a
Massachusetts corporation in each of which Robert W. Gunn and/or his affiliates
will own an 90% interest and Charles S. Intravaia will own a 10% interest.
Under the limited liability company operations agreement of the Purchaser (the
"LLC Agreement"), Robert W. Gunn and/or his affiliates is the manager of the
Purchaser and has the obligation and responsibility to manage and conduct the
day-to-day business and affairs of the Purchaser. Robert W. Gunn will also be
the President of the corporate Purchaser. Robert W. Gunn and/or his affiliates
will control the Purchaser.
Description of the Property to Be Sold
The real estate owned by both the Building Venture and the Marina Venture
will be sold. See "SUMMARY - The Partnership".
Indebtedness on the Property
The Building Venture is currently financed with a loan originated by the
Aid Association for Lutherans and which amortizes over twenty (20) years and is
payable in full in March 2016, although the lender may call the loan at any
time after February 2006. The interest rate on the loan is 7.85%. The Purchaser
will not assume the existing loan.
In connection with the repayment of the loan, the existing loan documents
provide for a standard prepayment penalty based upon the loss in yield
experienced by the lender in connection with the prepayment of the loan prior
to the maturity date. Based upon the fact that there is estimated total
remaining indebtedness as of September 15, 1999 in the approximate amount of
$5,500,250, the Partnership will pay the lender a prepayment penalty of
approximately $417,075 in order to repay the loan prior to maturity in
connection with the Sale.
Purchaser's Valuation
The Purchase Price for the Property is $13,550,000, which is greater than
the appraised value of the Property as of March 1, 1999 and April 16, 1999. The
Purchase Price was derived through analysis by the Purchaser, taking into
account cash flow of the Property and current and future capital needs of the
Property. See "Background of the Sale" below. The Purchaser considered a number
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of factors, including the preceding twelve months of net operating income
of the Property, the age, condition and location of the Property, and the
significant costs necessary to address deferred maintenance items and to
appropriately manage properties of this age and undertake the capital
improvements necessary to position the Property to meet competition from newer
properties.
The Purchase Price is not subject to adjustment based on the results of
the Purchaser's due diligence investigation. In addition, because the Property
is being sold on an "as is" basis, it is more likely that the Partnership will
receive and retain the full amount of the Purchase Price without adjustment.
The Partnership has a high degree of confidence in the Purchaser's ability to
consummate the Sale, because the Purchaser has completed its due diligence
investigation and has deposited $271,000 earnest money into escrow prior to
consummation of the Sale and has obtained the necessary equity investment and
financing to complete the sale. Another advantage of the Sale is that, because
the offer is for multiple properties, the transaction costs are more favorable
than they might otherwise be if the Property were listed with a broker and sold
in separate sales, and therefore the amount that can be distributed to the
Limited Partners is enhanced. However, for a discussion of certain
disadvantages of the Sale, see "SUMMARY-Fairness of the Sale" and " SPECIAL
FACTORS."
General Partner's Valuation
The General Partner has not prepared a formal valuation with respect to
the proposed Sale. The General Partner has relied on the Independent
Appraisals, the Fairness Opinion, the Capital Needs Analysis, prior interest in
the Property and its general familiarity with and experience in the market
where the Property is located to establish that the Purchase Price is a fair
price for the Property. See "SUMMARY-Fairness of the Sale--Independent
Appraisal" and "SPECIAL FACTORS."
Background Of the Sale
In April 1998, the Partnership decided to conduct a capital needs analysis
to properly reserve for long-term capital needs of the core, shell and systems
of the Building and the dock, land and bulkhead of the Marina. In late 1998, a
capital needs analysis was commenced, and it was completed in the spring of
1999. At approximately the same time an appraisal was undertaken to evaluate
the effect on the value of the Property of significant cash flow needed to be
escrowed and to contemplate exit strategies. A second appraisal was engaged to
independently confirm the first appraisal. Based on the appraisals and the
capital needs analysis, the asset manager indicated it was willing to purchase
the Property and take the risk of the significant capital needs of the
Property. A sale of the Property would provide funds to allow the Partnership
to liquidate within its originally anticipated holding period. Subsequent to
that a fairness opinion was engaged to evaluate the proposed transaction based
on the independent appraisals.
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Failure to Approve the Sale
The General Partner believes that consummation of the Sale is the
preferable course of action at this time. If the Limited Partners fail to
approve the Proposal, however, the Partnership will most likely hold the
Property for the next seven (7) years until the maturity of the existing
mortgage debt. The Partnership might then take advantage of any future property
appreciation through a future sale of the Property or a portion thereof to the
Purchaser or other buyer. There is no assurance that the General Partner could
arrange for an alternative sale of the Property at an appropriate price or on
terms acceptable to the Partnership.
The Partnership may also attempt to refinance the existing mortgage debt
and utilize any loan proceeds to implement certain capital improvements
necessary for the Marina Land, the bulkhead, and other significant items. A
small amount of proceeds may or may not be available to distribute to the
Limited Partners. A refinancing of the existing debt would likely include an
additional prepayment penalty, which may result in a decision to hold the
Property until such prepayment penalty is reduced. If the Partnership were to
refinance, it might have to borrow funds at interest rates that are currently
higher than the rate now paid by the Partnership. Therefore, a refinancing
could also increase the risk of loss of the Property due to any failure to make
increased debt service payments. Also, due to increased debt service payments
and the expected additional time needed to hold the Property due to an
additional prepayment penalty, a refinancing may adversely affect the timing
and amount of any future distributions to Limited Partners.
As indicated in the Partnership's annual reports to Limited Partners and
Form 10-Ks, the annual third party cost of administration of the Partnership
was $245,565 for 1998, $245,895 for 1997 and $244,415 for 1996. These
administrative costs are incurred irrespective of the number of properties
owned by the Partnership and cover the operating and administrative expenses of
the Partnership, including annual audit, preparation of the Partnership's tax
return, asset management, accounting, investor services and public reporting
fees.
The primary disadvantages of the Sale to Limited Partners include (i) a
potential loss of benefits resulting from any improvements in economic and
market conditions, (ii) a potentially lower aggregate gross sales price
resulting from the sale of the Property as a package as opposed to individually
or not offering the Property for sale on the open market and (iii) a lack of
appraisal rights for dissenting Limited Partners.
In the event that the terms of the Sale are not approved, the Partnership
will pay the Purchaser a "breakup fee". See TERMS OF THE PURCHASE AGREEMENT --
"Breakup Fee".
Terms Of the Purchase Agreement
The following is a summary of the material terms of the proposed Purchase
Agreement. THIS SUMMARY DOES NOT PURPORT TO BE COMPLETE, AND REFERENCE IS MADE
TO THE FORM OF PURCHASE AGREEMENT, WHICH WILL BE AVAILABLE UPON REQUEST
PURSUANT TO THE PROCEDURES SET FORTH IN THE SECTION OF THIS SOLICITATION
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STATEMENT ENTITLED "AVAILABLE INFORMATION." The Purchase Agreement has been
executed, but a closing will not take place unless the Limited Partners approve
the Proposal. Capitalized terms used but not defined in this summary of
material terms have the meaning ascribed to them in the form of the Purchase
Agreement.
Structure of the Sale. The Partnership holds majority interests in and
controls two joint venture partnerships which hold title to the Property. In
order to effectuate the Sale, these title-holding entities will transfer title
and deliver the deeds and other documents of transfer to the Purchaser on the
Closing Date.
Purchase Price. The Purchase Price for the Property will be $13,550,000,
payable by the Purchaser on the Closing Date and subject to certain standard
adjustments at closing. The Purchase Price will be paid in cash and is expected
to be paid out of proceeds from third party financing and capital contributions
made to the Purchaser.
Condition of the Property; Review of the Property. The Purchaser will
purchase the Property on an "As Is," "Where-Is" and "With All Faults" basis
with limited representations by the Partnership as to the condition of the
Property or its fitness for any purpose. The Purchaser has undertaken an
extensive due diligence review of the Property. Unlike purchasers in many third
party purchase agreements, the Purchaser has completed its due diligence prior
to execution of the Purchase Agreement, and as such, satisfaction with the due
diligence investigation will not be a condition precedent to closing.
Conditions Precedent to Closing. The obligation of the Purchaser to close
under the Purchase Agreement will be subject to the concurrent approval by the
Limited Partners of the sale of the Property to the Purchaser. There will be
customary closing conditions for real estate transactions, including issuance
of appropriate title policies.
Casualty to or Condemnation of the Property. If the Property or any
portion thereof is damaged by fire or other casualty on or before the Closing
Dates, and the cost of repairing such damage equals or exceeds the greater of
$677,500 or 5% of the Purchase Price, then the Purchaser may elect to terminate
the Purchase Agreement. Further, if all or any material portion of the Property
is taken by eminent domain (or is a subject of a pending or contemplated taking
which has not been consummated) before the Closing Date, then the Purchaser
will have the right to terminate the Purchase Agreement. In the event of a fire
or other casualty where the damage is less than $677,500 or 5% of the Purchase
Price, or if the condemnation does not affect a material portion of the
affected Property, the Purchaser will be required to proceed with the closing
without adjustment to the Purchase Price and will be entitled to receive, as
applicable, an assignment of the proceeds of any insurance in the event of a
fire or other casualty or an assignment of any award for such taking in the
event of a condemnation.
Breakup Fee. If, for any reason whatsoever, except for the inability of
the Partnership to obtain the necessary approval for the Sale from the Limited
Partners, (after Purchaser informs the Partnership that the financing
contingency in the Purchase Agreement has been satisfied), the Partnership
requests to be released from its obligation to sell as set forth herein,
Purchaser may, in its sole discretion, in lieu of requiring specific
performance on the part of the Partnership, release the Partnership from its
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obligations hereunder and accept a one time payment from the Partnership in the
amount of $850,000. If the Partnership is unable to obtain the necessary
approval from the Limited Partners in accordance with the terms of the Purchase
Agreement and Purchaser in its sole discretion does not expect the Partnership
to obtain such approval, the Partnership will pay Purchaser a one time fee in
the amount of $150,000, plus reimbursement of all third party expenses incurred
in connection with the Sale.
Representations and Warranties and Physical Due Diligence Conditions.
Unlike many third party agreements, the Purchase Agreement will not require the
Partnership to make substantial representations and warranties concerning the
condition or operation of the Property, or other similar matters, such as
environmental studies or engineering. The Purchase Agreement also will not
provide the purchaser with a typical period to perform due diligence
investigations at the Property or with a basis on which to refuse to close the
Sale based directly on the outcome of any due diligence investigation since
such due diligence investigations will have been completed prior to execution
of the Purchase Agreement. Further, any representations and warranties made by
the Partnership pursuant to the Purchase Agreement will survive for a period of
only six months after the closing, which is a shorter period of time than that
found in many third party agreements.
Default and Damages. The Purchase Agreement will provide that the
Purchaser's recourse for any uncured breach ("Default") by the Partnership on
or prior to the Closing Date of any matter related to the Purchase Agreement
will be either to (i) seek from the escrow holder the return of the earnest
money deposits made on behalf of the Purchaser and any documents which have
been deposited with the escrow holder on behalf of the Purchaser and to seek
reimbursement from the Partnership for the reasonable and documented
out-of-pocket expenses incurred in connection with the Purchaser's due
diligence investigation (such as environmental and engineering studies) and
other transaction costs, but in no event an amount in excess of 2% of the
Purchase Price, or (ii) seek specific performance of the Partnership's
obligations under the Purchase Agreement.
In the event of the Purchaser's Default with respect to the Purchase, the
Partnership's sole remedy will be to retain, as liquidated damages, the earnest
money deposits for the Property. Further, in the event the Purchaser objects or
fails to cooperate with the release of such earnest money deposit held by the
escrow holder, the Partnership will also have all of the remedies otherwise
available to the Partnership at law or in equity.
Pro-rations and Costs. All items of income and expense for the Property,
such as collected rents and real estate taxes, will be apportioned and adjusted
between the Partnership and the Purchaser to the Closing Date. The Partnership
and the Purchaser will each pay one-half of any third party escrow fees from
the transaction, with the Partnership paying any documentary transfer and stamp
taxes in connection with the recordation of the applicable deed and the
Purchaser paying the premiums and other costs for title insurance, including
any endorsements requested by the Purchaser or its lender.
Comparison to Third Party Agreements. The Purchase Agreement relating to
the Sale contains several provisions favorable to the Seller, which are not
customarily found in combination with each other in many third party
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agreements, including the following: absence of a brokerage fee; a financing
contingency which has been satisfied; the lack of due diligence conditions
precedent to closing; limited representations and warranties; limited
survivability of representations and warranties; and sale of the Property on an
"as is" "where is" and "with all faults" basis.
Indemnification
If a claim is made against the General Partner in connection with its
actions on behalf of the Partnership with respect to the Sale, the General
Partner expects that it will seek to be indemnified by the Partnership with
respect to such claim. The Partnership Agreement provides that, except in the
case of fraud, negligence, misconduct or other breach of fiduciary duty to the
Partnership or any Partner, the General Partner will not be liable, responsible
or accountable in damages or otherwise to the Partnership or any of the Limited
Partners for any liabilities or other obligations imposed on, incurred by or
asserted against the General Partner or the Partnership in any way relating to
or arising out of, or alleged to relate to or arise out of, any action or
inaction on the part of the Partnership or on the part of the General Partner
as a general partner of the Partnership. However, the General Partner will not
be indemnified from any liability, loss, or damage incurred by it in connection
with any claim or settlement involving allegations that any state securities
law or the Securities Act of 1933, as amended, was violated by the General
Partner unless the General Partner is successful in defending such action and
such indemnification is specifically approved by a court of law which has been
advised as to the current position of both the Securities Exchange Commission
and the Massachusetts Division of Corporations regarding indemnification for
violations of securities laws.
As a result of these indemnification rights, a Limited Partner's remedy
with respect to claims against the General Partner relating to its involvement
in the Sale could be more limited than the remedy which might have been
available absent the existence of these rights in the Partnership Agreement. A
successful claim for indemnification would reduce the amount of Partnership
cash available for distributions to the Limited Partners by an amount
equivalent to that paid to the General Partner under such a claim.
ABSENCE OF HISTORIC REHABILITATION TAX CREDIT RECAPTURE
In 1990, 1991 and 1996, Rehabilitation Tax Credits generated by the
Partnership and allocated to the Limited Partners totaled approximately $192.00
per $1,000 Unit. These credits fully vested on December 31, 1996. Therefore,
the proposed Sale transaction will result in no recapture of Rehabilitation Tax
Credits previously allocated to the Limited Partners.
CERTAIN FEDERAL AND STATE INCOME TAX CONSEQUENCES OF THE SALE
General.
The Sale, if approved, will have certain tax implications to the Limited
Partners that must be considered. The following summarizes the material
estimated federal income tax consequences to Limited Partners arising from the
Sale and provides a general overview of certain state income tax
considerations. This summary is based upon the Internal Revenue Code of 1986,
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as amended (the "Code"), Treasury regulations, court decisions and published
positions of the Internal Revenue Service (the "Service"), each as in effect on
the date of this Solicitation Statement. There can be no assurance that the
Service will agree with the conclusions stated herein or that future
legislation or administrative changes or court decisions will not significantly
modify the federal or state income tax law regarding the matters described
herein, potentially with retroactive effect. This summary is not intended to,
and should not, be considered an opinion respecting the federal or state income
tax consequences of the Sale.
A partnership is not a taxable entity and incurs no federal income tax
liability. Instead, each partner is required to take into account in computing
his or her income tax liability, his or her allocable share of the
Partnership's items of income, gain, loss, deduction and credit (hereinafter
referred to as "income or loss") in accordance with the partnership agreement.
If the allocation of income or loss in the partnership agreement does not have
"substantial economic effect" as defined in Code Section 704(b), the law
requires the partnership's income or loss to be allocated in accordance with
the partners' economic interests in the partnership. The distribution of cash
attributable to partnership income is generally not a separate tax event.
For tax purposes, the Partnership will realize and recognize gain or loss
separately for each Property (i.e., for the Property owned by the Building
Venture and the Property owned by the Marina Venture). The amount of gain for
tax purposes recognized with respect to an asset, if any, will be an amount
equal to the excess of the amount realized (i.e., cash or consideration
received reduced by the expenses of the Sale) over the Partnership's adjusted
tax basis for such asset. The amount of loss recognized with respect to an
asset, if any, will be an amount equal to the excess of the Partnership's
adjusted tax basis over the amount realized by the Partnership for such asset.
The "adjusted tax basis" of an asset is its cost (including nondeductible
capital expenditures made by the Partnership at the time of purchase) or other
basis with certain additions or subtractions, including (i) additions for the
cost of capital expenditures such as improvements, betterments, commissions and
other nondeductible charges and (ii) subtractions for depreciation and
amortization.
Each Limited Partner must report his or her allocable share of these gains
and losses in the year in which the Property is sold. Each Limited Partner's
allocable share of any Section 1245 gain, Section 1231 gain, Section 1250 gain
or loss and Partnership net taxable income or loss from operations will be
reflected on his or her applicable Schedule K-1 (as determined in accordance
with the allocation provisions contained in the Partnership Agreement discussed
below).
Under Section 702(a)(3) of the Code, a partnership is required to
separately state, and partners are required to account separately for, their
distributive share of all gains and losses. Accordingly, each Limited Partner's
allocable share of any Section 1231 gain or loss, Section 1245 gain, or Section
1250 gain realized by the Partnership as a result of the Sale would be
reportable by such Limited Partner on his or her individual tax return. Section
1231 gains are those gains arising from the sale or exchange of "Section 1231
Property" which means (i) depreciable assets used in a trade or business or
(ii) real property used in a trade or business and held for more than one year.
Conversely, Section 1231 losses are those losses arising from the sale or
exchange of Section 1231 Property. If Section 1231 losses exceed Section 1231
gains, such losses would be treated as ordinary losses by the Partners.
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To the extent that Section 1231 gains for any taxable year exceed certain
Section 1231 losses for the year, subject to certain exceptions (such as
depreciation recapture, as discussed below), such gains and losses will be
treated as long-term capital gains. However, Section 1231 gains will be treated
as ordinary income to the extent of prior Section 1231 losses from any source
that were treated as ordinary in any of the previous five years.
Under Sections 1245 and 1250 of the Code, a portion of the amount allowed
as depreciation expense with respect to Section 1231 Property may be
"recaptured" as ordinary income upon sale or other disposition rather than as
long-term capital gains ("Section 1245 gains" and "Section 1250 gains,"
respectively). It is anticipated that the Building will be sold at a gain and
the Marina will be sold at a loss. The Partnership expects that the Building
and the Marina will each be treated as Section 1231 Property and that a portion
of any gain realized will be treated as either Section 1245 gain or Section
1250 gain.
The Partnership Agreement provides that distributions from the Sale will
be made:
(i) First, to each Limited Partner in the amount of such Limited
Partner's Adjusted Capital Contribution (i.e., $1,000 per Unit);
(ii) Second, to each Limited Partner in an amount equal to the
greater of: (a) a cumulative, noncompounded annual return on such Limited
Partner's average After Credit Invested Capital at a percentage rate equal
to 8.5% plus such Limited Partner's Early Investor Annual Percentage
Return, if any; or (b) a cumulative, noncompounded annual return on such
Limited Partner's average Adjusted Capital Contributions at a percentage
equal to 6.0% plus such Limited Partner's applicable Early Investor Annual
Percentage Return, if any; and
(iii) Finally, the balance, if any, 85% to the Limited Partners and
15% to the General Partner.
The General Partner expects that the Limited Partners will recognize
taxable gain from the Sale and final liquidation of approximately $242.00 per
Unit. Syndication costs in the amount of $129.00 per Unit will reduce the
amount of gain reportable by the Limited Partners. Actual gain will be
allocated among the Partners in proportion to the amount of Sale proceeds
distributed to them. Any passive losses, which have been suspended from this or
other passive investments, may be available to reduce this gain. The
Partnership's accountants have estimated that, for Limited Partners who have
not utilized prior Partnership passive activity losses to offset passive
activity income from other sources, approximately $142.00 per Unit in suspended
passive losses will be available from the Partnership. The expected
distribution to the Limited Partners from net proceeds from the Sale and
certain cash from operations, together with the planned distribution upon
liquidation, is anticipated to be approximately $475.00 per Unit and is
expected to exceed the Limited Partners' income tax liability attributable
thereto of Limited Partners who acquired their Units in the public offering.
The Partnership anticipates that approximately $30.00 per Unit in federal
income taxes (a net after tax benefit of approximately $112.00 per Unit for
those Partners who have not yet utilized any of their suspended passive losses
from the Partnership) may be incurred as a result of the Sale and liquidation
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by Limited Partners who acquired their Units in the public offering, as
reflected in the following table, which assumes that a Limited Partner has a
mid-range federal income tax rate of 31%.
Gain Estimated
Per Unit Federal Tax
Taxed at a 31% federal rate $ 34.00 $ (10.00)
Taxed at a 25% federal rate $ 79.00 $ (20.00)
-- -------- ---------
Total (without regard to suspended passive
losses) $ 113.00 $ (30.00)
Potential tax benefit from suspended passive
losses of $457.00 at 31% $ 142.00
------- -- ---------
Total potential net tax benefits (including
suspended passive losses) $ 112.00
=========
LIMITED PARTNERS SHOULD CONSULT THEIR OWN TAX ADVISORS REGARDING THE
SPECIFIC INCOME TAX CONSEQUENCES OF THE SALE TO THEM, INCLUDING THE
APPLICABILITY AND EFFECT OF FEDERAL, STATE, LOCAL AND FOREIGN TAX LAWS.
Capital Gains.
Net long-term gain on the Sale of the Property is less than the total
depreciation taken during the holding period. Therefore, all the gain that is
not taxable at ordinary income tax rates (recapture) will be taxed at the
federal level at the 25% rate.
Passive Loss Limitations.
Limited Partners who are individuals, trusts, estates, or personal service
corporations are subject to the passive activity loss limitation rules. A
Limited Partner's allocable share of Partnership income or loss is treated as
derived from a passive activity, except to the extent of the Partnership's
portfolio income. Portfolio income includes such items as interest and
dividends. A Limited Partner's allocable share of any Partnership gain realized
on the Sale will be characterized as passive activity income, and the
liquidation of the Partnership (termination of a passive activity in a fully
taxable event) will permit the deduction of any previously deferred passive
losses, if any, allocated to the Limited Partners.
Certain State Income Tax Considerations.
Because each state's tax law varies, it is impossible to predict the tax
consequences to the Limited Partners in all the state jurisdictions in which
they are subject to tax. Accordingly, the following is a general summary of
certain common (but not necessarily uniform) principles of state income
taxation. State income tax consequences to each Limited Partner will depend
upon the provisions of the state tax laws to which the Limited Partner is
subject. The Partnership will generally be treated as engaged in business in
Maryland, and the Limited Partners would generally be treated as doing business
in Maryland and therefore subject to tax in Maryland. Most states modify or
adjust the taxpayer's federal taxable income to arrive at the amount of income
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potentially subject to state tax. Resident individuals generally pay state tax
on 100% of such state-modified income, while corporations and other taxpayers
generally pay state tax only on that portion of state-modified income allocated
to the taxing state under the state's own apportionment and allocation rules.
The State of Maryland will require the Partnership to withhold approximately
$6.00 per Unit on the gain associated with the Sale for non-Maryland residents.
All Limited Partners will be required to file a Maryland State tax return.
Tax Conclusions.
The discussion set forth above is only a summary of the material federal
income tax consequences to the Limited Partners of the Sale and of certain
state income tax considerations. It does not address all potential tax
consequences that may be applicable to the Limited Partners and to certain
other categories of Limited Partners, such as non-United States persons,
corporations, insurance companies, subchapter S corporations, partnerships or
financial institutions. It also does not address local or foreign tax
consequences of the Sale. ACCORDINGLY, LIMITED PARTNERS SHOULD CONSULT THEIR
OWN TAX ADVISORS REGARDING THE SPECIFIC INCOME TAX CONSEQUENCES OF THE SALE TO
THEM, INCLUDING THE APPLICABILITY AND EFFECT OF FEDERAL, STATE, LOCAL AND
FOREIGN TAX LAWS.
DISTRIBUTIONS
The Partnership has not made any distributions to be Limited Parties since
its inception.
NO APPRAISAL RIGHTS
If Limited Partners owning a majority of the outstanding Units on the
Record Date consent to the Proposal, such approval will bind all Limited
Partners. The Partnership Agreement and the Delaware Uniform Limited
Partnership Act, under which the Partnership is governed, do not give rights of
appraisal or similar rights to Limited Partners who dissent from the consent of
the majority in approving or disapproving the Proposal. Accordingly, dissenting
Limited Partners do not have the right to have their Units appraised or to have
the value of their Units paid to them if they disapprove of the action of a
majority in interest of the Limited Partners.
LACK OF ESTABLISHED
MARKET FOR THE UNITS
The General Partner has no knowledge of a formal, established public
trading market for the Units and believes that secondary sales activity for the
Units is limited and sporadic. Due to the fact that the Units are not listed on
any exchange or quoted on NASDAQ, privately negotiated sales and sales through
intermediaries are the primary means available to a Limited Partner to
liquidate an investment in the Units. While some information is available
through private publications regarding the prices at which such secondary sales
transactions in the Units have been made, these publications expressly disclaim
the accuracy and reliability of the information regarding such trades.
Accordingly, the General Partner does not believe that such information is of
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comparative value in analyzing the distributions to be made in connection with
the Sale. Other than sales of a total of 23 Units to trusts for Mr. Sullivan's
minor children, no sales of Units were made by or to affiliates of the
Partnership during the last two years.
VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF
On the Record Date, there were 16,361 Units issued and outstanding, and
entitled to vote held of record by 1,393 Limited Partners. At the Record Date,
trusts for the benefit of Mr. Sullivan's minor children owned 23 Units.
Otherwise, the General Partner and its affiliates owned no Units. Other than
Spiegel Corporation, no person is known by the Partnership to be beneficial
owner of more than 5% of the Units.
YEAR 2000 INFORMATION
The Partnership has assessed the potential impact of the "Year 2000"
computer systems issue on its operations. If the Sale is consummated, the
Partnership will liquidate prior to January 1, 2000, and no Year 2000 issues
will be presented.
In the event that the Sale is not consummated, the Partnership has relied
on the efforts of GFI, which has been retained by the Partnership to manage the
business and financial operations of the Property, to resolve any potential
Year 2000 issues. In the course of providing property management services to
the Partnership, GFI has retained a third party consultant to modify all
applicable software to provide for a 4-digit year field. The General Partner
believes that the modifications undertaken by GFI are sufficient to address any
potential Year 2000 problems and that the impact of the Year 2000 issue will
not materially affect the Partnership's operating results or financial
condition if the Sale is not consummated. Accordingly, neither GFI nor the
Partnership has taken any further actions with respect to the Year 2000 issue.
VOTING PROCEDURES
Each Limited Partner is entitled to one (1) vote for each Unit owned of
record by such Limited Partner on the Record Date. Approval of the Proposal
requires the affirmative consent of Limited Partners holding a majority in
interest of the Units. A duly executed consent card on which a consent or an
indication of withholding consent is not indicated will be deemed a consent to
the Proposal. A vote "for" or "against" the Proposal may be revoked by written
notice of revocation or by a later-dated consent containing different
instructions at any time on or before the Expiration date.
This Solicitation Statement is accompanied by a separate consent card.
Consent cards should be completed, signed and returned by the Expiration to the
Solicitation Agent at the address specified below or by facsimile transmission
of the front and back of the card to the number specified below. A
self-addressed, prepaid envelope for return of the consent card is included
with this Solicitation Statement.
AVAILABLE INFORMATION
The Partnership is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and, in
accordance therewith, files reports, statements, and other information with the
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Securities and Exchange Commission (the "Commission"). Such reports, statements
and other information can be inspected and copied at the public reference
facilities maintained by the Commission at 450 Fifth Street, N.W., Washington,
D.C. 20549, and should be available at the Commission's Regional offices at 500
West Madison, 14th Floor, Chicago, IL, 60661-2511 and 7 World Trade Center,
13th Floor, New York, NY, 10048. Copies of such material can be obtained from
the Public Reference Section of the Commission 450 Fifth Street, N.W.,
Washington, DC, 20549, at prescribed rates. Such material may also be accessed
on the World Wide Web through the Commission's Internet address at
http://www.sec.gov.
The following documents, which have been filed with the Commission,
contain important information about the Partnership and have previously
provided to Limited Partners:
(i) The Partnership's Annual Report on Form 10-K as amended and restated
for the year ended December 31, 1998 (Commission File No. 33-31778)
(the "Form 10-K")
(ii) The Partnership's Quarterly Report on Form 10-Q for the fiscal
quarter ended March 31, 1999 (Commission File No. 33-31778) (the
"Form 10-Q")
The Commission permits the Partnership to "incorporate by reference"
information into this Solicitation Statement, which means that the Partnership
can disclose important information to Limited Partners by referring them to
another document filed separately with the Commission. The information
incorporated by reference is deemed to be part of this Solicitation Statement,
except for any information superceded by information in this Solicitation
Statement.
The Partnership hereby incorporates by reference the Form 10-K, all
reports filed pursuant to Section 13(a) or 15(d) of the Exchange Act that it
may file or has already filed with the Commission between December 31, 1998 and
the date of action by Consent, other than those delivered in connection
herewith, and the financial information contained in Part I of the Form 10-Q.
A Limited Partner of the Partnership may obtain from the Partnership or
the Commission any of the documents incorporated by reference. Documents
incorporated by reference are available from the Partnership without charge,
excluding all exhibits unless such exhibits have been specifically incorporated
by reference in the document incorporated by reference in this Solicitation
Statement. Limited Partners may obtain documents incorporated by reference in
this Solicitation Statement, or a copy of the Partnership Agreement or the form
of Purchase Agreement, by written or oral request, by first class mail or other
equally prompt means within one business day of receipt of such request from
Georgeson & Company, Inc., Wall Street Plaza, 88 Pine Street, New York, NY
10005.
21
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APPENDIX A
HISTORIC PRESERVATION PROPERTIES
1990 L.P. Tax Credit Fund
CONSENT OF LIMITED PARTNER
THIS CONSENT IS SOLICITED BY AND ON BEHALF OF HISTORIC PRESEVATION PROPERTIES
1990 L.P. TAX CREDIT FUND (THE "PARTNERSHIP") BY BOSTON HISTORIC PARTNERSHIP,
II, THE GENERAL PARTNER OF THE PARTNERSHIP. The General Partner recommends a
vote "FOR" the Proposal, as defined in the accompanying Consent Solicitation
Statement. A vote "FOR" the Proposal also will constitute your consent to all
actions necessary to consummate all transactions with respect to the Proposal
contemplated by the Consent Solicitation Statement. All capitalized terms used
herein without definition have the meanings assigned to them in the Consent
Solicitation Statement.
THIS CONSENT WILL BE RECORDED IN ACCORDANCE WITH THE INSTRUCTIONS BELOW. IF
NO INSTRUCTIONS ARE INDICATED, YOU WILL BE DEEMED BY YOUR SIGNATURE BELOW TO
HAVE CONSENTED TO THE PROPOSAL.
THE GENERAL PARTNER RECOMMENDS A VOTE FOR THE PROPOSAL.
PLEASE MARK THE APPROPRIATE BOX WITH RESPECT TO THE PROPOSAL:
FOR AGAINST ABSTAIN
--- ------- -------
Approval of the Sale of the Property
Approve the Sale of the Property [_] [_] [_]
<PAGE>
The undersigned acknowledges receipt from the General Partner of the Consent
Solicitation Statement dated August 2, 1999 pertaining to the Proposal.
Dated: ________, 199_
Signature
Signature (if held jointly)
Title
Please sign exactly as name appears hereon. When Units are held by joint
tenants, both should sign. When signing as an attorney, executor,
administrator, trustee or guardian, please state your full title. If a
corporation, please sign in full corporate name by President or other
authorized officer. If a partnership, please sign in partnership name by an
authorized person.
PLEASE MARK, SIGN, DATE AND RETURN THIS CONSENT, PRIOR TO 5:00 P.M. ON August
31, 1999 (UNLESS SUCH TIME IS EXTENDED PURSUANT TO THE CONSENT SOLICITATION
STATEMENT), BY FACSIMILE TO 212-440-9009 OR BY MAIL, USING THE ENCLOSED
PRE-PAID ENVELOPE, TO Georgeson & Co. Inc., Wall Street Station, P.O. Box 1100,
New York, NY 10268-1008. IF YOU HAVE ANY QUESTIONS OR NEED ASSISTANCE IN
FILLING OUT THIS CONSENT, PLEASE CALL THE SOLICITATION AGENT AT 1-800-233-2064.
2
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HISTORIC PRESERVATION PROPERTIES 1990 L.P.
TAX CREDIT FUND
August 2, 1999
Dear Limited Partner:
The General Partner of Historic Preservation Properties 1990 L.P. Tax Credit
Fund encloses herewith for your review a proposal described in the enclosed
consent Solicitation Statement and presented on the attached ballot.
The Proposal is to approve the sale of all of the Partnership's property for a
total sale price of $13,550,000.
If the Proposal is approved by a majority in interest of the Limited Partners,
then each Limited Partner will receive approximately $475 per Unit, including
$450 per Unit within 30 days after the closing of sale and approximately $19
per Unit from contingent reserves within six months thereafter. In addition, $6
per Unit will be deposited as required for Maryland state taxes.
If a majority in interest of Limited Partners approves the Proposal, then all
Limited Partners will receive the sale and liquidation proceeds as described
above.
Refer to the Consent Solicitation Statement for a complete discussion of the
circumstances surrounding this Proposal and the benefits and risks of approval
or disapproval.
Please complete the attached ballot or vote by one of the alternative methods
described on the back of this letter as soon as you have reviewed the enclosed
material, but in no event later than August 31, 1999.
Respectfully submitted,
Terrence P. Sullivan
General Partner
