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CROSSON DANNIS, INC.
REAL ESTATE VALUATION AND CONSULTATION
CAMPBELL CENTRE II
8150 NORTH CENTRAL EXPRESSWAY, SUITE 950
DALLAS, TEXAS 75206
(214)739-3388
FAX (214)739-4592
cdrevc@aol.com
Stephen T. Crosson, MAI, SRA David B. Acree, MAI
Charles G. Dannis, MAI, SRA Norman L. Archibald, MAI, SRA
Deborah A. Wilson, JD John Scarborough, SRA
October 3, 1996
Board of Directors of McNeil Investors, Inc., as the
General Partner of McNeil Partners, L.P., as the
General Partner of McNeil Real Estate Fund X, Ltd.
c/o McNeil Partners, L.P., its general partner
13760 Noel Road, Suite 700, LB 700
Dallas, Texas 75240
Re: Analysis of Present Estimated Liquidation Value of Unit of Limited
Partnership Interest in McNeil Real Estate Fund X, Ltd. a California
limited partnership (the "Partnership")
Gentlemen:
We understand that the Partnership has received an offer to purchase any and
all of the outstanding units of limited partnership interest in the Partnership
(each, a "Unit" and collectively, the "Units") from High River Limited
Partnership, Riverdale LLC, Unicorn Associates Corporation and Carl C. Icahn
dated September 20, 1996, (the "HR Offer"). In connection with your analysis of
the HR Offer you have requested, and accordance with your request, we have
completed, an analysis of the Present Estimated Liquidation Value of a unit of
limited partnership interest in the Partnership.
The effective date of our conclusions is October 3, 1996.
Our conclusions are specifically based upon and subject to several important
assumptions and limiting conditions presented in our report to you which is
attached to this letter (the "Report").
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Board of Directors of McNeil Investors, Inc.
October 3, 1996
Page Two
After employment of the limited valuation processes and methodology described
in the Report and subject to the assumptions, limiting conditions and other
considerations described in the Report, we have estimated a Present Estimated
Liquidation Value (as defined in the Report) of a Unit, effective as of October
3, 1996, of $134 TO $145 PER UNIT. This estimate is not intended to be and
does not constitute an opinion as to the fair market value of a Unit. In
making our estimate of the Present Estimated Liquidation Value of a Unit as set
forth above, based upon the limited valuation processes and methodology
described in this Report and subject to the assumptions, limiting conditions
and other considerations set forth in this Report, we have estimated a gross
amount of cash that the Partnership would have available to distribute to the
holders of Units out of the net proceeds of the Liquidation (as defined in the
Report) over the Period of Liquidation (as defined in the Report), effective as
of October 3, 1996, of approximately $250 PER UNIT.
In addition, you have asked us for our opinion as to the adequacy, from a
financial point of view, to the holders of the Units of the consideration
offered to such holders in the HR Offer as compared to the Present Estimated
Liquidation Value of a Unit. Based on the limited valuation processes and
methodology described in the attached report and subject to the assumptions and
limiting conditions and other considerations set forth in the attached report,
we are of the opinion that, as of October 3, 1996, the consideration offered to
the holders of Units in the HR Offer is inadequate, from a financial point of
view, to such holders of Units as compared to the Present Estimated Liquidation
Value of a Unit as set forth above.
This letter must remain attached to, and is a permanent part of, the
accompanying Report for the conclusions in such Report to be considered valid.
Neither this letter, the Report nor any part hereof or thereof is intended to
be nor does it constitute a recommendation to any holder of a Unit as to
whether or not to accept the consideration offered for such Units in the HR
Offer, whether as a means for such holders of Units to liquidate their Units or
otherwise.
The Report and the conclusions expressed therein are for the use of the board
of directors of McNeil Investors, Inc., in its capacity as the general partner
of McNeil Partners, L.P., the general partner of the Partnership and the use of
the Partnership.
Respectfully submitted,
Crosson Dannis, Inc.
CDI/ab
Attachments
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ANALYSIS OF PRESENT ESTIMATED LIQUIDATION VALUE
REPORT OF CROSSON DANNIS INC.
RE: FUND X, LTD.
PURPOSE, DEFINITIONS AND SCOPE
PURPOSE
The PURPOSE of the analysis of Crosson Dannis, Inc. is to: (1) estimate the
Present Estimated Liquidation Value (as defined below) of a unit of limited
partnership interest (each, a "Unit" and collectively, the "Units") in McNeil
Real Estate Fund X, Ltd. (the "Partnership") and (2) to give our opinion as to
the adequacy, from a financial point of view, to the holders of Units, of the
consideration offered by High River Limited Partnership, Riverdale LLC, Unicorn
Associates Corporation and Carl C. Icahn (the "Bidders") in the offer, dated
September 20, 1996, made by the Bidders to the holders of the Units to purchase
any and all of the Units (the "HR Offer"). The effective date of our conclusion
and opinion is October 3, 1996.
CERTAIN LIMITATIONS
We have not been requested to opine as to, and this report does not include or
constitute an opinion regarding or otherwise address, the fair market value of
a Unit. The general partner of the Partnership may, in the future, select and
use other strategies for realizing the value of the Partnership's assets. Our
analysis and conclusions described herein cannot and do not take into account
the potential value of the Units if other strategies are employed. This report
is not intended to be and does not constitute a recommendation to any holder of
a Unit as to whether or not to accept the consideration offered for such Units
in the HR Offer, whether as a means for such holders of Units to liquidate
their Units or otherwise.
DEFINITIONS
When used herein, the following terms have the meanings set forth below:
"PARTNERSHIP FINANCIAL MODEL" means the financial model for the Partnership,
including projections, prepared by the Partnership's management based on
certain assumptions.
"PERIOD OF LIQUIDATION" means the period during which the assets of the
Partnership are assumed to be sold and the net proceeds distributed to the
holders of the Units, which period is from January 1, 1997 to December 31,
2001.
"PRESENT ESTIMATED LIQUIDATION VALUE" means the present value of cash
distributable out of the net proceeds of an assumed orderly liquidation of the
Partnership's assets to the holders of Units over the Period of Liquidation.
CROSSON DANNIS, INC.
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"LIQUIDATION" means an assumed orderly liquidation of the Partnership's assets
commencing at the beginning of the Period of Liquidation and ending by the end
of the Period of Liquidation and conducted under the following conditions:
a. The consummation of asset sales will occur within the Period of
Liquidation.
b. The buyers and the seller all act prudently and knowledgeably in
connection with the sale and purchase of the assets.
c. The seller is not under compulsion to sell within an inordinately
short time.
d. The buyers are typically motivated.
e. Both buyers and the seller are acting in what they consider their
best interests.
f. An adequate marketing effort will be made in the specified time
allowed for the completion of a sale of any asset.
g. Payment for the assets will be made in cash in U.S. dollars or in
terms of financial arrangements comparable thereto.
h. The price for each asset sold represents the normal consideration
that would be paid for that asset if the sale were unaffected by
special or creative financing or sales concessions granted by
anyone associated with the sale.
RELATIONSHIP TO CLIENT
Crosson Dannis, Inc.'s relationship to the client is that of an independent
third-party consultant. Neither Crosson Dannis, Inc. nor any shareholder,
director, officer or employee of Crosson Dannis, Inc. has an interest in the
Partnership. The fee paid to Crosson Dannis, Inc. in connection with rendering
of this Report has not been contingent upon the conclusions reached or the
substance of this Report.
SCOPE
The scope of our analysis included a number of independent investigations and
analyses. To a significant extent our analysis was based on information
provided to Crosson Dannis, Inc. by the Partnership and its management. The
valuation processes and methodology employed by Crosson Dannis, Inc. is as
outlined below:
1. Reviewed property level files for each real property owned by the
Partnership.
a. Identified those real properties not currently operating
on a stabilized basis.
b. Inspected a representative sampling of real properties.
CROSSON DANNIS, INC.
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2. Reviewed the Partnership's Quarterly Report on Form 10-Q for the
quarter ended June 30, 1996.
3. Accumulated market data as we deemed appropriate.
4. Reviewed the Partnership Financial Model, including the financial
projections that formed a part of the Partnership Financial
Model.
a. Modified certain property level assumptions on which the
Partnership Financial Model and the projections contained
in it were based as we deemed appropriate.
b. Modified certain partnership level assumptions on which
the Partnership Financial Model and the projections
contained in it were based as we deemed appropriate.
5. Interviewed management of the Partnership regarding the business
and operations of the Partnership and the assumptions on which
the Partnership Financial Model and the projections contained
therein were based, particularly those assumptions made at the
partnership level.
6. Reviewed the HR Offer.
7. Based upon the above, performed a discounted cash flow analysis
using the Partnership Financial Model.
It is most important to understand that the scope of work did not include a
determination or appraisal of the market value or any other measure of value of
the individual real properties owned by the Partnership.
ADDITIONAL ASSUMPTIONS AND LIMITING CONDITIONS
The following additional assumptions and limiting conditions are integral to
the understanding of the conclusions reached herein.
PRUDENT AND COMPETENT MANAGEMENT
We have assumed that the management of the Partnership and each of its
assets is competent, prudent and reasonable relative to current market
standards for partnerships similar in structure and of similar assets.
We have also assumed that the leasing of the real property assets of the
Partnership is competent and prudent and reasonable in accordance with
current market standards for similar properties.
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USE AND PURPOSE OF THIS REPORT
This Report is based upon our review and analysis of the facts and data
contained in the information, documents and files that you and others
have provided to us. We assume no responsibility for changes in market,
economic or other conditions or the factual basis of this Report after
the date of this opinion or any inaccuracy or incompleteness of such
information, files or documents that could affect this Report. We
assume no responsibility for updating this Report. The conclusions
expressed in this Report are for the specific purpose as set forth in
this Report and are invalid if used for any other purpose. This Report
is for the use of the Board of Directors of McNeil Investors, Inc. in
its capacity as the general partner of McNeil Partners, L.P., general
partner of the Partnership, and the use of the Partnership. THIS REPORT
IS NOT INTENDED TO BE AND DOES NOT CONSTITUTE A RECOMMENDATION TO ANY
LIMITED PARTNER OF THE PARTNERSHIP AS TO ANY MATTER.
PARTNERSHIP ASSETS
We assume no responsibility for the legal description of any real
property assets of the Partnership reviewed or title to those assets.
With your concurrence, with respect to the assets, including real
property, and business interests of the Partnership, we have assumed:
The Partnership holds good and, as the case may be under
applicable state laws, marketable or indefeasible title to its
assets.
The Partnership, the General Partner and all other pertinent
persons have fully complied with all applicable federal, state
and local laws and regulations that would otherwise adversely
affect the value of the assets of the Partnership.
All required licenses, certificates of occupancy, consents or
legislative or administrative authority from any federal, state
or local governmental authority or agency has been or will be
obtained or renewed for any use of the assets of the Partnership
on which this Report is based, whether in whole or part.
As to the real property assets of the Partnership, all existing
leases, subleases and other use agreements are in full force and
effect and each party to all such agreements are in full
compliance with their obligations thereunder and no default of
event of default exists with respect to any such agreements.
The assets of the Partnership are all freely transferable.
No asset of the Partnership is subject to any option, right of
first offer, right of first refusal or other encumbrance that
could result in any obligation of the Partnership to sell
otherwise dispose of such asset for an amount less than the then
fair market value of such asset.
CROSSON DANNIS, INC.
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THE UNITS
We have assumed that the holders of the Units acquired the Units and
continue to hold them as long-term investments and with the
understanding that there is no active trading market in the Units and
that the Units are illiquid. We have not considered the circumstances
of any particular investor in reaching the conclusions expressed in this
Report.
LEGAL OR OTHER SPECIALIZED EXPERTISE
No opinion is intended to be expressed for matters which require legal
or specialized expertise, investigation, or knowledge beyond that
customarily employed by professional valuation firms. We have assumed
that legal descriptions and information concerning the partnership
agreement of the Partnership given to us are accurate.
ACCURACY OF FINANCIAL AND THIRD PARTY DATA
We have assumed and relied upon the accuracy and completeness of the
financial and other information used by us in arriving at our
conclusions expressed in this Report without assuming responsibility for
the independent verification of such information and have further relied
upon the assurances of management of the Partnership and its general
partner that they are not aware of any facts that would make such
information inaccurate, incomplete or otherwise misleading in any
material respect. With respect to any financial projections of the
Partnership provided to us, we have assumed that such projections have
been reasonably prepared on a basis reflecting the best currently
available estimates and judgments of the management of the Partnership
as to the future financial performance of the Partnership. However, for
purposes of our analysis, and based upon our review of certain
independent market data, we also may have utilized certain adjustments
to any such projections. If so, those adjustments are described in this
Report. In arriving at our conclusion in this Report, we have not
conducted a physical inspection of all of the Partnership's properties,
but have obtained and reviewed existing market data on certain assets of
the Partnership. Our conclusion is necessarily based upon market,
economic and other conditions as they exist on, and can be evaluated as
of, the date of this Report.
OPINION DATE
The date of this Report is October 3, 1996. The dollar amount reported
is based upon the purchasing power of the U.S. dollar as of this date.
Crosson Dannis, Inc. assumes no responsibility for economic or physical
factors occurring subsequent to the date of this Report.
INDEPENDENCE
Neither Crosson Dannis, Inc. nor any shareholder, director, officer or
employee of Crosson Dannis, Inc. has any interest in the Partnership.
The fee paid to Crosson Dannis, Inc. in connection with rendering of
this Report has not been contingent upon the conclusions reached or the
substance of this Report.
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RESPONSIBILITY FOR ASSUMPTIONS
Many of the assumptions made in the preparation of this Report and in
reaching our opinion expressed in this Report are beyond the control of
the Partnership, its general partner and any other person. Such
assumptions may or may not prove to be correct. Neither Crosson Dannis,
Inc. nor any of its shareholders, officers, directors, employees or
agents shall have any responsibility for the accuracy of such
assumptions.
EFFECT OF LIQUIDATION EXPENSE
The conclusions expressed herein specifically disregard the impact(s) of
litigation expense resulting from tender defense costs and/or class
action litigation.
DESCRIPTION OF PARTNERSHIP
The Partnership is a California limited partnership. According to the general
partner, 135,030 units of limited partnership are currently outstanding.
Real estate assets owned by the partnership are as follows:
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NAME/LOCATION PROPERTY TYPE
================================================================================
Briarwood (Tucson)/1300 E. Ft. Lowell Road APT
Tucson, AZ
- --------------------------------------------------------------------------------
Coppermill/7110 S. Granite APT
Tulsa, OK
- --------------------------------------------------------------------------------
Orchard, The/5350 Cider Mill Lane APT
Indianapolis, IN
- --------------------------------------------------------------------------------
Quail Meadows/9100 E. Harry APT
Wichita, KS
- --------------------------------------------------------------------------------
Regency Park/1604-C Reed Road APT
Fort Wayne, IN
- --------------------------------------------------------------------------------
Sandpiper/8200 N. Sheridian Boulevard APT
Westminister, CO
- --------------------------------------------------------------------------------
Spanish Oaks/3206 Cripple Creek APT
San Antonio, TX
- --------------------------------------------------------------------------------
La Plaza Business Center/4220 S Maryland OFC
Parkway
Las Vegas, NV
- --------------------------------------------------------------------------------
Cave Spring Corners/3901 Brambelton Avenue RTL
Roanoke, VA
- --------------------------------------------------------------------------------
Iberia Plaza/S Lewis Street RTL
New Iberia, LA
- --------------------------------------------------------------------------------
Lakeview Plaza/2909 Richmond Road RTL
Lexington, KY
- --------------------------------------------------------------------------------
Parkway Plaza/1303 M.L.K., Jr Drive RTL
Lafayette, LA
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CROSSON DANNIS, INC.
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PARTNERSHIP VALUATION
The conclusions reached this Report are the result in part of an analysis of
the Partnership Financial Model developed and provided by the management of the
Partnership, including McNeil Partners, L.P., its general partner, and McNeil
Investors, Inc., the general partner of McNeil Partners, L.P. Our estimate of
the Present Estimated Liquidation Value is based on a valuation analysis that
was a discounted cash flow analysis applied to the cash distributions
anticipated to be received by the holders of Units based on the Partnership
Financial Model. That analysis is based in part on the assumption that the
Partnership will commence the Liquidation at the commencement of the Period of
Liquidation and that the Liquidation will be completed within the Period of
Liquidation. The Partnership Financial Model and the projections contained
therein are based on certain important assumptions. The Partnership Financial
Model with the assumptions and projections utilized in making the estimates and
forming the opinion herein expressed are contained within the files of Crosson
Dannis, Inc. Said documents are not included herein due to their confidential
nature.
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CONCLUSIONS
PRESENT ESTIMATED LIQUIDATION VALUE
After employment of the limited valuation processes and methodology described
herein and subject to the assumptions, limiting conditions and other
considerations set forth herein, we have estimated a Present Estimated
Liquidation Value of a Unit, effective as of October 3, 1996, of $134 TO $145
PER UNIT.
In making our estimate of the Present Estimated Liquidation Value of a Unit as
set forth above, based upon the limited valuation processes and methodology
described in this Report and subject to the assumptions, limiting conditions
and other considerations set forth in this Report, we have estimated a gross
amount of cash that the Partnership would have available to distribute to the
holders of Units out of the net proceeds of the Liquidation over the Period of
Liquidation, effective as of October 3, 1996, of approximately $250 PER UNIT.
ADEQUACY OF THE HR OFFER
A comparison of the Crosson Dannis, Inc. estimate of the Present Estimated
Liquidation Value per Unit with the consideration offered by the Bidders for a
Unit in the HR Offer is shown below. We understand that by the terms of the HR
Offer, the consideration for any Units purchased by the Bidders will be
adjusted by the amount of any distributions made by the Partnership to the
holders of the Units after August 15, 1996. We further understand that the
stated consideration for any Unit purchased pursuant to the HR Offer is not so
adjusted for any distribution.
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CROSSON DANNIS, INC. $134 to $145/UNIT
BIDDERS' OFFER $85.50/UNIT
================================================================================
In view of the foregoing and subject to the assumptions, limiting conditions
and other considerations set forth herein, we are of the opinion that, as of
October 3, 1996, the consideration offered to the holders of Units in the HR
Offer for a Unit is inadequate, from a financial point of view, to the holders
of Units compared with the Present Estimated Liquidation Value for a Unit as
set forth above.
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