Exhibit (a)(1)
OFFER TO PURCHASE FOR CASH
UP TO 13,120 LIMITED PARTNERSHIP UNITS
OF
MARRIOTT RESIDENCE INN LIMITED PARTNERSHIP
AT
$300 PER UNIT
by
MADISON LIQUIDITY INVESTORS 114, LLC
(the "Purchaser")
THE OFFER, WITHDRAWAL RIGHTS AND PRORATION PERIOD WILL EXPIRE AT 5:00 P.M.,
EASTERN DAYLIGHT TIME, ON JUNE 15, 2001, UNLESS EXTENDED.
The Purchaser hereby seeks to acquire limited partnership Units in Marriott
Residence Inn Limited Partnership, a Delaware limited partnership (the
"Partnership"). The Purchaser is a Delaware limited liability company owned by
MRI Partners, LLC, a joint venture between subsidiaries of Madison Capital
Management, LLC ("Madison") and Haberhill LLC ("Haberhill"), and other
affiliates of Madison. Madison is a privately-held investment management firm,
and Haberhill is a privately-held real estate investment advisory firm. None of
the Purchaser, Madison nor Haberhill is affiliated with the Partnership or its
general partner. For information concerning the Purchaser and its principals,
please refer to Section 11 - "Certain Information Concerning the Purchaser"
below and Schedule I attached hereto.
The Purchaser hereby offers to purchase up to 13,120 of the issued and
outstanding Units at a purchase price of $300 per Unit, in cash, reduced by any
cash distributions made or declared on or after May 16, 2001 (the "Offer Date"),
with interest at the rate of 7% per annum from the Expiration Date (defined
below) to the date of payment (the "Offer 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 Assignment and Transfer and accompanying documents,
as each may be supplemented or amended from time to time (which together
constitute the "Offer"). The Offer will expire at 5:00 p.m., Eastern Daylight
Time, on June 15, 2001 or such other date to which this Offer may be extended
(the "Expiration Date").
The Units sought pursuant to the Offer represent 20% of the Units issued and
outstanding as of December 31, 2000. The Purchaser's affiliates currently
beneficially own an aggregate of 163 Units, or approximately 0.25% of the total
of 65,600 outstanding Units. If the Offer is successful and the Purchaser
acquires all of the Units sought, it and its affiliates will beneficially own
approximately 20.25% of the outstanding Units, including the Units owned by its
affiliates.
THE OFFER IS NOT CONDITIONED UPON ANY MINIMUM NUMBER OF UNITS BEING TENDERED.
IF, AS OF THE EXPIRATION DATE, MORE THAN 13,120 UNITS ARE VALIDLY TENDERED AND
NOT PROPERLY WITHDRAWN, THE PURCHASER WILL ONLY ACCEPT FOR PURCHASE ON A PRO
RATA BASIS 13,120 UNITS, SUBJECT TO THE TERMS AND CONDITIONS HEREIN. SEE
SECTION 13 - "CONDITIONS OF THE OFFER." A UNITHOLDER MAY TENDER ANY OR ALL
UNITS OWNED BY SUCH UNITHOLDER, SUBJECT TO THE PROVISIONS OF SECTION 7.01 OF THE
PARTNERSHIP'S LIMITED PARTNERSHIP AGREEMENT.
The Purchaser believes, although it cannot guarantee, that the Offer may be an
attractive one for many Unitholders, based on (i) the Offer Price being greater
than current and recent historical secondary market prices, (ii) the
Partnership's historical operations and distribution performance, (iii) the
nature and condition of the Partnership's properties and the future capital
expenditure obligations they will require, (iv) the terms of the
Partnership's indebtedness and the long-term management agreement encumbering
such properties and (v) the financial and record-keeping benefits that will
accrue to a Unitholder whose interest is purchased. Before tendering, however,
Unitholders are urged also to consider the following factors:
. Unitholders who tender their Units will give up the opportunity to
participate in any future benefits from the ownership of Units,
including potential future distributions by the Partnership. The Offer
Price per Unit payable to a tendering Unitholder by the Purchaser may
be less than the total amount which might otherwise be received by the
Unitholder with respect to the Units over the remaining term of the
Partnership.
. Although the Purchaser cannot predict with certainty the future value
of the Partnership's assets on a per Unit basis, the Offer Price could
differ significantly from the net proceeds that would be realized from
a sale of the properties owned by the Partnership or that may be
realized upon a future liquidation of the Partnership. See
"Introduction - Establishment of the Offer Price."
. The Purchaser is making the Offer for investment purposes and with the
intention of making a profit from the ownership of the Units. In
establishing the Offer Price of $300 per Unit, the Purchaser is
motivated to establish the lowest price that might be acceptable to
Unitholders consistent with the Purchaser's objectives. Such
objectives and motivations may conflict with the interests of the
Unitholders in receiving the highest price for their Units.
. Upon the liquidation of the Partnership, the Purchaser will benefit to
the extent, if any, that the amount per Unit it receives in the
liquidation exceeds the Offer Price, if any. Therefore, Unitholders
might receive more value if they hold their Units, rather than tender,
and receive proceeds from the liquidation of the Partnership.
Alternatively, Unitholders may prefer to receive the Offer Price now
rather than wait for uncertain future net liquidation proceeds. No
independent person has been retained to evaluate or render any opinion
with respect to the fairness of the Offer Price and no representation
is made by the Purchaser or any of its affiliates as to such fairness.
When the assets of the Partnership are ultimately sold, the return to
Unitholders could by higher or lower than the Offer Price. Unitholders
are urged to consider carefully all the information contained herein
before accepting the Offer.
. The General Partner does not disseminate a net asset value for the
Units. The Purchaser in any event believes that net asset value does
not necessarily reflect the fair market value of a Unit, which may be
higher or lower than net asset value depending on several factors.
Estimates of net asset value are generally based upon a hypothetical
sale of all of a partnership's assets, as of a hypothetical date, and
the distribution to the limited and general partners of the gross
proceeds of such sales, net of related indebtedness. They generally do
not take into account (i) future changes in market conditions, (ii)
timing considerations or (iii) unforeseeable costs associated with
winding up a partnership.
. After the Expiration Date, and unless otherwise prohibited, the
Purchaser will vote the Units acquired in the Offer in its own
interest, which may be different from or in conflict with the
interests of the remaining Unitholders.
. In the event a total of more than 13,120 Units are tendered, the
Purchaser will accept only a portion of the Units tendered by a
Unitholder on a pro rata basis, subject to the terms and conditions of
the Offer.
. The transfer of Units is subject to the requirements of Section 7.01
of the Partnership's Limited Partnership Agreement, which provides
among other things, that (i) assignments may only be made
on the first day of a fiscal quarter of the Partnership, (ii) no
assignments after which the assignor would hold less than five Units
will be permitted or recognized and (iii) the General Partner may
impose restrictions on transfers if, based upon the advice of counsel
to the Partnership, it determines such further limitations or
restrictions are necessary or advisable to protect the Partnership
from being considered a "publicly traded partnership" within the
meaning of Section 7704 of the Internal Revenue Code.
As the Purchaser believes that the Expiration Date will not occur in
time for the transfer of the Units to be effectuated by the first day
of the Partnership's third fiscal quarter (on or about July 1, 2001),
it will pay interest on the Offer Price at the rate of 7% per annum
from the Expiration Date to the date the Offer is consummated and
payment is made for the Units (currently expected to be on or about
October 1, 2001). If the Offer is not consummated, or any Unit or
Units are not accepted for payment and paid for, no interest shall be
paid in respect of unpurchased Units. It should also be noted that the
Purchaser will, pursuant to the terms and conditions of the Offer and
the Partnership's Limited Partnership Agreement, and subject to
applicable law, be empowered to exercise voting and other rights
appurtenant to ownership of Units accepted for payment prior to
payment therefor.
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 and thereby delay acceptance for payment of, and the payment for,
any Units, (ii) upon the occurrence of any of the conditions specified in
Section 13 of this Offer to Purchase, to terminate the Offer and not accept for
payment any Units not theretofore accepted for payment or paid for, or to delay
the acceptance for payment of, or payment for, any Units not theretofore
accepted for payment or paid for, and (iii) to amend the Offer in any respect.
Notice of any such extension, termination or amendment will promptly be
disseminated to Unitholders in a manner reasonably designed to inform
Unitholders of such change in compliance with Rules 14d-4(c) and 14d-6(d) under
the Securities Exchange Act of 1934 (the "Exchange Act"). In the case of an
extension of the Offer, such extension will be followed by a press release or
public announcement which will be issued no later than 9:00 a.m., Eastern
Daylight Time, on the next business day after the scheduled Expiration Date, in
accordance with Rule 14e-1(d) under the Exchange Act.
May 16, 2001
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 (an "Assignee") desiring to
tender any Units should either (a) complete and sign the Agreement of Assignment
and Transfer (a copy of which is enclosed with this Offer to Purchase) in
accordance with the instructions to the Agreement of Assignment and Transfer
(see Instructions to Complete the Agreement of Assignment and Transfer) and mail
or deliver an executed Agreement of Assignment and Transfer and any other
required documents to Madison Liquidity Investors 114, LLC at the address set
forth below or (b) request his or her broker, dealer, commercial bank, trust
company or other nominee to effect the transaction for him or her. Unless the
context requires otherwise, references to Unitholders in this Offer to Purchase
shall be deemed to also refer to Beneficial Owners and Assignees.
For deliveries by mail, Federal Express or other private overnight couriers:
Madison Liquidity Investors 114, LLC
6143 South Willow Drive
Suite 202
Greenwood Village, Colorado 80113
Telephone: 1-800-269-7313 (toll-free)
Facsimile: (No Agreements of Assignment and Transfer will be accepted by fax)
Questions or requests for assistance or additional copies of this Offer to
Purchase or the Agreement of Assignment and Transfer may be directed to the
Purchaser, at 1-800-269-7313 (toll-free).
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 ASSIGNMENT AND TRANSFER. NO SUCH
RECOMMENDATION, INFORMATION OR REPRESENTATION MAY BE RELIED UPON AS HAVING BEEN
AUTHORIZED.
EACH UNITHOLDER IS URGED TO READ CAREFULLY THE ENTIRE OFFER TO PURCHASE,
THE AGREEMENT OF ASSIGNMENT AND TRANSFER AND RELATED DOCUMENTS.
The Partnership is subject to the information and reporting requirements of
the Exchange Act and in accordance therewith is required to file reports and
other information with the Securities and Exchange Commission (the "SEC" or
"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 (EDGAR) system, at its internet web site at
www.sec.gov, may be inspected at the public reference facilities maintained by
the Commission at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W.,
Washington, D.C. 20549, and are available for inspection and copying at the
regional offices of the Commission located in Northwestern Atrium Center, 500
West Madison Street, Suite 1400, Chicago, Illinois 60661 and at 7 World Trade
Center, 13th Floor, New York, New York 10048. 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 or will be filing 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, furnishing 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 offices of the Commission in the manner specified above.
TABLE OF CONTENTS
Page
SUMMARY TERM SHEET........................................................
INTRODUCTION..............................................................
TENDER OFFER
Section 1. Terms of the Offer..........................................
Section 2. Procedures for Tendering Units..............................
Section 3. Acceptance for Payment and Payment for Units................
Section 4. Proration...................................................
Section 5. Withdrawal Rights...........................................
Section 6. Extension of Tender Period; Termination; Amendment..........
Section 7. Certain Federal Income Tax Consequences.....................
Section 8. Effects of the Offer........................................
Section 9. Purpose of the Offer; Future Plans.........................
Section 10. The Business of the Partnership.............................
Section 11. Certain Information Concerning the Purchaser................
Section 12. Source of Funds.............................................
Section 13. Conditions of the Offer.....................................
Section 14. Certain Legal Matters.......................................
Section 15 Fees and Expenses...........................................
Section 16. Miscellaneous...............................................
Schedule I - The Purchaser and its Principals
SUMMARY TERM SHEET
Madison Liquidity Investors 114, LLC is offering to purchase up to 13,120
Units for $300 per Unit in cash. Following is a summary of our Offer. This
summary is not a complete description of the Offer. You should read carefully
this entire Offer to Purchase and the documents accompanying it.
Who is offering to buy my Units?
The Purchaser is a Delaware limited liability company owned by affiliates
of Madison Capital Management, LLC and Haberhill LLC. The Purchaser's owners
are private investors, and more information concerning them and their principals
is contained in Section 11 of this Offer to Purchase and Schedule I hereto.
What securities and how much of them are sought in the Offer?
We are seeking to purchase up to 13,120 Units of limited partnership
interest in the Partnership, which are the Units issued to public investors in
the Partnership.
How much are you offering?
$300 cash per Unit, less the amount of any distributions declared or made
with respect to them after the date of this Offer, May 16, 2001, together with
interest on the Offer Price at the rate of 7% per annum from the Expiration Date
until consummation of the Offer. If the Offer is not consummated, or any Unit or
Units are not accepted for payment and paid for, no interest shall be paid in
respect of unpurchased Units. The Purchaser is offering to pay interest on the
Offer Price because the Partnership's Limited Partnership Agreement, which
provides, among other things, that assignments may only be made on the first day
of a fiscal quarter of the Partnership, will in all likelihood delay payment for
Units accepted for payment until at least the first day of the Partnership's
fourth fiscal quarter (approximately October 1, 2001).
Do you have the financial resources to pay, and is your financial condition
relevant to my decision?
If the total amount of Units sought is purchased, our capital commitment
will be approximately $3,936,000. Madison has invested more than $130 million
for selected institutional and high-net worth investors and the Purchaser's
owners have adequate liquid assets at their disposal to fund payment to selling
Unitholders. This is a cash offer that is not conditioned on financing being
available, and we have no current intention to take control of the Partnership.
How long do I have to decide?
Until at least 5:00 p.m., Eastern Daylight Time, on June 15, 2001. The
Offer can be extended in our discretion. If we extend the Offer, we will make a
public announcement not later than 9:00 a.m., Eastern Daylight Time, on the day
after the Offer was scheduled to expire.
What are the most significant conditions to the Offer?
There are no conditions to the Offer based on minimum Units tendered, the
availability of financing or otherwise determined by the success of the Offer.
We may, however, not be obligated to purchase Units in the event certain
conditions occur, such as legal or governmental actions which would prohibit the
purchase, and we are not obligated to purchase any Units if, among other things,
there is a material adverse change in the Partnership or its business (including
extraordinary distributions by, or change in control of, the Partnership).
How do I tender?
Deliver a completed Agreement of Assignment and Transfer to the Purchaser
no later than the time the Offer expires. A pre-addressed postage-paid envelope
is enclosed for your convenience.
Can I withdraw Units I tender?
Yes, at any time until the Offer expires, and if we have not accepted your
Units by the Expiration Date, at any time thereafter until we do accept them.
We will be deemed to have accepted your Units, subject to the terms and
conditions of the Offer, on the Expiration Date unless we terminate the Offer.
To do so, you must deliver a written notice of withdrawal with the required
information to the Purchaser while you still have the right to withdraw.
What does the General Partner think of your Offer?
We have not sought the General Partner's approval or disapproval. The
General Partner is expected to announce a recommendation with regards to the
Offer within ten business days or as soon as possible upon becoming aware of it.
Will the Partnership continue as a public company?
Yes, unless the total number of Unitholders (3,839 of record as of December
31, 2000, as set forth in the Partnership's Annual Report on Form 10-K for the
fiscal year ended December 31, 2000, dated April 2, 2001) drops below 300. We
do not currently anticipate that the Offer will result in this, although we
cannot now determine the results with any certainty.
Will the Offer affect my Units if I don't tender?
No, although if we acquire all the Units sought in the Offer, we would
control a large, but not necessarily controlling, block.
What are your future intentions?
We have no current intention to seek control or change management or
operations of the Partnership, or to liquidate it, although we reserve the
right, at the appropriate time, to exercise limited partner and other rights,
including rights relating to limited partner votes concerning management of the
Partnership and its properties, sales of the Partnership's properties and
liquidation and dissolution. The Purchaser will, pursuant to the terms and
conditions of the Offer and subject to applicable law, be empowered to exercise
voting and other rights appurtenant to ownership of Units accepted for payment
prior to payment therefor.
What is the market value of my Units?
According to the Partnership, "there is currently no established public
trading market for the Units and it is not anticipated that a public market for
the Units will develop." Our review of independent secondary market reporting
publications found few sales of Units in secondary markets between February 1,
1999 and January 31, 2001, with 102 reported trades in the secondary market
which are described in the table below. These prices, however, do not take into
account the distribution resulting from the class action litigation of $152 per
unit that was paid to Unitholders during the fourth quarter of 2000. In
addition, these prices do not take into account
commissions and other transaction costs which sellers of Units may be required
to pay, and which typically range between 8% to 10% of the reported selling
price.
Reporting Period Weighted Average Price High Trade Low Trade Units Traded
12/1/2000 -01/31/2001 $218 $241 $175 222
10/1/2000 - 11/30/2000 $217 $225 $175 130
08/1/2000 - 09/30/2000 $320 $335 $282 100
06/1/2000 - 07/31/2000 $336 $340 $335 40
04/1/2000 - 05/31/2000 $329 $351 $325 125
02/1/2000 - 03/31/2000 $327 $340 $305 83
12/1/1999 - 01/31/2000 $375 $430 $325 335
10/1/1999 - 11/30/1999 $483 $500 $430 175
08/1/1999 - 09/30/1999 $509 $515 $500 50
06/1/1999 - 07/31/1999 $543 $555 $525 211
04/1/1999 - 05/31/1999 $552 $573 $500 296
02/1/1999 - 03/31/1999 $566 $579 $530 168
We believe the information published by these independent sources is the
product of their private market research and does not constitute the
comprehensive transaction reporting of a securities exchange. We therefore do
not know whether this information is accurate or complete.
Who can I talk to if I have questions about the Offer?
The Purchaser, Madison Liquidity Investors 114, LLC, at 1-800-269-7313
(toll-free).
To the Unitholders of Marriott Residence Inn Limited Partnership:
INTRODUCTION
Madison Liquidity Investors 114, LLC hereby seeks to acquire limited
partnership Units in Marriott Residence Inn Limited Partnership. The Purchaser
is owned by MRI Partners, LLC, a joint venture between subsidiaries of Madison
Capital Management, LLC and Haberhill LLC, and other affiliates of Madison.
Madison is a privately-held investment management firm, and Haberhill is a
privately-held real estate investment advisory firm. None of the Purchaser,
Madison nor Haberhill is affiliated with the Partnership or its general partner.
For information concerning the Purchaser and its principals, please refer to
Section 11 - "Certain Information Concerning the Purchaser" below and Schedule I
attached hereto.
The Purchaser hereby offers to purchase up to 13,120 of the issued and
outstanding Units at a Offer Price of $300 per Unit, in cash, reduced by any
cash distributions made or declared on or after May 16, 2001, with interest as
described below, upon the terms and subject to the conditions set forth in this
Offer to Purchase and in the related Agreement of Assignment and Transfer and
accompanying documents, as each may be supplemented or amended from time to
time. The Offer will expire at 5:00 p.m., Eastern Daylight Time, on June 15,
2001 or such other date to which this Offer may be extended. The Units sought
pursuant to the Offer represent 20% of the Units issued and outstanding as of
December 31, 2000. The transfer of Units is subject to the requirements of
Section 7.01 of the Partnership's Limited Partnership Agreement. As the
Purchaser believes that the Expiration Date will not occur in time for the Offer
to be consummated before the first day of the Partnership's fourth fiscal
quarter (approximately October 1, 2001), it will pay interest on the Offer Price
at the rate of 7% per annum from the Expiration Date to the date of payment. If
the Offer is not consummated, or any Unit or Units are not accepted for payment
and paid for, no interest shall be paid in respect of unpurchased Units.
Unitholders who tender their Units will not be obligated to pay any brokerage
commissions in connection with the tender of Units.
For further information concerning the Purchaser, see Section 11 - "Certain
Information Concerning the Purchaser" below and Schedule I.
THE OFFER IS NOT CONDITIONED UPON ANY MINIMUM NUMBER OF UNITS BEING
TENDERED. IF, AS OF THE EXPIRATION DATE, MORE THAN UNITS ARE VALIDLY TENDERED
AND NOT PROPERLY WITHDRAWN, THE PURCHASER WILL ONLY ACCEPT FOR PURCHASE ON A PRO
RATA BASIS UNITS, SUBJECT TO THE TERMS AND CONDITIONS HEREIN. SEE SECTION 13 -
"CONDITIONS OF THE OFFER." A UNITHOLDER MAY TENDER ANY OR ALL UNITS OWNED BY
SUCH UNITHOLDER.
Factors to Consider When Tendering
The Purchaser is making this Offer because it believes that the Units
represent an attractive investment at the price offered. There can be no
assurance, however, that the Purchaser's judgment is correct, and, as a result,
ownership of Units by the Purchaser will be a speculative investment. The
Purchaser is acquiring the Units for investment purposes and has no current plan
to change current management or the operations of the Partnership or effectuate
any extraordinary transaction involving the Partnership.
The Purchaser believes, although it cannot guarantee, that the Offer may be
an attractive one for many Unitholders, based on (i) the Offer Price being
greater than current and recent historical secondary market prices, (ii) the
Partnership's historical operations and distribution performance, (iii) the
nature and condition of the Partnership's properties and the future capital
investment obligations they will entail, (iv) the terms of the Partnership's
significant loan and management contractual obligations and (v) the financial
and record-keeping benefits that will accrue to a Unitholder whose interest is
purchased. Before tendering, however, Unitholders are
urged also to consider the factors set forth on the cover page of this Offer to
Purchase and the other information concerning the Partnership and the Offer
found herein and in publicly-available reports and other information concerning
the Partnership.
Establishment of the Offer Price
The Purchaser has set the Offer Price at $300 per Unit, in cash, with
interest as described herein, reduced by any cash distributions made or declared
on or after the date hereof.
The Purchaser established the Offer Price based on its analysis of the
Partnership's assets and estimates of when the Partnership may liquidate. The
Purchaser conducted an internal analysis of the Partnership based on the
Partnership's Annual Report on Form 10-K for the fiscal year ended December 31,
2000 and its Quarterly Report on Form 10-Q for the fiscal quarter ended March
23, 2001. The Purchaser estimated the 2000 cash flow of the Partnership's
properties at approximately $18 million, and applied to that cash flow a
capitalization rate of 12.5% (which the Purchaser believes is within a range
currently employed in the marketplace for extended stay hotels of similar age
and quality which are subject to a management agreement structure similar to the
Partnership's), yielding a value of approximately $144 million for the
Partnership's properties. The Purchaser then assumed that all Partnership cash
and cash equivalents would be used to fund a portion of the Partnership's future
capital expenditures of $47 million (as estimated by the Partnership in its
Quarterly Report on Form 10-Q for the fiscal quarter ended March 23, 2001),
subtracted the mortgage debt on the properties as of that date, and subtracted
the General Partner's one percent share of sales and refinancing proceeds.
This analysis yielded a estimated value of approximately $40 million, or
$614 per Unit. The Purchaser, however, does not believe that this estimated per
Unit value is an accurate reflection of what an investor might receive today or
in future periods, in respect of a Unit. In the Purchaser's judgment, that
amount may be less than this estimate of per-Unit net asset value, after taking
into account (i) a reduction in the value of the Partnership's properties due to
the unfavorable terms of the management agreement, (ii) a reduction in cash and
cash equivalents to fund payment of the deferred incentive management fees and
(iii) other unknown factors. In addition, the Purchaser took into account (1)
the lack of liquidity, (2) the limited frequency of trading of Units in the
secondary market, (3) the fact that it will not control the Partnership upon
consummation of the Offer, (4) the apparent absence of a definitive liquidation
plan for the Partnership, (5) the fact that the Partnership is currently not
paying distributions out of operations, (6) the indebtedness of the Partnership
and (7) certain tax considerations in establishing the Offer Price, which
represents a 51% discount to its estimated value. The Purchaser set the Offer
Price based primarily on its desire to establish the lowest price that might be
acceptable to Unitholders consistent with its objectives, and to reflect its
belief that an investor would probably not, for the foregoing reasons, realize
the estimated value calculated by the Purchaser through a sale.
Commencing in January, 2001, executives of Host Marriott Corporation and its
affiliates ("Host Marriott"), which owns the Partnership's General Partner,
approached Douglas Greene, managing member of Haberhill and a former senior
executive of Host Marriott, concerning its desire to sell its interests in the
Partnership and an affiliated partnership, Marriott Residence Inn II Limited
Partnership, and the possibility that Haberhill would acquire those interests.
Pursuant to those discussions, Haberhill executed a confidentiality agreement
dated February 1, 2001 and, until negotiations were terminated by Host Marriott
in April 2001, participated, with Madison, in discussions with Host Marriott
representatives and its financial advisors concerning the possible acquisition
of its and others' interests in such partnerships and Host Marriott's
alternatives to such a possible transaction. The Offer Price is not the result
of these discussions nor of other discussions between the Purchaser and the
Partnership. The Purchaser has had no meaningful access to the books and records
of the Partnership, and has based the Offer Price upon its own analysis of
publicly available information. The Offer Price is not the result of arm's
length negotiations between the Purchaser and the Partnership.
The Offer Price represents the price at which the Purchaser is willing to
purchase Units. No independent person has been retained to evaluate or render
any opinion with respect to the fairness of the Offer Price and no
representation is made by the Purchaser or any affiliate of the Purchaser as to
such fairness. Other measures of the value of the Units may be relevant to
Unitholders. Unitholders are urged to consider carefully all of the information
contained herein and consult with their own advisors, tax, financial or
otherwise, in evaluating the terms of the Offer before deciding whether to
tender Units.
General Background Information
Certain information contained in this Offer to Purchase that relates to, or
represents, statements made by the Partnership or the General Partner, has been
derived from information provided in reports filed by the Partnership with the
SEC. The Purchaser expressly disclaims any responsibility for the information
included in these filed reports and extracted in this discussion.
According to publicly available information, as of December 31, 2000, there
were 65,600 Units issued and outstanding. As of the Partnership's most recent
filing on Form 10-K for the year ended December 31, 2000, these outstanding
Units were held by approximately 3,839 Unitholders of record. Affiliates of the
Purchaser currently beneficially own an aggregate of 163 Units or approximately
0.25% of the outstanding Units. See Section 11 - "Certain Information
Concerning the Purchaser" below.
Tendering Unitholders will not be obligated to pay brokerage fees or
commissions on the sale of the Units to the Purchaser pursuant to the Offer.
The Purchaser will pay all charges and expenses incurred in connection with the
Offer. The Purchaser desires to purchase all the Units tendered by each
Unitholder, up to 20% of the total outstanding Units and subject to Proration,
when applicable, except where otherwise prohibited. See Section 4 - "Proration"
below.
If, prior to the Expiration Date, the Purchaser increases the consideration
offered to Unitholders pursuant to the Offer, such 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.
Unitholders are urged to read this Offer to Purchase and the accompanying
Agreement of Assignment and Transfer carefully before deciding whether to tender
their Units.
TENDER OFFER
Section 1. Terms of the Offer.
Upon the terms and subject to the conditions of the Offer (including the
terms and conditions of any extension or amendment of the Offer), the Purchaser
will accept for payment and pay for up to 13,120 Units validly tendered on or
prior to the Expiration Date and not withdrawn in accordance with Section 5 of
this Offer to Purchase. The term "Expiration Date" shall mean 5:00 p.m., Eastern
Daylight Time, on June 15, 2001, unless and until the Purchaser, in its sole
discretion, shall have extended the period of time for which the Offer is open,
in which event the term "Expiration Date" shall mean the latest time and date on
which the Offer, as so extended by the Purchaser, will expire.
The Offer is conditioned on satisfaction of certain conditions. See Section
13 - "Conditions of the Offer," which sets forth in full the conditions of the
Offer. The Purchaser reserves the right (but shall not be obligated), in its
sole discretion and for any reason, to waive any or all of such conditions. If,
by the Expiration Date, any or all of such conditions have not been satisfied or
waived, the Purchaser reserves the right (but shall not be obligated) to (i)
decline to purchase any of the Units tendered, terminate the Offer and return
all tendered Units to tendering Unitholders, (ii) waive all the unsatisfied
conditions and, subject to complying with the applicable rules and regulations
of the Commission, purchase all Units validly tendered, (iii) 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 (iv) amend the Offer. The rights reserved by the
Purchaser in this paragraph are in addition to the Purchaser's right to
terminate the Offer at any time prior to the acceptance of tendered Units for
payment.
Section 2. Procedures for Tendering Units.
Valid Tender. For Units to be validly tendered pursuant to the Offer, a
properly completed and duly executed Agreement of Assignment and Transfer (a
copy of which is enclosed) with any other documents required by the Agreement of
Assignment and Transfer or the instructions thereto, must be received on or
prior to the Expiration Date by the Purchaser at 6143 South Willow Drive, Suite
202, Greenwood Village, Colorado 80113. A Unitholder may tender any or all
Units owned by such Unitholder. Unitholders should recognize that, if proration
is required pursuant to the terms of the Offer, the Purchaser will accept for
payment from among those Units validly tendered on or prior to the Expiration
Date and not properly withdrawn, the maximum number of Units permitted pursuant
to the Offer on a pro rata basis, with adjustments to avoid purchases of certain
fractional Units and purchases which would violate the terms of the Offer or the
Partnership's Limited Partnership Agreement, based upon the number of Units
validly tendered prior to the Expiration Date and not properly withdrawn.
In order for a tendering Unitholder to participate in the Offer, the
Unitholder must complete, in its entirety, the following documents that
accompany this Offer to Purchase:
(1) The Agreement of Assignment and Transfer; and
(2) Any other applicable documents included herewith or in the
Instructions to Complete the Agreement of Assignment and Transfer.
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 Daylight Time, on June 15, 2001, or such date to which the
Offer may be extended.
The method of delivery of the Agreement of Assignment and Transfer and all
other required
documents is at the option and risk of the tendering Unitholder and 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.
Signature Guarantees. The signatures on the Agreement of Assignment and
Transfer must be medallion guaranteed by a commercial bank, savings bank, credit
union, savings and loan association or trust company having any 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. (the "NASD").
Backup Federal Income Tax Withholding. To prevent the possible application of
backup federal income tax withholding with respect to payment of the Offer Price
for Units purchased pursuant to the Offer, a tendering Unitholder must provide
the Purchaser with such Unitholder's correct taxpayer identification number
("TIN") or Social Security Number and make certain certifications that such
Unitholder is not subject to backup federal income tax withholding.
Each tendering Unitholder must insert in the Agreement of Assignment and
Transfer the Unitholder's taxpayer identification number or social security
number in the space provided on the signature page to the Agreement of
Assignment and Transfer. The Agreement of Assignment and Transfer also includes
a substitute Form W-9, which contains the certifications referred to above. See
the Instructions to the Agreement of Assignment and Transfer and the
accompanying Tax Certification page.
FIRPTA Withholding. To prevent the withholding of federal income tax in an
amount equal to 10% of the sum of the Offer Price plus the amount of Partnership
liabilities allocable to each Unit tendered, each Unitholder must complete the
FIRPTA Affidavit included in the Agreement of Assignment and Transfer certifying
such Unitholder's TIN or Social Security Number and address and that the
Unitholder is not a foreign person. See the Instructions to the Agreement of
Assignment and Transfer and Section 7 - "Certain Federal Income Tax
Consequences" of this Offer to Purchase.
Appointment as Attorney-in-Fact and Proxy. By executing an Agreement of
Assignment and Transfer as set forth above, and subject to Section 5 -
"Withdrawal Rights" of this Offer to Purchase, a tendering Unitholder
irrevocably constitutes and appoints the Purchaser and its designees as such
Unitholder's true and lawful attorneys-in-fact and proxies, in the manner set
forth in the Agreement of Assignment and Transfer, with respect to the Units
tendered by such Unitholder and accepted for payment by the Purchaser (and with
respect to any and all other Units or other securities issued or issuable in
respect of such Unit on or after the date hereof), each with full power of
substitution, to the full extent of such Unitholder's rights (such power of
attorney and proxy being deemed to be an irrevocable power coupled with an
interest) to (i) seek to transfer ownership of such Units on the Partnership's
books (and to execute and to deliver any accompanying evidences of transfer and
authenticity which the Purchaser, the Partnership or the General Partner may
deem necessary or appropriate in connection therewith, including, without
limitation, any documents or instruments required to be executed under a
"Transferor's (Seller's) Application for Transfer" created by the NASD, if
required), (ii) become a Substitute Limited Partner, (iii) receive any and all
distributions made or declared by the Partnership after the Offer Date, (iv)
receive all benefits and otherwise exercise all rights of beneficial ownership
of such Units in accordance with the terms of the Offer, (v) execute and deliver
to the Partnership and/or the General Partner (as the case may be) a change of
address form instructing the Partnership to send any and all future
distributions to which the Purchaser is entitled pursuant to the terms of the
Offer in respect of tendered Units to the address specified in such form, (vi)
endorse any check payable to or upon the order of such Unitholder representing a
distribution to which the Purchaser is entitled pursuant to the terms of the
Offer, in each case on behalf of the tendering Unitholder, in favor of the
Purchaser or any other payee the Purchaser otherwise designates, (vii) exercise
all such Unitholder's voting and other rights as any such attorney-in-fact in
their 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, (viii) act in
such manner as any such attorney-in-fact shall, in its sole discretion, deem
proper with respect to the Units, (ix) execute a Loss and Indemnity Agreement
relating to the Units on such Unitholder's behalf if such Unitholder fails to
include its original certificate(s) (if any) representing the Units with the
Agreement of Assignment and Transfer or (x) commence any litigation that the
Purchaser or its designees, in their sole discretion, deem necessary to enforce
any exercise of the Purchaser's or such designees powers as such Unitholder's
attorneys-in-fact as set forth above.
Such appointment will be effective upon receipt by the Purchaser of the
Agreement of Assignment and Transfer. Upon such receipt, all prior proxies
given by such Unitholder 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).
Assignment of Entire Interest in the Partnership. By executing and delivering
the Agreement of Assignment and Transfer, a tendering Unitholder irrevocably
sells, assigns, transfers, conveys and delivers to the Purchaser, all of his
right, title and interest in and to the Units tendered thereby and accepted for
payment pursuant to the Offer and any and all non-cash distributions, other
Units or other securities issued or issuable in respect thereof on or after the
Offer Date, including, without limitation, to the extent that they exist, all
rights in, and claims to, any Partnership profits and losses, cash
distributions, proceeds of or other consideration resulting from litigation or
other assertion of claims having accrued in favor of the Partnership, the
tendering Unitholder or his or hers predecessor(s) in interest with respect to
the tendering Unitholder's or such other person's purchase of Units or otherwise
with respect to the business or management of the Partnership from its inception
to the time of payment for the Units tendered hereunder, voting rights and other
benefits of any nature whatsoever and whenever distributable or allocable to the
Units under the Partnership's Limited Partnership Agreement, (i) unconditionally
to the extent that the rights appurtenant to the Units may be transferred and
conveyed without the consent of the General Partner and (ii) in the event that
the Purchaser elects to become a Substituted Limited Partner of the Partnership,
subject to the consent of the General Partner to the extent such consent may be
required in order for the Purchaser to become a substituted limited partner of
the Partnership. In addition, by executing an Agreement of Assignment and
Transfer, and not otherwise timely withdrawing pursuant to the provisions of
Section 5 hereof, a Unitholder also assigns to the Purchaser all of the
Unitholder's rights to receive distributions from the Partnership with respect
to the Units which are accepted for payment and purchased pursuant to the Offer,
including those cash distributions made or declared on or after the Offer Date.
Determination of Validity; Rejection of Units; Waiver of Defects; No
Obligation to Give Notice of Defects. All questions as to the validity, form,
eligibility (including time of receipt) and acceptance for payment of any tender
of Units pursuant to the procedures described above will be determined by the
Purchaser, in its sole discretion, which determination shall be final and
binding. The Purchaser reserves the absolute right to reject any or all tenders
if not in proper form or if the acceptance of, or payment for, the Units
tendered may, in the opinion of the Purchaser's counsel, be unlawful. The
Purchaser also reserves the right to waive any defect or irregularity in any
tender with respect to any particular Units of any particular Unitholder, and
the Purchaser's interpretation of the terms and conditions of the Offer
(including the Agreement of Assignment and Transfer and the Instructions
thereto) will be final and binding. Neither the Purchaser nor any other person
will be under any duty to give notification of any defects or irregularities in
the tender of any Units or will incur any liability for failure to give any such
notification.
A tender of Units 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, including
the tendering Unitholder's representation and warranty that (i) such Unitholder
owns the Units being tendered within the meaning of Rule 14e-4 under the
Exchange Act and (ii) the tender of such Units complies with Rule 14e-4. Rule
14e-4 requires, in general, that a tendering security holder will actually be
able to deliver the security subject to the tender offer, and is of concern
particularly to any Unitholders who have granted options to sell or purchase the
Units, hold option rights to acquire such securities, maintain "short" positions
in the Units
(i.e., have borrowed the Units) or have lent the Units to a short seller.
Because of the nature of limited partnership units, the Purchaser believes it is
unlikely that any option trading or short selling activity exists with respect
to the Units. In any event, a Unitholder will be deemed to tender Units in
compliance with Rule 14e-4 and the Offer if the holder is the record owner of
the Units and the holder (i) delivers the Units pursuant to the terms of the
Offer, (ii) causes such delivery to be made, (iii) guarantees such delivery,
(iv) causes a guaranty of such delivery or (v) uses any other method permitted
in the Offer.
Section 3. Acceptance for Payment and Payment for Units.
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, and including the provisions of Section 7.01 of the Partnership's
Limited Partnership Agreement), the Purchaser will accept for payment, and will
pay for, Units validly tendered and not withdrawn in accordance with Section 5,
as promptly as practicable following the Expiration Date. In addition, subject
to applicable rules of the Commission, the Purchaser expressly reserves the
right to delay acceptance for payment of, or payment for, Units pending receipt
of any regulatory or governmental approvals specified in Section 14 - "Certain
Legal Matters" or pending receipt of any additional documentation required by
the Agreement of Assignment and Transfer. The tendering Unitholders will be
paid promptly subject to and following (i) receipt of a valid, properly and
fully executed Agreement of Assignment and Transfer, (ii) receipt by the
Purchaser of the Partnership's confirmation that the transfer of Units has been
effectuated and (iii) actual transfer of Units to the Purchaser, subject to
Section 4 - "Proration" of this Offer to Purchase. The Purchaser will issue
payment only to the Unitholder of record and payment will be forwarded only to
the address listed on the Agreement of Assignment and Transfer.
For purposes of the Offer, the Purchaser shall be deemed to have accepted for
payment validly tendered and not withdrawn Units, subject to the terms and
conditions of the Offer (including Section 4 - "Proration" of this Offer to
Purchase), at the Expiration Date. The Purchaser shall 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 actual transfer of Units to the Purchaser has occurred. Upon
the terms and subject to the conditions of the Offer, payment for the Units
purchased pursuant to the Offer will in all cases be made by the Purchaser.
Interest will be paid on the Offer Price for Units in accordance with the
terms and conditions of the Offer.
If any tendered Units accepted for payment are not purchased for any reason,
the Agreement of Assignment and Transfer with respect to such Units not
purchased will be of no force or effect from and after the date the Offer is
terminated and no payments (including, without limitation, interest 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 (but subject to compliance with Rule 14e-
1(c) under the Exchange Act), the Purchaser may, nevertheless, on behalf of the
Purchaser, retain tendered Units, subject to any limitations of applicable law,
and such Units may not be withdrawn except to the extent that the tendering
Unitholders are entitled to withdrawal rights as described in Section 5.
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.
Unless otherwise prohibited, the Purchaser reserves the right to transfer or
assign, in whole or from time to time in part, the right to purchase Units
tendered pursuant to the Offer, but 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.
Section 4. Proration.
If not more than 13,120 Units are validly tendered and not properly withdrawn
prior to the Expiration Date, the Purchaser, upon the terms and conditions of
the Offer, will accept for payment all such Units so tendered.
If more than 13,120 Units are validly tendered and not properly withdrawn on
or prior to the Expiration Date, the Purchaser, upon the terms and conditions of
the Offer, will accept for payment and pay for an aggregate of 13,120 Units so
tendered, on a pro rata basis according to the number of Units validly tendered
by each Unitholder and not properly withdrawn on or prior to the Expiration
Date, with appropriate adjustments to avoid tenders of fractional Units and
purchases that may otherwise violate the Partnership's Limited Partnership
Agreement, where applicable.
In the event that proration is required, the Purchaser will determine the
precise number of Units to be accepted and will forward payment together with a
notice explaining the final results of the proration as soon as practicable.
The Purchaser will not pay for any Units tendered until after the final
proration factor has been determined.
In the event that proration of tendered Units is required, and because of the
difficulty of determining the proration results, the Purchaser may not be able
to announce the final results of such proration until at least approximately
seven business days after the Expiration Date. Subject to the terms and
conditions of the Offer, including the provisions of Section 7.01 of the
Partnership's Limited Partnership Agreement, and the Purchaser's obligation
under Rule 14e-1(c) under the Exchange Act to pay Unitholders the Offer Price in
respect of Units tendered or to return those Units promptly after the
termination or withdrawal of the Offer, the Purchaser does not intend to pay for
any Units accepted for payment pursuant to the Offer until the final proration
results are known.
Section 5. Withdrawal Rights.
Except as otherwise provided in this Section 5, all tenders of Units pursuant
to the Offer are irrevocable, provided that Units tendered pursuant to the Offer
may be withdrawn at any time prior to the Expiration Date.
For withdrawal to be effective, a written notice of withdrawal 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 June 15, 2001, or such other date to
which this Offer may be extended) at the address set forth in the attached
Agreement of Assignment and Transfer. Any such notice of withdrawal must
specify the name of the person who tendered the Units to be withdrawn and must
be signed by the same person(s) who signed the Agreement of Assignment and
Transfer and must also contain a Medallion Signature Guarantee. If the Units
are held in the name of two or more persons, all such persons must sign the
notice of withdrawal.
If purchase of, or payment for, Units is delayed for any reason (including
because of the terms of the Offer and Section 7.01 of the Partnership's 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 under
the Offer, tendered Units may be retained by the Purchaser and may not be
withdrawn except to the extent that tendering Unitholders are entitled to
withdrawal rights as set forth in this Section 5, 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., Units) deposited by or on behalf of security holders promptly after the
termination or withdrawal of the tender offer.
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, which determination shall be final and binding. Neither the
Purchaser nor any other person will be under any duty to give notification of
any defects or irregularities in any notice of withdrawal or will incur any
liability for failure to give any such notification.
Any Units properly withdrawn will be deemed not to be validly tendered for
purposes of the Offer. Withdrawn Units may be re-tendered, however, by
following the procedures described in Section 2 at any time prior to the
Expiration Date.
Section 6. Extension of Tender Period; Termination; Amendment.
The Purchaser expressly reserves the right, in its sole discretion and
regardless of whether any of the conditions set forth in Section 13 -
"Conditions of the Offer" shall have been satisfied, at any time and from time
to time, to (i) extend the period of time during which the Offer is open and
thereby delay acceptance for payment of, and the payment for, validly tendered
Units, (ii) upon the occurrence or failure to occur of any of the conditions
specified in Section 13, delay the acceptance for payment of, or payment for,
any Units not heretofore accepted for payment or paid for, or to terminate the
Offer and not accept for payment any Units not theretofore accepted for payment
or paid for, and (iii) amend the Offer in any respect, including, without
limitation, by increasing or decreasing the consideration offered or the number
of Units being sought in the Offer or both or changing the type of
consideration. Any extension, termination or amendment will be followed as
promptly as practicable by public announcement, the announcement in the case of
an extension to be issued no later than 9:00 a.m., Eastern Daylight Time, on the
next business day after the previously scheduled Expiration Date, in accordance
with the public announcement requirement of Rule 14d-4(c) under the Exchange
Act. Without limiting the manner in which the Purchaser may choose to make any
public announcement, except as provided by applicable law (including Rules 14d-
4(c) and 14d-6(d) under the Exchange Act), the Purchaser will have no obligation
to publish, advertise or otherwise communicate any such public announcement,
other than by issuing a release to the Dow Jones News Service. The Purchaser
may also be required by applicable law to disseminate to Unitholders certain
information concerning the extensions of the Offer or any other material changes
in the terms of the Offer.
If the Purchaser extends the Offer, or if the Purchaser (whether before or
after its acceptance for payment of Units) is delayed in its payment for Units
or is unable to pay for Units pursuant to the Offer for any reason (including
because of the terms of the Offer and Section 7.01 of the Partnership's Limited
Partnership Agreement), then, without prejudice to the Purchaser's rights under
the Offer, the Purchaser may retain tendered Units on behalf of the Purchaser,
and such Units may not be withdrawn except to the extent tendering Unitholders
are entitled to withdrawal rights as described in Section 5. However, the
ability of the Purchaser to delay payment for Units that the Purchaser has
accepted for payment is limited by Rule 14e-1 under the Exchange Act, which
requires that the Purchaser pay the consideration offered or return the
securities deposited by or on behalf of holders of securities promptly after the
termination or withdrawal of the Offer.
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
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 to Purchase, "business day" means any day other than a Saturday, Sunday or
a federal holiday, and consists of the time period from 12:01 a.m. through 12:00
midnight, Eastern Daylight Time.
Section 7. Certain Federal Income Tax Consequences.
The following summary is a general discussion of certain federal income tax
consequences of a sale of Units pursuant to the Offer assuming that the
Partnership is a partnership for federal income tax purposes and that it is not
a "publicly traded partnership" as defined in Section 7704 of the Internal
Revenue Code of 1986, as amended (the "Code"). This summary is based on the
Code, applicable Treasury Regulations thereunder, administrative rulings,
practice and procedures and judicial authority as of the date of the Offer. All
of the foregoing are subject to change, and any such change could affect the
continuing accuracy of this summary. This summary does not discuss all aspects
of federal income taxation that may be relevant to a particular Unitholder in
light of such Unitholder's specific circumstances or to certain types of
Unitholders subject to special treatment under the federal income tax laws (for
example, foreign persons, dealers in securities, banks, insurance companies and
tax-exempt organizations), nor does it discuss any aspect of state, local,
foreign or other tax laws. Sales of Units pursuant to the Offer will be taxable
transactions for federal income tax purposes, and may also be taxable
transactions under applicable state, local, foreign and other tax laws.
EACH UNITHOLDER SHOULD CONSULT HIS OR ITS TAX ADVISOR AS TO THE PARTICULAR
TAX CONSEQUENCES TO SUCH UNITHOLDER OF SELLING UNITS PURSUANT TO THE OFFER.
Consequences to Tendering Unitholder. A Unitholder will recognize gain or
loss on a sale of Units pursuant to the Offer equal to the difference between
(i) the Unitholder's "amount realized" on the sale and (ii) the Unitholder's
adjusted tax basis in the Units sold. The "amount realized" with respect to a
Unit sold pursuant to the Offer will be a sum equal to the amount of cash
received by the Unitholder for the Unit plus the amount of Partnership
liabilities allocable to the Unit (as determined under Code Section 752). The
amount of a Unitholder's adjusted tax basis in Units sold pursuant to the Offer
will vary depending upon the Unitholder's particular circumstances, and will be
affected by both allocations of Partnership income, gain or loss, and any cash
distributions made by the Partnership to a Unitholder with respect to such
Units. In this regard, tendering Unitholders will be allocated a pro rata share
of the Partnership's taxable income or loss with respect to Units sold pursuant
to the Offer through the effective date of the sale.
In general, the character (as capital or ordinary) of a Unitholder's gain
or loss on a sale of a Unit pursuant to the Offer will be determined by
allocating the Unitholder's amount realized on the sale and his adjusted tax
basis in the Units sold between "Section 751 items," which are "inventory items"
and "unrealized receivables" (including depreciation recapture) as defined in
Code Section 751, and non-Section 751 items. The difference between the portion
of the Unitholder's amount realized that is allocable to Section 751 items and
the portion of the Unitholder's adjusted tax basis in the Units sold that is so
allocable will be treated as ordinary income or loss, and the difference between
the Unitholder's remaining amount realized and adjusted tax basis will be
treated as capital gain or loss assuming the Units were held by the Unitholder
as a capital asset. The Purchaser believes that tax gain realized on a sale of
Units pursuant to the Offer will be treated as a capital gain under these rules,
subject to any recapture items which are treated as ordinary income.
A Unitholder's capital gain (if any) or loss on a sale of Units pursuant to
the Offer will be treated as long-term capital gain or loss if the Unitholder's
holding period for the Units exceeds one year. Under current law (which is
subject to change), long-term capital gains of individuals and other non-
corporate taxpayers are generally taxed at a maximum marginal federal income tax
rate of 20% (or 25% on recapture of the amount of accelerated depreciation on
real property), whereas the maximum marginal federal income tax rate for other
income of such persons is 39.6%. Capital losses are deductible only to the
extent of capital gains, except that non-corporate taxpayers may deduct up to
$3,000 of capital losses in excess of the amount of their capital gains against
ordinary income. Excess capital losses generally can be carried forward to
succeeding years (a corporation's carryforward period is five years and a non-
corporate taxpayer can carry forward such losses indefinitely); in addition,
corporations, but not non-corporate taxpayers, are allowed to carry back excess
capital losses to the three preceding taxable years.
Under Code Section 469, a non-corporate taxpayer or personal service
corporation can deduct passive activity losses in any year only to the extent of
such person's passive activity income for such year, and closely held
corporations may not offset such losses against so-called "portfolio" income. A
Unitholder with "suspended" passive activity losses (i.e., net tax losses in
excess of statutorily provided "phase-in" amounts) from the Partnership
generally will be entitled to offset such losses against any income or gain
recognized by the Unitholder on a sale of his Units pursuant to the Offer. If a
Unitholder is unable to sell all his Units, the deductibility of any unused
losses would continue to be subject to the passive activity loss limitation
until the Unitholder sells his remaining Units. See Section 8 ("Effects of the
Offer"). A Unitholder (other than corporations and certain foreign individuals)
who tenders Units may be subject to 31% backup withholding unless the Unitholder
provides a taxpayer identification number ("TIN") and certifies that the TIN is
correct or properly certifies that he is awaiting a TIN. A Unitholder may avoid
backup withholding by properly completing and signing the Substitute Form W-9
included as part of the Agreement of Assignment and Transfer.
IF A UNITHOLDER WHO IS SUBJECT TO BACKUP WITHHOLDING DOES NOT PROPERLY
COMPLETE AND SIGN THE SUBSTITUTE FORM W-9, THE PURCHASER WILL WITHHOLD 31% FROM
PAYMENTS TO SUCH UNITHOLDER. SEE INSTRUCTION 3 TO THE AGREEMENT OF ASSIGNMENT
AND TRANSFER.
Gain realized by a foreign Unitholder on a sale of a Unit pursuant to the
Offer will be subject to federal income tax. Under Section 1445 of the Code,
the transferee of a partnership interest held by a foreign person is generally
required to deduct and withhold a tax equal to 10% of the amount realized on the
disposition. The Purchaser will withhold 10% of the amount realized by a
tendering Unitholder from the Offer Price payable to such Unitholder unless the
Unitholder properly completes and signs the FIRPTA Affidavit included as part of
the Agreement of Assignment and Transfer certifying the Unitholder's TIN, that
such Unitholder is not a foreign person and the Unitholder's address. Amounts
withheld would be creditable against a foreign Unitholder's federal income tax
liability and, if in excess thereof, a refund could be obtained from the
Internal Revenue Service by filing a U.S. income tax return.
Consequences to a Non-Tendering Unitholder. The Purchaser does not
anticipate that a Unitholder who does not tender his or its Units will realize
any material tax consequences as a result of the election not to tender.
However, if as a result of the Offer there is a sale or exchange of 50% or more
of the total Units in Partnership capital and profits within a 12-month period,
a termination of the Partnership for federal income tax purposes would occur,
and the taxable year of the Partnership would close. In the case of such a sale
or exchange, the Properties (subject to related debt) of the Partnership would
be treated as contributed to a new partnership (or an association taxable as a
corporation). The Partnership will then be deemed to distribute to its
Unitholders interests in the new partnership in a deemed liquidation of the
Partnership. The Purchaser has not, however, had access to complete information
concerning assignments of Units and cannot, therefore, be certain that the
Partnership will not terminate for tax purposes as a result of sales pursuant to
the Offer. The consequences of a termination of the Partnership could include
changes in the methods of depreciation available to the Partnership for tax
purposes and possibly other consequences the extent of which cannot be
determined by the Purchaser without access to the books and records of the
Partnership. In addition, a termination of the Partnership could cause the
Partnership or its assets to become subject to unfavorable statutory or
regulatory changes enacted or issued prior to the termination but previously not
applicable to the Partnership or its assets because of protective "transitional"
rules. The Purchaser has reserved the right not to purchase Units to the extent
such purchase would cause a termination of the Partnership for federal income
tax purposes.
Consequences to a Tax-Exempt Unitholder. Although certain entities are
generally exempt from federal
income taxation, such tax-exempt entities (including Individual Retirement
Accounts ("IRAs") are subject to federal income tax on any "unrelated business
taxable income" ("UBTI"). UBTI generally includes, among other things, income
(other than, in the case of property which is not "debt-financed property,"
interest, dividends, real property rents not dependent upon income or profits,
and gain from disposition of non-inventory property) derived by certain trusts
(including IRAs) from a trade or business or by certain other tax-exempt
organizations from a trade or business, the conduct of which is not
substantially related to the exercise of such organization's charitable,
educational or other exempt purpose and income to the extent derived from debt-
financed property. Subject to certain exceptions, "debt-financed property" is
generally any property which is held to produce income and with respect to which
there is an "acquisition indebtedness" at any time during the taxable year.
Acquisition indebtedness is generally indebtedness incurred by a tax-exempt
entity directly or through a partnership (i) in acquiring or improving a
property, (ii) before acquiring or improving a property if the indebtedness
would not have been incurred but for such acquisition or improvement or (iii)
after acquiring or improving a property if the indebtedness would not have been
incurred but for such acquisition or improvement and the incurrence of such
indebtedness was reasonably foreseeable at the time of the acquisition or
improvement.
To the extent the Partnership holds debt-financed property or inventory or
other assets as a dealer, a tax-exempt Unitholder (including an IRA) could
realize UBTI on the sale of a Unit. In addition, a tax-exempt Unitholder will
realize UBTI upon the sale of a Unit, if such Unitholder held its Units as
inventory or otherwise as dealer property, or acquired its Units with
acquisition indebtedness. However, any UBTI recognized by a tax-exempt
Unitholder as a result of a sale of a Unit, in general, may be offset by such
Unitholder's net operating loss carryover (determined without taking into
account any amount of income or deduction which is excluded in computing UBTI),
subject to applicable limitations.
EACH TAX-EXEMPT UNITHOLDER SHOULD CONSULT ITS TAX ADVISOR AS TO THE
PARTICULAR TAX CONSEQUENCES TO SUCH UNITHOLDER OF SELLING OR NOT SELLING UNITS
PURSUANT TO THE OFFER.
Section 8. Effects of the Offer.
Certain Restrictions on Transfer of Interests. Section 7.01 of the
Partnership's Limited Partnership Agreement restricts transfers of Units if,
among other things, in the opinion of counsel to the Partnership a transfer
would cause a termination of the Partnership for federal income tax purposes
(which termination will occur when Units representing 50% or more of the total
Partnership capital and profits are transferred within a 12-month period).
Consequently, sales of Units in the secondary market and in private transactions
during the 12-month period following completion of the Offer may be restricted,
and the Partnership may not process any requests for recognition of transfers or
Units during such twelve-month period which the General Partner believes may
cause a tax termination. The Purchaser does not intend to purchase Units to the
extent such purchase would cause a termination of the Partnership. See Section
13 -"Conditions of the Offer."
Effect on Trading Market. There is no established public trading market for
the Units and, therefore, a reduction in the number of Unitholders should not
materially further restrict the Unitholders' ability to find purchasers for
their Units on any secondary market.
Voting Power of Purchaser. Depending on the number of Units acquired by the
Purchaser pursuant to the Offer, the Purchaser may have the ability to exert
certain influence on matters subject to the vote of Unitholders, unless
otherwise prohibited.
The Units are registered under the Exchange Act, which requires, among
other things that the Partnership furnish certain information to its Unitholders
and to the Commission and comply with the Commission's proxy rules in connection
with meetings of, and solicitation of consents from, Unitholders. The Purchaser
does not
expect or intend that consummation of the Offer will cause the Units to
cease to be registered under Section 12(g) of the Exchange Act. 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. Because the Units are widely held,
however, the Purchaser expects that even if it purchases the maximum number of
Units in the Offer, the units will continue to be held of record by more than
300 persons.
Section 9. Purpose of the Offer; Future Plans.
Purpose of the Offer. The purpose of the Offer is to enable the Purchaser
to acquire a significant interest in the Partnership for investment purposes
based on its expectation that there may be underlying value in the Properties.
The Purchaser does not currently intend to change current management or the
operation of the Partnership and does not have current plans for any
extraordinary transaction involving the Partnership. However, these plans could
change at any time in the future. The purchase of the Units will allow the
Purchaser to benefit from (i) any cash distributions from Partnership operations
in the ordinary course of business, (ii) any distributions of net proceeds from
the sale of any Properties and (iii) any distributions of net proceeds from the
liquidation of the Partnership.
Following the completion of the Offer, the Purchaser, or its affiliates,
may acquire additional Units. Any such acquisitions may be made through private
purchases, one or more future tender offers or by any other means deemed
advisable or appropriate. Any such acquisitions may be at a consideration higher
or lower than the consideration to be paid for the Units purchased pursuant to
the Offer.
The Purchaser is acquiring the Units pursuant to the Offer solely for
investment purposes. Although the Purchaser has no present intention to seek
control of the Partnership or to change the management or operations of the
Partnership, the Purchaser reserves the right, at an appropriate time, to
exercise limited partner and other rights, including rights relating to limited
partner votes concerning management of the Partnership and its properties, sales
of the Partnership's properties and liquidation and dissolution of the
Partnership.
Section 10. The Business of the Partnership.
Information included herein concerning the Partnership is derived from the
Partnership's publicly-filed reports. Additional financial and other
information concerning the Partnership is contained in the Partnership's Annual
Reports on Form 10-K, Quarterly Reports on Form 10-Q and other filings with the
Commission. Such reports and other documents may be examined and copies may be
obtained from the offices of the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549, and at the Commission's Web site at http://www.sec.gov.
Copies should be available by mail upon payment of the Commission's customary
charges by writing to the Commission's principal offices at 450 Fifth Street,
N.W., Washington, D.C. 20549. The Purchaser disclaims any responsibility for
the information included in such reports and extracted in this Offer to
Purchase.
The Partnership was formed in 1988 to acquire, own and operate 15 Marriott
Residence Inn properties and the land on which they are located. The
Partnership's Inns, which range in age between 14 and 17 years, are located in
seven states and contain a total of 2,129 suites as of December 31, 2000. The
Inns are extended-stay, limited service hotels which cater primarily to business
and family travelers who stay more than five consecutive nights. They do not
have restaurants, but each suite contains a fully-equipped kitchen. They are
operated as part of the Residence Inn by Marriott system and are managed by
Residence Inn by Marriott, Inc., a wholly-owned subsidiary of Marriott
International, Inc. under a long-term management agreement.
In the Partnership's Annual Report on Form 10-K for the fiscal year ended
December 31, 2000, the Partnership discloses that in September 2000, the General
Partner, Marriott International, Inc. and related defendants closed on a lawsuit
filed by limited partners from seven limited partnerships, including the
Partnership.
In accordance with the terms of the settlement, the defendants made cash payment
of approximately $152 per Unit to release all claims. The property manager of
the Partnership also agreed to forgive $29.8 million of deferred incentive
management fees payable by the Partnership.
In the Partnership's Quarterly Report on Form 10-Q for the fiscal quarter
ended March 23, 2001, the Partnership discloses that the General Partner is
currently attempting to sell its properties or, in the alternative, to find a
buyer for the partnership interests in the Partnership, and that the General
Partner has recently engaged a financial advisor to solicit bids from interested
parties.
Section 11. Certain Information Concerning the Purchaser.
The Purchaser is a limited liability company organized under the laws of
the State of Delaware owned by Madison, Haberhill and certain affiliates of
Madison. None of the Purchaser, Madison nor Haberhill is affiliated with the
Partnership or its general partner. For information concerning the Purchaser and
its principals, please refer to Schedule I attached hereto. The principal
businesses of Madison and Haberhill is investment in securities, particularly
limited partnership securities. The principal business address of the Purchaser
is 410 Park Avenue, Suite 540, New York, New York 10022.
The Purchaser has available sufficient amounts of liquid capital necessary
to fund the acquisition of all Units subject to the Offer, the expenses to be
incurred in connection with the Offer, and all other anticipated costs of the
Purchaser. The Purchaser is not a public company and has not prepared audited
financial statements. Madison has invested more than $130 million for selected
institutional and high-net worth investors and the Purchaser's owners have
adequate liquid assets at their disposal to fund payment to selling Unitholders.
As of the date of this Offer, the principals of the Purchaser own
approximately 0.25% of the outstanding Units of the Partnership. These Units
were acquired between April 1998 and March 1999 in an unregistered tender offer
at a price of $400 per Unit (which took place prior to the distribution
resulting from the class action litigation of $152 per Unit that was paid to
Unitholders during the fourth quarter of 2000). In consideration of the limited
and inefficient nature of the market for the Units, the Purchaser does not
believe that the prices paid for previously acquired Units should be relied upon
as a complete and accurate representation as to the current fair market value of
the Units.
Except as otherwise set forth herein, (i) neither the Purchaser nor, to the
best knowledge of the Purchaser, the persons listed on Schedule I nor 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,
the persons listed on Schedule I nor any affiliate of the Purchaser, or any
director, executive officer or subsidiary of any of the foregoing has effected
any transaction in the Units within the past 60 days, (iii) neither the
Purchaser nor, to the best knowledge of the Purchaser, the persons listed on
Schedule I nor any affiliate of the Purchaser have 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 the Purchaser or, to the best knowledge of
the Purchaser, the persons listed on Schedule I, or any affiliate of the
Purchaser on the one hand, and the Partnership or its 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 affiliate of the
Purchaser, on the one hand, the persons listed on Schedule I, and the
Partnership or its affiliates, on the other hand, concerning a merger,
consolidation or acquisition, tender offer or other acquisition of securities,
an election of directors or a sale or other transfer of a material amount of
assets.
Section 12. Source of Funds.
The Purchaser expects that approximately $3,936,000 would be required to
purchase 13,120 Units, if tendered, and an additional $100,000 may be required
to pay related fees and expenses. The Purchaser anticipates funding all of the
purchase price and related expenses through its owners' and affiliates' existing
liquid capital reserves, which are committed to that purpose. Accordingly,
there are no financing arrangements involving third parties which are necessary
for completion of the Offer.
Section 13. Conditions of the Offer.
Notwithstanding any other terms of the Offer and in addition to (and not in
limitation of) the Purchaser's rights to extend and amend the Offer at any time
in its sole discretion, the Purchaser shall not be required to accept for
payment or to pay for any Units tendered 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 or (ii) 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
transactions contemplated by the Offer shall not have been filed, occurred or
been obtained on or before the Expiration Date.
The Purchaser shall not be required to accept for payment or pay for any
Units not theretofore accepted for payment or paid for and may terminate or
amend the Offer as to such Units if, at any time on or after the date of the
Offer and before the later of the Expiration Date or the date payment is made
for the Units, the Purchaser determines, in its reasonable judgment, that any of
the following conditions exist:
(a) 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;
(b) there shall be any action taken, or any statute, rule, regulation or
order proposed, enacted, enforced, promulgated, issued or deemed applicable to
the Offer by any federal or state court, government or governmental authority or
agency, other than the application of the waiting period provisions of the Hart-
Scott-Rodino Antitrust Improvements Act of 1976, as amended, which might,
directly or indirectly, result in any of the consequences referred to in clauses
(i) through (vii) of paragraph (a) above;
(c) there shall have been threatened, instituted or pending any action,
proceeding, application, audit, claim or counterclaim by any government or
governmental authority or agency, domestic or foreign, or by or before any court
or governmental, regulatory or administrative agency, authority or tribunal,
domestic, foreign or supranational, which might, directly or indirectly, result
in any of the consequences referred to in clauses (i) through (vii) of paragraph
(a) above;
(d) any change or development shall have occurred or been threatened (or
any condition, event or development involving a prospective change) since the
date hereof, in the business, properties, assets, liabilities, financial
condition, capitalization, partners' equity, licenses, franchises, tax status,
operations, results of operations or prospects of the Partnership, which, in the
reasonable judgment of the Purchaser, is or may be adverse to the Partnership,
or the Purchaser shall have become aware of any fact that, in the reasonable
judgment of the Purchaser, does or may have an adverse effect on the value of
the Units;
(e) there shall have occurred (i) any general suspension of trading in, or
limitation on prices for, securities on any national securities exchange or in
the over-the-counter market in the United States, (ii) a declaration of a
banking moratorium or any suspension of payments in respect of banks in the
United States (whether or not mandatory), (iii) any limitation (whether or not
mandatory) by any governmental authority on, or other event which might an
adverse affect, the extension of credit by banks or lending institutions or
result in any imposition of currency controls in the United States, (iv) a
commencement of a war or armed hostilities or other national or international
calamity directly or indirectly involving the United States, (v) a material
change in United States or other currency exchange rates or a suspension of a
limitation on the markets thereof or (vi) 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) more than fifty percent of the outstanding Units have
been or are proposed to be acquired 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) 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 Tender Offer;
(h) the Partnership or any of its subsidiaries shall have authorized,
recommended, proposed or announced an agreement or intention to enter into an
agreement, with respect to any merger, consolidation, liquidation or business
combination, any acquisition or disposition of a material amount of assets or
securities, or any comparable event, not in the ordinary course of business
consistent with past practices;
(i) the failure to occur of any necessary approval or authorization by any
federal or state authorities necessary to the consummation of the purchase 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;
(j) 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; or
(k) the Partnership or its General Partner shall have amended, or proposed
or authorized any amendment to, the Limited Partnership Agreement or the
Purchaser shall have become aware that the Partnership or its General Partner
have proposed any such amendment.
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
giving rise to such conditions (including, without limitation, any action or
inaction by the Purchaser or any of its affiliates) or may be waived by the
Purchaser in whole or in part at any time and from time to time in its sole
discretion. The failure by the Purchaser at any time to exercise the
foregoing rights will not be deemed a waiver of such rights, which will be
deemed to be ongoing and may be asserted at any time and from time to time. Any
termination by the Purchaser concerning the events described above will be final
and binding upon all parties.
Section 14. Certain Legal Matters.
General. Except as set forth in this Section, 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 (i) any filings, approvals or other actions by any domestic or foreign
governmental or administrative or regulatory agency that would be required prior
to the acquisition of Units by the Purchaser pursuant to the Offer other than
the filing of a Tender Offer Statement on Schedule TO (which has been filed) and
any required amendments thereto or (ii) 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. Should any such approval or other action be required, it is
the Purchaser's present intention that such additional approval or action would
be sought. While there is no present intent to delay the purchase of Units
tendered pursuant to the Offer pending receipt of any such additional approval
or the taking of any such action, there can be no assurance that any such
additional approval or action, if needed, would be obtained without substantial
conditions or that adverse consequences might not result to the Partnership's
business, or that certain parts of the Partnership's business might not have to
be disposed of or held separate or other substantial conditions complied with in
order to obtain such approval or action, any of which could cause the Purchaser
to elect to terminate the Offer without purchasing Units thereunder. The
Purchaser's obligation to purchase and pay for Units is subject to certain
conditions, including conditions related to the legal matters discussed in this
Section 14.
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 and the FTC and certain waiting period requirements
have been satisfied. The Purchaser does not believe that the HSR Act is
applicable to the acquisition of Units pursuant to the Offer.
ERISA. By executing and returning the Agreement of Assignment and Transfer,
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.
Margin Requirements. The units are not "margin securities" under the
regulations of the Board of Governors of the Federal Reserve System and,
accordingly, such regulations are not applicable to the Offer.
State Takeover Laws. A number of states have adopted anti-takeover laws
which purport, to varying degrees, to be applicable to attempts to acquire
securities of corporations or other entities which are incorporated or organized
in such states or which have substantial assets, security holders, principal
executive officers or principal places of business therein. Although the
Purchaser has not attempted to comply with any state anti-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 this Offer to Purchase nor any action taken in connection therewith
is intended as a waiver of such right. If any state anti-takeover statute is
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 obliged to accept
for purchase or pay for any Units tendered.
Section 15. Fees and Expenses.
Except as otherwise set forth herein, the Purchaser will pay all costs and
expenses of printing, publishing and mailing the Offer and its legal fees and
expenses. The Purchaser will not pay any fees or commissions to any broker,
dealer or other person for soliciting tenders of Units pursuant to the Offer.
Section 16. Miscellaneous.
THE OFFER IS BEING MADE TO ALL UNITHOLDERS, BENEFICIAL OWNERS AND
ASSIGNEES, ALL TO THE EXTENT KNOWN BY THE PURCHASER. 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.
No person has been authorized to give any information or to make any
representation on behalf of the Purchaser not contained herein or in the
Agreement of Assignment and Transfer and, if given or made, such information or
representation must not be relied upon as having been authorized.
Pursuant to Rule 14d-3 of the General Rules and Regulations under the
Exchange Act, the Purchaser has filed with the Commission a Tender Offer
Statement on Schedule TO, together with exhibits, furnishing certain additional
information with respect to the Offer. Such statement and any amendments
thereto, including exhibits, may be inspected and copies may be obtained at the
same places and in the same manner as set forth with respect to information
concerning the Partnership in Section 11 "Certain Information Concerning the
Purchaser."
May 16, 2001
MADISON LIQUIDITY INVESTORS 114, LLC
SCHEDULE I
THE PURCHASER AND ITS PRINCIPALS
Executive Officers and Directors of the Purchaser
The Purchaser is a Delaware limited liability company owned by Madison and
Haberhill and affiliates of Madison. Set forth below is the name, current
business address, present principal occupation, and employment history for at
least the past five years of each principal Madison and Haberhill. Each person
listed below is a citizen of the United States of America.
Bryan E. Gordon, Managing Director of Madison
Prior to forming Madison, Mr. Gordon's 13-year background in investment
banking and management consulting emphasized the areas of real estate and
corporate finance. He specialized in equity and debt financings, mergers and
acquisitions, roll-up and formation transactions, and restructurings of limited
partnerships, REITs, corporations and joint ventures. Mr. Gordon's experience
includes seven years in the Real Estate and Partnership Finance Groups at Smith
Barney, Inc.; two years in the Investment Banking Division of Bear, Stearns &
Co., Inc.; and one year in the Real Estate and Partnership Finance Group at E.
F. Hutton & Company, Inc. Mr. Gordon earned an MBA degree from Columbia
University's Graduate School of Business and a BSE degree, cum laude, from the
Wharton School of the University of Pennsylvania.
Ronald M. Dickerman, Managing Director of Madison
Prior to forming Madison, Mr. Dickerman spent 14 years focusing on the
analysis, acquisition, financing, management and disposition of income-producing
assets such as real estate, mortgage products, healthcare properties, leased
equipment, media properties, oil & gas properties and other specialty assets.
In 1991, he founded First Equity Realty Corp., a real estate investment firm
specializing in the acquisition of under-performing real estate assets from
financial institutions. During the period 1987 to 1991, Mr. Dickerman was an
investment banker in the Partnership Finance Group at Smith Barney, Harris Upham
& Co., Inc., where he was responsible for the origination, analysis,
structuring, acquisition, asset management, disposition and marketing of real
estate and other limited partnerships. In this capacity, Mr. Dickerman raised
approximately $525 million in equity capital for assets valued at over $2
billion. Mr. Dickerman earned an MBA degree from Columbia University's Graduate
School of Business and a BA degree from Tufts University.
Douglas H. S. Greene, Managing Director of Haberhill
Prior to forming Haberhill, Mr. Greene spent 18 years with Marriott
Corporation and Host Marriott Corporation. As a Senior Vice President with Host
Marriott from 1993 to 2000, he was responsible for management of Host Marriott's
Asian hotel joint venture, selected hotel acquisitions, including those
involving debt purchase and foreclosure, negotiated prepackaged bankruptcies and
partnership rollups. He was also involved with certain of Host Marriott's
limited partnership activities, including operations management oversight and
refinancing and disposition of partnership properties. Prior to 1993, he was a
Vice President with Marriott Corporation, where his duties included a variety of
acquisition, disposition and corporate and financing activities for the
company's lodging properties. Mr. Greene earned a BS degree from Cornell
University's School of Hotel Administration.