SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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SCHEDULE 14D-9
SOLICITATION/RECOMMENDATION STATEMENT
PURSUANT TO SECTION 14(d)(4) OF THE
SECURITIES EXCHANGE ACT OF 1934
MARRIOTT RESIDENCE INN II LIMITED PARTNERSHIP
(Name of Subject Company)
MARRIOTT RESIDENCE INN II LIMITED PARTNERSHIP
(Name of Person Filing Statement)
Units of Limited Partnership Interests
(Title of Class of Securities)
571641208
(CUSIP Number of Class of Securities)
Robert E. Parsons, Jr.
President and Manager
RIBM Two LLC
Marriott Residence Inn II Limited Partnership
10400 Fernwood Road
Bethesda, Maryland 20817
(301) 380-2070
(Name, Address and Telephone Number of
Person Authorized to Receive Notice and Communications
On Behalf of the Person Filing Statement)
COPIES TO:
J. Warren Gorrell, Jr., Esq.
Joseph G. Connolly, Jr., Esq.
Hogan & Hartson L.L.P.
555 13th Street, N.W.
Washington, D.C. 20004
(202) 637-5600
[ ] CHECK THE BOX IF THE FILING RELATES SOLELY TO PRELIMINARY COMMUNICATIONS
MADE BEFORE THE COMMENCEMENT OF A TENDER OFFER
ITEM 1. Subject Company Information.
The name of the subject company is Marriott Residence Inn II Limited
Partnership, a Delaware limited partnership (the "Partnership"). The principal
executive offices of the Partnership are located at 10400 Fernwood Road,
Bethesda, Maryland 20817; the telephone number for the Partnership at its
principal executive offices is 301-380-2070. The general partner of the
Partnership is RIBM Two LLC (the "General Partner").
The class of equity securities to which this Solicitation/
Recommendation Statement on Schedule 14D-9 (this "Statement") relates is the
Partnership's units of limited partnership interests (the "Units"). As of
March 1, 2002, there were a total of 70,000 outstanding Units.
ITEM 2. Identity and Background of Filing Person.
The filing person is the subject company. The principal executive
offices and telephone number of the Partnership are set forth in response to
Item 1 of this Statement.
This Statement relates to the tender offer by Madison Liquidity
Investors 117, LLC, a Delaware limited liability company (the "Purchaser"), and
MRI Partners LLC, Madison Capital Management, LLC ("Madison"), Haberhill LLC
("Haberhill"), Bryan E. Gordon, Ronald M. Dickerman and Douglas H. S. Greene, as
co-bidders, disclosed in a Tender Offer Statement on Schedule TO dated February
15, 2002, and filed at the Securities and Exchange Commission on February 19,
2002, to purchase up to 8,341 Units for $300 per Unit in cash, reduced by any
cash distributions made or declared on or after February 15, 2002, with interest
at the rate of 7% per annum from the expiration date of the tender offer to the
date of payment, upon the terms and subject to the conditions set forth in the
Offer to Purchase dated February 15, 2002 (the "Offer to Purchase").
Based on the information in the Schedule TO, the business address of
the Purchaser is 410 Park Avenue, Suite 540, New York, New York 10022; telephone
number 212-687-0518.
ITEM 3. Past Contacts, Transactions, Negotiations and Agreements.
There is no material agreement, arrangement or understanding or any
material actual or potential conflict of interest between: (i) the Partnership
and the General Partner; (ii) the Partnership and the Purchaser or (iii) the
General Partner and the Purchaser except as described below.
The General Partner is entitled to receive distributions of the
Partnership's operating cash flow and net sale or refinancing proceeds as set
forth in the Partnership's Amended and Restated Agreement of Limited
Partnership, dated as of November 23, 1988 (the "Partnership Agreement"), and
summarized below.
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The Partnership generally distributes cash available for distribution
as follows: (i) first, 99% to the limited partners and 1% to the General
Partner, until the partners have received, with respect to such year, an amount
equal to 10% of their Net Capital Investment, defined as the excess of original
capital contributions over cumulative distributions of net refinancing and sales
proceeds ("Capital Receipts"); (ii) second, remaining cash available for
distribution will be distributed as follows, depending on the amount of Capital
Receipts previously distributed:
(a) 99% to the limited partners and 1% to the General Partner, if
the partners have received aggregate cumulative distributions
of Capital Receipts of less than 50% of their original capital
contributions; or
(b) 90% to the limited partners and 10% to the General Partner, if
the partners have received aggregate cumulative distributions
of Capital Receipts equal to or greater than 50% but less than
100% of their original capital contributions; or
(c) 75% to the limited partners and 25% to the General Partner, if
the partners have received aggregate cumulative distributions
of Capital Receipts equal to 100% or more of their original
capital contributions.
Cash available for distribution means, with respect to any fiscal
period, the cash revenues of the Partnership from all sources during the fiscal
period, other than Capital Receipts less (i) all cash expenditures of the
Partnership during such fiscal period, including, without limitation, debt
service, repayment of advances made by the General Partner, fees for management
services and administrative expenses (excluding expenditures incurred by the
Partnership in connection with a transaction resulting in Capital Receipts), and
(ii) such reserves as may be determined by the General Partner in its reasonable
discretion to be necessary to provide for the foreseeable cash needs of the
Partnership or for the maintenance, repair or restoration of the Partnership's
Inns.
As of December 31, 2001, the Partnership had distributed a total of
$46,101,000 to the partners ($652 per limited partner unit) since inception. The
Partnership made no distributions during the years ended December 31, 2001, 2000
and 1999. In 1998, $3,536,000 ($50 per limited partner unit) was distributed
from 1997 cash flow from operations. No distributions of Capital Receipts have
been made since inception.
Under the Partnership Agreement, the General Partner has the exclusive
right to conduct the business and affairs of the Partnership subject only to the
management agreement. The General Partner is required to devote to the
Partnership such time as may be necessary for the proper performance of its
duties, but the officers and managers of the General Partner are not required to
devote their full time to the performance of such duties. The Partnership
reimburses the General Partner or Host Marriott, L.P., the owner of a Class A 1%
managing economic interest in the General Partner ("Host Marriott"), as
applicable, for the cost of providing such administrative and other services to
the extent that any officer or manager devotes time to the Partnership.
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The following sets forth amounts paid by the Partnership to Host
Marriott and its subsidiaries, including the General Partner, as distributions
with respect to the general partner interest and for the cost of providing all
administrative and other services as General Partner for the years ended
December 31, 2001, 2000 and 1999 (in thousands):
2001 2000 1999
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(unaudited)
Administrative expenses reimbursed..... $ 225 $ 374 $ 105
Cash distributions..................... -- -- --
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$ 225 $ 374 $ 105
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ITEM 4. The Solicitation or Recommendation.
(a) Solicitation or Recommendation. The General Partner is not
expressing an opinion, nor making a recommendation, and is remaining neutral
towards the Offer to Purchase.
(b) Reasons. In deciding to remain neutral on the Offer to Purchase,
the General Partner considered the following:
As previously disclosed to the limited partners, consistent with the
terms of the Partnership Agreement and the original investment objectives
contemplated at the formation of the Partnership, the General Partner is
currently attempting to sell the Marriott Residence Inns owned by the
Partnership ("Inns") or, in the alternative, find a buyer for the Units. In this
regard, the General Partner engaged Merrill Lynch & Co. as its financial advisor
in April 2001 to solicit bids from interested parties. As part of that process,
Merrill Lynch prepared a list of over 20 parties that Merrill Lynch believed
might have an interest in acquiring either the Partnership's Inns or the Units
and contacted those parties. Several of the parties contacted requested
additional information, conducted preliminary due diligence of the Partnership
and submitted acquisition proposals to the Partnership. As a result of that
process, and as previously disclosed, the Partnership had begun exclusive
discussions with one potential acquirer.
Shortly after the events of September 11, 2001, these discussions were
suspended to allow the parties to determine the effect on the business and
operations of the Partnership of the terrorist attacks of September 11, 2001, as
well as the current economic conditions generally. In this regard, limited
partners should be aware that the Partnership's unaudited financial results for
the fourth quarter of fiscal 2001 indicate a decrease in revenue per available
room and operating profit of 16.0% and 10.3%, respectively, from the fourth
quarter of fiscal 2000. In addition, the Inns experienced significantly weaker
than expected operating results in January 2002. The General Partner understands
that the potential acquirer is continuing to evaluate the possibility of a
transaction with the Partnership, taking into account the current operating
results of the Inns and the general economic environment. Accordingly, there can
be no assurance that a transaction will occur or, if it were to occur, of the
timing or ultimate value of any such transaction. In addition, if a transaction
were to occur, it would require approval of the limited partners as well as the
consent of the Partnership's lenders.
Although the General Partner is not making a recommendation at this
time, the General Partner believes that limited partners should consider the
following in making their own decision about whether to accept or reject the
offer:
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. Over the past several years, the General Partner has retained cash in the
Partnership in anticipation of financing required capital improvements to
the Inns. The Partnership's unaudited financial results for the fourth
quarter of fiscal 2001 indicate that the Partnership's cash balance as of
December 28, 2001 was approximately $25.1 million (approximately $359 per
Unit).
. In light of the increased competition in the extended-stay hotel market,
the manager of the Inns has proposed additional improvements to the Inns
totaling approximately $59 million over the next five years that are
intended to enhance their overall value and competitiveness. These
improvements include total suite refurbishments at a majority of the Inns
as part of the Partnership's ongoing routine capital replacement.
. The General Partner has reviewed the manager's proposed Inn renovations and
improvements with respect to fiscal 2002 and has agreed to undertake
certain of these capital improvements. The improvements that the General
Partner has agreed to undertake involve Inns that were built between 1985
and 1989 and that have not been renovated in four to nine years. The
General Partner does not believe that cash flows from the operations of the
Inns will be sufficient to fund these improvements. As a result, the
General Partner expects to fund these improvements with approximately $9.7
million (approximately $138 per Unit) of the Partnership's existing cash
reserves. Actual funding of these improvements is not expected to occur
until the end of this fiscal year. The General Partner will continue to
monitor the capital expenditure program with a view towards maximizing
limited partner value.
. The manager of the Inns also has proposed additional improvements to the
Inns that are intended to be implemented in fiscal years subsequent to
2002. The General Partner will review and assess these additional proposed
improvements annually at the end of each fiscal year.
. The General Partner does not believe that cash from Inn operations and the
Partnership's remaining cash reserves will be sufficient to fund the
Partnership's required debt service payments and all of the proposed
additional capital expenditures requested by the manager of the Inns. As a
result, at the present time, it appears unlikely that cash distributions
will be possible for the next several years.
. Limited partners will have to make the determination as to whether to wait
for a possible transaction resulting from Merrill Lynch's solicitation
efforts or to sell their Units now at the tender offer price. If a limited
partner is interested in liquidating its Units immediately, the tender
offer gives the limited partner this opportunity.
. Additionally, there can be no assurance that a better offer for the
purchase of the Units will be available now or in the future. In this
regard, limited partners should be aware that, based upon the Partnership's
current results of operations, its debt-service obligations, its
capital-expenditure requirements for the next several years and the
purchase price range discussed with the potential acquirer prior to
September 11, 2001, the General Partner does not believe that, at the
current time, the aggregate consideration, including any potential cash
distribution made in connection with any such transaction, that a unit
holder would receive in any acquisition transaction would significantly
exceed the tender offer price.
. Although the General Partner continues to pursue a sale of the Partnership,
there can be no assurance that a transaction will occur or, if it were to
occur, of the timing or ultimate value of any transaction. If the General
Partner is unable to find an acquirer for the Partnership, or finds the
consideration offered by the acquirer to be below an acceptable level, the
General Partner will terminate the sale process and continue to conduct the
business and affairs of the Partnership. If the Partnership continues to
operate, the General Partner will continue to pursue all options at its
disposal to maximize the value of the Partnership to the limited partners.
(c) Intent to Tender. Neither the Partnership nor the General Partner
or, to the knowledge of the Partnership, any affiliate of the Partnership or the
General Partner intends to tender any Units that are held of record or
beneficially by such person to the Purchaser.
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ITEM 5. Persons/Assets, Retained, Employed, Compensated or Used.
Neither the Partnership, the General Partner nor any person acting on
their behalf has employed, retained or compensated, or intends to employ, retain
or compensate, any person to make solicitations or recommendations to the
limited partners on their behalf concerning the Offer to Purchase.
ITEM 6. Interest in Securities of the Subject Company.
Neither the Partnership nor the General Partner or any of their
executive officers, directors, affiliates or subsidiaries have effected any
transactions in the Units during the past sixty days.
ITEM 7. Purposes of the Transaction and Plans or Proposals.
(a) The Partnership has not undertaken or engaged in any negotiations
in response to the Offer to Purchase which relates to: (i) a tender offer or
other acquisition of the Units by the Partnership, any of its subsidiaries or
any other person; (ii) any extraordinary transaction, such as a merger,
reorganization or liquidation, involving the Partnership; (iii) a purchase, sale
or transfer of a material amount of assets by the Partnership; or (iv) any
material change in the present dividend rate or policy, or indebtedness or
capitalization of the Partnership. However, as described in Item 4 above, prior
to receipt of the Offer to Purchase, the Partnership had commenced its efforts
to find a party interested in acquiring either the Partnership's Inns or, in the
alternative, the Units.
(b) There are no transactions, resolutions, agreements in principle or
signed contracts in response to the Offer to Purchase that relate to or would
result in one or more of the events referred to in Item 7(a).
ITEM 8. Additional Information.
None.
ITEM 9. Exhibits.
(a)(1) Letter to Limited Partners.
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After due inquiry and to the best of my knowledge and belief, I certify
that the information set forth in this statement is true, complete and correct.
MARRIOTT RESIDENCE INN II LIMITED
PARTNERSHIP
By: RIBM Two LLC
General Partner
Date: March 5, 2002 /s/ Robert E. Parsons, Jr.
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Robert E. Parsons, Jr.
President and Manager
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