Exhibit (b)(10)
STATUS REPORT ON
PROPOSED TRANSACTION
INVOLVING THE
MCNEIL PARTNERSHIPS
DECEMBER 1999
This analysis has been prepared solely for the purpose of providing a
status report at the direction of the McNeil Partnerships. Such analysis shall
not be construed as and does not represent an opinion by Robert A. Stanger &
Co., Inc. ("Stanger") regarding any transaction. This memorandum contains
confidential and proprietary information which has not been made public and is
being delivered at the direction of the Partnerships with the express
understanding that such information will not be divulged to anyone except
persons in the recipients organization who have a need to know for purposes of
this transaction. This analysis and the contemporaneous meeting associated
therewith is pursuant to the agreement between Stanger and the McNeil
Partnerships.
McNeil Partnerships
Status Report
December 1999
TABLE OF CONTENTS
Exhibit
-------
Allocation Summary........................................................1
Review of McNeil Partnership Allocations..................................2
Allocations and Calculation of Unit Values................................3
Summary of McREMI & MPLP Allocations......................................4
Adjusted Working Capital Analyses.........................................5
Unit Value Comparisons....................................................6
Form of Second Stanger Opinion............................................7
EXHIBIT 1
ALLOCATION SUMMARY
Aggregate Consideration $644,440,000
Fees Due to PaineWebber (2,627,000)
-------------
Adjusted Purchase Price $641,813,000
=============
The total fee to PaineWebber has been estimated at $3,844,000, of which
$1,162,000 has already been paid and $55,000 has been separately allocated to
Fairfax ($21,000) and Summerhill ($34,000). The remaining balance due to
PaineWebber as a success fee is reflected above.
EXHIBIT 2
REVIEW OF MCNEIL PARTNERSHIPS ALLOCATIONS
1. Adjusted purchase price was allocated between the McNeil Business and
the Partnerships as a group based upon the relative value of the real
estate and the McNeil Business Value
2. Allocated value was reduced by mortgage debt and adjusted by estimated
excess cash balance (after transaction expenses), estimated as of
January 31, 2000
3. Allocation between the Limited Partners and the MPLP Allocation Amount
was based upon: (i) the general partners proportionate interest in the
profits and losses of the Partnerships based upon capital
contributions; (ii) the deficit restoration obligation of the General
Partners; (iii) certain rights and other assets corresponding to the
McNeil Partnerships which are being contributed in connection with the
general partners interest and (iv) the amounts due to McREMI (the
"Second McREMI Allocated Value").
EXHIBIT 3
MCNEIL PARTNERSHIPS
ALLOCATIONS AND UNIT VALUE CALCULATION
(amounts in thousands)
(except per unit amounts)
EXCESS CASH BALANCE
TOTAL MORTGAGE DEBT BALANCE -------------------------------
REAL ESTATE/ ------------------------- NET
McNEIL BUS. ALLOCATED Dec-99 JANUARY Jan-00 WORKING JANUARY Jan-00
VALUE % VALUE BALANCE AMORT. BALANCE CAPITAL(1) AMORT. BALANCE
----- - ----- ------- ------ ------- ---------- ------ -------
Hearth Hollow 3,643 0.57% $3,673 (2,114) 5 (2,109) 249 (5) 244
McNeil Midwest 11,816 1.86% 11,915 (8,823) 16 (8,807) 61 (16) 45
Regency North 5,030 0.79% 5,073 (2,364) 5 (2,359) (74) (5) (79)
Fairfax Assoc 3,880 0.61% 3,913 (2,244) 6 (2,238) 92 (6) 86
Summerhill 6,410 1.01% 6,464 (5,656) 0 (5,656) (738) 0 (738)
MREF IX 92,748 14.57% 93,525 (48,027) 67 (47,960) 1,934 (67) 1,867
MREF X 68,636 10.78% 69,212 (35,797) 72 (35,725) 1,208 (72) 1,136
MREF XI 71,138 11.18% 71,735 (35,313) 38 (35,275) 1,825 (38) 1,787
MREF XII 56,243 8.84% 56,714 (37,121) 34 (37,087) 302 (34) 268
MREF XIV 40,944 6.43% 41,287 (23,223) 45 (23,178) 1,608 (45) 1,563
MREF XV 40,170 6.31% 40,507 (22,857) 44 (22,813) 327 (44) 283
MREF XX 5,989 0.94% 6,039 (2,590) 6 (2,584) 1,486 (6) 1,480
MREF XXI 19,222 3.02% 19,383 (12,254) 20 (12,234) 852 (20) 832
MREF XXII 12,996 2.04% 13,105 (6,927) 9 (6,918) 1,290 (9) 1,281
MREF XXIII 6,430 1.01% 6,484 (4,184) 5 (4,179) 86 (5) 81
MREF XXIV 15,220 2.39% 15,348 (1,629) 3 (1,626) 1,448 (3) 1,445
MREF XXV 46,800 7.35% 47,192 (7,200) 0 (7,200) 3,772 0 3,772
MREF XXVI 41,813 6.57% 42,164 (18,655) 28 (18,627) 1,977 (28) 1,949
MREF XXVII 52,350 8.22% 52,789 0 0 0 5,481 0 5,481
-----------------------------------------------------------------------------------------------
PARTNERSHIP TOTAL 601,479 94.50% 606,520 (276,977) 403 (276,574) 23,188 (403) 22,785
McNEIL
ALLOCATED VALUE 35,000 5.50% 35,293 0 0 0 0 0 0
-----------------------------------------------------------------------------------------------
0
TOTAL 636,479 100.00% $641,813 ($276,977) $403 ($276,574) $23,188 ($403) $22,785
================================================================================================
MPLP ALLOCATION AMOUNT
----------------------
SECOND GENERAL PER PRESS PER PER UNIT
McREMI PARTNER FINAL UNIT RELEASE UNIT TOTAL VARIANCE
ALLO. VAL. INTEREST VALUE UNITS ESTIMATE PRICE VARIANCE VARIANCE PERCENT.
---------- ----- ----- -------- ----- -------- -------- --------
Hearth Hollow (305) (33) 1,470 35 42,003 40,115 1,888 66 4.7%
McNeil Midwest (393) (484) 2,277 90 25,302 25,840 (538) (48) (2.1%)
Regency North (195) (10) 2,430 32 75,929 75,916 13 0 0.0%
Fairfax Assoc (6) (797) 958 2 479,061 450,065 28,996 58 6.4%
Summerhill (53) 18 35 1 35,497 9,309 26,188 26 281.3%
MREF IX (988) 687 47,132 110,170 428 424 4 420 0.9%
MREF X (719) (2,595) 31,309 134,980 232 234 (2) (276) (0.9%)
MREF XI (623) (2,396) 35,228 159,813 220 221 (1) (91) (0.3%)
MREF XII (241) (2,800) 16,854 229,666 73 77 (4) (831) (4.7%)
MREF XIV (439) (618) 18,615 86,534.384 215 214 1 97 0.5%
MREF XV (375) (985) 16,617 102,796 162 160 2 170 1.0%
MREF XX (182) (216) 4,537 49,511.566 92 92 0 (18) (0.4%)
MREF XXI (1,341) (4,177) 2,463 24,863 99 99 0 2 0.1%
MREF XXII (735) (1,601) 5,132 19,493,088 0.26 0.25 0.01 259 5.3%
MREF XXIII (281) (360) 1,745 6,574,985 0.27 0.28 (0.01) (96) (5.2%)
MREF XXIV (364) (505) 14,298 40,000 357 347 10 418 3.0%
MREF XXV (403) (1,430) 41,931 82,943,685 0.51 0.50 0.01 459 1.1%
MREF XXVI (355) (797) 24,334 86,530,671 0.28 0.27 0.01 971 4.2%
MREF XXVII (544) (1,213) 56,512 5,162,909 10.95 10.54 0.41 2,095 3.9%
------------------------------------- ----------
PARTNERSHIP TOTAL (8,542) (20,311) 323,878 TOTAL 3,681
McNEIL ==========
ALLOCATED VALUE 8,542 20,311 64,146
-------------------------------------
TOTAL $0 $0 $388,024
=====================================
EXHIBIT 4
MCNEIL PARTNERSHIPS
SUMMARY OF MCREMI & MPLP ALLOCATIONS
(AMOUNTS IN THOUSANDS)
ADJUSTED
TOTAL MCREMI MPLP DRO GP $190,000 GP
PAYABLE ONLY ONLY INTEREST ADJUST. INTEREST
------- ---- ---- -------- ------- --------
Hearth Hollow ($348) (305) (43) 0 (43) 10 (33)
McNeil Midwest (910) (393) (517) 0 (517) 34 (484)
Regency North (219) (195) (24) 0 (24) 14 (10)
Fairfax Assoc (814) (6) (808) 0 (808) 11 (797)
Summer Hill (53) (53) 0 0 0 18 18
MREF IX (3,646) (988) (2,658) 3,082 424 264 687
MREF X (4,191) (719) (3,472) 682 (2,790) 195 (2,595)
MREF XI (4,029) (623) (3,406) 808 (2,598) 202 (2,396)
MREF XII (4,367) (241) (4,126) 1,166 (2,960) 160 (2,800)
MREF XIV (1,608) (439) (1,169) 435 (734) 116 (618)
MREF XV (1,474) (375) (1,099) 0 (1,099) 114 (985)
MREF XX (415) (182) (233) 0 (233) 17 (216)
MREF XXI (5,572) (1,341) (4,231) 0 (4,231) 55 (4,177)
MREF XXII (2,373) (735) (1,638) 0 (1,638) 37 (1,601)
MREF XXIII (659) (281) (378) 0 (378) 18 (360)
MREF XXIV (913) (364) (549) 0 (549) 43 (505)
MREF XXV (1,966) (403) (1,563) 0 (1,563) 133 (1,430)
MREF XXVI (1,526) (355) (1,171) 255 (916) 119 (797)
MREF XXVII (1,906) (544) (1,362) 0 (1,362) 149 (1,213)
-----------------------------------------------------------------
TOTALS (36,990) (8,542) (28,448) 6,427 (22,021) 1,710 (20,311)
=================================================================
EXHIBIT 5
MCNEIL PARTNERSHIPS
ADJUSTED WORKING CAPITAL ANALYSIS
---------------------------------
(AMOUNTS IN THOUSANDS)
TOTAL ADJUSTED
CURRENT JANUARY CURRENT OTHER SUBTOTAL MCNEIL WORKING
ASSETS ADJUST. LIABIL. LIABILITIES PAYABLE OTHER CAPITAL
------ ------- ------- ----------- ------- ----- -------
Hearth Hollow 433 25 (209) (348) (99) 348 249
McNeil Midwest 647 59 (645) (910) (849) 910 61
Regency North 155 42 (271) (219) (293) 219 (74)
Fairfax Assoc 333 37 (278) (814) (722) 814 92
Summerhill 178 20 (936) (53) (791) 53 (738)
MREF IX 7,279 348 (5,693) (3,646) (1,713) 3,646 1,934
MREF X 5,194 347 (4,333) (4,191) (2,982) 4,191 1,208
MREF XI 5,816 219 (4,210) (4,029) (2,204) 4,029 1,825
MREF XII 3,679 246 (3,623) (4,367) (4,065) 4,367 302
MREF XIV 3,747 228 (2,367) (1,608) 0 1,608 1,608
MREF XV 2,434 221 (2,328) (1,474) (1,147) 1,474 327
MREF XX 1,978 9 (501) (415) 1,071 415 1,486
MREF XXI 2,324 58 (1,530) (5,572) (4,721) 5,572 852
MREF XXII 1,907 58 (674) (2,373) (1,083) 2,373 1,290
MREF XXIII 529 14 (457) (659) (573) 659 86
MREF XXIV 2,243 109 (904) (913) 536 913 1,448
MREF XXV 6,238 234 (2,701) (1,966) 1,805 1,966 3,772
MREF XXVI 3,969 240 (2,232) (1,526) 451 1,526 1,977
MREF XXVII 7,330 356 (2,204) (1,906) 3,575 1,906 5,481
----- --- ------ ------ ----- ----- -----
TOTAL 56,413 2,871 (36,096) (36,990) (13,802) 36,990 0 23,188
====== ===== ====== ====== ======= ====== = ======
EXHIBIT 6
McNEIL PARTNERSHIPS
VALUE COMPARISONS(1)
Estimated Net Going
Units Offer Asset Concern Liquidation
Partnership Outstanding Price (2) Value Value Value
- ----------- ----------- --------- ----- ----- -----
Hearth Hollow 35 42,003 40,835 37,184 38,263
McNeil Midwest 90 25,302 23,828 14,106 20,384
Regency North 32 75,929 74,165 62,774 70,102
Fairfax Assoc. 2 479,061 457,288 178,769 407,288
Summerhill 1 35,497 0 0 (7) 0
McNeil IX 110,170 428 418 374 397
McNeil X 134,980 232 226 189 213
McNeil XI 159,813 220 215 183 204
McNeil XII 229,666 73 71 42 64
McNeil XIV 86,534 215 210 195 198
McNeil XV 102,796 162 157 145 147
McNeil XX 49,512 92 90 64 87
McNeil XXI 24,863 99 90 0 (5) 0
McNeil XXII 19,493,088 0.26 0.26 0.21 0.24
McNeil XXIII 6,574,985 0.27 0.25 0.16 0.21
McNeil XXIV 40,000 357 353 280 343
McNeil XXV 82,943,685 0.51 0.50 0.44 0.48
McNeil XXVI 86,530,671 0.28 0.28 0.24 0.26
McNeil XXVII 5,162,909 10.95 10.83 9.72 10.57
Robert A. Stanger & Co.(3) SPECTRUM(4)
------------------------- --------------------- Tender Offer Ranges (5)
Weighted Weighted ----------------------
Partnership # Units Average # Units Average Low High
- ----------- ------- -------- ------- -------- --- ----
Hearth Hollow 3 28,000 (6) N/A N/A 15,000 15,000
McNeil Midwest 10 11,294 (6) N/A N/A 15,000 26,500 (8)
Regency North 1 16,000 (6) N/A N/A 16,000 77,000 (8)
Fairfax Assoc. N/A N/A N/A N/A N/A N/A
Summerhill N/A N/A N/A N/A N/A N/A
McNeil IX 1,302 297 74 352 200 350
McNeil X 385 185 N/A N/A 115 205
McNeil XI 442 180 128 190 100 165 (8)
McNeil XII 633 47 185 53 32 50
McNeil XIV 146 158 N/A N/A 89 151 (8)
McNeil XV 559 153 130 147 115 140 (8)
McNeil XX 186 94 N/A N/A 60 175 (9)(8)
McNeil XXI N/A N/A N/A N/A 80 105 (10)
McNeil XXII N/A N/A 5,000 0.21 0.07 0.26 (8)
McNeil XXIII N/A N/A N/A N/A 0.01 0.15
McNeil XXIV 98 327 19 296 275 335
McNeil XXV 551,367 0.37 35,125 0.40 0.26 0.38 (8)
McNeil XXVI 221,958 0.24 55,000 0.21 0.16 0.23
McNeil XXVII 28,821 8.46 1,000 8.85 6.00 8.25
(1) Based upon estimated balance sheets and Excess Cash Balance estimates
of the General Partner as of JANUARY 31, 2000. and includes impact,
if any, of Deficit Restoration Obligation.
(2) Offer price based upon allocation methodology and assumes payment for
Excess Cash Balance.
(3) Per Seconday Market Database of Robert A. Stanger & Co., Inc. through
September 30, 1999, except as noted.
(4) "The Partnership Spectrum", September/October 1999 issue.
(5) Partnership is approximately 95% leveraged and therefore going concern
value is deemed inapplicable.
(6) Reported by McREMI.
(7) Partnership is more than 95% leveraged and therefore going concern
value is deemed inapplicable.
(8) Units are subject to a offer expiring in fourth quarter of 1999.
(9) High offer was by Mackenzie Patterson in November 1997. Partnership
made a special distribution in 1998 (after such offfer) of $116 per
unit from payoff of Notes.
(10) One offer at $100 at October 1998. Partnership owned Wise County
Property, which was foreclosed in May 1998 and Fort Meig's Plaza, which
was sold in April 1998 with no cash in excess of debt balance. May have
affected offeror's value estimate. Second offer in fourth quarter 1999
at $105 for 8% of units.
EXHIBIT 7
FORM OF SECOND STANGER OPINION
------------------------------
December __, 1999
McNeil Real Estate Fund IX, Ltd. McNeil Real Estate Fund XXIV, L.P.
McNeil Real Estate Fund X, Ltd. McNeil Real Estate Fund XXV, L.P.
McNeil Real Estate Fund XI, Ltd. McNeil Real Estate Fund XXVI, L.P.
McNeil Real Estate Fund XII, Ltd. McNeil Real Estate Fund XXVII, L.P.
McNeil Real Estate Fund XIV, Ltd. Hearth Hollow Associates, L.P.
McNeil Real Estate Fund XV, Ltd. McNeil Midwest Properties I, L.P.
McNeil Real Estate Fund XX, L.P. Regency North Associates, L.P.
McNeil Real Estate Fund XXI, L.P. Fairfax Associates II, Ltd.
McNeil Real Estate Fund XXII, L.P. McNeil Summerhill I, L.P.
McNeil Real Estate Fund XXIII, L.P.
Gentlemen:
The general partners (the "General Partners") of the above identified
partnerships (the "Partnerships") have advised us that the Partnerships are
contemplating a transaction (the "Transaction") pursuant to an agreement (the
"Master Agreement") in which WXI/McN Realty L.L.C., a newly formed Delaware
limited liability company (the "Company"), will acquire (i) the general
partnership interests in each of the Partnerships and certain rights and assets
relating thereto (collectively, the "General Partner Interests"), (ii) the
limited partnership interests in each of the Partnerships (the "Limited Partner
Interests") and (iii) the assets of McNeil Real Estate Management, Inc. and
certain rights relating thereto (collectively, the "McREMI Assets"), in exchange
for cash and membership interests in the Company ("Membership Interests") and
the prepayment and assumption of indebtedness of the Partnerships and their
subsidiaries (collectively, the total cash, Membership Interests and the
aggregate amount of indebtedness being prepaid or assumed are referred to herein
as the "Aggregate Consideration"). The Aggregate Consideration will approximate
$644,440,000. Capitalized terms used but not defined herein have the meanings
ascribed to such terms in the Master Agreement.
1
We understand that, pursuant to the terms of the Master Agreement, the
parties to the Master Agreement have agreed to allocate the Aggregate
Consideration between certain assets of McREMI (the "Partial McREMI Allocated
Value"), on the one hand, and all of the Partnerships taken as a whole
(collectively, the "Total Allocated Partnership Value"), on the other hand,
pursuant to an Allocation Analysis (the "Allocation Analysis") prepared by
Robert A. Stanger & Co., Inc. ("Stanger"). We understand that the Total
Allocated Partnership Value will be allocated among the individual Partnerships
pursuant to the terms of the Master Agreement (the portion of the Total
Allocated Partnership Value allocated to each Partnership, the "Per Partnership
Allocated Value" for such Partnership). In rendering the Allocation Analysis,
the Per Partnership Allocated Value will be reduced by the aggregate amount of
indebtedness of such Partnership (the "Net Per Partnership Allocated Value"). We
understand that, pursuant to the terms of the Master Agreement, the parties to
the Master Agreement have agreed to allocate the Net Per Partnership Allocated
Value of each Partnership among the General Partner Interests in each
Partnership (which shall include a further allocation between the proportional
interest in such Partnership based upon capital contributions and each of the
rights and other assets corresponding to such Partnership which are being
contributed in connection with such interests in accordance with Article II of
the Master Agreement), the amounts due to McREMI (the "Second McREMI Allocated
Value"), and each class of Limited Partner Interests in such Partnership (the
"Limited Partner Consideration Amount"). We understand that the Master Agreement
contemplates a special payment to Limited Partners of each Partnership at or
around the closing date of the Transaction in an amount equal to the estimated
working capital balance as of such date (the "Excess Cash Balance"). The Excess
Cash Balance and the Limited Partner Consideration Amount of each Partnership
will be paid to holders of Limited Partner Interests of each Partnership based
upon the provisions of the partnership agreement of each Partnership relating to
a liquidation.
We understand that limited partners in each of the Partnerships will have
the opportunity to approve or reject the participation by their Partnership in
the Transaction pursuant to a proxy statement and a limited partners meeting
which will be prepared and held, respectively, in connection with the
Transaction, and further that limited partners in each Partnership (except
Fairfax Associates II, Ltd. ("Fairfax") and McNeil Summerhill I, L.P.
("Summerhill")), will receive only cash in exchange for Limited Partner
Interests. We understand that affiliates of the General Partners are expected to
contribute assets to the Company in connection with the Transaction (including
the General Partner Interests in each of the Partnerships, the Limited Partner
Interests in Fairfax and Summerhill, the McREMI Assets and additional cash) with
an aggregate value range of $65.1 million to $100 million, representing
approximately 30.4% to 46.7% of the initial mezzanine debt and equity
capitalization of the Company.
On June 24, 1999, Stanger provided an opinion as to the fairness, from a
financial point of view, to the holders of each class of Limited Partner
Interests in each Partnership of: (i) the Aggregate Consideration to be paid for
the McREMI Assets and the Limited Partner Interests and General Partner
Interests in the Partnerships in connection with the Transaction; (ii) the
allocation of the Aggregate Consideration between the Partial McREMI Allocated
Value, on the one hand, and the Total Allocated Partnership Value, on the other
hand; (iii) the Per Partnership Allocated Value for each Partnership; (iv) the
methodology of allocation of the Per Partnership Allocated Value, less
indebtedness prepaid or assumed, among the General Partner Interests, the Second
McREMI
2
Allocated Value and each class of Limited Partner Interests; and (v) the
estimated per unit Excess Cash Balance and Limited Partner Consideration Amount
with respect to each class of Limited Partner Interests for each Partnership
determined as of March 31, 1999, based upon the balance sheet of each
Partnership as of such date adjusted for transaction expenses and the allocation
thereof, as estimated by the General Partner. You have requested that Stanger
provide a second opinion (the "Second Stanger Opinion") as to the fairness from
a financial point of view, to the holders of each class of Limited Partner
Interest in each Partnership of: (i) the portion of the Aggregate Consideration
allocated to the General Partner Interests in each Partnership; (ii) the Second
McREMI Allocated Value for each Partnership; (iii) the Limited Partner
Consideration Amount for each class of Limited Partner Interests in each
Partnership; and (iv) the sum of the estimated per unit Limited Partner
Consideration Amount and Excess Cash Balance with respect to each class of
Limited Partner Interests for each Partnership, based on the General Partner's
estimates as of January 31, 2000 of the modified net working capital balance of
each Partnership, calculated in accordance with the terms of the Master
Agreement.
Stanger, founded in 1978, has provided research, investment banking and
consulting services to clients located throughout the United States, including
major New York Stock Exchange member firms and insurance companies and over
seventy companies engaged in the management and operation of partnerships and
real estate investment trusts. The investment banking activities of Stanger
include financial advisory services, asset and securities valuations, industry
and company research and analysis, litigation support and expert witness
services, and due diligence investigations in connection with both publicly
registered and privately placed securities transactions.
Stanger, as part of its investment banking business, is regularly engaged
in the valuation of businesses and their securities in connection with mergers,
acquisitions, and reorganizations and for estate, tax, corporate and other
purposes. In particular, Stanger's valuation practice principally involves
partnerships, partnership securities and the assets typically owned through
partnerships including, but not limited to, real estate, mortgages secured by
real estate, oil and gas reserves, cable television systems, and equipment
leasing assets.
In arriving at the opinion set forth below, we have:
o Reviewed the Master Agreement and the form of the First Amended
and Restated Limited Liability Company Operating Agreement of
WXI/McN Realty L.L.C. attached as an exhibit to the Master
Agreement;
o Reviewed a draft of the Proxy Statement relating to the
Transaction for each Partnership;
o Reviewed the financial statements of the Partnerships for the
years ended December 31, 1997 and 1998 and the nine months ended
September 30, 1999;
o Reviewed the financial statements of McREMI and its affiliates
for the years ended December 31, 1997 and 1998 and the nine
months ended September 30, 1999;
3
o Reviewed the General Partner's estimates as of January 31, 2000
of the modified net working capital balance of each Partnership,
calculated in accordance with the terms of the Master Agreement:
o Conducted such other studies, analyses, inquiries and
investigations as we deemed appropriate.
In rendering this opinion, we have relied, without independent
verification, on the accuracy and completeness in all material respects of all
financial and other information that was furnished or otherwise communicated to
us by McREMI, the General Partners and the Partnerships. We have not performed
an independent appraisal of the assets and liabilities of the Partnerships or
the McREMI Assets. We have not conducted any engineering studies and have relied
on the estimates of the management of McREMI with respect to deferred
maintenance and the estimated cost to remediate environmental conditions for
each Property.
We have relied on the assurance of McREMI, the General Partners and the
Partnerships, that: (i) the Property budgets and discounted cash flow analyses
provided to us were in the judgment of McREMI, the General Partners and the
Partnerships reasonably prepared on bases consistent with actual historical
experience and reflect the best currently available estimates and good faith
judgments; (ii) any estimates of costs to remediate environmental conditions are
adequately considered in the capital expenditure estimates provided to us and
that no additional environmental conditions are present at the Properties; (iii)
any historical financial data, balance sheet data, transaction cost estimates
and estimates of the deficit restoration obligation of the general partner which
would be due upon a liquidation are accurate in all material respects; (iv) no
material changes have occurred in the information reviewed or in the value of
the Properties or the McREMI Assets between the date the information was
provided to us and the date of this letter; and (v) McREMI, the General Partners
and the Partnerships are not aware of any information or facts regarding the
Partnerships, the Properties, the McREMI Assets or the Company that would cause
the information supplied to us to be incomplete or misleading in any material
respect.
We did not determine or negotiate the amount or form of the Aggregate
Consideration. We have not been requested to, and therefore do not: (i) make any
recommendation to McREMI, the General Partners or the Limited Partners with
respect to whether to approve or reject the Transaction; or (ii) express any
opinion as to (a) the impact of the Transaction with respect to McREMI, the
General Partners or the Limited Partners of any Partnership that does not
participate in the Transaction; (b) the tax consequences of the Transaction for
McREMI, the General Partners or the Limited Partners of any Partnership; (c) the
Company's ability to qualify as a partnership or real estate investment trust,
or the consequences of the Company's failure to so qualify; (d) the potential
capital structure of the Company or its impact on the financial performance of
the Membership Interests; (e) the Company's ability to finance its obligations
pursuant to the Master Agreement or the impact of a failure to obtain financing
on the financial performance of the Company or the Partnerships; (f) whether or
not alternative methods of determining or allocating the Aggregate Consideration
to be received by the General Partners, Limited Partners of the Partnerships or
McREMI would have also provided fair results or results substantially similar to
those of the methodology used; (g) alternatives to the Transaction; or (h) any
other terms of the Transaction
4
other than each of the matters set forth in clauses (i) through (iv) of the
final paragraph of this letter. Furthermore, we are not expressing any opinion
herein to Robert A. McNeil or Carole McNeil in their capacities as direct or
indirect holders of General or Limited Partner Interests in the Partnerships or
McNeil Partners, L.P. or of capital stock in McREMI. Further, we are not
expressing any opinion herein as to the fairness of any terms of the Transaction
other than as described herein, including without limitation: (i) the fairness
of the amounts or allocations of Transaction costs, or (ii) the prices at which
the Membership Interests in the Company may trade, if at all, following the
Transaction, or the trading value of the Membership Interests compared with the
current fair market value of any assets contributed to the Company in connection
with the Transaction if the Company were to be liquidated in the current real
estate market.
This letter does not purport to be a complete description of the analyses
performed or the matters considered in rendering our opinion. The analyses and
the summary set forth herein must be considered as a whole, and selecting
portions of such summary or analyses, without considering all factors and
analyses, would create an incomplete view of the processes underlying this
opinion. In rendering this opinion, judgment was applied to a variety of complex
analyses and assumptions. The assumptions made and the judgments applied in
rendering the opinion are not readily susceptible to partial analysis or summary
description. The fact that any specific analysis is referred to herein is not
meant to indicate that such analysis was given greater weight than any other
analysis.
Based upon and subject to the foregoing, it is our opinion that, as of the
date of this letter, each of the matters set forth in the following clauses (i)
through (iv) is fair from a financial point of view to the holders of each class
of Limited Partner Interests in each Partnership: (i) the portion of the
Aggregate Consideration allocated to the General Partner Interests in each
Partnership; (ii) the Second McREMI Allocated Value for each Partnership; (iii)
the Limited Partner Consideration Amount for each class of Limited Partner
Interests in each Partnership; and (iv) the sum of the estimated per unit
Limited Partner Consideration Amount and Excess Cash Balance with respect to
each class of Limited Partner Interests for each Partnership, based on the
General Partner's estimates as of January 31, 2000 of the modified net working
capital balance of each Partnership, calculated in accordance with the terms of
the Master Agreement.
Yours truly,
Robert A. Stanger & Co., Inc.
Shrewsbury, New Jersey
December __, 1999
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