Exhibit (a)(1)
OFFER TO PURCHASE FOR CASH
MR. BEN FARAHI
IS OFFERING TO PURCHASE UP TO 20,000 UNITS OF
LIMITED PARTNERSHIP INTEREST IN
BIGGEST LITTLE INVESTMENTS, L.P.,
A DELAWARE LIMITED PARTNERSHIP,
FOR $165 PER UNIT IN CASH
I will purchase up to 20,000 (approximately 11%) of the outstanding
units of limited partnership interest in your partnership. If more units are
tendered to me, I will accept units on a pro rata basis according to the
number of units tendered by each person.
You will not pay any fees or commissions if you tender your units, with
the exception of taxes or fees which may be payable in respect of custodial
or other beneficiary accounts.
My offer is not subject to any minimum number of units being tendered.
I am an affiliate of your general partner. I am making this offer with
a view towards making a profit.
Depending on your tax circumstances, there may be federal income tax
benefits associated with a tender of your units. In the event that my
purchase price is less than your tax basis for any units you tender in this
offer, you will receive the tax benefit of your loss at the time of your
tender, rather than deferring this benefit until you sell the units at a
later time.
My offer and your withdrawal rights will expire at 12:00 midnight, New
York City time, on January 30, 2008, unless I extend the deadline.
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 MY
OFFER, INCLUDING THE FOLLOWING:
-On October 16, 2006, your general partner completed a thorough review
of an offer received by the partnership from counsel to Monarch Casino
& Resort, of which my brothers, John and Bob Farahi, are officers and
directors, proposing to purchase the Sierra Marketplace Shopping
Center, the partnership's sole property, at a cash price of $27
million, subject to certain conditions. The general partner concluded
that this offer was not in the best interest of the partnership's
limited partners and, therefore, did not enter into negotiations with
Monarch. In the event that the partnership had accepted the offer and
distributed the proceeds therefrom, the limited partners would have
been entitled to an amount equal to approximately $175 per unit. I
own approximately 10.3% of the outstanding shares of common stock of
Monarch Casino & Resort and, as such, am deemed to be an affiliate of
Monarch. Further, I served as an officer and director of Monarch
Casino & Report from its inception until my resignation from such
positions in May 2006. Accordingly, a conflict of interest exists for
me between my stock ownership of Monarch Casino & Resort and my
position as sole manager of your partnership's general partner.
Moreover, as described below, control of the actions of Western Real
Estate Investments, LLC, a limited liability company of which each of
my brothers and I were one-third members and that owned approximately
50.8% of the partnership's outstanding units, is currently subject to
dispute between me, on the one hand, and my brothers, on the other
hand.
-Although I anticipate that the value of the Sierra Marketplace
property may appreciate substantially in the next five to 10 years
and, therefore, I do not believe that a sale of the property before
that time is in the best interests of your partnership, I will
consider any unsolicited offers received by the partnership relating
to Sierra Marketplace, in accordance with my fiduciary duties as the
sole manager of the partnership's general partner. I considered
Monarch's unsolicited offer in accordance with those fiduciary
duties.
-On June 22, 2006, I filed Articles of Dissolution with the Secretary
of State of the State of Nevada with respect to Western Real Estate
Investments, LLC, in which I own a one-third interest, and of which I
am the sole managing member. As mentioned above, Western Real Estate
Investments owned 91,902 units, constituting 50.8% of the outstanding
units. Shortly after my filing, the Articles of Dissolution with
respect to Western Real Estate Investments were challenged by my
brothers. I believe that each of my brothers and I own one-third of
the assets of Western Real Estate Investments and, accordingly, one-
third of Western's partnership units. In March 2007, I took the
action of transferring 95%, or 87,306, of Western's units to each of
the three members proportionately. Such transfers were made effective
April 1, 2007. Together with the units I own individually, then, I
own, directly or indirectly, approximately 27.5% of the outstanding
units and may be in a position to influence the outcome of
partnership decisions on which limited partners may vote. However,
in the event that it is eventually determined under Nevada law that
my brothers can reverse the distribution by Western Real Estate
Investments and control its actions, it is possible, although
unlikely, that they would control a majority interest in the
partnership's outstanding units. As majority owners of the
partnership, my brothers could remove and replace the general partner
of the partnership of which I am the sole manager, and control
whether, and on what terms, the Sierra Marketplace is sold or cause
the partnership to take actions such as making additional investments
in mortgage loans or real estate, mortgaging the Sierra Marketplace
and otherwise conducting the partnership's business.
-I am making my offer to make a return on my investment. Accordingly,
in establishing my purchase price I was motivated to set the lowest
price for your units that might be acceptable to you consistent with
my objectives. Such objectives may conflict with your interest in
receiving the highest price for your units.
-My purchase price of $165 is not based on any third party appraisal
or valuation. In addition, my purchase price was determined without
any arm's-length negotiation between me and your partnership. No
independent person has given an opinion on the fairness of my offer,
and no representation is made by me or the general partner of your
partnership on the fairness of my offer. My purchase price is in
excess of 37% above the average price for the limited number of units
which were traded in the informal secondary market between January
2006 and August 2007. I have estimated the liquidation value per
partnership unit at $186, using a very conservative calculation
methodology. (see "Section 13. Background of the Offer" below).
-If you tender your units you will be giving up future potential value
from owning the units.
-You may receive more value by retaining your units than by selling
your units to me.
-I am an affiliate of the general partner of your partnership. For the
year ended December 31, 2006 and the fiscal quarter ended September
30, 2007, the general partner was allocated an aggregate of $15,744
and $14,192, respectively, of your partnership's taxable income for
acting in its capacity as the general partner and $111,797 and
$84,328, respectively, in management fees.
-It is possible that I may conduct a future offer at a higher price. I
anticipate continuing to make offers, on a periodic basis. However, I
will not make any further offers upon the occurrence of any of the
following: (i) I no longer have the financial wherewithal to
undertake such offers or (ii) the number of limited partners would
decrease below 500 as a result of such offers. It is my intent and
goal to acquire 50% or more of the units of your partnership and to
provide the limited partners of your partnership with a cost-effective
liquidity alternative to the more expensive secondary market.
To accept my offer, please execute the enclosed letter of transmittal
and return it to American Stock Transfer & Trust Company, which is acting as
Depositary for my offer, together with any additional documents required, in
the enclosed pre-addressed, postage paid envelope (see Section 3. "Procedures
for Tendering Units"). Questions and requests for assistance or for
additional copies of this offer to purchase or the letter of transmittal
should be directed to MacKenzie Partners, Inc., which is acting as
Information Agent for my offer, at (800) 322-2885.
December 17, 2007
TABLE OF CONTENTS
SUMMARY TERM SHEET..........................................................1
RISK FACTORS................................................................2
OFFER PRICE MAY NOT REPRESENT FAIR MARKET VALUE...........................2
ESTIMATED LIQUIDATION VALUE MAY NOT PROPERLY REFLECT CURRENT MARKET VALUE 3
LOSS OF FUTURE BENEFITS FROM YOUR OWNERSHIP OF UNITS......................3
INCREASE IN CONTROL OF YOUR PARTNERSHIP BY ME.............................3
CONFLICTS OF INTEREST WITH RESPECT TO THE OFFER...........................4
NO GENERAL PARTNER RECOMMENDATION.........................................4
CONFLICTS OF INTEREST RELATING TO FEES....................................4
POSSIBLE FUTURE OFFER AT A HIGHER PRICE...................................4
RECOGNITION OF TAXABLE GAIN ON A SALE OF YOUR UNITS.......................4
CONTINUATION OF THE PARTNERSHIP...........................................5
THE OFFER...................................................................5
SECTION 1. TERMS OF THE OFFER.............................................5
SECTION 2. PRORATION; ACCEPTANCE FOR PAYMENT AND PAYMENT FOR UNITS........5
SECTION 3. PROCEDURES FOR TENDERING UNITS.................................6
SECTION 4. WITHDRAWAL RIGHTS..............................................8
SECTION 5. EXTENSION OF TENDER PERIOD; TERMINATION; AMENDMENT.............8
SECTION 6. CERTAIN FEDERAL INCOME TAX CONSEQUENCES........................9
SECTION 7. EFFECTS OF THE OFFER..........................................11
SECTION 8. FUTURE PLANS..................................................12
SECTION 9. CERTAIN INFORMATION CONCERNING YOUR PARTNERSHIP...............12
SECTION 10. CONFLICTS OF INTEREST AND TRANSACTIONS WITH AFFILIATES.......16
SECTION 11. CERTAIN INFORMATION CONCERNING ME............................17
SECTION 12. SOURCE OF FUNDS..............................................20
SECTION 13. BACKGROUND OF THE OFFER......................................20
SECTION 14. CONDITIONS OF THE OFFER......................................21
SECTION 15. CERTAIN LEGAL MATTERS........................................21
SECTION 16. FEES AND EXPENSES............................................22
SECTION 17. MISCELLANEOUS................................................22
SUMMARY TERM SHEET
This summary term sheet highlights the most material information
regarding my offer, but it does not describe all of the details thereof. I
urge you to read this entire offer to purchase, which contains the full
details of my offer. I have This summary term sheet highlights the most
material information regarding my offer, but it does not describe all of the
details thereof. I urge you to read this entire offer to purchase, which
contains the full details of my offer. I have also included in the summary
term sheet references to the sections of this offer to purchase where a more
complete discussion may be found. As used herein, the term "general partner"
refers to Maxum LLC, of which I am the sole manager.
- THE OFFER. Subject to the terms hereof, I am offering to acquire
20,000 of the limited partnership units of BIGGEST LITTLE INVESTMENTS,
L.P., your partnership, for $165 per unit in cash. See "Section 1.
Terms of the Offer" and "Section 13. Background of the Offer."
- FACTORS IN DETERMINING THE OFFER PRICE. In determining the offer price
per unit I principally considered: (i) that the units do not
presently generate current income; (ii) that there is no efficient
trading market for the units; (iii) the average sale price for the
units traded in the informal secondary market between January 2006 and
August 2007; and (iv) the possible increase in the value of the
property owned by the partnership. See "Section 13. Background of the
Offer."
- EXPIRATION DATE. My offer expires on January 30, 2008, unless
extended, and you can tender your units until my offer expires. See
"Section 1. Terms of the Offer."
- RIGHT TO EXTEND THE EXPIRATION DATE. I can extend the offer in my sole
discretion, and I will either issue a press release or send you a
notice of any such extension. See "Section 5. Extension of Tender
Period; Termination; Amendment."
- HOW TO TENDER. To tender your units, complete the accompanying
acknowledgment and agreement and send it, along with any other
documents required by the letter of transmittal, to the Depositary,
American Stock Transfer & Trust Company, at one of the addresses set
forth on the back of this offer to purchase. See "Section 3.
Procedures for Tendering Units."
- WITHDRAWAL RIGHTS. You can withdraw your units at any time prior to
the expiration of the offer, including any extensions. In addition,
you can withdraw your units at any time on or after February 16, 2008
if I have not already accepted units for purchase and payment. See
"Section 4. Withdrawal Rights."
- HOW TO WITHDRAW. To withdraw your units, you need to send a notice of
withdrawal to the Depositary, identifying yourself and the units to be
withdrawn. See "Section 4. Withdrawal Rights."
- TAX CONSEQUENCES. Your sale of units in this offer will be a taxable
transaction for federal income tax purposes. The consequences to each
limited partner may vary and you should consult your tax advisor on
the precise tax consequences to you. See "Section 6. Certain Federal
Income Tax Consequences."
- AVAILABILITY OF FUNDS. I currently have access to the necessary cash
to consummate the offer. See "Section 12. Source of Funds."
- CONDITIONS TO THE OFFER. There are a number of conditions to my offer,
including the absence of competing tender offers, the absence of
certain changes in your partnership and the absence of certain changes
in the financial markets. See "Section 14. Conditions of the Offer."
- REMAINING AS A LIMITED PARTNER. If you do not tender your units, you
will remain a limited partner in your partnership. See "Section 7.
Effects of the Offer."
- CONFLICTS OF INTEREST. The general partner of your partnership (of
which I am the sole manager) is entitled to receive payment for
services and reimbursement of certain expenses involving your
partnership and its assets. As a result, a conflict of interest exists
between continuing the partnership and receiving these fees, and the
liquidation of the partnership and the termination of these fees. See
"Section 9. Certain Information Concerning Your Partnership" and
"Section 10. Conflicts of Interest and Transactions with Affiliates."
- NO GENERAL PARTNER RECOMMENDATION. The general partner of your
partnership makes no recommendation as to whether you should tender or
refrain from tendering your units, and believes each limited partner
should make his or her own decision whether or not to tender. See
"Section 13. Background of the Offer."
- NO SUBSEQUENT OFFERING PERIOD. I do not intend to have a subsequent
offering period after the expiration date of the initial offering
period (including any extensions). See "Section 5. Extension of Tender
Period; Termination; Amendment."
- ADDITIONAL INFORMATION. For more assistance in tendering your units,
please contact my Information Agent at one of the addresses or the
telephone number set forth on the back cover page of this offer to
purchase.
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS DOCUMENT, THE
LETTER OF TRANSMITTAL AND OTHER DOCUMENTS THAT I HAVE REFERRED YOU TO. I HAVE
NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH INFORMATION THAT IS DIFFERENT.
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. My offer price may not reflect the price that you could receive in the
open market for your units which could be higher than my offer price.
According to Partnership Spectrum, an independent industry publication,
between January 2006 and August 2007, a limited number of units were traded
in the informal secondary market for units at prices ranging from a high of
$160.00 per unit to a low of $80.00 per unit, with a weighted average price
of approximately $119.68 per unit, without taking into account commissions
and other transactional cost. On October 14, 2004, your partnership
commenced a program to redeem units from all limited partners owning fewer
than 100 units at a price of $69 per unit in cash, as a result of which the
partnership acquired 2,238 units on or about December 20, 2004. On April 27,
2005, I commenced a tender offer for 20,000 units at a price of $87 per unit,
as a result of which I acquired 9,646 units on June 24, 2005. During 2005, I
acquired an aggregate of 568 units in a series of private transactions at an
average price of $87.63 per unit and, between February 2006 and March 2006, I
acquired an additional 84 Units in a series of private transactions at an
average price of $91.00 per unit. On June 6, 2006, I commenced a tender offer
for 65,000 units at a price of $140 per unit, as a result of which I acquired
8,821 units on August 29, 2006.
ESTIMATED LIQUIDATION VALUE MAY NOT PROPERLY REFLECT CURRENT MARKET VALUE
Your general partner has estimated that the liquidation value of your
partnership as of September 30, 2007 was approximately $186.00 per unit.
This estimate may not reflect the current market value of your partnership's
one real property asset. I did not undertake an independent analysis of the
liquidation value of the partnership.
LOSS OF FUTURE BENEFITS FROM YOUR OWNERSHIP OF UNITS
If you tender your units in response to my offer you will transfer to me
all right, title and interest in and to all of the units I 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 me, such as future distributions by
your partnership and the potential for appreciation in the value of the units
you sell to me.
INCREASE IN CONTROL OF YOUR PARTNERSHIP BY ME
I currently beneficially own approximately 27.5% of the outstanding
units. On June 22, 2006, I filed Articles of Dissolution with the Secretary
of State of the State of Nevada with respect to Western Real Estate
Investments, LLC, a limited liability company in which I own a one-third
interest, and of which I am the sole managing member. Western Real Estate
Investments owned 91,902 units, constituting 50.8% of the outstanding units.
Shortly after my filing, the Articles of Dissolution with respect to Western
Real Estate Investments were challenged by my brothers, each of whom owns a
one-third interest in Western Real Estate Investments. I believe that each
of my brothers and I own one-third of the assets of Western Real Estate
Investments. The sole assets of Western Real Estate Investments are its
units of the partnership. Accordingly, on March 2007, I took the action of
transferring 95%, or 87,306, of Western's units to each of the three members
proportionately. Such transfers were made effective April 1, 2007. As a
result, I received one-third of the distribution, constituting 29,102 units.
I also beneficially own one-third of the remaining 4,596 units owned by
Western, or 1,532 units, in addition to the 19,163 units I own individually.
In the aggregate, I own, directly or indirectly, 49,797 units, or 27.5% of
the outstanding units, and my brothers together own 61,268 units individually
and by their two-thirds ownership of Western Real Estate Investments, or
33.9% of the outstanding units. I am no longer acting in concert with, or
considered for securities law purposes to be part of a "group" with, either
of my brothers with respect to my ownership of units. The more units I
acquire, the more I will be able to influence limited partner voting
decisions of your partnership. As the owner, directly or indirectly, of a
substantial portion of the outstanding units, both my brothers and,
separately, I, may presently be able to influence decisions such as the
removal of the general partner, amendments of the partnership agreement, the
sale of substantially all of your partnership's assets and the liquidation of
your partnership. In the event that it is eventually determined under Nevada
law that my brothers can reverse the distribution by Western Real Estate
Investments and control its actions, it is possible, although unlikely, that
they would control 91,902 units on behalf of Western Real Estate Investments,
constituting a 50.8% majority interest in the partnership's outstanding
units.
CONFLICTS OF INTEREST WITH RESPECT TO THE OFFER
I am making this offer with a view to making a profit. There is a
conflict between my desire to purchase your units at a lower price than the
price at which you desire to sell your units. I determined my offer price
without negotiation with any other party, including the general or any
limited partner.
NO GENERAL PARTNER RECOMMENDATION
The general partner of your partnership, of which I am the sole manager,
makes no recommendation as to whether or not you should tender or refrain
from tendering your units. You must make your own decision whether or not to
participate in the offer based upon a number of factors, including several
factors that may be personal to you, such as your financial position, your
need or desire for liquidity, your preferences regarding the timing of when
you might wish to sell your units, other financial opportunities available to
you, and your tax position and the tax consequences to you of selling your
units.
CONFLICTS OF INTEREST RELATING TO FEES
Because my affiliates receive fees for managing your partnership and its
assets, a conflict of interest exists between continuing the partnership and
receiving such fees, and the liquidation of the partnership and the
termination of such fees. Also, a decision of the limited partners of your
partnership to remove, for any reason, the general partner of your
partnership would result in a decrease or elimination of the substantial fees
to which it is entitled for services provided to your partnership. For the
year ended December 31, 2006 and the fiscal quarter ended September 30, 2007,
the general partner was allocated an aggregate of $15,744 and $14,192,
respectively, of your partnership's taxable income for acting in its capacity
as the general partner and $111,797 and $84,328, respectively, in fees for
managing the assets owned by your partnership.
POSSIBLE FUTURE OFFER AT A HIGHER PRICE
It is possible that I may conduct a future offer at a higher price. I
anticipate continuing to make offers, on a periodic basis. Such a decision
will depend on, among other things, the performance of the partnership,
prevailing economic conditions and my interest in acquiring additional units.
However, I will not make any further offers upon the occurrence of any of the
following: (i) I no longer have the financial wherewithal to undertake such
offers or (ii) the number of limited partners would decrease below 500 as a
result of such offers. It is my intent and goal to acquire 50% or more of
the units of your partnership and to provide the limited partners of your
partnership with a cost-effective liquidity alternative to the more expensive
secondary market.
RECOGNITION OF TAXABLE GAIN ON A SALE OF YOUR UNITS
Your sale of units for cash will be a taxable sale, with the result that
you will recognize taxable gain or loss measured by the difference between
the amount realized on the sale and your adjusted tax basis in the units of
limited partnership interest of your partnership you transfer to me. The
"amount realized" with respect to a unit of limited partnership interest you
transfer to me will be equal to the sum of the amount of cash received by you
for the unit sold pursuant to the offer plus the amount of partnership
liabilities allocable to the unit. The particular tax consequences for you of
my offer will depend upon a number of factors related to your tax situation,
including your tax basis in the units you transfer to me, whether you dispose
of all of your units, and whether you have available suspended passive
losses, credits or other tax items to offset any gain recognized as a result
of your sale of your units. Therefore, depending on your basis in the units
and your tax position, your taxable gain and any tax liability resulting from
a sale of units to me pursuant to the offer could exceed my offer price.
Because the income tax consequences of tendering units will not be the same
for everyone, you should consult your own tax advisor to determine the tax
consequences of the offer to you.
CONTINUATION OF THE PARTNERSHIP
Your partnership will continue to be operated as it has in the past.
Accordingly, there may be no way to liquidate your investment in the
partnership in the future until the assets are sold and the partnership is
liquidated.
THE OFFER
SECTION 1. TERMS OF THE OFFER. Upon the terms and subject to the
conditions of the offer, I will accept and thereby purchase up to 20,000
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"
means 12:00 Midnight, New York City time, on January 30, 2008, unless I have
extended the period of time during which the offer is open, in which case the
term "expiration date" means the latest time and date on which the offer, as
extended by me, expires. See Section 5 of this offer to purchase for a
description of my right to extend the period of time during which the offer
is open and to amend or terminate my offer.
My 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. I reserve the
right, in my 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, I 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;
(iii) extend the offer and, subject to the withdrawal rights of limited
partners, retain the units that have been tendered during the period or
periods for which the offer is extended; or (iv) amend the offer.
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
properly withdrawn is 20,000 or less, I will accept for payment, subject to
the terms and conditions of the offer, all units so tendered. If more than
20,000 units are validly tendered on or prior to the expiration date and not
properly withdrawn, I will accept for payment an aggregate of 20,000 units so
tendered on a pro rata basis according to the number of units validly
tendered by each limited partner with appropriate adjustments to avoid
purchases of fractional units.
I will pay for up to the maximum number of units validly tendered and
not withdrawn in accordance with Section 4, within five days following the
expiration date. In all cases, the payments for units purchased in my offer
will be made only after timely receipt by my Depositary of a properly
completed and duly executed letter of transmittal or a facsimile thereof, and
any other documents required by the terms hereof or by the letter of
transmittal. See "Section 3. Procedures for Tendering Units."
For purposes of the offer, I will be deemed to have accepted for
payment, and thereby purchased, validly tendered units under the offer when,
as and if I give verbal or written notice to my Depositary of my 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 my
Depositary, which will act as agent for tendering limited partners for the
purpose of receiving cash payments from me 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 me and I will
return any certificates representing such units. If, for any reason,
acceptance for payment of, or payment for, any units tendered in my offer is
delayed, then, without prejudice to my rights under Section 14 of this offer
to purchase, I may cause my 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 my 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 for 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 or a facsimile thereof and any other documents
required by the terms hereof or by the letter of transmittal including
certificates, if any, representing the units being tendered, must be received
by my Depositary on or prior to the expiration date. If you do not provide me
with the certificate(s) representing your units which you would like to
tender to me, by signing the letter of transmittal you are certifying that
the certificate(s) representing your units have been lost or misplaced and
agreeing to indemnify me and your partnership in the manner provided for in
the letter of transmittal. 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, or four units in the
case of a limited partner which is an IRA or Keogh Plan, will not be
effective. I will reject only those units that may not be transferred
pursuant to the term of the partnership agreement rather than the entire
tender and will work with representatives of your partnership's independent
transfer agent to ensure compliance with the partnership agreement.
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 eligible institutions such as 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, 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 delivery will be deemed made only when actually received by my
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 28% backup
federal income tax withholding unless you provide me 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, I will be required to withhold 28% (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 Consequences."
FIRPTA WITHHOLDING. To prevent the withholding of federal income tax in
an amount equal to 10% of the amount realized on the disposition (the amount
realized is generally the offer price plus the partnership liabilities
allocable to each unit purchased), you must certify that you are not a
foreign person if you tender units. See the instructions to the
acknowledgment and agreement set forth in the letter of transmittal and
"Section 6. Certain Federal Income Tax Consequences."
TRANSFER TAXES. The amount of any transfer taxes (whether imposed on the
registered holder of units or any person) payable on account of the transfer
of units will be deducted from the purchase price unless satisfactory
evidence of the payment of such taxes or exemption therefrom is submitted.
APPOINTMENT AS PROXY; POWER OF ATTORNEY. By executing the letter of
transmittal, you are irrevocably appointing me and my designees as your
proxy, in the manner set forth in the acknowledgment and agreement and each
with full power of substitution, to the fullest extent of your rights with
respect to the units tendered by you and accepted for payment by me. Each
such proxy shall be considered coupled with an interest in the tendered
units. Such appointment will be effective when, and only to the extent that,
I 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). My designees and I will, as to those units, be
empowered to exercise all voting and other rights as a limited partner as I,
in my sole discretion, may deem proper at any meeting of limited partners, by
written consent or otherwise. I reserve the right to require that, in order
for units to be deemed validly tendered, immediately upon my acceptance for
payment of the units, I must be able to exercise full voting rights with
respect to the units, including voting at any meeting of limited partners
and/or limited partners then scheduled or acting by written consent without a
meeting, to the extent that such voting rights are attendant to the ownership
of the units. By executing the letter of transmittal, you agree to execute
all such documents and take such other actions as shall be reasonably
required to enable the units tendered to be voted in accordance with my
directions. The proxy granted by you to me will remain effective and be
irrevocable for a period of ten years following the termination of my offer.
By executing the letter of transmittal, you also irrevocably constitute
and appoint me and my designees as your attorneys-in-fact, 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 by me. Such appointment will
be effective when, and only to the extent that, I pay for your units and will
remain effective and be irrevocable for a period of ten years following the
termination of my offer. You will agree not to exercise any rights pertaining
to the tendered units without my prior consent. Upon such payment, all prior
powers of attorney granted by you with respect to such units will, without
further action, be revoked, and no subsequent powers of attorney may be
granted (and if granted will not be effective). Pursuant to such appointment
as attorneys-in-fact, my designees and I each will have the power, among
other things: (i) to transfer ownership of such units on the partnership
books maintained by your general partner (and execute and deliver any
accompanying evidences of transfer and authenticity it may deem necessary or
appropriate in connection therewith); (ii) upon receipt by the Depositary of
the offer consideration, to become a substituted limited partner, to receive
any and all distributions made by your partnership on or after the date on
which I acquire such units, and to receive all benefits and otherwise
exercise all rights of beneficial ownership of such units in accordance with
the terms of my offer; (iii) to execute and deliver to the general partner of
your partnership a change of address form instructing the general partner to
send any and all future distributions to which I am entitled pursuant to the
terms of the offer in respect of tendered units to the address specified in
such form; and (iv) to endorse any check payable to you or upon your order
representing a distribution to which I am entitled pursuant to the terms of
my offer, in each case, in your name and on your behalf.
ASSIGNMENT OF INTEREST IN FUTURE DISTRIBUTIONS. By executing the letter
of transmittal, you will irrevocably assign to me and my assigns all of your
right, title and interest in and to any and all distributions made by your
partnership from any source and of any nature, including, without limitation,
distributions in the ordinary course, distributions from sales of assets,
distributions upon liquidation, winding-up or dissolution, payments in
settlement of existing or future litigation, and all other distributions and
payments from and after the expiration date of my offer, in respect of the
units tendered by you and accepted for payment and thereby purchased by me.
If, after the unit is accepted for payment and purchased by me, you receive
any distribution from any source and of any nature, including, without
limitation, distributions in the ordinary course, distributions from sales of
assets, distributions upon liquidation, winding-up or dissolution, payments
in settlement of litigation and all other distributions and payments, from
your partnership in respect of such unit, you will agree to promptly forward
such distribution to me.
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 in my offer will be determined by me, in my sole discretion,
which determination shall be final and binding. I reserve the absolute right
to reject any or all tenders of any particular unit determined by me not to
be in proper form or if the acceptance of, or payment for, that unit may, in
the opinion of my counsel, be unlawful. I 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 my interpretation of the terms and
conditions of the offer, including the letter of transmittal and the
instructions thereto, will be final and binding. Neither me, my Depositary,
my Information Agent, 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 under any of the procedures
described above and the acceptance for payment of such unit will constitute a
binding agreement between the tendering limited partner and me 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 and 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 my Depositary at the address
set forth on the back cover of this offer to purchase. Any such notice of
withdrawal must specify the name of the person who tendered, the 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, I may
cause my 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 my
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 my 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. I
expressly reserve the right, in my sole discretion, at any time and from time
to time: (i) to extend the period of time during which my offer is open and
thereby delay acceptance for payment of, and the payment for, any unit; (ii)
to terminate the offer and not accept any units not theretofore accepted for
payment or paid for if any of the conditions of the offer are not satisfied
or if any event occurs that might reasonably be expected to result in a
failure to satisfy such conditions; (iii) 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; and (iv) to amend my offer in any respect, including,
without limitation, by increasing the consideration offered, increasing or
decreasing the number of units being sought, or both. Notice of an amendment
will promptly be disseminated to you in a manner reasonably designed to
inform you of the change in compliance with Rule 14d-4(c) under the Exchange
Act. 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 my
offer, in accordance with Rule 14e-1(d) under the Exchange Act.
If I extend the offer, or if I delay payment for a unit, whether before
or after its acceptance for payment, then, without prejudice to my rights
under the offer, I may cause my 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 my 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 I make a material change in the information concerning the offer or
if I waive a material condition to my offer, I 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, 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 security
holders, 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 security holders 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 CONSEQUENCES. 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 my
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 my 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 my 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 MY OFFER.
You will recognize gain or loss on a sale of units in my 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 plus your share of the partnership's
liabilities that are applicable to the unit and decreased by your share of
your partnership's losses and distributions. If you are selling only some of
your units, you will be entitled to apply a portion of your basis determined
with reference to the relative value of the transferred units to your total
units. 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
share of the partnership's liabilities that are allocable to the unit.
Until the closing of our purchase of your units, 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
partnership agreement concerning transfers of units. Such allocations and any
cash distributed prior to the closing 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 my offer. In this regard,
if you tender your units, you will be allocated a pro rata share of taxable
income with respect to your units sold in my offer through the end of the
calendar quarter in which the units are sold, but I will receive all future
distributions made with respect to your units. See "Section 9. Certain
Information Concerning Your Partnership."
Your gain or loss on a sale of a unit in my offer generally will be
treated as a capital gain or loss if you held the unit as a capital asset.
Gain recognized by you on the disposition of units with a holding period of
12 months or less will be classified as short-term capital gain and subject
to taxation at ordinary income tax rates. 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 15%; however, their gain attributable to the recapture of
straight-line depreciation deductions is taxed at a federal income tax rate
of 25%. The maximum federal income tax rate for other income of such persons
is 35%. 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 carry forward 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, you generally cannot use your losses from your
partnership's passive activities to offset your non-passive activity income
(and if you are a closely-held corporation, you generally cannot use your
losses from your partnership's passive activities to offset your portfolio
income). Those "suspended" losses are no longer limited by the passive loss
rules when you dispose of your entire interest in the partnership in a
taxable transaction. Therefore, if you sell all your units in my offer, then
your loss on the sale (and any previously suspended passive losses from the
partnership) will be deductible by you in full in the year of sale (subject
to the limitation on the deductibility of capital losses and any other
applicable limitations). But if you sell only some of your units, you will
not be entitled to deduct any suspended losses and the loss from the sale of
your units will be considered a passive loss, subject to the limitations
subscribed above.
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 110%.
If you are a tax-exempt investor, you generally should not realize
unrelated business taxable income upon a sale of your units in my offer
assuming you do not hold your units subject to acquisition indebtedness.
However, 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.
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 28% with
respect to the payment of the purchase price, you will have to provide me
with your correct taxpayer identification number. See the instructions to the
letter of transmittal.
TAX CONSEQUENCES TO NON-TENDERING AND PARTIALLY-TENDERING LIMITED
PARTNERS. Section 708 of the Code provides that if there is a sale or
exchange of 50% or more of the total interest in capital and profits of a
partnership within any 12-month period, such partnership terminates for
United States federal income tax purposes. The partnership will not process
any requests for transfers of units during such 12-month period which could
cause a tax termination. If your partnership was deemed to terminate for tax
purposes, the following federal income tax events will be deemed to occur:
the terminated partnership will be deemed to have contributed all of its
assets (subject to its liabilities) to a new partnership in exchange for an
interest in the new partnership and, immediately thereafter, the old
partnership will be deemed to have distributed interests in the new
partnership to the remaining limited partners in proportion to their
respective interests in the old partnership in liquidation of the old
partnership.
You will not recognize any gain or loss upon such deemed contribution of
your partnership's assets to the new partnership or upon such deemed
distribution of interests in the new partnership, and your capital account in
your partnership will carry over to the new partnership.
A termination of your partnership for federal income tax purposes may
also subject the assets of your partnership to longer depreciable lives than
those currently applicable to the assets of your partnership. This would
generally decrease the annual average depreciation deductions allocable to
you for certain years following our offer if you do not tender all of your
interests in your partnership (thereby increasing the taxable income
allocable to your interests in your partnership each such year), but would
have no effect on the total depreciation deductions available over the total
recovery period of the assets of your partnership. Additionally, upon a
termination of your partnership, the taxable year of your partnership will
close for federal income tax purposes.
Please note that I do not believe that a sale or exchange of 50% or more
of the total interest in capital and profits of your partnership within a 12-
month period will occur as a result of this offer.
SECTION 7. EFFECTS OF THE OFFER.
LIMITATIONS ON RESALES. Under the partnership agreement, transfers of
units which in the opinion of counsel to your partnership would cause a
termination of your partnership for federal income tax purposes are not
permitted. A termination may occur when 50% or more of the units are
transferred in a 12-month period. Depending upon the number of units tendered
in my offer, sales of units on the secondary market for the 12-month period
following completion of my offer may be limited. The partnership will not
process any requests for transfers of units during such 12-month period which
the general partner of your partnership believes may cause a tax termination.
However, I do not believe that a transfer of 50% or more of the units within
a 12-month period will occur as a result of my 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.
INFLUENCE ON LIMITED PARTNER VOTING DECISIONS BY ME. I will have the
right to vote each unit that I purchase in the offer. As the beneficial
owner, directly or indirectly, of a significant portion of the outstanding
units I may be able to influence all voting decisions by the limited partners
of your partnership. Based on the number of units that I purchase in the
offer, I will be in an even stronger position to influence the outcome of
voting decisions with respect to your partnership. Accordingly, I may be able
to: (i) prevent non-tendering limited partners from taking action they desire
but that I oppose; and (ii) take action desired by me 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 partner; dissolving your
partnership; selling all or substantially all of your partnership's assets;
effecting material changes in the investment objectives and policies of your
partnership; and causing most types of amendments to the partnership
agreement. When voting on matters, I will vote units owned and acquired by
me, in my interest.
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. I will not accept tenders from any seller
if doing so will cause the total number of limited partners to fall below
500.
SECTION 8. FUTURE PLANS. I am seeking to acquire units primarily for
investment purposes and with a view to making a profit. I anticipate
continuing to make offers, on a periodic basis, as long as I have the
financial wherewithal to undertake such offers. It is my intended goal to
provide the limited partners of your partnership with a cost-effective
liquidity alternative to the more expensive secondary market and to acquire
50% or more of the units of your partnership. However, I will not make any
further offers upon the occurrence of any of the following: (i) I no longer
have the financial wherewithal to undertake such offers or (ii) the number of
limited partners would decrease below 500 as a result of such offers.
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-KSB, quarterly reports on Form 10-QSB 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. 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, Biggest Little Investments L.P. and formerly Resources
Accrued Mortgage Investors 2, L.P., Resources Accrued Mortgage Investors L.P.
Series 87 and Resources Accrued Mortgage Investors L.P. Series 88, was
organized on August 14, 1986 under the laws of the State of Delaware. Its
principal executive offices are located at 3650 S. Virginia Street, Suite K2,
Reno, Nevada 89502. Its telephone number is (775) 825-3355. Your partnership
was formed for the purpose of investing in "zero coupon" first and junior
mortgage loans which were secured by real property.
Until January 1, 2002, the general partners of your partnership were RAM
Funding, Inc. and Presidio AGP Corp. Effective January 1, 2002, the managing
general partner interest and the associate general partner interest were
acquired by Maxum LLC, a Nevada limited liability company and the current
general partner of which I am the sole manager. On October 8, 2003, your
partnership received consents from the holders of a majority of its
outstanding units of limited partnership interest to adopt its Second Amended
and Restated Agreement of Limited Partnership. Pursuant to the amended
limited partnership agreement, your partnership was renamed "Biggest Little
Investments L.P." In addition, your partnership was provided with the ability
to leverage its property in an effort to increase the value of the
partnership, to purchase additional real estate for investment and/or
development and to make or acquire additional mortgage loans or short-term
loans, as well as to reinvest operating income and proceeds from the sale or
refinancing of its properties or the disposition of its mortgage loans.
Finally, the amended agreement permitted your partnership to repurchase units
from the limited partners. No unit repurchases occurred until 2004.
On September 1, 2005, your partnership's amended limited partnership
agreement was amended to provide the general partner with a right of first
refusal to purchase units from selling limited partners who propose to sell
the units to a purchaser which is not an existing limited partner of your
partnership. The general partner believes that this amendment will reduce
your partnership's administrative costs and, accordingly, is in the best
interests of your partnership and its partners.
On April 14, 2006, a distributions of $2.50 per unit was paid to limited
partners of record as of the close of business on March 31, 2006.
YOUR PARTNERSHIP'S CURRENT INVESTMENTS. Your partnership had an
investment in a mortgage loan issued on February 10, 1989 in the amount of
$6,500,000 to High Cash Partners, L.P., a public limited partnership
originally sponsored by Integrated Resources, Inc., which declared bankruptcy
in 1994. The total amount, including fees, allocated to the mortgage loan
from the gross proceeds of your partnership's initial public offering in 1989
was $7,715,134 including payment to RAM Funding of a mortgage placement fee
of $385,757. Commencing on March 1, 2001, your partnership began receiving
interest payments on the mortgage loan, which payments represented 16% of the
partnership's 2002 revenue. On March 3, 2003, your partnership acquired the
deed to the property securing the mortgage loan, a shopping center commonly
known as the Sierra Marketplace located in Reno, Nevada, in lieu of
foreclosing on the loan. The property consists of approximately 213,000
square feet of net rentable area and occupies 18.67 acres, consisting
primarily of two main buildings with spaces for two anchor tenant and surface
parking for approximately 1,100 automobiles. The partnership currently owns
the property in fee simple and the property is not subject to any mortgages,
liens or other encumbrances.
In an effort to maximize the financial viability of Sierra Marketplace,
the partnership demolished and rebuilt part of the property, and may
demolish, rebuild, remodel and renovate other parts of the property. As part
of the renovation, the portion of the shopping center previously occupied by
Good Guys was demolished for the purpose of creating in its place a new
driveway (and traffic signal) directly between Sierra Marketplace and the
adjacent property, a hotel casino, which is controlled by an affiliate of the
general partner. The partnership took an impairment charge in 2003 on the
portion of the building of Sierra Marketplace that was demolished for this
purpose. The driveway was constructed and put into use on September 30,
2004, and is being shared by, and provides a connection between, Sierra
Marketplace and the adjacent property. In January 2004, the adjacent
property entered into a lease with the partnership for a 37,368 square foot
section of Sierra Marketplace (including the new driveway). The adjacent
property has begun paying rent and has a minimum lease term of 15 years at a
monthly rent of $25,000, subject to increase every 60 months based on the
Consumer Price Index. The adjacent property also uses part of the common
area of Sierra Marketplace and pays its proportionate share of the common
area expense of Sierra Marketplace. The adjacent property has the option to
renew the lease for three five-year terms, and at the end of the extension
period, has the option to purchase the leased section of Sierra Marketplace
at a price to be determined based on an MAI Appraisal. The space being leased
by the adjacent property provides pedestrian and vehicle access to the
adjacent property, and the adjacent property has use of a portion of the
parking spaces at Sierra Marketplace. The total cost of the project was $2.0
million, two-thirds ($1.35 million) of which was the responsibility of the
adjacent property. Pursuant to the lease agreement, each of a committee of
independent directors of Monarch Casino & Resort, Inc. ("Monarch"), which
through its wholly owned subsidiary Golden Road Motor Inn Inc. operates the
Atlantis Casino Resort in Reno, Nevada, the property adjacent to the Sierra
Marketplace Shopping Center, will order a Member Appraisal Institute (MAI)
appraisal of the property. If each valuation is within 10% of the other,
the average of the two valuations will be the purchase price. If the
valuations differ by more than 10%, the two MAI appraisers will select a
third MAI appraiser to appraise the property. From the total of three
valuations, the average of the two closest valuations will be the purchase
price. The purchase price will then be adjusted and decreased by the amount
which Monarch can demonstrate that it paid for improvements to the property
during the five-year period immediately preceding the exercise of the right
to purchase. The terms of the lease also prohibit unlimited gaming at Sierra
Marketplace within the first five years of the lease (of which two years
remain) and that, after the expiration of this five-year period, Monarch is
entitled to purchase an extension of the restriction on unlimited gaming at a
price to be determined based on an MAI appraisal. Monarch has indicated that
it will likely purchase such extension. The partnership believes that such
extension has substantial value and will be one of the determining factors in
how the Sierra Marketplace will be redeveloped. The partnership continues to
market the Sierra Marketplace property to potential tenants.
In addition to the driveway lease, the adjacent property is currently
leasing approximately 18,225 square feet of office and storage space at the
Sierra Marketplace and is paying approximately $15,100 per month in rent plus
common area expenses for such spaces. The adjacent property is also leasing
sign space at the Sierra Marketplace for $1,060 per month.
In June 2007, the adjacent property began leasing a portion of the
parking lot at the Sierra Marketplace consisting of a total of approximately
276 parking spaces for a monthly fee of $25,000. Effective November 4, 2007,
this month-to-month lease was amended reducing the number of parking spaces
leased to 125 and reducing the monthly rent to $17,500.
The affiliate of the general partner which controls the adjacent
property does not have any ownership, options to purchase (except with
respect to the driveway discussed above) or first rights of refusal over or
control of the Sierra Marketplace.
In March 2006, the space in Sierra Marketplace previously occupied by
Smith's was broken into and vandalized resulting in damage in excess of
$200,000. The partnership filed an insurance claim on the loss and, in 2007,
received $161,001 in settlement proceeds from the insurance company. During
the first quarter of 2007, the partnership took an impairment in the amount
of $234,945 on the Sierra Marketplace property while it evaluates repair and
lease options for the damaged space. In March 2007, a vacant space at the
Sierra Marketplace was vandalized resulting in damage in excess of $83,000.
The partnership filed an insurance claim on the loss and, in August 2007,
received $47,594 in settlement proceeds from the insurance company. The
partnership took an impairment of $83,890 during the third quarter of 2007
while it evaluates repair and lease options for the vacant space. The
partnership has increased its security measures at the Sierra Marketplace.
On November 1, 2005, the partnership filed an application with the City
of Reno to change the zoning of the Sierra Marketplace from "Commercial" to
"Hotel Casino." The City of Reno adopts a master plan with respect to use,
which plan is modified every few years. Sierra Marketplace is located in an
area of the current master plan designated for gaming since approximately
1995. With this master plan designation, I believe that the shopping
center's zoning as "commercial" could be changed easily to "gaming" if
desired, which could add significant value to the property. The City of Reno
may be considering changing the master plan for the area where the Sierra
Marketplace is located. Accordingly, for purposes of protecting the real
estate value of the Sierra Marketplace, representatives of Maxum, the
partnership's general partner, applied for a zoning change to "hotel casino"
so that the partnership would not lose the ability to obtain this zoning
designation in the future. On January 25, 2006, the City of Reno approved
the zoning change application. The zoning change was not related to the
Atlantis Casino Resort expansion. The partnership operates and intends to
continue to operate totally independent of Atlantis, other than the portion
of Sierra Marketplace that Monarch rents for vehicular and pedestrian access
between the shopping center and the casino and for office and storage space.
Moreover, Atlantis Casino Resort currently owns 16 acres of vacant property
available to it for expansion purposes.
Your partnership currently has no plans or proposals concerning the
Sierra Marketplace and continues to hold the property for investment based on
my belief in the long term value of the real estate. The partnership is
considering many different alternatives for the purpose of further enhancing
the value of the property and, accordingly, increasing the value of the
units. The reason for marketing vacant space only to tenants willing to sign
short-term leases is the intent to substantially reduce costs when the
partnership does identify a long-term plan for the property. Potential
future plans for the shopping center include further renovation to attract
more profitable short-term leases, redevelopment of the property for
commercial purposes, or entering into long term leases with Monarch or
another third party.
On July 26, 2006, the partnership received a letter from counsel to
Monarch setting forth the terms of a proposal by Monarch to purchase the
Sierra Marketplace Shopping Center at a cash price of $27 million. In the
event that the partnership had accepted the offer and distributed the
proceeds therefrom, the limited partners would have been entitled to an
amount equal to approximately $175 per unit. The partnership had received
expressions of interest in the property from Monarch and other third parties
in the past but no prior offers were ever made, nor were any significant
negotiations ever commenced. In October 2005, a representative of a publicly
held casino operator met with me, in my capacity as the sole manager of the
general partner of the partnership, and stated that his company was
interested in purchasing the property adjacent to the Sierra Marketplace and,
contingent upon such purchase, also desired to purchase Sierra Marketplace.
However, negotiations between the casino operator and Monarch, the owner of
the adjacent property, were unsuccessful and, accordingly, no offer was ever
made to purchase Sierra Marketplace. In addition, on May 3, 2006, the
partnership received a letter from counsel to Monarch confirming a prior
telephone conversation in which such counsel had advised me that the Monarch
Board of Directors wished to immediately commence negotiations for the Sierra
Marketplace. During the referenced telephone conversation, a member of the
Board of Directors of Monarch informed me that Monarch was interested in
negotiating to purchase the Sierra Marketplace. I, on behalf of the general
partner of the partnership, responded to the representative of Monarch that
the partnership was not interested in selling the Sierra Marketplace but
would, instead, consider entering into a long-term lease arrangement. On
July 20, 2006, Monarch filed a Form 8-K stating that Monarch's Board of
Directors had been "accumulating information relative to a potential purchase
offer" for Sierra Marketplace. On October 16, 2006, the general partner
completed a thorough review of Monarch's offer and concluded that this offer
was not in the best interest of the partnership's limited partners and,
therefore, did not enter into negotiations with Monarch.
As of November 30, 2007, approximately 31% of Sierra Marketplace's
rentable square footage was occupied and the average effective monthly rent
was approximately $1.11 per occupied square foot. This does not include the
driveway leased to the adjacent property.
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 2006 and 2005
is based on audited financial statements.
SELECTED FINANCIAL DATA
FISCAL YEAR ENDED FISCAL QUARTER
DECEMBER 31, ENDED SEPTEMBER
30,
----------------------- -------------------
2006 2005 2007 2006
---------- ----------- --------- ---------
Rental income $1,745,166 $1,908,599 $484,250 $449,591
Interest and other income 369,869 1,181,581 110,585 96,420
---------- ----------- --------- ---------
Total revenues 2,115,035 3,090,180 594,835 546,011
---------- ----------- --------- ---------
Operating expenses 537,711 551,034 168,841 160,217
General and administrative 303,513 128,519 14,385 79,386
Depreciation 522,251 522,081 116,635 130,563
Management fees 111,707 177,390 32,134 26,690
Costs of development not
consummated 10,000 148,871 0 0
Total expenses 1,485,272 1,527,895 331,995 396,856
---------- ----------- --------- ---------
Net income $ 629,763 $1,562,285 $262,840 $149,155
========== =========== ========= =========
Net income per unit $ 3.39 $ 8.42 $ 1.42 $ 0.80
========== =========== ========= =========
December 31, September 30,
-------------------------- -------------
2006 2005 2007
----------- ----------- -------------
Balance sheet data:
Total assets $21,076,715 $20,874,940 $21,643,152
Total liabilities 139,236 103,282 138,006
Limited partners' equity (180,937
units outstanding at 9/30/07,
12/31/06 and 12/31/05) 20,401,204 20,239,528 20,954,679
Statement of cash flows data:
Cash and cash equivalents $ 7,264,486 $ 6,534,089 $ 8,426,045
Net cash provided by operating
activities 1,194,339 2,354,654 952,964
Net cash used in investing
activities 0 (12,771) 208,595
Net cash used in financing
activities (463,942) 0 0
SECTION 10. CONFLICTS OF INTEREST AND TRANSACTIONS WITH AFFILIATES. I
have certain conflicts of interest with respect to the offer as set forth
below.
VOTING BY ME. As the beneficial owner, directly or indirectly, of a
significant portion of the outstanding units, I presently may be able to
influence decisions. As a result of the offer, I will be in an even stronger
position to influence the outcome of such partnership decisions. This means
that: (i) non-tendering limited partners could be prevented from taking
action they desire but that I oppose; and (ii) I will be able to take action
desired by me but opposed by non-tendering limited partners. See "Section 7.
Effects of the Offer."
TRANSACTIONS WITH AFFILIATES. Under the partnership agreement, your
general partner is entitled to receive 2.5% of your partnership's income,
loss, capital and distributions including without limitation your
partnership's cash flow from operations and disposition proceeds. Your
general partner will also receive its pro rata interest in any distributions
made by your partnership as well as fees for managing the property owned by
the partnership. I am the sole manager of your general partner.
In January 2004, members of an entity affiliated with the general
partner, which controls the property adjacent to the Sierra Marketplace,
entered into a lease with the partnership for a 37,368 square foot section of
Sierra Marketplace (including the new driveway). The adjacent property has
begun paying rent and has a minimum lease term of 15 years at a monthly rent
of $25,000, subject to increase every 60 months based on the Consumer Price
Index. The adjacent property also uses part of the common area of Sierra
Marketplace and pays its proportionate share of the common area expense of
Sierra Marketplace. In addition to the driveway lease, the adjacent property
is currently leasing approximately 18,225 square feet of office and storage
space at the Sierra Marketplace and is paying approximately $15,100 per month
in rent plus common area expenses for such spaces. The adjacent property is
also leasing sign space at the Sierra Marketplace for $1,060 per month. In
June 2007, the adjacent property began leasing a portion of the parking lot
at the Sierra Marketplace consisting of a total of approximately 276 parking
spaces for a monthly fee of $25,000. Effective November 4, 2007, this month-
to-month lease was amended reducing the number of parking spaces leased to
125 and reducing the monthly rent to $17,500. See "SECTION 9. CERTAIN
INFORMATION CONCERNING YOUR PARTNERSHIP-YOUR PARTNERSHIP'S CURRENT
INVESTMENTS."
SECTION 11. CERTAIN INFORMATION CONCERNING ME. I am Ben Farahi, a
partner of Farahi Investment Company, a Nevada general partnership engaged
in real estate investment and development in the Reno, Nevada area. The
other partners of Farahi Investment Company are my brothers, John Farahi and
Bob Farahi. My brothers and I are the sole owners of Virginia Springs
Limited Liability Company, a Nevada limited liability company formed for the
purpose of investing in real estate-related investments. The principal
executive offices of Virginia Springs and Farahi Investment Company are
located at 3650 S. Virginia Street, Suite K2, Reno, Nevada 89502, and their
telephone number is (775) 825-3355.
At age 52, I was Co-Chairman of the Board, Chief Financial Officer,
Secretary and Treasurer of Monarch Casino & Resort, Inc., which through its
wholly owned subsidiary Golden Road Motor Inn ("Golden Road") operates the
Atlantis Casino Resort in Reno, Nevada, from its inception in 1993 to May 23,
2006. I am also in the process of selling my Monarch stock and, in the past
two months, have sold approximately 1.3% of my shares. I have resigned as an
executive officer and director of Monarch, in part, to eliminate any
potential conflict of interest with respect to my position with the
partnership's general partner and my ownership of units and with the intent
of focusing on the best interests of your partnership. Each of my brothers,
however, remains a director and executive officer of Monarch. From 1973
until June 1993, I was Secretary, Treasurer and a Director of Golden Road in
charge of financial planning and construction. I hold a mechanical
engineering degree from the University of California at Berkeley and a M.B.A.
degree in accounting from the California State University, Hayward.
Neither I nor Farahi Investment Company was convicted in a criminal
proceeding during the past five years (excluding traffic violations or
similar misdemeanors). In addition, none of such persons or entities was a
party to any judicial or administrative proceeding during the past five years
(except for matters that were dismissed without sanction or settlement) that
resulted in a judgment, decree or final order enjoining the person from
future violations of, or prohibiting activities subject to, federal or state
securities laws, or a finding of any violation of federal or state securities
laws.
As of the date of this offer to purchase, I own, directly or indirectly,
49,797 units. To the best of my knowledge, no other affiliate of mine
beneficially owns or has a right to acquire any units.
UNITS OWNED BY MY AFFILIATES. Western Real Estate Investments purchased
2,799 units in various open market transactions, and I purchased 44 units in
an open market transaction, prior to 2001. Western then purchased 166 units
at prices per unit ranging from $82.75 to $102.00 in a series of transactions
that occurred between January 10, 2001 and January 30, 2001. In addition,
Western paid for 120 units on February 14, 2001 for approximately $102.00 per
unit; 299 units on February 15, 2001 for approximately $104.00 per unit; 24
units on March 22, 2001 for approximately $130.00 per unit; and 140 units on
March 30, 2001 for approximately $125.00 per unit. Western purchased such
units through intermediaries (e.g. through the trading system operated by
American Partnership Board, Inc., which publishes sell offers by holders of
units).
In addition to the foregoing, on February 12, 2001, Western commenced a
tender offer for an aggregate of 40,000 units at a purchase price of $127.00
per unit payable in cash, pursuant to which it acquired 6,841 units at an
aggregate purchase price of $848,106.00.
As of January 1, 2002, in accordance with the terms and conditions of
the General and Limited Partner Interest Assignment Agreement, dated as of
October 10, 2001 (the "Assignment Agreement"), among your general partner,
Western Real Estate Investments, RAM Funding, Inc., the former managing
general partner of your partnership, Presidio AGP Corp., the former associate
general partner of your partnership, and certain affiliates of RAM Funding
and Presidio AGP who are former limited partners of your partnership, Western
acquired an aggregate of 57,695 units from the former limited partners and
your general partner acquired the general partnership interests for a total
purchase price of $4,395,181.46 and an assignment of the settlement rights of
our affiliated entities with respect to the pending litigation to the selling
entities. The funds necessary to purchase these interests were obtained from
capital contributions made directly or indirectly by Farahi Investment
Company. The Assignment Agreement also required the former general partners
to cause the partnership to distribute all cash reserves other than $500,000
immediately prior to the change in general partners, resulting in a
distribution equal to $25.12 per unit on December 31, 2001.
On August 14, 2002, Virginia Springs accepted for payment 9,703 units at
a purchase price of $95 per unit, pursuant to a tender offer commenced by
Virginia Springs on March 29, 2002.
The purchase prices for the units acquired by Western during 2001 and
2002 took into account the value of the distribution made by the partnership
on December 31, 2001 in the amount of $25.12 per Unit and the distributions
made during 2002 totaling $37.56 per unit with respect to the settlement of
certain litigation brought by the partnership against its former general
partners.
In 2003, Virginia Springs accepted for payment 12,339 units at a
purchase price of $68 per unit, pursuant to a tender offer commenced on
February 18, 2003. In addition, Western acquired 407 units in 2003 at a
price per unit of $68 from several limited partners in a series of private
transactions.
On December 17, 2003, your partnership commenced a program to redeem
units from all limited partners owning fewer than 100 units at a price of $76
per unit in cash. Units held in employee benefit plans were not eligible for
the repurchase program. Your partnership believed that this was an
appropriate time to make this liquidity feature available to many of the
limited partners. The repurchase program was originally scheduled to
terminate on January 27, 2004. On January 21, 2004, the program was extended
until March 10, 2004, and terminated on such date. The effective date of the
repurchase program was January 1, 2004. Your partnership acquired 4,744 units
as a result of the repurchase program and subsequently retired all 4,744
units.
On October 14, 2004, your partnership commenced another program to
redeem units from all limited partners owning fewer than 100 units at a price
of $69 per unit in cash. Units held in employee benefit plans were not
eligible for this second repurchase program. Your partnership believed that
this was again an appropriate time to make this liquidity feature available
to many of the limited partners. The repurchase program was originally
scheduled to terminate on November 18, 2004. On November 18, 2004, the
program was extended until December 20, 2004, and terminated on such date.
The effective date of the second repurchase program was October 1, 2004. Your
partnership acquired 2,238 units as a result of its second repurchase program
and subsequently retired all 2,238 units.
Also in 2004, Western acquired 1,359 units at purchase prices per unit
ranging from $66 to $76 per unit from several limited partners in a series of
private transactions.
In March 2005, Western purchased 10 Units from a limited partner in a
private transaction at a price of $70 per Unit.
On April 27, 2005, I commenced a tender offer for 20,000 units at a
price of $87 per unit, as a result of which I acquired 9,646 units on June
24, 2005.
During 2005, I acquired an aggregate of 568 units in a series of private
transactions at an average price of $87.63 per unit.
On January 1, 2006, Virginia Springs transferred all of its 22,042 Units
to Western.
Between February 2006 and March 2006, I consummated agreements to
purchase 84 Units from various limited partners at an average price of $91.00
per Unit in a series of private transactions.
On June 26, 2006, I commenced a tender offer for 65,000 units at a price
of $140 per unit, as a result of which I acquired 8,821 units on August 31,
2006.
Except as set forth immediately above in this Section 11, neither I, nor
your general partner, nor Western Real Estate Investments, Virginia Springs
nor Farahi Investment Company, nor to the best of my knowledge, any affiliate
thereof has effected any transaction in the units within the past 60 days.
RELATED PARTY CONTRACTS AND TRANSACTIONS. Except as otherwise set forth in
Sections 9 and 10 hereof, neither I, nor your general partner, nor Western
Real Estate Investments, nor Virginia Springs, nor Farahi Investment Company
nor, to the best of my knowledge, any affiliate thereof 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.
Except as otherwise set forth in Section 10 hereof, there have been no
transactions or business relationships which would be required to be
disclosed under the rules and regulations of the Commission between me, your
general partner, Western, Virginia Springs, Farahi Investment Company or, to
the best of my knowledge, any affiliate thereof, on the one hand, and your
partnership or its affiliates, on the other hand.
On June 22, 2006, I filed Articles of Dissolution with the Secretary of
State of the State of Nevada with respect to Western Real Estate Investments,
LLC, of which I am the sole managing member and the owner of one-third of the
outstanding interests. The Articles of Dissolution were subsequently
challenged by my brothers, each of whom also owns a one-third interest in
Western Real Estate Investments. I believe that each of my brothers and I
own one-third of the assets of Western Real Estate Investments. The sole
assets of Western Real Estate Investments are its units of the partnership.
In March 2007, I took the action of transferring 95%, or 87,306, of Western's
units to each of the three members proportionately. Such transfers were made
effective April 1, 2007. Accordingly, I received one-third of the
distribution, constituting 29,102 units. I also beneficially own one-third
of the remaining 4,596 units owned by Western Real Estate Investments, or
1,532 units, in addition to the 19,163 units I own individually. In the
aggregate, I own, directly or indirectly, 49,797 units, or 27.5% of the
outstanding units, and my brothers together own 61,268 units individually and
by their two-thirds ownership of Western, or 33.9% of the outstanding units.
I am no longer acting in concert with, or considered for securities law
purposes to be part of a 'group' with, either of my brothers with respect to
my ownership of units.
Except as set forth above in this Section 11, there have been no
contracts, negotiations or transactions between me, your general partner,
Western, Virginia Springs, Farahi Investment Company or, to the best of my
knowledge, any affiliate thereof, 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. I expect that approximately $3,330,000,
exclusive of fees and expenses, will be required to purchase all of the
20,000 units I am seeking in this offer. I plan to obtain the funds necessary
to consummate the offer, including fees and expenses, from my personal funds.
My personal net worth is in excess of $10,000,000. Assets that are not
readily marketable do not make up a significant portion of my net worth and I
am not a maker of any material guarantees.
SECTION 13. BACKGROUND OF THE OFFER. Taking into account that I am
offering to purchase units which are a relatively illiquid investment and
which do not presently generate current income, I have determined an
estimated liquidation value for your partnership.
The following chart summarizes our determination of the estimated
liquidation value of your partnership:
Estimated value of real property investment $27,000,000
Accounts receivable 26,017
Unencumbered cash reserves as of September 30, 2007 8,426,045
Net of accounts payable ($138,006)
Less: liquidation costs (4% of property value) ($810,000)
----------
Liquidation value 34,504,056
X 97.5% to limited partners 33,641,455
Per unit liquidation value (180,937 units at
September 30, 2007) $186.00
I believe that the above methodology is an appropriate method for
determining the liquidation value of your partnership's assets. The
utilization of different valuation methods or assumptions also could be
appropriate. In this regard, you should understand that other appropriate
valuation methods could yield a higher value.
The purchase price represents the price at which I am willing to
purchase the units. No independent person has been retained to evaluate or
render any opinion on the fairness of the offer price and no representation
is made by me, or the general partner of your partnership, as to the fairness
of my offer. I did not, nor did the general partner of your partnership,
attempt to obtain a current independent valuation or appraisal of your
partnership's real property. You are urged to consider carefully all of the
information contained herein and consult with your own advisors, tax,
financial or otherwise, in evaluating the terms of my offer before deciding
whether to tender your units.
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 American 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 (other than selling via private transactions) 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 January 2006 and August 2007, there were 17
reported trades in the secondary market (for a total of 1,501 units) which
were made at between a high of $160.00 per unit and a low of $80.00 per unit,
with a weighted average price of approximately $119.68 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
$250 and $400).
Your partnership is making no recommendation as to whether limited
partners should tender their units.
SECTION 14. CONDITIONS OF THE OFFER. Notwithstanding any other term of
my offer, I shall not be required to accept for payment or pay for any units
not theretofore accepted for payment or paid for and may terminate or amend
my offer as to such units, if at any time prior to the expiration of the
offer, 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 my offer or the
acceptance for payment of or payment for any units by me.
The above conditions must be satisfied or waived prior to the expiration
date of my offer and I will exercise the standard of reasonableness in
determining whether the conditions have been satisfied. Finally, I will not
purchase units under the offer if it will result in the units becoming
eligible for deregistration under Section 12(g) of the Securities Exchange
Act of 1934, as amended.
SECTION 15. CERTAIN LEGAL MATTERS.
GENERAL. Except as set forth in this Section 15, I am not aware of any
filings, approvals or other actions by any domestic or foreign governmental
or administrative agency that would be required prior to the acquisition of
units by me in my offer. Should any such approval or other action be
required, it is my present intention that such additional approval or action
would be sought. While there is no present intent to delay the purchase of
units tendered in my 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 me to elect to terminate my offer without purchasing units
hereunder. My 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. I do not believe that the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended, is applicable to the acquisition of
units contemplated by my offer.
MARGIN REQUIREMENTS. The units are not "margin securities" under the
regulations of the Board of Governors of the Federal Reserve System and,
accordingly, such regulations are not applicable to my offer.
STATE TAKEOVER LAWS. A number of states have adopted anti-takeover laws
which purport, to varying degrees, to be applicable to attempts to acquire
securities of corporations which are incorporated in such states or which
have substantial assets, security holders, principal executive offices or
principal places of business therein. Although I have not attempted to comply
with any state anti-takeover statutes in connection with my offer, I reserve
the right to challenge the validity or applicability of any state law
allegedly applicable to my offer and nothing in this offer to purchase nor
any action taken in connection herewith is intended as a waiver of such
right. If any state anti-takeover statute is applicable to my offer, I might
be unable to accept for payment or purchase units tendered in my offer or be
delayed in continuing or consummating our offer. In such case, I 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, I
will not pay any fees or commissions to any broker, dealer or other person
for soliciting tenders of units in our offer. I have retained MacKenzie
Partners, Inc. to act as Information Agent and American Stock Transfer &
Trust Company to act as Depositary in connection with my offer. I will pay
MacKenzie Partners, Inc. and American Stock Transfer & Trust Company, Inc.
reasonable and customary compensation for their services in connection with
the offer, plus reimbursement for out-of-pocket expenses. I will also pay all
costs and expenses of printing and mailing my offer and its legal fees and
expenses. You will not be required to pay any fees or commissions to me in
connection with a tender. However, you will be responsible for the payment of
any fees charged by your broker for assisting you in tendering your units or
any fee charged by a custodian or other trustee of an Individual Retirement
Account or profit sharing plan that is the record owner of your units.
Although I do not know the fees charged by these brokers and trustees, I
believe that such fees are typically $24 to $100 per transaction.
SECTION 17. MISCELLANEOUS. I am not aware of any jurisdiction in which
the making of my offer is not in compliance with applicable law. If I become
aware of any jurisdiction in which the making of my offer would not be in
compliance with applicable law, I will make a good faith effort to comply
with any such law. If, after such good faith effort, I cannot comply with any
such law, my offer will not be made to, nor will tenders be accepted from or
on behalf of, the holders of units residing in such jurisdiction.
No person has been authorized to give any information or to make any
representation on my behalf 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.
I have filed with the Commission a Schedule TO, pursuant to Rule 14d-3
under the Exchange Act, furnishing certain additional information with
respect to my offer, and may file amendments thereto. The Schedule TO 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.
BEN FARAHI
December 17, 2007
The letter of transmittal and any other required documents should be
sent or delivered by you or your broker, dealer, commercial bank, trust
company or other nominee to the Depositary at its address set forth below:
VIA U.S. MAIL American Stock Transfer & Trust Company
59 Maiden Lane
New York, New York 10038
Attn: Reorg. Department - RAM 2
VIA HAND AND American Stock Transfer & Trust Company
OVERNIGHT COURIER 6201 15th Avenue
Brooklyn, New York 11219
Attn: Reorg. Department - RAM 2
VIA FACSIMILE: (718) 234-5001
Questions and requests for assistance may be directed to the Information
Agent at its address and telephone numbers listed below. Additional copies
of this Offer to Purchase and the Letter of Transmittal may be obtained from
the Information Agent.
The Information Agent for the Offer is:
MacKenzie Partners, Inc.
105 Madison Avenue
New York, New York 10016
tenderoffer@mackenziepartners.com
800-322-2885
212-929-5500
15