<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
--------
SCHEDULE 13E-3
RULE 13E-3 TRANSACTION STATEMENT
(PURSUANT TO SECTION 13(e) OF THE SECURITIES EXCHANGE ACT OF 1934)
WINTHROP APARTMENT INVESTORS LIMITED PARTNERSHIP
(Names of Issuers)
LON-WAI ASSOCIATES L.L.C.
(Names of Persons Filing Statement)
UNITS OF LIMITED PARTNERSHIP INTEREST
(Titles of Classes of Securities)
NONE
(CUSIP Numbers of Classes of Securities)
Michael L. Ashner
LON-WAI Associates L.L.C.
100 Jericho Quadrangle
Suite 214
Jericho, New York 11735-2717
(516) 822-0022
(Name, Address and Telephone Number of Person Authorized to Receive Notices and
Communications on Behalf of Persons Filing Statement)
Copies to:
Mark I. Fisher, Esq.
ROSENMAN & COLIN LLP
575 Madison Avenue
New York, NY 10022-2585
(212) 940-8800
<PAGE>
This statement is filed in connection with (check the
appropriate box):
a. |_| The filing of solicitation materials or an
information statement subject to Regulation 14A, Regulation 14C or Rule
13e-3(c) under the Securities Exchange Act of 1934.
b. |_| The filing of a registration statement under the
Securities Act of 1933.
c. |X| A tender offer.
d. |_| None of the above.
Check the following box if the soliciting materials or information statement
referred to in checking box (a) are preliminary copies. |_|
Calculation of Filing Fee
Transaction Valuation/1/ Amount of Filing Fee
$3,390,000 $678
|_| Check box if any part of the fee is offset as provided by Rule 0-11(a)(2)
and identify the filing with which the offsetting fee was previously paid.
Identify the previous filing by registration statement number, or the form
or schedule and the date of its filing.
Amount previously paid:____________ Filing Party: _________________
Form or Registration No: __________ Date Filed: _________________
- -----------
/1/ The filing fee was determined by computing the maximum number of Units (113)
that can be purchased in connection with this offer multiplied by the cash
offering price per Unit ($30,000) and dividing the resultant transaction
value by 1/50 of 1% in accordance with Rule 0-11 promulgated under the
Securities Exchange Act of 1934, as amended.
2
<PAGE>
INTRODUCTION
This Rule 13e-3 Transaction Statement is being filed by LON-WAI
Associates, L.L.C. (the "Purchaser") in connection with the offer to purchase
(the "Offer to Purchase") outstanding units of limited partnership interest
("Units") of Winthrop Apartment Investors Limited Partnership (the
"Partnership"). The Purchaser is an affiliate of WAI Associates Limited
Partnership, a general partner of the Partnership. The Partnership is the issuer
of the class of securities which is the subject of the Rule 13e-3 transaction.
As an exhibit to this Rule 13e-3 Transaction Statement, the Purchaser
is filing with the Securities and Exchange Commission an Offer to Purchase the
Units. The information contained in the Offer to Purchase is incorporated by
reference in answer to the items in this Rule 13e-3 Transaction Statement. The
Cross-Reference Sheet set forth below shows the location in the Offer to
Purchase of the information required to be included in response to the items of
this Rule 13e-3 Transaction Statement. The information contained in the Offer to
Purchase, including all appendices and schedules thereto, is hereby expressly
incorporated herein by reference, and the responses to each item herein are
qualified in their entirety by reference to the information contained in the
Offer to Purchase and the appendices and schedules thereto.
<PAGE>
CROSS REFERENCE SHEET
(Pursuant to General Instruction F to Schedule 13E-3)
<TABLE>
<CAPTION>
Schedule 13E-3 Item
Number and Caption Caption in Offer to Purchase
- ------------------ ----------------------------
<S> <C>
Item 1. Issuer and Class of Security
Subject to the Transaction
(a)...................... Cover page; "THE TENDER OFFER - Section 7. Certain Information Concerning
the Partnership."
(b)...................... Cover page; "INTRODUCTION."
(c)...................... "INTRODUCTION"; "SPECIAL FACTORS."
(d)...................... "THE TENDER OFFER - Section 7. Certain Information Concerning the
Partnership -- Selected Financial Data."
(e)...................... Not Applicable.
(f)...................... "THE TENDER OFFER - Section 9. Certain Information Concerning the
Purchaser."
</TABLE>
Item 2. Identity and Background
This Rule 13e-3 Transaction Statement is being filed by LON-WAI Associates,
L.L.C., a Delaware limited liability company. The Purchaser is an affiliate of
the general partner of the Partnership. Information with respect to each of the
filing persons can be found in the Offer to Purchase under captions listed
below.
<TABLE>
<S> <C>
(a)...................... Cover page; "THE TENDER OFFER - Section 9. Certain Information Concerning
the Purchaser."
(b)...................... "THE TENDER OFFER - Section 9. Certain Information Concerning the
Purchaser."
(c)...................... "THE TENDER OFFER - Section 9. Certain Information Concerning the
Purchaser"; "Schedule 1" to Offer to Purchase.
(d)...................... "THE TENDER OFFER - Section 9. Certain Information Concerning the
Purchaser"; "Schedule 1" to Offer to Purchase.
</TABLE>
2
<PAGE>
<TABLE>
<S> <C> <C>
(e), (f)................. None of the persons with respect to whom information is provided in response to
this Item was, during the last five years, convicted in a criminal proceeding or a
party to a civil proceeding of a judicial or administrative body of competent
jurisdiction which resulted in the person being subject to a judgment, decree or
final order enjoining further violations of, or prohibiting activities subject to,
federal or state securities laws or finding any violation of such law.
(g)...................... Each of the persons with respect to whom information is provided in response to
this Item is a citizen of the United States.
Item 3. Past Contacts, Transactions
and Negotiations
(a)(1)................... "THE TENDER OFFER - Section 7 - Certain Information Concerning the
Partnership"; "THE TENDER OFFER - Section 8. Conflicts of Interest and
Transactions with Affiliates."
(a)(2)................... "THE TENDER OFFER - Section 7 - Certain Information Concerning the
Partnership."
(b)...................... "THE TENDER OFFER - Section 7 - Certain Information Concerning the
Partnership."
Item 4. Terms of the Transaction
(a)...................... Cover page; "INTRODUCTION"; "SPECIAL FACTORS"; "THE TENDER
OFFER - Section 1. Terms of the Offer"; "THE TENDER OFFER - Section 11.
Conditions of the Offer."
(b)...................... Not Applicable.
Item 5. Plans or Proposals of
the Issuer or Affiliate
(a)...................... "THE TENDER OFFER - Section 6. Future Plans."
(b)...................... "THE TENDER OFFER - Section 6. Future Plans."
(c)...................... "THE TENDER OFFER - Section 6. Future Plans."
</TABLE>
3
<PAGE>
<TABLE>
<S> <C> <C>
(d)...................... "THE TENDER OFFER - Section 6. Future Plans."
(e)...................... "THE TENDER OFFER - Section 6. Future Plans."
(f)...................... Not Applicable.
(g)...................... Cover page; "INTRODUCTION"; "SPECIAL FACTORS - Effects of the Offer."
Item 6. Source and Amount of Funds
or Other Considerations
(a)...................... "THE TENDER OFFER - Section 10. Source of Funds."
(b)...................... Filing Fees 1,000
Legal Fees 50,000
Fairness Opinion Fee 35,000
Solicitation Expenses 30,000
Printing costs 5,500
"THE TENDER OFFER - Section 13. Fees and Expenses."
(c)...................... "THE TENDER OFFER - Section 10. Source of Funds."
(d)...................... Not Applicable.
Item 7. Purpose(s), Alternatives,
Reasons and Effects
(a)...................... Cover page; "INTRODUCTION;" "SPECIAL FACTORS - Purpose of the Offer."
(b)...................... "SPECIAL FACTORS - Purpose of the Offer."
(c)...................... "INTRODUCTION"; "SPECIAL FACTORS - Purpose of the Offer".
(d)...................... Cover page; "INTRODUCTION;"; "SPECIAL FACTORS - Effects of the Offer";
"SPECIAL FACTORS - Certain Federal Income Tax Consequences."
Item 8. Fairness of the Transaction
(a)...................... Cover page; "INTRODUCTION"; "SPECIAL FACTORS - Purchase Price
Considerations and Fairness of the Offer."
</TABLE>
4
<PAGE>
<TABLE>
<S> <C> <C>
(b)...................... Cover page; "INTRODUCTION;" "SPECIAL FACTORS - Purchase Price
Considerations and Fairness of the Offer."
(c)...................... Not Applicable.
(d)...................... Not Applicable.
(e)...................... Not Applicable.
(f)...................... Not Applicable.
Item 9. Reports, Opinions, Appraisals
and Certain Negotiations
(a)...................... Cover page; "INTRODUCTION"; "SPECIAL FACTORS - Purchase Price
Considerations and Fairness of the Offer"; "SPECIAL FACTORS - Fairness
Opinion of Valuation Research Corporation."
(b)...................... "SPECIAL FACTORS - Fairness Opinion of Valuation Research Corporation."
(c)...................... "SPECIAL FACTORS - Fairness Opinion of Valuation Research Corporation."
Item 10. Interest in Securities
of the Issuer
(a)...................... "INTRODUCTION"; "THE TENDER OFFER - Section 9. Certain Information
Concerning the Purchaser."
(b)...................... Not Applicable.
Item 11. Contracts, Arrange-
ments or Understand-
ings with Respect to
the Issuer's
Securities
...................... Not Applicable.
Item 12. Present Intention and
Recommendation of
Certain Persons with
Regard to the
Transaction.
(a)...................... Not Applicable.
</TABLE>
5
<PAGE>
<TABLE>
<S> <C> <C>
(b)...................... Not Applicable.
Item 13. Other Provisions of
the Transaction
(a)...................... "THE TENDER OFFER - Section 4. Withdrawal Rights".
(b)...................... Not Applicable.
(c)...................... Not Applicable.
Item 14. Financial Information
(a)...................... "THE TENDER OFFER - Section 7. Certain Information Concerning the
Partnership - "Schedule 2."
(b)...................... Not Applicable.
Item 15. Persons and Assets Employed,
Retained or Utilized
(a)...................... Not Applicable.
(b)...................... "THE TENDER OFFER - Section 13. Fees and Expenses."
Item 16. Additional Information Reference is hereby made to the Offer to Purchase
including each appendix and schedule thereto
and the related Letter of Transmittal, which
are incorporated herein by reference.
Item 17. Material to be
Filed as Exhibits
(a)...................... Not Applicable.
(b)...................... Fairness Opinion of Valuation Research Corporation.
(c)...................... Not applicable.
(d)(i)................... Offer to Purchase.
</TABLE>
6
<PAGE>
<TABLE>
<S> <C> <C>
(d)(ii).................. Letter of Transmittal.
(e)...................... Not Applicable.
(f)...................... Not Applicable.
</TABLE>
7
<PAGE>
SIGNATURE
After due inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete and
correct.
Date: March 4, 1997
LON-WAI ASSOCIATES L.L.C.
By: AP GP Win Master, L.P., Member
By: AP GP Win Master, Inc., General Partner
By: /s/ Michael L. Ashner
Name: Michael L. Ashner
Title: Vice President
8
<PAGE>
INDEX TO EXHIBITS
Exhibit No. Title
(b) Fairness Opinion of Valuation Research Corporation
(d)(i) Offer to Purchase
(d)(ii) Letter of Transmittal
9
<PAGE>
Exhibit (b)
<PAGE>
VALUATION RESEARCH CORPORATION
February 28, 1997
LON-WAI Associates L.L.C.
One International Place
Boston, MA 02110
Ladies and Gentlemen:
Valuation Research Corporation ("VRC") has been retained by you in your capacity
as the potential purchaser of up to 113 of the outstanding units of Limited
Partnership Interest ("Units") of Winthrop Apartment Investors Limited
Partnership, a Maryland limited partnership (the "Partnership"), to express our
opinion as of February 28, 1997, as to the fairness, from a financial point of
view, of the $3,390,000 cash tender offer to the tendering unit holders at a per
Unit price of $30,000 (the "Offering Price"). We understand that under the terms
of the proposed tender offer (the "Offer") that LON-WAI Associates L.L.C., an
affiliate of the General Partner, WAI Associates Limited Partnership ("WAI"),
would purchase 113 Units and thus, with the two units already owned by the
purchaser and its affiliates, control 46% of the outstanding units of the
Partnership.
Winthrop Apartments Investors Limited Partnership was formed on September 5,
1991, under the Maryland Revised Uniform Limited Partnership Act for the purpose
of making equity investments in existing, income producing residential apartment
properties. The Partnership was initially capitalized on or about September 5,
1991 with $1,000, representing a cash contribution to the Partnership from the
General Partner of $990 and from WFC Realty Co., Inc., the Initial Limited
Partner of the Partnership, of $10.
In January 1992 the Partnership initiated a public offering of 250 units of
limited partnership interests at a purchase price of $100,000 per unit. The
final admission of Limited Partners into the Partnership occurred in December,
1992, at which time subscriptions for 250 units had been accepted.
The Partnership exists for the sole purpose of investing in income producing
residential apartment real estate. Currently the direct property investment is
in four residential apartment properties: Webb Bridge Crossing, Alpharetta,
Georgia; Chesapeake
<PAGE>
VALUATION RESEARCH CORPORATION
Winthrop Financial Associates February 28, 1997
Page 2
Apartments, Austin, Texas; Covington Creek, Irving, Texas; and Northside Circle,
Atlanta, Georgia.
The following tables set forth certain information regarding these properties:
<TABLE>
<CAPTION>
Acquisition Acquisition
Property Name Location Date Units Cost
<S> <C> <C> <C> <C>
Webb Bridge Crossing Alpharetta, GA 11/22/91 164 $4,725,000
Chesapeake (Formerly Austin, TX 01/17/92 124 1,855,000
Lost Mill)
Covington Creek Irving, TX 11/18/92 248 6,300,000
Northside Circle Atlanta, GA 01/20/93 219 4,450,000
--- ------------
Total 755 $17,330,000
=== ===========
</TABLE>
You have specifically asked Valuation Research Corporation to render a written
opinion as to whether the $30,000 per unit Offering Price for 113 of the Units
is fair, from a financial point of view, to the tendering unit holders.
During the course of our study, discussions were held with management and we
became familiar with the amended and restated limited partnership agreement of
Winthrop Apartment Investors Limited Partnership. In addition, VRC has examined
extensive data provided by the General Partner and published market data
pertaining to the underlying assets of the Partnership. This includes, but is
not limited to, the following:
o Selected financial data for the Partnership as reported in the Form
10-K and Form 10-QSB of the Securities and Exchange Commission for
the past four years.
o Unaudited financial statement and other internal financial analysis
for the four owned residential apartment properties that constitute
the underlying assets of the Partnership.
o Market data pertaining to the current real estate market in the
neighborhoods of the four owned residential apartments.
o Demographic and economic histories and projections for the subject
properties' neighborhoods.
o Actual income and sales data for competing comparable properties.
<PAGE>
VALUATION RESEARCH CORPORATION
Winthrop Financial Associates February 28, 1997
Page 3
The basis of our opinion of the fairness of the offer for the Units is the cash
distribution which would flow to the Unit holder upon a sale of the real
property owned or invested in by the Limited Partnerships, net of any debt
associated with the property or Partnership plus any current assets held by the
Partnership.
To determine the value of the underlying real property asset(s) two income
capitalization appraisal techniques known as the direct capitalization income
approach and a discounted cash flow analysis were used. The results of these
approaches were verified by using a second appraisal technique known as the
direct sales comparison approach. The basic premise of the income approach is
that the earning power of a real estate investment is the critical element
affecting its value, and value is often defined as the present worth of
anticipated future income. The basic premise of the direct sales comparison
approach is the comparing of recently sold comparable properties and their sales
price with the subject property.
INCOME APPROACH
The first step in both income approaches is the determination of a proper rental
or revenue stream that one would expect to be able to obtain from the subject
property based on actual historical operations and a study of comparable rental
properties. A similar analysis of typical operating expenses along with expected
vacancy and collection losses aids in constructing an operating statement that
results in a net operating income (NOI) for the first and subsequent years. The
estimated first year NOI can then be converted into an indicated property value
through the overall direct capitalization process, while the estimated future
cash flows can be converted into an indicated value by discounting those
individual yearly amounts to a present value.
Our analysis began with an estimate of each of the subject's market rent
potential based on an analysis of comparable properties which have recently been
rented and an analysis of the actual rentals in place with the subject property.
Using this information, a potential gross income estimate was made. This
estimated potential gross income was projected to grow over the course of the
projection period--10 years--at various rates based on current and forecasted
economic conditions in each of the subject areas.
Secondly, allowances for vacancy and collection losses were made based on market
surveys in each of the subject's area and actual historical performance of the
subject property. This adjustment ranged from a low of 3% for the Austin, Texas
area to 11.5% for the Atlanta, Georgia area.
The result of subtracting the vacancy and collection loss estimate from the
estimated gross income is the effective gross income. It is this effective gross
income that is used to pay for any operating expenses associated with the
operation of the subject property.
The estimate of the operating expenses was based on a combination of historical
expenses of the subject and published market surveys. These operating expenses
were projected to grow at a projected 3% inflation rate per year over the course
of the 10-year projection period.
<PAGE>
VALUATION RESEARCH CORPORATION
Winthrop Financial Associates February 28, 1997
Page 4
In addition to the normal operating expenses an estimate of the cost and timing
of major capital improvements is made and used as an added expense. The basis
for this capital improvement expense adjustment is the actual age and size of
each subject property and the projected amount and timing of replacements for
such major items as roofing; heating, ventilating and air condition units; etc.
The result is approximately $400 per unit on a composite basis.
The net operating income (NOI) is that cash flow which accrues to the owner of
the property after deductions for the above expenditures and allowances. It is
this net operating income that was converted into an estimate of value.
The following table sets forth the estimated aggregate revenues, expenses and
net operating income (NOI) of the properties underlying the subject limited
partnership for each of the twelve-month periods ending December 31, 1997
through December 31, 2006 that were included in the financial forecasts used by
VRC in connection with the preparation of the Fairness Opinion.
WINTHROP APARTMENT INVESTORS LTD.
(In Thousands of Dollars)
Year 1997 1998 1999 2000 2001
Revenue 5,233 5,323 5,422 5,522 5,624
Expenses* 2,651 2,727 2,806 2,887 2,970
Net Income 2,582 2,596 2,616 2,635 2,654
Year 2002 2003 2004 2005 2006
Revenue 5,728 5,835 5,943 6,053 6,165
Expenses* 3,056 3,145 3,236 3,329 3,426
Net Income 2,672 2,690 2,707 2,724 2,739
*Including Capital Expenditures
In rendering this fairness opinion, VRC relied, without assuming responsibility
for independent verification, on the accuracy and completeness of all financial
and operating data, financial analyses, reports and other information that were
publicly available, compiled or approved by or otherwise furnished or
communicated to VRC by or on behalf of the General Partner. With respect to the
financial forecasts utilized by VRC, VRC believes that the assumptions
underlying the forecasts are reasonable and that consequently there is a
reasonable probability that the projections would prove to be substantially
correct. However, readers of this fairness opinion should be aware that actual
revenues, expenses and net operating income of the properties underlying the
limited partnership will depend to a large extent on a number of factors that
<PAGE>
VALUATION RESEARCH CORPORATION
Winthrop Financial Associates February 28, 1997
Page 5
cannot be predicted with certainty or which may be outside of the control of the
General Partners, including general business, market and economic conditions,
supply and demand for rental properties in the areas in which the properties are
located, future operating expense and capital expenditure requirements for the
properties, future occupancy rates, the ability of the General Partners and
property managers for the properties to maintain the attractiveness of the
properties to tenants, real estate tax rates, changes in tax laws and other
factors. As a result, actual results could differ significantly from the
forecasted results.
The following paragraphs summarize the significant quantitative and qualitative
analyses performed by VRC in arriving at the fairness opinions. VRC considered
all such quantitative and qualitative analyses in connection with its valuation
analysis, and no one method of analysis was given particular emphasis.
Capitalization Rate Valuation Analysis - VRC assumed that the partnership
commenced an orderly liquidation of the properties. VRC applied capitalization
rates ranging from 9.5% to 10.0% to the net operating income after capital
expenditures ("Cash Flow") estimated for each such property for the twelve-month
period ended December 31, 1997 to determine a range of its capitalized values.
VRC believes that a capitalization rate analysis provides a basis for estimating
what a real estate investor would be willing to pay for a particular property.
To the range of capitalized property values, VRC deducted the estimated mortgage
balance as of December 31, 1996 of the mortgage loan dated January 5, 1996 in
the amount of $15,885,365 which amount is secured by all four properties.
Finally, expenses associated with the liquidation of the portfolio were deducted
and working capital balances were added. Using this methodology, the implied
value of the 250 partnership units is $26,800 to $31,195 per unit.
Discounted Cash Flow Analysis - VRC performed a discounted cash flow analysis of
(i) the present value of the forecasted cash flows from future operations of
those properties owned by the Partnership, and (ii) the present value of the
estimated proceeds of a sale of the property at the conclusion of the forecast
period. In completing its analysis, VRC utilized financial and operating
forecasts of each property's estimated cash flow for the twelve-month periods
ending December 31, 1997 to December 31, 2006 and applied discount rates of
10.5% to 11.5% to forecasted cash flow and to a forecasted residual value. The
residual value was based on capitalizing forecasted cash flow for the year 2006
at 10%. Since its discounted cash flow analysis assumes the immediate sale of
the properties to third parties, VRC did not take into account any tax
ramifications of the cash flow in its analysis. To the resulting range of
values, VRC deducted the estimated mortgage balance as of December 31, 1996 of
the mortgage loan dated January 5, 1996 in the amount of $15,885,365 which
amount is secured by all four properties. Finally, expenses associated with the
liquidation of the portfolio were deducted and working capital balances were
added. Using this methodology, the implied value of the 250 partnership units is
$25,920 to $31,155 per unit.
SALES COMPARISON VALUATION ANALYSIS
VRC compiled data on recent sales of comparable apartment complexes in each
of the four subject markets. Using this market data, adjustments were made to
the reported transfer price to reflect differences in physical and location
attributes vis-a-vis the subject apartment(s). The
<PAGE>
VALUATION RESEARCH CORPORATION
Winthrop Financial Associates February 28, 1997
Page 6
result is a range of transfer prices that are applicable to each of the subject
properties. Based on this analysis, a range of selling prices for each of the
partnership's apartments can be estimated. From this range of estimated selling
prices VRC deducted the estimated mortgage balance as of December 31, 1996 of
the mortgage loan dated January 5, 1996 in the amount of $15,885,365 which
amount is secured by all four properties. Finally, expenses associated with the
liquidation of the portfolio were deducted and working capital balances were
added. Using this methodology, the implied value of the 250 partnership units is
$28,200 to $31,175 per unit.
The preparation of a fairness opinion involves various determinations as to the
most appropriate and relevant quantitative and qualitative methods of financial
analyses and the application of those methods to the particular circumstances
and therefore such an opinion is not readily susceptible to partial analyses or
summary description. Accordingly, VRC believes its analyses must be considered
as a whole and that considering any portion of such analyses and of the factors
considered, without considering all analyses and factors, could create a
misleading or incomplete view of the process underlying the fairness opinions.
Any estimates contained in these analyses are not necessarily indicative of
actual values or predictive of future results or values, which may be
significantly more or less than as set forth herein.
VRC's fairness opinion was based solely upon the information available to it and
the economic market and other circumstances that existed as of the date hereof.
Events occurring after such date could materially affect the assumptions and
conclusions contained in the fairness opinions. VRC has not undertaken to
reaffirm or revise this fairness opinion or otherwise comment upon any events
occurring after the date hereof.
VRC has relied without independent verification on the accuracy and completeness
of all of the financial and other information reviewed by us for purposes of
this opinion. Nothing came to our attention, for purposes of this opinion, which
causes us to question their accuracy or their representation of the operations
of the assets under review. We have not verified the title to ownership of these
assets, nor have we made an independent valuation or appraisal of the reported
current assets or any of the liabilities reported by the Partnership on its
financial statements. Our opinion necessarily is based on conditions as they
exist and can be valued only as of February 28, 1997.
Based on and subject to the foregoing and based on such other matters as we
consider relevant, it is our opinion that as of the date hereof, the $30,000 per
unit offer to the limited partners of the Winthrop Apartment Investors Limited
Partnership represents a fair value, from a financial point of view, for their
interests in the Partnership.
This letter is solely for the information of and assistance to the parties to
whom it is addressed in conducting their investigation with regard to the
upcoming tender offer of 113 of the Units of the Partnership. The Partnership
may include this letter as a part of the information statement filed with the
Security and Exchange Commission. Any other uses are expressly prohibited and
neither this letter nor any of its parts may be circulated, quoted, or otherwise
referred to for any other purpose without the written consent of VRC, the
exercise of which will be at the sole discretion of VRC, not unreasonably
withheld. If given, such consent shall not be without
<PAGE>
VALUATION RESEARCH CORPORATION
Winthrop Financial Associates February 28, 1997
Page 7
sufficient review by VRC as to the precise language of such disclosure and the
time and place of its potential release.
The above limitations do not apply to interested parties as defined herein.
However, in such instances, this opinion must be provided to such parties in it
entirety. The term "interested parties" shall include the Partnership's auditors
and attorneys, participants and assignees, regulators, or appropriate parties
involved in this transaction.
VRC has no responsibility to update the opinion stated herein for events and
circumstances occurring after the date of this letter.
This opinion is subject to the assumptions and limiting conditions contained
herein. VRC has not investigated the title to, nor the liabilities against, the
Partnership or the underlying assets of the Partnership and assumes no
responsibility concerning these matters. Neither Valuation Research Corporation
nor any of its personnel have any present or contemplated financial interest in
the Partnership or the assets of the Partnership, and we certify that the
compensation received for this opinion letter is not contingent on the
conclusions stated. Additionally, the assignment was not based on a requested
minimum valuation, a specific valuation, or the approval of a loan.
Valuation Research Corporation does not conduct or provide environmental
liability assessments of any kind in performing its valuations so that our
opinion of the fairness of the Offer does not reflect any actual or contingent
environmental liabilities associated with the owned residential property that
constitutes the underlying assets of the Partnership.
Respectfully submitted,
VALUATION RESEARCH CORPORATION
/s/Valuation Research Corporation
Engagement Number: 04-2657-00
<PAGE>
VALUATION RESEARCH CORPORATION
LIMITING FACTORS AND ASSUMPTIONS
In accordance with recognized professional ethics, the professional fee for this
service is not contingent upon our conclusion of value, and neither Valuation
Research Corporation nor any of its employees have a present or intended
material financial interest in the subject company.
The opinion expressed herein is valid only for the stated purpose as of the date
of the fairness opinion.
Financial statements and other related information provided by the subject
company or its representatives in the course of this investigation have been
accepted, without further verification, as fully and correctly reflecting the
company's business conditions and operating results for the respective periods,
except as specifically noted herein.
Public information and industry and statistical information has been obtained
from sources we deem to be reliable; however, we make no representation as to
the accuracy or completeness of such information, and have accepted the
information without further verification.
The conclusions of value are based upon the assumption that the current level of
management expertise and effectiveness would continue to be maintained and that
the character and integrity of the enterprise through any sale, reorganization,
exchange, or diminution of the owners' participation would not be materially or
significantly changed.
This letter and the conclusions arrived at herein are for the exclusive use of
our client for the sole and specific purposes as noted herein. Furthermore, the
letter and conclusions are not intended by the author, and should not be
construed by the reader, to be investment advice in any manner whatsoever. The
conclusions reached herein represent the considered opinion of Valuation
Research Corporation, based upon information furnished to them by the
Partnership and other sources.
LON-WAI Associates L.L.C. and the General Partner of Winthrop Apartment
Investors Limited Partnership have assured VRC that there will be no material
change in the proposed tender office or any documents in VRC's possession as of
February 28, 1997.
Neither all nor any part of the contents of this letter (especially any
conclusions as to value, the identity of any appraiser or appraisers, or the
firm with which such appraisers are connected, or any reference to any of their
professional designations) should be disseminated to the public through
advertising media, public relations, news media, sales media, mail, direct
transmittal, or any other public means of communication, without the prior
written consent and approval of Valuation Research Corporation.
<PAGE>
VALUATION RESEARCH CORPORATION
Future services regarding the subject matter of this letter, including, but not
limited to, testimony or attendance in court, shall not be required of Valuation
Research Corporation, unless previous arrangements have been made in writing.
Valuation Research Corporation is not an environmental consultant or auditor,
and it takes no responsibility for any actual or potential environmental
liabilities. Any person entitled to rely on this letter wishing to know whether
such liabilities exist, or their scope, and the effect on the value of the
property is encouraged to obtain a professional environmental assessment.
Valuation Research Corporation does not conduct or provide environmental
assessments and has not performed one for the subject property.
Valuation Research Corporation has asked The Partnership whether it is subject
to any present or future liability relating to environmental matters (including
but not limited to CERCLA/Superfund liability). Valuation Research Corporation
has not determined independently whether The Partnership is subject to any such
liabilities, nor the scope of any such liabilities. Valuation Research
Corporation's appraisal takes no such liabilities into account except as they
have been reported expressly to Valuation Research Corporation by The
Partnership, or by an environmental consultant working for The Partnership and
then only to the extent that the liability was reported to us in an actual or
estimated dollar amount. To the extent such information has been reported to us,
Valuation Research Corporation has relied on it without verification and offers
no warranty or representation as to its accuracy or completeness.
We have not made a specific compliance survey or analysis of the subject
properties to determine whether it is subject to or in compliance with the
Americans with Disabilities Act of 1990 (ADA) and this opinion does not consider
the impact, if any, of noncompliance in estimating the value of The Units.
<PAGE>
Offer to Purchase for Cash
Up to 113 Units of Limited Partnership Interest
of
WINTHROP APARTMENT INVESTORS
LIMITED PARTNERSHIP
for
$30,000 Net Per Unit
by
LON-WAI ASSOCIATES L.L.C.
THE OFFER, WITHDRAWAL RIGHTS AND PRORATION PERIOD
WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY
TIME, ON MARCH 31, 1997, UNLESS EXTENDED.
LON-WAI Associates L.L.C., a Delaware limited liability company (the
"Purchaser"), hereby offers to purchase up to 113 of the outstanding Units of
Limited Partnership Interest ("Units") of Winthrop Apartment Investors Limited
Partnership, a Maryland limited partnership (the "Partnership"), for $30,000 per
Unit (the "Purchase Price"), net to the seller in cash, without interest, upon
the terms set forth in this Offer to Purchase (the "Offer to Purchase") and in
the related Letter of Transmittal, as each may be supplemented or amended from
time to time (which together constitute the "Offer"). HOLDERS OF UNITS
("UNITHOLDERS") WHO TENDER THEIR UNITS WILL NOT BE OBLIGATED TO PAY ANY
COMMISSIONS OR PARTNERSHIP TRANSFER FEES, WHICH COMMISSIONS AND FEES WILL BE
BORNE BY THE PURCHASER. The 113 Units sought pursuant to the offer represent
approximately 45.2% of the total Units outstanding as of December 31, 1996.
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 OF THE INFORMATION SET FORTH IN
THIS DOCUMENT. ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL.
The Purchaser is an affiliate of WAI Associates Limited Partnership,
the general partner of the Partnership (the "General Partner"). Based in part on
a fairness opinion from an independent appraiser, the Purchaser believes that
the Purchase Price is fair to tendering Unitholders. (See "SPECIAL FACTORS -
Purchase Price Considerations and Fairness of the Offer" and "- Fairness Opinion
of Valuation Research Corporation".)
Before tendering, Unitholders are urged to consider the following
factors:
o The Purchaser (which is an affiliate of the General Partner) estimated
the liquidation value of the Partnership's assets as of December 31,
1996 at $30,565 per Unit (the "Estimated Liquidation Value"). (See
"SPECIAL FACTORS Purchase Price Considerations and Fairness of the
Offer".) The Partnership, however, is not required to liquidate for a
number of years, and the General Partner does not otherwise have any
present plans or intentions to sell the Partnership's real estate
properties and liquidate the Partnership.
o As of December 31, 1996, the Units were held by 342 Unitholders. If, as
a result of the Offer or any time thereafter, the Units are held as of
the beginning of any year by less than 300 Unitholders, then the
obligations of the Partnership to make periodic filings with the
Securities and Exchange Commission (the "Commission") under the
Securities Exchange Act of 1934 (the "Exchange Act") will be suspended
as to that year. However, pursuant to the terms of the Agreement of
Limited Partnership of the Partnership (the "Partnership Agreement"),
the Partnership will continue to furnish Unitholders with annual
audited financial statements and quarterly unaudited financial
statements. (See "SPECIAL FACTORS -Effects of the Offer".)
o The Purchaser (which is an affiliate of the General Partner) is making
the Offer with a view to making a profit from an investment in the
Units. However, as discussed under "SPECIAL FACTORS - Purchase Price
Considerations and Fairness of the Offer," the Purchaser believes that
the Purchase Price is fair to tendering Unitholders.
o The Purchaser and the General Partner are affiliated and, accordingly,
certain conflicts of interest with respect to the Offer may exist for
the General Partner. Because of the affiliation between the Purchaser
and the General Partner, the Partnership has advised the Purchaser that
it makes no recommendation and is remaining neutral as to whether a
Unitholder should tender its Units in the Offer.
(continued on next page)
------------------------------------------------
If you have any questions or need additional information, you may
contact the Information Agent for the Offer (the "Information Agent") at:
The Swensen Group, L.L.C.
(800) 914-7896
March 4, 1997
<PAGE>
o Depending upon the number of Units tendered pursuant to the Offer, the
Purchaser could be in a position to significantly influence all
Partnership decisions on which Unitholders may vote, including
decisions regarding removal and replacement of the General Partner,
certain types of amendments to the Partnership Agreement, sales of
assets and liquidation. (See "SPECIAL FACTORS - Effects of the Offer".)
This means that (i) non-tendering Unitholders could be prevented from
taking action they desire but that the Purchaser opposes and (ii) the
Purchaser may be able to take action desired by the Purchaser but
opposed by the non-tendering Unitholders.
o Consummation of the Offer may limit the ability of Unitholders to
dispose of Units in the secondary market during the twelve month period
following completion of the Offer. (See "SPECIAL FACTORS - Effects of
the Offer".)
o Unitholders who tender their Units will be giving up the opportunity to
participate in any future potential benefits represented by the
ownership of such Units, including the right to receive any potential
future distributions by the Partnership (including the distribution of
approximately $1,530 per Unit anticipated to be made by the Partnership
during the second quarter of 1997 with respect to the third and fourth
quarters of 1996).
o The prospectus pursuant to which Units were sold does not provide a
specific anticipated holding period for the Partnership's properties,
but instead indicates that the Partnership intends to hold the
properties until sale or other disposition appears to be advantageous
to Unitholders in view of the Partnership's investment objectives.
The Purchaser expressly reserves the right, in its sole discretion, at
any time and from time to time, (i) to extend the period of time during which
the Offer is open and thereby delay acceptance for payment of, and the payment
for, any Units, (ii) to terminate the Offer and not accept for payment any Units
not theretofore accepted for payment or paid for, (iii) upon the occurrence of
any of the conditions specified in Section 11 of this Offer to Purchase, to
delay the acceptance for payment of, or payment for, any Units not theretofore
accepted for payment or paid for, and (iv) to amend the Offer in any respect
(including, without limitation, by increasing the consideration offered,
increasing or decreasing the number of Units being sought, or both). Notice of
any such termination or amendment will promptly be disseminated to Unitholders
in a manner reasonably designed to inform Unitholders of such change. In the
case of an extension of the Offer, such extension will be followed by a press
release or public announcement which will be issued no later than 9:00 a.m., New
York City time, on the next business day after the scheduled Expiration Date, in
accordance with Rule 14e-1(d) under the Exchange Act.
Unitholders are urged to read this Offer to Purchase and the
accompanying Letter of Transmittal carefully before deciding whether to tender
their Units. Any Unitholder desiring to tender Units should complete and sign
the Letter of Transmittal and mail or deliver the signed Letter of Transmittal
to The Swensen Group, L.L.C., an affiliate of the Purchaser which is acting as
the Depositary for the Offer (the "Depositary"), at the following address:
THE SWENSEN GROUP, L.L.C.
By U.S. Mail: 167 Milk Street, #421
Boston, MA 02109-4315
By Hand or Overnight Delivery: Attention: Special Projects Department
One International Place, 12th Floor
Boston, MA 02110
By Facsimile: (617) 330-7969
If you have any questions or if you need assistance in completion of
the Letter of Transmittal, you may contact the Information Agent by calling:
(800) 914-7896
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
Page
<S> <C>
INTRODUCTION.................................................................................. 1
SPECIAL FACTORS............................................................................... 3
Purpose of the Offer................................................................. 3
Effects of the Offer................................................................. 3
Purchase Price Considerations and Fairness of the Offer.............................. 3
Fairness Opinion of Valuation Research Corporation................................... 5
Certain Federal Income Tax Considerations............................................ 6
THE TENDER OFFER.............................................................................. 9
Section 1. Terms of the Offer....................................................... 9
Section 2. Proration; Acceptance for Payment and
Payment for Units.................................................. 9
Section 3. Procedures for Tendering Units........................................... 9
Section 4. Withdrawal Rights........................................................ 11
Section 5. Extension of Tender Period; Termination; Amendment....................... 11
Section 6. Future Plans............................................................. 11
Section 7. Certain Information Concerning the Partnership........................... 12
Section 8. Conflicts of Interest and Transactions
with Affiliates.................................................... 14
Section 9. Certain Information Concerning the Purchaser............................. 15
Section 10. Source of Funds......................................................... 15
Section 11. Conditions of the Offer................................................. 15
Section 12. Certain Legal Matters................................................... 17
Section 13. Fees and Expenses....................................................... 17
Section 14. Miscellaneous........................................................... 17
Appendix A Glossary
Schedule 1 Information With Respect to the Executive Officers
and Directors of AP GP Win Master, Inc.
Schedule 2 Financial Statements of the Partnership
</TABLE>
<PAGE>
To the Holders of Units of Limited Partnership Interest
of Winthrop Apartment Investors Limited Partnership
INTRODUCTION
The Purchaser hereby offers to purchase up to 113 of the outstanding
Units for $30,000 per Unit net to the seller in cash without interest, upon the
terms set forth in this Offer to Purchase and in the related Letter of
Transmittal, as each may be supplemented or amended from time to time.
UNITHOLDERS WHO TENDER THEIR UNITS WILL NOT BE OBLIGATED TO PAY ANY COMMISSIONS
OR PARTNERSHIP TRANSFER FEES, WHICH COMMISSIONS AND FEES WILL BE BORNE BY THE
PURCHASER.
The Purchase Price was determined as a result of the Purchaser's own
independent analysis. The Purchaser believes that the Purchase Price is fair to
tendering Unitholders based in part on the fairness opinion rendered by
Valuation Research Corporation ("Valuation Research"), an independent appraiser.
(See "SPECIAL FACTORS - Purchase Price Considerations and Fairness of the Offer"
and "Fairness Opinion of Valuation Research Corporation".) Unitholders are urged
to consider carefully all of the information contained herein before accepting
the Offer.
Before tendering, Unitholders are urged to consider the following
factors:
o The Purchaser (which is an affiliate of the General Partner) estimated
the liquidation value of the Partnership's assets as of December 31,
1996 at $30,565 per Unit. (See "SPECIAL FACTORS - Purchase Price
Considerations and Fairness of the Offer") The Partnership, however, is
not required to liquidate for a number of years, and the General
Partner does not otherwise have any present plans or intentions to sell
the Partnership's real estate properties and liquidate the Partnership.
o As of December 31, 1996, the Units were held by 342 Unitholders. If, as
a result of the Offer or any time thereafter, the Units are held as of
the beginning of any year by less than 300 Unitholders, then the
obligations of the Partnership to make periodic filings with Commission
under the Exchange Act will be suspended as to that year. However,
pursuant to the terms of the Partnership Agreement, the Partnership
will continue to furnish Unitholders with annual audited financial
statements and quarterly unaudited financial statements. (See "SPECIAL
FACTORS - Effects of the Offer".)
o The Purchaser (which is an affiliate of the General Partner) is making
the Offer with a view to making a profit from an investment in the
Units. However, as discussed under "SPECIAL FACTORS - Purchase Price
Considerations and Fairness of the Offer," the Purchaser believes that
the Purchase Price is fair to tendering Unitholders.
o The Purchaser and the General Partner are affiliated and, accordingly,
certain conflicts of interest with respect to the Offer may exist for
the General Partner. Because of the affiliation between the Purchaser
and the General Partner, the Partnership has advised the Purchaser that
it makes no recommendation and is remaining neutral as to whether a
Unitholder should tender Units in the Offer.
o Depending upon the number of Units tendered pursuant to the Offer, the
Purchaser could be in a position to significantly influence all
Partnership decisions on which Unitholders may vote, including
decisions regarding removal and replacement of the General Partner,
certain types of amendments to the Partnership Agreement, sales of
assets and liquidation. (See "SPECIAL FACTORS - Effects of the Offer".)
This means that (i) non-tendering Unitholders could be prevented from
taking action they desire but that the Purchaser opposes and (ii) the
Purchaser may be able to take action desired by the Purchaser but
opposed by the non-tendering Unitholders.
o Consummation of the Offer may limit the ability of Unitholders to
dispose of Units in the secondary market during the twelve month period
following completion of the Offer. (See "SPECIAL FACTORS - Effects of
the Offer".)
o Unitholders who tender their Units will be giving up the opportunity to
participate in any potential future benefits represented by ownership
of such Units, including the right to receive any potential future
distributions by the Partnership (including the distribution of
approximately $1,530 per Unit anticipated to be made by the Partnership
during the second quarter of 1997 with respect to the third and fourth
quarters of 1996).
o The prospectus pursuant to which Units were sold does not provide a
specific anticipated holding period for the Partnership's properties,
but instead indicates that the Partnership intends to hold the
properties until sale or other disposition appears to be advantageous
to Unitholders in view of the Partnership's investment objectives.
<PAGE>
Unitholders who desire liquidity may wish to consider the Offer.
However, each Unitholder must make his or her own decision based upon such
Unitholder's particular circumstances, including the Unitholder's own financial
needs, other investment opportunities and tax position. Each Unitholder should
consult with his or her own advisors, tax, financial or otherwise, in evaluating
the terms of and whether to tender Units pursuant to the Offer.
The Offer will provide Unitholders with an opportunity to liquidate
their investment without the usual transaction costs associated with market
sales. Unitholders may no longer wish to continue with their investment in the
Partnership for a number of reasons, including:
o The absence of a formal trading market for the Units.
o The Offer will provide Unitholders with an immediate opportunity to
liquidate their investment in the Partnership without the usual
transaction costs associated with market sales or partnership transfer
fees.
o General disenchantment with real estate investments, particularly
long-term investments in limited partnerships.
According to information supplied by the Partnership, there are 250
Units issued and outstanding held by approximately 342 Unitholders. The
Purchaser and its affiliates own two Units in the aggregate, constituting less
than 1% of the Units outstanding.
Certain information contained in this Offer to Purchase which relates
to the Partnership, or represents statements made by the General Partner, has
been derived from information provided to the Purchaser by the General Partner.
Unitholders are urged to read this Offer to Purchase, and the
accompanying Letter of Transmittal carefully before deciding whether to tender
their Units.
If you have any questions or if you need assistance in completion of
the Letter of Transmittal, you may contact the Information Agent by calling
(800) 914-7896.
2
<PAGE>
SPECIAL FACTORS
Purpose of the Offer.
The Purchaser is acquiring the Units for the purpose of increasing its
interest in the Partnership and for investment purposes. In light of the
purposes of the Offer, neither the Purchaser nor the General Partner pursued or
otherwise considered any alternatives to the Offer. The transaction is
structured as a tender offer in light of the fact that there has been no recent
activity in the secondary market for the Units. Furthermore, the Purchaser
limited the number of Units subject to the Offer in order to avoid a possible
termination of the Partnership for federal income tax purposes.
Effects of the Offer.
Limitations on Resales. Pursuant to the Partnership Agreement,
transfers of Units which would result in the termination of the Partnership for
federal income tax purposes may not be made. Depending upon the number of Units
tendered pursuant to the Offer, sales of Units on the secondary market for the
twelve-month period following completion of the Offer may be limited.
Effect on Trading Market. There is no established public trading market
for the Units and, therefore, a reduction in the number of Unitholders should
not materially further restrict the Unitholders' ability to find purchasers for
their Units.
Suspension of Obligation to File Reports under the Exchange Act. The
Partnership currently files periodic reports with the Commission under the
Exchange Act. If following the Offer there are fewer than 300 Unitholders of
record as of the beginning of any year (as of December 31, 1996, the Units were
held by 342 Unitholders), the obligation of the Partnership to make periodic
filings with the Commission for that year would be suspended. However, pursuant
to the terms of the Partnership Agreement, the Partnership will continue to
furnish Unitholders with annual audited financial statements and quarterly
unaudited financial statements.
Increased Interest in the Partnership. If the Offer is fully
subscribed, the Purchaser (together with its affiliates) will increase its
ownership in Units from two Units (representing less than 1% of the outstanding
Units) to 115 Units (representing approximately 46% of the outstanding Units).
In such event, the interest of the Purchaser (together with its affiliates other
than the General Partner) in the book value of the Partnership as of September
30, 1996 ($20,984 per Unit) will increase from approximately $42,000 to
approximately $2,414,000.
Control of all Unitholder Voting Decisions by Purchaser. The Purchaser
will have the right to vote each Unit purchased pursuant to the Offer. Depending
on the number of Units purchased pursuant to the Offer, the Purchaser could be
in a position to significantly influence all voting decisions with respect to
the Partnership. Accordingly, the Purchaser could (i) prevent non-tendering
Unitholders from taking action they desire but that the Purchaser opposes and
(ii) take action desired by the Purchaser but opposed by non-tendering
Unitholders. Under the Partnership Agreement, Unitholders holding a majority of
the Units are entitled to take action with respect to a variety of matters,
including: removal and replacement of the General Partner; dissolution of the
Partnership; the sale of all or substantially all of the Partnership's
properties; and certain types of amendments to the Partnership Agreement. When
voting on such matters, the Purchaser will vote Units owned and acquired by it
in its interest, which, because of its affiliation with the General Partner, may
also be in the interest of the General Partner.
Purchase Price Considerations and Fairness of the Offer.
The Purchaser established the Purchase Price by analyzing a number of
quantitative and qualitative factors including: (i) the Estimated Liquidation
Value; (ii) the lack of liquidity of an investment in the Partnership; (iii) the
net book value per Unit; and (iv) the costs to the Purchaser associated with
acquiring the Units.
Unitholders should note that, notwithstanding the Purchaser's belief
that the Purchase Price is fair to tendering Unitholders, the Purchaser is
making the Offer with a view to making a profit from an investment in the Units.
In this regard, Unitholders should consider other measures of the value of the
Units which they deem relevant and are urged to consult with their own advisors,
tax, financial or otherwise, in evaluating the terms of the Offer before
deciding whether to tender Units.
The Partnership's Form 10-K for the year ended December 31, 1995
indicates that there is no active market for the Units and trading in the Units
is sporadic and occurs through private transactions. At present, privately
negotiated sales and sales through intermediaries (e.g., through the trading
system operated by Chicago Partnership Board, Inc., which publishes sell offers
by holders of Units) are the only means available to a Unitholder to liquidate
3
<PAGE>
an investment in the Units (other than the Offer) because the Units are not
listed or traded on any exchange or quoted on any NASDAQ list or system. During
the twelve-month period ended November 30, 1996, there were no reported sales of
Units.
The Purchaser is offering to purchase Units which are a relatively
illiquid investment and is not offering to purchase the Partnership's underlying
assets. Consequently, the Purchaser does not believe that the underlying asset
value of the Partnership is determinative in arriving at the Purchase Price.
Nevertheless, using the capitalization of income approach, the Purchaser derived
an estimated liquidation value for the Partnership's assets. In determining the
Estimated Liquidation Value, the Purchaser first calculated the "Adjusted Value"
of each of the Partnership's properties. The Adjusted Value, as illustrated
below, was calculated by reducing a property's net operating income ("NOI")
(which was based on unaudited property revenues and expenses during the year
ended December 31, 1996) by $400 per apartment unit, an amount customarily
reserved for capital expenditures at the properties (the "Reserve"). This amount
was then divided by a 10% capitalization rate (the "Cap Rate") to determine the
property's Adjusted Value.
The following table illustrates the method used by the Purchaser to
determine the Adjusted Value of each of the properties.
- -------------------------------------------------------------------------------
Property NOI Replacement Adjusted Value
Reserve
- -------------------------------------------------------------------------------
Chesapeake Apts. $369,211 $49,600 $3,196,110
- -------------------------------------------------------------------------------
Covington Apts. 751,008 99,200 6,518,080
- -------------------------------------------------------------------------------
Northside Circle Apts. 817,352 87,600 7,297,520
- -------------------------------------------------------------------------------
Webb Bridge Apts. 676,234 65,600 6,106,340
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
TOTAL $2,613,805 $302,000 $23,118,050
- -------------------------------------------------------------------------------
To determine the Estimated Liquidation Value of the Partnership's
assets, the Purchaser then (i) added to the aggregate Adjusted Value the net
amount of current assets and liabilities of the Partnership at December 31,
1996, which net amount equaled $1,772,626 and (ii) subtracted the $15,885,365 of
long-term debt of the Partnership outstanding at December 31, 1996 and estimated
Partnership liquidation costs of $1,271,493 (which represents a 3% disposition
fee plus additional costs equal to approximately 2.5% of the aggregate Adjusted
Value). The resulting Estimated Liquidation Value of the Partnership's assets is
approximately $7,733,818 or $30,565 per Unit (based upon the percentage of
capital distributions to which Unitholders are entitled).
The Purchaser believes that realization of the Estimated Liquidation
Value by the Partnership may be impacted by factors generally affecting the sale
of real estate, including market conditions at the time of sale. The Partnership
is not required to liquidate for a number of years and the General Partner does
not otherwise have any present plan or intentions to sell or refinance the
properties.
The Purchaser believes that the Reserve and Cap Rate utilized by it are
within a range of reserves and capitalization rates currently employed in the
marketplace. The utilization of different reserves and capitalization rates
could also be appropriate. In this regard, Unitholders should be aware that the
use of lower reserves and/or capitalization rates or an increase in NOI would
result in higher Adjusted Values for the Partnership's properties. Further,
Unitholders should understand that while the Purchaser employed the above method
of determining the Estimated Liquidation Value, there may be alternative
valuation methods that would yield differing values.
Although no specific weights were assigned to the foregoing factors,
based on the lack of liquidity of an investment in the Partnership, the
Estimated Liquidation Value of $30,565 per Unit, the September 30, 1996 book
value of approximately $20,984 per Unit and the fairness opinion described
below, the Purchaser believes that the Offer is fair to tendering Unitholders
from a financial point of view.
The Partnership has informed the Purchaser that it periodically is
requested to give a Unitholder an estimated valuation of the Units in connection
with various matters affecting the Unitholder. The Partnership has informed the
Purchaser that the most recent estimated valuation given was $22,000 per Unit,
which valuation was given as of December 31, 1996. Such estimated valuation was
based, among other things, on an assumed liquidation of the Partnership based
upon unaudited 1996 operating results, a 10.25% capitalization rate and
application of a 20% discount factor to reflect the illiquidity of an investment
in the Units.
4
<PAGE>
Unitholders should note that the Partnership Agreement of the
Partnership provides that if on the termination of the Partnership, the General
Partner's Capital Account is less than zero (after allocation of profits and
losses recognized upon the disposition of Partnership assets in connection with
the liquidation of the Partnership), the General Partner is required to pay to
the Partnership an amount equal to the least of (i) the deficiency in its
capital account, or (ii) 1.01% of the total capital contributions made by the
Unitholders. Through ownership of Units by the Purchaser, the potential
liability of the General Partner is effectively reduced. Although there was a
deficit in the capital account of the General Partner of $335,187 as of December
31, 1996 (equal to approximately $1,345 per Unit), such amount is subject to
future reduction through allocation of a portion of the taxable gain, if any,
that results from any sale of the Partnership's properties. Consequently, the
ultimate amount, if any, of the deficit and the date on which it would be paid
are indeterminable. Accordingly, the Purchaser has attributed no value to this
obligation in establishing the Purchase Price.
Fairness Opinion of Valuation Research Corporation.
The Purchaser retained Valuation Research to evaluate the fairness of
the Purchase Price, from a financial point of view, to unaffiliated Unitholders.
Valuation Research was selected by the Purchaser based on Valuation Research's
experience, expertise and familiarity with appraising and valuing real estate
assets and investments. Valuation Research is a nationally recognized appraisal
firm and is regularly engaged in the valuation of properties and securities in
connection with real estate assets. Valuation Research was retained to evaluate
the fairness of the Purchase Price established by the Purchaser. Valuation
Research did not determine or recommend the amount of consideration to be paid
pursuant to the Offer. Valuation Research has previously provided, and is
expected to continue to provide, appraisal services to affiliates of the
Purchaser at its customary fees. Other than such appraisal services, there is no
material relationship between Valuation Research or any of its affiliates and
the Purchaser or any of its affiliates which existed during the past two years
or which is mutually understood to be contemplated.
In connection with its engagement, Valuation Research rendered to the
Purchaser a written opinion dated February 28, 1997 that, as of such date, the
Offer is fair to unaffiliated Unitholders from a financial point of view. As
discussed below, Valuation Research's opinion is based upon certain assumptions
and is subject to certain limitations.
In arriving at its opinion, Valuation Research reviewed (i) selected
financial data for the Partnership as reported in the Partnership's public
reports as filed with the Commission for the past four years, (ii) unaudited
financial statements and other internal financial analyses for the Partnership's
properties, (iii) market data pertaining to the current real estate market in
the neighborhoods in which the properties are located, (iv) demographic and
economic histories and projections for the subject properties' neighborhoods,
(v) actual income and sales data for competing comparable properties and (vi)
other information, including data provided by the General Partner, and published
market data pertaining to the underlying assets of the Partnership. Valuation
Research also met with management to discuss the business and prospects of the
Partnership and became familiar with the terms of the Partnership Agreement.
In conducting its analysis, Valuation Research utilized two income
capitalization appraisal techniques known as the direct capitalization income
approach and a discounted cash flow analysis. The results of these approaches
were verified by using a second appraisal technique known as the direct sales
comparison approach.
For purposes of its analysis, Valuation Research estimated the net
operating income for each property for each year during a ten year period ending
December 31, 2006. Such net operating income was estimated by Valuation Research
through a three step process. First, Valuation Research estimated each
property's market rent potential based on an analysis of comparable properties
which were recently rented and an analysis of the actual rentals in place with
the subject property. Using this information, a potential gross income estimate
was made. This estimated potential gross income was projected to grow over the
course of the projection period at various rates based on current and forecasted
economic conditions in each of the property locations. Second, allowances for
vacancy and collection losses, based on market surveys in each of the property
locations and actual historical performance of the subject property, were
subtracted from the potential gross income estimate, resulting in an effective
gross income for each property. Third, operating expenses and capital
improvements of each property were deducted from its effective gross income.
Valuation Research estimated the operating expenses based on a combination of
historical expenses of the property and published market surveys. These
operating expenses were projected to grow at a 3% inflation rate per year over
the course of the projection period. Valuation Research estimated the cost and
timing of major capital improvements made to the properties by using the actual
age and size of each property and the projected amount and timing of
replacements for such major items as roofing, heating, ventilating and air
conditioning units. Such capital expenses were estimated at $400 per unit on a
composite basis. Finally, the net operating income of the properties was
calculated based on cash flow after the deduction of the above expenditures and
allowances.
5
<PAGE>
Based on the assumption that the Partnership commenced an orderly
liquidation of the properties, Valuation Research next applied capitalization
rates ranging from 9.5% to 10% to the net operating income after capital
expenditures estimated for each such property for the twelve-month period ended
December 31, 1997 to determine a range of capitalization values. From these
values, Valuation Research deducted the December 31, 1996 mortgage balance of
$15,885,365. Finally, expenses associated with liquidation of the portfolio were
deducted and working capital balances were added. Using this methodology,
Valuation Research found the implied value of the Partnership's assets to be
between $26,800 and $31,195 per Unit.
Valuation Research also conducted a discounted cash flow analysis to
determine the value of the Partnership's assets. It determined (i) the present
value of the forecasted cash flows from future operations of the properties and
(ii) the present value of the estimated proceeds of a sale of the property at
the conclusion of the projection period. In completing its analysis, Valuation
Research utilized financial and operating forecasts of each property's estimated
cash flow for the twelve-month periods ending December 31, 1997 to December 31,
2006 and applied discount rates of 10.5% to 11.5% to forecasted cash flow and to
a forecasted residual value. The residual value was based on capitalizing
forecasted cash flow in the last twelve month period at 10%. Since its
discounted cash flow analysis assumes the immediate sale of the properties to
third parties, Valuation Research did not take into account any tax
ramifications of the cash flow in its analysis. From these values, Valuation
Research deducted the December 31, 1996 mortgage balance of $15,885,365.
Finally, expenses associated with liquidation of the portfolio were deducted and
working capital balances were added. Using this methodology, Valuation Research
found the implied value of the Partnership's assets to be between $25,920 and
$31,155 per Unit.
Valuation Research also appraised the Partnership's assets through a
sales comparison approach to confirm its valuation of the Partnership's assets.
Valuation Research compiled data on recent sales of comparable apartment
complexes in each of the four subject markets. Using this market data,
adjustments were made to the reported transfer price to reflect differences in
physical and location attributes. The result is a range of transfer prices that
are applicable to each of the properties. Based on this analysis, a range of
selling prices for each of the properties was estimated. From these values,
Valuation Research deducted the December 31, 1996 mortgage balance of
$15,885,365. Finally, expenses associated with the liquidation of the portfolio
were deducted and working capital balances were added. Using this methodology,
Valuation Research found the implied value of the Partnership's assets to be
between $28,200 and $31,175 per Unit.
Based on its analysis and such other matters Valuation Research
considered relevant, it is Valuation Research's opinion that, as of February 28,
1997, the $30,000 Purchase Price is fair, from a financial point of view, to
tendering Unitholders.
Valuation Research relied without independent verification on the
accuracy and completeness of all of the financial and other information reviewed
by them for purposes of their opinion. Nothing came to Valuation Research's
attention, for purposes of their opinion, which caused them to question the
accuracy of the representation of the operations of the assets under review.
Valuation Research reasonably believed at the date of its opinion that
the assumptions underlying its financial forecasts were reasonable and that
there was a reasonable probability that the projections used in their analyses
would prove to be substantially correct. However, Valuation Research noted that
the actual revenues, expenses and net operating income of the properties
underlying the Partnership will depend to a large extent on factors that cannot
be predicted with certainty, and as a consequence, actual results might differ
from what they have forecasted. In addition, Valuation Research did not appraise
any of the Partnership's properties.
Neither Valuation Research nor any of its personnel have any present or
contemplated financial interest in the Partnership or the assets of the
Partnership. In addition, the compensation payable to Valuation Research is not
contingent on the conclusions stated in its opinion. See "The Tender Offer -
Section 13. Fees and Expenses" for a description of the fee arrangements with
Valuation Research.
A copy of the opinion furnished by Valuation Research is attached as an
exhibit to the Schedule 13E-3 filed by the Purchaser in connection with the
Offer. In addition, a copy of such opinion shall be made available for
inspection and copying at the principal executive offices of the Purchaser
during its regular business hours by any interested Unitholder or his
representative who has been so designated in writing.
6
<PAGE>
Certain Federal Income Tax Consequences
The following summary is a general discussion of certain federal income
tax consequences of a sale of Units pursuant to the Offer. This summary is based
on the Internal Revenue Code of 1986, as amended (the "Code"), applicable
Treasury Regulations thereunder, administrative rulings, practice and procedures
and judicial authority as of the date of the Offer. All of the foregoing are
subject to change, and any such change could affect the continuing accuracy of
this summary. This summary does not discuss all aspects of federal income
taxation that may be relevant to a particular Unitholder in light of such
Unitholder's specific circumstances or to certain types of Unitholders subject
to special treatment under the federal income tax laws (for example, foreign
persons, dealers in securities, banks, insurance companies and certain
tax-exempt organizations), nor does it discuss any aspect of state, local,
foreign or other tax laws. Sales of Units pursuant to the Offer will be taxable
transactions for federal income tax purposes, and may also be taxable
transactions under applicable state, local, foreign and other tax laws. EACH
UNITHOLDER SHOULD CONSULT HIS OR ITS TAX ADVISOR AS TO THE PARTICULAR TAX
CONSEQUENCES TO SUCH UNITHOLDER OF SELLING UNITS PURSUANT TO THE OFFER.
A taxable Unitholder will recognize gain or loss on a sale of Units
pursuant to the Offer equal to the difference between (i) the Unitholder's
"amount realized" on the sale and (ii) the Unitholder's adjusted tax basis in
the Units sold. The "amount realized" with respect to a Unit sold pursuant to
the Offer will be a sum equal to the amount of cash received by the Unitholder
for the Unit plus the amount of Partnership liabilities allocable to the Unit
(as determined under Code Section 752). The amount of a Unitholder's adjusted
tax basis in Units sold pursuant to the Offer will vary depending upon the
Unitholder's particular circumstances.
A tendering Unitholder will be allocated Partnership taxable income or
loss with respect to the Units sold pursuant to the Offer in accordance with the
provisions of the Partnership Agreement concerning transfers of Units. Such
allocations and any cash distributions made by the Partnership to a Unitholder
with respect to such Units will affect the Unitholder's adjusted tax basis in
his Units and, therefore, the amount of such Unitholder's taxable gain or loss
on sale of Units pursuant to the Offer. In this regard, tendering Unitholders
will be allocated a share of the Partnership's taxable income or loss for 1996
with respect to Units sold pursuant to the Offer but will not be entitled to
receive any further cash distributions to be made for 1996 with respect to such
Units.
Based on the results of Partnership operations through December 31,
1996, and without giving effect to Partnership operations, transactions or
distributions since that time, the Purchaser estimates that, depending on the
Unitholder's date of entry into the Partnership, a Unitholder who acquired Units
in the original offering of Units will recognize taxable gain of between
approximately $1,581 per Unit (for Units purchased in April 1992) and $606 per
Unit (for Units purchased in December 1992). Under the passive activity loss
rules (discussed below), such gain generally would be treated as passive
activity income, which can be offset (subject to any other applicable
limitations) by the Unitholder's passive activity losses, if any, from other
investments.
The gain or loss recognized by a Unitholder on a sale of a Unit
pursuant to the Offer generally will be treated as a capital gain or loss if the
Unit was held by the Unitholder as a capital asset. (The portion of a
Unitholder's gain on the sale that is attributable to "unrealized receivables"
(which include depreciation recapture) as defined in Code Section 751, however,
would be treated as ordinary income rather than capital gain.) Such capital gain
or loss will be treated as long-term capital gain or loss if the tendering
Unitholder's holding period for the Unit exceeds one year. Under current law,
long-term capital gains of individuals and other non-corporate taxpayers are
taxed at a maximum marginal federal income tax rate of 28%, whereas the maximum
marginal federal income tax rate for other income of such persons is 39.6%.
Capital losses are deductible only to the extent of capital gains, except that
non-corporate taxpayers may deduct up to $3,000 of capital losses in excess of
the amount of their capital gains against ordinary income. Excess capital losses
generally can be carried forward to succeeding years (a corpora-tion's
carryforward period is five years and a non-corporate taxpayer can carry forward
such losses indefinitely); in addition, corporations, but not non-corporate
taxpayers, are allowed to carry back excess capital losses to the three
preceding taxable years.
Under Code Section 469, a non-corporate taxpayer or personal service
corporation can deduct passive activity losses in any year only to the extent of
such person's passive activity income for such year, and closely held
corporations may not offset such losses against so-called "portfolio" income.
Gain or loss recognized on a sale of a Unit pursuant to the Offer by a
Unitholder who or which is subject to the passive activity loss limitation
generally would be treated as passive activity income or loss. If a Unitholder
recognizes a loss on a sale of a Unit pursuant to the Offer, such loss generally
would not be subject to the passive activity loss limitation provided the
Unitholder sells all his Units. If a Unitholder is unable to sell all of his
Units pursuant to the Offer, then such loss could not be deducted under the
passive activity loss rules (except to the extent of the Unitholder's passive
activity income from the Partnership or other sources) until the Unitholder's
remaining Units are sold. (See "SPECIAL FACTORS - Effects of the Offer".)
7
<PAGE>
A taxable Unitholder (other than corporations and certain foreign
individuals) who tenders Units may be subject to 31% backup withholding unless
the Unitholder provides a taxpayer identification number ("TIN") and certifies
that the TIN is correct or properly certifies that he is awaiting a TIN. A
Unitholder may avoid backup withholding by properly completing and signing the
Substitute Form W-9 included as part of the Letter of Transmittal. If a
Unitholder who is subject to backup withholding does not properly complete and
sign the Substitute Form W-9, the Purchaser will withhold 31% from payments to
such Unitholder.
Gain realized by a foreign Unitholder on a sale of a Unit pursuant to
the Offer will be subject to federal income tax. Under Section 1445 of the Code,
the transferee of a partnership interest held by a foreign person is generally
required to deduct and withhold a tax equal to 10% of the amount realized on the
disposition. The Purchaser will withhold 10% of the amount realized by a
tendering Unitholder from the Purchase Price to be made payable to such
Unitholder unless the Unitholder properly completes and signs the FIRPTA
Affidavit included as part of the Letter of Transmittal certifying the
Unitholder's TIN, that such Unitholder is not a foreign person and the
Unitholder's address. Amounts withheld would be creditable against a foreign
Unitholder's federal income tax liability and, if in excess thereof, a refund
could be obtained from the Internal Revenue Service by filing a U.S.
income tax return.
Although certain entities are generally exempt from federal income
taxation, such tax-exempt entities (including Individual Retirement Accounts)
are subject to federal income tax on any "unrelated business taxable income"
("UBTI"). A tax-exempt Unitholder may realize UBTI on a sale of Units pursuant
to the Offer to the extent that the Partnership's property is subject to
"acquisition indebtedness" (as defined in the Code) or if such Unitholder
acquired its Units with acquisition indebtedness. Such UBTI generally may be
offset by such Unitholder's net operating loss carryover, if any (determined
without taking into account any amount of income or deduction which is excluded
in computing UBTI), subject to applicable limitations.
8
<PAGE>
THE TENDER OFFER
Section 1. Terms of the Offer. Subject to the terms of the Offer, the
Purchaser will pay for Units validly tendered on or prior to the Expiration Date
and not withdrawn in accordance with Section 4 of this Offer to Purchase. The
term "Expiration Date" shall mean 12:00 Midnight, New York City time, on March
31, 1997, unless the Purchaser extends the period of time during which the Offer
is open. In the event the Offer is extended, the term "Expiration Date" shall
mean the latest time and date on which the Offer, as extended by the Purchaser,
shall expire.
IF, PRIOR TO THE EXPIRATION DATE, THE PURCHASER SHALL INCREASE THE
PURCHASE PRICE OFFERED TO UNITHOLDERS, SUCH INCREASED PURCHASE PRICE SHALL BE
PAID FOR ALL UNITS ACCEPTED FOR PAYMENT PURSUANT TO THE OFFER, WHETHER OR NOT
SUCH UNITS WERE TENDERED PRIOR TO SUCH INCREASE.
The Offer is conditioned on satisfaction of certain conditions. See
Section 11, which sets forth in full the conditions of the Offer. The Purchaser
reserves the right (but shall not be obligated), in its sole discretion, to
waive any or all of such conditions. If, on or prior to the Expiration Date, any
or all of such conditions have not been satisfied or waived, the Purchaser may
(i) decline to purchase any of the Units tendered, terminate the Offer and
return all tendered Units to tendering Unitholders, (ii) waive all the
unsatisfied conditions and, subject to complying with applicable rules and
regulations of the Commission, purchase, all Units validly tendered, (iii)
extend the Offer and, subject to the right of Unitholders to withdraw Units
until the Expiration Date, cause the Depositary to retain the Units that have
been tendered during the period or periods for which the Offer is extended, or
(iv) amend the Offer, including by increasing the Purchase Price.
Section 2. Proration; Acceptance for Payment and Payment for Units. If
the number of Units validly tendered on or prior to the Expiration Date and not
withdrawn is equal to or less than the total number of Units sought pursuant to
the Offer, the Purchaser will accept for payment, subject to the terms and
conditions of the Offer, all Units so tendered. If the number of Units validly
tendered on or prior to the Expiration Date and not withdrawn exceeds the total
number of Units sought pursuant to the Offer, the Purchaser will accept for
payment, subject to the terms and conditions of the Offer, the total number of
Units sought pursuant to the Offer on a pro rata basis (with such adjustments to
avoid purchase of fractional Units).
Subject to the terms and conditions of the Offer, the Purchaser will
pay for Units validly tendered and not withdrawn in accordance with Section 4 as
promptly as practicable following the Expiration Date. In all cases, the
Purchase Price will be paid only after timely receipt by the Depositary of a
properly completed and duly executed Letter of Transmittal and any other
documents required by the Letter of Transmittal. (See "Section 3. Procedures for
Tendering Units".)
For purposes of the Offer, the Purchaser shall be deemed to have
accepted for payment tendered Units when, as and if the Purchaser gives oral or
written notice to the Depositary of the Purchaser's acceptance for payment of
such Units pursuant to the Offer. Upon the terms and subject to the conditions
of the Offer, payment for Units tendered and accepted for payment pursuant to
the Offer will in all cases be made by deposit of the Purchase Price with the
Depositary, which will act as agent for the tendering Unitholders for the
purpose of receiving payment from the Purchaser and transmitting payment to
tendering Unitholders. Under no circumstances will interest be paid on the
Purchase Price by reason of any delay in making such payment.
If any tendered Units are not purchased for any reason, the Letter of
Transmittal with respect to such Units will be destroyed by the Purchaser. If
for any reason acceptance for payment of, or payment for, any Units tendered
pursuant to the Offer is delayed or the Purchaser is unable to accept for
payment, purchase or pay for Units tendered pursuant to the Offer, then, without
prejudice to the Purchaser's rights under Section 11, the Purchaser may cause
the Depositary to retain tendered Units and such Units may not be withdrawn
except to the extent that the tendering Unitholders are entitled to withdrawal
rights as described in Section 4; provided, however, that the Purchaser is
required, pursuant to Rule 14e-1(c) under the Exchange Act, to pay Unitholders
the Purchase Price in respect of Units tendered or return such Units promptly
after termination or withdrawal of the Offer.
Section 3. Procedures for Tendering Units.
Valid Tender. To validly tender Units, a properly completed and duly
executed Letter of Transmittal,and any other documents required by the Letter of
Transmittal, must be received by the Purchaser on or prior to the Expiration
Date.
9
<PAGE>
Signature Requirements. If the Letter of Transmittal is signed by the
registered holder of the Units and payment is to be made directly to that
holder, then no notarization or signature guarantee is required on the Letter of
Transmittal. Similarly, if the Units are tendered for the account of a member
firm of a registered national securities exchange, a member of the National
Association of Securities Dealers, Inc. or a commercial bank, savings bank,
credit union, savings and loan association or trust company having an office,
branch or agency in the United States (each an "Eligible Institution"), no
notarization or signature guarantee is required on the Letter of Transmittal.
However, in all other cases, all signatures on the Letter of Transmittal must
either be notarized or guaranteed by an Eligible Institution.
In order for a tendering Unitholder to participate in the Offer, Units
must be validly tendered and not withdrawn on or prior to the Expiration Date,
which is 12:00 Midnight, New York City time, on March 31, 1997, unless extended.
The method of delivery of the Letter of Transmittal and all other
required documents is at the option and risk of the tendering Unitholder and
delivery will be deemed made only when actually received by the Depositary.
Backup Federal Income Tax Withholding. To prevent the possible
application of backup federal income tax withholding with respect to payment of
the Purchase Price, a tendering Unitholder must provide the Purchaser with such
Unitholder's correct taxpayer identification number by completing the Substitute
Form W-9 included in the Letter of Transmittal. (See the Instructions to the
Letter of Transmittal and "SPECIAL FACTORS - Certain Federal Income Tax
Consequences".) In addition, if a tendering Unitholder does not provide his
correct taxpayer identification number, an additional $50 will be deducted from
the Purchase Price to pay the penalty imposed on the Purchaser by the Internal
Revenue Service for failing to provide a taxpayer identification number.
FIRPTA Withholding. To prevent the withholding of federal income tax in
an amount equal to 10% of the sum of the Purchase plus the amount of Partnership
liabilities allocable to each Unit purchased, each Unitholder must complete the
FIRPTA Affidavit included in the Letter of Transmittal certifying such
Unitholder's taxpayer identification number and address and that the Unitholder
is not a foreign person. (See the Instructions to the Letter of Transmittal and
"SPECIAL FACTORS - Certain Federal Income Tax Consequences".)
Other Requirements. By executing a Letter of Transmittal, a tendering
Unitholder irrevocably appoints the designees of the Purchaser as such
Unitholder's proxies, in the manner set forth in the Letter of Transmittal, each
with full power of substitution, to the full extent of such Unitholder's rights
with respect to the Units tendered by such Unitholder and accepted for payment
and purchased by the Purchaser. Such appointment will be effective when, and
only to the extent that, the Purchaser accepts such Units for payment. Upon such
acceptance for payment, all prior proxies given by such Unitholder with respect
to such Units will, without further action, be revoked, and no subsequent
proxies may be given (and if given will not be effective). The designees of the
Purchaser will, as to such Units, be empowered to exercise all voting and other
rights of such Unitholder as they in their sole discretion may deem proper at
any meeting of Unitholders, by written consent or otherwise. The Purchaser
reserves the right to require that, in order for Units to be deemed validly
tendered, immediately upon the Purchaser's acceptance for payment of such Units,
the Purchaser must be able to exercise full voting rights with respect to such
Units, including voting at any meeting of Unitholders then scheduled. In
addition, by executing a Letter of Transmittal, a Unitholder also assigns to the
Purchaser all of the Unitholder's rights to receive distributions from the
Partnership with respect to Units which are accepted for payment and purchased
pursuant to the Offer. (See "SPECIAL FACTORS - Certain Federal Income Tax
Consequences".) By executing a Letter of Transmittal, a tendering Unitholder
irrevocably appoints the Purchaser, as such Unitholder's attorney-in-fact, to
execute and deliver, on behalf of such Unitholder, an assignment transferring to
the Purchaser the Investor Certificate evidencing such Unitholder's ownership of
Units.
Determination of Validity; Rejection of Units; Waiver of Defects; No
Obligation to Give Notice of Defects. All questions as to the validity, form,
eligibility (including time of receipt) and acceptance for payment of any tender
of Units pursuant to the procedures described above will be determined by the
Purchaser, in its sole discretion, which determination shall be final and
binding. The Purchaser reserves the absolute right to reject any or all tenders
if not in proper form or if the acceptance of, or payment for, the Units
tendered may, in the opinion of the Purchaser's counsel, be unlawful. The
Purchaser also reserves the right to waive any defect or irregularity in any
tender with respect to any particular Units of any particular Unitholder, and
the Purchaser's interpretation of the terms and conditions of the Offer
(including the Letter of Transmittal and the Instructions thereto) will be final
and binding. Neither the Purchaser, the Depositary nor any other person will be
under any duty to give notification of any defects or irregularities in the
tender of any Units or will incur any liability for failure to give any such
notification.
10
<PAGE>
A tender of Units pursuant to any of the procedures described above
will constitute a binding agreement between the tendering Unitholder and the
Purchaser on the terms set forth in the Offer.
Section 4. Withdrawal Rights. Except as otherwise provided in this
Section 4, all tenders of Units pursuant to the Offer are irrevocable, provided
that Units tendered pursuant to the Offer may be withdrawn at any time prior to
the Expiration Date and, unless already accepted for payment as provided in this
Offer to Purchase, may also be withdrawn at any time after May 2, 1997.
For withdrawal to be effective, a written or facsimile transmission
notice of withdrawal must be timely received by the Depositary at the address
set forth on the back cover of this Offer to Purchase. Any such notice of
withdrawal must specify the name of the person who tendered the Units to be
withdrawn and must be signed by the person(s) who signed the Letter of
Transmittal in the same manner as the Letter of Transmittal was signed.
If purchase of, or payment for, Units is delayed for any reason or if
the Purchaser is unable to purchase or pay for Units for any reason, then,
without prejudice to the Purchaser's rights under the Offer, the Purchaser may
cause the Depositary to retain tendered Units and such Units may not be
withdrawn except to the extent that tendering Unitholders are entitled to
withdrawal rights as set forth in this Section 4; provided, however, that the
Purchaser is required, pursuant to Rule 14e-1(c) under the Exchange Act, to pay
Unitholders the Purchase Price in respect of Units tendered or return such Units
promptly after termination or withdrawal of the Offer.
Any Units properly withdrawn will be deemed not to be validly tendered
for purposes of the Offer. Withdrawn Units may be re-tendered, however, by
following any of the procedures described in Section 3 at any time prior to the
Expiration Date.
Section 5. Extension of Tender Period; Termination; Amendment. The
Purchaser expressly reserves the right, in its sole discretion, at any time and
from time to time, (i) to extend the period of time during which the Offer is
open and thereby delay acceptance for payment of, and the payment for, any
Units, (ii) to terminate the Offer and not accept for payment any Units not
already accepted for payment or paid for, (iii) upon the occurrence of any of
the conditions specified in Section 11, to delay the acceptance for payment of,
or payment for, any Units not already accepted for payment or paid for, and (iv)
to amend the Offer in any respect (including, without limitation, by increasing
the consideration offered, increasing or decreasing the number of Units being
sought, or both). Notice of any such termination or amendment will promptly be
disseminated to Unitholders in a manner reasonably designed to inform
Unitholders of such change. In the case of an extension of the Offer, such
extension will be followed by a press release or public announcement which will
be issued no later than 9:00 a.m., New York City time, on the next business day
after the scheduled Expiration Date, in accordance with Rule 14e-1(d) under the
Exchange Act.
If the Purchaser extends the Offer, or if the Purchaser (whether before
or after its acceptance for payment of Units) is delayed in its payment for
Units or is unable to pay for Units pursuant to the Offer for any reason, then,
without prejudice to the Purchaser's rights under the Offer, the Purchaser may
cause the Depositary to retain tendered Units and such Units may not be
withdrawn except to the extent tendering Unitholders are entitled to withdrawal
rights as described in Section 4; provided, however, that the Purchaser is
required, pursuant to Rule 14e-1(c) under the Exchange Act, to pay Unitholders
the Purchase Price in respect of Units tendered or return such Units promptly
after termination or withdrawal of the Offer.
If the Purchaser makes a material change in the terms of the Offer or
the information concerning the Offer or waives a material condition of the
Offer, the Purchaser will extend the Offer and disseminate additional tender
offer materials to the extent required under the Exchange Act. The minimum
period during which an offer must remain open following a material change in the
terms of the offer or information concerning the offer will depend upon the
facts and circumstances, including the relative materiality of the change in the
terms or information. In the Commission's view, an offer should remain open for
a minimum of five business days from the date the material change is first
published, sent or given to securityholders, and if material changes are made
with respect to information that approaches the significance of price or the
percentage of securities sought, a minimum of ten business days may be required
to allow for adequate dissemination to securityholders and for investor
response. As used in this Offer to Purchase, "business day" means any day other
than a Saturday, Sunday or a federal holiday, and consists of the time period
from 12:01 a.m. through 12:00 Midnight, New York City time.
Section 6. Future Plans. The Purchaser is acquiring the Units for
investment purposes. Following the completion of the Offer, the Purchaser may
acquire additional Units. Any such acquisition may be made through private
purchases or by any other means deemed advisable. Any such acquisition may be at
a price higher or lower than the price to be paid for the Units purchased
pursuant to the Offer. Neither the Purchaser nor the General Partner has any
present plans or intentions with respect to a merger, reorganization or
liquidation of the Partnership,
11
<PAGE>
a sale of assets or refinancing of any of the Partnership's properties or a
change in the management, capitalization or distribution policy of the
Partnership. However, the Purchaser believes that consistent with its fiduciary
obligations the General Partner will continue to seek to maximize returns to
investors in its Units.
Section 7. Certain Information Concerning the Partnership. Information
included herein concerning the Partnership is derived from the Partnership's
publicly-filed reports. Additional financial and other information concerning
the Partnership is contained in the Partnership's Annual Reports on Form 10-K,
Quarterly Reports on Form 10-Q and other filings with the Commission. Such
reports and other documents may be examined and copies may be obtained from the
offices of the Commission at 450 Fifth Street, N.W., Washington, D.C 20549, and
at the regional offices of the Commission located in the Northwestern Atrium
Center, 500 Madison Street, Suite 1400, Chicago, Illinois 60661, and 7 World
Trade Center, New York, New York 10048. Copies should be available by mail upon
payment of the Commission's customary charges by writing to the Commission's
principal offices at 450 Fifth Street, N.W., Washington, D.C. 20549. The
Purchaser disclaims any responsibility for the information included in such
reports and extracted in this Offer to Purchase.
The Partnership was organized in September 1991 under the laws of the
State of Maryland. Its principal executive offices are located at One
International Place, Boston, Massachusetts 02110. Its telephone number is (617)
330-8600. The Partnership's only business is investing in existing,
income-producing residential apartment properties.
In July 1995, Apollo Real Estate Investment Fund, L.P. ("Apollo Fund
I") acquired indirect ownership and control of the General Partner. See the
Partnership's Form 10-K for the year ended December 31, 1995 for additional
information with respect to the transaction. The General Partner is currently
indirectly owned and controlled by Apollo Fund I and Apollo Real Estate
Investment Fund II, L.P. ("Apollo Fund II"). Apollo Fund I and Apollo Fund II
are private real estate investment funds organized in 1993 and 1996,
respectively, to make direct and indirect investments in real estate assets,
joint ventures and operating companies. Apollo Real Estate Advisors, L.P.
("AREA") and its affiliate, Apollo Real Estate Advisors II, L.P. ("AREA II"),
serve as the respective general partners of Apollo Fund I and Apollo Fund II.
Apollo Fund II is an affiliate of the Purchaser.
Properties.
A description of the properties which the Partnership owns is as
follows. All properties are owned in fee.
<TABLE>
<CAPTION>
Acquisition Acquisition
Property Name Location No. of Units Date Cost
- -------------------------- ---------------- --------------- ------------ -----------
<S> <C> <C> <C> <C>
Chesapeake Apts. Austin, TX 124 1/17/92 $1,855,000
Covington Creek Apts. Irving, TX 248 11/18/92 $6,300,000
Northside Circle Apts. Atlanta, GA 219 1/20/93 $4,450,000
Webb Bridge Crossing Alpharetta, GA 164 11/22/91 $4,725,000
Apts.
- --------------------------------------------------------------------------------------
TOTAL 755 $17,330,000
======================================================================================
</TABLE>
12
<PAGE>
Occupancy.
The following chart sets forth the occupancy and average rent per
apartment unit for the years ended December 31, 1995, 1994, 1993 and 1992:
<TABLE>
<CAPTION>
Chesapeake Covington Creek Northside Circle Webb Bridge
-------------------- -------------------- -------------------- -------------------
Average Average Average Average
Year Occupancy Rent/unit Occupancy Rent/unit Occupancy Rent/unit Occupancy Rent/unit
- ----- ---------- ---------- ----------- --------- ---------- --------- ---------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1992 95.8% $355/mo -- -- -- -- 96.2% $528/mo
1993 96.1% $421/mo 93.4% $498/mo 92.0% $527/mo 96.3% $555/mo
1994 95.8% $471/mo 94.0% $516/mo 92.6% $582/mo 96.9% $584/mo
1995 96.3% $504/mo 93.2% $536/mo 90.3% $623/mo 91.1% $650/mo
</TABLE>
Real Estate and Accumulated Depreciation.
Set forth below is the carrying value and accumulated depreciation of
the Partnership's properties as of December 31, 1995.
<TABLE>
<CAPTION>
Buildings,
Description and Improvements & Accumulated
Ownership Land Personal Property Total Depreciation Depreciable Life
- ------------------- ----------- ---------------- -------------- ------------- ---------------
<S> <C> <C> <C> <C> <C>
Chesapeake Apts., $316,520 $2,059,530 $2,376,050 $394,147 3-40 yrs.
Austin, Tx
Covington Creek $1,198,378 $5,347,584 $6,545,962 $518,456 5-40 yrs.
Apts., Irving, TX
Northside Circle $1,342,806 $3,432,858 $4,775,664 $338,244 3-40 yrs.
Apts., Atlanta, GA
Webb Bridge $808,737 $4,139,458 $4,948,195 $455,626 5-40 yrs.
Crossing Apts.,
Atlanta, GA
----------------------------------------------------------------------------------
$3,666,441 $14,979,430 $18,645,871 $1,706,473
==================================================================================
</TABLE>
The total cost of land, buildings, improvements and personal property
net of accumulated depreciation at December 31, 1995 for federal income tax
purposes is $16,476,353.
Long Term Debt.
On January 5, 1996, the Partnership closed a new first mortgage loan in
the amount of $16,000,000 secured by all of the properties. The loan amount was
allocated $2,080,000, $4,320,000, $5,120,000 and $4,480,000 to Chesapeake
Apartments, Covington Creek Apartments, Northside Circle Apartments and Webb
Crossing Apartments, respectively. The mortgage loan bears interest at an
initial rate of 7.27%, requires monthly principal and interest payments of
approximately $109,000 and will be fully amortized on February 11, 2026. The
Partnership has the option to prepay the mortgage loan without penalty on, or
three months before, February 1, 2003. If the Partnership does not elect to
prepay the loan, the interest rate will be adjusted to the greater of 12.27% or
a "Treasury Rate" (as defined) plus 7.75 percentage points.
13
<PAGE>
Selected Financial Data.
The following is a summary of certain financial data for the
Partnership for the periods indicated.
<TABLE>
<CAPTION>
For the Nine Months Ended
September 30 For the Year Ended or as of December 31,
------------------------------ -----------------------------------------------------------------------
1996 1995 1995 1994 1993 1992 1991
---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Rental Income $ 3,653,000 $ 3,493,000 $ 4,712,752 $ 4,484,341 $ 4,078,483 $ 1,607,009 $ 101,506
Interest and Other
Income $ 248,000 $ 327,000 $ 434,971 $ 293,229 $ 271,959 $ 291,693 $ 8,320
----------- ---------- ------------ ------------ ------------ ------------ -----------
Total Income $ 3,901,000 $ 3,820,000 $ 5,147,723 $ 4,777,570 $ 4,350,442 $ 1,898,702 $ 109,826
=========== ========== ============ ============ ============ ============ ===========
Total Expenses $ 3,487,000 $ 2,382,000 $ 3,260,176 $ 3,044,415 $ 2,907,454 $ 1,343,862 $ 92,915
=========== ========== ============ ============ ============ ============ ===========
Net Income $ 414,000 $ 1,438,000 $ 1,887,547 $ 1,733,155 $ 1,442,988 $ 554,840 $ 16,911
=========== ========== ============ ============ ============ ============ ===========
Net Income per Unit $ 1,640 $ 5,524 $ 7,250 $ 6,725 $ 5,599 varies with the date of admission
=========== ========== ============ ============ ============
Total Assets $ 21,698,000 $22,108,733 $ 22,499,215 $ 22,824,380 $ 23,106,140 $ 23,185,136 $ 4,971,552
Mortgage Payable $ 15,934,000 $ -- $ -- -- -- -- --
Distributions per Unit $ 68,708 $ 8,700 $ 8,700 $ 7,790 $ 7,072 $ 0 $ 0
Book Value per Unit $ 20,984 N/A $ 88,054 N/A N/A N/A N/A
Earnings/Fixed
Charges 29% N/A N/A N/A N/A N/A N/A
</TABLE>
For additional financial information concerning the Partnership, see Schedule 2
to the Offer to Purchase.
Section 8. Conflicts of Interest and Transactions with Affiliates. The
General Partner, the Purchaser and their affiliates have conflicts of interest
with respect to the Offer as set forth below.
Conflicts of Interest With Respect to the Offer. The General Partner has
a conflict of interest with respect to the Offer, including as a result of its
affiliation with the Purchaser. (See "Section 9. Certain Information
Concerning the Purchaser".)
Voting by the Purchaser. As a result of the Offer, the Purchaser may be
in a position to significantly influence all Partnership decisions on which
Unitholders may vote. This means that (i) non-tendering Unitholders could be
prevented from taking action they desire but that the Purchaser opposes and (ii)
the Purchaser may be able to take action desired by the Purchaser but opposed by
the non-tendering Unitholders. (See "SPECIAL FACTORS - Effects of the Offer".)
Transactions with Affiliates. Winthrop Management, an affiliate of the
General Partner, is entitled to receive an annual property management fee from
the Partnership equal to 5% of gross receipts from the Partnership's properties.
The annual property management fees paid by the Partnership to Winthrop
Management for the years ended December 31, 1995, 1994 and 1993 and the nine
months ended September 30, 1996 were $243,313, $229,628, $202,388 and $190,000,
respectively. Winthrop Management was also paid a fee of $80,000 by the
Partnership in connection with the January 5, 1996 loan.
The General Partner and its affiliates received cash distributions from
the Partnership in the amount of $90,151, $64,874, $113,026 and $11,000 for the
years ended December 31, 1995, 1994, 1993 and the nine months ended September
30, 1996, respectively.
See "Section 7. Certain Information Concerning the Partnership" for
information with regard to a recent change in control of the General Partner.
14
<PAGE>
Section 9. Certain Information Concerning the Purchaser. The Purchaser
is a newly formed Delaware limited liability company. The members of the
Purchaser are AP GP Win Master, L.P. ("Win Master"), a newly formed Delaware
limited partnership, the general partner of which is AP GP Win Master, Inc.
("Win Master GP"), a wholly-owned subsidiary of Apollo Fund II, and AP Wem
Associates L.P. ("Wem Associates"), a newly formed Delaware limited partnership,
the general partner of which is Win Master. The address of the principal office
of the Purchaser is One International Place, Boston, Massachusetts 02110.
Members of the General Partner's senior management may be afforded the
opportunity to purchase limited partnership interests in Wem Associates.
Apollo Fund I and Apollo Fund II are private real estate investment
funds organized in 1993 and 1996, respectively, to make direct and indirect
investments in real estate assets, joint ventures and operating companies.
Apollo Real Estate Capital Advisors II, Inc. ("Advisors") is the general partner
of AREA II, the general partner of Apollo Fund II. Since its inception, the
directors of Advisors have been Leon D. Black and John J. Hannan, who were
founding principals of Apollo Advisors, L.P., which, together with an affiliate,
serves as the general partner of Apollo Investment Fund, L.P., AIF II, L.P. and
Apollo Investment Fund III, L.P., private securities investment funds, and,
together with William L. Mack, of AREA and AREA II. Mr. Mack has been the
President and Managing Partner of the Mack Organization, a national owner and
developer of and investor in office and industrial buildings as well as other
commercial properties principally in the New York/New Jersey metropolitan area
as well as throughout the United States since 1963. The address of the principal
office of Advisors, AREA II, Apollo Fund II, Win Master and Wem Associates, and
the business address of Messrs. Black, Hannan and Mack, is c/o Apollo Real
Estate Advisors, L.P., 1301 Avenue of the Americas, New York, New York 10019.
For certain information concerning the executive officers and directors
of the Purchaser and Win Master GP, see Schedule 1 to this Offer to Purchase.
Except as otherwise set forth herein, (i) neither the Purchaser, Win
Master GP, Advisors, to the best of Purchaser's knowledge, the persons listed on
Schedule 1, nor any affiliate of the foregoing beneficially owns or has a right
to acquire any Units, (ii) neither the Purchaser, Win Master GP, Advisors, to
the best of Purchaser's knowledge, the persons listed on Schedule 1, nor any
affiliate thereof or director, executive officer or subsidiary of Win Master GP
or Advisors has effected any transaction in the Units within the past 60 days,
(iii) neither the Purchaser, Win Master GP, Advisors, to the best of Purchaser's
knowledge, any of the persons listed on Schedule 1, nor any director or
executive officer of Win Master GP or Advisors, has any contract, arrangement,
understanding or relationship with any other person with respect to any
securities of the Partnership, including, but not limited to, contracts,
arrangements, understandings or relationships concerning the transfer or voting
thereof, joint ventures, loan or option arrangements, puts or calls, guarantees
of loans, guarantees against loss or the giving or withholding of proxies, (iv)
there have been no transactions or business relationships which would be
required to be disclosed under the rules and regulations of the Commission
between any of the Purchaser, Win Master GP, Advisors, or, to the best of
Purchaser's knowledge, the persons listed on Schedule 1, on the one hand, and
the Partnership or its affiliates, on the other hand, and (v) there have been no
contracts, negotiations or transactions between the Purchaser, Win Master GP,
Advisors, or, to the best of Purchaser's knowledge, the persons listed on
Schedule 1, on the one hand, and the Partnership or its affiliates, on the other
hand, concerning a merger, consolidation or acquisition, tender offer or other
acquisition of securities, an election of directors or a sale or other transfer
of a material amount of assets.
The Purchaser owns two Units which it acquired in February 1997 from
its affiliate for $30,000 per Unit.
Section 10. Source of Funds. The Purchaser expects that $3,390,000
(exclusive of fees and expenses) would be required to purchase the Units sought
pursuant to the Offer, if tendered. The Purchaser presently contemplates that it
will obtain all of such funds (plus amounts to pay fees and expenses) from
capital contributions from its members who have an aggregate net worth
substantially in excess of the amount required to purchase the Units.
Section 11. Conditions of the Offer. Notwithstanding any other term of
the Offer, the Purchaser shall not be required to accept for payment or to pay
for any Units tendered if all authorizations, consents, orders or approvals of,
or declarations or filings with, or expirations of waiting periods imposed by,
any court, administrative agency or commission or other governmental authority
or instrumentality, domestic or foreign, necessary for the consummation of the
transactions contemplated by the Offer shall not have been filed, occurred or
been obtained. Furthermore, notwithstanding any other term of the Offer, the
Purchaser shall not be required to accept for payment or pay for any Units not
theretofore accepted for payment or paid for and may terminate or amend the
Offer as to such Units if, at any time on or after the date of the Offer and
before the acceptance of such Units for payment or the payment therefor, or the
later thereof, as applicable and as determined by the Purchaser, any of the
following conditions exists:
15
<PAGE>
(a) a preliminary or permanent injunction or other order of
any federal or state court, government or governmental authority or
agency shall have been issued and shall remain in effect which (i)
makes illegal, delays or otherwise directly or indirectly restrains or
prohibits the making of the Offer or the acceptance for payment of or
payment for any Units by the Purchaser, (ii) imposes or confirms
limitations on the ability of the Purchaser effectively to exercise
full rights of ownership of any Units, including, without limitation,
the right to vote any Units acquired by the Purchaser pursuant to the
Offer or otherwise on all matters properly presented to the
Partnership's Unitholders, (iii) requires divestiture by the Purchaser
of any Units, (iv) causes any material diminution of the benefits to be
derived by the Purchaser as a result of the transactions contemplated
by the Offer, or (v) might materially adversely affect the business,
properties, assets, liabilities, financial condition, operations,
results of operations or prospects of the Purchaser or the Partnership;
(b) there shall be any action taken, or any statute, rule,
regulation or order proposed, enacted, enforced, promulgated, issued or
deemed applicable to the Offer by any federal or state court,
government or governmental authority or agency, which might, directly
or indirectly, result in any of the consequences referred to in clauses
(i) through (v) of paragraph (a) above;
(c) any change or development shall have occurred or been
threatened since the date hereof, in the business, properties, assets,
liabilities, financial condition, operations, results of operations or
prospects of the Partnership, which, in the reasonable judgment of the
Purchaser, is or may be materially adverse to the Partnership, or the
Purchaser shall have become aware of any fact that, in the reasonable
judgment of the Purchaser, does or may have a material adverse effect
on the value of the Units;
(d) there shall have occurred (i) any general suspension of
trading in, or limitation on prices for, securities on any national
securities exchange or in the over-the-counter market in the United
States, (ii) a declaration of a banking moratorium or any suspension of
payments in respect of banks in the United States, (iii) any limitation
by any governmental authority on, or other event which might affect,
the extension of credit by lending institutions or result in any
imposition of currency controls in the United States, (iv) a
commencement of a war or armed hostilities or other national or
international calamity directly or indirectly involving the United
States, (v) a material change in United States or other currency
exchange rates or a suspension of a limitation on the markets thereof,
or (vi) in the case of any of the foregoing existing at the time of the
commencement of the Offer, a material acceleration or worsening
thereof;
(e) there shall have been threatened, instituted or pending
any action or proceeding before any court or government agency or other
regulatory or administrative agency or commission or by any other
person challenging the acquisition of any Units pursuant to the Offer,
or otherwise directly or indirectly relating to the Offer, or
otherwise, in the reasonable judgment of the Purchaser, adversely
affecting the Purchaser or the Partnership; and
(f) the Partnership shall have (1) issued, or authorized or
proposed the issuance of, any partnership interests of any class, or
any securities convertible into, or rights, warrants or options to
acquire, any such interests or other convertible securities, (2) issued
or authorized or proposed the issuance of any other securities in
respect of, in lieu of, or in substitution for, all or any of the
presently outstanding Units, (3) refinanced any of the Partnership's
properties, other than in the ordinary course of the Partnership's
business and consistent with the past practice, (4) declared or paid
any distribution, other than in cash and consistent with past practice,
on any of its partnership interests, or (5) the Partnership or the
General Partner shall have authorized, proposed or announced its
intention to propose any merger, consolidation or business combination
transaction, acquisition of assets, disposition of assets or material
change in its capitalization, or any comparable event not in the
ordinary course of business and consistent with past practice.
The foregoing conditions are for the sole benefit of the Purchaser and
may be asserted by the Purchaser regardless of the circumstances giving rise to
such conditions or may be waived by the Purchaser in whole or in part at any
time and from time to time in its sole discretion. Any determination by the
Purchaser concerning the events described above will be final and binding upon
all parties. Notwithstanding anything to the contrary set forth in this Section
11, all conditions set forth in this Section 11 must be satisfied or waived
prior to the Expiration Date.
16
<PAGE>
Section 12. Certain Legal Matters.
General. Except as set forth in this Section 12, the Purchaser is not
aware of any filings, approvals or other actions by any domestic or foreign
governmental or administrative agency that would be required prior to the
acquisition of Units by the Purchaser pursuant to the Offer. Should any such
approval or other action be required, it is the Purchaser's present intention
that such additional approval or action would be sought. While there is no
present intent to delay the purchase of Units tendered pursuant to the Offer
pending receipt of any such additional approval or the taking of any such
action, there can be no assurance that any such additional approval or action,
if needed, would be obtained without substantial conditions or that adverse
consequences might not result to the Partnership's business, or that certain
parts of the Partnership's business might not have to be disposed of or held
separate or other substantial conditions complied with in order to obtain such
approval or action, any of which could cause the Purchaser to elect to terminate
the Offer without purchasing Units thereunder. The Purchaser's obligation to
purchase and pay for Units is subject to certain conditions, including
conditions related to the legal matters discussed in this Section 12.
Antitrust. The Purchaser does not believe that the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended, is applicable to the acquisition
of Units contemplated by the Offer.
Margin Requirements. The Units are not "margin securities" under the
regulations of the Board of Governors of the Federal Reserve System and,
accordingly, such regulations are not applicable to the Offer.
State Takeover Laws. A number of states have adopted anti-takeover laws
which purport, to varying degrees, to be applicable to attempts to acquire
securities of corporations which are incorporated in such states or which have
substantial assets, securityholders, principal executive offices or principal
places of business therein. Although the Purchaser has not attempted to comply
with any state anti-takeover statutes in connection with the Offer, the
Purchaser reserves the right to challenge the validity or applicability of any
state law allegedly applicable to the Offer and nothing in this Offer to
Purchase nor any action taken in connection herewith is intended as a waiver of
such right. If any state anti-takeover statute is applicable to the Offer, the
Purchaser might be unable to accept for payment or purchase Units tendered
pursuant to the Offer or be delayed in continuing or consummating the Offer. In
such case, the Purchaser may not be obligated to accept for purchase or pay for
any Units tendered.
Section 13. Fees and Expenses. Except as set forth in this Section 13,
the Purchaser will not pay any fees or commissions to any broker, dealer or
other person for soliciting tenders of Units pursuant to the Offer. The
Purchaser has retained its affiliate, The Swensen Group, L.L.C., to act as
Information Agent and as Depositary in connection with the Offer. The Purchaser
will pay The Swensen Group, L.L.C. reasonable and customary compensation for its
respective services in connection with the Offer, plus reimbursement for
out-of-pocket expenses. The Purchaser will also pay all costs and expenses of
printing and mailing the Offer and its legal fees and expenses. The Purchaser
has retained Valuation Research to evaluate the fairness of the Purchase Price
to unaffiliated Unitholders. The Purchaser has agreed to pay Valuation Research
$35,000 upon delivery of its opinion.
Section 14. Miscellaneous. The Purchaser is not aware of any
jurisdiction in which the making of the Offer is not in compliance with
applicable law. If the Purchaser becomes aware of any jurisdiction in which the
making of the Offer would not be in compliance with applicable law, the
Purchaser will make a good faith effort to comply with any such law. If, after
such good faith effort, the Purchaser cannot comply with any such law, the Offer
will not be made to (nor will tenders be accepted from or on behalf of) the
holders of Units residing in such jurisdiction.
No person has been authorized to give any information or to make any
representation on behalf of the Purchaser not contained herein or in the Letter
of Transmittal and, if given or made, such information or representation must
not be relied upon as having been authorized.
The Purchaser has filed with the Commission a Transaction Statement on
Schedule 13E-3 pursuant to Rule 13E-3 under the Exchange Act, furnishing certain
additional information with respect to the Offer, and may file amendments
thereto. The Schedule 13E-3 and any amendments thereto, including exhibits, may
be inspected and copies may be obtained at the same places and in the same
manner as set forth in Section 7 hereof (except that they will not be available
at the regional offices of the Commission).
LON-WAI ASSOCIATES L.L.C.
March 4, 1997
17
<PAGE>
Appendix A
GLOSSARY
Advisors: Apollo Real Estate Capital Advisors II, Inc.
Apollo Fund I: Apollo Real Estate Investment Fund, L.P.
Apollo Fund II: Apollo Real Estate Investment Fund II, L.P.
AREA: Apollo Real Estate Advisors, L.P.
AREA II: Apollo Real Estate Advisors II, L.P.
Business Day: Any day other than Saturday, Sunday or a federal holiday, and
consists of the time period from 12:01 a.m. through 12:00 Midnight, New York
City time
Cap Rate: The 10% capitalization rate used in calculating the Estimated
Liquidation Value
Code: The Internal Revenue Code of 1986, as amended
Commission: The Securities and Exchange Commission
Depositary: The Swensen Group, L.L.C.
Eligible Institution: A member firm of a registered national securities
exchange, a member of the National Association of Securities Dealers, Inc., a
commercial bank, savings bank, credit union, savings and loan association or
trust company having an office, branch or agency in the United States
Estimated Liquidation Value: The Purchaser's estimate of the liquidation value
of the Partnership's assets, as determined in the "SPECIAL FACTORS" section of
the Offer to Purchase
Exchange Act: Securities Exchange Act of 1934, as amended
Expiration Date: 12:00 Midnight, New York City Time on March 31, 1997, unless
and as extended
General Partner: WAI Associates Limited Partnership, the general partner of the
Partnership
Information Agent: The Swensen Group, L.L.C.
NOI: Net Operating Income
Offer: This offer of the Purchaser set forth in this Offer to Purchase and the
related Letter of Transmittal, as each may be supplemented or amended from time
to time
Offer to Purchase: This Offer of the Purchaser, dated March 4, 1997.
Partnership: Winthrop Apartment Investors Limited Partnership, a Maryland
limited partnership.
Purchase Price: The amount of cash paid to each Unitholder for each Unit
tendered upon consummation of the Offer.
Purchaser: LON-WAI Associates L.L.C.
Reserve: $400 per apartment unit
TIN: Taxpayer identification number
Unitholders: Holders of Units
Units: Limited partnership interests or assignee interests of the Partnership
Valuation Research: Valuation Research Corporation, an independent appraiser
<PAGE>
Schedule 1
INFORMATION WITH RESPECT TO THE EXECUTIVE
OFFICERS AND DIRECTORS OF AP GP WIN
MASTER, INC.
Set forth below is the name, current business address, present principal
occupation, and employment history for at least the past five years of each
director and executive officer of the Purchaser and Win Master GP. Each person
listed below is a citizen of the United States.
Present Principal Occupation or Employment; Material Occupation,
Position, Office or Employment for the Past Five Years
Michael D. Weiner. Mr. Weiner has been an officer and director of Win Master GP
since November, 1996 and an officer of Advisors since its inception. Since 1993,
Mr. Weiner has been associated with AREA and since May 1996 with AREA II which
respectively act as managing general partner of Apollo Fund I and Apollo Fund
II. In addition, since 1992, Mr. Weiner has been associated with Apollo
Advisors, L.P., which, together with an affiliate, serves as the managing
general partner of Apollo Investment Fund, L.P., AIF II, L.P. and Apollo
Investment Fund III, L.P., private securities investment funds. From prior to
1992, Mr. Weiner was a partner of the national law firm of Morgan, Lewis &
Bockius. Mr. Weiner is also a director of Applause, Inc., Capital Apartment
Properties, Inc., Continental Graphics Holdings, Inc., Converse, Inc., Florsheim
Group, Inc. and Furniture Brands International, Inc. Mr. Weiner's business
address is 1999 Avenue of the Stars, Los Angeles, California 90067-6048.
W. Edward Scheetz. Mr. Scheetz has been an officer and director of Win Master
GP since November, 1996 and an officer of Advisors since its inception. Since
1993, Mr. Scheetz has been a principal of AREA and since May 1996 of AREA II
which respectively act as managing general partner of Apollo Fund I and Apollo
Fund II. From prior to 1993, Mr. Scheetz was a principal of Trammell Crow
Ventures, a national real estate investment firm. Mr. Scheetz is also a director
of Capital Apartment Properties, Inc., Metropolis Realty Inc., Koger Equity
Inc., NextHealth Inc., Roland International, Inc., Koll Management Services,
Inc. and Western Pacific Housing Corp. Mr. Scheetz' business address is 1301
Avenue of the Americas, New York, New York 10019.
Michael L. Ashner. Mr. Ashner has been an officer of Win Master GP since
November, 1996. Since January 1996, Mr. Ashner has also been President and Chief
Executive Officer of Winthrop Financial Associates, A Limited Partnership
("Winthrop"), which is engaged in the real estate investment business. From June
1994 until January 1996, Mr. Ashner was a Director, President and Co-Chairman of
National Property Investors, Inc., a real estate investment firm ("NPI"). Since
1981, Mr. Ashner has also served as President of Exeter Capital Corporation, a
firm which has organized and administered real estate limited partnerships. Mr.
Ashner has substantial investments and manages numerous partnerships and
corporations which own real estate investments. Mr. Ashner's business address is
100 Jericho Quadrangle, Suite 214, Jericho, New York 11753.
Lee S. Neibart. Mr. Neibart has been an officer of Win Master GP since November
1996 and an officer of Advisors since its inception. Since 1993, Mr. Neibart has
been associated with AREA and since May 1996 with AREA II which respectively act
as managing general partner of Apollo Fund I and Apollo Fund II. Prior to 1993,
Mr. Neibart was Executive Vice President and Chief Operating Officer of The
Robert Martin Company, a private real estate development and management firm
based in Westchester County, New York. Mr. Neibart is also a director of Capital
Apartment Properties, Inc., Metropolis Realty Inc., Koger Equity Inc.,
NextHealth Inc., Roland International, Inc. and a past President of the NAIOP in
New York. Mr. Neibart's business address is 1301 Avenue of the Americas, New
York, New York 10019.
Peter Braverman. Mr. Braverman has been an officer of the Win Master GP since
November, 1996. Since January 1996, Mr. Braverman has been a Senior Vice
President of Winthrop. From June 1995 until January 1996, Mr. Braverman was a
Vice President of NPI. From June 1991 until March 1994, Mr. Braverman was
President of the Braverman Group, a firm specializing in management consulting
for the real estate and construction industries. From 1988 to 1991, Mr.
Braverman was Vice President and Assistant Secretary of Fischbach Corporation, a
publicly traded, international real estate and construction firm. Mr.
Braverman's business address is 100 Jericho Quadrangle, Suite 214, Jericho, New
York 11753.
<PAGE>
Schedule 2
Winthrop Apartment Investors Limited Partnership(1)
Table of Contents
Audited Balance Sheets - December 31, 1995
and 1994 F-2
Audited Statements of Operations for the Years Ended
December 31, 1995, 1994 and 1993 F-3
Audited Statements of Changes in Partners' Capital
for the Years Ended December 31, 1995,
1994 and 1993 F-4
Audited Statements of Cash Flows for the Years Ended
December 31, 1995, 1994 and 1993 F-5
Notes to Financial Statements - December 31, 1995 F-6
Balance Sheets (Unaudited) -- September 30, 1996
and December 31, 1995 F-9
Statements of Operations (Unaudited) for the
Nine Months Ended September 30, 1996 and September 30, 1995 F-10
Statements of Operations (Unaudited) for the
Three Months Ended September 30, 1996 and September 30, 1995 F-11
Statements of Cash Flows (Unaudited) for the
Nine Months Ended September 30, 1996 and Septeber 30, 1995 F-12
Statements of Partners' Capital (Unaudited) for
the Nine Months Ended September 30, 1996 F-13
Notes to Financial Statements - September 30, 1996 F-14
- --------
(1) The audited financial information set forth in this Schedule 2 has
been extracted from the Partnership's Annual Report on Form 10-K for the year
ended Deember 31, 1995. The unaudited financial information set forth in this
Schedule 2 has been extracted from the Partnership's Quarterly Report on Form
10-Q for the quarterly period ended September 30, 1996.
<PAGE>
WINTHROP APARTMENT INVESTORS
LIMITED PARTNERSHIP
BALANCE SHEETS--DECEMBER 31, 1995 AND 1994
ASSETS
<TABLE>
<CAPTION>
1995 1994
REAL ESTATE, AT COST:
<S> <C> <C>
Land $ 3,666,441 $ 3,666,441
Buildings and improvements, net of accumulated
depreciation of $1,706,472 and $1,168,349 in
1995 and 1994, respectively 13,272,958 13,575,990
------------ ------------
16,939,399 17,242,431
OTHER ASSETS:
Cash 3,454,800 3,581,214
Security deposits, prepaid expenses and other assets 305,855 239,221
Deferred costs, net of accumulated amortization of $293,180
and $210,827 in 1995 and 1994, respectively 1,799,161 1,761,514
------------- ------------
$ 22,499,215 $ 22,824,380
============ ============
<CAPTION>
LIABILITIES AND PARTNERS' CAPITAL
LIABILITIES:
<S> <C> <C>
Accrued real estate taxes $ 291,795 $ 237,422
Accounts payable 45,340 34,932
Security deposits 124,623 127,521
Accrued expenses and other liabilities 43,635 53,079
--------------- ------------
505,393 452,954
-------------- ------------
PARTNERS' CAPITAL:
Limited partners - 250 Units of limited partnership interest
authorized and outstanding 22,013,444 22,376,021
General partner (19,622) (4,595)
---------------- --------------
21,993,822 22,371,426
-------------- ------------
$ 22,499,215 $22,824,380
============ -==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-2
<PAGE>
WINTHROP APARTMENT INVESTORS
LIMITED PARTNERSHIP
STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
<TABLE>
<CAPTION>
1995 1994 1993
INCOME:
<S> <C> <C> <C>
Rental $ 4,712,752 $ 4,484,341 $ 4,078,483
Interest 204,350 127,943 122,823
Other 230,621 165,286 149,136
------------------------- -------------- ------------------
5,147,723 4,777,570 4,350,442
------------------------- -------------- ------------------
EXPENSES:
Leasing 190,992 149,938 176,991
General and administrative 305,943 310,030 334,818
Management fees 243,313 229,628 202,388
Utilities 391,652 369,405 353,644
Repairs and maintenance 625,427 619,178 496,591
Painting and decorating 138,056 124,814 164,540
Insurance 180,118 163,200 139,290
Taxes 564,218 501,806 504,742
Amortization 82,353 82,353 77,204
Depreciation 538,104 494,063 457,246
------------------------- -------------- ------------------
Total expenses 3,260,176 3,044,415 2,907,454
------------------------- -------------- ------------------
Net income $ 1,887,547 $ 1,733,155 $ 1,442,988
========================= ============== ==================
NET INCOME ALLOCATED:
General partner $ 75,124 $ 51,995 $ 43,290
Limited partners 1,812,423 1,681,160 1,399,698
------------------------ --------------- ------------------
$ 1,887,547 $ 1,733,155 $ 1,442,988
====================== ================= ==================
NET INCOME PER UNIT OF LIMITED
PARTNERSHIP INTEREST $7,250 $6,725 $ 5,599
==================== =================== ==================
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-3
<PAGE>
WINTHROP APARTMENT INVESTORS
LIMITED PARTNERSHIP
STATEMENTS OF CHANGES IN PARTNERS' CAPITAL
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
<TABLE>
<CAPTION>
General Limited Total
Partner's Partner's Partner's
Capital Capital Capital
-------------------- -------------------- -------------------
<S> <C> <C> <C>
BALANCE, DECEMBER 31, 1992 $ 78,020 $ 22,912,212 $ 22,990,232
Distributions (113,026) (1,669,548) (1,782,574)
Net income 43,290 1,399,698 1,442,988
-------------------- -------------------- -------------------
BALANCE, DECEMBER 31, 1993 8,284 22,642,362 22,650,646
Distributions (64,874) (1,947,501) (2,012,375)
Net income 51,993 1,681,160 1,773,155
-------------------- -------------------- -------------------
BALANCE, DECEMBER 31, 1994 $ (4,595) $ 22,376,021 $ 22,371,426
Distributions (90,151) (2,175,000) (2,265,151)
Net Income 75,124 1,812,423 1,887,547
-------------------- -------------------- -------------------
Balance, December 31, 1995 $ (19,622) $ 22,013,444 $ 21,993,822
==================== ==================== ===================
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-4
<PAGE>
WINTHROP APARTMENT INVESTORS
LIMITED PARTNERSHIP
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
<TABLE>
<CAPTION>
1995 1994 1993
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 1,887,547 $ 1,733,155 $ 1,442,988
Adjustments to reconcile net income to net cash
provided by operating activities-
Depreciation 538,104 494,063 457,246
Amortization 82,353 82,353 77,204
Changes in assets and liabilities-
(Increase) decrease in security deposits,
prepaid expenses and other assets (66,634) (34,708) 393,003
Increase in accrued real estate taxes 54,373 81,542 155,880
Increase (decrease) in accounts payable 10,408 (77,301) 36,094
(Decrease) increase in security deposits liability (2,898) 10,528 55,644
(Decrease) increase in payables due to affiliates - (17,296) 17,296
Decrease in accrued expenses and other (9,444) (13) (4,324)
liabilities
------------------- --------------- -----------------
Net cash provided by operating activities 2,493,809 2,272,323 2,631,031
------------------- --------------- -----------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of and improvements to properties (235,072) (187,322) (4,853,785)
Increase in deferred acquisition costs - - (444,800)
------------------- --------------- -----------------
Net cash used in investing activities (235,072) (187,322) (5,298,585)
------------------- --------------- -----------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Deferred financing costs (120,000) - -
Distributions (2,265,151) (2,012,375) (1,782,574)
------------------- --------------- -----------------
Net cash used in financing activities (2,385,151) (2,012,375) (1,782,574)
------------------- --------------- -----------------
NET (DECREASE) INCREASE IN CASH (126,414) 72,626 (4,450,128)
CASH, BEGINNING OF YEAR 3,581,214 3,508,588 7,958,716
------------------ ---------------- -----------------
CASH, END OF YEAR $ 3,454,800 $ 3,581,214 $ 3,508,588
================== ================ =================
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-5
<PAGE>
WINTHROP APARTMENT INVESTORS
LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995
(1) ORGANIZATION
Winthrop Apartment Investors Limited Partnership (the Partnership) was
organized on September 5, 1991 under the laws of the State of Maryland for
the purpose of acquiring, renovating, operating and managing certain
residential apartments, including projects in Austin, Texas (Chesapeake
Apartments); Irving, Texas (Covington Creek Apartments); Fulton County,
Georgia (Webb Bridge Crossing Apartments); and Atlanta, Georgia (Northside
Circle Apartments) (see Note 3). Termination of the Partnership will occur
on December 31, 2041 or earlier upon the occurrence of certain events
specified in the partnership agreement.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Accounting
The accompanying financial statements have been prepared on the accrual
basis in accordance with generally accepted accounting principles.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
Syndication Costs
Syndication costs, which represent the amounts paid in connection with the
offering of limited partnership interests, are charged against limited
partners' capital as incurred.
Income Taxes
No provision has been made for federal, state or local income taxes in the
accompanying financial statements of the Partnership. The partners are
required to report on their individual tax returns their allocable shares
of income, gains, losses, deductions and credits of the Partnership.
Deferred Costs
Organization costs are amortized on the straight-line basis over five
years. Acquisition fees are amortized on the straight-line basis over 27.5
and 40 years.
F-6
<PAGE>
WINTHROP APARTMENT INVESTORS
LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995
(Continued)
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Depreciation
The Partnership provides for depreciation of buildings and improvements on
the straight-line basis over their estimated useful lives of 40 years for
buildings and improvements and 3-15 years for personal property.
(3) ACQUISITION OF THE PROPERTIES
The Partnership acquired a residential apartment complex (Webb Bridge
Crossing Apartments) on November 22, 1991 for a purchase price of
$4,725,000. The purchase represents 164 market-rate rental apartments in
Fulton County, Georgia. The purchase was financed by an interim loan from
Citibank, N.A. (subsequently repaid in 1992).
In January and November 1992, the Partnership acquired two residential
apartment complexes (Chesapeake and Covington Creek Apartments)
representing an aggregate of 372 market-rate rental apartments located in
Austin and Irving, Texas. The purchase prices of these two apartment
complexes were $1,855,076 and $6,300,000, respectively. The purchase of
Chesapeake Apartments was financed by an interim loan from Citibank, N.A.;
the purchase of Covington Creek Apartments was financed by proceeds from
the offering (see Note 4).
On January 20, 1993, the Partnership acquired Northside Circle Apartments
for a purchase price of $4,450,000 financed from proceeds of the offering.
This purchase represents a 219-unit market-rate rental apartment complex
located in Atlanta, Georgia.
(4) PARTNERS' CAPITAL
The general partner of the Partnership is Two Winthrop Limited Partnership
(Two Winthrop). WFC Realty Co., Inc. (WFC Realty), a wholly owned
subsidiary of First Winthrop, was the initial limited partner that
withdrew from the Partnership upon the first admission of investors. The
initial capital contribution to the Partnership from these two partners
totaled $1,000. The Partnership has received $24,700,000 of capital
contributions from the syndication of 250 investor limited partner units.
The offering was closed as of December 31, 1992 with the final admission
of limited partner units.
F-7
<PAGE>
WINTHROP APARTMENT INVESTORS
LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995
(Continued)
(5) RELATED PARTY TRANSACTIONS
The Partnership entered into various arrangements with affiliates of the
general partners. Related party transactions include the following:
a. Fees of $1,315,200 were incurred by the Partnership and paid to
affiliates for services performed in connection with the offering and
acquisition of the properties.
b. The Partnership paid $582,519 to an affiliate for various expenses
incurred in connection with the organization and syndication of its
limited partnership units.
c. The Partnership paid Winthrop Securities, an affiliate, a selling
commission equal to $8,000 per limited partner unit.
d. The Partnership pays to an affiliate of the general partner an annual
property management fee equal to 5% of gross operating revenues for
the properties. Fees of $243,313, $229,628 and $202,388 were charged
to operations for 1995, 1994 and 1993, respectively.
(6) DEFERRED COSTS
The following is a summary of the deferred costs at December 31, 1995 and
1994:
<TABLE>
<CAPTION>
Period 1995 Costs 1994 Costs
<S> <C> <C> <C>
Organizational costs-1991 5 Years $ 40,000 $ 40,000
Organizational costs-April 30, 1992 5 Years 127,481 127,481
Deferred acquisition costs-Webb Bridge Land 3,488 3,488
Deferred acquisition costs-Webb Bridge 27.5 Years 11,409 11,409
Deferred acquisition costs-Webb Bridge 40 Years 5,620 5,620
Deferred acquisition costs-Lost Mill Land 4,138 4,138
Deferred acquisition costs-Lost Mill 27.5 Years 13,537 13,537
Deferred acquisition costs-Lost Mill 40 Years 6,668 6,668
Acquisition fee 27.5 Years 978,736 978,736
Acquisition fee 40 Years 482,064 482,064
Acquisition fee Land 299,200 299,200
Deferred financing costs-1995 30 years 120,000 -
----------- -----------
2,092,341 1,972,341
Less-Accumulated amortization 293,180 210,827
$ 1,799,161 $ 1,761,514
=========== ===========
</TABLE>
F-8
<PAGE>
<TABLE>
<CAPTION>
Balance Sheets (Unaudited)
(In Thousands, Except Unit Data)
September 30, December 31,
Assets 1996 1995
----------------------- -----------------------
<S> <C> <C>
Real estate, at cost:
Land $ 3,666 $ 3,666
Buildings and improvements, net of accumulated
depreciation of $2,110 (1996) and $1,706 (1995) 12,997 13,273
----------------------- -----------------------
16,663 16,939
Other Assets:
Deferred costs, net of accumulated amortization of
$441 (1996) and $293 (1995) 2,332 1,799
Cash and cash equivalents 1,714 3,455
Other assets 989 306
----------------------- -----------------------
Total assets $ 21,698 $ 22,499
======================= =======================
Liabilities and Partners' Capital
Liabilities:
Mortgage payable $ 15,934 $ -
Accrued expenses and other liabilities 409 336
Security deposits 128 125
Accounts payable 8 45
----------------------- -----------------------
Total liabilities 16,479 506
----------------------- -----------------------
Partners' Capital:
Limited partners' capital (250 units authorized,
issued and outstanding) 5,246 22,013
General partner's (deficit) (27) (20)
----------------------- -----------------------
Total partners' capital 5,219 21,993
----------------------- -----------------------
Total liabilities and
partners' capital $ 21,698 $ 22,499
======================= =======================
</TABLE>
See notes to financial statements.
F-9
<PAGE>
<TABLE>
<CAPTION>
Statements of Operations (Unaudited)
For the Nine Months Ended
(In Thousands, Except Unit Data) September 30, September 30,
1996 1995
----------------------- -----------------------
<S> <C> <C>
Income:
Rental $ 3,653 $ 3,493
Other 196 166
Interest 52 161
----------------------- -----------------------
Total revenues 3,901 3,820
----------------------- -----------------------
Expenses:
Mortgage interest 896 -
Leasing 156 143
General and administrative 293 223
Management fees 190 180
Utilities 288 291
Repairs and maintenance 472 480
Painting and decorating 116 104
Insurance 133 135
Taxes 417 377
Amortization 122 62
Depreciation 404 387
----------------------- -----------------------
Total expenses 3,487 2,382
----------------------- -----------------------
Net income $ 414 $ 1,438
======================= =======================
Net income allocated:
General Partner $ 4 $ 57
Limited Partners 410 1,381
----------------------- -----------------------
$ 414 $ 1,438
======================= =======================
Net income per limited partnership unit $ 1,640.00 $ 5,524.00
======================= =======================
Distributions per limited partnership unit $ 68,708.00 $ 8,700.00
======================= =======================
</TABLE>
See notes to financial statements
F-10
<PAGE>
<TABLE>
<CAPTION>
Statements of Operations (Unaudited)
For the Three Months Ended
(In Thousands, Except Unit Data) September 30, September 30,
1996 1995
----------------------- -----------------------
<S> <C> <C>
Income:
Rental $ 1,253 $ 1,188
Other 72 70
Interest 12 55
----------------------- -----------------------
Total revenues 1,337 1,313
----------------------- -----------------------
Expenses:
Mortgage interest 305 -
Leasing 51 73
General and administrative 72 44
Management fees 66 60
Utilities 97 96
Repairs and maintenance 145 191
Painting and decorating 38 44
Insurance 43 44
Taxes 162 152
Amortization 41 21
Depreciation 134 129
----------------------- -----------------------
Total expenses 1,154 854
----------------------- -----------------------
Net income $ 183 $ 459
======================= =======================
Net income allocated:
General Partner $ 2 $ 18
Limited Partners 181 441
----------------------- -----------------------
$ 183 $ 459
======================= =======================
Net income per limited partnership unit $ 724.00 $ 1,764.00
======================= =======================
Distributions per limited partnership unit $ - $ 4,500.00
======================= =======================
</TABLE>
See notes to financial statements.
F-11
<PAGE>
Statements of Cash Flows (Unaudited)
<TABLE>
<CAPTION>
For the Nine Months Ended
(In Thousands) September 30, September 30,
1996 1995
----------------------- -----------------------
<S> <C> <C>
Cash Flows from Operating Activities:
Net income $ 414 $ 1,438
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 404 387
Amortization 148 62
Changes in assets and liabilities:
Increase in other assets (496) (8)
(Decrease) Increase in accounts payable (37) 18
Increase (Decrease) in security deposits 3 (1)
Increase in accrued expenses and
other liabilities 73 94
----------------------- -----------------------
Net cash provided by operating activities 509 1,990
----------------------- -----------------------
Cash Flows from Investing Activities:
Additions to real estate (128) (135)
Increase in replacement reserve accounts (187) -
----------------------- -----------------------
Cash used in investing activities (315) (135)
----------------------- -----------------------
Cash Flows from Financing Activities:
Proceeds from mortgage financing 16,000 -
Principal payments on mortgage notes (66) -
Deferred financing costs paid (681) -
Distributions to partners (17,188) (2,265)
----------------------- -----------------------
Net cash used in financing activities (1,935) (2,265)
----------------------- -----------------------
Net (Decrease) in cash and cash equivalents (1,741) (410)
Cash and Cash Equivalents at Beginning of the Period 3,455 3,581
----------------------- -----------------------
Cash and Cash Equivalents at End of the Period $ 1,714 $ 3,171
======================= =======================
Supplemental Disclosure of Cash Flow Information-
Cash paid for interest $ 809,000 $ -
======================= =======================
</TABLE>
See notes to financial statements.
F-12
<PAGE>
<TABLE>
<CAPTION>
Statements of Partners' Capital (Unaudited)
(In Thousands, Except Unit Data)
Units of
Limited General Limited Total
Partnership partner's partners' partners'
Interest (deficit) capital capital
---------------------- ----------------- ------------------ ------------------
<S> <C> <C> <C> <C>
Balance - January 1, 1996 250 $ (20) $ 22,013 $ 21,993
Net income - 4 410 414
Distributions - (11) (17,177) (17,188)
---------------------- ----------------- ------------------ ------------------
Balance - September 30, 1996 250 $ (27) $ 5,246 $ 5,219
====================== ================= ================== ==================
</TABLE>
See notes to financial statements.
F-13
<PAGE>
NOTES TO FINANCIAL STATEMENTS
1. General
The accompanying financial statements, footnotes and discussions should
be read in conjunction with the financial statements, related footnotes
and discussions contained in the Partnership's annual report for the
year ended December 31, 1995.
The financial information contained herein is unaudited. In the opinion
of management, all adjustments necessary for a fair presentation of
such financial information have been included. All adjustments are of a
normal recurring nature. Certain amounts have been reclassified to
conform to the September 30, 1996 presentation. The balance sheet at
December 31, 1995 was derived from audited financial statements at such
date.
The results of operations for the three and nine months ended September
30, 1996 and 1995 are not necessarily indicative of the results to be
expected for the full year.
2. Accounting Change
On January 1, 1996, the Partnership adopted Statement of Financial
Accounting Standards ("SFAS") No. 121, "Accounting for the Impairment
of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of",
which requires impairment losses to be recognized for long-lived assets
used in operations when indicators of impairment are present and the
undiscounted cash flows are not sufficient to recover the asset's
carrying amount. The impairment loss is measured by comparing the fair
value of the asset to its carrying amount. The adoption of the SFAS has
no effect on the Partnership's financial statements.
3. Related Party Transactions
Winthrop Management, an affiliate of the Managing General Partner, is
entitled to receive 5% of gross receipts from all Partnership
properties they manage. For the nine months ended September 30, 1996
and 1995, Winthrop Management earned approximately $190,000 and
$180,000, respectively. Winthrop Management was also paid an $80,000
fee relating to the mortgage financing.
4. Mortgage Payable
On January 5, 1996, the Partnership closed a new first mortgage loan in
the amount of $16,000,000 secured by all of the properties. The loan
amount was allocated $2,080,000, $4,320,000, $5,120,000 and $4,480,000
to Chesapeake Apartments, Covington Creek Apartments, Northside Circle
Apartments and Webb Crossing Apartments, respectively.
The mortgage loan bears interest at an initial rate of 7.27% (until the
"Optional Prepayment Date", as defined), requires monthly principal and
interest payments of approximately $109,000 and is fully amortized on
February 11, 2026. The Partnership has the option to prepay the
mortgage loan without penalty on, or three months before, February 1,
2003 (the "Optional Prepayment Date"). If the Partnership does not
elect to prepay the loan, the interest rate will be adjusted to the
greater of 12.27% or a "Treasury Rate" (as defined) plus 7.75
percentage points. The Partnership was required to fund approximately
$278,000 in reserves at closing to complete certain required capital
improvements to the properties, and establish tax and insurance
escrows. The Partnership is also required to fund an ongoing
replacement reserve. In connection with the closing, Two Winthrop was
replaced as the Managing General Partner of the Partnership with WAI
Associates Limited Partnership. The lender required the transfer of the
general partnership interest as a condition to making the loan to
assure that the Partnership and its general partner are single purpose
entities, formed solely for the purpose of owning and operating the
properties. Approximately $14,923,000 of the proceeds from the
financing were distributed (see Note 5) to the partners.
F-14
<PAGE>
5. Distributions
The Partnership distributed $68,708 per unit ($17,177,000 in total) to
the holders of limited partnership units during the nine month period
ended September 30, 1996. The general partner received $11,000 of the
approximate $172,000 distribution due them for the nine month period
ended September 30, 1996. In October 1996, the Partnership distributed
$1,532 per unit ($383,000 in total) to the holders of limited
partnership units. The general partner received $200,000, which
included the $161,000 balance due from the 1996 distribution and
$35,000 due from 1995 distributions.
6. Allocation of Income, Losses and Cash Flow
In accordance with the partnership agreement, cash flow shall be
allocated 99% to the investor limited partners and 1% to the general
partner, until the investor limited partners have received a 6%
noncumulative, noncompounded annual rate of return on their invested
capital, at which point the remainder shall be distributed 90% to the
investor limited partners and 10% to the general partner. Income shall
be allocated to the partners in proportion to the cash available for
distribution distributable to the partners; losses shall be allocated
90% to the investor limited partners and 10% to the general partner. If
there is no such cash available for distribution, income will be
allocated 90% to the investor limited partner and 10% to the general
partner.
F-15
<PAGE>
The Letter of Transmittal and any other required documents should be
sent or delivered by each Unitholder or his broker, dealer, commercial bank,
trust company or other nominee to the Depositary at the address set forth below:
THE SWENSEN GROUP, L.L.C.
By U.S. Mail: 167 Milk Street, #421
Boston, MA 02109-4315
By Hand or Overnight Delivery: Attention: Special Projects Department
One International Place, 12th Floor
Boston, MA 02110
By Facsimile: (617) 330-7969
If you have any questions or if you need assistance in completion of
the Letter of Transmittal, you may contact the Information Agent by calling:
(800) 914-7896
Any questions or requests for assistance or for additional copies of
this Offer to Purchase, the Letter of Transmittal and other tender offer
materials may be directed to the Purchaser at the telephone number and address
listed above. You may also contact your broker for assistance concerning the
Offer.
<PAGE>
LETTER OF TRANSMITTAL
OF
LIMITED PARTNERSHIP INTERESTS
OF
WINTHROP APARTMENT INVESTORS LIMITED PARTNERSHIP
(Please indicate changes or corrections to the name, address or Taxpayer
I.D.number)
THE OFFER, WITHDRAWAL RIGHTS AND PRORATION PERIOD WILL EXPIRE AT 12:00 MIDNIGHT,
NEW YORK CITY TIME, ON MARCH 31, 1997 (THE "EXPIRATION DATE") UNLESS EXTENDED.
To participate in the Offer, a duly executed copy of this Letter of
Transmittal and any other documents required by this Letter of Transmittal must
be received by the Depositary on or prior to the Expiration Date. Delivery of
this Letter of Transmittal or any other required documents to an address or
facsimile number other than as set forth below does not constitute valid
delivery. The method of delivery of all documents is at the election and risk of
the tendering Unitholder. Please use the pre-addressed, postage-paid envelope
provided.
This Letter of Transmittal is to be completed by Unitholders of
Winthrop Apartment Investors Limited Partnership (the "Partnership"), pursuant
to the procedures set forth in the Offer to Purchase (as defined below) and the
Instructions attached hereto. Capitalized terms used herein and not defined
herein have the meanings ascribed to such terms in the Offer to Purchase.
PLEASE CAREFULLY READ THE ACCOMPANYING INSTRUCTIONS
Gentlemen:
The undersigned hereby tenders to LON-WAI Associates L.L.C., a Delaware
limited liability company (the "Purchaser"), with an address at One
International Place, Boston, Massachusetts, 02110, the number of Units of
Limited Partnership Interests ("Units") of the Partnership set forth above
(unless an indication is made in the signature box that less than all of such
Units are being tendered) for a purchase price equal to $30,000 per Unit, net to
the seller in cash, without interest, upon the terms and subject to the
conditions set forth in the Offer to Purchase, dated March 4, 1997 (the "Offer
to Purchase") and this Letter of Transmittal, as each may be supplemented or
amended from time to time (which together constitute the "Offer"). Receipt of
the Offer to Purchase is hereby acknowledged.
The undersigned recognizes that, if more than 113 Units are validly
tendered prior to or on the Expiration Date and not properly withdrawn, the
Purchaser will, upon the terms of the Offer, accept for payment from among those
Units tendered prior to or on the Expiration Date 113 Units on a pro rata basis,
with adjustments to avoid purchases of certain fractional Units, based upon the
number of Units validly tendered prior to or on the Expiration Date and not
withdrawn.
Subject to and effective upon acceptance for payment of any of the
Units tendered hereby, the Undersigned hereby sells, assigns and transfers to,
or upon the order of, Purchaser all right, title and interests in and to such
Units which are purchased pursuant to the Offer. The undersigned hereby
irrevocably constitutes and appoints the Purchaser and its designees as the
Unitholder's proxies and true and lawful agent and attorney-in-fact of the
undersigned with respect to such Units, with full power of substitution (such
power of attorney being deemed to be an irrevocable power coupled with an
interest), to deliver such Units and transfer ownership of such Units on the
books of the Partnership, together with all accompanying evidences of transfer
and authenticity, including, without limitation, any documents or instruments
required to be executed under a "Transferor's (Seller's) Application for
Transfer" created by the NASD, if required, and an assignment transferring to
the Purchaser the Investor Certificate evidencing such Unitholder's ownership of
Units, to or upon the order of the Purchaser and, upon payment of the purchase
price in respect of such Units by the Purchaser, to receive all benefits and
otherwise exercise all rights of beneficial ownership of such Units, including
all voting rights, all in accordance with the terms of the Offer. Upon the
purchase of Units pursuant to the Offer, all prior proxies and consents given by
the undersigned with respect to such Units will be revoked and no subsequent
proxies or consents may be given (and if given will not be deemed effective). In
addition, by executing this Letter of Transmittal, the undersigned assigns to
the Purchaser all of the undersigned's right to receive distributions from the
Partnership with respect to Units which are purchased pursuant to the Offer. If
legal title to the Units is held through an IRA or KEOGH or similar account, the
Unitholder understands that this Letter of Transmittal must be signed by the
custodian of such IRA or KEOGH account and the Unitholder hereby authorized and
directs the custodian of such IRA or KEOGH to confirm this Letter of
Transmittal. The proxies and power of attorney granted herein not be affected by
the subsequent mental disability of the Unitholder, and the Purchaser shall not
be required to post a bond in any nature in connection with this Power of
Attorney.
The undersigned hereby represents and warrants that the undersigned
owns the Units tendered hereby within the meaning of Rule 13d-3 under the
Securities Exchange Act of 1934, as amended, and has full power and authority to
validly tender, sell, assign and transfer the Units tendered hereby, and that
when any such Units are purchased by the Purchaser, the Purchaser will acquire
good, marketable and unencumbered title thereto, free and clear of all liens,
restrictions, charges, encumbrances, conditional sales agreements or other
obligations relating to the sale or transfer thereof, and such Units will not be
subject to any adverse claim. Upon request, the undersigned will execute and
deliver any additional documents deemed by the Purchaser to be necessary or
desirable to complete the assignment, transfer, or purchase of Units tendered
hereby.
<PAGE>
The undersigned understands that a tender of Units to the Purchaser
will constitute a binding agreement between the undersigned and the Purchaser
upon the terms and subject to the conditions of the Offer. The undersigned
recognizes that under certain circumstances set forth in the Offer to Purchase,
the Purchaser may not be required to accept for payment any of the Units
tendered hereby. In such event, the undersigned understands that any Letter of
Transmittal for Units not accepted for payment will be destroyed by the
Purchaser. All authority herein conferred or agreed to be conferred shall
survive the death or incapacity of the undersigned and any obligations of the
undersigned shall be binding upon the heirs, personal representatives,
successors and assigns of the undersigned. Except as stated in the Offer to
Purchase, this tender is irrevocable.
================================================================================
SIGNATURE BOX
(See Instructions 2, 3 and 4 as necessary)
- --------------------------------------------------------------------------------
To tender, please sign exactly as your name is printed on the front of this
Letter of Transmittal. For joint owners, each joint owner must sign. (See
Instruction 2.) TRUSTEES, EXECUTORS, ADMINISTRATORS, GUARDIANS,
ATTORNEYS-IN-FACT, OFFICERS OF A CORPORATION OR OTHER PERSONS ACTING IN A
FIDUCIARY OR REPRESENTATIVE CAPACITY SIGN BELOW AND SEE INSTRUCTION 2. The
signatory hereto hereby certifies under penalties of perjury the Taxpayer I.D.
number printed (or corrected) on the front page of this Letter of Transmittal
and the statements in Box A, Box B and, if applicable, Box C.
X ______________________ X ______________________
(Signature) (Signature)
Number of Units Tendered: _________________ (If no indication is made, all
Units will be deemed tendered.)
Name and Capacity
(if other than individuals): ______________ (Title) __________________________
Address (Fiduciaries Only):_____________________________________________________
(city) (state) (zip)
Area Code and Telephone No. ( ) (Day) ( ) (Evening)
---------------- ---------------
Notarization of Signature
(See Instruction 2)
STATE OF ______________________ )
) SS.:
COUNTY OF _____________________ )
On this ____ day of _____________, 1997, before me came personally ____________
______________________________________ to me know to be the person who executed
(Please Print)
this Letter of Transmittal.
______________________________________
Notary Public
OR
Signature Guarantee
(See Instruction 2)
Name and Address of Eligible Institution ____________________________________
______________________________________________________________________________
______________________________________________________________________________
Authorized Signature _______________________ Title ________________
Name ________________________________________ Date ___________, 1997
================================================================================
DELIVER TO:
THE SWENSEN GROUP, L.L.C.
167 Milk Street, #421
Boston, Massachusetts 02109-4315
Telephone: (800) 914-7896
Facsimile: (617) 330-7969
(If Tendering by facsimile, please transmit both the front and back of the
Letter of Transmittal AND the Tax Certificate Page.)
BEFORE RETURNING THIS LETTER OF TRANSMITTAL, PLEASE REFER TO
THE ACCOMPANYING INSTRUCTIONS.
<PAGE>
TAX CERTIFICATIONS
================================================================================
BOX A
SUBSTITUTE FORM W-9
(See Instruction 4 - Box A)
- --------------------------------------------------------------------------------
The person signing this Letter of Transmittal hereby certifies the following to
the Purchaser under penalties of perjury:
(i) The TIN printed (or corrected) on the front page of the Letter of
Transmittal is the correct TIN of the Unitholder, or if this box / / is checked,
the Unitholder has applied for a TIN. If the Unitholder has applied for a TIN, a
TIN has not been issued to the Unitholder, and either: (a) the Unitholder has
mailed or delivered an application to receive a TIN to the appropriate IRS
Center or Social Security Administration Office, or (b) the Unitholder intends
to mail or deliver an application in the near future (it being understood that
if the Unitholder does not provide a TIN to the Purchaser 31% of all reportable
payments made to the Unitholder will be withheld until a TIN is provided to the
Purchaser); and
(ii) Unless this box / / is checked, the Unitholder is not subject to
Backup Withholding either because the Unitholder: (a) is exempt from Backup
Withholding, (b) has not been notified by the IRS that the Unitholder is subject
to backup withholding as a result of a failure to report all interest or
dividends, or (c) has been notified by the IRS that such Unitholder is no longer
subject to Backup Withholding.
Note: Place an "X" in the box in (ii) if you are unable to certify that the
Unitholder is not subject to Backup Withholding.
================================================================================
================================================================================
BOX B
FIRPTA AFFIDAVIT
(See Instruction 4 - Box B)
- --------------------------------------------------------------------------------
Under Section 1445(e)(5) of the Internal Revenue Code and Treas. Reg.
1.1445-11T(d), a transferee must withhold tax equal to 10% of the amount
realized with respect to certain transfers of an interest in a partnership if
50% or more of the value of its gross assets consists of U.S. real property
interests and 90% or more of the value of its gross assets consists of U.S. real
property interests plus cash equivalents, and the holder of the partnership
interest is a foreign person. To inform the Purchaser that no withholding is
required with respect to the Unitholder's interest in the Partnership, the
person signing this Letter of Transmittal hereby certifies the following under
penalties of perjury:
(i) Unless this box / / is checked, the Unitholder, if an individual,
is a U.S. citizen or a resident alien for purposes of U.S. income taxation, and
if other than an individual, is not a foreign corporation, foreign partnership,
foreign estate or foreign trust (as those terms are defined in the Internal
Revenue Code and Income Tax Regulations); (ii) the Unitholder's U.S. social
security number (for individuals) or employer identification number (for
non-individuals) is correct as printed (or corrected) on the front page of the
Letter of Transmittal; and (iii) the Unitholder's home address (for
individuals), or office address (for non-individuals), is correct as printed (or
corrected) on the front of this Letter of Transmittal. If a corporation, the
jurisdiction of incorporation is
.
The person signing this Letter of Transmittal understands that this
certification may be disclosed to the IRS by the Purchaser and that any false
statements contained herein could be punished by fine, imprisonment, or both.
================================================================================
================================================================================
BOX C
SUBSTITUTE FORM W-8
(See Instruction 4 - Box C)
- --------------------------------------------------------------------------------
By checking this box / /, the person signing this Letter of Transmittal hereby
certifies under penalties or perjury that the Unitholder is an "exempt foreign
person" for purposes of the Backup Withholding rules under the U.S. federal
income tax laws, because the Unitholder:
(i) Is a nonresident alien individual or a foreign corporation,
partnership, estate or trust;
(ii) If an individual, has not been and plans not to be present
in the U.S. for a total of 183 days or more during the calendar year;
and
(iii) Neither engages, nor plans to engage, in a U.S. trade or
business that has effectively connected gains from transactions with a broker or
barter exchange.
================================================================================
PLEASE REFER TO ATTACHED INSTRUCTIONS ON BACK PAGE
<PAGE>
INSTRUCTIONS
Forming Part of the Terms and Conditions of the Offer
1. DELIVERY OF THE LETTER OF TRANSMITTAL. For convenience in responding to the
Offer, a pre-addressed, postage-paid envelope has been enclosed with the
Offer to Purchase. However, to ensure receipt of the Letter of Transmittal,
it is suggested that you use overnight courier delivery or, if the Letter of
Transmittal is to be delivered by United States mail, that you use certified
or registered mail, return receipt requested.
To be effective, a duly completed and signed Letter of Transmittal (or
facsimile thereof) must be received by the Depositary at the address (or
facsimile number) set forth below before the Expiration Date, Midnight,
Eastern Time on March 31, 1997, unless extended. Unless otherwise indicated
in the signature box, all Units owned by a Unitholder shall be deemed to
have been tendered pursuant to the Offer.
THE SWENSEN GROUP, L.L.C.
By U.S. Mail: 167 Milk Street, #421
Boston, Massachusetts 02109-4315
By Hand or Overnight Attention: Special Projects Department
Delivery: One International Place, 12th Floor
Boston, Massachusetts 02110
By Facsimile: (617) 330-7969
For Additional Information Call: (800) 914-7896
THE METHOD OF DELIVERY OF THE LETTER OF TRANSMITTAL AND ALL OTHER REQUIRED
DOCUMENTS IS AT THE OPTION AND RISK OF THE TENDERING UNITHOLDER AND DELIVERY
WILL BE DEEMED MADE ONLY WHEN ACTUALLY RECEIVED BY THE DEPOSITARY. IN ALL
CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ASSURE TIMELY DELIVERY.
2. SIGNATURE REQUIREMENTS.
Individual and Joint Owners. After carefully reading and completing the
Letter of Transmittal, in order to tender Units, Unitholder(s) must sign at
the "X" in the SIGNATURE BOX of the Letter of Transmittal. The signature(s)
must correspond exactly with the name printed (or corrected) on the front of
the Letter of Transmittal without any change whatsoever. If any Units are
registered in the names of two or more joint holders, all such holders must
sign the Letter of Transmittal.
If the Letter of Transmittal is signed by the registered holder of the Units
and payment is to be made directly to that holder, then no notarization or
signature guarantee is required on the Letter of Transmittal. Similarly, if
Units are held in an account of a member firm of a registered national
securities exchange, a member firm of the National Association of Securities
Dealers, Inc. or a commercial bank, savings bank, credit union, savings and
loan association or trust company having an office, branch or agency in the
United States (each an "Eligible Institution") no notarization or signature
guarantee is required. For Units held in IRA Accounts, the beneficial owner
should sign and no notarization or signature guarantee is required. However,
in all other cases, all signatures on the Letter of Transmittal must either
be notarized or guaranteed by an Eligible Institution.
Trustees, Corporations and Fiduciaries. Trustees, executors, administrators,
guardians, attorneys-in-fact, officers of a corporation, authorized partner
of a partnership or other persons acting in a fiduciary or representative
capacity must sign at the "X" in the SIGNATURE BOX and have their signatures
notarized OR signature guaranteed by an Eligible Institution, by completing
the Notarization or Signature Guarantee set forth in the SIGNATURE BOX of
the Letter of Transmittal and must submit proper evidence satisfactory to
the Purchaser of their authority to so act. (See Instruction 3 herein.)
3. DOCUMENTATION REQUIREMENTS. In addition to information required to be
completed on the Letter of Transmittal, additional documentation may be
required by the Purchaser under certain circumstances including, but not
limited to those listed below. Questions on documentation should be
directed to The Swensen Group, L.L.C. at (800) 914-7896.
Deceased Owner (Joint Tenant) - Certified Copy of Death Certificate
Deceased Owner (Others) - Certified Copy of Death
Certificate. (See also
Executor/Administrator/Guardian
below.)
Executor/Administrator/Guardian - (i) Certified copies of court
Appointment Documents for
Executor or Administrator
dated within 60 days; and
(ii) a copy of applicable
provisions of the Will
(Title Page, Executor(s)'
powers, asset
distribution); OR
(iii) Certified copy of Estate
distribution documents.
Attorney-in-fact - Current Power of Attorney.
Corporations/partnerships - Certified copy of Corporate
Resolution(s), (with raised
corporate seal), or other evidence
of authority to act. Partnerships
should furnish copy of Partnership
Agreement.
Trust/pension Plans - Copy of cover page of the Trust or
Pension Plan, along with copy of the
section(s) setting forth names and
powers of Trustee(s) and any
amendments to such sections or
appointment of Successor Trustee(s).
All signatures must be notarized or signature guaranteed.
4. TAX CERTIFICATIONS. Unitholders tendering Units to the Purchaser pursuant to
the Offer must furnish the Purchaser with his, her or its Taxpayer
Identification Number ("TIN") and certify under penalties of perjury, the
representations in Boxes A, B, and, if applicable, Box C. By signing in the
Signature Box the Unitholder(s) certify that the TIN as printed (or
corrected) on the front of the Letter of Transmittal is correct.
U.S. PERSONS. A Unitholder who or which is a United States citizen OR a
resident alien individual, a domestic corporation, a domestic partnership, a
domestic trust or a domestic estate (collectively, "U.S. Persons") as those
terms are defined in the Internal Revenue Code and Income Tax Regulations,
should follow the instructions below with respect to certifying Boxes A and
B (on the reverse side of the Letter of Transmittal).
BOX A - Substitute Form W-9. Part (i), Taxpayer Identification Number - The
person signing this Letter of Transmittal must provide to the Purchaser the
Unitholder's correct TIN and certify its correctness as printed (or
corrected) on the front of the Letter of Transmittal and the representations
made in Boxes A, B and (if applicable) Box C are correct under penalties of
perjury. If a correct TIN is not provided, penalties may be imposed by the
Internal Revenue Service ("IRS"), in addition to the Unitholders's being
subject to Backup Withholding. Part (ii), Backup Withholding - In order to
avoid 31% federal income tax Backup Withholding, the person signing this
Letter of Transmittal must certify, under penalties of perjury, that such
Unitholder is not subject to backup Withholding. Certain Unitholders
(including, among others, all Corporations and certain exempt non-profit
organizations) are not subject to Backup Withholding. Backup Withholding is
not an additional tax. If withholding results in an overpayment of taxes, a
refund may be obtained from the IRS. DO NOT CHECK THE BOX IN BOX A, PART
(II), UNLESS YOU HAVE BEEN NOTIFIED BY THE IRS THAT YOU ARE SUBJECT TO
BACKUP WITHHOLDING.
When Determining the TIN to be Furnished, Please Refer to the Following Note
as a Guideline:
Individual Accounts should reflect their own TIN. Joint Accounts should
reflect the TIN of the person whose name appears first. Trust Accounts
should reflect the TIN assigned to the Trust. Custodial accounts for the
benefit of minors should reflect the TIN of the minor. Corporations or other
business entities should reflect the TIN assigned to that entity.
BOX B - FIRPTA Affidavit - Section 1445 of the Internal Revenue Code
requires that Unitholders transferring interests in partnerships with real
estate assets meeting certain criteria, certify under penalty of perjury,
the representations made in Box B, or be subject to withholding of tax equal
to 10% of the Purchase Price for Units purchased. Tax withheld under Section
1445 of the Internal Revenue Code is not an additional tax. If withholding
results in an overpayment of tax, a refund may be obtained from the IRS.
Note(s): Box B, Part (i) Should be checked only if the Unitholder is NOT a
U.S. Person, as described therein. Corporations should insert the
jurisdiction of incorporation in the blank in Part (iii).
BOX C - Foreign Persons - In order for a Unitholder, who is a Foreign Person
(i.e., not a U.S. Person as defined above) to qualify as exempt from 31%
Backup Withholding, the person signing this Letter of Transmittal must
certify, under penalties of perjury, the statement in Box C of this Letter
of Transmittal attesting to the Foreign Unitholder's status by checking the
box preceding such statement. UNLESS THE BOX IS CHECKED, SUCH FOREIGN
UNITHOLDER WILL BE SUBJECT TO 31% WITHHOLDING OF TAX UNDER SECTION 1445 OF
THE CODE.
5. VALIDITY OF LETTER OF TRANSMITTAL. All questions as to the validity, form,
eligibility (including time of receipt) and acceptance of a Letter of
Transmittal will be determined by the Purchaser and such determination will
be final and binding. The Letter of Transmittal will not be valid until any
irregularities have been cured or waived. Neither the Purchaser nor The
Swensen Group, L.L.C. is under any duty to give notification of defects in a
Letter of Transmittal and neither will incur liability for failure to give
such notification.
