<PAGE>
SCHEDULE 14A INFORMATION
Proxy 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 Section 240.14a-11(c) or Section 240.14a-12
DIVALL INCOME PROPERTIES 3 LIMITED PARTNERSHIP
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(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(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:
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(2) Aggregate number of securities to which transaction applies:
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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):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[X] Fee paid previously with preliminary materials.
[_] 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: $680.00
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(2) Form, Schedule or Registration Statement No.: Schedule 14A
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(3) Filing Party: Divall Income Properties 3 Limited Partnership
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(4) Date Filed: April 2, 1998
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<PAGE>
DIVALL INCOME PROPERTIES 3 LIMITED PARTNERSHIP
101 W. 11th Street, Suite 1110
Kansas City, Missouri 64105
- --------------------------------------------------------------------------------
REQUEST FOR CONSENT OF LIMITED PARTNERS
- --------------------------------------------------------------------------------
Dear Limited Partner:
As discussed more fully in the attached Consent Statement, we are
soliciting the consent of Limited Partners to a sale of all the Partnership's
remaining properties and a subsequent liquidation of the Partnership. We believe
that a liquidation of the Partnership is in the best interests of the Limited
Partners. Please read the Consent Statement carefully before filling out the
attached Consent Card.
Holders of more than 50% of the outstanding Partnership units must approve
the sale of all or substantially all of the Partnership's assets. Only Limited
Partners of record at the close of business on April 10, 1998 will be entitled
to notice of, and to participate in, the vote. Failure of a Limited Partner to
return a Consent Card will constitute a vote AGAINST the proposed sale.
If Limited Partners holding a majority of outstanding Partnership interests
do approve of the sale, we will aggressively pursue the final sale of the
properties on the terms described in the Consent Statement.
Your consent is important. Please sign and date the enclosed GRAY Consent
Card and return it promptly in the enclosed return envelope. You may revoke your
Consent in writing.
Very truly yours,
THE PROVO GROUP, INC.,
as General Partner of
DIVALL INCOME PROPERTIES 3 LIMITED
PARTNERSHIP
April 15, 1998
<PAGE>
DIVALL INCOME PROPERTIES 3 LIMITED PARTNERSHIP
101 W. 11TH ST. SUITE 1110
KANSAS CITY, MISSOURI 64105
CONSENT STATEMENT
April 15, 1998
This Consent Statement is being furnished to holders of limited partnership
interests ("Limited Partners") in DiVall Income Properties 3 L.P., a Wisconsin
limited partnership ("Partnership"), in connection with the solicitation of
written consents by the Partnership to approve a sale of all of the
Partnership's properties either on an individual or group basis (the "Proposed
Transaction"), and to subsequently liquidate the Partnership. No meeting will
be held in connection with this solicitation of consents from the Limited
Partners. To be counted, a properly signed GRAY Consent Card must be received
by the independent voting tabulator Resource/Phoenix (the "Tabulator") at 2401
Kerner Blvd., San Rafael, California 94901 on or before May 31, 1998. Failure
of a Limited Partner to return a Consent Card will constitute a vote AGAINST the
Proposed Transaction.
This Consent is solicited by the General Partner, The Provo Group, Inc., on
behalf of the Partnership. Solicitation of consents other than by mail may be
made by telephone, facsimile or in person by regularly employed officers, agents
and employees of the General Partner, who will not receive additional
compensation for their efforts. The total cost of soliciting consents will be
borne by the Partnership.
Only Limited Partners of record at the close of business on April 10, 1998
will be entitled to vote by consenting to the Proposed Transaction. A Limited
Partner may revoke its Consent Card at any time prior to May 31, 1998, by
mailing a properly executed Consent Card bearing a later date or by mailing a
signed, written notice of revocation to the attention of the General Partner or
the Tabulator. Revocation of a Consent Card will be effective upon receipt by
the General Partner or the Tabulator of either (i) an instrument revoking the
Consent Card or (ii) a duly executed Consent Card bearing a later date. This
Consent Statement and Consent Card were first mailed to Limited Partners on or
about April 15, 1998.
INTRODUCTION
General Information
If the Proposed Transaction is consummated and all of the Partnership's
properties are sold, the consideration paid will be at least $3,400,000. This
minimum sales price represents approximately 90% of the cumulative appraised
value of all Partnership properties, before deducting any expenses incurred to
close the transaction. Although the General Partner intends to sell all the
properties in a single sale, if the General Partner believes it is in the best
interest of the Limited Partners, the properties may be sold individually or in
any combination provided that the total sales price for the
<PAGE>
properties included in the transaction equals or exceeds 90% of the aggregate
appraised value for such properties. See "Description of the Proposed
Transaction -- Purchase Price."
The Partnership's Amended and Restated Agreement of Limited Partnership
(the "Partnership Agreement") provides in Section 10.2 that the General Partner
may not sell substantially all of the properties without the approval of Limited
Partners holding more than 50% of the Partnership interests ("Units"). The total
number of outstanding Partnership interests as of December 31, 1997 was
17,102.52 Units. Each Unit is entitled to one vote. There is no established
trading market for the Units.
As of December 31, 1997, the Partnership had approximately 1,093 Limited
Partners. According to filings with the Securities and Exchange Commission, The
Engineers Joint Pension Fund owns 8.77 percent of the Partnership's outstanding
Units. To the best knowledge of the General Partner, no other person or group
owns more than five percent of the Partnership's outstanding Units. Neither the
General Partner, nor any of its officers or directors are the beneficial owners
of any Partnership Units.
Forward-Looking Statements
This Consent Statement contains forward-looking statements. Discussions
containing such forward-looking statements may be found in the material set
forth under "Description of the Proposed Transaction" and "Pro Forma Unaudited
Financial Data" as well as within the Consent Statement generally. In addition,
when used in this Consent Statement, the words "believes," "anticipates,"
"expects" and similar expressions are intended to identify forward-looking
statements; however, not all forward-looking statements will contain such
expressions. Such statements are subject to a number of risks and uncertainties.
Actual results or events in the future could differ materially from those
described in the forward-looking statements as a result of the inability of the
general partner to find a suitable purchaser for the properties, the inability
to agree on an acceptable purchase price or contract terms, a decrease in the
financial performance of the properties, the discovery of an environmental
condition impacting one or more of the properties, an economic downturn in the
markets in which the properties are located and other factors set forth in this
Consent Statement. The partnership undertakes no obligation to publicly release
any revisions to these forward-looking statements that may be made to reflect
any future events or circumstances.
DESCRIPTION OF THE PROPOSED TRANSACTION
---------------------------------------
Background and Recommendation of the General Partners
The General Partner is currently marketing the Partnership's properties
("Properties"), reviewing both aggregate sales possibilities and single-property
sales to determine the most profitable and efficient manner to sell the
Properties. While the General Partner's marketing efforts have not been
aggressive to date, the General Partner intends to increase its efforts upon a
majority vote in favor of the Proposed Transaction. To that end, the General
Partner retained Valuation Associates
2
<PAGE>
Real Estate Group of Orlando, Florida ("Valuation Associates") to conduct an
appraisal of the Properties, which appraisals were completed on February 4, 1998
and reflect the value of $3,775,000.
Valuation Associates was selected to appraise the Properties by the General
Partner because of its reputation in the industry and due to satisfaction with
prior engagements of the firm. The General Partner and Valuation Associates have
no other current or ongoing relationships. Valuation Associates has been in the
business of the valuation of restaurant and other real estate properties for
over 30 years. Its staff includes Members of the Appraisal Institute (MAI) and
have other qualifications such as the SRPA designation and various state
certifications. Many members of its staff also hold advanced degrees in finance,
economics, real estate and restaurant and hospitality management. The market
value appraisals of the leased properties provided by Valuation Associates
follow the Uniform Standards of Professional Appraisal Practice, and exclude
wall coverings, tenant improvements and furniture, fixture and equipment. The
appraisal process included inspections of the sites and buildings, gathering and
analysis of comparable sales, rents and construction costs, and evaluation of
the leased properties under the "income approach," utilizing the discounted cash
flow technique.
The General Partner believes the Proposed Transaction is in the best
interests of the Limited Partners and strongly recommends a vote in favor of the
Proposed Transaction because: (1) the Partnership's current size limits
operating efficiencies; (2) potential for a decrease in property values; (3)
improved conditions for the sale of restaurant properties; and (4) the lack of
an established trading market for the Units. See "Description of the Proposed
Transaction -- Advantages to the Limited Partners."
Description of the Properties
All of the Properties involve restaurant tenants located at the places set
forth in the following table.
<TABLE>
<CAPTION>
Acquisition Date Tenant Location Appraised Value
- ---------------- ------ -------- ---------------
<C> <S> <C> <C>
08/14/90 Hardee's 2450 E. Layton Ave. $ 870,000
St. Francis, WI
09/11/90 Applebee's 2101 Greentree Rd. $1,100,000
Pittsburgh, PA
02/05/91 Hardee's 9505 S. 13th St. $ 820,000
Oak Creek, WI
07/01/91 Denny's 9060 Arapahoe Rd. $ 260,000
Englewood, CO
04/28/92 Denny's 4375 Sinton Rd. $ 725,000
Colorado Springs, CO
----------
Total $3,775,000
</TABLE>
3
<PAGE>
All five of the Properties are owned in fee simple and are leased under 20
year terms. All operating leases are triple net which require the tenants to pay
all property operating costs, including maintenance, repairs, utilities,
property taxes, and insurance. All leases contain percentage rent provisions
which require the tenant to pay a specified percentage (3% to 7%) of gross sales
above a threshold amount. In the opinion of the General Partner, each of the
Properties is adequately covered by insurance.
Terms and Consideration
If the Proposed Transaction is for all of the Properties, the consideration
will be at least $3,400,000 ("Minimum Price"), before deducting all closing
expenses, commissions, legal fees and other necessary expenses, the sum of which
is estimated at 6% of the final sales price. Any potential buyer ("Buyer") will
agree, subject to the terms and conditions set by the Partnership in its bid
package, to acquire either (i) all the Properties set forth above for an
aggregate purchase price equal to at least the Minimum Price; or (ii) less than
all the Properties for a purchase price for the Properties being sold at least
equal to 90% of the cumulative sum of the appraised value for such Properties.
The General Partner intends to sell the Properties under a closed bid
process. Such a process will include identification of target purchasers with
proven financing ability and performance of certain evaluations of the
Properties, such as environmental testing. Bid packages will be sent to no less
than 6 potential purchasers. Potential purchasers will be requested to sign
confidentiality agreements to safeguard the Partnership's confidential and
proprietary information. Sealed bids will be requested. Each bid must be all
cash, completely unconditional and accompanied by a substantial deposit.
If the Proposed Transaction is approved, the General Partner intends to
conduct the sale in an aggressive and efficient manner, resulting in timely
distributions to Limited Partners. Accordingly, the General Partner has
established the following time line goals for completion of the Proposed
Transaction:
<TABLE>
<CAPTION>
<S> <C>
May 31, 1998 Deadline for receipt of Consent Cards
June 15, 1998 Send bid packages to prospective purchasers
July 15, 1998 Deadline for receipt of bid proposals
August 31, 1998 Closing of Proposed Transaction
November 15, 1998 Final Distribution to Limited Partners
</TABLE>
The foregoing are the General Partner's goals for and estimates of the time
required for each step of the Proposed Transaction. Various delays may be
encountered which could result in a later closing date or distribution date.
Three of the Partnership's leases contain rights of first refusal, allowing
lessees to match any purchase price within 30 days of notice. Under the schedule
detailed above, these rights are not expected to have a significant impact on
the timing of the Proposed Transaction.
4
<PAGE>
The General Partner will attempt to sell the Properties on the most
favorable terms that the General Partner is able to negotiate, but in no event
will the General Partner accept a sale price for a group sale of all of the
Properties which is less than the Minimum Price nor a sales price for a sale of
less than all of the Properties which is less than 90% of the cumulative
appraised value of those Properties. Note that in a group sale of two or more
Properties, certain individual Properties may be sold for less than 90% of their
appraised value if other Properties in the group can be sold at a high enough
price to meet the cumulative minimum of 90% of appraised value of all such
Properties.
Certain fees, costs and expenses will be incurred by the Partnership in the
proposed sale, including appraisal fees, title insurance fees, survey fees,
legal fees, brokerage and disposition fees or commissions, and the like. The
General Partner estimates such expenses will constitute approximately 6% of the
total sales price.
Advantages to the Limited Partners
Lack of Operating Efficiency. At its inception, the Partnership owned and
managed nine properties. As of February 28, 1998, the Partnership had disposed
of all but five of those properties, with a cumulative appraised value of
$3,775,000. See "Description of the Properties." At its current size, the
Partnership no longer benefits from the management efficiencies that occur when
operating multiple properties. The Partnership's expenses have not decreased in
proportion to the number of properties sold and the resulting decrease in net
cash flows from operations. Certain expenses of the Partnership, such as audit
fees, the contractual minimum management fees, tax return and K-1 preparation,
and securities law compliance fees, are relatively fixed and do not vary with
the number of properties owned. Consequently, the General Partner believes that
the Proposed Transaction would provide the most profitable and efficient manner
to distribute the Partnership's value to the Limited Partners.
Maximizing Value. The General Partner believes that the Proposed
Transaction will maximize the Partnership's realization of value in the
Properties. The Properties are currently leased under 20 year leases, with
remaining lease terms between 9-14 years. The remaining terms of the Leases are
one of the primary factors that a prospective buyer will evaluate in pricing the
Properties. As the leases approach maturity, prospective buyers are likely to
attribute a greater discount to the value of the Properties and, therefore, if
the Partnership continues to hold the Properties, the General Partner believes
that the Properties' fair market value may decrease.
Improved conditions for the sale of restaurant properties. As the economic
well-being of consumers has increased as a result of full employment and strong
financial markets, restaurants have seen increased customer traffic. As a
result, in many real estate markets, prices for restaurant properties have been
increasing. In addition, the low interest rate environment has resulted in
improved values for "triple net" leased properties, the value of which generally
move inversely with interest rates.
Lack of an established trading market. There is currently no active or
established trading market for Partnership Units. The Proposed Transaction would
provide an efficient and cost effective manner for Limited Partners to realize
the value of their Units without having to comply with the conditions and
restrictions of selling its Units individually. The General Partner believes
that the
5
<PAGE>
Proposed Transaction is the most attractive opportunity for the Limited Partners
to obtain the value of their Units because Properties will be sold in a
competitive bid process. Selling Units individually may require selling at a
price below the appraised value to attract a buyer for an illiquid investment.
The General Partner also believes that the Proposed Transaction is likely to
result in a higher value to Limited Partners than a tender offer for Units,
because such tender offers usually reflect a substantial discount for lack of
marketability of the Units and the profit requirements of the offeror.
Disadvantages to Limited Partners
While the General Partner believes that the Proposed Transaction would be
in the best interests of the Limited Partners, each Limited Partner should
consider the following factors in evaluating the Proposed Transaction. Upon the
completion of the liquidation, Limited Partners will no longer receive
distributions of cash flows from operations since the Partnership will no longer
be operating the Properties. However, Limited Partners will receive a
distribution of the net proceeds from the sale of Properties, after deduction of
certain expenses and fees as described above. Limited Partners will be subject
to capital gains taxes to the extent the sales price per Unit exceeds the
Limited Partner's adjusted tax basis in each Unit. Finally, Limited Partners
will not benefit from future appreciation, if any, in the value of the
Properties if the Properties are sold.
Advantages to the General Partner
The Permanent Management Agreement ("PMA") and the amended Partnership
Agreement both provide for the General Partner to receive a 3% commission
("Disposition Fee") on the sale of any Partnership properties if it provides a
substantial portion of the services in the sales effort. While eventually all
Properties will be sold, consummation of the Proposed Transaction may allow the
General Partner to collect such fees earlier than it might otherwise if the
Partnership remained an ongoing concern, but conversely eliminates future
management fees to the General Partner following liquidation of the Partnership.
FEDERAL INCOME TAX CONSEQUENCES OF THE PROPOSED TRANSACTION
The following is a summary of the material Federal income tax consequences
which may affect a Limited Partner resulting from the Proposed Transaction. This
summary is not intended as a substitute for careful tax planning, and
consequences may vary according to each Limited Partner's individual
circumstances.
This summary is based on the Internal Revenue Code of 1986, as amended
("Code"), as well as currently existing regulations thereunder, judicial
decisions and current administrative rules and practices. The following
discussion does not discuss the impact, if any, state or local taxes may have on
the Proposed Transaction. Furthermore, no assurance can be given as to the
accuracy or completeness of this summary.
6
<PAGE>
Taxation of Partnerships in General
An entity classified as a partnership for federal income tax purposes is
not subject to federal income tax. Rather, income or loss "flows through" the
partnership to the partners, who are taxed individually on their allocable
shares of partnership income, gain, loss or deductions. However, the partnership
is a tax reporting entity that must file an annual return disclosing the
partnership's gain or loss. The tax treatment of partnership items of taxable
income or loss is generally determined at the partnership level. Each partner is
required to treat partnership items on its return in a manner consistent with
the treatment of such items on the partnership return and may be penalized for
intentional disregard of the consistency requirement. Each partner must account
for its allocable share of partnership taxable income or loss in computing its
income tax, whether or not any actual cash distribution is made to such partner
during its taxable year.
Basis of Partnership Interests
A partner's basis in its unit is equal to its cost for such unit, reduced
by its allocable share of partnership distributions, taxable losses and
expenditures of the partnership not deductible in computing its taxable income
and not properly chargeable to its capital account, and increased by its
allocable share of partnership taxable profits, income of the partnership exempt
from tax and additional contributions to the partnership. For purposes of
determining basis, an increase in a partner's share of partnership liability is
treated as a contribution of money by that partner to the partnership.
Conversely, a decrease in its share of partnership liability is treated as
distribution of money from the partnership. Generally, a partner may not take
recourse liabilities into account in determining its basis except to the extent
of any additional capital contribution it is required to make under the
partnership agreement. However, if a partnership asset is subject to a liability
for which no partner has any personal liability, in general, the partner's
allocable share of the nonrecourse liability will be taken into account to
determine basis.
Effect of the Proposed Transaction
The Proposed Transaction will be a taxable event to the Limited Partners.
Gain or loss on a sale generally will be measured by the difference between the
amount realized and the adjusted basis of the assets that are sold. Generally
the amount realized is the sum of any money received, plus the fair market value
of any property received, plus the amount of liability from which the
partnership is discharged as a result of the sale. The adjusted basis of
property is generally the initial tax basis less deductions, allowed or
allowable, for depreciation.
A substantial portion of the assets to be sold, including building, land
and equipment, which were held for more than one year are expected to be treated
as "section 1231 assets." Section 1231 assets are property used in the trade or
business of a character which is subject to the allowance for depreciation, held
for more than one year, and real property used in the trade or business held for
more than one year. Gains or losses from the sale of section 1231 assets would
be combined with any other section 1231 gains or losses incurred by the
Partnership in that year, and the section 1231 gains or losses would be
allocated to the Limited Partners as provided in the Partnership Agreement.
7
<PAGE>
Effect of Liquidation
Generally, upon the liquidation of a partnership, gain will be recognized
by and taxable to a partner to the extent the amount of cash distributed to it
exceeds the partner's basis in its Unit at the time of distribution. Any gain or
loss which a Limited Partner recognizes from a liquidating distribution is
generally taxed as capital gain or loss. However, any income or loss received
from the normal operations of the partnership during the year of liquidation,
may constitute ordinary income or loss.
Any capital gain or loss will be treated as long-term if the Limited
Partner has held its Units for more than eighteen months when the liquidation is
consummated. For non-corporate limited partners, long-term capital gains are
generally taxed at a 20% rate. If the Limited Partner has held his units more
than one year, but less than 18 months, such gain will be a mid-term capital
gain. Mid-term capital gains are generally taxed at a 28% rate. If the Limited
Partner has held its Units for less than a year, any gain will be a short-term
capital gain. Short-term capital gains are taxed as ordinary income. Capital
losses generally are deductible only to the extent of capital gains plus, in the
case of a non-corporate Limited Partner, up to $3,000 of ordinary income.
Capital losses realized upon the liquidation may be utilized to offset capital
gains from other sources and may be carried forward, subject to applicable
limitations.
Exempt Employee Trusts and Individual Retirement Accounts
Tax-exempt organizations, including trusts which hold assets of employee
benefit plans, although not generally subject to federal income tax, are subject
to tax on certain income derived from a trade or business carried on by the
organization which is unrelated to its exempt activities. However, such
unrelated business taxable income does not in general include income from real
property, gain from the sale of property other than inventory, interest,
dividends and certain other types of passive investment income that is derived
from "debt-financed properties" as defined in Section 514 of the Code. Further,
if, as the Partnership believes, the Properties are not characterized as
"inventory," and are not held primarily for sale to customers in the ordinary
course of the Partnership's business, the income from the sale of the Properties
should not constitute unrelated business taxable income. Finally, the
Partnership's temporary investment of funds in interest-bearing instruments and
deposits also should not give rise to unrelated business taxable income.
THE FOREGOING ANALYSIS CANNOT BE, AND IS NOT INTENDED AS, A SUBSTITUTE FOR
CAREFUL TAX PLANNING. LIMITED PARTNERS ARE URGED TO CONSULT THEIR OWN TAX
ADVISORS WITH RESPECT TO THEIR OWN TAX SITUATIONS AND THE EFFECTS OF THIS
TRANSACTION AS TO FEDERAL TAXES INCLUDING, BUT NOT LIMITED TO, INCOME AND ESTATE
TAXES.
8
<PAGE>
DISTRIBUTION UPON LIQUIDATION OF THE PARTNERSHIP
------------------------------------------------
Upon completion of the Proposed Transaction, the Partnership will be
dissolved and its business wound up in accordance with Article VIII of the
Partnership Agreement. The sale proceeds, after establishing any necessary cash
reserves to cover liabilities, will be distributed to the Limited Partners and
the General Partner in the manner set forth in the Partnership Agreement,
although the distribution to the General Partner is expected to be limited to
the minimum amount necessary to cover its tax obligations resulting from the
liquidation. In addition, pursuant to Paragraph 24 of the Permanent Manager
Agreement between the Partnership and the General Partner, the Partnership will
use approximately $100,000 from the Indemnification Trust to purchase general
liability insurance coverage in a policy that will cover a 5 year "tail" period.
The insurance will cover the General Partner from claims arising from or related
to the General Partner's operation of the Partnership. The insurance will not
include coverage for criminal acts or fraud. The remainder of the amounts in the
Indemnification Trust, approximately $200,000, will be distributed with the sale
proceeds during liquidation.
While the Minimum Price provides a floor on the amounts to be received in
the proposed sale, the General Partner believes that there is a reasonable
likelihood that the Properties will actually be sold at or above their appraised
values. The General Partner estimates that a sale of the Properties at the
appraised values will, after deducting all expenses associated with this consent
solicitation, the sale of properties and establishment of required reserves,
result in a liquidating distribution to the Limited Partners of approximately
$242 per Unit. The Limited Partners are also expected to receive a distribution
of $70 per Unit in May of 1998, consisting of proceeds from the January sale of
the Partnership's Denny's property in Sanford, Florida. Together, the General
Partner anticipates that all liquidating distributions will total $312 per Unit.
If a final liquidating distribution of $242 per Unit is achieved, then Limited
Partners will have received a total of $910 to $746 per Unit in distributions
over the life of the Partnership (from the first Unit sold in 1991 to the last
in April of 1992). For additional information regarding the calculation of the
estimated liquidating distribution upon a sale at the Minimum Value, the
appraised value, and at 10% above the appraised value, see Note 3 to the "Pro
Forma Unaudited Financial Data," below.
Upon completion of the distribution of the Partnership's funds and the
liquidation of the Partnership, the General Partner will execute and record a
Certificate of Cancellation of the Partnership, and the legal existence of the
Partnership will cease.
REGULATORY REQUIREMENTS
-----------------------
Other than the requirement under Wisconsin law that the Partnership file a
Certificate of Cancellation to dissolve the Partnership, there are no federal or
state regulatory requirements that apply to the Proposed Transaction.
9
<PAGE>
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
-------------------------------------------------
The following document filed by the Partnership with the Securities &
Exchange Commission are hereby incorporated in this Consent Statement by
reference:
Annual Report on Form 10-K for the fiscal year ended December 31, 1997
("Form 10-K").
All reports and other documents filed by the Partnership after the date of
this Consent Statement pursuant to Section 13(a), 13(c), 14 or 15(d) of the
Securities and Exchange Act of 1934 and prior to the final date on which written
consents may be received shall be deemed to be incorporated by reference herein
and to be a part hereof from the dates of filing of such reports or documents.
Any statement contained herein or in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for the purposes of this Consent Statement to the extent that a statement
contained herein or in another document that also is or is deemed to be
incorporated by reference herein modifies or supersedes such statement. Any
statement so modified or superseded shall not be deemed, except as so modified
or superseded, to constitute a part of this Consent Statement.
PRO FORMA UNAUDITED FINANCIAL DATA
----------------------------------
The following unaudited pro forma balance sheet assumes that as of December
31, 1997, the Partnership had sold the Properties for $3,775,000 and liquidated
the Partnership. The funds available for distribution to Limited Partners,
adjusting for payment of liabilities of the Partnership, expenses and prorations
of sale and expenses of liquidation, are expected to total approximately
$5,411,000, including proceeds from the January sale of the Partnership Denny's
property in Sanford, Florida, which will be distributed in May.
The unaudited pro forma balance sheet should be read in conjunction with
the appropriate notes to the unaudited pro forma financial data.
ALL OF THE FOLLOWING UNAUDITED PRO FORMA FINANCIAL DATA IS BASED UPON AMOUNTS AS
OF DECEMBER 31, 1997. FINAL RESULTS MAY DIFFER FROM SUCH INFORMATION.
10
<PAGE>
DIVALL INCOME PROPERTIES 3 LIMITED PARTNERSHIP
PRO FORMA BALANCE SHEET
December 31, 1997
(Unaudited)
<TABLE>
<CAPTION>
Pro Forma Adjustments
----------------------------------------------
Sale of Sale of
Historical Property Remaining Liquidation & Pro Forma
December 31, January 1998 Properties Dissolution December 31,
1997 (Note 1) (Note 2) (Note 3) 1997
------------ ------------ ----------- ------------- ------------
<S> <C> <C> <C> <C> <C>
Assets
Investment Properties $4,578,585 $(1,005,603) $(3,572,982) $ 0 $0
Cash and cash equivalents, at cost
which approximates market value 595,420 1,194,878 3,479,611 (5,269,909) 0
Cash held in indemnification trust 290,662 (290,662) 0
Receivables and prepaid assets 26,711 (26,711) 0
Deferred rent receivable 31,029 (31,029) 0
Deferred fees, net of amortization 21,524 (21,524) 0
---------- ----------- ----------- ----------- --
Total Assets $5,543,931 $ 189,275 $ (145,924) $(5,587,282) $0
========== =========== =========== =========== ==
Liabilities and Partners' Capital
Due to current General Partner $ 1,395 $ (1,395) $0
Accounts payable and accrued expenses 25,331 (25,331) 0
Security deposits 36,819 (10,184) (26,635) 0
Unearned rental income 42,254 (42,254) 0
---------- ----------- ----------- ----------- --
105,799 (10,184) (68,889) (26,726) 0
---------- ----------- ----------- ----------- --
Partners' Capital:
General Partner 8,805 1,995 (770) (10,029) 0
Limited Partners 5,429,327 197,464 (76,265) (5,550,527) 0
---------- ----------- ----------- ----------- --
5,438,132 199,459 (77,035) (5,560,556) 0
---------- ----------- ----------- ----------- --
Total Liabilities and Partners' Capital $5,543,931 $ 189,275 $ (145,924) $(5,587,282) $0
========== =========== =========== =========== ==
</TABLE>
See accompanying notes to pro forma financial statements.
11
<PAGE>
DIVALL INCOME PROPERTIES 3 LIMITED PARTNERSHIP
NOTES TO UNAUDITED PRO FORMA BALANCE SHEET
Note 1
- ------
During January 1998, the Partnership's Denny's property in Sanford, Florida
was sold to the tenant for $1,250,000, resulting in a net gain, after
disposition fees, of approximately $200,000. The net proceeds from this sale
of approximately $1,195,000 ($70 per unit) will be distributed to limited
partners with their May 15, 1998 distribution.
Note 2
- ------
The pro forma balance sheet assumes that the Partnership's remaining
properties have been sold for $3,775,000 (the appraised value).
The estimated loss recognized from the sale of the remaining properties has
been computed as follows:
<TABLE>
<S> <C>
Total contract sale price (at appraised value) $ 3,775,000
Less: Net book value of real estate investment properties (3,572,982)
Disposition fee (a) (113,250)
Other expenses of sale (primarily legal fees and
title insurance) (113,250)
Write-off of non-cash assets (52,553)
-----------
Net (loss) on sale of real estate (at appraised value) $ (77,035)
===========
</TABLE>
(a) All or part of the disposition fee may be paid to an affiliate of the
general partner pursuant to the terms of the Permanent Manager Agreement
and the amended Partnership Agreement. Services to be provided by the
general partner in connection with the liquidation include administrative
services pertaining to any future IRS and state tax audits for all open
years as well as all other ongoing partnership recordkeeping requirements.
Note 3
- ------
The costs of dissolution and liquidation of the Partnership are estimated
at $225,000, including $100,000 for the purchase of General Partner
liability insurance in exchange for the release of the Partnership's
Indemnification Trust in the amount of approximately $290,000.
The estimated distribution of available funds in liquidation of the
Partnership to limited partners as of December 31, 1997 based on three
estimated selling price scenarios has been computed as follows:
<TABLE>
<CAPTION>
Sale Price
------------------------------------------
10% Below Appraised 10% Above
Appraisal Value Appraisal
----------- ----------- -----------
<S> <C> <C> <C>
Total contract sale price $3,400,000 $3,775,000 $4,152,500
Liabilities transferred in sale (68,889) (68,889) (68,889)
Disposition fee per Permanent Manager Agreement (102,000) (113,250) (124,575)
Other expenses of sale (primarily legal fees and title insurance) (102,000) (113,250) (124,575)
----------- ----------- -----------
Adjusted cash received 3,127,111 3,479,611 3,834,461
Add: Current liquid assets of the Partnership (including
indemnification trust account) 912,793 912,793 912,793
Proceeds from January property sale 1,194,878 1,194,878 1,194,878
Less: Current liabilities of the Partnership (26,726) (26,726) (26,726)
Estimated expenses of liquidation and dissolution (225,000) (225,000) (225,000)
----------- ----------- -----------
Estimated cash available for final distribution $4,983,056 $5,335,556 $5,690,406
=========== =========== ===========
Estimated distribution to Limited Partners per $1,000 unit assuming
liquidation retroactively to December 31,1997 $291.36 $311.97 $332.72
=========== =========== ===========
Pro forma distribution comprising December 31, 1997 liquidation
value:
May 15, 1998 distribution of January 1998 property sale proceeds $70.00 $70.00 $70.00
Estimated final liquidation distribution $221.36 $241.97 $262.72
----------- ----------- -----------
$291.36 $311.97 $332.72
=========== =========== ===========
</TABLE>
12
<PAGE>
DIVALL INCOME PROPERTIES 3 LIMITED PARTNERSHIP,
a Wisconsin Limited Partnership
CONSENT OF LIMITED PARTNER TO SALE OF
ALL OF THE PARTNERSHIP'S PROPERTY
The undersigned Limited Partner acknowledges receipt of the Consent
Statement dated April 15, 1998 respecting the proposed sale of the Partnership's
properties and the subsequent liquidation of the Partnership. The undersigned
Limited Partner understands that the General Partner is seeking the consent of
the Limited Partners to a sale of the Partnership's properties at a Minimum Sale
Price of $3,400,000, to one or more buyers.
The General Partner recommends a vote FOR a sale of the Partnership's
properties.
THIS PROPOSED SALE OF THE PARTNERSHIP'S PROPERTIES REQUIRES THE APPROVAL BY
THE HOLDERS OF MORE THAN 50% OF THE OUTSTANDING UNITS OF THE PARTNERSHIP.
PLEASE CHECK THE APPROPRIATE BLANK BOX BELOW IN BLUE OR BLACK INK TO
INDICATE YOUR VOTE ON THIS MATTER.
Consent to the Sale of the Partnership's Properties: proposal to
authorize the General Partner to sell all of the Partnership's
properties at a gross purchase price of not less than $3,400,000.
Approval of a sale of the Partnership's properties will also be deemed
a consent to the termination and dissolution of the Partnership (upon
completion of the sale).
FOR [ ] AGAINST [ ] ABSTAIN [ ]
_________________________________________ Date:______________
Signature of Unit Holder
_________________________________________
Print Name
[LABEL]
_________________________________________ Date:______________
Signature of Unit Holder, if held jointly
_________________________________________
Print Name
PLEASE SIGN EXACTLY AS YOUR NAME APPEARS ON THE ABOVE LABEL REPRESENTING YOUR
LIMITED PARTNERSHIP INTEREST. WHEN SUCH INTEREST(S) ARE HELD BY JOINT TENANTS,
BOTH SHOULD SIGN. WHEN SIGNING AS AN ATTORNEY, EXECUTOR, ADMINISTRATOR, TRUSTEE
OR GUARDIAN, PLEASE GIVE FULL TITLE OF SUCH. IF A CORPORATION, PLEASE HAVE
SIGNED IN FULL CORPORATE NAME BY THE PRESIDENT OR OTHER AUTHORIZED OFFICER. IF A
PARTNERSHIP, PLEASE HAVE SIGNED IN THE PARTNERSHIP'S NAME BY AN AUTHORIZED
PERSON.
