EXHIBIT 3.2 REAL ESTATE ASSOCIATES LIMITED THIRD RESTATED CERTIFICATE AND AGREEMENT OF LIMITED PARTNERSHIP

 

                                                                   EXHIBIT 3.2

 

 

                        REAL ESTATE ASSOCIATES LIMITED

        THIRD RESTATED CERTIFICATE AND AGREEMENT OF LIMITED PARTNERSHIP

 

 

         This Third Restated Certificate and Agreement of Limited Partnership

by and among Sonnenblick-Goldman Corp. of California, a California corporation

with principal offices at 1901 Avenue of the Stars, Los Angeles, California

90067 (the "Corporate General Partner"), and Charles H. Boxenbaum, an

individual residing at 780 Latimer Road, Santa Monica, California 90402 (the

"Individual General Partner") as general partners (hereinafter collectively

referred to as the "General Partners"), and Nicholas G. Ciriello, an

individual residing at 418 South Lucerne Boulevard, Los Angeles, California

90020 ("Initial Limited Partner"), is entered into as of the date(s) set forth

on the signature pages hereto. Such Initial Limited Partner, and any

additional or substituted limited partners hereafter admitted to the Limited

Partnership as herein provided, are referred to collectively as the "Limited

Partners" and individually as a "Limited Partner."

 

                             W I T N E S S E T H:

 

         WHEREAS, on September 15, 1977, the Partnership was formed pursuant

to the laws of the State of California, on December 30, 1977, the Restated

Certificate and Agreement of Limited Partnership of the Partnership changing

certain provisions of such Agreement was filed, and on May 30, 1978, the

Second Restated Certificate and Agreement of Limited Partnership was filed;

 

         WHEREAS, the General Partners and the Initial Limited Partner desire

to change certain provisions in, and restate in full, their agreement; and

 

         WHEREAS, it is the intention of the parties thereto to admit

additional Limited Partners to the Partnership for the purpose of acquiring

additional capital therefor;

 

         NOW, THEREFORE, the parties hereto hereby agree as follows:

 

Section 1: Formation.

 

         1.1 The General Partners and the Initial Limited Partner do hereby

form a limited partnership (The "Partnership") under the Limited Partnership

Act of the State of California.

 

Section 2: Name.

 

         2.1 The business of the Partnership shall be conducted under the name

Real Estate Associates Limited, which name may be changed by the General

Partners by written notice to the Limited Partners.

 

Section 3: Addresses of Parties.

 

         3.1 The principal place of business of the Partnership shall be at

1901 Avenue of the Stars, Suite 1200, Los Angeles, California 90067, or at

such other place as the General Partners may from time to time designate in

writing to the Limited Partners. The Partnership may also maintain such other

offices at such other places as the General Partners may deem advisable.

 

         3.2 The addresses of the General Partners shall be those stated in

the first paragraph of this Agreement, or at such other places as the General

Partners may from time to time designate in writing to the Limited Partners.

The addresses of the Limited Partners shall be those stated after their names

on Schedule A hereto or in any amended certificate hereto. A Limited Partner

may change such address by written notice to the General Partners, which

notice shall become effective upon receipt.

 

Section 4: Business of the Partnership.

 

         4.1 The business of the Partnership shall be:

 

               (a) to acquire debt and equity interests as a limited partner

         in any partnership or joint venture (a "local limited partnership")

         which will (i) acquire, hold, finance, construct, improve,

         rehabilitate, manage, and/or operate government-assisted or other

         housing projects (the "Projects" and the interests of the Partnership

         in the local limited partnerships shall be referred to as "Project

         Interests"), (ii) monitor and supervise management of construction

         and operations of the Projects, (iii) arrange for and supervise the

         conversion of any Project to other uses, or (iv) perform any act for

         a purpose authorized by this Agreement;

 

               (b) to acquire, hold (in the Partnership's name or under any

         other title arrangement selected by the General Partners), lease,

         sell, mortgage, convey, or refinance any real or personal property,

         including, but not limited to, the Project Interests described in

         paragraph (a) above;

 

               (c) to hold, own, maintain, manage, improve, develop, operate,

         sell, transfer, convey, lease, mortgage, exchange, or otherwise

         dispose of or deal in or with Projects and Project Interests

         described in paragraph (a) above; and

 

               (d) to perform any acts to accomplish the foregoing purposes.

 

Section 5: Contributions to Capital; Additional Limited Partners.

 

         5.1 The capital of the Limited Partnership shall be divided into no

less than 1 and up to 20 General Partners interests and no less than 1,400 and

up to 20,000 non-assessable limited partnership interests, each of which

limited partnership interest is hereinafter referred to as a "Unit."

 

         5.2 The General Partners shall contribute an aggregate of $12,500 to

the capital of the Partnership, for which the General Partners shall be

credited with the ownership of a total of one General Partners interest, and

shall have such interest in and to the profits and losses thereof as is

described in Section 7 hereof.

 

         5.3 (a) Each Limited Partner shall contribute as capital to the

Partnership an amount equal to the number of Units for which he has subscribed

multiplied by $1,000 (with a minimum aggregate capital contribution of

$5,000), all of which shall be paid to the Partnership concurrently with the

recordation in the Official Records of Los Angeles County of an amendment of

this Agreement reflecting the admission of each Limited Partner. Investors

whose subscriptions have been accepted by the General Partners will be

admitted as Limited Partners within 15 days after the minimum of $1,400,000

from the sale of Units has been received by the General Partners. Thereafter,

investors will be admitted as Limited Partners no later than the last day of

the calendar month following the date the General Partners accepted their

subscriptions. The General Partner will accept or reject subscriptions within

three business days after receipt thereof.

 

         (b) The Initial Limited Partner shall contribute as capital to the

Partnership an amount equal to the number of Units for which he has subscribed

multiplied by $1,000 less brokerage commissions (with a minimum aggregate

capital contribution of $4,600), all of which shall be paid to the Partnership

concurrently with the recordation reflecting the admission of other Limited

Partners, and have the right, but not the obligation, to purchase additional

Units as provided herein. Furthermore, upon the admission of additional

Limited Partners to the Partnership, the Initial Limited Partner may elect to

withdraw such investment and cease to be a Limited Partner.

 

         (c) The General Partners are authorized to admit additional Limited

Partners to the Partnership by selling not more than 20,000 Units for cash to

selected persons as may apply to become Limited Partners pursuant to the terms

of an offering described in a Prospectus (the "Prospectus") to which this

Agreement will be annexed, by completing a subscription agreement (the

"Subscription Agreement") in the form to be set forth in the Prospectus,

provided that no person admitted as a Limited Partner shall have been

permitted to purchase more than 250 Units, subject, however, to the right of

the General Partners to establish special requirements for larger

subscriptions.

 

         (d) No Limited Partner shall have the right to withdraw or reduce his

capital contribution. No Limited Partner shall have the right to bring an

action for partition against the Partnership or to demand or receive property

other than cash in return for his capital contribution. No Limited Partner

shall have priority over any other Limited Partner, either as to the return of

his capital contribution or as to profits, losses, or distributions.

 

         (e) The net proceeds to the Partnership will be $910 for each Unit. A

person acquiring Units will participate with other Limited Partners in the

income, gains, losses, deductions, credits, and cash distributions on a pro

rata basis in accordance with the number of Units owned. The "Capital Account"

for each Unit as of any date is the cash contributed to the Partnership in

respect of such Unit, properly adjusted to reflect as of such date profits,

losses, and cash distributions with respect to the interest in the Partnership

represented by such Units.

 

         (f) To accomplish the purpose of this Section 5.3, the General

Partners are hereby authorized to do all things necessary to admit such

additional Limited Partners, including, but not limited to, registering the

Units under the Securities Act of 1933, as amended, pursuant to the rules and

regulations of the Securities and Exchange Commission, qualifying the Units

for sale with state securities regulatory authorities or perfecting exemptions

from qualification, and entering into such underwriting or agency arrangements

for the solicitation of the Units upon such terms and conditions as the

General Partners may deem advisable.

 

         5.4 Proceeds from contributions for Units and other Partnership funds

shall be held by the General Partners as fiduciaries for the exclusive use of

the Partnership and after the start of Partnership operations, shall be

temporarily invested in U.S. Treasury Bills and Bonds, bank certificates of

deposit, other short-term government obligations, commercial paper (investment

grade), and tax-exempt notes and bonds, or registered investment companies

holding such securities. Interest thereon shall inure to the benefit of the

Partnership, and the Limited Partners, as such, shall not receive interest on

funds contributed by them. Any funds (other than designated reserves) not

invested in Projects or Project Interests within 18 months from the effective

date of the Prospectus shall be distributed pro rata to the Limited Partners

as a return of capital.

 

Section 6: Organizational Expenses.

 

         6.1 The Partnership shall pay all costs of qualifying and offering

the Units (including sales commissions) and all formation and organization

expenses, including expenses associated with the selection and acquisition of

Projects (which expenses are, however, subject to the limitation set forth in

Section 9.6.1 hereof). The General Partners will be liable for the amount, if

any, by which the aggregate organizational expenses and sales commissions

exceed 12% of the gross proceeds from the sale of Units.

 

Section 7: Profits and Losses.

 

         7.1 Prior to the amendment to this Agreement for the purpose of

admitting additional Limited Partners to the Partnership in accordance with

Section 5.3(c) hereof, the combined interests of the General Partners in each

item of income, gain, loss, deduction, and credit will be 99%, to be allocated

between the General Partners as they may agree. During such period, the

Initial Limited Partner shall share in 1% of the income, gain, loss,

deduction, and credit. Thereafter, the combined interests of the General

Partners in each material item of income, gain, loss, deduction, and credit

will be equal to 1% of each such item at all times during the existence of the

Partnership, except that upon dissolution and liquidation of the Partnership,

the General Partners shall be allocated, before any other allocations are made

hereunder, all Partnership income and/or gain in an amount up to the

difference between the losses allocated to the General Partners prior to the

admission of the additional Limited Partners and 1% of Partnership losses

during such period. Subject to this additional allocation of income to the

General Partners, the Limited Partners shall share 99% of the income, gain,

loss, deduction, and credit in proportion to their respective Units, provided

that, in determining whether such items are paid or incurred during any period

any Limited Partner is a member of the Partnership, such items shall be

allocated, as determined by the General Partners, on a daily basis, on a more

precise basis of actual amounts paid or incurred during such period, or on any

other basis permitted by the Internal Revenue Code of 1954. For the purpose of

Sections 702 and 704 of the Internal Revenue Code, or the corresponding

sections of any future federal internal revenue law, or any similar tax law of

any state or other jurisdiction, the determination of each Limited Partner's

distributive share of any Partnership item of income, gain, loss, deduction,

or credit for any Partnership accounting year or other period shall be made in

accordance with the proportion that number of such Limited Partner's Units

bears to the number of all Limited Partners' Units outstanding. In the event

of the transfer of a Unit (other than in the case of a default), the

distributive share of the aforesaid Partnership items (in respect of the Unit

so transferred) shall be allocated between the transferor and the transferee

in accordance with this Section.

 

Section 8: Cash Distributions.

 

         8.1 The General Partners shall distribute annually substantially all

of the Partnership's Net Cash Flow as defined herein. The General Partners

shall be entitled to receive 1% of the Net Cash Flow to be distributed, but

any such distributions to the General Partners shall be reduced by the amount

paid as an Annual Management Fee as set forth in Section 9.5 hereof. The

Limited Partners shall receive, in proportion to their respective Units, the

balance of the distributed cash flow.

 

         8.2 "Net Cash Flow" shall mean the Partnership's share of all cash

receipts derived from the ownership of a Project or Project Interest therein

(exclusive of any proceeds from the sale or financing of Projects or Projects

Interests, refinancing or other extraordinary transactions not in the ordinary

course of business) less (a) expenses, (b) such reserves as the General

Partners deem reasonably necessary for the proper operation of the

Partnership's business, and (c) any expenditures authorized by this Agreement

(except for construction expenditures paid out of capital or loan proceeds).

The General Partners may at their discretion reinvest or distribute all or any

portion of the proceeds from the disposition or refinancing of any Project or

Project Interest therein, provided that in the event of a sale, the Partners

shall have first received an amount sufficient to pay state and federal taxes

from the sale of such Project or Project Interest, if any, calculated at the

maximum rate then in effect. To the extent that such proceeds are not

reinvested or committed within twelve months from the date of the sale or

refinancing, they shall be distributed. Distributions of the net proceeds from

the sale or financing of Projects or Project Interests, refinancing thereof,

or other extraordinary transactions not in the ordinary course of business

shall be distributed to the General and Limited Partners pursuant to Section

9.6.2 hereof.

 

         8.3 The General Partners shall designate a record date to determine

Partners entitled to cash distributions, which shall not be less than 15 days

nor more than 30 days before each cash distribution. The Partnership shall

cause to be maintained records reflecting the name, address, and number of

Units and General Partners interests held by each Partner for the Purpose of

determining recipients of cash distributions and notices.

 

Section 9: The General Partners.

 

         9.1 The General Partners shall have complete discretion in the

management and control of the business of the Partnership for the purposes

herein stated, shall make all decisions affecting the business of the

Partnership and shall manage and control the affairs of the Partnership to the

best of their abilities and use their best efforts to carry out the purposes

of the Partnership. The powers of the General Partners include, but are not

limited to, the powers:

 

                (a) to expend the capital and profits of the Partnership in

         furtherance of the Partnership's business;

 

               (b) to acquire, hold (in the Partnership's name or, in the best

         interest of the Partnership, under any other title arrangement

         selected by the General Partners), lease, sell, mortgage, convey, or

         refinance any real or personal property, including Projects and

         Project Interests, at such price and upon such terms, as they deem to

         be in the best interests of the Partnership, including the power to

         vote to amend a local limited partnership agreement in such a manner

         as to reduce the limited partnership interest of the Partnership in

         the local limited partnership, to vote to reduce the Partnership's

         interests in the profits, losses, and special allocations of the

         local limited partnership and assign a part of the limited

         partnership interest in such partnership, provided that such action

         is necessary to preserve the economic value of the Partnership's

         Project Interest;

 

               (c) to monitor the construction and operations of any of the

         Projects, Project Interests, or other Partnership property and to

          make recommendations with respect thereto;

 

               (d) to retain independent consultants to evaluate the Projects,

         Project Interests, and other Partnership property;

 

               (e) to borrow money and execute promissory notes and to secure

         the same by mortgage upon the Partnership's property;

 

               (f) to invest in short-term debt obligations (including

         obligations of federal and state governments and their agencies,

         commercial paper, and certificates of deposit of commercial banks,

         savings banks, or savings and loan associations) such funds as are

         temporarily not required for investment in Projects, Project

         Interests, or other Partnership property;

 

               (g) to lend money or provide advances in furtherance of the

         Partnership's purposes; and

 

               (h) to enter into and carry out agreements of any kind,

         provided that all contracts with the General Partners or their

         affiliates must provide for termination by the Partnership on 60 days

         written notice, without penalty, and to do any and all other acts and

         things necessary, proper, convenient, or advisable to effectuate and

         carry out the purposes of the Partnership.

 

         9.2 The General Partners shall (a) diligently and faithfully devote

such of their time to the business of the Partnership as they deem necessary

to conduct it for the greatest advantage of the Partnership; (b) file and

publish all certificates, notices, statements, or other instruments required

by law for formation and operation of the Partnership in all appropriate

jurisdictions; (c) cause the Partnership to carry adequate public liability,

property damage, and other insurance, any or all of which may name the General

Partners as the sole insured; (d) indemnify and hold the Partnership harmless

from any loss, damage or liability due to, or arising out of, any General

Partner's breach of fiduciary duty; and (e) maintain capital accounts on the

books and records of the Partnership in respect of each Interest in the

Partnership. The General Partners may become Limited Partners and thereby

become entitled to all of the rights of Limited Partners to the extent of the

Units so acquired, provided that such acquisition of Units shall not reduce

any liability of the General Partner under this Agreement. Notwithstanding the

foregoing, the General Partners shall have fiduciary responsibility for the

safekeeping and use of all funds and assets of the Partnership, whether or not

in their immediate possession or control and they shall not employ, or permit

another to employ, such funds, or assets in any manner except for the

exclusive benefit of the Partnership.

 

         9.3 Notwithstanding any provision in this Agreement to the contrary,

it is understood and agreed that (i) in conducting, carrying on, and managing

the business of the Partnership, the General Partners shall be bound by the

following investment policies, which may not be changed, altered, or amended

except as provided in Section 14 hereof and (ii) the General Partners shall

endeavor to conduct the Partnership's business in accordance with the policies

set forth in the Prospectus:

 

               (a) except for interim commitments in U.S. Treasury Bills and

         Bonds, bank certificates of deposit, other short-term government

         obligations, commercial paper (investment grade), and tax-exempt

         notes and bonds, or registered investment companies holding such

         securities, investments will be initially limited to Project

         Interests, provided that (i) not less than 90% of the amount of

         public offering proceeds available for investment will be invested in

         Project Interests in local limited partnerships or joint ventures

         which will own or lease federal, state, or local government-assisted

         housing projects and (ii) the Partnership may subsequently refinance

         or convert such Project Interests to other uses with a view to

         realizing higher revenue or capital gains, although reinvestment of

         cash flow (excluding proceeds resulting from a disposition or

         refinancing or property) shall not be allowed.

 

               (b) Projects or Project Interests will be acquired with a view

         toward maximizing tax deductions, with cash income and long-term

         appreciation as additional considerations, and not with a view to

         early resale;

 

               (c) the Partnership will seek to avoid depreciation recapture

         and defer taxes by not selling any Projects or Project Interests

         within ten years, except (i) to qualified tenant cooperatives as

         defined in the Internal Revenue Code, and (ii) under circumstances

         described in the Prospectus;

 

               (d) upon any sale or refinancing the Partnership shall not

         reinvest any proceeds thereof prior to distributing to the Partners

         from the proceeds sufficient cash to pay the state and federal tax at

         the then maximum rates, and may distribute to the Partners the

         balance of the Proceeds;

 

               (e) the Partnership may (i) borrow money only against

         Individual Projects or Project Interest to acquire such Projects or

         Interests therein, to defray expenses or preserve its interest in

         each Individual Project or interest therein but may not pledge or

         encumber other Projects or Project Interests for this purpose, (ii)

         borrow only such amount for which the Partnership can reasonably

         expect to meet debt service requirements from anticipated Net Cash

         Flow, and (iii) make or cause its affiliates to make loans or

         advances for the acquisition of Projects or Project Interests, but

         may not receive Interest or other financing charges or fees in excess

         of the amounts which would be charged by unrelated banks for

         comparable loans for the same purpose in the locality of the Project

         or in amounts which otherwise are unreasonable or require any

         prepayment charge or penalty, provided that in connection with any of

         the foregoing transactions, (A) the Partnership shall not enter into

         transactions involving the use of "all-inclusive" or "wrap-around"

         notes except as permitted by the Rules of the Department of

         Corporations of the State of California, and (B) the Partnership

         shall not incur any indebtedness whereby the lender will have or

          acquire, at any time as a result of making such loan, any direct or

         indirect interest in the profits, capital, or property of the

         Partnership other than as a secured creditor;

 

               (f) the Partnership shall not (i) issue senior securities,

         except as set forth in the preceding paragraph and even then only at

         par or at a premium, (ii) invest in other issuers for the purpose of

         exercising control (other than local limited partnerships owning or

          leasing projects), (iii) underwrite the securities of other issuers,

         or (iv) offer Units in exchange for property;

 

               (g) except in a case in which a single Project investment

         exceeds this limitation, the Partnership shall not sell and reinvest

         more than 25% of its portfolio of Projects or Project Interests

         within any single year, unless by exempted sales to qualified tenant

         cooperatives;

 

               (h) the Partnership shall not make loans to the General

         Partners or their affiliates and will not make loans to others except

         (i) to developers in connection with the acquisition of Projects or

         Project Interests (and then only if such loans do not exceed, in the

         aggregate, 5% of the difference between the aggregate amount of

         contributions made pursuant to Section 5 hereof less expenses of the

         Partnership determined in accordance with Section 6 hereof), (ii) to

         local limited partnerships in which the Partnership has an equity

         interest, and (iii) as permitted by Sections 5.4 or 9.3(a) hereof:

 

               (i) commitments of Partnership funds will be contingent upon

         receipt of satisfactory appraisals as to non-government-assisted

         Projects and Projects Interests or FHA feasibility or equivalent

         letters as to government-assisted projects and no significant

         contribution to government-assisted projects will be made prior to

         initial Endorsement by FHA/HUD or its equivalent for non-FHA/HUD

         Projects;

 

               (j) the Partnership will not purchase or lease a Project or

         Project Interest, if the General Partners or their affiliates have

         (or if any limited partnership in which the General Partners or their

         affiliates have an interest in has) any equity interest in such

         Project or have made loans with respect thereto, or any interest of a

         type other than equity or debt, which equity interests, loans, or

         other type of interest have not been disclosed to the Limited

         Partners;

 

               (k) the Partnership will not sell or lease any Project or

         Project Interest to the General Partners or their affiliates;

 

                (l) the Partnership will not purchase Projects or Project

         Interests in exchange for Units;

 

               (m) the Partnership shall not give the General Partners or

         their affiliates the exclusive right of employment to sell Projects

         or Project Interests;

 

               (n) the Partnership may not pay the General Partners or their

         affiliates any commission in connection with the reinvestment of the

         proceeds of any resale, exchange, or refinancing of any Project

         Interest;

 

               (o) the General Partners, their affiliates, and any salesman or

         dealer offering Units shall not take any action in violation of

         Section 260.140.114.6 of Title 10 of the California Administrative

          Code;

 

               (p) the Partnership's funds may not be commingled with the

         funds of others;

 

               (q) all expenses of t