Exhibit (a)(2)
EQUITY RESOURCE DOVER FUND LP
c/o Equity Resource Investments
44 Brattle Street
Cambridge, MA 02138
April 20, 2005
Offer To Purchase up to 125 Units of
1999 Broadway Associates
For a Price of $10,000 per Unit
Dear Limited Partner:
The Equity Resource Dover Fund LP (the "Purchaser) is offering to purchase
limited partnership units in 1999 Broadway Associates Limited Partnership (the
"Partnership") for a price of $10,000 per unit. If you wish to sell your
interest, please complete the enclosed agreement and return it to us by May 20,
2005. Payment for properly tendered units will be made within ten business days
following the close of the offer.
FACTORS TO CONSIDER IN EVALUATING THE OFFER
Market Weakness Could Have an Impact on Your Investment
The Partnership owns an interest in a 42-story office tower and eight-story
parking garage (collectively the "Property") located in Denver, Colorado's
central business district ("CBD"). The Property had a vacancy rate of 15% as of
year-end 2004 and currently has an additional 12% of its net rentable space on
the sub-lease market. Lucent Technologies, the lessee of the72,979 square feet
of available sub-lease space, has vacated the space and will not renew its lease
when it expires at the end of this year. As a result, the Partnership will have
to re-lease this space in order to avoid a loss of the $1,520,882 in annual
lease revenue generated by the Lucent lease. Current real estate conditions in
the Denver market could make this difficult. Office vacancies have risen and
rents have fallen dramatically since 2001. Though there are signs of slight
improvement in the market, weakness remains. According to the fourth quarter
2004 Denver Office MarketView published by CB Richard Ellis, the vacancy rate
for office space in the CBD was projected to be 14.2% as of the end of 2004,
with an overall availability rate of 19.2%. Asking rents are projected to be
$18.53 per square foot. This is lower than the $20.84 per square foot rent
Lucent currently pays under its lease and does not factor in the rent
concessions and tenant improvements that would likely be needed in order to
re-lease the space. These market issues raise concerns for the Partnership on a
going-forward basis. On page 2 of its most recent financial statements, the
Partnership states that, "because of the decline in the Denver real estate
market, the Partnership may be unable to find a new tenant or tenants at rental
rates that will generate cash flow sufficient to meet its debt service
obligations." [See "THE OFFER-Section 7-Purpose and Effects of the Offer"]
No Recent Distributions/Future Distributions May be Limited
The Partnership made a cash distribution of $141.73 per unit in 2002. There have
been no distributions made since that time and no other distributions made since
1999. The Purchaser does not anticipate additional distributions from the
Partnership in the near future. On page 10 of its most recent financial
statements, the Partnership states, "it appears that the original investment
objective of capital growth from the inception of the (Partnership) will not be
attained and that the limited partners will not receive a complete return of
their invested capital. The extent to which invested capital is refunded to the
limited partners is dependant upon the performance of the Property and the
market in which it is located." Given the market conditions discussed above and
the issues relating to the Lucent space, the performance of the Partnership may
decline in future years. The Purchaser considered this factor (along with other
factors discussed in the offer) when determining its offer price.
Potential Tax Benefits on the Sale of Your Interest
The sale of your units is a taxable event that may create two tax benefits
making a sale more advantageous at this time. First, based on the Purchaser's
own calculations, a typical original investor paying the full investment amount
at the time of the first close would be able to recognize a capital loss of
approximately $10,000 per unit on a sale of their interest under the offer. To
the extent that a selling limited partner is able to realize such a loss, the
tax benefits associated with the loss would be in addition to their sale
proceeds. Second, limited partners may be able to take advantage of the release
of suspended passive losses on the sale of their investment. Since 1989, the
Partnership has generated passive losses of approximately $64,000 per unit for a
typical original investor paying the full investment amount at the time of the
first close. Over the life of a limited partnership investment, passive losses
can be used only to offset passive income. Losses that cannot be used to offset
passive income are suspended for use in future years. When a limited partnership
investment is terminated, suspended losses are released and can then be used to
offset ordinary income. For limited partners with suspended passive losses, the
benefits associated with the release of those losses on a sale could be
substantial. Since each limited partner's tax situation is different, we urge
you to consult your tax advisor regarding the specific tax implications of a
sale. Also, the figures in this section apply to a typical original investor
paying the full investment amount at the time of the first close. Investors who
purchased units on a deferred basis will likely have a different, though not
materially different, tax situation. [See "THE OFFER-Section 6-Tax
Consequences"]
The Purchaser Estimated the Partnership's Net Asset Value in Determining its
Offer Price
In determining the offer price, the Purchaser calculated a net asset value (NAV)
for units using an estimate of the Property's value based on a potential sale
price of $87 per square foot. This was the price paid in a June 2004 sale of an
office tower located at 1700 Broadway in Denver ("Comparison Property"). Based
on the $87 per square foot value, deducting selling commissions of 3%, adding in
the Partnership's other assets and deducting the Partnership's liabilities, the
Purchaser calculated a Partnership NAV of $17,847 per unit. Limited partners
should keep in mind that this calculation makes certain assumptions that, if
changed, would alter the NAV of units. The Purchaser chose this method based on
its belief that the risks associated with owning units are related primarily to
the weakness in the Denver office market that is discussed above. Since the
Purchaser believes that it is market weakness and not weakness specific to the
Property that is causing the risks associated with owning units, the Purchaser
believes that recent property sales best take the market weakness into account.
While other sales of other properties in the Denver CBD may be relevant to a
discussion of the Property's potential value, the Purchaser calculated the
Partnership's NAV using the per square foot sale price of the Comparison based
on the fact that: (1) this is the most recent sale that the Purchaser is aware
of; and (2) the Comparison Property is in close proximity to the Property. [See
"THE OFFER-Section 7-Purpose and Effects of the Offer"]
The Purchaser Applied an Illiquidity Discount to Arrive at the Offer Price
In determining its offer price of $10,000 per unit, the Purchaser applied an
illiquidity discount to its NAV calculation. Applying an illiquidity discount is
standard in valuing real estate limited partnership interests
for the reasons discussed below. According to the Direct Investments Spectrum, a
national reporting service covering limited partnerships, the average annual
discounts applied to real estate limited partnerships since 1992 have ranged
from 25% to 44%. The Purchaser chose an illiquidity discount at the top of this
range based on its own analysis of the Partnership, the Property and the Denver
real estate market. Other measures of value may be relevant to a limited
partner, and all limited partners are urged to carefully consider all of the
information contained in the Offer to Purchase and Agreement of Sale and to
consult with their own advisors (tax, financial, or otherwise) in evaluating the
terms of the offer before deciding whether to tender units. [See "THE
OFFER-Section 7-Purpose and Effects of the Offer"]
Opportunity for Liquidity
The Purchaser anticipates that the Partnership will continue to operate for the
foreseeable future. By selling your units under the offer, you will terminate
your investment in the Partnership and eliminate future K-1 reporting for this
Partnership. The opportunity for liquidity may be an attractive option for some
limited partners. Other than tender offers, privately negotiated sales and sales
through intermediaries are the only current means to liquidate limited
partnership interests. These interests are not listed or traded on any national
securities exchange or quoted on NASDAQ. To the best of the Purchaser's
knowledge, 5 units in the Partnership have been traded in the past twelve
months. These units, which represent approximately one percent of the
Partnership's total outstanding units, were acquired by the Purchaser for a
price of $5,000 per unit in three privately negotiated sales. [See "THE
OFFER-Introduction-Market Value of Units"]
Effects of a Sale of Your Units
Limited partners who sell their units will be giving up the opportunity to
participate in any future benefits associated with ownership of units, including
the right to participate in any future distribution of cash or property,
including any proceeds associated with the liquidation of the Partnership.
Offer Price May Not Represent the Full Value of Your Units
No independent party has been retained by the Purchaser or by any other person
to evaluate or render any opinion to limited partners with respect to the
fairness of the offer price. No representation is being made as to fairness or
to other measures of value that may be relevant to limited partners. Limited
partners should remember that the per unit NAV calculated by the Purchaser is
based on assumptions that if changed, would alter the value of units. As a
result, the Purchaser's offer price may be viewed as speculative in nature and
could differ significantly from the proceeds that could be realized upon a
liquidation of the Partnership. [See "THE OFFER-Section 7-Purpose and Effects of
the Offer"]
The Purchaser is Seeking to Acquire Units for Long-Term Investment Purposes
The Purchaser is in the business of acquiring fractional investment interests
for long-term retention and seeks to purchase units in the Partnership in
advancement of that strategy. The units acquired as a result of this offer will
be held as long-term investments and not with a view to a resale. The Purchaser
does not typically acquire general partner positions and is not engaged in
property management.
Please read the enclosed offer carefully. It contains important information
concerning this offer, the Partnership and the Purchaser. If you wish to sell
your units, complete the enclosed Agreement of Sale according to the directions
on the agreement, sign where indicated and return it in the pre-addressed return
envelope. If you have any questions regarding the offer or would like an
additional copy, please call Equity Resource Investments LLC, the information
agent for this offer, at (617) 876-4800.
Sincerely,
Equity Resource Dover Fund LP