BALCOR PENSION INVESTORS-IV
P.O. BOX 7190
DEERFIELD, ILLINOIS 60015-7190
June 17, 1996
Dear Investor:
As you know, on May 20, 1996, Walton Street Capital Acquisition Co. II, L.L.C.
("Walton Street") announced an unsolicited offer to purchase up to
approximately 33% of the outstanding limited partnership interests ("Units") of
Balcor Pension Investors-IV (the "Partnership") at a price of $65 per Unit. In
our letter to you dated May 28, 1996, we informed you that we were expressing
no opinion and remaining neutral with respect to Walton Street's offer. While
our position with respect to the offer has not changed, we wanted to provide
you with certain additional information that may be useful to you in evaluating
the offer.
On June 3, 1996, the Partnership received a non-binding proposal from
Heitman/JMB Advisory Corporation ("Heitman") to purchase all of the
Partnership's remaining real properties and the Partnership's one remaining
mortgage loan. Inasmuch as this proposal included certain terms and
conditions which are not acceptable to the Partnership, representatives of the
General Partner spoke with representatives of Heitman in an attempt to
determine the viability of the Heitman proposal and to request additional
information on certain matters, including Heitman's source of capital. On June
6, 1996, the Partnership delivered a non-binding counterproposal to Heitman
setting forth the Partnership's asking price for the assets which would be
available for sale, and the basic terms and conditions upon which the
Partnership would be agreeable to pursuing negotiations. As of this time,
Heitman has not responded to this counterproposal and accordingly, the General
Partner does not know whether or not the terms and conditions thereof are
acceptable to Heitman or whether there will be further negotiations.
It must be kept in mind that even if Heitman and the Partnership proceed with
negotiations, the Heitman proposal is contingent on many factors including
among others Heitman's satisfactory due diligence review of the Partnership's
properties, the negotiation of a mutually acceptable purchase agreement and
Heitman's ability to obtain adequate capital to consummate the transaction.
Additionally, a sale of all or substantially all of the Partnership's assets
will require the approval of the holders of a majority of the outstanding
Units. If a contract for the sale of the assets is executed with Heitman, the
General Partner will attempt to obtain the necessary investor approval through
a proxy solicitation.
As a result of the significant contingencies and conditions stated above, there
can be no assurance that a sale to Heitman will ultimately be consummated or if
a sale is completed what the final terms will be. In fact there is a very
substantial risk that a sale will not be consummated. However, in the event
that a sale of the assets is consummated at the price contemplated in the
Partnership's counterproposal, the net proceeds from a sale to Heitman which
would be available for distribution to investors, when added to the available
proceeds of the potential sales described in our May 28 letter and Partnership
cash reserves, would be materially greater than the amount of the Walton Street
offer. Even in the event that the sale to Heitman and the other sales
described in our May 28 letter are consummated, there can be no assurance what
actual dollar amount of distributions to the limited partners will be achieved.
As stated in our May 28 letter, the strategy was to dispose of the
Partnership's remaining nine assets by the end of 1997, and the remaining
residential properties were being marketed for sale. Subsequent to the letter,
we have approved for sale Palm View apartments. The negotiated price is
approximately 47% above the Alex. Brown valuation for the property. If the
sale is consummated at the negotiated price, the net proceeds would result in a
distribution to investors of approximately $8.50 per Unit or approximately 13%
of the Walton Street offer and the Partnership will still own eight assets. No
assurance can be given that a contract will be entered into with respect to
Palm View apartments, or what the final distribution will be if the transaction
is consummated.
Under the terms of Walton Street's offer, as revised, Walton Street cannot,
until June 27, 1996, purchase and pay for any Units tendered prior to that
time, and you may withdraw Units tendered to Walton Street at any time prior to
5:00 p.m. Eastern Standard Time on June 27, 1996. If you wish to withdraw any
Units tendered to Walton Street, you may do so by complying with the withdrawal
procedures set forth in Walton Street's offer. Your General Partner will
continue to act in the manner it believes to be in the best interests of the
limited partners.
Very truly yours,
/s/Thomas E. Meador
- ------------------------------
Thomas E. Meador, Chairman
Balcor Mortgage Advisors-III