-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, NOsBtZVCAwTcGyAhgwAyLEkXKELSeILQpE723FH72iAKtXt1TzxCLrHSeXlu38+t HmtjPogHndt1SpLYA8g52g== 0001005477-99-005552.txt : 19991125 0001005477-99-005552.hdr.sgml : 19991125 ACCESSION NUMBER: 0001005477-99-005552 CONFORMED SUBMISSION TYPE: SC 14D1 PUBLIC DOCUMENT COUNT: 4 FILED AS OF DATE: 19991124 SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: INTEGRATED RESOURCES HIGH EQUITY PARTNERS SERIES 85 CENTRAL INDEX KEY: 0000730067 STANDARD INDUSTRIAL CLASSIFICATION: REAL ESTATE [6500] IRS NUMBER: 133239107 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 14D1 SEC ACT: SEC FILE NUMBER: 005-51099 FILM NUMBER: 99763891 BUSINESS ADDRESS: STREET 1: CAMBRIDGE CENTER STREET 2: 9TH FLOOR CITY: CAMBRIDGE STATE: MA ZIP: 02142 BUSINESS PHONE: 617-234-3000 MAIL ADDRESS: STREET 1: CAMBRIDGE CENTER STREET 2: 9TH FLOOR CITY: CAMBRIDGE STATE: MA ZIP: 02142 FORMER COMPANY: FORMER CONFORMED NAME: HIGH EQUITY PARTNERS SERIES 85 DATE OF NAME CHANGE: 19850626 FORMER COMPANY: FORMER CONFORMED NAME: RESOURCES HIGH EQUITY PARTNERS DATE OF NAME CHANGE: 19850203 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: MILLENIUM FUNDING II LLC CENTRAL INDEX KEY: 0001099599 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 000000000 FILING VALUES: FORM TYPE: SC 14D1 BUSINESS ADDRESS: STREET 1: C/O PRESIDIO CAPITAL INVESTMENT CO LLC STREET 2: 527 MADISON AVE CITY: NEW YORK STATE: NY ZIP: 10022 BUSINESS PHONE: 2123193400 MAIL ADDRESS: STREET 1: C/O PRESIDIO CAPITAL INVESTMENT CO LLC STREET 2: 527 MADISON AVE CITY: NEW YORK STATE: NY ZIP: 10022 SC 14D1 1 SCHEDULE SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ------------------------------------ SCHEDULE 14D-1 TENDER OFFER STATEMENT PURSUANT TO SECTION 14(D)(1) OF THE SECURITIES EXCHANGE ACT OF 1934 ------------------------------------ INTEGRATED RESOURCES HIGH EQUITY PARTNERS, SERIES 85, A CALIFORNIA LIMITED PARTNERSHIP (Name of Subject Company) MILLENNIUM FUNDING II LLC PRESIDIO CAPITAL INVESTMENT COMPANY, LLC ---------------------------------------- (Bidders) UNITS OF LIMITED PARTNERSHIP INTEREST (Title of Class of Securities) NONE (Cusip Number of Class of Securities) ------------------------------------ David G. King, Jr. Presidio Capital Investment Company, LLC 527 Madison Avenue New York, New York 10022 (212) 319-3400 (Name, Address and Telephone Number of Person Authorized to Receive Notices and Communications on Behalf of Bidders) Copy to: Mark I. Fisher, Esq. Rosenman & Colin LLP 575 Madison Avenue New York , New York 10022 (212) 940-8877 ------------------------------------ CALCULATION OF FILING FEE - -------------------------------------------------------------------------------- Transaction Valuation*: $3,086,866 Amount of Filing Fee: $617.37 - -------------------------------------------------------------------------------- * For purposes of calculating the fee only. This amount assumes the purchase of 26,936 units of limited partnership interest ("Units") of the subject partnership for $114.60 per Unit. The amount of the filing fee, calculated in accordance with Section 14(g)(3) and Rule 0-11(d) under the Securities Exchange Act of 1934, as amended, equals 1/50th of one percent of the aggregate of the cash offered by the bidders. |_| 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: Not Applicable Form or Registration No.: Not Applicable Filing Party: Not Applicable Date Filed: Not Applicable CUSIP No. NONE 14D-1 ================================================================================ 1. Name of Reporting Persons; I.R.S. Identification Nos. of Above Persons Millennium Funding II LLC ------------ - -------------------------------------------------------------------------------- 2. Check the Appropriate Box if a Member of a Group (a) |_| (b) |X| - -------------------------------------------------------------------------------- 3. SEC Use Only - -------------------------------------------------------------------------------- 4 Sources of Funds AF - -------------------------------------------------------------------------------- 5. Check if Disclosure of Legal Proceedings is Required Pursuant to Items 2(e) or 2(f) |_| - -------------------------------------------------------------------------------- 6. Citizenship or Place of Organization Delaware - -------------------------------------------------------------------------------- 7. Aggregate Amount Beneficially Owned by Each Reporting Person None - -------------------------------------------------------------------------------- 8. Check if the Aggregate Amount in Row 7 Excludes Certain Shares |_| - -------------------------------------------------------------------------------- 9. Percent of Class Represented by Amount in Row 7 0 - -------------------------------------------------------------------------------- 10. Type of Reporting Person OO ================================================================================ 2 CUSIP No. NONE 14D-1 ================================================================================ 1. Name of Reporting Persons; I.R.S. Identification Nos. of Above Persons PRESIDIO CAPITAL INVESTMENT COMPANY, LLC --------- - -------------------------------------------------------------------------------- 2. Check the Appropriate Box if a Member of a Group (a) |_| (b) |X| - -------------------------------------------------------------------------------- 3. SEC Use Only - -------------------------------------------------------------------------------- 4 Sources of Funds N/A - -------------------------------------------------------------------------------- 5. Check if Disclosure of Legal Proceedings is Required Pursuant to Items 2(e) or 2(f) |_| - -------------------------------------------------------------------------------- 6. Citizenship or Place of Organization Delaware - -------------------------------------------------------------------------------- 7. Aggregate Amount Beneficially Owned by Each Reporting Person 92,744* - -------------------------------------------------------------------------------- 8. Check if the Aggregate Amount in Row 7 Excludes Certain Shares |_| - -------------------------------------------------------------------------------- 9. Percent of Class Represented by Amount in Row 7 23.19% - -------------------------------------------------------------------------------- 10. Type of Reporting Person OO ================================================================================ * 92 Units are owned by Millennium Funding Corp., 73,735 Units are owned by Millennium Funding II Corp. and 3,351 Units are owned by Millennium Funding I LLC. In addition, Presidio Capital Corp. has the right to acquire an additional 15,566 Units. All of such entities are directly or indirectly 100% owned by Presidio Capital Investment Company, LLC. 3 SCHEDULE 14D-1 ITEM 1. SECURITY AND SUBJECT COMPANY. (a) The name of the subject company is Integrated Resources High Equity Partners, Series 85, A California Limited Partnership (the "Partnership"). The address of the Partnership's principal executive offices is 5 Cambridge Center, 9th Floor Cambridge, Massachusetts 02142. (b) This Statement relates to an offer by Millennium Funding II LLC, a Delaware limited liability company (the "Purchaser"), to purchase up to 26,936 of the outstanding units of limited partnership interest ("Units") of the Partnership at a purchase price of $114.60 per Unit, net to the seller in cash, upon the terms and subject to the conditions set forth in the Offer to Purchase dated November 24, 1999 (the "Offer to Purchase") and the related Letter of Transmittal (which, together with any supplements or amendments, collectively constitute the "Offer"), copies of which are filed as Exhibits (a)(1) and (a)(2) hereto, respectively. The information set forth in the Offer to Purchase under "Introduction" and Section 9 ("Certain Information Concerning your Partnership") is incorporated herein by reference. As of September 30, 1999, the Partnership had 400,010 Units outstanding. (c) The information set forth in the Offer to Purchase in Section 13 ("Background of the Offer") is incorporated herein by reference. ITEM 2. IDENTITY AND BACKGROUND. (a)-(d), (g) This Statement is being filed by the Purchaser and Presidio Capital Investment Company, LLC (collectively, the "Bidders"). The information set forth in the Offer to Purchase under "Introduction," in Section 11 ("Certain Information Concerning Us") and in Schedule 1 to the Offer to Purchase is incorporated herein by reference. (e)-(f) During the last five years, none of the Bidders nor, to the best of their knowledge, any of the persons listed in Schedule 1 to the Offer to Purchase (i) has been convicted in a criminal proceeding (excluding traffic violations or similar misdemeanors) or (ii) was a party to a civil proceeding of a judicial or administrative body of competent jurisdiction and as a result of such proceeding was or is 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 with respect to such laws. (g) Each of the individuals listed on Schedule 1 to the Offer to Purchase is a citizen of the United States. 4 ITEM 3. PAST CONTACTS, TRANSACTIONS OR NEGOTIATIONS WITH THE SUBJECT COMPANY. (a)-(b) The information set forth in the Offer to Purchase under "Introduction," in Section 9 ("Certain Information Concerning Your Partnership"), in Section 10 ("Conflicts of Interest and Transactions with Affiliates") and in Section 13 ("Background of the Offer") is incorporated herein by reference. ITEM 4. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION. (a) The information set forth in the Offer to Purchase in Section 12 ("Source of Funds") is incorporated herein by reference. (b)-(c) Not applicable. ITEM 5. PURPOSE OF THE TENDER OFFER AND PLANS OR PROPOSALS OF THE BIDDER. (a)-(e) The information set forth in the Offer to Purchase under "Introduction" and in Section 8 ("Future Plans") is incorporated herein by reference. (f)-(g) The information set forth in the Offer to Purchase in Section 7 ("Effects of the Offer") is incorporated herein by reference. ITEM 6. INTEREST IN SECURITIES OF THE SUBJECT COMPANY. (a)-(b) The information set forth in the Offer to Purchase under "Introduction," and in Section 11 ("Certain Information Concerning Us") is incorporated herein by reference. ITEM 7. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT TO THE SUBJECT COMPANY'S SECURITIES. The information set forth in the Offer to Purchase under "Introduction," in Section 7 ("Effects of the Offer"), Section 10 ("Conflicts of Interest and Transactions with Affiliates"), Section 11 ("Certain Information Concerning Us") and Section 13 ("Background of the Offer") is incorporated herein by reference. ITEM 8. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED. The information set forth in the Offer to Purchase under "Introduction" and in Section 16 ("Fees and Expenses") is incorporated herein by reference. ITEM 9. FINANCIAL STATEMENTS OF CERTAIN BIDDERS. Not applicable. 5 ITEM 10. ADDITIONAL INFORMATION. (a) Not applicable. (b)-(d) The information set forth in the Offer to Purchase in Section 15 ("Certain Legal Matters") is incorporated herein by reference. (e) The information set forth in the Offer to Purchase under "Introduction" and in Section 13 ("Background of the Offer") is incorporated herein by reference. (f) The information set forth in the Offer to Purchase and the related Letter of Transmittal, copies of which are filed as Exhibits (a)(1) and (a)(2) hereto, respectively, is incorporated herein by reference in its entirety. ITEM 11. MATERIAL TO BE FILED AS EXHIBITS. (a)(1) Offer to Purchase, dated November 24, 1999. (a)(2) Letter of Transmittal and Related Instructions. (a)(3) Cover Letter, dated November 24, 1999, from the Purchaser to the Limited Partners of the Partnership. (c)(1) Agreement, dated March 6, 1998 (the "Agreement") among Presidio Capital Corp., American Real Estate Holdings, L.P. and Olympia Investors L.P. (incorporated by reference to Exhibit (c)(i) to Statement on Schedule 14D-9 of the Partnership (the "Olympia 14D-9"), which was filed with the Securities and Exchange Commission (the "Commission") as of March 25, 1998). (c)(2) Amendment No. 1 to the Agreement (incorporated by reference to Exhibit (iii) to Amendment No. 1 to the Olympia 14D-9 which was filed with the Commission as of May 22, 1998). (c)(3) Amendment No. 2 to the Agreement (incorporated by reference to Exhibit (iii) to Amendment No. 2 to the Olympia 14D-9 which was filed with the Commission as of July 1, 1998). (c)(4) Amendment No. 3 to the Agreement (incorporated by reference to Exhibit (a)(6) to Amendment No. 9 to Schedule 14D-9 of Olympia Investors L.P. and certain other bidders which was filed with the Commission as of July 17, 1998). 6 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. Dated: November 24, 1999 MILLENNIUM FUNDING II LLC By: Presidio Capital Investment Company, LLC, Member By: David G. King, Jr. ------------------------------------- David G. King, Jr. President PRESIDIO CAPITAL INVESTMENT COMPANY, LLC By: David G. King, Jr. ------------------------------------- David G. King, Jr. President 7 EXHIBIT INDEX Exhibit Description (a)(1) Offer to Purchase, dated November 24, 1999. (a)(2) Letter of Transmittal and Related Instructions. (a)(3) Cover Letter, dated November 24, 1999, from the Purchaser to the Limited Partners of the Partnership. (c)(1) Agreement, dated March 6, 1998 (the "Agreement") among Presidio Capital Corp., American Real Estate Holdings, L.P. and Olympia Investors L.P. (incorporated by reference to Exhibit (c)(i) to Statement on Schedule 14D-9 of the Partnership (the "Olympia 14D-9"), which was filed with the Securities and Exchange Commission (the "Commission") as of March 25, 1998). (c)(2) Amendment No. 1 to the Agreement (incorporated by reference to Exhibit (iii) to Amendment No. 1 to the Olympia 14D-9 which was filed with the Commission as of May 22, 1998). (c)(3) Amendment No. 2 to the Agreement (incorporated by reference to Exhibit (iii) to Amendment No. 2 to the Olympia 14D-9 which was filed with the Commission as of July 1, 1998). (c)(4) Amendment No. 3 to the Agreement (incorporated by reference to Exhibit (a)(6) to Amendment No. 9 to Schedule 14D-9 of Olympia Investors L.P. and certain other bidders which was filed with the Commission as of July 17, 1998). 8 EX-99.1(A)(1) 2 OFFER TO PURCHASE Exhibit (a)(1) Offer to Purchase for Cash MILLENNIUM FUNDING II LLC is offering to purchase up to 26,936 units of limited partnership interest in Integrated Resources High Equity Partners, Series 85, a California Limited Partnership, for $114.60 per unit in Cash We are an affiliate of your general partners and are making this offer to you as required by a court-approved settlement of a class action and derivative litigation involving your partnership. We will purchase up to 26,936 (6.7%) of the outstanding units of limited partnership interest in your partnership. If more units are tendered to us, we will accept units on a pro rata basis according to the number of units tendered by each person. Our offer and your withdrawal rights will expire at 12:00 midnight, New York City time, on December 22, 1999, unless we extend the deadline. You will not pay any fees or commissions if you tender your units. Our offer is not subject to any minimum number of units being tendered. See "Risk Factors" beginning on page 1 of this offer to purchase for a description of risk factors that you should consider in connection with our offer, including the following: o Our offer price and the maximum number of units we may purchase were determined as part of the negotiations of the court-approved settlement. The offer price was based on March 1998 appraisals of your partnership's properties and may not reflect the current fair market value of your units. o We have estimated that the net asset value of your partnership as of September 30, 1999 is $147.35 per unit. Our estimate is based on the March 1998 appraisals of your partnership's properties and the net current assets of your partnership on September 30, 1999. o You will not receive any future potential benefits from units you sell to us, such as future distributions by your partnership and the potential for appreciation in the value of the units you sell to us. You will not be entitled to vote units you sell to us for or against a reorganization of your partnership into a real estate investment trust or other publicly-traded entity which your general partners intend to propose to you in the near future as required by the court-approved settlement. If you sell your units to us, you also will not receive stock or other securities to be exchanged for units if the reorganization is approved by limited partners. o Our affiliates currently own approximately 19.3% of the outstanding units. The more units we acquire, the more we are able to influence limited partner voting decisions of your partnership. o Your general partners are affiliates of ours and, therefore, your general partners have conflicts of interest relating to our offer. If you desire to accept our offer, you should complete and sign the letter of transmittal in accordance with the instructions and mail the signed letter of transmittal and any other required documents to Georgeson Shareholder Communications Inc., which is acting as Information Agent and Depositary for our offer, at one of its addresses set forth on the back cover of this offer to purchase. Questions and requests for assistance or for additional copies of this offer to purchase or the letter of transmittal may also be directed to the Information Agent/Depositary at (800) 223-2064. November 24, 1999 1 TABLE OF CONTENTS Page ---- INTRODUCTION...................................................................1 RISK FACTORS...................................................................1 THE TENDER OFFER...............................................................3 Section 1. Terms of the Offer..........................................3 Section 2. Proration; Acceptance for Payment and Payment for Units.....3 Section 3. Procedures for Tendering Units..............................4 Section 4. Withdrawal Rights...........................................5 Section 5. Extension of Tender Period; Termination; Amendment..........5 Section 6. Certain Federal Income Tax Consequences.....................6 Section 7. Effects of the Offer........................................8 Section 8. Future Plans................................................8 Section 9. Certain Information Concerning Your Partnership.............9 Section 10. Conflicts of Interest and Transactions with Affiliates.....12 Section 11. Certain Information Concerning Us..........................13 Section 12. Source of Funds............................................14 Section 13. Background of the Offer....................................14 Section 14. Conditions of the Offer....................................16 Section 15. Certain Legal Matters......................................16 Section 16. Fees and Expenses..........................................17 Section 17. Miscellaneous..............................................17 Appendix A........................................................Glossary Schedule 1 Information With Respect to the Executive Officers and Directors of NorthStar Capital Investment Corp. INTRODUCTION We are offering to purchase up to 26,936 units, representing approximately 6.7% of the outstanding units of limited partnership interest in your partnership, for the purchase price of $114.60 per unit, net to the seller in cash, without interest. We are affiliated with your general partners and our offer is made upon the terms and subject to the conditions set forth in this offer to purchase and in the accompanying letter of transmittal. We are making our offer to satisfy the requirements of a court-approved settlement of a class action and derivative litigation involving your partnership. The first step in the settlement was the solicitation of consents to amend the partnership agreement of your partnership. The required consents have been obtained and the partnership agreement has been amended. The amendments modify (i) the partnership management fee paid by your partnership to one of your general partners and (ii) the manner of calculating the payments that your general partners may be required to make on liquidation of your partnership. Our offer is the second step required by the settlement. If you tender your units in response to our offer you will not be obligated to pay any fees or commissions. We have retained Georgeson Shareholder Communications Inc. to act as the Information Agent in connection with our offer. We will pay all charges and expenses in connection with the services of the Information Agent. The offer is not conditioned on any minimum number of units being tendered. Our offer will expire at 12:00 midnight., New York City time, on December 22, 1999, unless we have extended the period of time during which the offer is open. If you desire to accept our offer, you must complete and sign the letter of transmittal in accordance with the instructions and mail the letter of transmittal and any other required documents to the Information Agent. You may withdraw your tender of units at any time prior to the expiration date of our offer. Our affiliates currently own 77,178 units representing approximately 19.3% of the outstanding units. In the third step of the settlement your general partners are required to use their best efforts to reorganize your partnership into a real estate investment trust or other entity whose shares are listed on a national securities exchange or on the NASDAQ National Market System. The reorganization will only occur if it is approved by the holders of a majority of the units. If you sell units to us, you will not be entitled to vote on the reorganization and will not receive stock or other securities if the reorganization is approved. RISK FACTORS Before deciding whether or not to tender any of your units, you should consider carefully the following risks and disadvantages of the offer: Offer Price May Not Represent Fair Market Value There is no established or regular trading market for your units, nor is there another reliable standard for determining the fair market value of the units. Our offer price may not reflect the price that you could receive in the open market for your units. Such price could be higher than our offer price which was determined as part of the negotiations of the court-approved settlement and was based on March 1998 property appraisals. According to Partnership Spectrum, an independent industry publication, between August 1, 1999 and September 30, 1999, a limited number of units traded in the informal secondary market for units at prices ranging from a high of $105 per unit to a low of $85 per unit, with a weighted average price of $95.36 per unit (not taking into account commissions and other transactional costs). Our Estimate of Net Asset Value May Not Properly Reflect Current Market Value We have estimated that the net asset value of your partnership as of September 30, 1999 is $147.35 per unit. Our estimate is based on March 1998 appraisals of your partnership's properties and the amount of your partnership's net current assets on September 30, 1999. The appraised values used in our estimate may not reflect the current market value of your partnership's properties. Loss of Future Benefits from Your Ownership of Units If you tender your units in response to our offer you will transfer to us all right, title and interest in and to all of the units we accept, including the right to participate in any future potential benefits represented by the ownership of the units. Accordingly, you will not receive any future potential benefits from units you sell to us, such as future distributions by your partnership of operating cash flow or property sale proceeds and the potential for appreciation in the value of the units you sell to us. You also will not be entitled to vote units you sell to us for or against a reorganization of your partnership into a real estate investment trust or other publicly-traded entity which your general partners intend to propose to you in the near future as required by the court-approved settlement. If you sell your units to us, you will not receive stock or other securities to be exchanged for units if the reorganization is approved by limited partners. Possible Increase in Control of Your Partnership by Us Our affiliates currently own approximately 19.3% of the outstanding units. The more units we acquire, the more we are able to influence limited partner voting decisions of your partnership, including decisions on the removal of your general partners, amendment of the partnership agreement, the reorganization of your partnership, the sale of substantially all of your partnership's assets and the liquidation of your partnership. Alternatives to Selling Us Your Units Your general partners originally anticipated holding your partnership's properties for seven to ten years following the time such properties were acquired (the properties were acquired between July 1985 and December 1986). Instead of selling us your units you and other limited partners in your partnership could propose alternative actions such as liquidating your partnership. Conflicts of Interest Since our affiliates receive fees for managing and administering your partnership and its properties, a conflict of interest exists for your general partners between continuing the partnership and receiving such fees, and liquidating the partnership. Also, under the court-approved settlement the amount our affiliates are required to pay to your partnership upon its liquidation is reduced each year that your partnership is not liquidated. This obligation is completely eliminated if your partnership is not liquidated by the end of 2008. Accordingly, a conflict of interest exists for your general partners between continuing the partnership and reducing the amount they would be required to pay to the partnership, and liquidating the partnership. This obligation is also eliminated if your partnership is reorganized into a publicly-traded entity assuming such reorganization occurs. Sale of Your Units Will Be a Taxable Transaction A sale of units to us will be a taxable sale. In general, you will recognize gain or loss equal to the difference between the amount realized on the sale of your units and your adjusted tax basis in the units sold. If you are subject to income tax, your after-tax benefit or cost from a sale will be based on a number of factors including your tax basis in the units sold, whether you sell all of your units, whether you have unused passive activity losses from your partnership, and whether (if you sell at a loss) you have capital gains against which to offset your capital loss. We recommend that you consult with your tax advisor prior to tendering your units to determine your particular tax situation. Holding Units May Result in Greater Future Value You might receive more value if you retain your units until your partnership is liquidated or until your partnership is reorganized into a real estate investment trust or other publicly-traded entity assuming such reorganization occurs. 2 Continuation of the Partnership Unless the reorganization of your partnership is approved, your partnership will continue to be operated as it has in the past. Accordingly, unless your partnership is actually reorganized into a publicly-traded entity, there may be no way to liquidate your investment in the partnership in the future until the properties are sold and the partnership is liquidated. THE TENDER OFFER Section 1. Terms of the Offer. Upon the terms of the offer, we will accept (and thereby purchase) up to 26,936 units that are validly tendered on or prior to the expiration date and not withdrawn in accordance with the procedures set forth in Section 4 of this offer to purchase. For purposes of this offer, the term "expiration date" shall mean 12:00 Midnight, New York City time, on December 22, 1999, unless we have extended the period of time during which the offer is open, in which case the term "expiration date" shall mean the latest time and date on which the offer, as extended by us, shall expire. See Section 5 of this offer to purchase for a description of our right to extend the period of time during which the offer is open and to amend or terminate our offer. Our offer is subject to satisfaction of certain conditions. The offer is not conditioned upon any minimum amount of units being tendered. See Section 14, which sets forth in full the conditions of the offer. We reserve the right (but in no event shall we be obligated), in our sole discretion, to waive any or all of those conditions. If, on or prior to the expiration date, any or all of such conditions have not been satisfied or waived, we may (i) decline to purchase any of the units tendered, terminate the offer and return all tendered units to tendering limited partners, (ii) waive all the unsatisfied conditions and, subject to complying with applicable rules and regulations of the Securities and Exchange Commission (the "Commission"), purchase all units validly tendered or (iii) extend the offer and, subject to the withdrawal rights of limited partners, cause the Depositary to retain the units that have been tendered during the period or periods for which the offer is extended. Section 2. Proration; Acceptance for Payment and Payment for Units. If the number of units validly tendered on or before the expiration date and not withdrawn is 26,936 or less, we will accept for payment, subject to the terms and conditions of the offer, all units so tendered. If more than 26,936 units are validly tendered on or prior to the expiration date and not properly withdrawn prior to the expiration date in accordance with the procedures set forth in Section 4, we will accept for payment and pay for, subject to the terms and conditions of the offer, an aggregate of 26,936 of the units so tendered on a pro rata basis according to the number of units validly tendered by each limited partner and not properly withdrawn on or prior to the expiration date (with appropriate adjustments to avoid purchases of fractional units). The Purchaser will pay for up to 26,936 units validly tendered and not withdrawn in accordance with Section 4, as promptly as practicable following the expiration date. In all cases, the payments for units purchased pursuant to the offer will be made only after timely receipt by the Depositary of a properly completed and duly executed letter of transmittal (or a facsimile thereof), and any other documents required by the letter of transmittal. (See "Section 3. Procedures for Tendering Units".) For purposes of the offer, we will be deemed to have accepted for payment pursuant to the offer, and thereby purchased, validly tendered units when, as and if we give verbal or written notice to the Depositary of our acceptance of those units for payment 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 through the Depositary, which will act as agent for tendering limited partners for the purpose of receiving cash payments from us and transmitting cash payments to tendering limited partners. Under no circumstances will interest be paid on the offer 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 us. If, for any reason, acceptance for payment of, or payment for, any units tendered pursuant to the offer is delayed or we are unable to accept for payment, purchase or pay for units tendered pursuant to the offer, then, without prejudice to our rights under Section 14 of this offer to purchase, we may cause the Depositary to retain tendered units and those units may not be withdrawn except to the extent that the tendering limited partners are entitled to withdrawal rights as described in Section 4 of this offer to purchase; subject, however, to our 3 obligation under Rule 14e-1(c) under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), to pay limited partners the offer price in respect of units tendered or return those 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 (including certificates representing the units being tendered) must be received by us on or prior to the expiration date. If you have lost or misplaced the certificate(s) representing your units and you would like to tender your units to us, you must complete, sign, have notarized and return to us the enclosed Affidavit of Loss and Indemnity Agreement. In order to comply with certain restrictions on transfer in the partnership agreement, a tender which would result in the tendering limited partner owning less than ten units (four units in the case of a limited partner which is an IRA or Keogh Plan) will not be effective. Signature Requirements. If the letter of transmittal is signed by the registered holder of a unit, then no notarization or signature guarantee is required on the letter of transmittal. Similarly, if a unit is 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 you to take part in the offer, your units must be validly tendered and not withdrawn on or prior to the expiration date. The method of delivery of the letter of transmittal and all other required documents (including certificates representing the units being tendered) is at your option and risk of delivery will be deemed made only when actually received by the Depositary. Backup Federal Income Tax Withholding. If you tender your units and you are not a corporation or foreign individual, you may be subject to 31% backup federal income tax withholding unless you provide us with your correct taxpayer identification number ("TIN"). To avoid this backup withholding, you should complete and sign the Substitute Form W-9 included in the letter of transmittal. If you tender your units and do not complete the Substitute Form W-9, we will be required to withhold 31% (and if you fail to provide your TIN, an additional $50 or such other amount as may be imposed by law) from the purchase price payment made to you. See the instructions to the letter of transmittal and "Section 6. Certain Federal Income Tax Matters." FIRPTA Withholding. If you are a foreign person and you tender your units, we will be required, in certain instances, to withhold a tax equal to 10% of the amount realized on the sale (i.e., the purchase price plus the Partnership liabilities allocable to each unit sold) unless you complete and sign the FIRPTA Affidavit included in the letter of transmittal certifying your TIN and your address and that you are not a foreign person. See the instructions to the letter of transmittal and "Section 6. Certain Federal Income Tax Matters." Other Requirements. By executing the letter of transmittal, you are irrevocably appointing us and our designees, in the manner set forth in the letter of transmittal, each with full power of substitution, to the full extent of your rights with respect to the units tendered by you and accepted for payment and purchased by us. Such appointment will be effective when, and only to the extent that, we accept the tendered units for payment. Upon such acceptance for payment, all prior proxies given by you with respect to the units will, without further action, be revoked, and no subsequent proxies may be given (and if given will not be effective). We and our designees will, as to those units, be empowered to exercise all of your voting and other rights as a limited partner as we in our sole discretion may deem proper at any meeting of limited partners, by written consent or otherwise. We reserve the right to require that, in order for units to be deemed validly tendered, immediately upon our acceptance for payment for the units, we must be able to exercise full voting rights with respect to the units, including voting at any meeting of limited partners then scheduled. In addition, by executing the letter of transmittal, you also assign to us all of your rights to receive distributions from the partnership with respect to units which we have accepted for payment and purchased pursuant to the offer. (See "Section 6. Certain Federal Income Tax Matters".) 4 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 our offer will be determined by us, in our sole discretion, which determination shall be final and binding. We reserve the absolute right to reject any or all tenders of any particular unit determined by us not to be in proper form or if the acceptance of, or payment for, that unit may, in the opinion of our counsel, be unlawful. We also reserve the right to waive any defect or irregularity in any tender with respect to any particular unit of any particular limited partner, and our interpretation of the terms and conditions of the offer (including the letter of transmittal and the instructions thereto) will be final and binding. Neither us, the Depositary nor any other person will be under any duty to give notification of any defects or irregularities in the tender of any unit or will incur any liability for failure to give any such notification. Binding Agreement. A tender of a unit pursuant to any of the procedures described above and the acceptance for payment of such unit will constitute a binding agreement between the tendering unitholder and us on the terms set forth in this offer and the related letter of transmittal. Section 4. Withdrawal Rights. You may withdraw tendered units at any time prior to the expiration date or after the 60th day following the date of this offer to purchase, if the units have not been previously accepted for payment. For a 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 the offer to purchase. Any such notice of withdrawal must specify the name of the person who tendered, the number of 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, a unit is delayed for any reason, or if we are unable to purchase or pay for a unit for any reason, then, without prejudice to our rights under the offer, we may cause the Depositary to retain tendered units and such units may not be withdrawn except to the extent that a tendering limited partner is entitled to withdrawal rights as set forth in this Section 4; subject, however, to our obligation, pursuant to Rule 14e-1(c) under the Exchange Act, to pay the offer price in respect of units tendered or return those units promptly after termination or withdrawal of the offer. Any units properly withdrawn will thereafter be deemed not to have been validly tendered for purposes of our offer. However, withdrawn units may be re-tendered 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. We expressly reserve the right, in our sole discretion, at any time and from time to time (i) to extend the period of time during which our offer is open and thereby delay acceptance for payment of, and the payment for, any unit and (ii) upon the occurrence of any of the conditions specified in Section 14 of this offer to purchase, to delay the acceptance for payment of, or payment for, any units not already accepted for payment or paid for. An extension of the offer 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 of our offer, in accordance with Rule 14e-1(d) under the Exchange Act. If we extend the offer, or if we delay payment for a unit (whether before or after its acceptance for payment) or are unable to pay for units pursuant to our offer for any reason, then, without prejudice to our rights under the offer, we may cause the Depositary to retain tendered units and those units may not be withdrawn except to the extent tendering limited partners are entitled to withdrawal rights as described in Section 4; subject, however, to our obligation, pursuant to Rule 14e-1(c) under the Exchange Act, to pay the offer price in respect of units tendered or return those units promptly after termination or withdrawal of the offer. If we make a material change in the information concerning the offer or if we waive a material condition to our offer, we will extend the offer and disseminate additional tender offer materials to the extent required by Rules 14d-4(c) and 14d-6(d) under the Exchange Act. The minimum period during which an offer must remain open following any material change in the information concerning the offer will depend upon the facts and circumstances, 5 including the relative materiality of the change in 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. Certain Federal Income Tax Matters. The following summary is a general discussion of certain federal income tax considerations that should be relevant to you in connection with a sale of units in our 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, all as of the date of our 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 you in light of your specific circumstances or to certain types of investors subject to special tax rules (for example, dealers in securities, banks, insurance companies and, except as discussed below, foreign and tax-exempt investors), nor does it discuss any aspect of state, local, foreign or other tax laws. Sales of units pursuant to our 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. Your resulting tax consequences will depend, in part, on your personal tax situation. YOU SHOULD CONSULT YOUR OWN TAX ADVISOR AS TO THE PARTICULAR TAX CONSEQUENCES, INCLUDING STATE AND LOCAL TAX CONSEQUENCES, TO YOU OF SELLING UNITS IN OUR OFFER. You will recognize gain or loss on a sale of units in our offer equal to the difference between (i) your "amount realized" on the sale and (ii) your adjusted tax basis in the units sold. The amount of your adjusted tax basis will vary depending upon your particular circumstances, but generally will equal your cash investment in your units, increased by your share of your partnership's income and gain and decreased by your share of your partnership's losses and distributions. The "amount realized" with respect to a unit sold will be a sum equal to the amount of cash received by you for the unit plus the amount of your partnership's liabilities that are allocable to the unit. You will be allocated a share of your partnership's taxable income or loss with respect to the units sold by you in accordance with the provisions of your partnership's limited partnership agreement concerning transfers of units. Such allocations and any cash distributed by your partnership to you or for your benefit will affect your adjusted tax basis in your units and, therefore, your taxable gain or loss upon a sale of units in our offer. In this regard, if you tender your units, you will be allocated a pro rata share of taxable income (or loss) with respect to your units sold in our offer through the end of the calendar quarter in which the units are sold, but we will receive all future distributions made with respect to your units. Based on the results of your partnership's operations through December 31, 1998, and without giving effect to your partnership's operations, transactions or distributions after that date other than distributions of your partnership's cash flow from operations through June 30, 1999, we estimate that, depending on your date of entry into your partnership, if you sell your units in our offer and you are a taxable investor who purchased your units in your partnership's original offering, you will recognize a gain for federal income tax purposes of between $32.83 per unit for units acquired in April 1985 and $19.67 per unit for units acquired in June 1986. We also estimate that, if you purchased your units in your partnership's original offering, you may have "suspended" passive activity losses (i.e., net tax losses that you could not previously deduct under the passive activity loss rules described below) from your partnership of up to $21.28 per unit (subject to reduction to the extent you utilized any of such losses to offset your passive activity income from other investments). Under the passive activity loss rules (discussed below), your suspended passive activity losses from your partnership generally should be deductible by you from your other income (subject to any other applicable limitations) if you sell all of your units in our offer. Your gain or loss on a sale of a unit in our offer generally will be treated as a capital gain or loss if you held the unit as a capital asset. Your capital gain or loss will be treated as long-term capital gain or loss assuming your holding period for the unit exceeds 12 months. Under current law, capital gains and losses of individuals and non-corporate taxpayers are taxed under tax rules different from the rules applicable to corporations. Long-term capital gains of individuals and other non-corporate taxpayers are taxed at a maximum federal income tax rate of 20%; however, their gain attributable to straight-line depreciation deductions is taxed at a federal income tax rate of 25%. 6 The maximum 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 their ordinary income. An individual's long-term capital losses in excess of his long-term capital gains can offset his short-term capital gains on which he would otherwise be subject to tax at the same federal income tax rates as his ordinary income. Excess capital losses generally can be carried forward to succeeding years (a corporation'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 special tax rules applicable to "passive activity losses," if you are a non-corporate taxpayer or closely held corporation, you generally cannot use your losses from your partnership to offset your non-passive activity income. As a result, you may have suspended passive activity losses from your partnership. However, if you sell all your units in our offer, then your suspended passive activity losses from your partnership, as well as any loss you recognize on the sale of your units in our offer, generally could be deducted by you in the year of sale (subject to any other applicable limitations). If you recognize a gain on the sale of your units in our offer but do not sell all of your units, then any suspended passive activity losses from your partnership in excess of your gain recognized on the sale could not be deducted by you (except to the extent of your passive activity income from other sources) until your remaining units are sold. If you recognize a loss on the sale of your units in our offer but do not sell all of your units, then your loss on the sale and your suspended passive activity losses (if any) from your partnership would be deductible by you only to the extent of your passive activity income from your partnership or from other sources. In order to avoid liability for federal estimated tax penalties, an individual generally is required to make quarterly estimated tax payments on account of his annual tax liability. Penalties generally may be avoided by the individual's paying at least 90% of his taxes due for the current year or a percentage of his prior year's tax equal to 105% if the preceding tax year is 1998, 108.6% if the preceding tax year is 1999, 110% if the preceding tax year is 2000, 112% if the preceding tax year is 2001 and 110% if the preceding tax year is 2002 or thereafter. Accordingly, if you are an individual and you elect to pay estimated taxes for 1999 equal to 105% of your tax liability for 1998, you would be able to defer payment of taxes associated with a sale of your units until April, 2000, whereas if you elect to pay estimated taxes for 1999 equal to 90% of your estimated tax liability for 1999, you will have to make quarterly estimated tax payments on account of your tax liability on a sale of your units in 1999. Inasmuch as your partnership's assets are not generating unrelated business taxable income and are not subject to "acquisition indebtedness" (as defined in the Code), if you are a tax-exempt investor, you generally should not realize unrelated business taxable income upon a sale of your units in our offer unless your units are held subject to acquisition indebtedness incurred by you. If you are a tax-exempt investor described in section 501(c)(7), (c)(9), (c)(17) or (c)(20) of the Code, you should consult your tax advisor concerning the application of "set aside" and reserve requirements to a sale of your units. In addition to federal income tax, you may be subject to state and local taxes on your gain (if any) on a sale of your units. You should consult with your own professional tax advisors concerning the state and local tax consequences of a sale of your units. Information Reporting, Backup Withholding and FIRPTA. If you sell your units, you must report the sale by filing a statement with your federal income tax return for the year of sale. To prevent the possible application of back-up federal income tax withholding of 31% with respect to the payment of the purchase price, you will have to provide us with your correct taxpayer identification number. See the instructions to the letter of transmittal. If you are a foreign person (as defined in the Code), your gain, if any, on the sale of your units in our offer will be subject to federal income tax under the Foreign Investment in Real Property Tax Act, and we will be required to deduct and withhold 10% of the amount realized by you on the sale. Amounts withheld would be creditable against your federal income tax liability and, if in excess thereof, you could obtain a refund from the Internal Revenue Service by filing a U.S. federal income tax return. See the instructions to the letter of transmittal. 7 Section 7. Effects of the Offer. Effect on Trading Market. There is no established public trading market for the units and, therefore, a reduction in the number of limited partners should not materially further restrict your ability to find purchasers for your units through secondary market transactions. Stronger Influence on Limited Partner Voting Decisions by Purchaser and its Affiliates. We will have the right to vote each unit that we purchase in the offer. Depending on the number of units that we purchase in the offer, we and our affiliates could be in a stronger position to influence the outcome of voting decisions with respect to your partnership. Accordingly, we and our affiliates could (i) prevent non-tendering limited partners from taking action they desire but that we and our affiliates oppose and (ii) take action desired by us and our affiliates but opposed by non-tendering limited partners. Under the partnership agreement, limited partners holding a majority of the units are entitled to take action with respect to a variety of matters, including: removing your general partners; dissolving your partnership; selling all or substantially all of your partnership's properties; effecting material changes in the investment objectives and policies of your partnership; and causing most types of amendments to the partnership agreement. Consent of limited partners holding a majority of the outstanding units will also be required to approve the reorganization of your partnership into a real estate investment trust or other publicly-traded entity which your general partners have agreed to propose as part of the settlement of the class action and derivative litigation involving your partnership. When voting on matters, we and our affiliates will vote units owned and acquired by us, in our interest, which, because of our affiliation with your general partners, may also be in the interest of your general partners. The units are registered under the Exchange Act, which means, among other things, that your partnership is required to furnish certain information to its limited partners and to the Commission and comply with the Commission's proxy rules in connection with meetings of, and solicitation of consents from, limited partners. Our purchase of units pursuant to the offer will not result in the units becoming eligible for deregistration under Section 12(g) of the Exchange Act. Section 8. Future Plans. We are offering to purchase units as required by the court-approved settlement of a class action and derivative litigation involving your partnership. Following the completion of the offer, we 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 under this offer. Under the settlement, your general partners have agreed to use their best efforts to reorganize the partnership into a separate real estate investment trust or other entity whose shares will be listed on a national securities exchange or on the NASDAQ National Market System. The reorganization will be made in accordance with applicable federal securities law which provides, among other things, for the preparation of a detailed disclosure document containing a comprehensive description of the proposed reorganization. In addition, the reorganization will require approval by the limited partners holding a majority of the outstanding units. Your general partners believe that an investment in the reorganized entity will be significantly different from an investment in your partnership. The potential benefits of, and risks associated with, an investment in the reorganized entity can only be assessed after the structure and terms of the reorganization have been fully determined. Although the structure and terms have not yet been fully determined, it is presently anticipated that, unlike your partnership, the reorganized entity may have an infinite life, will have the ability to borrow money to purchase additional properties and will be able to reinvest the proceeds of property sales. Other than the reorganization described above, your general partners do not have any present plans or intentions with respect to a merger, reorganization or liquidation of your partnership, a sale of assets or financing of any of your partnership's properties or a change in the management, capitalization or distribution policy of your partnership. (See "Section 9. Certain Information Concerning Your Partnership".) However, we expect that consistent with their fiduciary obligations, your general partners will continue to review any opportunities such as sales of your partnership's properties and will seek to maximize returns to limited partners. Your general partners' intentions are to manage your partnership's assets to maximize capital appreciation and improve property operations. 8 Section 9. Certain Information Concerning Your Partnership. Information included herein concerning your partnership is derived from your partnership's publicly-filed reports. Additional financial and other information concerning your partnership is contained in your 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 materials may also be reviewed through the Commission's Web site (http://www.sec.gov). Your partnership was organized on August 19, 1983 under the laws of the State of California. Its principal executive offices are located at 5 Cambridge Center, 9th floor, Cambridge, Massachusetts 02142. Its telephone number is (617) 234-3000. Your partnership is engaged in the business of operating and holding for investment previously acquired income-producing properties consisting of office buildings, shopping centers and other commercial and industrial properties. The original anticipated holding period of your partnership's properties was 7-10 years from the acquisition of such properties by your partnership (which occurred from July 1985 to December 1986). Presidio Capital Investment Company, LLC, the entity which is our sole member, and certain of its affiliates and affiliates of your general partners, entered into a services agreement with AP-PCC III, L.P. pursuant to which AP-PCC III, L.P. was retained to provide asset management and investor relation services to your partnership and other entities affiliated with your partnership. As a result of this agreement, AP-PCC III, L.P. has the duty to direct the day to day affairs of your partnership, including, without limitation, reviewing and analyzing potential sale, financing or restructuring proposals regarding your partnership's assets, preparation of all partnership reports, maintaining partnership records and maintaining bank accounts of your partnership. AP-PCC III, L.P. is not permitted, however, without the consent of our affiliate Presidio Capital Corp., or as otherwise required under the terms of your partnership's agreement of limited partnership to, among other things, cause your partnership to sell or acquire an asset or file for bankruptcy. In order to facilitate the provision by AP-PCC III, L.P. of the asset management services and the investor relation services, effective October 25, 1999, the officers and directors of your managing general partner resigned and nominees of AP-PCC III, L.P. were elected as the officers and directors of your managing general partner. AP-PCC III, L.P. is an affiliate of Winthrop Financial Associates, a Boston based company that provides asset management services, investor relation services and property management services to over 150 limited partnerships which own commercial property and other assets. 9 Properties. The following is a description of the properties in which your partnership has an interest. Unless otherwise indicated, all properties listed are owned by your partnership in fee simple. Property Name Rentable Square Acquisition (and Description) Location Footage Date - ----------------- -------- ------- ---- Southport Shopping Center Fort Lauderdale, FL 143,089 4/15/86 (Shopping Center) Loch Raven Plaza Towson, MD 150,000 6/26/86 (Retail/Office Complex) Century Park I(1) Kearny Mesa, CA 203,188 11/7/86 (Office Complex) 568 Broadway(2) New York, NY 299,000 12/2/86 (Office Building) Seattle Tower(1) Seattle, WA 141,000 12/16/86 (Office Building) - ---------- (1) Owned in fee simple by a joint venture in which your partnership and High Equity Partners L.P. - Series 86 each have a 50% interest. (2) Owned in fee simple by a joint venture in which your partnership and High Equity Partners L.P. - Series 86 each have a 38.925% interest and in which High Equity Partners L.P. - Series 88 has a 22.15% interest. 10 Real Estate and Accumulated Depreciation. The following table shows the encumbrances, the initial cost to your partnership of land, buildings and improvements, cost capitalization of improvements and carrying costs subsequent to acquisition, gross carrying value and accumulated depreciation of each of your partnership's properties as of December 31, 1998. Limited partners should note that the gross carrying value of a property does not represent the fair market value of the property or the amount for which the property could be sold.
Reductions Costs Recorded Capitalized Subsequent Subsequent to to Initial Cost Acquisition Acquisition --------------------------- ---------------------------- ------------ Buildings and Carrying Description Encumbrances Land Improvements Improvements Costs Write-downs - ------------------------------ ------------ ------------ ------------ ------------ ------------ ------------ RETAIL: The Southport Shopping Center $ -- $ 6,961,667 $ 13,723,333 $ 1,833,613 $ 1,866,962 $ (4,900,000) Ft. Lauderdale, FL The Loch Raven Shopping Center -- 2,469,871 6,860,748 2,839,104 953,837 (4,800,000) Towson, MD ------------ ------------ ------------ ------------ ------------ ------------ -- 9,431,538 20,584,081 4,672,717 2,820,799 (9,700,000) ------------ ------------ ------------ ------------ ------------ ------------ OFFICE: Century Park Office Complex -- 3,122,064 12,717,936 1,952,221 1,353,130 (11,700,000) Kearny Mesa, CA 568 Broadway Office Building -- 2,318,801 9,821,517 5,108,031 1,556,212 (10,821,150) New York, NY Seattle Tower Office Building -- 2,163,253 5,030,803 2,160,343 609,392 (6,050,000) Seattle, WA ------------ ------------ ------------ ------------ ------------ ------------ 7,604,118 27,570,256 9,220,595 3,518,734 (28,571,150) ------------ ------------ ------------ ------------ ------------ ------------ $ -- $ 17,035,656 $ 48,154,337 $ 13,893,312 $ 6,339,533 $(38,271,150) ============ ============ ============ ============ ============ ============ Gross Amount at Which Carried at Close Of Period ------------------------------------------ Buildings and Accumulated Date Description Land Improvements Total Depreciation Acquired - ------------------------------ ------------ ------------ ------------ ------------ -------- RETAIL: The Southport Shopping Center $ 5,998,194 $ 13,487,381 $ 19,485,575 $ 4,957,302 1986 Ft. Lauderdale, FL The Loch Raven Shopping Center 1,507,227 6,816,330 8,323,557 2,329,632 1986 Towson, MD ------------ ------------ ------------ ------------ 7,505,421 20,303,711 27,809,132 7,286,934 ------------ ------------ ------------ ------------ OFFICE: Century Park Office Complex 1,123,811 6,331,540 7,455,351 3,048,080 1986 Kearny Mesa, CA 568 Broadway Office Building 977,120 7,006,291 7,983,411 2,873,194 1986 New York, NY Seattle Tower Office Building 764,613 3,149,178 3,913,791 1,435,125 1986 Seattle, WA ------------ ------------ ------------ ------------ 2,865,544 16,487,009 19,352,553 7,356,399 ------------ ------------ ------------ ------------ $ 10,370,965 $ 36,790,720 $ 47,161,685 $ 14,643,333 ============ ============ ============ ============
Note: The aggregate cost for Federal income tax purposes is $85,432,835 at December 31, 1998. 11 Selected Financial Data. The following is a summary of certain financial data for your partnership for the periods indicated. The summary financial information for your partnership for the years ended 1998, 1997, 1996, 1995 and 1994 is based on audited financial statements. The summary financial information for the nine months ended September 30, 1999 and 1998 is based on unaudited financial statements.
Nine Months Ended September 30, Year Ended December 31, ------------------------------- ----------------------------------------------------------------------- 1999 1998 1998 1997 1996 1995 1994 ---- ---- ---- ---- ---- ---- ---- Rental Revenue ....... $ 7,440,086 $ 7,166,179 $ 9,189,542 $ 9,021,378 $ 8,888,016 $ 7,877,644 $ 7,994,126 Net Income (Loss) .... $ 2,827,089 $ 2,661,314 $ 2,931,223(5) $ 2,134,659 $ 2,134,717 $(18,624,934)(3) $ 1,442,884(1) Net Income (Loss) Per Unit.................. $ 6.71 $ 6.32 $ 6.96 $ 5.07 $ 5.07 $ (44.23)(3) $ 3.43(1) Distributions Per Unit(4)............... $ 1.88(6) $ 2.82 $ 3.76 $ 3.57 $ 2.40 $ 2.40 $ 14.39(2) Total Assets ......... $42,319,737 $41,226,384 $40,814,689 $39,600,417 $39,290,185 $ 37,309,597 $56,742,945
- ---------- (1) Net income for the year ended December 31, 1994 includes a write-down for impairment on Southern National of $181,000, or $0.43 per unit. (2) Distributions for the year ended December 31, 1994 include a $9.45 per unit distribution from the proceeds of the sale of Southern National. (3) Net loss for the year ended December 31, 1995 includes a write-down for impairment on Century Park I, Seattle Tower, 568 Broadway, Loch Raven, Southport and Westbrook in the aggregate amount of $20,469,050, or $48.61 per unit. (4) All distributions are in excess of accumulated undistributed net income and, therefore, represent a return of capital to investors on a generally accepted accounting principles basis. (5) Net income for the year ended December 31, 1998 includes a $389,359 gain, or $0.92 per unit, from the sale of the Westbrook property. (6) No distributions were made in respect of the third quarter of 1999. Section 10. Conflicts of Interest and Transactions with Affiliates. Your general partners have certain conflicts of interest with respect to the offer as set forth below. Voting by Us and Our Affiliates. As a result of the offer, we and our affiliates may be in a stronger position to influence the outcome of partnership decisions on which limited partners may vote. This means that (i) non-tendering limited partners could be prevented from taking action they desire but that we and our affiliates oppose and (ii) we and our affiliates may be able to take action desired by us and our affiliates but opposed by non-tendering limited partners. (See "Section 7. Effects of the Offer".) Transactions with Affiliates. Your partnership has a property management services agreement with Resources Supervisory Management Corp. ("Resources Supervisory"), an affiliate of your general partners, to perform certain functions relating to the management of the properties of your partnership. Portions of the property management fees were paid to unaffiliated management companies which are engaged for the purpose of performing the management functions for certain properties. For 1998, 1997, and 1996, and for the first nine months of 1999, Resources Supervisory received an aggregate of $371,144, $350,490, $327,759, and $223,707, respectively, of which $212,371, $196,300, $191,956 and $169,701 was paid to unaffiliated management companies, respectively. Resources High Equity, Inc., your managing general partner, received reimbursement of expenses of $150,000 per year for the administration of your partnership for each of 1998, 1997 and 1996, and $112,500 for the first nine months of 1999. Another affiliate of your general partner was reimbursed for $102,007 of expenses during 1998 and $76,500 of expenses during the first nine months of 1999. Your managing general partner receives a partnership asset management fee for managing the affairs of your partnership which, prior to the effectiveness of recent amendments to the partnership agreement, was equal to 1.05% of the invested assets (as defined in the partnership agreement). Under this method of calculation, your managing general partner received a partnership asset management fee of $887,329, $908,172, and $908,172, respectively, for 1998, 1997 and 1996. As a result of the recent amendments to the partnership agreement, your managing general partner is now entitled to a partnership asset management fee which is equal to 1.25% of the gross asset value of the assets of your partnership, as determined by an independent appraiser of national reputation 12 selected by your general partners. The recently enacted amendments provide that for 1999 your managing general partner will be paid an asset management fee of $418,769. Your general partners were allocated 5% of the net income (losses) of your partnership which in the aggregate, amounted to $146,561, $106,733, $106,736 and $141,354, for 1998, 1997 and 1996 and the first nine months of 1999, respectively, and received $79,160, $75,160, $50,528, and $39,580, respectively, as its 5% share of distributions for those periods. The recently enacted amendments also fix the amount your general partners must pay to your partnership on liquidation at $3,912,950. This amount is reduced by 10% for each full calendar year after 1998 (prorated for any calendar year in which your partnership is liquidated on a day of the year which is not December 31) in which your partnership is not liquidated and will be eliminated if your partnership has not been liquidated by the end of 2008. The obligation will also be eliminated if your partnership is reorganized into a publicly-traded entity. Presidio Capital Corp., an affiliate of ours, has guaranteed your general partners' obligation to pay to your partnership such amounts described above upon the liquidation of your partnership. Your partnership's limited partnership agreement provides for the indemnification of your general partners and their affiliates in certain circumstances. Your partnership reimbursed your general partners for $1,034,510 of costs they incurred in defending and preparing the settlement materials in respect of the class action and derivative litigation involving your partnership which is more fully described in Section 13. Section 11. Certain Information Concerning Us. We are Millennium Funding II LLC, a Delaware limited liability company formed for the purpose of making the offer. We are wholly-owned by Presidio Capital Investment Company, LLC, a Delaware limited liability company controlled by NorthStar Capital Investment Corp., a Maryland corporation. Our principal executive office is at 527 Madison Avenue, New York, New York 10022. The names, positions and business addresses of the directors and executive officers of NorthStar Capital Investment Corp., as well as a biographical summary of the experience of such persons for the past five years or more, are set forth on Schedule 1 attached hereto and are incorporated herein by reference. In connection with a tender offer for units in your partnership made on March 12, 1998 by Olympia Investors, L.P., a Delaware limited partnership ("Olympia"), Olympia and our affiliate, Presidio Capital Corp., entered into an agreement which provides, among other things, for: (i) an agreement by Olympia and its affiliates to limit their acquisition of units to those acquired in the Olympia tender offer and to limit Olympia's acquisition of assets or properties of your partnership to properties or assets which your general partners or its affiliates have publicly announced their intention to sell or in respect of which they have hired a broker; (ii) an agreement by Olympia and its affiliates not to (A) seek the removal of your general partners or call any meeting of limited partners of your partnership; (B) make any proposal to or seek proxies from limited partners of your partnership; or (C) act, either alone or together with others, to seek to control the management, policies or affairs of your partnership or to effect any business combination or other extraordinary transaction that involves your partnership or your general partners; (iii) an agreement by Olympia and its affiliates to vote all units in your partnership which they own in favor of any proposal by your general partners resulting in limited partners receiving securities listed on NASDAQ or a national securities exchange; (iv) Olympia's grant to an affiliate of your general partners of an option to purchase 50% of the units acquired in Olympia's tender offer at a price determined in accordance with Olympia's agreement with Presidio Capital Corp., and 50% of Olympia's costs associated with its tender offer; and (v) an agreement pursuant to which either party can initiate so-called "buy/sell" procedures by notifying the other of a specified price per unit and the other terms and conditions on which the other party would then be required to elect (subject to certain exceptions) either to buy the units acquired in connection with Olympia's tender offer from the initiating party or to sell the units to the initiating party. The agreements described in clauses (i), (ii) and (iii) above expire on March 6, 2001, but may expire earlier under certain circumstances. After Olympia's tender expired, Olympia announced that it had accepted for payment 31,132 units pursuant to its tender offer. Pursuant to the agreement, an affiliate of Presidio Capital Corp. bought 50% of the units which were owned by Olympia as a result of its tender offer, or 15,566 units, for $101.81 per unit. Presidio Capital Corp. may be deemed to beneficially own the remaining units owned by Olympia as a consequence of the agreement. 13 On November 10, 1999, an affiliate of ours and of your general partners purchased 3,351 units from Everest Properties II LLC and its affiliates for $131.61 per unit. Except as otherwise set forth herein, (i) neither we, Presidio Capital Corp., Presidio Capital Investment Company, LLC, NorthStar Capital Investment Corp. (collectively, the "Presidio Entities") to the best of our 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 we, any Presidio Entity, to the best of our knowledge, the persons listed on Schedule 1, nor any affiliate thereof or director, executive officer or subsidiary of us or the Presidio Entities. has effected any transaction in the units within the past 60 days, (iii) neither we, any Presidio Entity, to the best of our knowledge, any of the persons listed on Schedule 1, nor any director or executive officer of us or the Presidio Entities, has any contract, arrangement, understanding or relationship with any other person with respect to any securities of your 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 us, any Presidio Entity, or, to the best of our knowledge, the persons listed on Schedule 1, on the one hand, and your partnership or its affiliates, on the other hand, and (v) there have been no contracts, negotiations or transactions between us, any Presidio Entity, or, to the best of our knowledge, the persons listed on Schedule 1, on the one hand, and your 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. Section 12. Source of Funds. We expect that approximately $3,086,866 (exclusive of fees and expenses) will be required to purchase all of the 26,936 units we are seeking in this offer. We plan to obtain the funds necessary to consummate the offer (including fees and expenses) from capital contributions directly or indirectly from Presidio Capital Investment Company, LLC, which has a net worth substantially greater than the amount required to purchase the units. (See "THE TENDER OFFER - Section 11. Certain Information Concerning Us".) Section 13. Background of the Offer. Acquisition of Control. In November 1994, Presidio Capital Corp. acquired control of your general partners upon consummation of a Plan of Reorganization of Integrated Resources, Inc. under Chapter 11 of the Bankruptcy Code. The Action. The class action and derivative litigation involving your partnership was brought by certain limited partners in your partnership as well as High Equity Partners L.P. - Series 86 and High Equity Partners L.P. - Series 88. The complaint in the action alleged, among other things, various state law class and derivative claims against your general partners, the general partners of the other HEP Partnerships and certain related parties, including claims for breach of fiduciary duty; breach of contract; unfair and fraudulent business practices; negligence; dissolution, accounting, receivership and removal of general partners; fraud; and negligent misrepresentation. Your general partners and the other defendants in the action at all times considered the action to be without merit and vigorously defended the action. The Settlement. In January 1999 the parties agreed to the terms of the settlement. Following a hearing held on April 29, 1999, the California Superior Court approved the settlement and all of the transactions contemplated thereby and found them to be fair, reasonable and adequate and in the best interest of the settlement class and your partnership. On August 1999, the settlement was consummated following the approval of amendments to the partnership agreement. The settlement required your general partners to cause this offer to be made and also requires the general partners to propose the reorganization of your partnership into a real estate investment trust or other publicly-traded entity. Establishment of Purchase Price. Our offer price was determined as part of the negotiation of the court-approved settlement and was based on March 1998 appraisals of your partnership's properties. We used the March 1998 appraisals of your partnership's properties to estimate the net asset value of your partnership as of September 30, 1999. The following table sets forth the values in the appraisals. For joint venture 14 investments, the value listed represents your partnership's proportionate interest in the joint venture. The appraised values listed below may not reflect the current market value of your partnership's properties. ------------------------------------------------------------------ Property Appraised Value -------- --------------- ------------------------------------------------------------------ Southport Shopping Center $ 19,700,000 ------------------------------------------------------------------ Loch Raven Plaza 8,400,000 ------------------------------------------------------------------ Century Park I 9,500,000 (1) ------------------------------------------------------------------ 568 Broadway 12,456,000 (2) ------------------------------------------------------------------ Seattle Tower 5,150,000 (1) ------------------------------------------------------------------ TOTAL $ 55,206,000 ------------------------------------------------------------------ - ---------- 1) Your partnership has a 50% interest in this property and the amount listed in the table represents 50% of the appraised value. (2) Your partnership has a 38.925% interest in this property and the amount listed in the table represents 38.925% of the appraised value. To estimate your partnership's net asset value as of September 30, 1999, we added to the aggregate appraised values the amount of all net current assets of your partnership at September 30, 1999 which equaled $6,836,000. The resulting net asset value of your partnership was approximately $62,042,000 or $147.35 per unit (based on the percentage of distributions to which limited partners are entitled). Secondary market sales activity for the units, including privately negotiated sales, has been limited. 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 limited partner to liquidate an investment in units because the units are not listed or traded on any exchange or quoted on any NASDAQ list or system. According to Partnership Spectrum, an independent third party industry publication, between August 1, 1999 and September 30, 1999, there were 53 reported trades in the secondary market (for a total of 1,568 units) which were made at between a high of $105 per unit and a low of $85 per unit, with a weighted average price of $95.36 per unit. These prices do not take into account commissions and other transactional costs which sellers of units may be required to pay (which typically range between 8% and 10% of the reported selling price). No independent person has been retained to evaluate or give any opinion about the fairness of the offer and no representation is made by us or your general partners as to such fairness. Other measures of the value of the units may be relevant to limited partners. Limited partners are urged to consider carefully all of the information contained in this offer to purchase and consult with their own advisors, tax, financial or otherwise, in evaluating the terms of this offer before deciding whether to tender units. Partnership Makes No Recommendation. Your partnership is making no recommendation as to whether limited partners should tender their units. Section 14. Conditions of the Offer. Notwithstanding any other provisions of our offer, we will not be required to accept for payment or to pay for any units tendered pursuant to our offer 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 our offer shall not have been filed, occurred or been obtained. Furthermore, notwithstanding any other term of our offer, we will not be required to accept for 15 payment or pay for any units not theretofore accepted for payment or paid for and may terminate our 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 us, any of the following conditions exists: (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 makes illegal, delays or otherwise directly or indirectly restrains or prohibits the making of our offer or the acceptance for payment of or payment for any units by us; and (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 (iii) of paragraph (a) above. The foregoing conditions are for our sole benefit and may be asserted by us regardless of the circumstances giving rise to such conditions or may be waived by us in whole or in part at any time and from time to time in our sole discretion. Any determination by us concerning the events described above will be final and binding upon all parties. Notwithstanding anything to the contrary set forth in this Section 14, all conditions set forth in this Section 14 must be satisfied or waived prior to the expiration date. Section 15. Certain Legal Matters. General. Except as set forth in this Section 15, we are not aware of any filings, approvals or other actions by any domestic or foreign governmental or administrative agency that would be required before we acquire units pursuant to our offer. Should any such approval or other action be required, it is our present intention to seek such additional approval or action. While there is no present intent to delay the purchase of units tendered pursuant to our 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 your partnership's business, or that certain parts of your 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 us to elect to terminate our offer without purchasing units under the offer. Our obligation to purchase and pay for units is subject to certain conditions, including conditions related to the legal matters discussed in this Section 15. Antitrust. We do not believe that the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, is applicable to the acquisition of units contemplated by our offer. Margin Requirements. The units are not "margin securities" under the regulations of the Board of Governors of the Federal Reserve System and, accordingly, those regulations are not applicable to our offer. State Takeover Laws. Many states have adopted anti-takeover laws which purport, to varying degrees, to be applicable to attempts to purchase securities of corporations which are incorporated in those states or which have substantial assets, securityholders, principal executive offices or principal places of business in those states. Although we have not attempted to comply with any state anti-takeover statutes in connection with our offer, we reserve 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 with our offer is intended as a waiver of that right. If any state anti-takeover statute is applicable to our offer, we 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, we may not be obligated to accept for purchase or pay for any units tendered. Section 16. Fees and Expenses. Except as set forth in this Section 16, we will not pay any fees or commissions to any broker, dealer or other person for soliciting tenders of units pursuant to the offer. We have retained Georgeson Shareholder Communications Inc. to act as Depositary in connection with our offer. We will pay Georgeson Shareholder Communications Inc. reasonable and customary compensation for its respective services in connection with the offer, plus reimbursement for out-of-pocket expenses. We will also pay all costs and 16 expenses of printing and mailing the offer and its legal fees and expenses. You will be responsible for the payment of any fees imposed by your broker for assisting you in tendering your units or any fees charged by a custodian or other trustee of any Individual Retirement Account or profit plan that is the record owner of your units. Section 17. Miscellaneous. We are not aware of any jurisdiction in which the making of our offer is not in compliance with applicable law. If we become aware of any jurisdiction in which the making of the offer would not be in compliance with applicable law, we will make a good faith effort to comply with any such law. If, after such good faith effort, we cannot comply with any such law, our offer will not be made to (nor will tenders be accepted from or on behalf of) the holders of units who reside in such jurisdiction. No person has been authorized to give any information or to make any representation on behalf of us 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. We have filed with the Commission a Schedule 14D-1, pursuant to Rule 14d-3 under the Exchange Act, furnishing certain additional information with respect to our offer, and may file amendments thereto. The Schedule 14D-1 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 9 hereof (except that they will not be available at the regional offices of the Commission). Millennium Funding II LLC November 24, 1999 17 SCHEDULE 1 INFORMATION WITH RESPECT TO THE EXECUTIVE OFFICERS AND DIRECTORS OF NORTHSTAR CAPITAL INVESTMENT CORP. 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 NorthStar Capital Investment Corp. 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 Peter W. Ahl, 34, has been a Vice President of NorthStar Capital Investment Corp. since November 1997. For the previous five years he was a director in the Alternate Investment Group of AEW Capital Management, L.P. Mr. Ahl's current business address is 527 Madison Avenue, New York, New York 10022. Martin L. Edelman, 58, has been a director of NorthStar Capital Investment Corp. since November 1997. Since 1994, Mr. Edelman has been of counsel to Battle Fowler LLP, a New York City law firm specializing in real estate and corporate law. Mr. Edelman is one of the Managing Partners of Chartwell Hotel Associates (an affiliate of Fisher Brothers, the Getty family and Soros family interests), and is on the Board of Directors and Executive Committee of Grupo Chartwell de Mexico, S.A. de C.V. Mr. Edelman is a member of the Board of Directors of each of Avis Rent-a-Car, Inc. Cendant Incorporated, Delancey Estates PLC., Acadia Real Estate Trust, and Capital Trust. Mr. Edelman's current business address is 75 East 55th Street, New York, New York 10022. Richard Georgi, 36, has been a director of NorthStar Capital Investment Corp. since June 1999. Currently, Mr. Georgi is a Managing Partner of Soros Real Estate Partnership and is responsible for the Soros group of funds (including Quantum Realty Fund) global real estate investments. Prior to joining SREP in 1999, Mr. Georgi spent nine years with Goldman Sachs & Co. in real estate related businesses, including responsibility for the Real Estate Principal Area and the Whitehall Real Estate Funds in Europe from 1995 to 1999. Mr. Georgi is a board member of Europlex, Mapeley and MedGroup. Mr. Georgi's current business address is 20 St. James Street, London SW2A 1ES. Marc Gordon, 35, has been a Vice President and Assistant Secretary of NorthStar Capital Investment Corp. since November 1997. From 1993 to 1997, Mr. Gordon was Vice President in the real estate investment banking group at Merrill Lynch. Mr. Gordon's current business address is 527 Madison Avenue, New York, New York 10022. David Hamamoto, 40, has been a Co-Chairman of the Board, Co-President and Co-Chief Executive of NorthStar Capital Investment Corp. since November 1997. Previously he was a partner and co-head of the Real Estate Principal Investment Area at Goldman, Sachs & Co. Mr. Hamamoto's current business address is 527 Madison Avenue, New York, New York 10022. Christopher M. Jeffries, 49, has been a director of NorthStar Capital Investment Corp. since May 1998. Mr. Jeffries founded Millennium Partners in 1990, a developer of mixed-use urban entertainment and living centers. Mr. Jeffries' current business address is 1995 Broadway, New York, New York 10023. David King, 37, has been a Vice President and Assistant Treasurer of NorthStar Capital Investment Corp. since November 1997. He is also a Vice President of your general partners. For more than the previous five years he was a Senior Vice President of Finance at Olympia & York Companies (USA). Mr. King's current business address is 527 Madison Avenue, New York, New York 10022. Martin Lamb, 38, has been a Vice President of NorthStar Capital Investment Corp. since April 1998. From 1996 until 1998 he was a Senior Vice President with The Morgan Stanley Real Estate Fund. Prior to that, he served as Vice President at The Argo Fund, an opportunistic real estate joint venture between affiliates of J.P. Morgan and The O'Connor Group. Mr. Lamb's current business address is 527 Madison Avenue, New York, New York 10022. Dallas E. Lucas, 37, has been a director, Vice President, Treasurer and Chief Financial Officer of NorthStar Capital Investment Corp. since August 1998. He is also a Vice President of your general partners. From 1994 until August 1998 he was the Chief Financial Officer and Senior Vice President of Crescent Real Estate Equities Company. Mr. Lucas' current business address is 527 Madison Avenue, New York, New York 10022. Richard J. McCready, 41, has been a Vice President and Secretary of NorthStar Capital Investment Corp. since March 1998. Previously, he was President, Chief Operating Officer and a director of First Winthrop Corporation. Mr. McCready's current business address is 527 Madison Avenue, New York, New York 10022. W. Edward Scheetz, 34, has been a Co-Chairman of the Board, Co-President and Co-Chief Executive Officer of NorthStar Capital Investment Corp. since November 1997. Previously he was a partner at Apollo Real Estate Advisors L.P. since 1993. Mr. Scheetz' current business address is 527 Madison Avenue, New York, New York 10022. Robert Soros has been a director of NorthStar Capital Investment Corp. since June 1999. Mr. Soros is a partner at Soros Private Equity Partners, an affiliate of Soros Fund Management LLC, which is responsible for the private equity and real estate investing for Quantum Group of Funds and Soros Fund Management Fund LLC. In addition, Mr. Soros oversees various Soros Family investments. Mr. Soros has been with Soros Fund Management LLC since 1994. Mr. Soros is a member of the Board of Directors of American Malls International and MenuDirect Corporation. Mr. Soros' current business address is 888 Seventh Avenue, 33rd Floor, New York, New York 10106. The letter of transmittal and any other required documents should be sent or delivered by each unitholder or such unitholder's broker, dealer, commercial bank, trust company or other nominee to the Depositary at the address set forth below: By Mail or Overnight Delivery: Georgeson Shareholder Communications Inc. 17 State Street, 27th Floor New York, New York 10004 If you have any questions or if you need assistance in completion of the letter of transmittal, you may contact Georgeson Shareholder Communications Inc., the Information Agent for the offer, by calling: (800) 223-2064 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 us at the telephone number and address listed above. You may also contact your broker for assistance concerning the offer. EX-99.(A)(2) 3 LETTER OF TRANSMITTAL Exhibit (a)(2) INTEGRATED RESOURCES HIGH EQUITY PARTNERS, SERIES 85, A CALIFORNIA LIMITED PARTNERSHIP LETTER OF TRANSMITTAL THE OFFER WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON DECEMBER 22, 1999 (the "Expiration Date") UNLESS EXTENDED. ================================================================================ To participate in the Offer, a duly executed copy of this Letter of Transmittal, all certificates representing the undersigned's interest in units of limited partnership tendered hereby (the "Certificates") and any other documents required by this Letter of Transmittal must be received by the Purchaser (as defined below) on or prior to the Expiration Date. Delivery of this Letter of Transmittal or any other required documents to an address 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 Limited Partner. Please use the pre-addressed envelope provided. This Letter of Transmittal is to be completed by limited partners ("Limited Partners") of Integrated Resources High Equity Partners, Series 85, A California Limited Partnership (the "Partnership") pursuant to the procedures set forth in the Offer to Purchase (as defined below). Capitalized terms used herein and not defined herein have the meanings ascribed to such terms in the Offer to Purchase, dated November 24, 1999 (the "Offer to Purchase"), made by Millennium Funding II LLC, a Delaware limited liability company. PLEASE READ CAREFULLY THE ACCOMPANYING INSRUCTIONS For information or assistance in connection with the offer or the completion of this Letter of Transmittal, please contact the Information Agent at (800) 223-2064. (Please indicate changes or corrections to the name, address and Tax Identification Number printed below.) To: Millennium Funding II LLC The undersigned hereby tenders all of its units of limited partnership interest in the Partnership as set forth above (together with the Certificates, the "Units") to Millennium Funding II LLC, a Delaware limited liability company (the "Purchaser") for $114.60 cash per Unit, upon the terms and subject to the conditions set forth in the Offer to Purchase, receipt of which is hereby acknowledged, and this Letter of Transmittal (the "Letter of Transmittal", which, together with the Offer to Purchase and any supplements, modifications or amendments thereto, constitute the "Offer"). The undersigned recognizes that, under the circumstances described in the Offer to Purchase, the Purchaser will accept Units for payment on a pro rata basis (with adjustments to avoid purchases of certain fractional Units) based upon the number of Units tendered prior to or on the Expiration Date and not withdrawn. Subject to and effective upon acceptance for payment of any Units tendered hereby in accordance with the terms of the Offer, the undersigned hereby sells, assigns and transfers to, or upon the order of, the Purchaser all right, title and interest in and to such Units purchased (including the related Certificates) and requests, authorizes and directs the General Partner to substitute the Purchaser as a limited partner of the Partnership in place of the undersigned with respect to such Units. The undersigned hereby irrevocably constitutes and appoints the Purchaser as the Limited Partner's proxy 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 and proxy being deemed to be an irrevocable power and proxy coupled with an interest) to deliver such Units and transfer ownership thereof on the Partnership books maintained by the General Partner, together with all accompanying evidences of transfer and authenticity, to or upon the order of the Purchaser and upon payment of the purchase price payable by the Purchaser in accordance with the terms of the Offer to Purchase in respect of such Units (the "Purchase Price"), to receive all benefits and otherwise exercise all rights of beneficial ownership of such Units, including, without limitation, all voting rights and the right to receive distributions from the Partnership, all in accordance with the Offer. Subject to and effective upon the purchase of any Units tendered hereby, the undersigned hereby requests that the Purchaser be admitted as a "Substitute Limited Partner" under the terms of the Partnership Agreement of the Partnership. Upon the purchase of such Units pursuant to the Offer, all prior proxies and consents given by the undersigned with respect thereto will be revoked and no subsequent proxies or consents may be given (and if given will not be deemed effective). 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 accepted for payment 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 the Units tendered hereby. The undersigned understands that a valid tender of Units to the Purchaser will constitute a binding agreement 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 accept for payment any Units tendered hereby. If any tendered Units are not purchased for any reason, this Letter of Transmittal shall be effective to transfer to the Purchaser only that number of Units as is accepted and thereby purchased by the Purchaser, and the Certificates (or, if necessary, new certificates) representing such unpurchased Units shall be returned. 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, administrators, executors, successors, assigns and trustees in bankruptcy and other legal representatives of the undersigned. Except as stated in the Offer to Purchase, this tender is irrevocable. - -------------------------------------------------------------------------------- FOR INFORMATION AND ASSISTANCE WITH THE OFFER, PLEASE CALL: (800) 223-2064. For Units to be validly tendered, Limited Partners should complete and sign this Letter of Transmittal and return it and all other documents required hereby in the self addressed envelope enclosed, or by Hand or Overnight Delivery to: Georgeson Shareholder Communications Inc. at 17 Street Street, 27th Floor, New York, New York 10004. - -------------------------------------------------------------------------------- BEFORE SIGNING AND RETURNING THIS LETTER OF TRANSMITTAL, PLEASE REFER TO THE ACCOMPANYING INSTRUCTIONS - -------------------------------------------------------------------------------- SIGNATURE BOX (ALL OWNERS) (See Instructions 1, 3 and 4 as necessary) Please sign exactly as your name is printed on the front of this Letter of Transmittal. For joint owners, each owner must sign. (See Instruction 1.) The signatory hereto hereby tenders the number of Units indicated in this Letter of Transmittal to the Purchaser pursuant to the terms of the Offer and certifies under penalties of perjury the statements in Box A, Box B, and, if applicable, Box C. X____________________________________ X_______________________________________ (Signature) (Signature) Tax I.D. Number X________________________________________ Name and Capacity (if other than individuals)______________(Title)______________ Address ________________________________________________________________________ (city) (state) (zip) Area Code and Telephone No. ( )____________ (Day) ( )____________ (Evening) - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- BOX A SUBSTITUTE FORM W-9 (See Instruction 3 - Box A) The person signing this Letter of Transmittal hereby certifies the following to the Purchaser of the Units indicated in this Letter of Transmittal under penalties of perjury: (i) The Taxpayer Identification Number ("TIN") printed (or corrected) on the front of this Letter of Transmittal is the correct TIN of the Limited Partner, or if this box |_| is checked, the Limited Partner has applied for a TIN. If the Limited Partner has applied for a TIN, a TIN has not been issued to the Limited Partner, and either: (a) the Limited Partner has mailed or delivered an application to receive a TIN to the appropriate IRS Center or Social Security Administration Office, or (b) the Limited Partner intends to mail or deliver an application in the near future (it being understood that if the Limited partner does not provide a TIN to the Purchaser within sixty (60) days, 31% of all reportable payments made to the Limited Partner will be withheld until the TIN is provided to the Purchaser); and (ii) Unless this box |_| is checked, the Limited Partner is not subject to backup withholding either because the Limited Partner: (a) is exempt from backup withholding, (b) has not been notified by the IRS that the Limited Partner is no longer 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 Limited Partner is no longer subject to backup withholding. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- BOX B FIRPTA AFFIDAVIT (See Instruction 3 - Box B) Under Section 1445(c)(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 interest plus cash or 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 Limited Partner'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 Limited Partner, 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 Limited Partner's U.S. social security number (for individuals) or employer identification number (for non-individuals) is correctly printed (or corrected) on the front of this Letter of Transmittal; and (iii) the Limited Partner's home address (for individuals), or office address (for non-individuals), is correctly printed (or corrected) on 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) By checking this box |_|, the person signing this Letter of Transmittal hereby certifies under penalties of perjury that the Limited Partner is an "exempt foreign person" for purposes of the backup withholding rules under the U.S. federal income tax laws, because the Limited Partner: (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. - -------------------------------------------------------------------------------- The Information Agent for the offer is: GEORGESON SHAREHOLDER COMMUNICATIONS INC. By Mail or Overnight Courier: 17 State Street 27th Floor New York, New York 10004 For Information please call: TOLL FREE (800) 223-2064 3 AFFIDAVIT OF LOSS AND INDEMNITY AGREEMENT (IF REQUIRED - SEE INSTRUCTION NO. 5) TO BE COMPLETED ONLY IF YOU CANNOT LOCATE YOUR CERTIFICATES The undersigned person(s) hereby represents, warrants, acknowledges and agrees under penalty of perjury as follows: I am the lawful owner of Certificate(s) representing the number of Units referred to in the Letter of Transmittal (the "Letter of Transmittal") executed by me in connection with the Offer to Purchase Units by Millennium Funding II LLC (the "Purchaser"), dated November 24, 1999. The Certificate(s) has (have) not been endorsed, cashed, negotiated, transferred, assigned, or otherwise disposed of. I have made a diligent search for the Certificate(s) and have been unable to find it (them), and make this Statement to the Purchaser, the Partnership and the general partners thereof for the purpose of inducing the acceptance of tender of the Units without surrender of the Certificate(s), and hereby agree to surrender the Certificate(s) for cancellation should I at any time find the Certificate(s). In consideration of the proceeds of tendering the Units and the Certificate(s), I agree to completely indemnify, protect and save harmless the Purchaser, the Partnership, the general partners thereof, the Depositary, and each of their respective agents and affiliates, and any other party to the transaction (collectively, the "Obligees") from and against all loss, costs and damages, including, without limitation, court costs and attorneys' fees, which they may be subject to or liable for in respect of the cancellation and replacement of the Certificate(s), and the distribution of the proceeds of the Certificate(s). The rights accruing to the Obligees under the preceding sentences shall not be limited by the negligence, inadvertence, accident, oversight or their failure to inquire into, contest, or litigate any claim, whenever such negligence, inadvertence, accident, oversight, breach or failure may occur or have occurred. Capitalized terms used herein and not defined herein have the meanings ascribed to such terms in the Letter of Transmittal. x_________________________________________ Address:__________________________ Signature of Limited Partner - Date __________________________________________ __________________________________ Printed name of Limited Partner - Date (Include zip code) (The address provided above must be the registered address of the Limited Partner.) x_________________________________________ Signature of Limited Partner - Date ( ) ___________________________________________ __________________________________ Printed name of Limited Partner - Date Telephone (Day) ( ) __________________________________ Telephone (Eve) __________________________________________ Capacity (Full Title) 4 INSTRUCTIONS Forming Part of the Terms and Conditions of the Offer 1. SIGNATURE AND DELIVERY OF REQUIREMENTS Individual and Joint Owners - Signature Requirements. After carefully reading and completing this Letter of Transmittal, in order to tender your Units, Limited Partner(s) must sign at the "X" in the Signature Box. The signature(s) must correspond exactly with the name printed (or corrected) on the front of this Letter of Transmittal without any change whatsoever. Note: For Units held in a custodial account, the beneficial owner should sign in the Signature Box. If the Units are registered in the names of two or more joint holders, all such holders must sign this Letter of Transmittal. Trustees, Corporations and Fiduciaries - Signature Requirements. 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. Signatories should indicate their title when signing and must submit proper evidence satisfactory to the Purchaser of their authority to act. Delivery Requirements. For Units to be validly assigned, a properly completed and duly executed copy of this Letter of Transmittal, any and all Certificates, together with any other documents required by this Letter of Transmittal, must be received by the Purchaser prior to or on the Expiration Date. To ensure receipt of this Letter of Transmittal, along with any and all Certificates, it is suggested that you use overnight courier delivery or, if this Letter of Transmittal is to be delivered by U.S. Mail, you use certified or registered mail, return receipt requested. All Letters of Transmittal should be addressed as follows: By Mail or Overnight Courier: Georgeson Shareholder Communications Inc. 17 State Street 27th Floor New York, New York 10004 For Additional Information Call: (800) 223-2064 Documentation Deceased Owner - Copy of Death Certificate. If other than a Joint Tenant, see also Executor/ Administrator/Guardian below. Deceased Owner (Other) - See Executor/Administrator/Guardian (a) below. Executor/Administrator Guardian - (a) Send copy of Court Appointment Documents; and (b) a copy of applicable provisions of Will (Title Page, Executor powers asset distributions); or (c) Estate distribution documents. Attorney-in-fact - Power of Attorney. Corporate/Partnerships - Resolution(s) of Board of Directors or other evidence of authority to so act. Trust/Pension Plans - Cover pages of the trust or plan, along with the trustee(s) section and/or amendments or resolutions of the above to prove authority to so act. 3 2. TRANSFER TAXES. The Purchaser will pay or cause to be paid all transfer taxes, if any, payable in respect of Units accepted for payment pursuant to the Offer. 3. U.S. PERSONS. A Limited Partner who or which is a United States citizen or resident alien individual, a domestic corporation, a domestic partnership, a domestic trust or a domestic estate (collectively, "United States persons") as those terms are defined in the Internal Revenue code and Income Tax Regulations, should complete the following: Box A -Substitute Form W-9. In order to avoid 31% federal income tax backup withholding, the Limited Partner must provide to the Purchaser the Limited Partner's correct Taxpayer Identification Number ("TIN") and certify, under penalties of perjury, that such Limited Partner is not subject to such backup withholding. The TIN that must be provided on the Substitute W-9 is that of the registered Limited Partner as printed (or corrected) on the front of this Letter of Transmittal. If a correct TIN is not provided, penalties may be imposed by the Internal Revenue Service ("IRS"), in addition to the Limited Partner being subject to backup withholding. Certain Limited Partners (including, among others, all corporations) 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. NOTE: The correct TIN for an IRA account is that of the Custodian (not the individual Social Security number of the beneficial owner). Box B - FIRPTA Affidavit. To avoid potential withholding of tax pursuant to section 1445 of the Internal Revenue Code, each Limited Partner who or which is a United States Person (as defined in Instruction 4 above) must certify, under penalties of perjury, the Limited Partner's TIN and address, and that the Limited Partner is not a foreign person. 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. 4. BOX C - FOREIGN PERSONS. In order for a Limited Partner who is a foreign person (i.e., not a United States person as defined in 3 above) to qualify as exempt from 31% backup withholding, such foreign Limited Partner must certify, under penalties of perjury, the statement in BOX C of this Letter of Transmittal attesting that foreign person's status by checking the box preceding such statement. Unless such box is checked, such foreign person will be subject to withholding tax under Section 3406 of the Code. 5. AFFIDAVIT OF LOSS AND INDEMNITY AGREEMENT. If the Limited Partner is unable to locate any of the Certificates representing Units to be tendered, the Limited Partner must complete and sign an Affidavit of Loss and Indemnity Agreement. 6. ADDITIONAL COPIES OF OFFER TO PURCHASE AND LETTER OF TRANSMITTAL. Request for assistance or additional copies of the Offer to Purchase and this Letter of Transmittal may be obtained from Georgeson Shareholder Communications Inc. by calling (800) 223-2064. 4 EX-99.(A)(3) 4 OFFER TO PURCHASE Exhibit (a)(3) Millennium Funding II LLC c/o Georgeson Shareholder Communications Inc. 17 State Street New York, New York 10004 November 24, 1999 Re: Offer to Purchase Units of Limited Partnership Interest in Integrated Resources High Equity Partners, Series 85, A California Limited Partnership Dear Limited Partners: In accordance with a court-approved settlement of a class action and derivative litigation involving Integrated Resources High Equity Partners, Series 85, A California Limited Partnership (your "partnership"), we are offering to acquire up to 26,936 units of limited partnership interest in your partnership for $114.60 per unit in cash. Enclosed for your review and consideration are documents relating to our offer to purchase your units. The general partners of your partnership are our affiliates. As a result of this affiliation, your partnership has indicated that it is remaining neutral and making no recommendation as to whether its limited partners should tender their units in response to our offer. Limited partners are urged to read our offer to purchase and the related materials and the enclosed Schedule 14D-9 carefully and in their entirety before deciding whether to tender their units. To accept our offer, complete the enclosed letter of transmittal and return it to us on or prior to December 22, 1999. Any questions, requests for additional information, or requests for assistance should be made to us at (800) 223-2064. You should evaluate our offer based on your own particular financial circumstances. Our offer contains numerous terms and conditions that you should review before making a decision, including certain risk factors that are summarized on the first page of our offer to purchase. We suggest that you review our offer to purchase with your personal financial and tax advisors. Sincerely, Millennium Funding II LLC -----END PRIVACY-ENHANCED MESSAGE-----