SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14D-9
Solicitation/Recommendation Statement
Under Section 14(d)(4)
of the Securities Exchange Act of 1934
DSI REALTY INCOME FUND VI, a California Limited Partnership
DSI REALTY INCOME FUND VII, a California Limited Partnership
DSI REALTY INCOME FUND VIII, a California Limited Partnership
DSI REALTY INCOME FUND IX, a California Limited Partnership
DSI REALTY INCOME FUND XI, a California Limited Partnership
(Name of Subject Company)
DSI REALTY INCOME FUND VI, a California Limited Partnership
DSI REALTY INCOME FUND VII, a California Limited Partnership
DSI REALTY INCOME FUND VIII, a California Limited Partnership
DSI REALTY INCOME FUND IX, a California Limited Partnership
DSI REALTY INCOME FUND XI, a California Limited Partnership
(Name of Persons Filing Statement)
Units of Limited Partnership Interests
(Title of Class of Securities)
n/a
(CUSIP Number of Class of Securities)
Robert J. Conway, President
DSI Properties, Inc.
6700 E. Pacific Coast Highway
Long Beach, CA 90803
(562) 493-3022
(Name, address and telephone
number of person authorized to
receive notices and communications on
behalf of the persons filing statement)
with a copy to:
Gary J. Singer, Esq.
O'Melveny & Myers LLP
610 Newport Center Drive, Suite 1700
Newport Beach, CA 92660
(949) 823-6915
Check the box if the filing relates solely to preliminary communications
made before the commencement of a tender offer.
Item 1. Subject Company Information
The names of the subject companies are DSI Realty Income Fund VI, DSI Realty
Income Fund VII, DSI Realty Income Fund VIII, DSI Realty Income Fund IX, DSI
Realty Income Fund XI (collectively the "Limited Partnerships," or
individually, a "Limited Partnership"), and the address of the principal
executive offices of the Limited Partnerships is 6700 E. Pacific Coast Highway,
Long Beach, CA 90803. The telephone number of the principal executive offices
of the Limited Partnerships is (562) 493-3022. The title of the class of
equity securities to which this statement relates are the limited partnership
units of each of the Limited Partnerships (the "Units"). As of April 17, 2002,
the number of Units outstanding in each of the Limited Partnerships is as
follows:
DSI Realty Income Fund VI 23,753
DSI Realty Income Fund VII 24,000
DSI Realty Income Fund VIII 24,000
DSI Realty Income Fund IX 30,693
DSI Realty Income Fund XI 20,000
Item 2. Identity and Background of Filing Person
(a) The name, address and telephone number of the Limited Partnerships, which
are the persons filing this Solicitation/Recommendation Statement on Schedule
14D-9 (the "Statement"), is set forth in Item 1 above.
(b) This Statement relates to the tender offer made by Mackenzie
Patterson, Inc., MP Income Fund 18, LLC, MP Income Fund 17, L.L.C., MP Falcon
Fund, LLC, MP Falcon Growth Fund, L.L.C., MP Falcon Growth Fund 2, L.L.C.,
Mackenzie Fund V1, L.P., Mackenzie Patterson Special Fund 3, L.P.,
Accelerated High Yield Institutional Fund I, Ltd., Accelerated High Yield
Institutional Investors, Ltd., Mackenzie Specified Income Fund, L.P., and MP
Dewaay Fund, L.L.C. (collectively, "MacKenzie"), disclosed in a tender offer
statement on Schedule TO (the "Schedule TO"), dated April 5, 2002 and filed
with the Securities and Exchange Commission (the "Commission"), to purchase
up to the following number of Units, representing all of the Units in each of
the Limited Partnerships, at the following cash purchase price per Unit upon
the terms and subject to the conditions set forth in the offer to purchase,
dated April 5, 2002, and in the related letter of transmittal included in the
Schedule TO (the "Hostile Offer"):
Target: Price per Unit: Maximum # of Units:
DSI Realty Income Fund VI $340 23,753
DSI Realty Income Fund VII $300 24,000
DSI Realty Income Fund VIII $340 24,000
DSI Realty Income Fund IX $260 30,693
DSI Realty Income Fund XI $300 20,000
According to the Schedule TO, the address of the principal executive offices
of MacKenzie is 1640 School Street, Moraga, California, 94556. All information
contained in this Statement or incorporated herein by reference concerning
MacKenzie or its affiliates, or actions or events with respect to any of them,
was provided by MacKenzie, and the Limited Partnerships assume no
responsibility therefor.
Item 3. Past Contacts, Transactions, Negotiations and Agreements
DSI Properties, Inc., a California corporation and Diversified Investors Agency,
a general partnership, are the general partners for each of DSI Realty Income
Fund VI, VII and VIII. DSI Properties, Inc., Robert J. Conway and Joseph W.
Conway are the general partners of DSI Realty Income Fund IX and XI. The
general partners of all of the Limited Partnerships are referred to herein as
the "General Partners." The General Partners are affiliates of Diversified
Securities, Inc., a California corporation and wholly -owned subsidiary of
DSI Financial, Inc., a California corporation.
The General Partners are compensated under the Limited Partnership Agreements
that govern the Limited Partnerships as follows:
1. Allocation of Profits and Losses. The General Partners are allocated one
percent of the net profits or losses from operations of the Limited
Partnerships, and the limited partners are allocated the balance of the net
profits or losses from operations in proportion to their limited partnership
interests.
2. Incentive Management Fee. The General Partners are entitled to receive an
incentive management fee for supervising the operations of the Limited
Partnerships equal to nine percent (9%) per year of cash available for
distribution on a cumulative basis, calculated as cash generated from
operations, less capital expenditures.
3. Sale or Disposition of Property. The General Partners are also entitled
to receive a percentage based on a predetermined formula of any cash
distribution from the sale or other disposition or refinancing of the
properties owned by the Limited Partnerships.
Item 4. The Solicitation or Recommendation
(a) Recommendation
Following receipt of the Hostile Offer, the General Partners reviewed and
considered the Hostile Offer with respect to each Limited Partnership. The
General Partners have determined that the Hostile Offer is not in the best
interests of the limited partners of each Limited Partnership, that the tender
offer price is grossly inadequate given the performance history of your Limited
Partnership and the inherent value of the Units, and recommend that the limited
partners reject the Hostile Offer and not tender their Units pursuant thereto.
If you have already tendered your Units to MacKenzie and have changed your mind
and wish to withdraw them, you mail the Notice of Withdrawal included in these
materials to DSI Properties, Inc. in accordance with the instructions set
forth therein.
(b) Reasons
The Hostile Offer appears to be part of a trend among investor groups whose
objective is to acquire units in public real estate partnerships. By making
purchase offers at prices well below the partnerships' liquidation value and
well below recent trade levels of the units that may have occurred in secondary
markets, these groups seek to acquire units in public real estate limited
partnerships at deep discounts without regard to the best interests of the
limited partners.
In making our recommendation that you not accept the Hostile Offer, we
considered a number of factors, including the following:
(i) Strong Current Performance. Your Limited Partnership is performing well
and has a long history of consistent and uninterrupted quarterly cash
distributions. If you tender your Units, you will be foregoing all current
and future quarterly and special cash distributions that have consistently
been paid by your Limited Partnership since inception, regardless of the state
of the national economy.
(ii) Undervaluation of the Units. The General Partners believe that the Hostile
Offer contains inaccurate and misleading statements about the estimated
liquidation values of your Limited Partnership. Moreover, the tender offer
prices are substantially less than MacKenzie's own estimated liquidation value
for your Limited Partnership's assets. By MacKenzie's own admission as stated
in the Hostile Offer the "purchase prices offered by [MacKenzie] are less than
[MacKenzie's] estimates of the net liquidation values of [the] Partnership's
assets and less than the prices reported in connection with limited secondary
market sales of Units." The Hostile Offer further states that with respect to
the fairness of the offer price that, "no representation is made by [MacKenzie]
or any affiliate of [MacKenzie] as to such fairness." By their own admission,
they are unable to state that the Hostile Offer is fair to limited partners.
The General Partners do not conduct appraisals of the self-storage projects and,
therefore, do not have an estimation of the value for the underlying real estate
assets. However, given the historical performance of the Limited Partnerships,
including uninterrupted cash distributions made to limited partners, the prices
offered in the Hostile Offer are a gross undervaluation of the projects.
(iii) Offer Price Reduced by April 2002 Distribution. If you tender your Units,
the tender offer price will be reduced by the amount of the quarterly
distribution that was already paid to you on April 15, 2002.
(iv) Loss of Capital Appreciation. If you tender your Units, you will be
precluded from realizing any long-term capital appreciation of the self storage
projects held by your Limited Partnership.
(v) Loss of Potential Future Profits. If you tender your Units, you will be
giving up potential profits from the future sale of the self storage projects
when they are ultimately sold by the Limited Partnership.
(vi) Tax Liability. If you tender your Units, you may create a significant and
substantial tax liability for yourself. Your proceeds from the tender offer
will be fully taxable on your 2002 income tax return and may create an
unanticipated tax burden.
(vii) Omissions from the Offering Materials Associated with the Hostile Offer.
The General Partners believe that the offering materials pursuant to which
MacKenzie has made the Hostile Offer contain numerous misleading statements or
omissions that the General Partners believe are material to a decision on the
part of a limited partner deciding whether to tender Units to MacKenzie. These
include the following:
a) Failure to Disclose Financial Condition- MacKenzie failed to provide in the
Hostile Offer sufficient financial information. A bidder is required to
disclose its financial statements when it is material to a limited partner's
decision whether to sell, tender or hold units being sought in the offer. The
financial condition of MacKenzie is material to limited partners in the Hostile
Offer because it is not at all clear from MacKenzie's Hostile Offer that it has
the financial ability to pay for your Units.
The aggregate value of the offer for all of the Units is $37.4 million.
However, according to the Hostile Offer, MacKenzie has current assets of only
$2,246,000, and we do not know how much of this amount represents cash readily
available to use to purchase Units. MacKenzie states that it has "aggregate
assets in excess of $28 million and believe they have the capital, as well as
access to other capital and credit sources, sufficient to fund the entire
amount." However, MacKenzie does not provide any information regarding these
sources of capital or loan commitments that would give comfort that it could
actually secure funds to pay for all of the Units.
b) Restrictions on Transfer of Units. MacKenzie failed to disclose in the
Hostile Offer that your Partnership Agreement provides that Units may not be
transferred without the General Partners' consent to the transfer, and such
consent can be withheld in the General Partners' sole and absolute discretion.
In addition, MacKenzie failed to disclose that your Partnership Agreement
prohibits the transfer of fewer than ten Units. Moreover, the Units are subject
to transfer restrictions pursuant to California state securities laws. It is
unlawful to sell the Units without the prior written consent of the California
Commissioner of Corporations. To the General Partners' knowledge, MacKenzie
has not obtained a permit that would allow you to transfer your Units to
MacKenzie without violating California state securities laws.
c) Restrictions under California Law. MacKenzie failed to disclose in the
Hostile Offer that under applicable California partnership law, if MacKenzie
owns more than 50% but less than 90% of the Units of the Limited Partnership
upon completion of the Hostile Offer, there will be restrictions on its ability
to merge with the Limited Partnership. Specifically, in order to merge with
the Limited Partnership under those circumstances after completion of the
Hostile Offer, non-tendering limited partners must be given nonredeemable
interests or securities in the MacKenzie entities in exchange for Units.
For all of the reasons stated above, we recommend that you NOT tender your
Units in the Hostile Offer.
(c) Intent to Tender
After reasonable inquiry, to the best of the General Partners' knowledge,
neither the General Partners nor any officer or affiliate of the Limited
Partnerships intends to tender any Units in the Hostile Offer.
Item 5. Persons/Assets Retained, Employed, Compensated or Used
Neither the Limited Partnerships nor any person acting on their behalf has
employed or retained or will compensate any other person to make solicitations
or recommendations to limited partners on behalf of the Limited Partnerships
with respect to the Hostile Offer.
Item 6. Interest in Securities of the Subject Company
Neither our General Partners nor, to the best knowledge of our General
Partners, any of its executive officers, directors, affiliates or subsidiaries
has effected any transactions in the Units during the past sixty (60) days.
Item 7. Purposes of the Transaction and Plans or Proposals
The Limited Partnerships are not currently undertaking or engaged in any
negotiations in response to the Hostile Offer that relate to: (1) a tender
offer for or other acquisition of the Limited Partnerships' Units by the Limited
Partnerships, any subsidiary of the Limited Partnerships, or any other person,
(2) an extraordinary transaction, such as a merger, reorganization, or
liquidation, involving the Limited Partnerships or any of their subsidiaries,
(3) a purchase, sale, or transfer of a material amount of assets of the Limited
Partnerships or any of their subsidiaries, or (4) any material change in the
present dividend rate or policy, or indebtedness or capitalization of the
Limited Partnerships.
There are no transactions, board resolutions, agreements in principle, or signed
contracts in response to the Hostile Offer that would relate to one or more
of the matters referred to in this Item 7.
Item 8. Additional Information
Attached hereto as Exhibit (a)(1) is a Notice of Withdrawal which limited
partners may use to withdraw their tender of Units to MacKenzie. The
instructions for withdrawal are set forth in the Notice.
Item 9. Exhibits
The following exhibits are filed herewith:
Exhibit No. Description
(a)(1) Notice of Withdrawal
(a)(5)(A) Stop, look and listen letter dated April 15, 2002
(a)(5)(B) Letter and summary to limited partners dated April 18, 2002
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.
DSI REALTY INCOME FUND VI, a California Limited Partnership
By: DSI Properties, Inc., a General Partner
By: /s/ Robert J. Conway
Robert J. Conway, President
By: Diversified Investors Agency, a General Partner
By:_ /s/ Robert J. Conway
Robert J. Conway, Partner
DSI REALTY INCOME FUND VII, a California Limited Partnership
By: DSI Properties, Inc., a General Partner
By: /s/ Robert J. Conway
Robert J. Conway, President
By: Diversified Investors Agency, a General Partner
By: /s/ Robert J. Conway
Robert J. Conway, Partner
DSI REALTY INCOME FUND VIII, a California Limited Partnership
By: DSI Properties, Inc., a General Partner
By: /s/ Robert J. Conway
Robert J. Conway, President
By: Diversified Investors Agency, a General Partner
By:____________________________
Robert J. Conway, Partner
DSI REALTY INCOME FUND IX, a California Limited Partnership
By: DSI Properties, Inc., a General Partner
By: /s/ Robert J. Conway
Robert J. Conway, President
By: /s/ Robert J. Conway
Robert J. Conway, a General Partner
By:_ /s/ Joseph W. Conway
Joseph W. Conway, a General Partner
DSI REALTY INCOME FUND XI, a California Limited Partnership
By: DSI Properties, Inc., a General Partner
By: /s/ Robert J. Conway
Robert J. Conway, President
By: /s/ Robert J. Conway
Robert J. Conway, a General Partner
By: /s/ Joseph W. Conway
Joseph W. Conway, a General Partner
Dated: April 18, 2002
EXHIBIT INDEX
Exhibit No. Description
(a)(1) Notice of Withdrawal
(a)(5)(A) Stop, look and listen letter dated April 15, 2002
(a)(5)(B) Letter and summary to limited partners dated April 18, 2002
Exhibit (a)(1)
NOTICE OF WITHDRAWAL
OF
PREVIOUSLY TENDERED
UNITS OF LIMITED PARTNERSHIP INTERESTS
TO: MacKenzie Patterson, Inc.
1640 School Street
Moraga, California 94556
Ladies and Gentlemen:
The following units of limited partnership interests (the "Units") of
DSI Realty Income Fund VI, DSI Realty Income Fund VII, DSI Realty Income
Fund VIII, DSI Realty Income Fund IX, and/or DSI Realty Income Fund XI
(the "Limited Partnerships") previously tendered to Mackenzie Patterson, Inc.,
MP Income Fund 18, LLC, MP Income Fund 17, L.L.C., MP Falcon Fund, LLC, MP
Falcon Growth Fund, L.L.C., MP Falcon Growth Fund 2, L.L.C., Mackenzie Fund
V1, L.P., Mackenzie Patterson Special Fund 3, L.P., Accelerated High Yield
Institutional Fund I, Ltd., Accelerated High Yield Institutional Investors,
Ltd., Mackenzie Specified Income Fund, L.P., and MP Dewaay Fund, L.L.C.
("MacKenzie"), are hereby withdrawn. Unless otherwise indicated under the
Section "Number of Units Withdrawn," all Units tendered to MacKenzie for any
and all Limited Partnerships are hereby withdrawn. Failure to complete such
Section shall be deemed to indicate the intent of the undersigned that all
Units tendered to MacKenzie for any and all Limited Partnerships be withdrawn.
DESCRIPTION OF UNIT(S) WITHDRAWN
AND
SIGNATURE OF LIMITED PARTNER(S)
All registered holders of limited partnership units must sign exactly
as name(s) appear(s) on the Partnership records. See Instruction 3.
NAME OF LIMITED PARTNERSHIP(S):_______________________________________________
______________________________________________________________________________
NUMBER OF UNITS WITHDRAWN: __________ (If all Units, leave blank)
_________________________________ ____________________________________
(Signature of Owner) (Signature of Joint Owner)
Name and Capacity (if other than individuals): _________________________________
Title: _________________________________________________________________________
Address:________________________________________________________________________
________________________________________________________________________________
(City) (State) (Zip)
Area Code and Telephone No. (Day): ( )_____________
(Evening): ( )_____________
SIGNATURE GUARANTEE (IF REQUIRED)
(SEE INSTRUCTION 4)
Name and Address of Eligible Institution:
________________________________________________________
________________________________________________________
________________________________________________________
Authorized Signature: ________________________________________________________
Name: ________________________________________________________
Title: ________________________________________________________
Date: ________________________________________________________
INSTRUCTIONS FOR WITHDRAWAL
OF
PREVIOUSLY TENDERED UNITS OF LIMITED PARTNERSHIP INTERESTS
PLEASE NOTE THAT YOU MAY ONLY WITHDRAW UNITS TENDERED IN AN OUTSTANDING
OFFER. ANY UNITS TENDERED IN PRIOR OFFERS AND PAID FOR MAY NOT BE
WITHDRAWN.
1. DELIVERY OF NOTICE OF WITHDRAWAL. If you are withdrawing Units
previously tendered pursuant to the offer to purchase, dated
April 5, 2002 (the "Offer to Purchase") by Mackenzie Patterson, Inc.,
MP Income Fund 18, LLC, MP Income Fund 17, L.L.C., MP Falcon Fund, LLC,
MP Falcon Growth Fund, L.L.C., MP Falcon Growth Fund 2, L.L.C.,
Mackenzie Fund V1, L.P., Mackenzie Patterson Special Fund 3, L.P.,
Accelerated High Yield Institutional Fund I, Ltd., Accelerated High
Yield Institutional Investors, Ltd., Mackenzie Specified Income Fund,
L.P., and MP Dewaay Fund, L.L.C. ("MacKenzie"), please complete,
execute, detach and send in the enclosed envelope the attached "Notice
of Withdrawal of Previously Tendered Units" ("Notice of Withdrawal"),
to:
DSI Properties, Inc.
6700 E. Pacific Coast Highway
Long Beach, CA 90803
UPON RECEIPT DSI PROPERTIES, INC WILL FAX YOUR NOTICE OF WITHDRAWAL TO
MACKENZIE. MACKENZIE MUST RECEIVE THE NOTICE OF WITHDRAWAL PRIOR TO
MAY 31, 2002, THE WITHDRAWAL EXPIRATION DATE SET FORTH IN THE OFFER TO
PURCHASE.
2. INADEQUATE SPACE. If any space provided in the Notice of Withdrawal
is inadequate, please list such additional information on a separate
schedule and attach the separate schedule to the Notice of Withdrawal.
3. SIGNATURE ON NOTICE OF WITHDRAWAL. The Notice of Withdrawal must be
signed, as applicable, by the person(s) who signed the Offer to Sell
Letter relating to the Offer to Purchase, in the same manner as such
Offer to Sell Letter was signed. The signatures must correspond exactly
with the name(s) as they appear on the Partnership records. If any Units
tendered pursuant to the Offer to Purchase are registered in the names
of two or more joint holders, all such holders must sign, as applicable,
the Notice of Withdrawal. If the Notice of Withdrawal is signed by any
trustee, executor, administrator, guardian, attorney-in-fact, officer
of a corporation or others acting in a fiduciary capacity, such persons
should so indicate when signing and must submit proper evidence of
their authority to act.
4. GUARANTEE OF SIGNATURES. If the signature was guaranteed on the
Offer to Sell, then it must be guaranteed on the Notice of Withdrawal.
5. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES. Questions and
requests for assistance may be directed to DSI Properties, Inc. at its
address and phone number listed below. Additional copies of this Notice
of Withdrawal may also be obtained from DSI Properties, Inc.
DSI Properties, Inc.
6700 E. Pacific Coast Highway
Long Beach, CA 90803
Call: Rick Conway at (800) 732-1733
Exhibit (a)(5)(A)
DSI Properties, Inc. April 15, 2002
Dear Limited Partner:
We have received notice that an UNSOLICITED offer to purchase limited
partnership units of your fund has been made by MacKenzie Patterson, Inc.,
and a group of eleven private real estate investment funds managed by
MacKenzie Patterson, Inc. (the "Purchasers"):
As a General Partner of your partnership, we will review the offer, evaluate
alternatives, and make a recommendation regarding the offer promptly to the
limited partners. We urge you NOT to take any action with respect to the
offer until we make our recommendation which will be mailed to you on or
before April 19, 2002.
Sincerely,
DSI Properties, Inc.
General Partner
Exhibit (a)(5)(B)
[Letterhead]
Dear Limited Partner,
You may have already received in the mail an unsolicited offer to purchase
limited partnership units of your Fund from MacKenzie Patterson, Inc., and
a group of eleven private real estate investment funds managed by MacKenzie.
As your general partners, we have reviewed and thoroughly analyzed the tender
offer from MacKenzie and believe the tender offer price is grossly inadequate
given the performance history of your Fund and the inherent value of its units,
for the reasons set forth in the attached summary. We urge you to reject the
tender offer. If you have already tendered your Units and wish to withdraw
them, please refer to the yellow Notice of Withdrawal and related instructions
included herein.
Sincerely,
Your General Partners
Summary of 14d-9 Filed with the Securities and Exchange Commission
Information Regarding the Tender Offer and the Bidder
The funds that are subject to the tender offer are DSI Realty Income Fund VI,
DSI Realty Income Fund VII, DSI Realty Income Fund VIII, DSI Realty Income
Fund IX, DSI Realty Income Fund XI (collectively the "Limited Partnerships,"
or individually, a "Limited Partnership"), and the address of the principal
executive offices of the Limited Partnerships is 6700 E. Pacific Coast Highway,
Long Beach, CA 90803. The telephone number is (562) 493-3022. The title of
the class of equity securities to which this statement relates are the
limited partnership units of each of the Limited Partnerships (the "Units").
This Statement relates to the tender offer made by Mackenzie Patterson, Inc.,
MP Income Fund 18, LLC, MP Income Fund 17, L.L.C., MP Falcon Fund, LLC, MP
Falcon Growth Fund, L.L.C., MP Falcon Growth Fund 2, L.L.C., Mackenzie
Fund V1, L.P., Mackenzie Patterson Special Fund 3, L.P., Accelerated High
Yield Institutional Fund I, Ltd., Accelerated High Yield Institutional
Investors, Ltd., Mackenzie Specified Income Fund, L.P., and MP Dewaay
Fund, L.L.C. (collectively, "MacKenzie"), disclosed in a tender offer
statement on Schedule TO (the "Schedule TO"), dated April 5, 2002 and filed
with the Securities and Exchange Commission (the "Commission"), to purchase
all of the Units in each of the Limited Partnerships (the "Hostile Offer").
The address of the principal executive offices of MacKenzie is 1640 School
Street, Moraga, California, 94556.
Information Regarding the General Partners
DSI Properties, Inc., a California corporation and Diversified Investors
Agency, a general partnership, are the general partners for each of DSI Realty
Income Fund VI, VII and VIII. DSI Properties, Inc., Robert J. Conway and Joseph
W. Conway are the general partners of DSI Realty Income Fund IX and XI. The
general partners of all of the Limited Partnerships are referred to herein as
the "General Partners." The General Partners are affiliates of Diversified
Securities, Inc., a California corporation and wholly -owned subsidiary of
DSI Financial, Inc., a California corporation. Compensation arrangements
between the Limited Partnerships and the General Partners are set forth in
Footnote number 4 to the Financial Statements contained in the Annual Report
of your Limited Partnership previously mailed to you.
Recommendation of the General Partners
Following receipt of the Hostile Offer, the General Partners reviewed and
considered the Hostile Offer with respect to each Limited Partnership. The
General Partners have determined that the Hostile Offer is not in the best
interests of the limited partners of each Limited Partnership, that the tender
offer price is grossly inadequate given the performance history of your Limited
Partnership and the inherent value of the Units, and recommend that the limited
partners reject the Hostile Offer and not tender their Units pursuant thereto.
The Hostile Offer appears to be part of a trend among investor groups whose
objective is to acquire units in public real estate partnerships. By making
purchase offers at prices well below the partnerships' liquidation value and
well below recent trade levels of the units that may have occurred in secondary
markets, these groups seek to acquire units in public real estate limited
partnerships at deep discounts without regard to the best interests of the
limited partners.
In making our recommendation that you not accept the Hostile Offer, we
considered a number of factors, including the following:
* Strong Current Performance. Your Limited Partnership is performing well and
has a long history of consistent and uninterrupted quarterly cash distributions.
If you tender your Units, you will be foregoing all current and future quarterly
and special cash distributions that have consistently been paid by your Limited
Partnership since inception, regardless of the state of the national economy.
* Undervaluation of the Units. The General Partners believe that the Hostile
Offer contains inaccurate and misleading statements about the estimated
liquidation values of your Limited Partnership. Moreover, the tender offer
prices are substantially less than MacKenzie's own estimated liquidation value
for your Limited Partnership's assets. The General Partners do not conduct
appraisals of the self-storage projects and, therefore, do not have an
estimation of the value for the underlying real estate assets. However, given
the historical performance of the Limited Partnerships, including uninterrupted
cash distributions made to limited partners, the prices offered in the Hostile
Offer are a gross undervaluation of the projects.
* Offer Price Reduced by April 2002 Distribution. If you tender your Units,
the tender offer price will be reduced by the amount of the quarterly
distribution that was already paid to you on April 15, 2002.
* Loss of Capital Appreciation. If you tender your Units, you will be
precluded from realizing any long-term capital appreciation of the self storage
projects held by your Limited Partnership.
* Loss of Potential Future Profits. If you tender your Units, you will be
giving up potential profits from the future sale of the self storage projects
when they are ultimately sold by the Limited Partnership.
* Tax Liability. If you tender your Units, you may create a significant and
substantial tax liability for yourself. Your proceeds from the tender offer
will be fully taxable on your 2002 income tax return and may create an
unanticipated tax burden.
* Omissions from the Offering Materials Associated with the Hostile Offer.
The General Partners believe that the offering materials pursuant to which
MacKenzie has made the Hostile Offer contain numerous omissions, including
failure to disclose the financial condition of MacKenzie, certain restrictions
on the transfer of your Units under state law and your Partnership Agreement.
Miscellaneous Information
Neither the General Partners nor any officer or affiliate of the Limited
Partnerships intends to tender any Units in the Hostile Offer.
Neither the Limited Partnerships nor any person acting on their behalf has
employed or retained or will compensate any other person to make solicitations
or recommendations to limited partners on behalf of the Limited Partnerships
with respect to the Hostile Offer.
Neither our General Partners nor, to the best knowledge of our General
Partners, any of its executive officers, directors, affiliates or subsidiaries
has effected any transactions in the Units during the past sixty (60) days.
The Limited Partnerships are not currently undertaking or engaged in any
negotiations in response to the Hostile Offer that relate to: (1) a tender
offer for or other acquisition of the Limited Partnerships' Units by the Limited
Partnerships, any subsidiary of the Limited Partnerships, or any other person,
(2) an extraordinary transaction, such as a merger, reorganization, or
liquidation, involving the Limited Partnerships or any of their subsidiaries,
(3) a purchase, sale, or transfer of a material amount of assets of the
Limited Partnerships or any of their subsidiaries, or (4) any material change
in the present dividend rate or policy, or indebtedness or capitalization of
the Limited Partnerships.
Notice of Withdrawal
Attached hereto is a Notice of Withdrawal which limited partners may use to
withdraw their tender of Units to MacKenzie. The instructions for withdrawal
are set forth in the Notice.