sc14d9
SECURITIES AND EXCHANGE
COMMISSION
Washington, DC 20549
Schedule 14D-9
(Rule 14d-101)
SOLICITATION/RECOMMENDATION STATEMENT
PURSUANT TO SECTION 14(d)(4) OF THE
SECURITIES EXCHANGE ACT OF 1934
CORNERSTONE REALTY FUND,
LLC
(Name of Subject
Company)
CORNERSTONE REALTY FUND,
LLC
(Name of Person Filing
Statement)
Units of membership interest
(Title of Class of
Securities)
N/A
(CUSIP Number of Class of
Securities)
Terry G. Roussel
Principal Executive Officer
1920 Main Street, Suite 400
Irvine, California 92614
(949) 852-1007
(Name, Address and Telephone
Number of Person Authorized to Receive
Notice and Communications on Behalf of the Person Filing
Statement)
Copies to:
Robert H. Bergdolt
Damon M. McLean
DLA Piper LLP (US)
4141 Parklake Avenue, Suite 300
Raleigh, North Carolina
27612-2350
(919) 786-2002
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Check the box if the filing relates solely to preliminary
communications made before the commencement of a tender offer.
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INTRODUCTION
This Solicitation/Recommendation Statement on
Schedule 14D-9
(the
Schedule 14D-9)
relates to an offer (the Tender Offer)
by MPF Flagship Fund 14, LLC; MPF Income Fund 26,
LLLC; MPF Flagship Fund 12, LLC; MPF Badger Acquisition
Co., LLC; MPF Opportunity Fund, LP; MPF Income Fund 24,
LLC; MP Value Fund 5, LLC; MP Value Fund 7, LLC; MPF
Flagship Fund 9, LLC; and Mackenzie Patterson Fuller, LP
(collectively, the Bidder) to purchase
up to 9,867 Units of membership interest (the
Units) of Cornerstone Realty Fund,
LLC, a California limited liability company (the
Company), at a price of $125 per
Unit (the Offer Price) upon the terms
and subject to the conditions set forth in the Offer to Purchase
filed by the Bidder with the Securities and Exchange Commission
on August 18, 2011, as amended from time to time (the
Offer to Purchase).
As discussed below, Cornerstone Industrial Properties, LLC,
the Companys managing member (the Managing
Member), recommends that the Companys members
(the Members) reject the Tender Offer and not
tender the Units for purchase pursuant to the Tender Offer.
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Item 1.
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Subject
Company Information
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The Companys name and the address and telephone number of
its principal executive offices is as follows:
Cornerstone Realty Fund, LLC
1920 Main Street, Suite 400
Irvine, California 92614
Toll-free Phone Number:
877-805-3333
The title of the class of equity securities to which this
Schedule 14D-9
relates is the Companys Units of membership interest, of
which there were 98,244.76 Units outstanding as of
August 18, 2011.
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Item 2.
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Identity
and Background of Filing Person
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The Company is the person filing this
Schedule 14D-9.
The Companys name, address and business telephone number
are set forth in Item 1 above, which information is
incorporated herein by reference.
This
Schedule 14D-9
relates to the Tender Offer by the Bidder pursuant to which the
Bidder has offered to purchase, subject to certain terms and
conditions, up to 9,867 Units at the Offer Price. The Tender
Offer is on the terms and subject to the conditions described in
the Tender Offer Statement on Schedule TO filed by the
Bidder with the Securities and Exchange Commission (the
SEC) on August 18, 2011 (as
amended from time to time and together with the exhibits
thereto, the Schedule TO).
Unless the Tender Offer is extended by the Bidder, it will
expire on October 10, 2011 at 11:59 p.m., Pacific Time.
According to Bidders Schedule TO, its business
address and telephone number is:
1640 School Street
Moraga, California 94556
Phone Number:
(925) 631-9100
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Item 3.
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Past
Contacts, Transactions, Negotiations and
Agreements
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To the knowledge of the Company, as of the date of this
Schedule 14D-9,
there are no material agreements, arrangements or understandings
or any actual or potential conflicts of interest
(i) between the Company or its affiliates and the Bidder
and its executive officers, directors or affiliates or
(ii) between the Company or its affiliates and the
executive officers or directors of affiliates of the Company,
except for agreements, arrangements or understandings and actual
or potential conflicts of interest discussed in Part I,
Item 13 of the Companys Annual Report on
Form 10-K
filed with the SEC on March 17, 2011 and under the heading
Plan of Liquidation Proposal The Plan of
Liquidation Interests in the Liquidation That Differ
from Your Interests in the Definitive Proxy Statement
filed by the Company on April 1, 2011, which excerpts are
incorporated herein by reference. The Annual Report on
Form 10-K
and the Definitive Proxy Statement were previously delivered to
all Members and are available for free on the SECs web
site at www.sec.gov.
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Item 4.
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The
Solicitation or Recommendation
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(a) Solicitation
or Recommendation.
The Managing Member has carefully reviewed and analyzed the
terms of the Tender Offer. The Managing Member has determined
that the terms of the Tender Offer are not advisable and are not
in the best interests of the Company or its Members.
Accordingly, the Managing Member recommends that the Members
reject the Tender Offer and not tender their Units for purchase
pursuant to the Offer to Purchase.
The Managing Member acknowledges that each Member must evaluate
whether to tender its Units to the Bidder pursuant to the Offer
to Purchase and that an individual Member may determine to
tender based on, among other things, the individual liquidity
needs of such Member.
(b) Background.
On August 18, 2011, the Bidder commenced the Tender Offer
to purchase up to 9,867 Units at a purchase price equal to $125
per Unit in cash upon the terms and subject to the conditions
set forth in the Offer to Purchase and in the related Letter of
Transmittal and Assignment Form. The Tender Offer, withdrawal
rights, and proration period are set to expire at
11:59 P.M., Pacific Time, on October 10, 2011 (the
Expiration Date) unless the Bidder
extends the Tender Offer. The Bidder reserved the right, in its
sole discretion, at any time and from time to time (but not the
obligation), (i) to extend the period of time during which
the Tender Offer is open, (ii) to not accept any Shares for
payment upon the occurrence of certain terms specified in the
Offer to Purchase and, prior to the Expiration Date, to
terminate the Tender Offer and (iii) to amend the Tender
Offer in any respect prior to the Expiration Date.
On August 17, 2011, the Bidder also sent a letter to the
Company indicating that it had commenced the Tender Offer by
summary newspaper advertisement pursuant to
Rule 14d-5(f)(2)
and
Rule 14d-4(a)(3)
of the General Rules and Regulations under the Securities and
Exchange Act, as amended (the Exchange
Act) and, for purposes of disseminating the Tender
Offer materials, requested the Company to inform the Bidder of
its election pursuant to paragraph (a)(3) of
Rule 14d-5
of the Exchange Act.
In the Offer to Purchase, the Bidder indicated that in
determining the Offer Price, the Bidder arrived at the
$125 Offer Price by applying a liquidity discount to the
estimated liquidation value of the Partnerships assets.
The [Bidder applies] such a discount with the intention of
making a profit by holding on to the Units until the Partnership
is liquidated, hopefully at close to the full estimated
liquidation value.
The Managing Member believes that the Tender Offer is an
opportunistic attempt by the Bidder to capture for itself the
potential opportunity to quickly realize the full value of a
tendering Members investment in the Company, which would
have the effect of depriving a tendering Member of that
opportunity.
(c) Reasons
for the Recommendation.
In reaching the conclusions and in making the recommendation
described above, the Managing Member (1) reviewed the terms
and conditions of the Tender Offer; and (2) considered
other information with respect to the Companys financial
condition, operations and strategy.
2
In undertaking the analysis noted above, the Managing Member
took into account the following in evaluating the merits of the
Tender Offer and in support of its recommendation that the
Stockholders reject the Tender Offer and not tender their Shares
in the Tender Offer:
1. Prior to submitting to Members for their consent a Plan
of Liquidation and Dissolution (the Plan of
Liquidation) on April 1, 2011, the Managing Member
engaged an independent real estate broker specializing in
multitenant industrial real estate to conduct a targeted bid
process to market the Companys portfolio of properties to
likely buyers. Based upon the results of that bidding process,
the Managing Member estimated that Members could expect to
receive between approximately $224 and $248 in the aggregate in
cash per Unit upon the consummation of a successful sale in
accordance with the Plan of Liquidation. Subsequent to receiving
Member approval of the Plan of Liquidation on May 29, 2011,
the Company executed a purchase and sale agreement with an
unaffiliated buyer to sell the Companys portfolio for
approximately $26.4 million. This pricing would have
produced liquidating distributions to Members within the range
estimated by the Company and significantly above the
$125 price currently being offered by the Bidder.
Unfortunately, the purchase and sale agreement was subsequently
terminated on July 1, 2011 due to the buyers
inability to secure acceptable financing for the transaction.
Nevertheless the Managing Member continues to work diligently
toward the liquidation of the Companys portfolio in
accordance with the Plan of Liquidation, and continues to
believe that an aggregate cash value of at at least $224 in cash
per Unit upon the completion of a successful liquidation is
achievable.
2. The Managing Member believes that the Offer Price
represents an opportunistic attempt by the Bidder to purchase
the Units at a low price and make a quick profit, thereby
depriving the Members who tender Units in the Tender Offer of
the potential opportunity to realize the full value of their
investment in the Company. The Managing Members belief in
this regard is supported by the bidders own
characterization of their offer. Specifically, the Managing
Member notes the following statement in the Bidders
materials: The Purchasers are making the Offer for
investment purposes and with the intention of making a profit
from the ownership of the Units. In establishing the purchase
price of $125 per Unit, the Purchasers are motivated to
establish the lowest price which might be acceptable to Unit
holders consistent with the Purchasers objectives.
However, there can be no assurance as to the actual value of
the Units as such value is dependent on a number of factors
including general economic conditions and the other factors
discussed in Item 8 Additional Information.
3. The fact that the Tender Offer is subject to certain
conditions, some of which provide the Bidder with discretion to
determine whether the conditions have been met, such as the
Bidders determination as to whether there has been any
change or development in the Companys business prospects
that may be materially adverse to the Company.
In light of the reasons considered above, the Managing Member
has determined that the terms of the Tender Offer are not
advisable and are not in the best interests of the Company or
the Members.
Accordingly, the Managing Member recommends that the Members
reject the Tender Offer and not tender their Units for purchase
pursuant to the Offer to Purchase.
The Managing Member acknowledges that each Member must evaluate
whether to tender its Units to the Bidder pursuant to the Offer
to Purchase and that an individual Member may determine to
tender based on, among other things, such Members
individual liquidity needs.
(d) Intent
to Tender.
The directors and executive officers of the Managing Member and
its affiliates are entitled to participate in the Tender Offer
on the same basis as other Members; however, all of these
directors and executive officers have advised us that they do
not intend to tender any of their Units in the Tender Offer
(including Units they are deemed to beneficially own).
3
To the knowledge of the Company, none of the Companys
subsidiaries or other affiliates currently intends to tender
Units held of record or beneficially by such person for purchase
pursuant to the Tender Offer.
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Item 5.
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Person/Assets
Retained, Employed, Compensated or Used
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Not applicable.
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Item 6.
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Interest
in Securities of the Subject Company
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During the past 60 days prior to the filing of the
Schedule 14D-9,
no transactions with respect to the Units have been effected by
the Company or, to the Companys best knowledge, by any of
its affiliates or subsidiaries or by the directors or executive
officers of CVI, other than as outlined below:
On or about July 15, 2011, the Company repurchased
212.77 units at $235 per unit, in accordance with the
terms of the Companys Unit Repurchase Program. Further
share purchases under this plan were suspended effective
July 31, 2011.
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Item 7.
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Purposes
of the Transaction and Plans or Proposals
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In response to the Offer, the Company has not undertaken and is
not engaged in any negotiations which relate to: (i) a
tender offer or other acquisition of the Companys
securities by the Company, any of its subsidiaries or any other
person; (ii) an extraordinary transaction, such as a
merger, reorganization or liquidation involving the Company or
any of its subsidiaries; (iii) a purchase, sale or transfer
of a material amount of assets of the Company or any of its
subsidiaries; or (iv) any material change in the present
dividend rate or policy, or indebtedness or capitalization of
the Company
Additionally, there is no transaction, board resolution,
agreement in principle, or signed contract in response to the
Offer which relates to or would result in one or more of the
foregoing matters.
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Item 8.
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Additional
Information
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Certain statements contained in this
Schedule 14D-9
other than historical facts may be considered forward-looking
statements. Such statements are subject to certain risks and
uncertainties, as well as known and unknown risks, which could
cause actual results to differ materially from those projected
or anticipated. Therefore, such statements are not intended to
be a guarantee of the Companys performance in future
periods.
Such forward-looking statements can generally be identified by
the Companys use of forward-looking terminology such as
may, will, expect,
intend, anticipate,
estimate, believe, continue
or other similar words. Readers are cautioned not to place undue
reliance on these forward-looking statements, which speak only
as of the date this
Schedule 14D-9
is filed with the SEC.
Any such forward-looking statements are subject to unknown
risks, uncertainties and other factors and are based on a number
of assumptions involving judgments with respect to, among other
things, general economic conditions, the financial health of the
Companys tenants, and occupancy rates in the markets in
which the Companys properties are located.
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Item 9.
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Materials
to Be Filed as Exhibits
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Exhibit
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No.
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Document
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(e)(1)
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Excerpt from the Annual Report on
Form 10-K
filed by the Company with the SEC on March 22, 2011*
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(e)(2)
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Excerpt from Definitive Proxy Statement filed by the Company
with the SEC on April 1, 2011*
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Incorporated by reference as provided in Item 3 hereto. |
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SIGNATURE
After due inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this
Schedule 14D-9
is true, complete and correct.
CORNERSTONE REALTY FUND, LLC
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By:
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CORNERSTONE INDUSTRIAL
PROPERTIES, LLC
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(Its Managing Member)
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By:
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CORNERSTONE VENTURES, INC.
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(Its Manager)
Terry G. Roussel
President
Date: September 1, 2011
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INDEX TO
EXHIBITS
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Exhibit
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No.
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Document
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(e)(1)
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Excerpt from the Annual Report on
Form 10-K
filed by the Company with the SEC on March 22, 2011*
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(e)(2)
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Excerpt from Definitive Proxy Statement filed by the Company
with the SEC on April 1, 2011*
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Incorporated by reference as provided in Item 3 hereto. |