Exhibit (a)(4)
August 12, 2005
SUBJECT: HIGHER OFFER TO PURCHASE UNITS at $23.00 per Unit, at least $2 per
Unit more than the Proposed Sale!
Dear Unit Holder:
As described in the Offer to Purchase and related Letters of Transmittal
(the "Offer") that we sent you a few weeks ago, we are offering to purchase up
to 1,540,000 Units or 100% of the outstanding limited partnership interests (the
"Units") in MERIDIAN HEALTHCARE GROWTH & INCOME FUND, L.P. (the "Partnership")
at a purchase price equal to:
$23 per Unit--at least a $2 PREMIUM to the proposed Sale!
We are extending the Offer for an additional week, until August 26, 2005.
In addition, we are taking this opportunity to respond to the General Partner's
"neutral" stance with respect to our Offer.
o The General Partner acknowledges that our Offer "represents a
premium of approximately $2 per Unit above the approximately $21 per
Unit the Fund expects will be available for distribution" upon
Formation Sale.
o The General Partner stated that it believed that there was
uncertainty regarding the consummation of our Offer, but gave no
reasons for this belief. In fact, we offered to change some of the
conditions to our Offer if the General Partner would agree to
recommend to you that you tender your Units, but the General Partner
refused to do so.
o The General Partner agreed in the contract to sell the Facilities to
recommend the Sale, so there is a conflict between the General
Partner's obligation under that agreement and the General Partner's
fiduciary duty to you to recommend what's best for you.
o Although the General Partner states that it is possible that neither
the Formation Contract nor our Offer will be consummated, we believe
that to be highly unlikely. But in any event, if we are right about
the value of the Facilities, there is only upside potential for you!
As we stated in our proxy statement, Senior Living Investment
Brokerage, Inc. believes that the facilities are worth between
$62,300,000 and $68,500,000, or approximately 24% to 37% more than the
Formation offer of $50,000,000!(a)
o The General Partner points to the fact that there is no public
information regarding our ability to fund this Offer. We believe this
is misleading because it fails to mention that we have represented to
both you and the U.S. Securities and Exchange Commission that we have
adequate funds to consummate the Offer.
o This Offer is conditioned upon Formation Capital deal failing to get
approval, so if you want to sell your Units, you should also send in a
"DOES NOT CONSENT" form to the General Partner or grant us a proxy to
do so on your behalf. Please note that while it is NOT a condition to
our accepting your Units that you submit a proxy or a "Does not
Consent" form, failure to do so reduces the likelihood that the
condition that the consent fail will be satisfied.
After carefully reading the Offer, if you elect to tender your Units, mail
(using the enclosed pre-addressed, postage paid envelope) or fax a duly
completed and executed copy of the Letter of Transmittal (printed on pink paper)
and change of address forms, and any other documents required by the Letter of
Transmittal, to the Depositary for the Offer at:
MacKenzie Patterson Fuller, Inc.
1640 School Street
Moraga, California 94556
Facsimile: (925) 631-9119
If you are going to tender your Units and grant us a proxy, please review
our proxy materials and the consent solicitation sent by the Partnership and
consider our position. If you have already granted us a proxy, or submitted a
"Does not Consent" form to the General Partner, or if you have not voted (which
counts as a "no" vote), you do not need to take any further action. Further, we
want to clarify that we are making this Offer at the same time as we are
soliciting proxies to vote down the proposed Sale. Thus, while we are making
this Offer with the intent to profit, we also hope that our Offer will help
prevent the Sale from closing. If our Offer is successful, we may obtain a
majority ownership in the Partnership, but we have no plan with respect to
liquidation of the Partnership. We may attempt to persuade the General Partners
to market the Facilities for sale. We may, at some point, explore the option of
taking over the role of General Partner if we are unhappy with the General
Partners' performance, but there are restrictions in the Partnership Agreement
that may prevent us from doing so (replacement of a General Partner requires the
other General Partner's consent and limited partner approval). Also, please note
that in our discussion of the Federal Income Tax Consequences section of our
Offer, we assume that the Partnership will be treated as a partnership for tax
purposes; we cannot assure you that it will not be treated as a publicly traded
partnership because the IRS could determine that the Units are readily traded on
a secondary market by virtue of the fact that there have been some tender offers
and auction trades of Units, however unlikely and inconsistent with the Code
that would be.
If you have any questions or need assistance, please call the Depository at
800-854-8357.
This Offer expires (unless extended) August 26, 2005.
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(a) Senior Living Investment Brokerage, Inc. Report
Brief Description of Qualifications: The principals at Senior Living
Investment Brokerage, Inc. ("Senior Living") have the knowledge and expertise to
value and market the Facilities. Senior Living has sold over 400 senior housing
facilities and has over $300 million in transactional experience. Representing
sellers of long-term care facilities is all it does. Its principals have a
combined experience of over 62 years in financing, developing, selling,
acquiring, brokering, appraising, and managing commercial real estate.
Method of Selection: One of our affiliated companies owns a nursing home in
Kansas that Senior Living is currently marketing for sale. Senior Living has
also consulted with us in the past about possible refinancing opportunities for
two of our affiliates' nursing facilities. We asked Senior Living if it would be
willing to analyze the Facilities and prepare a proposal as if it were being
considered to market the Facilities for sale. We selected this brokerage firm
because of the pre-existing relationship our principals have with the firm, and
because we believe the firm is extremely well-qualified to determine the value
of the Facilities given its expertise and experience.
Relationship and Compensation to be Received: The only relationship between
Senior Living and us is the Listing Agreement between Senior Living and our
affiliate to sell a skilled nursing facility owned by that affiliate in Kansas.
Pursuant to that Listing Agreement, Senior Living will be paid a customary
brokerage commission. No compensation was paid or will be paid to Senior Living
for the analysis it performed on the value of the Facilities.
Summary of Report:
We requested Senior Living to prepare a marketing proposal for the
Facilities, as if it were being considered to be the broker for the sale of the
Facilities (of course, this was hypothetical because we do not control who would
be retained to market and sell the Facilities if the Partnership decided to
market them because we are not the General Partners). Senior Living determined
the two most common variables used when pricing Skilled Nursing Facilities: the
Income Approach (or Capitalization Rates and Gross Income Multiple) and Sold
Comparables. Senior Living relied on information disclosed in Partnership's Form
10-K for the fiscal year ended December 31, 2004. In order to determine a value
based upon capitalization rates, it had to choose an appropriate rate (the
Income Approach determines value by dividing net operating income by the chosen
capitalization rate). It reviewed three sources, National Investment Center, The
Senior Care Investment Report, and Senior Housing Investment Survey to determine
the range of recent capitalization rates for similar properties. Given the
stability of the Facilities' performance, as well as other positive
characteristics, Senior Living believes an 11.0% to 11.5% capitalization rate is
an appropriate range for valuation purposes. Applying these capitalization rates
to the Facilities' performance yields a value of between $65,500,000 and
$68,500,000.
Using the Gross Income Multiple ("GIM") analysis, Senior Living looked to
the average GIM for skilled nursing facilities in 2004 and 2003, 0.73, according
to the Senior Care Acquisition Report. It increased the GIM by 0.22 for the sale
of the Facilities because of the increased economies of scale offered in a
portfolio sale of multiple properties. Thus, it used a GIM of 0.95. The GIM is
the sale price divided by the gross revenue. Thus, using a GIM of 0.95 yields a
probable sale price of approximately $62,300,000 based upon 2004 revenue, as
disclosed by the Partnership.
Senior Living also looked at several comparable sales of skilled nursing
facilities in comparable markets to determine a value for the Facilities. It did
so by calculating the sale price "per bed" and multiplying by the number of beds
in the Facilities. Analyzing the comparable sales and adjusting for the
attributes of the Facilities, Senior Living determined that at least $60,000 per
bed was appropriate, yielding a $66,200,000 value for the Facilities. Senior
Living concluded, based upon the information available and the above analysis,
that it would ask $70,000,000 for the Facilities were it the brokerage firm
hired to sell the Facilities.