EXHIBIT (a)(11)
August 28, 2003
Board of Directors
Hallwood Realty, LLC, General Partner of
Hallwood Realty Partners, L.P.
3710 Rawlins, Suite 1500
Dallas, Texas 75219
Gentlemen:
We understand that on August 19, 2003 High River Limited Partnership (the
"Bidder") amended its offer to purchase any and all of the outstanding limited
partnership units and the associated rights to purchase additional units (the
"Units") under that certain Unit Purchase Rights Agreement, dated as of November
30, 1990, as amended, of Hallwood Realty Partners, L.P. ("Target" or the
"Company"). The Bidder increased its purchase price to a price of $120.00 per
Unit net to the seller in cash upon the terms and subject to the conditions set
forth in the Offer to Purchase dated May 1, 2003, as amended (the "Offer to
Purchase") and the related Letter of Transmittal (which together constitute the
"Bidder Offer"). The Bidder Offer is subject to, among other things, the
Target's redemption of the rights of the Company's limited partners to purchase
additional Units under the Unit Purchase Rights Agreement without instituting
any similar rights plan or the invalidation of such rights. The terms of the
Bidder Offer are more fully set forth in the Schedule TO, as amended (the
"Schedule TO") originally filed by the Bidder with the Securities and Exchange
Commission on May 1, 2003. We understand that as of May 1, 2003, Bidder
presently owns approximately 14.74% of the outstanding Units of the Company and
that as of August 18, 2003, 60,079 units have been tendered pursuant to the
Bidder Offer.
You have asked for our opinion as to whether the consideration to be received by
holders of the Company's Units pursuant to the Bidder Offer is adequate from a
financial point of view to the holders of such Units (other than the Bidder and
its affiliates).
For purposes of the opinion set forth herein, we have:
(i) reviewed certain publicly available financial statements and
other business and financial information of the Company;
(ii) reviewed due diligence materials including internal materials
related to the historical and expected future financial
performance of the Company, the leasing profile and physical
characteristics of the assets and other financial and
operating data concerning the Company prepared by the
management of the Company;
(iii) analyzed certain financial projections prepared by the
management of the Company, including Argus models;
(iv) compiled and reviewed third-party market information for all
of the Company's markets;
(v) discussed the past and current operations, financial condition
and prospects of the Company, including information relating
to future strategic, financial and operational plans, with
senior executives of the Company;
(vi) reviewed information related to the Company's legal structure
and other key documents including Company's limited
partnership agreement and form of management agreement;
(vii) reviewed the reported prices and trading activity for the
Units;
(viii) compared the financial performance of the Company and the
prices and trading activity of the Units with that of certain
other comparable publicly-traded companies and their
securities;
(ix) reviewed the financial terms, to the extent publicly
available, of certain comparable acquisition transactions;
(x) reviewed the Offer to Purchase, the Schedule TO and certain
related documents; and
(xi) performed such other analyses and considered such other
factors as we have deemed appropriate.
We have assumed and relied upon without independent verification the accuracy
and completeness of the information supplied or otherwise made available to us
by the Company or its representatives for the purposes of this opinion. We have
further relied on the assurances of management that they are not aware of any
facts or circumstances that would make any of such information inaccurate or
misleading. With respect to the financial projections, we have assumed that they
have been reasonably prepared on bases reflecting the best currently available
estimates and judgments of the future financial performance of the Company. We
have not been asked to and have not undertaken an independent verification of
any of such information, and we do not assume any responsibility or liability
for the accuracy or completeness thereof. We have not made any independent
valuation or appraisal of the assets or liabilities of the Company, nor have we
been furnished with any such appraisals. Our opinion is necessarily based on
financial, economic, market and other conditions as in effect on, and the
information made available to us as of, the date hereof. Events occurring after
the date hereof could materially affect this opinion. We have not undertaken to
update, revise, reaffirm or withdraw this opinion or otherwise comment upon
events occurring after the date hereof. We are expressing no opinion herein as
to the prices at which the Units may trade at any time. Furthermore, our opinion
does not address the relative merits of the Bidder Offer as compared to any
alternative business transaction, or other alternatives, whether or not such
alternatives could be achieved.
We have acted as financial advisor to the Board of Directors of Hallwood Realty,
LLC, the General Partner of the Company (the "Board of Directors of the General
Partner"), in connection with the Bidder Offer and will receive a fee for our
services. In the ordinary course of our trading, brokerage, investment banking,
asset management, financing and principal investing activities, Morgan Stanley &
Co. Incorporated and its affiliates may at any time hold long or short
positions, and may trade or otherwise effect transactions, for our own account
or the accounts of customers, in debt or equity securities or senior loans of
the Company or its affiliates. Morgan Stanley & Co. Incorporated has provided
prior financial advisory and financing services to the Company (although not
within the past ten years).
It is understood that this letter is for the information of the Board of
Directors of the General Partner in connection with its consideration of the
Bidder Offer and does not constitute a recommendation to any holder of the
Company's Units as to whether or not such holder should tender its Units
pursuant to the Bidder Offer or with respect to how such holder should vote or
act on any matter relating to the Bidder Offer. Furthermore, we do not opine as
to the allocation of the consideration. This letter may not be used for any
other purpose or disclosed without our prior written consent; provided, however,
that we hereby consent to the inclusion of this opinion as an annex to the
Solicitation/Recommendation Statement on Schedule 14D-9 to be filed by the
Company with the Securities and Exchange Commission with respect to the Bidder
Offer and to the references to this opinion therein.
Based upon and subject to the foregoing, we are of the opinion on the date
hereof that the consideration to be received by the holders of the Company's
Units pursuant to the Bidder Offer is inadequate from a financial point of view
to such holders (other than the Bidder and its affiliates).
Very truly yours,
MORGAN STANLEY & CO. INCORPORATED
By: /s/ Devin I. Murphy
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Devin I. Murphy
Managing Director