DIRECT DIAL 212-545-4672
FACSIMILE 212-545-4677
KOLKER@WHAFH.COM
March 15, 2002
VIA TELECOPIER and FEDERAL EXPRESS
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Robert E. Parsons, Jr., President
RIBM Two LLC
General Partner
Marriott Residence Inn II Limited Partnership
10400 Fernwood Road, Dept. 908
Bethesda, MD 20817-1109
Re: Marriott Residence Inn II Limited Partnership (the "Partnership")
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Dear Robert:
I am writing on behalf of Madison Liquidity Investors 117, LLC
("Madison"), which is a client of this firm and a Limited Partner of the
Partnership. Madison is very concerned about several statements made in the
Partnership's March 6, 2002 Recommendation Statement on Schedule 14D-9 (the
"Statement"), which was filed in response to Madison's recent tender offer to
purchase up to 8,341 Units of the Partnership.
As the Statement acknowledges, the General Partner is obligated under
the terms of the Partnership Agreement to attempt to locate a purchaser for the
Partnership's Inns and liquidate the Partnership as promptly as practicable.
Apparently - although the disclosure on this point is vague - the General
Partner is in exclusive discussions with a potential purchaser of all of the
Inns. Given these facts, it is astounding that the General Partner, with its
fiduciary duties to the Limited Partners, has agreed to the Manager's request to
spend approximately $9.7 million of the Partnership's cash reserves later this
fiscal year and perhaps additional cash reserves in future years
(all in addition to funds already in the Partnership's FF&E reserve) to fund
capital improvements to the Inns. Madison's concerns about this decision to
expend cash reserves include the following:
1. These cash reserves belong almost entirely to the Limited Partners
upon the Partnership's liquidation. Expending these reserves now, at a time when
liquidation is impending, will deprive the Limited Partners of a significant
portion (approximately $135 per Unit) of the value of their investments.
2. These funds have been accumulated by the Partnership over several
years, and the Manager's requests to spend these funds on capital improvements
have been outstanding for several years. During this time, there have been no
cash distributions to the Limited Partners, although the funds which have been
accumulated in the cash reserve could have been used for that purpose. In recent
disclosures, the General Partner has repeatedly stated that the operation of the
Partnership's Inns is unlikely to yield any distributions to the Limited
Partners for several more years. Also, since the split of Marriott Corporation
into Host Marriott and Marriott International in 1993, the two companies have
been in constant negotiations on hotel management issues related to Host
Marriott-owned hotels, yet none of these negotiations seems to have benefitted
the Partnership and its Limited Partners. Given these facts, the timing of this
agreement between Host Marriott and Marriott International to expend these funds
now is highly suspect.
3. This decision to expend almost 40% of the Partnership's
unrestricted funds and possibly more in later years is material to the
Partnership's financial position, is highly significant information to its
investors and should have been disclosed immediately at the time it was made.
4. If, as the Statement appears to contend, a sale of the Inns will
generate little net proceeds to the Limited Partners, then expending these
distributable reserves at a time when the Partnership is in liquidation mode
would per se constitute a breach of fiduciary duties. In any event, it would be
contrary to the Limited Partners' best interests. Such a crucial decision should
at least be put to a vote of the Limited Partners.
Madison believes that the General Partner should reverse its decision
to commit these funds and is considering all of its available actions and
remedies in the event that the General Partner fails to do so.
Very truly yours,
Lawrence P. Kolker
LPK:jg\263411
cc: Madison Liquidity Investors 117, LLC
Christopher G. Townsend, Esq.
Jerome J. Kraisinger, Esq.
Edward Walter