AQUARIUS ACQUISITION, L.P.
C/O NOMURA ASSET CAPITAL CORPORATION
TWO WORLD FINANCIAL CENTER
NEW YORK, NEW YORK 10281
February 1, 1995
To: Limited Partners of
Springhill Lake Investors
Limited Partnership
Re: Offer to Purchase Units of
Springhill Lake Investors
Limited Partnership
Dear Limited Partner:
Enclosed with this letter is an Offer to Purchase (including the annexes
thereto, the "Offer to Purchase") pursuant to which the undersigned Aquarius
Acquisition, L.P., a newly formed Delaware limited partnership (the
"Purchaser"), is offering to purchase outstanding limited partnership
interests in Springhill Lake Investors Limited Partnership, a Maryland
limited partnership (the "Partnership") for cash consideration per Unit (as
such term is defined in the partnership agreement of the Partnership) of
$36,000 (pro rated in respect of fractional Units), which may include the
proceeds of a non-recourse loan (as more fully described below), upon the
terms and subject to the conditions set forth in the Offer to Purchase and in
the related Letter of Transmittal, as each may be supplemented or amended
from time to time (which together constitute this "Offer").
Limited Partners who tender Units will not be obligated to pay any
commissions, transfer fees, or transaction costs, all of which will be borne
by the Purchaser. This Offer is not conditioned on any minimum number of
Units being tendered. A Limited Partner may tender all or any portion of the
Units owned by it. A Limited Partner will retain ownership of any portion of
the Units it chooses not to tender.
This Offer has been made as an alternative to (a) the proposal ("Lerner
Proposal") made by Greenbelt Residential Limited Partnership, an affiliate of
Theodore N. Lerner ("Lerner"), to purchase the Partnership's 90% ownership
interest in operating partnerships that own Springhill Lake Apartments (the
"Project") or (b) a possible sale of the Project to a third party. ANY
LIMITED PARTNER WHO HAS DELIVERED ITS CONSENT TO THE LERNER PROPOSAL MAY
NEVERTHELESS STILL TENDER ALL OR ANY PORTION OF ITS UNITS PURSUANT TO THIS
OFFER.
This Offer will expire at 5:00 P.M. New York time on March 2, 1995 unless
extended.
EACH LIMITED PARTNER IS URGED TO READ CAREFULLY THE ENCLOSED OFFER TO
PURCHASE AND LETTER OF TRANSMITTAL IN THEIR ENTIRETY.
The Purchaser believes that Limited Partners may find this Offer an
attractive way to liquidate their investment in the Partnership, and a more
attractive alternative than the Lerner Proposal, or a possible sale of the
Project to a third party, for the following reasons:
o THIS OFFER PROVIDES MORE CASH PER UNIT ($36,000) TO LIMITED PARTNERS
THAN THE LERNER PROPOSAL (WHICH ESTIMATES AN EVENTUAL CASH PAYMENT OF $32,200
PER UNIT, CONSISTING OF $30,200 IN SALE PROCEEDS AND $2,000 FROM 1994
PARTNERSHIP OPERATIONS).
o THIS OFFER IS MORE LIKELY TO CLOSE THAN EITHER THE LERNER PROPOSAL OR A
POSSIBLE SALE OF THE PROJECT TO A THIRD PARTY. The Lerner Proposal is and any
possible sale to a third party would be subject to certain contingencies,
including the approval (i) by the Project's mortgage lender (the "Lender") of
the assumption of the mortgage loans affecting the Project and (ii) by
Limited Partners owning more than 50% of the Units. By contrast, this Offer
does not require the approval of the Lender or any other third party and does
not require any minimum level of participation by Limited Partners.
o THE LERNER PROPOSAL OR A SALE OF THE PROJECT TO A THIRD PARTY WILL
REQUIRE SIGNIFICANTLY MORE TIME TO NEGOTIATE AND CLOSE THAN THIS OFFER.
Because the Lerner Proposal or a third party sale would require the
completion of a consent solicitation process in respect of Limited Partners
and a negotiation period with the Lender to obtain its consent to the sale,
the Purchaser estimates that such a transaction would take at least three
months to conclude. A sale to a third party would take even longer because
the Partnership would also be required to market the Project for a reasonable
time, to provide each prospective purchaser adequate opportunity to conduct a
"due diligence" review of the Project, to negotiate sale documentation for
the Project with a prospective buyer and to provide Lerner with an
opportunity to match the terms of such a sale pursuant to his existing right
of first refusal arrangement. By contrast, consummation of this Offer is not
subject to any of the foregoing considerations.
o THIS OFFER PROVIDES MORE FLEXIBILITY THAN THE LERNER PROPOSAL OR A
POSSIBLE SALE TO A THIRD PARTY BECAUSE THIS OFFER GIVES EACH LIMITED PARTNER
THE OPTION TO: (A) RETAIN ITS UNITS; (B) RETAIN A PORTION OF ITS UNITS WHILE
ALSO TENDERING A PORTION OF ITS UNITS; OR (C) TENDER ALL ITS UNITS. Thus,
each Limited Partner who believes that now is not the right time to liquidate
its investment in the Partnership may retain it or a portion of its Units,
while each Limited Partner seeking liquidity for its investment may tender
all or a portion of its Units and receive cash consideration of $36,000 per
Unit. Neither the Lerner Proposal nor a possible sale of the Project to a
third party offers these options to Limited Partners.
o THIS OFFER PROVIDES THAT EACH LIMITED PARTNER WILL PROMPTLY RECEIVE
$36,000 IN CASH FOR EACH UNIT TENDERED AND IS NOT SUBJECT TO REDUCTION OR
CONTINGENCIES IF THIS OFFER IS CONSUMMATED. By contrast, because of certain
contingencies inherent in the Lerner Proposal, the actual per Unit
distribution amount which would result from a sale of the Project pursuant to
the Lerner Proposal could be even less than the $32,200 per Unit amount
estimated by Lerner. If the Lender does not approve assumption of the
mortgage loans affecting the Project by a new purchaser and insists on
receiving the prepayment penalty provided under the terms of the mortgage
(estimated to be as much as $5,000,000), the Lerner Proposal provides that
the per Unit proceeds could be reduced by $5,890, resulting in an estimated
per Unit distribution of only $26,310. In addition, the proposed form of
contract attached to the Lerner Proposal would require the Partnership to
make certain representations and warranties and to provide certain
indemnities which could cause the Partnership to reserve a portion of the
sale proceeds and thereby delay, and possibly reduce, the cash distribution
to Limited Partners.
The Purchaser is an affiliate of Nomura Asset Capital Corporation ("NACC")
and was formed on January 31, 1995. As of December 22, 1994, NACC acquired
indirect control of the managing general partner of the Partnership, Three
Winthrop Properties, Inc. ("Three Winthrop"), and on January 27, 1995
acquired indirect control (without equity ownership) of the Partnership's
other general partner, Linnaeus-Lexington Associates Limited Partnership
("Linnaeus-Lexington"). Because of the affiliation between the Purchaser,
Three Winthrop and Linnaeus-Lexington, the Partnership is making no
recommendation as to whether Limited Partners should tender their Units in
this Offer. In addition, this Offer is being made in compliance with the
provisions of Rule 13e-3 under the Securities and Exchange Act of 1934.
Pursuant to the Amended and Restated Limited Partnership Agreement of the
Partnership (the "Partnership Agreement"), a transfer of Units may not be
made if, after giving effect to such transfer, a termination of the
Partnership would occur for tax purposes. Such a tax termination would occur
if 50% or more of the outstanding interests in the Partnership (limited and
general) were transferred in any 12-month period. In order to prevent a
violation of the Partnership Agreement while, at the same time, providing
each tendering Limited Partner with a total of $36,000 per Unit in Cash
Consideration, the Purchaser has structured this Offer to include a
non-recourse loan in the event that more than 50.5% of the Units are
tendered. In such event, each tendering Limited Partner will be paid cash
consideration of $36,000 per Unit, a portion of which will represent the
purchase proceeds and the balance will represent the proceeds of a
non-recourse loan made by the Purchaser to such Limited Partner (each, a
"Loan"). Each Loan may be satisfied in full by a tendering Limited Partner,
one year and one day from
consummation of this Offer, by either (a) surrendering to the Purchaser the
portion of its Units which secure the Loan or, (b) a payment in cash equal to
the then outstanding balance of principal and accrued interest in respect of
such Loan. If the Purchaser acquires more than 50% of the Units, it may seek
to amend the Partnership Agreement to permit transfers of Units in excess of
the amount which would cause a tax termination of the Partnership. If any
such amendment becomes effective, the Loan will become due, upon demand of
the Purchaser. THE ACCEPTANCE OF A LOAN WILL NOT IMPOSE ANY PERSONAL
LIABILITY ON A TENDERING LIMITED PARTNER FOR THE PAYMENT OF ANY PRINCIPAL OR
INTEREST IN RESPECT OF ITS LOAN.
This letter provides only a brief summary of the terms and effects of the
Offer and is not meant to provide a full description thereof. Limited
Partners are urged to read the accompanying Offer to Purchase and Letter of
Transmittal carefully, and to consult their own advisors, tax, financial or
otherwise, before deciding whether to tender their Units.
In order to tender any Units in this Offer, the following documents must
be received by IBJ Schroder Bank & Trust Company, the Depository, prior to
5:00 P.M., New York time, on March 2, 1995:
(i) duly executed Letter of Transmittal (or facsimile thereof) which
requires Limited Partners to indicate, on the front page of the Letter
of Transmittal, the percentage of their Units being tendered and to
sign in the section titled "Sign Here to Tender.";
(ii) duly completed Substitute Form W-9 (included in the Letter of
Transmittal) which requires Limited Partners to indicate in Box A, its
Taxpayer Identification Number;
(iii) duly completed FIRPTA Affidavit (included in the Letter of
Transmittal) which requires Limited Partners to complete lines 2 and
3 in Box B;
(iv) duly executed signature page to the Note and Security Agreement (the
enclosed yellow page);
(v) If a Limited Partner is an "Exempt Foreign Person," a duly, completed
Substitute Form W-8 (included in the Letter of Transmittal) which
requires such Limited Partners to check the box in Box C; and
(vi) if a Limited Partner is a trustee, executor, administrator, guardian,
attorney-in-fact, officer of a corporation or other person acting in a
fiduciary or representative capacity, duly executed signature
guarantees and evidences of authority, in accordance with Instructions
1 and 3 in the Letter of Transmittal.
A prepaid self-addressed envelope is enclosed for your convenience. If you
have any questions or need assistance completing the Letter of Transmittal,
please call D.F. King & Co., Inc., the Information Agent, at (212) 269-5550
or at (800) 659-5550.
Very truly yours,
AQUARIUS ACQUISITION, L.P.