Exhibit (a)(1)-1
OFFER TO PURCHASE FOR CASH
UP TO 117,025 UNITS OF LIMITED PARTNERSHIP INTERESTS
OF
WESTIN HOTELS LIMITED PARTNERSHIP
AT
$725 PER UNIT
BY
KALMIA INVESTORS, LLC
MERCED Partners Limited Partnership
Smithtown Bay, LLC
Global Capital Management, Inc.
John D. Brandenborg
Michael J. Frey
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THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M., EASTERN TIME,
ON
FEBRUARY 9, 2004, UNLESS THE OFFER IS EXTENDED.
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Kalmia Investors, LLC, ("Kalmia"), Merced Partners Limited Partnership
("Merced"), Smithtown Bay, LLC ("Smithtown"), Global Capital Management, Inc.
("GCM"), John D. Brandenborg and Michael J. Frey (collectively, the "Purchaser")
hereby offer to acquire units of limited partnership interest ("Units") in
Westin Hotels Limited Partnership, a Delaware limited partnership (the
"Partnership"). Kalmia is a Delaware limited liability company formed on July
31, 1996. Smithtown, a Delaware limited liability company formed on July 29,
1996, was named the manager of Kalmia on January 3, 2003. GCM, a Delaware
corporation formed on September 23, 1998, is Smithtown's manager and the general
partner of Merced. Merced, a Delaware limited partnership formed on January 19,
1990, is the sole owner of all of the members of Kalmia including its manager,
Smithtown. John D. Brandenborg and Michael J. Frey are the sole officers and
directors of GCM.
The Purchaser hereby offers to purchase up to 117,025 Units at a purchase price
of $725 per Unit, in cash, without interest, less the amount of any
distributions declared or paid on or after December 31, 2003, in respect of that
Unit (the "Purchase Price"), upon the terms and subject to the conditions set
forth in this Offer to Purchase (the "Offer to Purchase") and in the related
Agreement of Sale, as each may be supplemented or amended from time to time
(which together constitute the "Offer"). Unitholders who tender their Units to
us will not be obligated to pay the $50 transfer fee per transferring Unitholder
charged by the Partnership, as this cost will be borne by the Purchaser.
THE OFFER IS CONDITIONED UPON CERTAIN CONDITIONS, ALTHOUGH THE PURCHASER
RESERVES THE RIGHT TO WAIVE SUCH CONDITIONS AND TO EXTEND THE OFFER, SUBJECT TO
THE TERMS AND CONDITIONS HEREIN. SEE SECTION 13 ("CERTAIN CONDITIONS OF THE
OFFER").
A HOLDER OF UNITS ("UNITHOLDER") MAY TENDER ANY OR ALL UNITS THAT IT OWNS.
FOR MORE INFORMATION OR FOR FURTHER ASSISTANCE WITH THE PROCEDURE OF TENDERING
YOUR UNITS PLEASE CALL THE PURCHASER'S TOLL-FREE INFORMATION LINE AT (800)
547-0854.
February 3, 2004
IMPORTANT
Any (i) Unitholder, (ii) beneficial owner, in the case of Units owned by
individual retirement accounts, Keogh Plans or qualified plans (a "Beneficial
Owner"), or (iii) person who has purchased Units but has not yet been reflected
on the Partnership's books as a limited partner of the Partnership (an
"Assignee") desiring to tender Units should complete and sign the Agreement of
Sale in accordance with the instructions in the Agreement of Sale, and mail or
deliver a fully executed original of the Agreement of Sale, along with any other
required documents, to the Purchaser at the address set forth on the back cover
of this Offer to Purchase, or request its broker, dealer, commercial bank,
credit union, trust company or other nominee to effect the transaction on their
behalf. Unless the context requires otherwise, references to Unitholders in this
Offer to Purchase shall be deemed to include record holders of Units, Beneficial
Owners and Assignees.
QUESTIONS OR REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES OF THIS AMENDED OFFER
TO PURCHASE OR THE AGREEMENT OF SALE MAY BE DIRECTED TO THE PURCHASER BY CALLING
THE TOLL-FREE INFORMATION LINE: (800) 547-0854.
NO PERSON HAS BEEN AUTHORIZED TO MAKE ANY RECOMMENDATION OR ANY REPRESENTATION
ON BEHALF OF THE PURCHASER OR TO PROVIDE ANY INFORMATION OTHER THAN AS CONTAINED
HEREIN OR IN THE AGREEMENT OF SALE. NO SUCH RECOMMENDATION, INFORMATION OR
REPRESENTATION MAY BE RELIED UPON AS HAVING BEEN AUTHORIZED.
TABLE OF CONTENTS
SUMMARY TERM SHEET 3
INTRODUCTION 10
RISKS AND FACTORS TO CONSIDER BEFORE TENDERING 11
OFFER TO PURCHASE 16
SECTION 1. Terms of the Offer 16
SECTION 2. Acceptance for Payment and Payment for Units 16
SECTION 3. Procedures for Tendering Units 17
Valid Tender 17
Backup Federal Income Tax Withholding 17
Tenders by Beneficial Holders 18
Signature Guarantees 18
Appraisal Rights 18
Other Requirements 18
Determination of Validity; Rejection of
Units ;Waiver of Defects; No Obligation to
Give Notice of Defects 19
SECTION 4. Withdrawal Rights 19
SECTION 5. Extension of Tender Period; Termination; Amendment 21
SECTION 6. Certain U.S. Federal Income Tax Considerations 20
SECTION 7. Purpose and Effects of the Offer 23
Purpose of the Offer 23
Rights that we will have if we are a
Majority Holder of Units 25
Effect on Trading Market and
Price Range of the Units 25
SECTION 8. Future Plans 26
SECTION 9. Past Contacts and Negotiations with General Partner 26
SECTION 10. Certain Information Concerning the Business of the
Partnership and Related Matters 31
Business 31
Distributions 33
SECTION 11. Certain Information Concerning the Purchaser 34
SECTION 12. Source of Funds 35
SECTION 13. Certain Conditions of the Offer 36
SECTION 14. Certain Legal Matters and Required Regulatory
Approvals 38
General 38
Antitrust 39
State Takeover Laws 39
ERISA 39
SECTION 15. Fees and Expenses 39
SECTION 16. Miscellaneous 39
SCHEDULE 1 42
SCHEDULE 2 43
SUMMARY TERM SHEET
Kalmia Investors, LLC ("Kalmia"), Merced Partners Limited Partnership
("Merced"), Smithtown Bay, LLC ("Smithtown"), Global Capital Management, Inc.
("GCM"), John D. Brandenborg and Michael J. Frey, which are collectively
referred to as "Purchaser", "we" or "us" in this document, are proposing to
acquire up to 117,025 of the outstanding units of limited partnership interest
of Westin Hotels Limited Partnership, which is referred to in this document as
the "Partnership", at a cash price of $725 per Unit, less the amount of any
distributions declared or paid on or after December 31, 2003 in respect of that
Unit, subject to the terms and conditions set forth in this Offer to Purchase.
See Section 1 ("Terms of the Offer") for a description of the terms of the
Offer. The following are some of the questions you, as a Unitholder in the
Partnership, may have, as well as our answers to those questions. We urge you to
read the remainder of this Offer to Purchase and the related Agreement of Sale,
which together constitutes the "Offer," carefully because the information in
this summary is not complete and additional important information is contained
in the remainder of this Offer. Please note that capitalized terms used in this
summary term sheet without definition are defined elsewhere in this document.
QUESTIONS AND ANSWERS ABOUT THE TENDER OFFER
Who is offering to buy my securities?
Kalmia Investors, LLC, is a Delaware limited liability company. Smithtown
Bay, LLC is a Delaware limited liability company formed on July 29, 1996.
Smithtown was named the manager of Kalmia on January 3, 2003. Smithtown's
manager is Global Capital Management, Inc., a Delaware corporation formed on
September 23, 1998. Kalmia's beneficial owners are Merced Partners Limited
Partnership, a Delaware limited partnership formed on January 19, 1990, of which
GCM is the general partner. GCM is controlled by its two officers and directors,
John D. Brandenborg and Michael J. Frey, Kalmia, Smithtown, GCM, Merced and
Messrs. Brandenborg and Frey, who are collectively the Purchaser, are offering
to buy your securities. See Section 11 ("Certain Information Concerning the
Purchaser") for further information about the Purchaser. Merced is a private
investment limited partnership.
What are the classes and amounts of securities sought in the Offer?
We are offering to buy 117,025 Units, which are approximately 86.3% of all
outstanding Units. Assuming that all such Units are tendered and not validly
withdrawn, and all conditions of the Offer are satisfied, we would own 100% of
all outstanding Units.
Have you recently made other tender offers for the Partnership's Units?
Yes. On July 24, 2003, the Purchaser filed with the Securities and Exchange
Commission ("Commission") an offer to purchase up to 79,917 Units, at $550 per
Unit in cash. That offer expired at 5:00 p.m. New York Time, on Friday, August
29, 2003. The Purchaser purchased 6,409 Units in that offer. Subsequently, on
October 6, 2003, the Purchaser filed with the Commission an offer to purchase up
to 73,250 Units, at $550 per Unit in cash. That offer expired at 5:00 p.m.,
Eastern Time on Friday, November 7, 2003. The Purchaser purchased 1,183 Units in
that offer.
Is the Offer conditioned on a minimum number of Units being tendered?
No, our Offer is not conditioned on a minimum number of Units being
tendered.
How much are you offering to pay and what is the form of payment?
We are offering to pay $725 in cash for each Unit, less the amount of any
distributions declared or paid on or after December 31, 2003, in respect of that
Unit. If you are the record owner of Units, you tender your Units to us in the
Offer and we accept them for payment, you will not have to pay transfer fees,
brokerage fees or similar expenses. If you own your Units through a broker or
other nominee, and your broker tenders your Units on your behalf, your broker or
nominee may charge you a fee. Regardless of whether you tender your Units
directly or through your broker or other nominee, we will pay the $50 transfer
fee per transferring Unitholder charged by the Partnership. When we pay you, we
will pay you by check mailed to your address as it appears in the Partnership's
records.
Do you have the financial resources to make payment?
Yes. We have the financial resources to pay for all tendered Units based on
our cash on hand and highly liquid securities in our proprietary portfolio. The
Offer is not conditioned on our obtaining any financing. See Section 12 ("Source
of Funds") for more information.
When will payment be made?
Payment will be made as promptly as practicable after the expiration of the
Offer and the Partnership has registered the transfers of the tendered Units
that we shall have accepted for payment on its books and records and we are
recognized by the Partnership as a Substituted Limited Partner in respect of all
such Units with full voting rights and rights to distributions (See Section 13
("Certain Conditions of the Offer")). In this regard, the Commission has stated
(release no. 34-43069, available July 24, 2000) that because transfers of
limited partnership interests are subject to delays, an offeror in a tender
offer for limited partnership interests may reasonably extend the period for
payment without violating the requirement for prompt payment. See Section 13
("Certain Conditions of the Offer"). Since the last business day of the current
calendar quarter is March 31, 2004, we expect that payment for accepted Units
will be delayed until at least March 31, 2004.
Why are you making this Offer?
On July 24, 2003, the Purchaser filed with the Commission an offer to
purchase up to 79,917 Units, pursuant to which the Purchaser purchased 6,409
Units. Subsequently, on October 6, 2003, the Purchaser filed with the Commission
an offer to purchase up to 73,250 Units, pursuant to which the Purchaser
purchased 1,183 Units. We are making this third Offer as a speculative
investment based upon our continued belief that the Units represent an
attractive investment at the price offered. Our belief is based upon, in part,
our assessment of the value of the Partnership's assets and liabilities. The
purpose of the Offer is to allow us to benefit from any one combination of the
following: (i) any cash distributions from the Partnership's operations in the
ordinary course of business; (ii) distributions of net proceeds from a
liquidation, if any; (iii) a refinancing of the Partnership or any of its
properties; (iv) cash that the Partnership may retain or distribute as a result
of a redemption of Units; (v) sale of the Units; and (vi) any other claims that
the Partnership may have.
Why are you making this third Offer when you already have made two offers?
Our Offer price is $25 above the price offered by Starwood Hotels & Resorts
Worldwide, Inc. ("Starwood"), which Starwood has recently stated it does not
intend to increase. Our third Offer gives such Unitholders another opportunity
to tender to us, and another opportunity for us to buy more Units at a price
that we consider desirable.
Are you affiliated with the Management Company of the Partnership?
No. The Purchaser is not affiliated with the Management Company.
Are you affiliated with Westin Realty Corp., the general partner of the
Partnership (the "General Partner")?
No. The Purchaser is not affiliated with the General Partner.
Has this Offer been approved by the General Partner?
No. We have not sought the General Partner's approval.
Why aren't you seeking approval of your Offer from the General Partner?
Approval of the General Partner is not required for us to make the Offer or
for Unitholders to tender their Units.
Do you need the Partnership's or General Partner's consent to purchase the
Units?
No. However, we need the General Partner's prior written consent in order
to be admitted as a "Substituted Limited Partner" of the Partnership. We may
decline to purchase any or all tendered Units if the General Partner does not
give us such consent. The General Partner also may suspend any or all transfers
of tendered Units if such transfers would result in the transfer of 40% or more
of the aggregate interests in the Partnership when added to the total of all
other sales of Units during the preceding 12 months. It is a condition of the
Offer that the Partnership recognize all transfers of tendered Units to us. If
the General Partner suspends transfers to us, in order to lift that suspension,
we may amend our offer to reduce the number of Units we are tendering for and
subject tendering Unitholders to a pro rata reduction of Units that we will
accept for payment. Based on the number Units tendered to us in our initial
offer and the number of other transfers of which we are aware during 2004, we do
not believe that transfers to us will be suspended.
If this Offer is successful will the Partnership continue as a public company?
We do not know whether the successful completion of our Offer will result
in the number of Unitholders dropping below 300, although based on the apparent
widespread holdings of the Units and the lack of public information indicating
any concentration of ownership, we do not believe that the number would drop
below 300. If we successfully complete our Offer and the total number of
Unitholders drops below 300 Unitholders, then we will request that the General
Partner take steps to suspend the Partnership's filing obligations under the
Exchange Act. However, the Partnership will still be required to prepare and
distribute to Unitholders an annual report pursuant to Section 12.04(e) of the
Partnership's limited partnership agreement (the "Limited Partnership
Agreement").
How long do I have to decide whether to tender my Units?
You may tender your Units until 5:00 p.m., Eastern Time, on February 9,
2004, which is the scheduled expiration date of the Offer, unless we decide to
extend the Offer period. See Section 3 ("Procedure for Tendering Units") for
information about tendering your Units.
Can the Offer be extended, how will I be notified if the Offer is extended, and
under what circumstances will it be extended?
Yes, we may decide to extend the Offer. If we extend the Offer we will make
a public announcement no later than 9:00 a.m., Eastern Time, on the business day
following the scheduled expiration date of the Offer (which is 5:00 p.m.,
Eastern Time, on February 9, 2004), stating the extended expiration date and the
approximate number of Units tendered to date.
Will there be a subsequent offer period?
No, although as noted above, we may extend the Offer.
What is the most significant condition to the Offer?
The Offer is conditioned on, among other things, the Purchaser having
confirmed to its reasonable satisfaction that, upon the purchase of the Units
pursuant to the Offer, the General Partner will give its prior written consent
to the Purchaser becoming a Substituted Limited Partner with respect to all
Units tendered (although the Purchaser reserves the right to waive this
condition).
When will you accept my tendered Units for payment?
Following the expiration of the Offer period, we will determine whether
your Units were validly tendered and accept Units for payment. We will issue a
press release when we have accepted tendered Units for payment.
How do I tender my Units?
You must complete and execute the Agreement of Sale and return it on or
prior to February 9, 2004 to the Purchaser in accordance with the instructions
in Section 3 ("Procedures for Tendering Units"). You may tender any or all of
your Units. For your convenience we have included a pre-addressed envelope for
you to return the Agreement of Sale, however, the method of delivery of the
Agreement of Sale is at your sole option and risk. The delivery will be deemed
made only when actually received by us. If delivery is by mail, registered mail
with return receipt requested is recommended.
Until what time can I withdraw previously tendered Units?
Units tendered pursuant to the Offer may be withdrawn at any time by
written notice received by the Purchaser on or prior to the Expiration Date
(including any extensions thereof), and, if and to the extent tendered Units
have not been accepted for payment by March 8, 2004 (the 60th day from the date
of this Offer), at any time thereafter. Once the Expiration Date has passed you
will not otherwise be able to withdraw your Units. See Section 4 ("Withdrawal
Rights") for more information.
How do I withdraw my previously tendered Units?
You (or your broker or nominee) must notify us in writing at the address
listed at the end of this Summary Term Sheet, and the notice must include your
name, the number of Units to be withdrawn and the name in which the tendered
Units are registered. For complete information about the procedures for
withdrawing your previously tendered Units. See Section 4 ("Withdrawal Rights").
Your Units will not be deemed to have been withdrawn unless all of the
procedures in Section 4 are properly followed in a timely fashion.
If I decide not to tender, how will the Offer effect my Units?
If the Offer is not consummated or if you do not tender your Units and we
consummate the Offer, you will remain a Unitholder. If the Offer is consummated
and we purchase 49,361 Units we will become the holder of a majority of the
Units, which will entitle us to certain rights under the Limited Partnership
Agreement. According to the Partnership's Annual Report on Form 10-K for the
fiscal year ending December 31, 2002 (the "2002 Form 10-K"), currently there is
no limited partner who holds a majority of the Units. See Section 7 ("Purpose
and Effects of the Offer").
Why should I tender Units pursuant to your Offer and not pursuant to the tender
offer commenced on November 4, 2003, by Starwood?
You should tender your Units pursuant to our Offer because we are offering
to pay $725 per Unit, while Starwood is only offering to pay $700. In a letter
to the Unitholders, dated January 6, 2004, Starwood stated that it does not
intend to increase that price. In addition, our Offer has no minimum condition,
while Starwood's offer includes a non-waivable condition that at least a
majority of the issued and outstanding Units be tendered and not withdrawn. That
means that Starwood will not purchase your Units unless at least 67,801 Units
are tendered to it. The Purchaser does not believe that Starwood will meet this
condition and therefore will not be able to complete its offer, unless Starwood
amends the terms of its offer.
Can I withdraw Units that I tendered pursuant to Starwood's tender offer and
tender those Units pursuant to your Offer?
Yes. You can withdraw Units that you tendered to Starwood by written notice
of withdrawal received by Starwood before 5:00 p.m., New York time, on January
23, 2004 (the expiration of Starwood's offer). To withdraw Units previously
tendered to Starwood, please see the Notice of Withdrawal that we have attached
for your convenience to our Schedule TO, filed with the Commission as Exhibit
(a)(1)-6, and have included in our letters to Unitholders, dated January 8,
2004, and January 14, 2004. Please also see Starwood's Offer to Purchase for a
full discussion of how to withdraw your Units from Starwood.
Do you intend to tender your Units to Starwood?
No. We do not intend to tender our Units, or any Units we purchase as a
result of this Offer, to Starwood pursuant to its tender offer commenced on
November 4, 2003. (Please see the Purchaser's Schedule 14D-9, filed with the
Commission on November 17, 2003, as amended).
Do you intend to give your consent to the proposals described in Starwood's
Offer to Purchase?
No. We do not intend to grant our consent to the proposals described in
Starwood's Offer to Purchase, dated November 4, 2003. (Please see the
Purchaser's 14D-9, filed with the Commission on November 17, 2003, as amended).
What impact will your Offer have on Starwood's tender offer?
Our Offer will affect Starwood's proposed offer if we obtain a majority of
the Units. Since we do not intend to tender any Units that we hold to Starwood,
our obtaining a majority of the Units would effectively make Starwood's offer
impossible to fulfill, unless Starwood modifies its proposed offer to remove the
unwaivable condition that Starwood obtain more than 50% of the Units.
What is the market value of my Units now?
There is no established public market for the Units, although there is a
limited secondary market for the Units. According to the 2002 Form 10-K, the
sale prices of Units from January 1, 2003 through March 17, 2003, ranged from
$225 to $465 per Unit, with an average sale price of $333.36, before certain
reductions (see Section 7 ("Purpose and Effects of the Offer")). The weighted
average price per Unit for Units traded over the 12 months ending September 30,
2003, was $441.76. We calculated this amount based on trades reported by The
Partnership Spectrum, an industry publication. According to the American
Partnership Board, there were 452 Units sold from June 1, 2003, through
September 30, 2003, at prices ranging from $435 to $600 per Unit. However,
prices obtainable in the secondary market today or at any other time may be
higher or lower than these historic prices.
Houlihan Lokey Howard & Zukin Financial Advisors, engaged by the
Partnership to render fairness opinions regarding recent tender offers, stated
that a price of $700 per Unit was fair to Unitholders from a financial point of
view (within the context of Starwood's tender offer commenced on November 7,
2003). Please see the Partnership's Amendment No. 2 to Schedule 14D-9, as filed
with the Commission on December 29, 2003.
How can I get further information about the Partnership?
On May 15, 2003, the Partnership filed a Preliminary Proxy Statement on
Schedule 14A with the Commission. On August 1, 2003, the Partnership filed a
Solicitation/Recommendation Statement on Schedule 14D-9 with the Commission, as
amended on August 6, 2003 and on August 29, 2003. On August 28, 2003, the
Partnership filed a Solicitation/Recommendation Statement on Schedule 14D-9 with
the Commission reporting preliminary financial information for the Westin
Michigan Avenue Hotel for July 2003. On August 7, 2003 the Partnership filed its
Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2003. On
September 8, 2003, the Partnership filed a Solicitation/Recommendation Statement
on Schedule 14D-9 with the Commission reporting the Partnership's preliminary
unaudited limited financial information for August 2003. On October 14, 2003,
the Partnership filed a press release on Schedule 8-K with the Commission,
reporting the Partnership's preliminary financial information for September
2003. On October 16, 2003, the Partnership filed a Solicitation/Recommendation
Statement on Schedule 14D-9 with the Commission. On October 27, 2003, the
Partnership filed a Solicitation/Recommendation Statement on Schedule 14D-9A
with the Commission. On November 6, 2003, the Partnership filed a 10-Q with the
Commission reporting quarterly earnings for the quarter ending September 30,
2003. On November 18, 2003, the Partnership filed a Solicitation/Recommendation
Statement on Schedule 14D-9 with the Commission. On November 18, 2003, the
Partnership filed a press release on Schedule 8-K with the Commission that
reported preliminary financial information for October 2003. On November 25,
2003, the Partnership filed a Solicitation/Recommendation Statement on Schedule
14D-9A with the Commission reporting a press release and unaudited financial
data. On December 29, 2003, the Partnership filed a Solicitation/Recommendation
Statement on Schedule 14D-9A with the Commission.
Do you intend to consummate a merger following the Offer?
No. The purpose of the Offer is to acquire Units for investment purposes
only (see Section 8 ("Future Plans")). We have no current plans or proposals
that would result in an extraordinary corporate transaction, such as a merger,
reorganization or liquidation involving the Partnership, the sale or transfer of
any material amount of assets of the Partnership, any material change in the
capitalization or dividend policy of the Partnership or any other material
change in the Partnership's company structure or business. However, we are
currently evaluating the Partnership's business and management and are
considering exercising our rights under the Limited Partnership Agreement as
owners of 10% or more of outstanding Units to call for a vote to remove the
General Partner. We reserve the right to change our plans and intentions. If we
become the holder of at least 50.1% of the units we will control many decisions
that the Unitholders can make (see Section 7 ("Purpose and Effects of the
Offer")), including removal of the General Partner.
What happens if the Partnership makes a distribution or other payment to
Unitholders?
Any distributions declared or paid on or after December 31, 2003 will be
for the benefit of the Purchaser. To the extent a tendering Unitholder receives
any distribution after that date, the amount of such distribution will be
deducted from the Purchase Price.
Who will determine the validity of my tender of Units?
We reserve the sole right to decide any questions concerning the validity,
form, eligibility, timeliness and other questions relating to tenders of Units.
We also reserve the right to waive any defect or irregularity. In exercising our
waiver power we may choose not to treat similar defects or irregularities in the
same manner. All of our decisions relating to the validity of tenders will be
final and binding.
What are the U.S. Federal income tax consequences of tendering Units in the
Offer?
If the Offer is consummated, a tendering Unitholder will be treated as
disposing of his Units in a taxable transaction for federal income tax purposes.
A tendering Unitholder will recognize gain or loss on such disposition equal to
the difference between (x) the amount realized on the disposition and (y) the
Unitholder's tax basis in the Units. The characterization of any such gain or
loss as capital or ordinary gain or loss will depend on whether the Units are
capital assets to the Unitholder and on the nature of the Partnership's assets.
See Section 6. ("Certain U.S. Federal Income Tax Considerations").
What are the U.S. Federal income tax consequences of not tendering Units in the
Offer?
A Unitholder who does not tender his Units pursuant to the Offer should not
realize any material tax consequences as a result of such failure to tender
unless the Partnership is deemed to be "terminated" for federal income tax
purposes as a result of the tenders by other Unitholders. If the Partnership is
deemed to be so "terminated," the Partnership's future depreciation and
amortization deductions with respect to its properties may be reduced in certain
future years immediately following the deemed termination with the result that
the amount of taxable income that a Unitholder derives from its Units with
respect to such years may be increased. In such an event, however, the amount of
the Partnership's depreciation and amortization deductions in subsequent future
years would be reduced in corresponding amounts with the result that the
aggregate amount of the Partnership's taxable income in the years following the
deemed termination should be equal to the aggregate amount of taxable income
that the Partnership would derive in such years if no termination were to occur.
See "Section 6. (Certain U.S. Federal Income Tax Considerations")
Who can I talk to if I have questions about the Tender Offer?
If you have questions or you need assistance with the procedure of
tendering your Units you should contact us at the following address and
telephone number:
Kalmia Investors, LLC
601 Carlson Parkway, Suite 200
Minnetonka, MN 55305
(800) 547-0854
To the Holders of Units of Limited Partnership Interests
of Westin Hotels Limited Partnership:
INTRODUCTION
Kalmia Investors, LLC, a Delaware limited liability company (the "Purchaser" or
"Kalmia"), hereby offers to purchase up to 117,025 units of limited partnership
interest ("Units") of Westin Hotels Limited Partnership, a Delaware limited
partnership (the "Partnership"), at a purchase price of $725 per Unit, in cash,
less the amount of any distributions declared or paid on or after December 31,
2003, in respect of a Unit, without interest thereon (the "Purchase Price"),
upon the terms and subject to the conditions set forth in this Offer to Purchase
and in the related Agreement of Sale (which together constitute the "Offer").
Unitholders who tender their Units to us will not be obligated to pay the $50
transfer fee per transferring Unitholder charged by the Partnership, as this
cost will be borne by the Purchaser. The 117,025 Units sought to be purchased
pursuant to the Offer represent, to the best knowledge of the Purchaser,
approximately 86.3% of the 135,600 Units outstanding as of the date of the
Offer, and together with the Units already owned by the Purchaser, constitute
100% of the outstanding Units.
RISKS AND FACTORS TO CONSIDER BEFORE TENDERING
We encourage you to consider the following risk factors:
o Holders of Units ("Unitholders") who tender their Units will be giving up
the right to participate in any future potential benefits of owning Units,
including, for example, the right to participate in any future distribution
of cash or property, whether from operations, the proceeds of a sale of the
Partnership's assets or in connection with any future liquidation of the
Partnership. However, there is no guarantee of future results of the
Partnership or that the Partnership would be liquidated efficiently.
o Although the Purchaser cannot predict the future value of the Partnership's
assets on a per Unit basis, the Purchase Price could differ significantly
from the net proceeds that would be recognized on a per Unit basis from the
sale of the Partnership's assets or that may be realized upon a future
liquidation of the Partnership.
o The tax consequences of the Offer to a particular Unitholder may be
different from those of other Unitholders and we urge you to consult your
own tax advisors in connection with the Offer.
o There is no established public market for the Units, although there is a
limited and sporadic secondary market for the Units. According to the
Partnership's 2002 Form 10-K, the sale prices of Units from January 1,
2003, through March 17, 2003, ranged from $225 to $465 per Unit, with an
average sale price of $333.36, which price does not reflect certain
reductions (see Section 7 ("Purpose and Effects of the Offer")). The
weighted average price per Unit for Units traded over the 12 months ending
September 30, 2003 was $441.76. We calculated this amount based on trades
reported by The Partnership Spectrum, an industry publication. According to
the American Partnership Board, there were 452 Units sold from June 1, 2003
through September 30, 2003, at prices ranging from $435 to $600 per Unit.
However, prices obtainable in the secondary market today or at any other
time may be higher or lower than these historic prices. We are not aware of
any more recent transactions. In addition, the Purchaser has purchased
Units in two tender offers during the second half of 2003 at a price of
$550 per Unit and Starwood Hotels & Resorts Worldwide, Inc. ("Starwood") is
offering to purchase Units at a price of $700 per Unit pursuant to tender
offer commenced by Starwood on November 4, 2003.
o The Purchaser may not purchase Units if the Partnership does not agree to
register the transfer of tendered Units from a Unitholder to the Purchaser
on its books and records. There are three circumstances in which the
Partnership may not register such a transfer. First, pursuant to the
Limited Partnership Agreement of the Partnership (the "Limited Partnership
Agreement"), Units may not be transferred if, in the opinion of counsel to
the Partnership, the transfer of Units would cause the Partnership to be
"terminated" for federal income tax purposes. Second, pursuant to the
Limited Partnership Agreement, the general partner of the Partnership may
suspend its approval of sale requests for Units if such transfer would
result in the transfer of 40% or more of the aggregate interests in the
Partnership when added to the total of all other sales of interest in the
Partnership during the preceding 12 months. Third, according to its public
filings, the Partnership has implemented a Unit transfer policy in order to
comply with a safe-harbor that will prevent the Partnership from being
deemed a "publicly traded partnership" pursuant to Section 7704 of the
Internal Revenue Code of 1986, as amended. The safe-harbor applies if the
sum of the percentage interests in Partnership capital or profits
represented by Units traded during any calendar year does not exceed 5% of
the aggregate Units outstanding. If the Partnership reaches the safe-harbor
limits for Unit transfers in 2004, the general partner of the Partnership
(the "General Partner") may suspend its approval of sale requests for Units
for the remainder of the 2004 calendar year. Depending upon the number of
Units purchased by the Purchaser pursuant to the Offer, it is possible that
one or more of the three circumstances noted above could arise and that the
General Partner may not approve the transfer of all of the Units tendered
by Unitholders pursuant to the Offer.
o The Purchaser is making the Offer with a view towards making a profit.
Accordingly, there may be a conflict between the desire of the Purchaser to
acquire the Units at a low price and the desire of the Unitholders to sell
the Units at a high price. No independent person has been retained to
evaluate or render any opinion with respect to the fairness of the $725
Purchase Price and no representation is made as to such fairness. Other
measures of value may be relevant to a Unitholder and all Unitholders are
urged to carefully consider all of the information contained in the Offer
to Purchase and Agreement of Sale and to consult with their own advisors
(tax, financial or otherwise) in evaluating the terms of the Offer before
deciding whether to tender their Units.
o After the Expiration Date, and unless otherwise prohibited, the Purchaser
will vote the Units acquired in the Offer in its own interests. The
Purchaser's interests may be different from or in conflict with the
interests of other Unitholders.
o The Purchaser will, subject to the terms and conditions of the Offer, the
Limited Partnership Agreement and applicable law, receive a
power-of-attorney from each Unitholder tendering Units accepted for payment
that grants the Purchaser the right to exercise voting and other rights
appurtenant to the ownership of such Units prior to payment therefor. The
Purchaser may not actually purchase Units accepted for payment if, for
example, the Partnership does not effectuate the transfer of such Units to
the Purchaser. Accordingly, a situation may arise where the Purchaser has
the right to exercise voting rights with respect to Units for which it has
not yet paid.
o The transfer of Units is subject to the requirements of Section 11.01 of
the Limited Partnership Agreement which states that the General Partner may
suspend transfers if and when any such transfer would result in the
transfer of 40% or more of the Units in the Partnership when added to the
total of all other sales or exchanges of Units within the preceding 12
months. If the General Partner suspends transfers to us, we may reduce the
number of Units we are tendering for in order to lift that suspension and
subject tendering Unitholders to a pro rata reduction of Units that we will
accept for payment.
o The transfer of Units is subject to the requirements of Section 11.02 of
the Limited Partnership Agreement which states that no assignee of a
Limited Partner's interest is entitled to become a "Substituted Limited
Partner" under the Limited Partnership Agreement until the General Partner
shall have given its prior written consent, which consent may be withheld
in the General Partner's absolute discretion.
o Under the terms of the Offer you may withdraw your Units through the
Expiration Date. However, after the Expiration Date and once the Units have
been accepted by the Purchaser for payment you will not be able to withdraw
your Units at all. If the Purchaser does not accept your tendered Units for
payment, once the Expiration Date has passed, then you will not be able to
withdraw your Units until March 8, 2004. The Purchaser will pay for Units
that have been validly tendered and not withdrawn and that have been
accepted for payment as promptly as practicable after the Partnership has
registered the transfers of all tendered Units to the Purchaser on its
books and records and the General Partner notifies us in writing that it
consents to us becoming a "Substituted Limited Partner" with full voting
and distribution rights in respect of the Units that we have accepted for
payment or any of the above conditions have been waived by us. The
Purchaser believes that the Partnership's practice is to provide
confirmation of the transfers only after they have actually taken place,
which may be some days or weeks after the date of book transfer. The
Purchaser will pay for Units accepted for payment as soon as possible after
receipt of confirmation of transfers. The Purchaser is not affiliated with
the Partnership and, accordingly, does not know with certainty if and/or
when it will receive such confirmation. If the Purchaser does not receive
such confirmation by the Expiration Date, it may not accept for payment
Units that have been tendered pursuant to the Offer. However, as noted
above, the Purchaser reserves the right, in its sole discretion, to pay
tendering Unitholders prior to the receipt of such confirmation, to its
reasonable satisfaction, that it will have the right to receive all
allocations and distributions attributable to Units accepted for payment).
o The Purchaser has not engaged a Depositary for the Offer. The Purchaser
will submit tendered Units that it accepts for payment to the Partnership's
transfer agent. The Purchaser will hold the funds necessary to pay
Unitholders for purchased Units upon transfer of the Units to the
Purchaser. The Purchaser has not engaged a Depositary to minimize the costs
of the Offer. While the Purchaser has substantial experience in affecting
the transfer of limited partnership interests, because the Purchaser has
not engaged a Depositary, there will be no independent third party holding
funds of the Purchaser to pay Unitholders for Units that will be purchased
in the Offer, or to verify independently that such funds are indeed
available. Also, payments to tendering Unitholders may be delayed if the
Purchaser were to suffer an event of bankruptcy or other material adverse
event prior to its making the payments. The Purchaser does not believe that
the absence of a Depositary will affect or delay the effectuation of Unit
transfers resulting from the Offer.
If the Purchaser is successful in purchasing approximately 36.3% of the Units in
this Offer, the Purchaser will become the holder of a majority of the Units in
the Partnership. As a majority holder, the Purchaser will have the right under
the Limited Partnership Agreement by majority vote to:
o Amend certain provisions of the Limited Partnership Agreement;
o Approve certain sales or borrowings by the Partnership;
o Approve the transfer of the General Partner's interest;
o Expel the General Partner or any successor General Partner with or without
cause;
o Elect a new General Partner or General Partners upon the adjudication of
incompetency, expulsion, withdrawal, death or dissolution of the General
Partner or any successor General Partner;
o Expel a general partner of a Hotel Partnership, with or without cause in
accordance with the terms of the agreement of limited partnership of such
Hotel Partnership; and
o Elect to dissolve the Partnership.
We urge any Unitholder that is not sophisticated in financial and business
matters to consult with a qualified business professional before accepting the
Offer.
Unitholders may no longer wish to continue with their investment in the
Partnership and might consider accepting the Offer for one or more of the
following reasons:
o The Offer will provide Unitholders with an immediate opportunity to
liquidate their investment in the Partnership without the usual transaction
costs associated with secondary market sales.
o In the Partnership's 2002 Form 10-K, Westin Realty Corp., the general
partner of the Partnership (the term "General Partner" includes Westin
Realty Corp.) states the following: "There is no public market for the
Units and it is not anticipated that a public market will develop." As
previously disclosed in the Summary Term Sheet, there is a limited
secondary market for the Units. Unitholders who desire to benefit from the
resale liquidity that the Offer represents as an alternative to the limited
and sporadic secondary market for the Units may wish to accept the Offer.
The Offer affords a significant number of Unitholders with an opportunity
to dispose of their Units for cash, which otherwise might not be available
to them. The Purchase Price is not intended to represent either the fair
market value of a Unit or the Partnership's assets on a per Unit basis.
o The Offer may be attractive to certain Unitholders who wish in the future
to avoid the continued additional expense, delay and complication in filing
income tax returns which result from the ownership of the Units. o The
Offer provides Unitholders with the opportunity to liquidate their Units
and to reinvest the proceeds in other investments should they desire to do
so.
If you wish to sell some or all of your Units in accordance with this Offer,
please read carefully the enclosed Offer to Purchase and the Agreement of Sale.
All you need to do is complete the Agreement of Sale in accordance with the
instructions provided therein, sign where indicated, have your signature
Medallion Guaranteed and return the required documentation to the Purchaser, in
the pre-addressed return envelope which we have provided. If you desire to
accept this Offer, please carefully follow the instructions in the Agreement of
Sale. Errors will delay and possibly prevent acceptance of your tender of Units.
If, prior to the Expiration Date, the Purchaser increases the consideration
offered to Unitholders pursuant to the Offer, that increased consideration will
be paid with respect to all Units that are purchased pursuant to the Offer,
whether or not such Units were tendered prior to such increase in consideration.
The Offer is being made by the Purchaser as a speculative investment based upon
the belief that the Units represent an attractive investment at the price
offered based upon, in part, the expected liquidation of the Partnership's
assets. The purpose of the Offer is to allow us to benefit from any one
combination of the following: (i) any cash distributions from the Partnership's
operations in the ordinary course of business; (ii) distributions of net
proceeds from a liquidation, if any; (iii) a refinancing of the Partnership or
any of its properties; (iv) cash that the Partnership may retain or distribute
as a result of a redemption of Units; (v) sale of the Units; and (vi) any other
claims that the Partnership may have.
The Purchaser reserves the right to extend the offer to purchase subject to the
terms and conditions herein. See Section 13 ("Certain Conditions of the Offer").
The Purchaser expressly reserves the right waive any or all of the conditions of
the Offer.
The Partnership is subject to the information and reporting requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith is required to file reports and other information with the
Securities and Exchange Commission ("Commission") relating to its business,
financial condition and other matters. Such reports and other information are
available on the Commission's Electronic Data Gathering and Retrieval System
(EDGAR) at its internet website at www.sec.gov and may be inspected at the
public reference facilities maintained by the Commission at room 1200, 450 Fifth
Street, N.W., Washington, D.C. 20549. Copies of such material can also be
obtained from the Public Reference Room of the Commission in Washington, D.C. at
prescribed rates.
The Purchaser has filed with the Commission a Tender Offer Statement on Schedule
TO (including exhibits) pursuant to Rule 14d-3 of the General Rules and
Regulations under the Exchange Act, which provides certain additional
information with respect to the Offer. Such Statement and any amendments
thereto, including exhibits, may be inspected and copies may be obtained from
the Commission in the manner specified above.
According to the Partnership's Third Quarter 2003 10-Q, there were 135,600 Units
issued and outstanding as of September 30, 2003, which, according to the
Partnership's 2002 Form 10-K are held by approximately 6,710 Unitholders. The
Purchaser currently owns 18,575 Units, or approximately 13.7% of the outstanding
Units.
Information contained in this Offer to Purchase which relates to, or represents
statements made by, the Partnership or the General Partner has been derived from
information provided in reports and other information filed with the Commission
by the Partnership and General Partner.
Unitholders are urged to read carefully this Offer to Purchase and the
accompanying Agreement of Sale before deciding whether to tender their Units.
OFFER TO PURCHASE
SECTION 1 Terms of the Offer.
Upon the terms and subject to the conditions of the Offer, the Purchaser will
accept for payment and pay for up to 117,025 Units that are validly tendered on
or prior to the Expiration Date and not validly withdrawn in accordance with
Section 4 ("Withdrawal Rights"). The term "Expiration Date" shall mean 5:00
p.m., Eastern Time, on February 9, 2004, unless and until the Purchaser shall
have extended the period of time for which the Offer is open, in which event the
term "Expiration Date" shall mean the latest date on which the Offer, as so
extended by the Purchaser, shall expire.
Subject to any approval rights of the General Partner under the terms of the
Limited Partnership Agreement, the Purchaser reserves the right to transfer or
assign, (in whole or in part from time to time), to one or more of the
Purchaser's affiliates, the right to purchase all or any portion of the Units
tendered pursuant to the Offer. Any such transfer or assignment will not relieve
the Purchaser of its obligations under the Offer or prejudice the rights of
tendering Unitholders to receive payment for Units validly tendered and accepted
for payment pursuant to the Offer.
The Offer is conditioned on satisfaction of certain conditions. See Section 13
("Certain Conditions of the Offer,") which sets forth in full the conditions of
the Offer. The Purchaser reserves the right (but shall not be obligated), for
any reason, or for no reason, to waive any or all of such conditions at any
time. If any or all of such conditions have not been satisfied or waived by the
Expiration Date, the Purchaser reserves the right (but shall not be obligated)
to (i) decline to purchase any of the Units tendered; (ii) terminate the Offer
and deem all Agreements of Sale to be null and void and of no force or effect
whatsoever (we will not return any documents to tendering Unitholders); (iii)
waive all the unsatisfied conditions and, subject to complying with applicable
rules and regulations of the Commission, purchase all Units validly tendered;
(iv) extend the Offer and, subject to the right of Unitholders to withdraw Units
until the Expiration Date, retain the Units that have been tendered during the
period or periods for which the Offer is extended; or (v) otherwise amend the
Offer.
The Offer to Purchase and the related Agreement of Sale are being mailed at the
Purchaser's expense to Unitholders. Unless the context requires otherwise,
references to Unitholders in this Offer to Purchase shall be deemed to include
record holders of Units, Beneficial Owners and Assignees.
SECTION 2 Acceptance for Payment and Payment for Units.
If all conditions of the Offer are satisfied, we will accept for payment from
the Unitholders all units validly tendered and not withdrawn.
Upon the terms and subject to the conditions of the Offer (including, if the
Offer is extended or amended, the terms and conditions of any extension or
amendment), the Purchaser will accept for payment, and will pay for, Units
validly tendered and not withdrawn in accordance with Section 4 ("Withdrawal
Rights") below. Payment will be made as promptly as practicable after the
expiration of the Offer and the Partnership has registered the transfers of the
tendered Units that we shall have accepted for payment on its books and records
and we are recognized by the Partnership as a Substituted Limited Partner in
respect of all such Units with full voting rights and rights to distributions
(See Section 13 ("Certain Conditions of the Offer")). Sections 11.01 and 11.02
of the Limited Partnership Agreement provide that assignments and transfers of
Units are only recognized on the Partnership's books as of the last business day
of a calendar quarter. Since the last business day of the current calendar
quarter is March 31, 2004, we expect that payment for accepted Units will be
delayed until at least March 31, 2004. The Purchaser will be deemed to have
purchased tendered Units accepted for payment when the Purchaser is in receipt
of the Partnership's confirmation that the transfer of Units has been
effectuated and that the Purchaser will be deemed a "Substituted Limited
Partner" with respect to the Units transferred and when actual transfer of Units
to the Purchaser has occurred. However, the Purchaser reserves the right, in its
sole discretion, to pay for accepted Units prior to such date. In all cases,
payment for Units purchased pursuant to the Offer will be made only after the
Expiration Date and the timely receipt by the Purchaser of a properly completed
and duly executed Agreement of Sale and any other documents required by the
Agreement of Sale. Under no circumstances will interest be paid on the Purchase
Price for any Unit by reason of any delay in making such payment.
If any tendered Units accepted for payment are not purchased for any reason, the
Agreement of Sale with respect to such Units not purchased will be deemed to be
of no force or effect from the date the Offer is terminated and no payments will
be made in respect of such Units. If, for any reason whatsoever, acceptance for
payment of, or payment for, any Units tendered pursuant to the Offer is delayed,
or the Purchaser is unable to accept for payment, purchase or pay for the Units
tendered pursuant to the Offer, then without prejudice to the Purchaser's rights
under Section 13 ("Certain Conditions of the Offer") (but subject to compliance
with Rule 14e-1(c) under the Exchange Act), the Purchaser may retain such
tendered Units, subject to any limitations of applicable law, and such Units may
not be withdrawn except in accordance with the withdrawal rights as described in
Section 4 ("Withdrawal Rights").
If, prior to the Expiration Date, the Purchaser shall increase the consideration
offered to Unitholders pursuant to the Offer, such increased consideration shall
be paid for all Units accepted for payment pursuant to the Offer, whether or not
such Units were tendered prior to such increase.
The Purchaser reserves the right to transfer or assign, at any time and from
time to time, in whole or in part, to one or more affiliates or direct or
indirect subsidiaries of the Purchaser, the right to purchase Units tendered
pursuant to the Offer, but no such transfer or assignment will relieve the
Purchaser of its obligations under the Offer or prejudice the rights of
tendering Unitholders to receive payment for Units validly tendered and accepted
for payment pursuant to the Offer.
SECTION 3 Procedures for Tendering Units.
Valid Tender. For Units to be validly tendered pursuant to the Offer, a properly
completed and duly executed Agreement of Sale (along with any other documents
necessary to properly effect the transfer) must be received by the Purchaser at
its address set forth on the signature page of the Agreement of Sale on or prior
to the Expiration Date. A Unitholder may tender any or all Units it owns.
In order for a tendering Unitholder to participate in the Offer, Units must be
validly tendered and not withdrawn prior to the Expiration Date, which is 5:00
p.m., Eastern Time, on February 9, 2004.
For your convenience, the Purchaser has included a pre-addressed envelope with
this Offer for returning the Agreement of Sale to the Purchaser, however the
method of delivery of the Agreement of Sale is at the option and sole risk of
the tendering Unitholder, and the delivery will be deemed made only when
actually received by the Purchaser. If delivery is by mail, registered mail with
return receipt requested is recommended. In all cases, sufficient time should be
allowed to ensure timely delivery.
Backup Federal Income Tax Withholding. To prevent the possible application of
backup federal income tax withholding with respect to payment of the Purchase
Price for Units purchased pursuant to the Offer, a tendering Unitholder must
verify to the Purchaser such Unitholder's correct taxpayer identification number
(which for an individual is usually his social security number) and make certain
certifications that the Unitholder is not subject to backup federal income tax
withholding.
A tendering Unitholder is required to certify in the Agreement of Sale, under
penalties of perjury, that (i) the tax identification number shown on the
Agreement of Sale is the Unitholder's correct taxpayer identification number;
and (ii) the Unitholder is not subject to backup withholding either because the
Unitholder has not been notified by the Internal Revenue Service (the "IRS")
that the Unitholder is subject to backup withholding as a result of failure to
report all interest or dividends, or the IRS has notified the Unitholder that
the Unitholder is no longer subject to backup withholding.
The Unitholder is also required to certify in the Agreement of Sale, under
penalties of perjury, that the Unitholder, if an individual, is not a
nonresident alien for purposes of U.S. income taxation, and if not an
individual, is not a foreign corporation, foreign partnership, foreign trust, or
foreign estate (as those terms are defined in the Internal Revenue Code and
applicable Treasury Regulations). The Unitholder understands that this
certification may be disclosed to the IRS by the Purchaser and that any false
statements contained therein could be punished by fine, imprisonment or both.
Tenders by Beneficial Holders. Tenders of Units made by beneficial holders of
Units will be deemed an instruction to brokers, dealers, commercial banks, trust
companies, custodians and similar persons or entities whose names, or the names
of whose nominees, appear as the registered owner of such Units, to tender such
Units on behalf of such beneficial holder. A tender of Units can only be made by
the registered owner of such Units.
Signature Guarantees. The signature(s) on the Agreement of Sale must be
Medallion Guaranteed by a commercial bank, savings bank, credit union, savings
and loan association or trust company having an office, branch or agency in the
United States, a brokerage firm that is a member firm of a registered national
securities exchange or a member of the National Association of Securities
Dealers, Inc., as provided in the Agreement of Sale.
Appraisal Rights. Unitholders will not have any appraisal or dissenter's rights
with respect to or in connection with the Offer.
Other Requirements. By executing and delivering the Agreement of Sale, a
tendering Unitholder irrevocably appoints the Purchaser and/or designees of the
Purchaser and each of them as such Unitholder's attorneys-in-fact and proxies,
with full power of substitution, to the full extent of such Unitholder's rights
(such power of attorneys and proxies being deemed to be an irrevocable power
coupled with an interest) to exercise all such Unitholder's voting and other
rights as any such attorney-in-fact in its sole discretion may deem proper at
any meeting of Unitholders or any adjournment or postponement thereof, by
written consent in lieu of any such meeting or otherwise, and act in such manner
as any attorney-in-fact shall, in its sole discretion, deem proper with respect
to the Units, in the manner set forth in the Agreement of Sale.
Such appointment will be effective upon receipt by the Purchaser of the
Agreement of Sale. Upon such receipt, all prior proxies given by such Unitholder
(including any that you may have given to Windy City) with respect to such Units
will, without further action, be revoked, and no subsequent proxies may be given
and if given will not be effective.
By executing and delivering the Agreement of Sale, a tendering Unitholder also
irrevocably assigns to the Purchaser, and its assigns, all of the right, title
and interest, free and clear of all liens and encumbrances of any kind, of such
Unitholder in the Partnership with respect to the Units tendered and purchased
pursuant to the Offer (and with respect to any and all other Units or other
securities issued or issuable in respect of such Units on or after the date
hereof). The Purchaser will seek to be admitted to the Partnership as a
Substitute Limited Partner in respect of all such tendered and purchased Units.
Determination of Validity; Rejection of Units; Waiver of Defects; No Obligation
to Give Notice of Defects. All questions as to the form of documents and
validity, eligibility (including time of receipt) and acceptance for payment of
any tender of Units will be determined by the Purchaser, in its sole discretion,
which determination will be final and binding on all parties. The Purchaser
reserves the absolute right to reject any or all tenders determined by it not to
be in proper form or the acceptance of or payment for, which may, in the opinion
of the Purchaser or Purchaser's counsel, be unlawful.
The Purchaser's interpretation of the terms and conditions of the Offer
(including the Agreement of Sale and the instructions thereto) will be final and
binding. No tender of Units will be deemed to have been validly made until all
defects and irregularities with respect to such tender have been cured or
waived. Neither the Purchaser nor any of its affiliates or assigns, if any, or
any other person will be under any duty to give any notification of any defects
or irregularities in tenders or incur any liability for failure to give any such
notification.
The Purchaser's acceptance for payment of Units tendered pursuant to any of the
procedures described above will constitute a binding agreement between the
tendering Unitholder and the Purchaser upon the terms and subject to the
conditions of the Offer.
SECTION 4 Withdrawal Rights.
Except as otherwise provided in this Section 4, tenders of Units made pursuant
to the Offer are irrevocable. Units tendered pursuant to the Offer may be
withdrawn at any time by written notice to the Purchaser on or prior to the
Expiration Date (including any extensions thereof), and, if and to the extent
tendered Units have not been accepted for payment by March 8, 2004 (the 60th day
from the date of this Offer), at any time thereafter. Once the Expiration Date
has passed you will not otherwise be able to withdraw your Units.
If, purchase of or payment for, Units is delayed for any reason (including
because of the terms of the Offer or Sections 11.01 or 11.02 of the Limited
Partnership Agreement), or if the Purchaser is unable to purchase or pay for
Units for any reason, then, without prejudice to the Purchaser's rights set
forth herein, the Purchaser may retain tendered Units and such Units may not be
withdrawn, except to the extent that the tendering Unitholder is entitled to as
set forth in this Section 4, subject to Rule 14e-1(c) under the Exchange Act,
which provides, in part, that no person who makes a tender offer shall fail to
pay the consideration offered or return the securities (i.e., the Units)
deposited by or on behalf of security holders promptly after the termination or
withdrawal of the tender offer. In this regard, the Commission has stated
(release no. 34-43069, available July 24, 2000) that because transfers of
limited partnership interests are subject to delays, an offeror in a tender
offer for limited partnership interests may reasonably extend the period for
payment without violating the requirement for prompt payment. See Section 13
("Certain Conditions of the Offer").
In order for a withdrawal to be effective, a written notice of withdrawal,
expressly indicating that the withdrawal relates to this Offer and not to any
other offer, must be timely received by the Purchaser (i.e. a valid notice of
withdrawal must be received after the date hereof but on or before February 9,
2004, or such other date to which this offer may be extended) at its address set
forth on the last page of this Offer to Purchase. Any such notice of withdrawal
must specify the name of the person who tendered the Units to be withdrawn, with
the signature of such person Medallion guaranteed in the same manner as the
signature in the Agreement of Sale, the number of Units to be withdrawn, and (if
the Agreement of Sale has been delivered) the name of the Unitholder as set
forth in the Agreement of Sale. Withdrawals of Units may not be rescinded. Any
Units properly withdrawn will be deemed not validly tendered for purposes of the
Offer, but may be re-tendered at any subsequent time prior to the Expiration
Date by following the procedures described in Section 3.
All questions as to the form and validity (including time of receipt) of notices
of withdrawal will be determined by the Purchaser, in its sole discretion, whose
determination will be final and binding. Neither the Purchaser nor any of its
affiliates or assigns, if any, or any other person will be under any duty to
give any notification of any defects or irregularities in any notice of
withdrawal or incur any liability for failure to give any such notification.
SECTION 5 Extension of Tender Period; Termination; Amendment.
The Purchaser expressly reserves the right, in its sole discretion, at any time
and from time to time, (i) to extend the period of time during which the Offer
is open by giving oral or written notice of such extension; (ii) to terminate
the Offer at any time on or prior to the Expiration Date if any of the
conditions specified in Section 13 ("Certain Conditions of the Offer") are not
satisfied by giving oral or written notice of such termination; (iii) upon the
failure to satisfy any of the conditions specified in Section 13 ("Certain
Conditions of the Offer"), to delay the acceptance for payment of any Units not
heretofore accepted for payment, by giving oral or written notice of such delay;
and (iv) to amend the Offer in any respect (including, without limitation, by
increasing or decreasing the consideration offered by giving oral or written
notice of such amendment. Any extension, termination, delay or amendment will be
followed as promptly as practicable by a public announcement, such announcement
in the case of an extension to be issued no later than 9:00 a.m., Eastern Time,
on the next business day after the previously scheduled Expiration Date, in
accordance with the public announcement requirement of Rule 14e-1(d) under the
Exchange Act. There will be no subsequent offer period.
If the Purchaser makes a material change in the terms of the Offer or the
information concerning the Offer or waives a material condition of the Offer,
the Purchaser will extend the Offer to the extent required by Rules 14d-4(c),
14d-6(d) and 14e-1 under the Exchange Act. The minimum period during which an
offer must remain open following a material change in the terms of the offer or
of information concerning the offer, other than a change in price or a change in
percentage of securities sought, will depend upon the facts and circumstances,
including the relative materiality of the change in the terms or information.
With respect to a change in price or a change in percentage of securities sought
(other than an increase of not more than 2% of the securities sought), however,
a minimum ten business day period is generally required to allow for adequate
dissemination to security holders and for investor response. As used in this
Offer, "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,
Eastern Time on such day.
SECTION 6 CERTAIN U.S. FEDERAL INCOME TAX CONSIDERATIONS.
General
The following is a summary of the principal United States federal income tax
consequences of the tendering of a Unit by a Unitholder pursuant to the Offer.
For purposes of this summary, (1) the Internal Revenue Code of 1986, as amended,
is referred to as "the Code," and (2) the Internal Revenue Service is referred
to as "the IRS." This summary assumes that the Partnership is treated as a
partnership for federal income tax purposes and not a "publicly traded
partnership" as defined in Section 7704 of the Code.
This summary deals only with Unitholders who hold the Units as "capital assets"
within the meaning of Section 1221 of the Code and does not address tax
considerations applicable (i) to Unitholders that are subject to special tax
rules (e.g., banks, insurance companies, tax-exempt organizations, regulated
investment companies, real estate investment trusts, grantor trusts, dealers in
securities or currencies, traders in securities that elect the mark-to-market
method of accounting for their securities holdings, persons that will hold the
Units as part of a hedging transaction, "straddle" or "conversion transaction"
for tax purposes, persons deemed to sell Units under the constructive sale
provisions of the Code, persons liable for alternative minimum tax or
Unitholders whose "functional currency" is not the U.S. dollar), or (ii) under
any state, local or foreign tax laws. This summary applies only to Unitholders
that are (i) citizens or "residents" (as defined in Section 7701(b) of the Code)
of the United States, (ii) corporations, or other entities that are taxable as
corporations, created or organized under the laws of the United States or any
state or political subdivision thereof (including the District of Columbia),
(iii) estates, the income of which is subject to United States federal income
taxation regardless of its source, and (iv) trusts, if a United States court can
exercise primary supervision over the administration of such trust and one or
more United States persons has the authority to control all substantial
decisions of the trust (collectively, "United States Persons").
This summary is based on the tax laws of the United States, including the Code,
final, temporary and proposed Treasury regulations, IRS administrative rulings
and practice, and judicial decisions in effect as of the date of the Offer, all
of which are subject to change, possibly with retroactive effect. The Purchaser
has not sought any ruling from the IRS with respect to the statements made and
the conclusions reached in the following summary, and the IRS is not precluded
from adopting contrary positions with respect to such statements and
conclusions.
PROSPECTIVE UNITHOLDERS WHO WISH TO TENDER UNITS SHOULD CONSULT THEIR OWN TAX
ADVISORS AS TO THE UNITED STATES FEDERAL, STATE, LOCAL AND OTHER TAX
CONSEQUENCES TO THEM OF MAKING A TENDER OF THE UNITS.
Consequences to a Tendering Unitholder
The sale of a Unitholder's Units pursuant to the Offer for the Purchase Price
will be treated as a taxable disposition of such Units for United States federal
income tax purposes. A Unitholder will recognize gain or loss on such a sale
equal to the difference between the amount realized on the sale and the
Unitholder's tax basis in the Units. The amount realized will be equal to the
sum of (x) the amount of cash received by the Unitholder pursuant to the Offer
and (y) the amount of the liabilities of the Partnership properly allocable to
the Unitholder for federal income tax purposes.
A Unitholder will recognize ordinary gain or loss on a sale of the Units
pursuant to the Offer in an amount equal to the exchanged Units' allocable share
of the ordinary gain or loss that the Partnership would have recognized if it
had sold all of its "unrealized receivables" (including depreciation recapture)
and "inventory items" (as such terms are defined in Section 751 of the Code) at
their respective fair market values in a fully taxable transaction immediately
prior to the exchange. The balance of a Unitholder's realized gain or loss will
be capital gain or loss.
A Unitholder's capital gain or loss on the sale of Units pursuant to the Offer
will be treated as long-term capital gain or loss if and to the extent that the
Unitholder's holding period in the Units for federal income tax purposes is more
than one year. Under current law, long-term capital gain of non-corporate
Unitholders would be taxable at a maximum rate of 15%. However, a 25% maximum
marginal tax rate would apply to a non-corporate Unitholder's allocable share of
the Partnership's "unrecaptured of Section 1250 gain" (i.e., gain on the sale of
an asset to the extent such gain is attributable to allowed or allowable
depreciation adjustments in respect of real property). Upon a sale of Units
pursuant to the Offer, non-corporate Unitholders that would otherwise realize
long-term capital gain or loss on the sale of their Units will recognize
unrecaptured Section 1250 gain in an amount equal to the exchanged Units'
allocable share of the unrecaptured Section 1250 gain that would be recognized
by the Partnership if it sold all of its Section 1250 property at its fair
market value in a fully taxable transaction immediately prior to the exchange.
The ability of a non-corporate Unitholder to offset capital losses against
ordinary income on an annual basis is limited.
Any income or gain derived by a Unitholder from the sale of all its Units
pursuant to the Offer may be eligible to be offset "passive activity losses"
derived by the Unitholder with respect to the Units in prior taxable years that
were not deductible in those years pursuant to the limitations on the
deductibility of "passive activity losses" contained in Section 469 of the Code.
If a Unitholder is unable to sell all of its Units, the deductibility of any
unused passive losses attributable to the Units would continue to be subject to
the passive activity loss limitations until the Unitholder sells his remaining
Units.
A Unitholder other than a corporation and certain foreign individuals that sells
Units pursuant to this Offer may be subject to certain backup withholding and
information reporting requirements unless the Unitholder provides a correct
taxpayer identification number ("TIN") to the Purchaser or properly certifies to
the Purchaser that it has applied for a TIN. In order to avoid backup
withholding, a Unitholder must properly complete and sign under penalties of
perjury the Substitute IRS Form W-9 included in the Agreement of Sale.
Federal income tax withholding is required with respect to the sales proceeds
derived by persons other than United States Persons ("Foreign Persons") from
transfers of interests in certain partnerships which own interests in United
States real property. In order to avoid this 10% withholding tax, a Unitholder
who tenders his Units pursuant to the Offer will be required to (i) certify
under penalties of perjury as part of the Agreement of Sale that he is not a
Foreign Person, and (ii) provide certain additional information to the
Purchaser.
A Unitholder who sells Units pursuant to this Offer must attach an information
statement to his federal income tax return for the year of the sale which
contains the information specified in Treasury Regulation section 1.751-1(a)(3).
Consequences to a Non-Tendering Unitholder
A Unitholder who does not tender his Units pursuant to the Offer (a
"non-tendering Unitholder") should not realize any material tax consequences as
a result of such failure to tender unless the Partnership is deemed to be
"terminated" for United States federal income tax purposes. The Partnership will
be deemed to be so "terminated" if 50% or more of the Partnership's Units are
sold or exchanged within a 12-month period that includes the date of the Offer.
The Purchaser cannot determine based upon the publicly available information
whether the consummation of the Offer will result in a termination of the
Partnership. While a non-tendering Unitholder will not recognize any taxable
gain or loss if the Partnership is deemed to be terminated for tax purposes,
such a termination may require the Partnership to reduce the amount of its
depreciation and amortization deductions with respect to its properties in
certain future years immediately following the deemed termination and thereby
increase the amount of taxable income that a Unitholder derives from the
Partnership in such years. In such an event, however, the amount of the
Partnership's depreciation and amortization deductions in subsequent future
years would be increased correspondingly with the result that the aggregate
amount of the taxable income derived by the Partnership in the years following
the deemed termination should be equal to the aggregate amount of taxable income
that the Partnership would derive in such years if no such termination were to
occur. In addition, it is possible that a deemed termination of the Partnership
could cause the Partnership to no longer be eligible for certain beneficial
"transitional" rules with respect to its properties that may have been contained
in statutory or regulatory changes enacted or issued prior to the termination.
The Purchaser reserves the right not to purchase Units to the extent such
purchase may cause the Partnership to be terminated for federal income tax
purposes.
THE PRECEDING DISCUSSION IS ONLY A SUMMARY OF CERTAIN TAX IMPLICATIONS OF THE
OFFER. UNITHOLDERS ARE URGED TO CONSULT WITH THEIR OWN TAX ADVISORS TO DETERMINE
THE TAX IMPLICATIONS OF THE OFFER IN LIGHT OF EACH SUCH UNITHOLDER'S PARTICULAR
CIRCUMSTANCES.
SECTION 7 Purpose and Effects of the Offer.
Purpose of the Offer. The Purchaser is making the Offer for investment purposes
only (See Section 8 ("Future Plans") with a view towards making a profit. The
Purchaser's intent is to acquire the Units at a discount to the value that the
Purchaser might ultimately realize from owning the Units.
The Offer is being made by the Purchaser as a speculative investment based upon
the belief that the Units represent an attractive investment at the price
offered. Our belief is based upon, in part, our assessment of the value of the
Partnership's assets and liabilities. The purpose of the Offer is to allow the
Purchaser to benefit from any one combination of the following: (i) any cash
distributions from Partnership operations in the ordinary course of business;
(ii) distributions of net proceeds from a liquidation, if any; (iii) a
refinancing of the Partnership or any of its properties; (iv) cash that the
Partnership may retain or distribute as a result of a redemption of Units; (v)
sale of the Units; and (vi) any other claims that the Partnership may have.
The Purchaser established the Purchase Price of $725 per Unit less the amount of
any distributions declared or paid on or after December 31, 2003 in respect of
that Unit, based on a number of factors, including (i) Purchaser's evaluation of
the assets and liabilities of the Partnership based on publicly available
information; (ii) the illiquid nature of the investment; and (iii) the costs to
the Purchaser associated with acquiring the Units.
The Purchase Price represents the price at which the Purchasers are willing to
purchase Units. No independent person has been retained by the Purchaser to
evaluate or render any opinion with respect to the fairness of the Purchase
Price to the Seller and no representation is made as to such fairness. The
Purchaser urges those Unitholders that are considering tendering their Units
pursuant to the Offer to first consult with their own advisors (tax, financial
and others) in evaluating the terms of the Offer before deciding whether or not
to tender Units.
The Purchaser is offering to purchase Units for which there is a limited and
sporadic secondary market and is not offering to purchase the Partnership's
underlying assets. Consequently, the Purchaser does not believe that the
underlying asset value of the Partnership is determinative in arriving at the
Purchase Price. Nevertheless, using publicly available information concerning
the Partnership contained in the Partnership's 2002 Form 10-K, the Purchaser
used an estimated asset value to derive an estimated market value for the Units
solely for purposes of formulating their Offer.
In determining their estimated value of the Units, the Purchaser first
calculated the estimated current net operating income in accordance with the
Partnership's financial statements. Then, in consideration of the factors
discussed above, the Purchaser determined the appropriate capitalization rate
for the Partnership's net operating income. The resulting net asset value of the
Partnership's properties was added to the Partnership's net current assets and
the Partnership's total estimated asset value was then reduced by the
Partnership's total liabilities and the Purchaser's estimate of the hypothetical
costs to liquidate the portfolio plus the Purchaser's estimated acquisition and
transfer costs.
Other measures of value may be relevant to a Unitholder and all Unitholders are
urged to carefully consider all of the information contained in the Offer to
Purchase and Agreement of Sale and to consult with their own advisors (tax,
financial or otherwise) in evaluating the terms of the Offer before deciding
whether to tender Units.
In its Preliminary Proxy Statement filed with the Commission on May 15, 2003, in
connection with a proposed refinancing, the Partnership has assumed for purposes
of making its recommendations to refinance the Partnership's debt that the
Westin Michigan Avenue hotel could be sold for $96.7 million.
However, the Partnership also states that with respect to the proposed
refinancing it considered, among other factors, the weakness of the market for
the sale of full-service hotels and the inability of the Partnership to find a
suitable purchaser for the Michigan Avenue hotel.
If the hotel were sold for $96.7 million and the Partnership liquidated, the
Purchaser estimates that, based upon its own assumptions, the sale would result
in a distribution of approximately $546 to each Unitholder.
Pursuant to this Offer, the Purchaser is offering to pay $725 cash, less the
amount of any distributions declared or paid on or after December 31, 2003, in
respect of that Unit, for each tendered Unit.
The Partnership disclosed in the 2002 Form 10-K the following information with
regard to restrictions on transfer of Units:
"There is no public market for the Units, and it is not anticipated that a
public market for the Units will develop. The transfer of Units, or any interest
therein, is subject to a variety of restrictions. Limited Partners may not
transfer their interests in the Partnership if, in the opinion of the
Partnership's counsel, such transfers might violate the registration
requirements of the Securities Act of 1933, as amended, or the laws of any other
jurisdiction or agency applicable to the transfers, cause the Partnership to be
regarded as an association taxable as a corporation, result in the dissolution
or termination of the Partnership or result in the Hotel Partnership not being
able to obtain or continue in effect any license permitting the service or sale
of alcoholic beverages in the Hotel. The assignee must also meet certain other
requirements set forth in the Limited Partnership Agreement before it may be
recognized as a substituted Limited Partner, including the payment of all
reasonable expenses connected with the transfer of any interest. The limited
partners or their representatives must furnish, as to voluntary transfers,
sufficient information to counsel to permit the foregoing determination to be
made."
Pursuant to the Limited Partnership Agreement, the transfer of Units will not be
allowed if, in the opinion of counsel to the Partnership, such transfer of Units
would cause the Partnership to be deemed to be "terminated" for federal income
tax purposes. Pursuant to the Limited Partnership Agreement, the General Partner
may suspend its approval of sale requests for Units if such transfer of Units
would result in the transfer of 40% or more of the interest in the Partnership
when added to the total of all other sales of interest in the Partnership during
the preceding 12 months.
Since the Purchaser cannot now predict the number of Units that it will purchase
pursuant to the Offer and cannot determine the amount of previous transfers of
Units without a further review of the Partnership's books and records, Purchaser
cannot assure a Unitholder that Units purchased pursuant to a tender offer filed
on Schedule TO would not cause a deemed "termination" of the Partnership for
federal income tax purposes. Further, it is a condition of the Offer that the
Partnership register the transfer of tendered Units from a Seller to the
Purchaser on its books and records.
In October 1996, the General Partner determined it to be in the best interest of
the Partnership to implement a Unit transfer policy that relies on the
protections of a 5% "safe harbor" provision, promulgated by the Internal Revenue
Service, that prevents the Partnership from being deemed a "publicly traded
partnership" pursuant to Section 7704 of the Internal Revenue Code of 1986, as
amended. The safe harbor applies if the sum of the percentage interests in
partnership capital or profits represented by Units traded during any calendar
year does not exceed 5% of the aggregate Partnership interests outstanding
(which approximates 6,848 Units).
Purchaser believes that Units purchased pursuant to a tender offer filed on
Schedule TO would not violate the publicly traded partnership rules. Further, it
is a condition of the Offer that the Partnership register the transfer of
tendered Units from a Seller to the Purchaser on its books and records and that
the Purchaser be recognized as a Substituted Limited Partner by the Partnership
in respect of the Units we shall have agreed to purchase.
RIGHTS THAT WE WILL HAVE IF WE ARE A MAJORITY HOLDER OF UNITS. If the Purchaser
is successful in purchasing approximately 36.3% of the Units in this Offer, the
Purchaser will become the holder of a majority of the Units in the Partnership.
As a majority holder, the Purchaser will have the right under the Partnership
Agreement by majority vote to:
o Amend certain provisions of the Limited Partnership Agreement;
o Approve certain sales or borrowings by the Partnership;
o Approve the transfer of the General Partner's interest;
o Expel the General Partner or any successor General Partner with or without
cause;
o Elect a new General Partner or General Partners upon the adjudication of
incompetency, expulsion, withdrawal, death or dissolution of the General
Partner or any successor General Partner;
o Expel a general partner of a Hotel Partnership, with or without cause in
accordance with the terms of the agreement of limited partnership of such
Hotel Partnership; and
o Elect to dissolve the Partnership.
Effect on Trading Market and Price Range of the Units. If a substantial number
of Units are purchased pursuant to the Offer, the result will be a reduction in
the number of Unitholders. In the case of certain kinds of equity securities, a
reduction in the number of security holders might be expected to result in a
reduction in the liquidity and volume of activity in the trading market for the
security. In this case, however, there is a limited and sporadic trading market
for the Units and, therefore, the Purchaser does not believe a reduction in the
number of Unitholders will materially further restrict the Unitholders' ability
to find purchasers for their Units.
The Partnership disclosed in its 2002 Form 10-K that there is no public market
for the Units, and it is not anticipated that a public market will develop.
The Units are registered under Section 12(g) of the Exchange Act, which means,
among other things, that the Partnership is required to file periodic reports
with the Commission and to comply with the Commission's proxy rules. As of the
date of the Partnership's 2002 Form 10-K there were approximately 6,710
Unitholders. If the Units were to be held by fewer than 300 persons, the
Partnership could apply to de-register the Units under the Exchange Act.
SECTION 8 Future Plans.
The Purchaser is acquiring the Units pursuant to the Offer for investment
purposes only. The Purchaser has no current plans or proposals that would result
in an extraordinary corporate transaction, such as a merger, reorganization or
liquidation involving the Partnership, the sale or transfer of any material
amount of assets of the Partnership, any material change in the capitalization
or dividend policy of the Partnership or any other material change in the
Partnership's company structure or business. However, the Purchaser is currently
evaluating the Partnership's business and management and is considering to
exercise its rights under the Limited Partnership Agreement as owners of 10% or
more of outstanding Units to call for a vote to remove the General Partner. The
Purchaser reserves the right to change its plans and intentions.
If the Offer is not consummated or if you do not tender your Units and we
consummate the Offer, you will remain a Unitholder of the Partnership. If the
Purchaser purchases at least 49,361 Units for which it has made the Offer, the
Purchaser will become the holder of a majority of the Units, which will give us
the ability to control many decisions of the Unitholders. According to the 2002
Form 10-K, currently there is no limited partner who holds a majority of the
Units.
The Purchaser and its affiliates may seek to acquire additional Units through
open market purchases, privately negotiated transactions, a tender or exchange
offer or other transactions or a combination of these methods on such terms and
at such prices as we shall determine, which may be different from the terms and
price paid in the Offer. We also reserve the right to dispose of Units that we
have acquired or may acquire. Such future purchases will also be for investment
purposes only and may be at prices higher or lower than the Purchase Price.
SECTION 9 Past Contacts, TRANSACTIONS, Negotiations AND AGREEMENTS.
Other than as set forth below, Smithtown Bay, LLC, as the manager of the
Purchaser, has not had negotiations or material discussions with the General
Partner within the last 2 years. Smithtown Bay, LLC succeeded the previous
manager on January 3, 2003. As none of the Offerors is affiliated with the
previous manager of the Purchaser, they do not know whether the previous manager
of the Purchaser had negotiations or material discussions with the General
Partner within the past 2 years.
On July 24, 2003, the Purchaser filed with the Commission an offer to purchase
up to 79,917 units of limited partnership interest in the Partnership, at $550
per Unit in cash, without interest thereon, less the amount of any distributions
declared or paid on or after July 7, 2003, in respect of that Unit upon the
terms and conditions set forth in the Offer to Purchase, dated July 24, 2003, as
amended on August 4, 2003, and in the related agreement of sale and accompanying
documents.
On September 8, 2003 the Partnership filed an Amendment No. 5 to reflect the
issuance of a new press release on September 8, 2003 to make certain corrections
to the press release issued September 2, 2003, and to replace Exhibit (a)(1)-10
with Exhibit (a)(1)-10 included therein. The Purchaser issued a press release,
dated Tuesday, September 2, 2003, which stated that such offer expired at 5:00
p.m. New York Time, on Friday, August 29, 2003. The press release further stated
that based upon a preliminary count, as of 5:00 p.m., New York time, on Friday,
August 29, 2003, approximately 6,658 Units were validly tendered pursuant to
that offer and not withdrawn and the Purchaser had accepted for payment in
accordance with the terms of that offer all such tendered Units. On October 1,
2003 the Purchaser reported 6,409 Units were tendered pursuant to the tender
offer were transferred by the Partnership to Kalmia. The reduction in beneficial
ownership of Units resulted from the fact that the purchase of 249 of the 6,658
Units tendered as of the expiration of that offer could not be completed because
they were withdrawn or were otherwise incapable of being transferred.
On October 6, 2003, the Purchaser filed a Schedule TO with the Commission to
reflect an offer to purchase up to 73,250 Units at $550 per Unit in cash,
without interest thereon, less the amount of any distributions declared or paid
on or after October 1, 2003, with respect to that Unit upon the terms and
conditions set forth in the offer to purchase, dated October 6, 2003, as amended
October 21, 2003, and as further amended on October 28, 2003, and in the related
agreement of sale and accompanying documents.
On October 23, 2003, the Purchaser filed an Amendment No. 2 to the Schedule TO
to reflect the mailing of a letter, dated October 23, 2003, to Unitholders. On
November 10, 2003, the Purchaser filed an Amendment No. 4 to the Schedule TO to
reflect the expiration on November 7, 2003 of the offer commenced on October 6,
2003, and the issuance of a press release, dated November 10, 2003. The press
release stated that, based upon a preliminary count, as of 5:00 p.m., Eastern
Time, on Friday, November 7, 2003, approximately 1,210 Units (or 0.9% of the
total number of outstanding Units) were tendered and not withdrawn and that upon
payment for these Units in accordance with the related agreements of sale, the
Purchaser would beneficially own approximately 13.7% of the total number of
outstanding Units.
On November 17, 2003, the Purchaser filed with the Commission a Schedule 14D-9
Solicitation/Recommendation Statement, urging Unitholders not to tender their
Units pursuant to the offer to purchase, dated November 4, 2003, by Starwood and
to vote against certain proposals to amend the Limited Partnership Agreement as
set forth in Starwood's offer to purchase. In addition, the Purchaser filed as
exhibits a letter to Unitholders, dated November 17, 2003, and a form of
withdrawal from Starwood's tender offer. The letter to Unitholders stated that
the Purchaser did not intend to tender its Units pursuant to Starwood's tender
offer and intended to vote against Starwood's proposals to amend the Limited
Partnership Agreement. On November 17, 2003, the Purchaser filed an amendment to
the Schedule 14D-9 to reflect the final text of the letter to Unitholders.
On December 1, 2003, the Purchaser filed with the Commission an Amendment No. 2
to the Schedule 14D-9, dated November 17, 2003, as amended on November 17, 2003,
to reflect the mailing of a letter to Unitholders, dated December 1, 2003, which
urged Unitholders not to tender their Units pursuant to Starwood's tender offer
and not consent to Starwood's proposed amendments to the Limited Partnership
Agreement; described the commencement of a lawsuit filed by unrelated third
parties against the General Partner and Starwood; advised Unitholders of the
apparent conflict of interest between the General Partner and Starwood; and
informed Unitholders that the Purchaser had requested that the General Partner
provide the Purchaser with information regarding the operations of the
Partnership in order to enable Purchaser to review any potential irregularities
in the operations of the Hotels (as defined in Section 10 below), irregularities
in any related party transactions and compliance with the hotel management
agreements.
Written contacts and negotiations with the General Partner
On July 8, 2003, the Purchaser sent a letter to the Partnership requesting the
list of limited partners of the Partnership. The Partnership received the list
of limited partners from the Partnership on July 14, 2003.
On July 24, 2003, and as amended on July 30, 2003 and August 4, 2003, the
Purchaser commenced a tender offer for up to 79,917 Units. On July 24, 2003, the
Purchaser sent a letter to the Partnership, copying its counsel, notifying it of
the commencement of such tender offer and enclosing therewith a copy of the
tender offer materials for such offer.
On July 30, 2003, the Purchaser sent a letter to the Partnership, copying its
counsel, notifying the Partnership of an amendment to the tender offer as filed
on July 30, 2003 with the Commission per Rule 14d-3 of the General Rules and
Regulations under the Exchange Act of 1934, as amended, enclosing therewith such
additional tender offer materials.
On August 7, 2003, the Purchaser sent a letter to the Partnership, copying its
counsel, notifying the Partnership of an amendment to the tender offer as filed
on August 4, 2003 with the Commission per Rule 14d-3 of the General Rules and
Regulations under the Exchange Act, as amended, enclosing therewith such
additional tender offer materials.
On August 18, 2003, the Purchaser sent a letter to the Partnership, copying its
counsel, notifying the Partnership of an amendment to the tender offer as filed
on August 18, 2003 with the Commission per Rule 14d-3 of the General Rules and
Regulations under the Exchange Act, as amended, enclosing therewith such
additional tender offer materials.
On August 25, 2003, counsel to the Purchaser sent a letter to the Partnership's
counsel, asking the Partnership to advise whether the General Partner would
admit Kalmia as a substitute limited partner with respect to Units accepted for
payment and purchased by Kalmia pursuant to the tender offer, and whether the
General Partner would register such Units in Kalmia's name for all purposes. The
letter also addressed other matters concerning the transfer of Units accepted
for payment and purchased by Kalmia pursuant to the tender offer, upon the
expiration of the tender offer.
Counsel to the Purchaser received a letter, dated August 29, 2003, from the
Partnership's counsel, indicating that the General Partner expected to transfer
the Units accepted for payment by the Purchaser pursuant to its offer on the
books of the Partnership and admit Kalmia as a substitute limited partner with
respect to those Units with full voting rights and rights to distributions no
later than September 30, 2003. In response to that letter, on September 12,
2003, the Purchaser also sent a letter to such counsel referring to the
expiration of the Purchaser's tender offer and requesting that the General
Partner expedite processing of the Units for transfer and substitution as soon
as practicable, and before September 30, 2003.
The Partnership's counsel subsequently advised the Purchaser's counsel orally
that the transfers would be made on September 30, 2003, in accordance with the
Partnership's general policy.
On September 2, 2003, the Purchaser sent a letter to the Partnership, copying
its counsel, notifying the Partnership of an amendment to the tender offer as
filed on September 2, 2003 with the Commission per Rule 14d-3 of the General
Rules and Regulations under the Exchange Act, as amended, enclosing therewith
with such additional tender offer materials.
On September 5, 2003, the Purchaser sent to the Partnership transfer requests
for 6,453 Units that it had accepted for payment, along with the transfer fee of
$50 per transfer.
On September 8, 2003, the Purchaser sent a letter to the Partnership, copying
its counsel, notifying the Partnership of the final amendment reporting the
results of the tender offer as filed on September 8, 2003 with the Commission
per Rule 14d-3 of the General Rules and Regulations under the Exchange Act, as
amended, enclosing therewith with such additional tender offer materials.
On September 9, 2003, the Purchaser sent a letter to the Partnership notifying
the Partnership of the filing of a Form 3 with the Commission on September 9,
2003, and enclosing a copy of such filing therein.
On September 12, 2003, the Purchaser executed and sent to the Partnership,
attention to Ms. DeMarino via Federal Express, a certification requested by the
Partnership.
On October 6, 2003, counsel to the Purchaser sent a letter to the Partnership,
copying its counsel, notifying it of the commencement a tender offer and
enclosing therewith a copy of the tender offer materials for such offer.
On October 28, 2003, the Purchaser sent a letter to the Partnership, copying its
counsel, notifying the Partnership of an amendment to the tender offer as filed
on with the Commission per Rule 14d-3 of the General Rules and Regulations under
the Exchange Act, as amended, enclosing therewith such additional tender offer
materials.
On November 10, 2003, counsel to the Purchaser sent a letter to the Partnership,
copying its counsel, notifying the Partnership of an amendment to the tender
offer as filed on with the Commission per Rule 14d-3 of the General Rules and
Regulations under the Exchange Act, as amended, enclosing therewith such
additional tender offer materials.
On November 12, 2003, counsel to the Purchaser sent a letter to the
Partnership's counsel, asking the Partnership to advise whether the General
Partner would admit Kalmia as a substitute limited partner with respect to Units
accepted for payment and purchased by Kalmia pursuant to the tender offer, and
whether the General Partner would register such Units in Kalmia's name for all
purposes. The letter also addressed other matters concerning the transfer of
Units accepted for payment and purchased by Kalmia pursuant to the tender offer,
upon the expiration of the tender offer.
On November 19, 2003, counsel to the Purchaser sent a fax to the Partnership's
counsel, requesting a response to the letter sent on November 12, 2003.
On November 26, 2003, the Purchaser sent a letter to the Partnership requesting
information regarding the operations of the Partnership.
On December 9, 2003, counsel to the Purchaser sent an e-mail to the
Partnership's counsel, requesting a response to the letter dated November 12,
2003, and subsequent fax dated November 19, 2003.
On December 31, 2003, the Purchaser sent a letter to the Partnership to follow
up on the letter sent on November 26, 2003. The letter stated that the requested
information should not be sent to the Purchaser, but rather the Purchaser's
counsel.
On January 6, 2004, counsel to the General Partner sent a letter to the
Purchaser, responding to the Purchaser's request for documents.
On January 9, 2004, the Purchaser sent a letter to the General Partner, which
stated that the Purchaser believed that the General Partner should recommend to
the Unitholders who have tendered to Starwood pursuant to Starwood's offer to
purchase that they should withdraw their Units from Starwood and tender them to
Purchaser.
On January 14, 2004, the Purchaser sent a letter to the General Partner, to
reflect the issuance of a press release by the Purchaser dated January14, 2004.
On January 19, 2004, the counsel to Purchaser received a fax, dated January 19,
2004, from counsel to the General Partner, advising the Purchaser of the General
Partner's right to suspend transfers if such transfers would result in the
transfer of 40% or more of the Units within the preceding twelve months. In
light of this transfer limitation, counsel to the General Partner "urged" the
Purchaser to "seek to obtain written consents from a majority of limited
partners to amend the Partnership Agreement to render the transfer restriction
contained in Section 11.01(b) of the Partnership Agreement inapplicable to the
transfer of units in connection with the Offer", and, alternatively, "to amend
the Offer to covenant to consummate a back-end merger on the same financial
terms as the Offer if the Offer is consummated."
On January 20, 2004, counsel to the Purchaser sent a letter to counsel to the
General Partner, stating that the issues raised by counsel to the General
Partner in the fax dated January 19, 2004, should be addressed only if (1)
tenders would result in more than 40% of the Units being transferred within the
preceding 12 months, and (2) the General Partner invokes its right to suspend
transfers.
Telephone contacts and negotiations with the General Partner and Affiliates
Between September 2, 2003 and January 8, 2004, there were numerous conversations
between employees of the Purchaser and employees of the Partnership relating
solely to administrative matters in respect of the transfers of Units tendered
in our previous offers.
On September 17, 2003 a representative of Starwood contacted the Purchaser by
telephone to arrange a future telephone call to be held on September 22, 2003.
On September 22, 2003, a telephone call was held among representatives of the
Purchaser and Starwood. The Starwood representatives asked the Purchaser's views
of Starwood's proposed tender offer. The Purchaser's representatives indicated
that they did not wish to discuss any potential or hypothetical event, whereupon
the call ended.
On December 5, 2003, representatives of Starwood contacted the Purchaser by
telephone to arrange a conference call, to be held on December 8, 2003.
Representatives of the Purchaser and Starwood subsequently exchanged emails over
whether that conference call would be privileged. On December 8, 2003, the
conference call was held among representatives of the Purchaser and Starwood
concerning Starwood's tender offer and the letters to Unitholders sent by the
Purchaser. During that call representatives of the Purchaser indicated to
representatives of Starwood that at that time the Purchaser did not intend to
tender its Units to Starwood in the current context of Starwood's offer.
The Purchaser attempted to call the General Partner on December 19, 2003, to
follow up on a letter, dated November 26, 2003, sent by the Purchaser to the
General Partner relating the request regarding the operations of the
Partnership.
The Purchaser attempted to call the General Partner to follow up on a letter,
dated November 12, 2003, sent by the Purchaser to the General Partner relating
to the transfer of Units accepted for payment in the Purchaser's second tender
offer. Subsequently, the Purchaser received a "Pending Transfer" notice with
respect to the Units expected to be transferred on December 31, 2003.
On December 9, 2003, counsel to the Partnership advised counsel to the Purchaser
via voice mail that the Partnership intended to continue the previous practices
as followed in connection with the Purchaser's previous tender offer, but that
if Starwood consummated a merger prior to year-end in 2003, the Purchaser would
have to deal with Starwood.
Agreements
Pursuant to the Purchaser's first tender offer dated July 24, 2003, as amended
on August 4, 2003, and in the related agreement of sale and accompanying
documents, Unitholders who tendered their Units entered into and executed an
agreement of sale whereby each undersigned Limited Partner, and/or Assignee
Holder or Beneficial Owner or Unitholder agreed to thereby sell, assign,
transfer, convey and deliver to Kalmia Investors, LLC, a Delaware limited
liability company all of such seller's right, title and interest in Units,
including any rights attributable to claims, damages, recoveries, including
recoveries from class action lawsuits, and causes of action accruing to the
ownership of such Units, being sold pursuant to such agreement of sale and the
offer to purchase dated July 24, 2003, as amended, for a purchase price of $550
per Unit. Each such agreement further provided that in the event a distribution
of cash, or any other distribution of value whatsoever is made or declared by
the Partnership on or after July 7, 2003 with respect to the Units being
transferred thereby, the cash price of $550 per Unit to be paid to the
Unitholder would be reduced by the amount of the distribution with respect to
such Units. In addition, each seller, by executing the agreement of sale,
irrevocably constituted and appointed Purchaser as its true and lawful agent,
proxy and attorney-in-fact with respect to the Units with full power of
substitution in respect of certain acts and actions relating to the transfer of
the Units to the Purchaser and the Purchaser's exercise of its rights as the
owner of such Units.
Pursuant to the Purchaser's second tender offer dated October 6, 2003, as
amended October 21, 2003 and as further amended on October 28, 2003, and in the
related agreement of sale and accompanying documents, Unitholders who tendered
their Units entered into and executed an agreement of sale whereby each
undersigned Limited Partner, and/or Assignee Holder or Beneficial Owner or
Unitholder agreed to thereby sell, assign, transfer, convey and deliver to
Kalmia Investors, LLC, a Delaware limited liability company all of such seller's
right, title and interest in Units, including any rights attributable to claims,
damages, recoveries, including recoveries from class action lawsuits, and causes
of action accruing to the ownership of such Units, being sold pursuant to such
agreement of sale and the offer to purchase dated October 6, 2003, as amended,
for a purchase price of $550 per Unit. Each such agreement further provided that
in the event a distribution of cash, or any other distribution of value
whatsoever is made or declared by the Partnership on or after October 1, 2003,
with respect to the Units being transferred thereby, the cash price of $550 per
Unit to be paid to the Unitholder would be reduced by the amount of the
distribution with respect to such Units. In addition, each seller, by executing
the agreement of sale, irrevocably constituted and appointed Purchaser as its
true and lawful agent, proxy and attorney-in-fact with respect to the Units with
full power of substitution in respect of certain acts and actions relating to
the transfer of the Units to the Purchaser and the Purchaser's exercise of its
rights as the owner of such Units.
SECTION 10 Certain Information Concerning the Business of the Partnership and
Related Matters.
Business. The following information was extracted from the Partnership's 2002
Form 10-K. The Purchaser did not prepare any of the information contained in the
2002 Form 10-K and the Purchaser makes no representation as to the accuracy or
completeness of such information.
Westin Hotels Limited Partnership (the "Partnership") and its subsidiary limited
partnerships, The Westin St. Francis Limited Partnership (the "St. Francis
Partnership") and The Westin Chicago Limited Partnership (the "Chicago
Partnership" or the "Hotel Partnership"), each a Delaware limited partnership
(collectively the "Hotel Partnerships"), were formed on April 25, 1986 for the
purpose of acquiring two hotels, The Westin St. Francis in San Francisco,
California (the "St. Francis") and the Michigan Avenue (formerly The Westin
Hotel, Chicago) in downtown Chicago, Illinois (collectively the "Hotels").
The St. Francis and the Michigan Avenue have been managed as part of the Westin
hotel chain since 1945 and 1964, respectively. As a result of the acquisition of
Westin Hotel Company ("Westin") by Starwood Hotels & Resorts Worldwide, Inc.
("Starwood") in 1998, the management agreements for the St. Francis and the
Michigan Avenue were assigned to St. Francis Hotel Corporation ("St. Francis
Corp.") and 909 North Michigan Avenue Corporation ("909 Corp."), respectively.
Westin Realty Corp. ("Westin Realty") is the sole general partner of the
Partnership (the "General Partner"). 909 Corp. and St. Francis Corp. are the
respective general partners of the subsidiary limited partnerships, the Chicago
Partnership and the St. Francis Partnership, which directly own and operate (or
in the case of the St. Francis Corp., owned and operated) each Hotel. Since
January 2, 1998, the General Partner has been a subsidiary of Starwood.
On January 18, 2000, the St. Francis Partnership entered into a definitive
agreement to sell the St. Francis to BRE/ St. Francis L.L.C., an affiliate of
the Blackstone Group, for gross proceeds of $243,000,000. Upon obtaining the
consent of a majority of the limited partners, the sale was consummated on April
26, 2000.
The Hotel Partnerships are engaged solely in the business of owning and
operating the Hotels (as of April 26, 2000, only the Michigan Avenue) and are,
therefore, engaged in only one industry segment.
The Michigan Avenue is operated by Starwood as part of the full-service, upscale
Westin hotel chain. Starwood owns, manages and franchises hotels throughout the
world and the inclusion of the Hotel within its global system provides the
benefits of name recognition, centralized reservations and advertising,
system-wide marketing programs, centralized purchasing and training and support
services. The hotel business in general is highly competitive. To the extent
hotel capacity expands or demand for hotel accommodations decreases, competition
will increase. The demand for particular accommodations and related services are
subject to various factors, including, but not limited to, seasonal variance,
changes in economic conditions, and changes in travel patterns and preferences
(which may be affected by airline schedules, weather conditions or
availability). Specific information regarding competitive conditions at the
Michigan Avenue is set forth in Schedule 2, "Hotel Owned by the Partnership."
The Hotel is managed by a wholly owned subsidiary of Starwood. Because Starwood
also owns, operates, manages and franchises hotels under the St. Regis(R), The
Luxury Collection(R), Sheraton(R), W(R) and Four Points(R) by Sheraton brands,
including other hotels in the Chicago area, potential conflicts of interest may
exist. While Starwood and its affiliates have the right to own, operate and
develop competing hotels, the general partners have a fiduciary duty to conduct
the affairs of the Partnership and the Hotel Partnerships in the best interests
of these entities and their partners.
Neither the Partnership nor the Hotel Partnerships have any employees.
Administrative and Hotel personnel are employees of either Starwood or the
Hotel's general partner. The Hotel and the Hotel Partnership reimburse Starwood
and the general partner for the costs of such employees. However, neither the
Partnership nor the Hotel Partnership is directly responsible for the payment of
executive compensation to the officers of the general partners.
In February 2001, the Partnership retained JLL to market the Michigan Avenue for
sale. In April 2001, formal marketing materials were distributed and discussions
with several potential purchasers subsequently commenced. After the occurrence
of the September 11 attacks, certain of the most qualified potential purchasers
indicated they would expect significant discounts on their preliminary offers
made prior to the attacks. Based on the unstable and depressed hotel real estate
market, resulting from the weakened general worldwide economic environment, the
General Partner did not believe that it was in the best interest of the limited
partners to sell the Michigan Avenue in late 2001 or 2002.
The General Partner also engaged JLL to assist in exploring a refinancing of the
Partnership's debt has recently directed JLL to focus its efforts towards
pursuing refinancing alternatives. On May 15, 2003, the Partnership filed a
Preliminary Proxy Statement seeking the consent of the Limited Partners to the
refinancing of the mortgage loan on the Michigan Avenue (the "Proposed
Refinancing"). In the Proposed Refinancing, the Hotel Partnership or its wholly
owned subsidiary expects to incur new indebtedness in an amount from $70.0
million to $75.0 million from a lender not affiliated with the Partnership or
Starwood. The General Partner has had discussions with potential lenders with a
goal of presenting a refinancing proposal to the limited partners. There can be
no assurance however, that such a proposal will be presented to the limited
partners. In the Partnership's Quarterly Report on Form 10-Q for the quarterly
period ended September 30, 2003, dated November 6, 2003, (the "Third Quarter
2003 10-Q"), the Partnership further stated that "[s]ubsequent to filing the
Preliminary Proxy Statement, the General Partner learned that Column [Financial,
Inc., its anticipated lender,] is not likely to be able to provide financing in
accordance with the terms outlined in the Preliminary Proxy Statement. However,
at this time and subject to today's dynamic lending environment, the General
Partner is not optimistic it will be able to find a lender willing to provide
financing to the Partnership upon terms set forth in the Preliminary Proxy
Statement."
Distributions. The Partnership disclosed in its 2002 Form 10-K and Forms 10-Q
for the first, second, and third quarters of 2003 that it made distributions as
follows:
Date Distributions Per Unit
2003
March 16 $6.72
June 10 $6.72
September 12 $6.72
December 15 $6.72*
2002
March 16 $6.72
June 14 $6.72
September 13 $6.72
December 13 $6.72
2001
March 15 $6.72
June 14 $6.72
September 13 $6.72
December 14 $6.72
- ----------
* Not disclosed in the Partnership's 2003 10-Q Forms.
Set forth below is a summary of certain financial information with respect to
the Partnership, which has been excerpted or derived from the Partnership's 2002
Form 10-K and the Third Quarter 2003 10-Q. More comprehensive financial and
other information is included in such reports and other documents filed by the
Partnership with the Commission, and the following summary is qualified in its
entirety by reference to such reports and other documents and all the financial
information and related notes contained therein. Such reports and other
documents may be examined and copies may be obtained from the offices of the
Commission at the address set forth in the "Introduction." The Purchaser
disclaims any responsibility for the information included in such reports and
documents, and extracted in this Offer to Purchase.
Selected Financial Information
(In Thousands of Dollars, except per Unit amounts)
Fiscal Year Fiscal Year Fiscal Year
Ended 12/31/02 Ended 12/31/01 Ended 12/31/00
-------------- -------------- --------------
Operating Profit 4,026.00 2,937.00 18,772.00(1)
Net Income 1,383.00 559.00 66,139.00(2)
Net Income per Unit 10.20 4.12 487.75(2)
Three Three Nine Nine
Months Months Months Months
Ended Ended Ended Ended
9/30/03 9/30/02 9/30/03 9/30/02
------- ------- ------- -------
Operating Profit (Loss) 2,300 1,609 3,166 1,090
Net Income (Loss) 1,691 949 1,301 (853)
Net Income (Loss) per Unit 12.46 7.00 9.59 (6.29)
Balance Sheet Data (in
thousands, except unit
amounts)
As of 9/30/03 As of 12/31/02 As of 12/31/01
------------- -------------- --------------
Total Assets 96,485 104,233 106,585
Total Liabilities 52,069 58,433 58,576
Total Partners Equity 39,856 41,289 43,551
Units Outstanding 135,600 135,600 135,600
(1)Includes St. Francis results through the sale date on April 26, 2000.
(2)Includes $52,606 gain on the St. Francis sale.
The foregoing summary is qualified in its entirety by reference to the
Partnership's 2002 Form 10-K and the Third Quarter 2003 10-Q and all of the
financial information and related notes contained therein.
For information concerning the properties owned by the Partnership, please refer
to Schedule 2 attached hereto, which is incorporated herein by reference.
SECTION 11 Certain Information Concerning the Purchaser.
Kalmia is a Delaware limited liability company, which was organized for the
purpose of acquiring the Units in the Partnership. The manager of the Purchaser
is Smithtown Bay, LLC, a Delaware limited liability company ("SB"), organized as
a private investment vehicle and which currently manages the Purchaser. The
Purchaser's offices are located at 601 Carlson Parkway, Suite 200, Minnetonka,
MN 55305, and its telephone number is (888) 323-3757. For certain information
concerning the members of SB, see Schedule 1 to this Offer to Purchase. The
Purchaser owns 18,575 Units which is approximately 13.7% of the issued and
outstanding Units.
Except as otherwise set forth herein, (i) neither the Purchaser nor, to the best
knowledge of the Purchaser, any of the persons listed on Schedule 1, or any
affiliate of the Purchaser beneficially owns or has a right to acquire any
Units; (ii) neither the Purchaser nor, to the best knowledge of the Purchaser,
any of the persons listed on Schedule 1, or any affiliate of the Purchaser or
any member, director, executive officer, or subsidiary of any of the foregoing
has effected any transaction in the Units; (iii) neither the Purchaser nor, to
the best knowledge of the Purchaser, any of the persons listed on Schedule 1 or
any affiliate of the Purchaser has any contract, arrangement, understanding, or
relationship with any other person with respect to any securities of the
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, consents, or
authorizations; (iv) there have been no transactions or business relationships
which would be required to be disclosed under the rules and regulations of the
Commission between any of the Purchasers, or, to the best knowledge of the
Purchaser, any of the persons listed on Schedule 1 or any affiliate of the
Purchaser, on the one hand, and the Partnership or affiliates, on the other
hand; and (v) there have been no contracts, negotiations, or transactions
between the Purchaser or to the best knowledge of the Purchaser, any of the
persons listed on Schedule 1 or any affiliate of the Purchaser, on the one hand,
and the Partnership or its affiliates, on the other hand, concerning a merger,
consolidation or acquisition, tender offer (other than as described in Section 8
of this Offer) or other acquisition of securities, an election or removal of the
General Partner (other than as described in Section 8 of this offer), or a sale
or other transfer of a material amount of assets.
Set forth below is a summary of certain unaudited financial information with
respect to Merced from its most recent unaudited statement of financial
condition dated November 30, 2003. Attached as Exhibit (a)(1)-5 to the Schedule
TO are copies of Merced's unaudited financial statements for the years ended
December 31, 2002 and 2001, and Merced's unaudited statements of financial
condition as of November 30, 2003, September 30, 2003, June 30, 2003 and March
31, 2003.
11/30/2003
ASSETS
Cash and cash equivalents $ 11,107,565
Accounts receivable 351,698,520
Securities owned, at fair value 630,359,623
Other assets 160,011
-------------
Total Assets $ 993,325,719
=============
LIABILITIES AND PARTNERS' CAPITAL
Securities sold but not yet purchased, at fair value $ 258,622,681
Accounts payable and other liabilities 37,112,161
-------------
Total Liabilities $ 295,734,842
Partners' capital 697,590,877
-------------
Total Liabilities and Partners' Capital $ 993,325,719
=============
SECTION 12 Source of Funds.
The Purchaser expects that approximately $84,843,125 (exclusive of fees and
expenses) will be required to purchase 117,025 Units. We will pay cash for all
tendered Units using our cash on hand and proceeds from highly liquid securities
in our proprietary portfolio. The Purchaser is not a public company. The Offer
is not contingent on obtaining financing.
SECTION 13 Certain Conditions of the Offer.
On or after the commencement of the Offer and before the Expiration Date
(notwithstanding any other provisions of the Offer) the Purchaser will not be
required to accept for payment or (subject to any applicable rules or
regulations of the Commission, including Rule 14e-1(c) under the Exchange Act
(relating to the Purchaser's obligation to pay for or return tendered Units
promptly after the expiration or termination of the Offer)), to pay for any
Units tendered but not accepted for payment and may amend or terminate the Offer
if: (i) the Purchaser shall not have confirmed to its reasonable satisfaction
that, upon purchase of the Units pursuant to the Offer, the Purchaser will have
full rights to ownership as to all such Units and that the Purchaser will become
a registered owner on the books and records of the Partnership and that the
Purchaser will be the record owner for purposes of any distributions made by the
Partnership to Unitholders; (ii) the Purchaser shall not have confirmed to its
reasonable satisfaction that, upon the purchase of the Units pursuant to the
Offer, the transfer restrictions will have been satisfied; (iii) the Purchaser
shall not have confirmed to its reasonable satisfaction that, upon the purchase
of the Units pursuant to the Offer, the General Partner will give its prior
written consent to the Purchaser becoming a Substituted Limited Partner with
respect to all Units tendered hereby; or (iv) all authorizations, consents,
orders or approvals of, or declarations or filings with, or expirations of
waiting periods imposed by, any court, administrative agency or commission or
other governmental authority or instrumentality, domestic or foreign, necessary
for the consummation of the purchase contemplated by the Offer shall not have
been filed, occurred or been obtained.
Furthermore, notwithstanding any other term of the Offer, the Purchaser will 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 the Offer as to such Units
if, at any time on or after the date of the Offer and before the Expiration Date
any of the following conditions exist:
(a) the acceptance by the Purchaser of Units tendered and not withdrawn pursuant
to the Offer or the transfer of such Units to the Purchaser violates
restrictions in the Limited Partnership Agreement which prohibit any transfer of
Units which would cause a termination of the Partnership or would cause the
Partnership to be taxed as a "publicly traded partnership" under the Internal
Revenue Code;
(b) there shall have been threatened, instituted or pending any action or
proceeding before any court or governmental agency or other regulatory or
administrative agency or commission or by any other person, challenging the
acquisition of any Units pursuant to the Offer or otherwise directly or
indirectly relating to the Offer, or otherwise, in the judgment of the
Purchaser, adversely affecting the Purchaser, the General Partner or the
Partnership;
(c) any statute, rule or regulation shall have been proposed, enacted,
promulgated or deemed applicable to the Offer, or any action or order shall have
been proposed, entered into or taken, by any government, governmental agency, or
other regulatory or administrative agency or authority, which, in the judgment
of the Purchaser, might (i) result in a delay in the ability of the Purchaser or
render the Purchaser unable, to purchase or pay for some or all of the tendered
Units, (ii) make such purchase or payment illegal, or (iii) otherwise adversely
affect the Purchaser or the Partnership;
(d) any change shall have occurred or be threatened (or any condition, event or
development involving a prospective change) in the business, properties, assets,
liabilities, financial condition, capitalization, partners' equity, licenses,
franchises, results of operations, tax status or prospects of the Partnership
which, in the judgment of the Purchaser, is adverse to the Partnership, or the
Purchaser shall have become aware of any facts which, in the judgment of the
Purchaser, have or may have adverse significance with respect to the value of
the Units;
(e) there shall have occurred (i) any general suspension of, or limitation on
prices for or trading in, securities in the over-the-counter market or on any
national securities exchange or quotation system, (ii) a declaration of a
banking moratorium or any suspension of payment in respect of banks in the
United States (whether or not mandatory) or any limitation (whether or not
mandatory) by federal or state authorities, or other event which might have an
adverse affect, on the extension of credit by lending institutions or result in
any imposition of currency controls in the United States, (iii) the commencement
of a war, armed hostilities or other international or national calamity directly
or indirectly involving the United States, (iv) a material change in United
States or other currency exchange rates or a suspension of a limitation on the
markets thereof; or, in the case of any of the foregoing existing at the time of
the commencement of the Offer, a material acceleration or worsening thereof;
(f) it shall have been publicly disclosed or the Purchaser shall have otherwise
learned that (i) a tender or exchange offer for some or all of the Units is
made, or publicly proposed to be made or amended, by another person (including a
"group" within the meaning of Section 13(d)(3) of the Exchange Act) or (ii) any
person or group that prior to such date had filed a statement with the
Commission pursuant to Section 13(d) or (g) of the Exchange Act has increased or
proposes to increase the number of Units beneficially owned by such person or
group as disclosed in such statement by two percent or more of the outstanding
Units;
(g) the Partnership shall have (i) issued, or authorized or proposed the
issuance of, any partnership interests of any class, or any securities
convertible into, or rights, warrants or options to acquire, any such interests
or other convertible securities; (ii) issued or authorized or proposed the
issuance of any other securities, in respect of, in lieu of, or in substitution
for, all or any of the presently outstanding Units; (iii) declared or paid any
distribution, OTHER THAN IN CASH, on any of its partnership interests; (iv)
authorized, proposed or announced its intention to propose any merger,
consolidation or business combination transaction, any acquisition of assets or
securities, disposition of assets or securities or material change in its
capitalization, or any comparable event not in the ordinary course of business
consistent with past practices; or (v) proposed or effected any amendment to the
Partnership's Agreement of Limited Partnership or the Purchaser shall have
become aware that the Partnership or its General Partner have proposed any such
amendment;
(h) the failure to occur of any necessary approval or authorization by any
Federal or state authorities necessary to consummation of the Purchaser of all
or any part of the Units to be acquired hereby, which in the reasonable judgment
of the Purchaser in any such case, and regardless of the circumstances
(including any action of the Purchaser) giving rise thereto, makes it
inadvisable to proceed with such purchase or payment;
(i) the Purchaser or any of its affiliates and the Partnership shall have agreed
that the Purchaser shall amend or terminate the Offer or postpone the payment
for the Units pursuant thereto;
(j) any developments shall have occurred or be threatened that might
substantially impair or encumber those benefits that the Purchaser is attempting
to achieve in this Offer;
(k) 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, in the view of the Purchaser, (i) makes illegal,
delays or otherwise directly or indirectly restrains or prohibits the making of
the Offer or the acceptance for payment of or payment for any Units by the
Purchaser, (ii) imposes, confirms or seeks to impose or confirm limitations on
the ability of the Purchaser effectively to exercise full rights of ownership of
any Units, including, without limitation, the right to vote any Units acquired
by the Purchaser pursuant to the Offer or otherwise on all matters properly
presented to the Partnership's Unitholders, (iii) requires divestiture by the
Purchaser of any Units, (iv) might cause any material diminution of the benefits
expected to be derived by the Purchaser or any of its affiliates as a result of
the transactions contemplated by the Offer, (v) might materially adversely
affect the business, properties, assets, liabilities, financial condition,
capitalization, partners' equity, licenses, franchises, tax status, operations,
results of operations or prospects of the Purchaser or the Partnership, (vi)
challenges the acquisition by the Purchaser of the Units or seeks to obtain any
material damages as a result thereof or (vii) challenges or adversely affects
the Offer;
(l) any of the following shall occur, or the General Partner or the Partnership
shall propose to effect any of the following: (A) a material change in the
capital structure of the Partnership, (B) a material change in the obligations
or rights of Unitholders with respect to the Partnership, (C) a material change
in the indebtedness secured by, or to the management agreement relating to, the
Michigan Avenue Hotel, (D) a material change in the ownership or management of
the Partnership, (E) an issuance or sale of any Units or rights to receive
Units, conditional or otherwise, (F) a distribution (whether cash, non-cash,
in-kind or otherwise) with respect of the Units; or (ii) any event shall occur
that materially damages or causes a material impairment of the Michigan Avenue
Hotel or prevents the Michigan Avenue Hotel from operating as a hotel in a
manner substantially similar to the manner in which it was operating as a hotel
as of the date of this Offer to Purchase and Solicitation Statement; or
(m) the Purchaser shall become aware that any material right of the Partnership
or any of its subsidiaries under any governmental license, permit or
authorization relating to any environmental law or regulation is reasonably
likely to be impaired or otherwise adversely affected as a result of, or in
connection with, the Offer.
The foregoing conditions are for the sole benefit of the Purchaser and its
affiliates and may be asserted by the Purchaser regardless of the circumstances
(including, without limitation, any action or inaction by the Purchaser or any
of its affiliates) giving rise to such condition, or may be waived by the
Purchaser, in whole or in part, from time to time in its sole discretion. The
failure by the Purchaser at any time prior to the Expiration Date to exercise
the foregoing rights will not be deemed a waiver of such rights, which rights
will be deemed to be ongoing and may be asserted at any time and from time to
time until the Expiration Date. The Purchaser does not believe the state of
hostilities in Iraq during the weeks immediately preceding the date of this
Offer triggers the condition described in clause (e) of this Section 13.
Starwood has announced a proposed tender offer. The Purchaser will not consider
an actual tender offer by Starwood on the terms described in its
pre-commencement communications to date to trigger the condition described in
clause (f) of this Section 13. Any determination by the Purchaser concerning the
events described in this Section 13 will be final and binding upon all parties.
SECTION 14 Certain Legal Matters and Required Regulatory Approvals.
General. Except as set forth in this Offer to Purchase, based on its review of
publicly available filings by the Partnership with the Commission and other
publicly available information regarding the Partnership, the Purchaser is not
aware of any licenses or regulatory permits that would be material to the
business of the Partnership, taken as a whole, and that might be adversely
affected by the Purchaser's acquisition of Units as contemplated herein, or any
filings, approvals or other actions by or with any domestic, foreign or
governmental authority or administrative or regulatory agency that would be
required prior to the acquisition of Units by the Purchaser pursuant to the
Offer as contemplated herein. Should any such approval or other action be
required, 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 the Partnership's business, or that certain
parts of the Partnership's or the Purchaser's business might not have to be
disposed of or held separate or other substantial conditions complied with in
order to obtain such approval. The Purchaser's obligation to purchase and pay
for Units is subject to certain conditions (See Section 13 ("Certain Conditions
of the Offer")).
Antitrust. Under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended (the "HSR Act"), and the rules and regulations that have been
promulgated thereunder by the Federal Trade Commission (the "FTC"), certain
acquisition transactions may not be consummated until certain information and
documentary material has been furnished for review by the Antitrust Division of
the Department of Justice (the "Antitrust Division") and the FTC and certain
waiting period requirements have been satisfied. The Purchaser does not
currently believe any filing is required under the HSR Act with respect to its
acquisition of Units contemplated by the Offer.
State Takeover Laws. The Purchaser has not attempted to comply with any state
takeover statutes in connection with the Offer. The Purchaser reserves the right
to challenge the validity or applicability of any state law allegedly applicable
to the Offer and nothing in the Offer, nor any action taken in connection
herewith, is intended as a waiver of that right. In the event that any state
takeover statute is found applicable to the Offer, the Purchaser might be unable
to accept for payment or purchase Units tendered pursuant to the Offer or be
delayed in continuing or consummating the Offer. In such case, the Purchaser may
not be obligated to accept for purchase, or pay for, any Units tendered.
ERISA. By executing and returning the Agreement of Sale, a Unitholder will be
representing that either (a) the Unitholder is not a plan subject to Title I of
the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), or
Section 4975 of the Code, or an entity deemed to hold "plan assets" within the
meaning of 29 C.F.R. Section 2510.3-101 of any such plan, or (b) the tender and
acceptance of Units pursuant to the Offer will not result in a nonexempt
prohibited transaction under Section 406 of ERISA or Section 4975 of the Code.
SECTION 15 Fees and Expenses.
The Purchaser will pay all expenses of the Offer, including certain fees and
expenses of its affiliates. The Purchaser will not pay any fees or commissions
to any broker, dealer or other person for soliciting tenders of Units or
otherwise pursuant to the Offer. However, brokers, dealers, commercial banks and
trust companies and other nominees, if any, will, upon request and prior
approval of the Purchaser, be reimbursed by the Purchaser for reasonable and
customary clerical and mailing expenses incurred by them in forwarding materials
to their customers.
Section 16 Miscellaneous.
THE OFFER IS NOT BEING MADE TO (NOR WILL TENDERS BE ACCEPTED FROM OR ON BEHALF
OF) UNITHOLDERS IN ANY JURISDICTION IN WHICH THE MAKING OF THE OFFER OR THE
ACCEPTANCE THEREOF WOULD NOT BE IN COMPLIANCE WITH THE LAWS OF SUCH
JURISDICTION. THE PURCHASER IS NOT AWARE OF ANY JURISDICTION WITHIN THE UNITED
STATES IN WHICH THE MAKING OF THE OFFER OR THE ACCEPTANCE THEREOF WOULD BE
ILLEGAL.
In any jurisdiction where the securities, blue sky or other laws require the
Offer to be made by a licensed broker or dealer, the Purchaser will engage one
or more registered brokers or dealers that are licensed under the laws of such
jurisdiction to make the Offer. The Purchaser has filed with the Commission the
Schedule TO, together with exhibits, pursuant to Rule 14d-3 of the General Rules
and Regulations under the Exchange Act, furnishing certain information with
respect to the Offer, and may file amendments thereto. Such Schedule TO and any
amendments thereto, including exhibits, may be examined and copies may be
obtained from the Commission as set forth above in "Introduction."
No person has been authorized to give any information or to make any
representation on behalf of the Purchaser not contained in this Offer to
Purchase or in the Agreement of Sale and, if given or made, any such information
or representation must not be relied upon as having been authorized. Neither the
delivery of the Offer to Purchase nor any purchase pursuant to the Offer shall,
under any circumstances, create any implication that there has been no change in
the affairs of the Purchaser or the Partnership since the date as of which
information is furnished or the date of this Offer to Purchase.
KALMIA INVESTORS, LLC
By: Smithtown Bay, LLC
Its Manager
By: Global Capital Management, Inc.
Its Manager
By: /s/ Michael J. Frey
--------------------
Name: Michael J. Frey
Title: Chief Executive Officer
Dated: February 3, 2004
SMITHTOWN BAY, LLC
By: Global Capital Management, Inc.
Its Manager
By: /s/ Michael J. Frey
--------------------
Name: Michael J. Frey
Title: Chief Executive Officer
Dated: February 3, 2004
MERCED PARTNERS LIMITED PARTNERSHIP
By: Global Capital Management, Inc.
Its General Partner
By: /s/ Michael J. Frey
--------------------
Name: Michael J. Frey
Title: Chief Executive Officer
Dated: February 3, 2004
GLOBAL CAPITAL
MANAGEMENT, INC.
By: /s/ Michael J. Frey
--------------------
Name: Michael J. Frey
Title: Chief Executive Officer
Dated: February 3, 2004
MICHAEL J. FREY
By: /s/ Michael J. Frey
--------------------
Dated: February 3, 2004
JOHN D. BRANDENBORG
By: /s/ John D. Brandenborg
-----------------------
Dated: February 3, 2004
SCHEDULE 1
INFORMATION REGARDING THE PURCHASER
Kalmia Investors, LLC ("Kalmia") is a Delaware limited liability company formed
on July 31, 1996. Smithtown Bay, LLC is a Delaware limited liability company
formed on July 29, 1996, and was named the manager of Kalmia Investors, LLC on
January 3, 2003. Smithtown Bay's manager is Global Capital Management, Inc.
("GCM"), a Delaware corporation formed on September 23, 1988. Merced Partners
Limited Partnership, a Delaware limited partnership formed on January 19, 1990,
of which GCM is the general partner, is the sole owner of all of the members of
Kalmia, including its manager, Smithtown Bay. GCM is controlled by its two
officers and directors, John D. Brandenborg and Michael J. Frey. Each Party's
principal executive offices are located at 601 Carlson Parkway, Suite 200,
Minnetonka, Minnesota 55305.
PRESENT PRINCIPAL OCCUPATION FIVE-YEAR EMPLOYMENT HISTORY
Michael J. Frey
Mr. Frey has been and continues to be Chairman, Chief Executive Officer,
Secretary and a Director of GCM, from January 1, 1999 to present. Mr. Frey was
Secretary, Vice-President and a Director of GCM from 1988 to December 31, 1998.
John D. Brandenborg
Mr. Brandenborg has been and continues to be President, Chief Operating Officer,
Treasurer and a Director of GCM, from January 1, 1999 to present. From August
1988 to December 31, 1998, Mr. Brandenborg was Vice-President, Treasurer and a
Director of GCM.
SCHEDULE 2
HOTEL OWNED BY THE PARTNERSHIP
The following information on the Properties owned by the Partnership was
extracted from the Partnership's 2002 Form 10-K.
The Partnership owns one hotel, The Westin Michigan Avenue, Chicago (formerly
The Westin Hotel, Chicago) in Chicago, Illinois.
The Westin Michigan Avenue, Chicago has 751 guest rooms, including 28 suites,
and 19 meeting rooms. The Hotel has a fitness center, a business center and
provides retail space for several specialty stores and a gift shop. It also
operates a restaurant and bar, and has an underground parking garage with 209
spaces.
More comprehensive financial and other information is included in such report
and other documents filed by the Partnership with the Commission, and the
following is qualified by reference to such report and other documents. Such
report and other documents may be examined and copies may be obtained from the
offices of the Commission at the addresses set forth in the "Introduction"
section of the Offer to Purchase. The Purchaser disclaims any responsibility for
the information included in such report and documents, and extracted in this
Schedule 2, as well as any changes which may have taken place in the information
in the report since the date it was issued.
The Agreement of Sale and any other required documents should be sent or
delivered in the pre-addressed envelope accompanying this Offer to Purchase by
each tendering Unitholder or its broker, dealer, commercial bank, credit union,
trust company or other nominee to the Purchaser at the following address:
KALMIA INVESTORS, LLC
601 Carlson Parkway, Suite 200
Minnetonka, MN 55305
FOR MORE INFORMATION OR FOR FURTHER ASSISTANCE WITH THE PROCEDURE OF TENDERING
YOUR UNITS PLEASE CALL THE PURCHASER'S TOLL-FREE INFORMATION LINE AT (800)
547-0854.