AIMCO Partnerships Buyout Case — Shelter Properties II Limited Partnership, National Property Investors III, US Realty Partners Limited Partnership, Shelter Properties IV Limited Partnership, Fox Strategic Housing Income Partners.

A Settlement of the Action was reached in July 2011.  The Court has granted final approval of the Settlement. More information about the Settlement, including a copy of the Class Notice can be accessed here.

Chimicles Schwartz Kriner & Donaldson-Smith LLP (CSK&D) filed a proposed class action in Denver, Colorado on behalf of the unaffiliated limited partners of Shelter Properties II Limited Partnership, National Property Investors III, US Realty Partners Limited Partnership, Shelter Properties IV Limited Partnership, Fox Strategic Housing Income Partners (the “Five Partnerships”).  The action arose from the buyout in early 2011 (“Merger”) of the unaffiliated limited partnership interests (“Unit(s)”) in the Five Partnerships by Apartment Investment and Management Company (“AIMCO”) and its affiliates (“Defendants”).

Over time, Defendants had acquired a majority of the outstanding Units of the Five Partnerships and ownership of their general partners.  In September 2010, Defendants announced that they would cash out the Units held by the unaffiliated LPs, which would result in Defendants owning a 100% interest in each of the Five Partnerships.  The Class consists of the minority, unaffiliated limited partners of each of the Five Partnerships.

Because Defendants owned a majority of the Units, the Merger was proposed and consummated without the approval or ratification by the LPs.  On September 14 and October 12, 2010 Defendants filed papers with the SEC, including Form S-4s, which were thereafter amended and/or supplemented (“Prospectuses”) and disseminated them to the LPs, which announced the Merger and the calculation of the Merger consideration.  The merger consideration to be paid to the LPs in the Merger was calculated primarily by taking Defendants’ appraised value of the Properties, adding additional assets, and then deducting mortgage balances, advances from Defendants, and other liabilities.

In the Merger, Defendants offered the LPs the right to contractually seek appraisal rights (“Contractual Appraisal Right Option”).  The Contractual Appraisal Right Option provided that the Defendants would unilaterally select three arbitrators to sit on a panel and would conduct the arbitration in Denver, Colorado and that the arbitration panel was permitted to charge the LPs with the costs of the appraisal proceeding.

Also as part of the Merger, Defendants offered to pay the LPs an additional cash payment, only if the LPs agreed to execute a waiver and release of Defendants from a broad array of potential claims not only related to the Merger but to “any other circumstance,” or any matter related to their ownership of Units, and for claims which the LPs might possess, but did not know or suspect to exist (“Waiver & Release”).

The Merger was consummated on February 11, 2011.

The Action contends that Defendants breached, or aided and abetted breaches of, fiduciary duties owed to the LPs, for proposing and implementing the Merger which was unfair to the LPs with respect to the price they were paid by Defendants for their Units, and with respect to the process employed in doing the Merger. In the Action, the Plaintiffs sought monetary damages and alleged that, among other things, Defendants misled the Class and gave them inadequate consideration for their Units in the buyout.

The Plaintiffs and Defendants entered into a Stipulation of Settlement in July 2011, which provides that the LPs will receive an additional payment for the Merger.  The Notice of Pendency of Class Action Settlement, available here, which was sent to the LPs contains details concerning the Settlement and your rights.

If you have any questions about the Notice, your rights or the litigation, please contact Kimberly Donaldson Smith, 361 West Lancaster Avenue, Haverford, PA 19041, Phone: 610-642-8500 or use the contact form below.