-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, FouJ8MTPFtCyzO5skYBD0LplNYCoAIjJZUtgYj6YZx9l/aqmJvamgPne2VVKon75 ngc19EIEY3PEPntzUd9nhw== 0000950110-96-001133.txt : 19960927 0000950110-96-001133.hdr.sgml : 19960927 ACCESSION NUMBER: 0000950110-96-001133 CONFORMED SUBMISSION TYPE: SC 14D1/A PUBLIC DOCUMENT COUNT: 3 FILED AS OF DATE: 19960926 SROS: NONE SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: MCNEIL REAL ESTATE FUND X LTD CENTRAL INDEX KEY: 0000312812 STANDARD INDUSTRIAL CLASSIFICATION: OPERATORS OF NONRESIDENTIAL BUILDINGS [6512] IRS NUMBER: 942577781 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 14D1/A SEC ACT: 1934 Act SEC FILE NUMBER: 005-48302 FILM NUMBER: 96634860 BUSINESS ADDRESS: STREET 1: 13760 NOEL ROAD STE 700 STREET 2: LB70 CITY: DALLAS STATE: TX ZIP: 75240 BUSINESS PHONE: 2144485800 MAIL ADDRESS: STREET 1: 13760 NOEL ROAD SUITE 700 LB 70 CITY: DALLAS STATE: TX ZIP: 75240 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: ICAHN CARL C ET AL CENTRAL INDEX KEY: 0000921669 STANDARD INDUSTRIAL CLASSIFICATION: UNKNOWN SIC - 0000 [0000] STATE OF INCORPORATION: NY FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 14D1/A BUSINESS ADDRESS: STREET 1: 100 SOUTH BEDFORD ROAD CITY: MT KISCO STATE: NY ZIP: 10549 BUSINESS PHONE: 9142427700 MAIL ADDRESS: STREET 1: 200 PARK AVENUE CITY: NEW YORK STATE: NY ZIP: 10166 SC 14D1/A 1 SCHEDULE 14D-1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 SCHEDULE 14D-1 TENDER OFFER STATEMENT PURSUANT TO SECTION 14(D)(1) OF THE SECURITIES EXCHANGE ACT OF 1934 (AMENDMENT NO. 1) AND AMENDMENT NO. 7 TO SCHEDULE 13D McNEIL REAL ESTATE FUND X, LTD. (NAME OF SUBJECT COMPANY [ISSUER]) HIGH RIVER LIMITED PARTNERSHIP CARL C. ICAHN (BIDDERS) LIMITED PARTNERSHIP UNITS (TITLE OF CLASS OF SECURITIES) 582568 20 0 (CUSIP NUMBER OF CLASS OF SECURITIES) KEITH L. SCHAITKIN, ESQ. GORDON ALTMAN BUTOWSKY WEITZEN SHALOV & WEIN 114 WEST 47TH STREET, 20TH FLOOR NEW YORK, NEW YORK 10036 (212) 626-0800 (Name, Address and Telephone Number of Person Authorized to Receive Notices and Communications on Behalf of Bidder) Calculation of Filing Fee - -------------------------------------------------------------------------------- Transaction Valuation*: $10,907,320 Amount of filing fee: $2,182 - -------------------------------------------------------------------------------- * For purposes of calculating the filing fee only. This amount assumes the purchase of 127,571 Units of the Partnership (consisting of all outstanding Units other than Units owned by the Bidder and its affiliate) at $85.50 in cash per Unit. The amount of the filing fee, calculated in accordance with Rule 0-11(d) under the Securities Exchange Act of 1934, as amended, equals 1/50th of one percent of the aggregate of the cash offered by the bidder. [X] Check box if any part of the fee is offset as provided by Rule 0-11(a)(2) and identify the filing with which the offsetting fee was previously paid. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing. Amount Previously Paid: $2,182 Form or Registration No.: Schedule 14D-1 Filing Party: High River Limited Partnership, Riverdale LLC, Unicorn Associates Corporation and Carl C. Icahn Date Filed: September 20, 1996 * The remainder of this cover page shall be filled out for a reporting person's initial filing on this form with respect to the subject class of securities, and for any subsequent amendment containing information which would alter the disclosures provided in a prior cover page. AMENDMENT NO. 1 TO SCHEDULE 14D-1 This Amendment No. 1 amends the Tender Offer Statement on Schedule 14D-1 filed with the Commission on September 20, 1996 (the "Schedule 14D-1") by High River Limited Partnership, a Delaware limited partnership (the "Purchaser"), Riverdale LLC, a New York limited liability company, Unicorn Associates Corporation, a New York corporation ("Unicorn"), and Carl C. Icahn (collectively, the "Reporting Persons") relating to the tender offer by the Purchaser to purchase any and all limited partnership units (the "Units") of McNeil Real Estate Fund X, Ltd., a California limited partnership, other than Units owned by the Purchaser and Unicorn, at a purchase price of $85.50 per Unit, net to the seller in cash, without interest, upon the terms and subject to the conditions set forth in the Offer to Purchase dated September 20, 1996 (the "Offer to Purchase") and in the related Assignment of Partnership Interest, as each may be supplemented or amended from time to time (which together constitute the "Offer"), to include the information set forth below. This Amendment also constitutes Amendment No. 5 to the Schedule 13D filed by the Reporting Persons on November 13, 1995, as amended by Amendment Nos. 1 through 4 thereto filed on February 13, 1996, May 24, 1996, August 5, 1996 and September 20, 1996, respectively. Capitalized terms used herein and not otherwise defined shall have the meanings ascribed to them in the Schedule 14D-1 and the Offer to Purchase. ITEM 10. ADDITIONAL INFORMATION Item 10(f) is hereby supplemented and amended as follows: The information set forth in the Offer to Purchase, dated September 20, 1996, as amended through September 25, 1996, a copy of which is attached hereto as Exhibit 22, is incorporated herein by reference. ITEM 11. MATERIAL TO BE FILED AS EXHIBITS Item 11 is hereby supplemented and amended by adding the following: 1 (a) Exhibit 22. Offer to Purchase, dated September 20, 1996, as amended through September 25, 1996 (filed herewith) (c) Exhibit 23. Power of Attorney of Carl C. Icahn, dated September 25, 1996, appointing Theodore Altman as attorney-in-fact for purposes of executing Amendments to the Schedule 14D-1 (filed herewith) Item 11 is hereby further amended as follows: The description of Exhibit 19 in Item 11 of the Schedule 14D-1 (and in the Exhibit Index thereto) is hereby amended and restated to read in its entirety as follows: Defendants' Answer to Complaint for Declaratory and Injunctive Relief filed by Purchaser and certain of its affiliates, as defendants, against McNeil Pacific Investors Fund 1972, McNeil Real Estate Fund V, Ltd., McNeil Real Estate Fund IX, Ltd., McNeil Real Estate Fund X, Ltd., McNeil Real Estate Fund XI, Ltd., McNeil Real Estate Fund XIV, Ltd., McNeil Real Estate Fund XV, Ltd., McNeil Real Estate Fund XX, L.P., McNeil Real Estate Fund, XXIV, L.P., and McNeil Real Estate Fund XXV, L.P., as plaintiffs The description of Exhibit 20 in Item 11 of the Schedule 14D-1 (and in the Exhibit Index thereto) is hereby amended and restated to read in its entirety as follows: Counterclaim of Purchaser for Injunctive and Other Relief re: Denial of Access to a Partner to Limited Partnership Records filed by Purchaser and certain of its affiliates, as defendants, against McNeil Pacific Investors Fund 1972, McNeil Real Estate Fund V, 2 Ltd., McNeil Real Estate Fund IX, Ltd., McNeil Real Estate Fund X, Ltd., McNeil Real Estate Fund XI, Ltd., McNeil Real Estate Fund XIV, Ltd., McNeil Real Estate Fund XV, Ltd., McNeil Real Estate Fund XX, L.P., McNeil Real Estate Fund XXIV, L.P., and McNeil Real Estate Fund XXV, L.P., as plaintiffs (without exhibits) The description of Exhibit 21 in Item 11 of the Schedule 14D-1 (and in the Exhibit Index thereto) is hereby amended and restated to read in its entirety as follows: Plaintiffs/Counter-Defendants' Answer to Counterclaim of Purchaser for Injunctive and Other Relief filed by McNeil Pacific Investors Fund 1972, McNeil Real Estate Fund V, Ltd., McNeil Real Estate Fund IX, Ltd., McNeil Real Estate Fund X, Ltd., McNeil Real Estate Fund XI, Ltd., McNeil Real Estate Fund XIV, Ltd., McNeil Real Estate Fund XV, Ltd., McNeil Real Estate Fund XX, L.P., McNeil Real Estate Fund XXIV, L.P., and McNeil Real Estate Fund XXV, L.P., as plaintiffs, against Purchaser and certain of its affiliates 3 SIGNATURES After reasonable inquiry and to the best of my knowledge and belief, I certify that the information set forth in this statement is true, complete and correct. Dated: September 25, 1996 HIGH RIVER LIMITED PARTNERSHIP By: RIVERDALE LLC, General Partner By: /s/ ROBERT J. MITCHELL ------------------------------------ Robert J. Mitchell Title: Vice President and Treasurer/Manager RIVERDALE LLC By: /s/ ROBERT J. MITCHELL ------------------------------------ Robert J. Mitchell Title: Vice President and Treasurer/Manager /s/ THEODORE ALTMAN ------------------------------------ Carl C. Icahn By: Theodore Altman as Attorney-in-fact UNICORN ASSOCIATES CORPORATION By: /s/ EDWARD MATTNER ------------------------------------ Edward Mattner Title: President [Signature Page for Amendment No. 1 to McNeil Real Estate Fund X, Ltd. Schedule 14D-1 and Amendment No. 7 to Schedule 13D] 4 EXHIBIT INDEX Exhibit 22. Offer to Purchase, dated September 20, 1996, as amended through September 25, 1996 Exhibit 23. Power of Attorney of Carl C. Icahn, dated September 25, 1996, appointing Theodore Altman as attorney-in-fact for purposes of executing amendments to the Schedule 14D-1 5 EX-22 2 OFFER TO PURCHASE OFFER TO PURCHASE FOR CASH ANY AND ALL UNITS OF LIMITED PARTNERSHIP INTEREST IN McNEIL REAL ESTATE FUND X, LTD. FOR $85.50 NET PER UNIT BY HIGH RIVER LIMITED PARTNERSHIP THE OFFER AND RELATED WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON OCTOBER 18, 1996, UNLESS THE OFFER IS EXTENDED. IMPORTANT HIGH RIVER LIMITED PARTNERSHIP, a Delaware limited partnership (the "Purchaser"), is offering to purchase any and all of the outstanding units of limited partnership interest ("Units") in McNEIL REAL ESTATE FUND X, LTD., a California limited partnership (the "Partnership"), at a purchase price of $85.50 per Unit (the "Purchase Price"), net to the seller in cash, without interest, less the amount of distributions per Unit, if any, declared or made by the Partnership between August 15, 1996 and the date of payment of the Purchase Price by the Purchaser, upon the terms and subject to the conditions set forth in the Offer to Purchase, as it may be supplemented or amended from time to time (the "Offer to Purchase"), and in the related Assignment of Partnership Interest, including the Instructions thereto, as it may be supplemented or amended from time to time (the "Assignment of Partnership Interest" which, collectively with the Offer to Purchase, constitute the "Offer"). LIMITED PARTNERS WHO TENDER THEIR UNITS IN RESPONSE TO THE OFFER WILL NOT BE OBLIGATED TO PAY ANY COMMISSIONS OR PARTNERSHIP TRANSFER FEES. Because Carl C. Icahn controls the Purchaser, he may be deemed to be a "co-bidder" with the Purchaser. Any holder of Units (each, a "Limited Partner") desiring to tender Units should complete and sign the Assignment of Partnership Interest or a facsimile thereof in accordance with the Instructions in the Assignment of Partnership Interest and mail or deliver the signed Assignment of Partnership Interest and the associated certificates of beneficial interest in the Partnership (the "Certificates") to the Depositary (as defined below). A Limited Partner may tender any or all of the Units owned by that Limited Partner, provided, however, that in order for a tender to be valid, the tender must satisfy the minimum units requirements (the "Minimum Units Requirements") required under the Partnership's Partnership Agreement (the "Partnership Agreement"). See Section 3 of the Offer to Purchase. For convenience, the relevant portions of the Partnership Agreement are set forth in Exhibit A to this Offer. (Continued on following page) ---------------------- For More Information or for Further Assistance, Please Call the Information Agent: BEACON HILL PARTNERS, INC. (212) 843-8500 (COLLECT) OR (800) 253-3814 (TOLL FREE) September 20, 1996, as amended through September 25, 1996 Limited Partners are urged to consider the following factors: o The Purchaser is making the Offer with a view to making a profit. Accordingly, there is a conflict between the desire of the Purchaser to purchase Units at the lowest possible price and the desire of the Limited Partners to sell their Units at the highest possible price. o The Purchase Price represents 75% of the liquidation value per Unit, and 66% of the net asset value per Unit, in each case, as estimated by the Purchaser. While the Purchaser believes that the actual current value of a Unit may be substantially less than its estimate of liquidation value, there is a substantial likelihood that the value realizable in an orderly liquidation could be greater than the estimated liquidation value. The Purchaser's estimate of liquidation value was based predominantly on publicly available information relating to the Partnership and its properties in the Partnership's Form 10-K for the fiscal year ended December 31, 1995 (the "Form 10-K") and its Form 10-Q for the period ended June 30, 1996 and, to a lesser extent, on the non-public Due Diligence Information (as hereinafter defined) provided to the Purchaser in 1995. The Purchaser's calculations are based on rough estimates and the values resulting therefrom may not be indicative of actual values to any extent. The Purchaser has not conducted any appraisal of the Partnership's properties and has no independent basis whatsoever for determining the accuracy or completeness of the Partnership's publicly filed financial information or the Due Diligence Information. See Section 13 of the Offer to Purchase. No representation is made by the Purchaser or any affiliate of the Purchaser with respect to the fairness of the Purchase Price. o The Purchaser (together with an affiliate) currently owns approximately 5.5% of the outstanding Units and may thereby be in a position to influence voting decisions with respect to the Partnership, including, without limitation, decisions concerning amendments to the Partnership Agreement and removal and replacement of the Partnership's general partner. The acquisition of additional Units pursuant to the Offer would enhance such voting influences. As a result (i) those who remain Limited Partners after the expiration of the Offer could be prevented from taking action they desire but that the Purchaser opposes and (ii) the Purchaser may be able to take action desired by the Purchaser but opposed by such remaining Limited Partners. Generally, however, voting decisions concerning the removal and substitution of the Partnership's general partner require the consent of the Partnership's general partner prior to effectuation. Further, to the extent valid, Reorganization Transactions require a Supermajority Vote (as those terms are defined in the Partnership Agreement) and the consent of the Partnership's general partner prior to effectuation. See Section 10 of the Offer to Purchase. o The terms of the Partnership Agreement require the Partnership's general partner to begin to liquidate the Partnership's properties no later than October 9, 1998, and to use commercially reasonable efforts to liquidate and terminate the Partnership by December 31, 1999. If such a liquidation were to occur, Limited Partners who sell their Units to the Purchaser pursuant to the Offer will not participate in any such liquidation, which may be at a price higher than the Purchase Price. See "Introduction" and Section 9 of the Offer to Purchase. o The Purchaser may seek to remove the Partnership's general partner and/or its property manager, McNeil Real Estate Management, Inc. ("McREMI") (which is an affiliate of the Partnership's general partner). Such removal may require the Partnership to pay a fee and other payments to the Partnership's general partner and/or its affiliates (including McREMI) and may result in acceleration of certain of the Partnership's debt obligations and/or the Partnership's incurrence of expenses pursuant to provisions of such debt obligations, which may have an adverse effect on the Partnership. See "Introduction" and Section 8 of the Offer to Purchase. o As discussed in Section 6 of the Offer to Purchase, the sale of 50 percent or more of the Units in the Partnership over a period of twelve months will result in the termination of the Partnership for federal income tax purposes. Such a termination would result in lower depreciation deductions to the Partnership for the next few years. Accordingly, it is possible that the acquisition of Units pursuant to the Offer, when combined with other transfers within twelve months, will result in a termination of the Partnership for income tax purposes. In such a case, non-tendering Limited Partners may, depending on their individual circumstances, have a greater tax liability with respect to the Partnership than they would have had in the absence of a termination. See Section 6 of the Offer to Purchase. Questions and requests for assistance or for additional copies of the Offer to Purchase and the Assignment of Partnership Interest may be directed to the Information Agent (as defined below) at the address and telephone number set forth below on the front and back covers of the Offer to Purchase. No soliciting dealer fees or other payments to brokers for tenders are being paid by the Purchaser. THIS TRANSACTION HAS NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION (THE "COMMISSION") NOR HAS THE COMMISSION PASSED UPON THE FAIRNESS OR MERITS OF SUCH TRANSACTION NOR UPON THE ACCURACY OR ADEQUACY OF THE INFORMATION CONTAINED IN THIS DOCUMENT. ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL. TABLE OF CONTENTS Page ---- INTRODUCTION .......................................................... 1 THE OFFER ............................................................. 3 Section 1. Terms of the Offer; Expiration Date ..................... 3 Section 2. Acceptance for Payment and Payment for Units ............ 3 Section 3. Procedure for Tendering Units ........................... 4 Section 4. Withdrawal Rights ....................................... 5 Section 5. Extension of Tender Period; Termination; Amendment ...... 6 Section 6. Certain Federal Income Tax Matters ...................... 6 Section 7. Effects of the Offer .................................... 8 Section 8. Future Plans of the Purchaser ........................... 9 Section 9. Certain Information Concerning the Partnership .......... 10 Section 10. Voting by the Purchaser ................................. 18 Section 11. Information Concerning the Purchaser and Certain Affiliates of the Purchaser ................... 18 Section 12. Source of Funds ......................................... 22 Section 13. Background of the Offer ................................. 22 Section 14. Conditions of the Offer ................................. 25 Section 15. Certain Legal Matters ................................... 26 Section 16. Fees and Expenses ....................................... 27 SCHEDULE I--Information with respect to the executive officers/managers and the controlling member of the general partner of the Purchaser and the controlling stockholder and sole director and the executive officer of Unicorn Associates Corporation ....... I-1 EXHIBIT A--Provisions of the Partnership Agreement relating to the Minimum Units Requirements .......................... A-1 i TO THE LIMITED PARTNERS OF McNEIL REAL ESTATE FUND X, LTD. INTRODUCTION High River Limited Partnership hereby offers to purchase any and all Units at the Purchase Price set forth above, net to the seller in cash, without interest, less the amount of distributions per Unit, if any, made or declared by the Partnership between August 15, 1996 and the date of payment of the Purchase Price by the Purchaser, upon the terms and subject to the conditions set forth in the Offer. Limited Partners who tender their Units in response to the Offer will not be obligated to pay any commissions or Partnership transfer fees. The Purchaser has retained Beacon Hill Partners, Inc. to act as Information Agent and IBJ Schroder Bank & Trust Company to act as Depositary (the "Depositary") in connection with the Offer. The Purchaser will pay all charges and expenses in connection with the services of the Information Agent and the Depositary. The Offer is not conditioned on any minimum number of Units being tendered. Subject to the Minimum Units Requirements, a Limited Partner may tender any or all of the Units owned by that Limited Partner. Notwithstanding any provision contained in the Offer to Purchase or any related document, under no circumstances will the Purchaser be required to accept any Units the transfer of which to the Purchase would be prohibited by the Partnership Agreement or any regulation or procedure adopted thereunder. Some Factors To Be Considered by Limited Partners. In considering the Offer, Limited Partners may wish to consider the following: o The Purchaser is making the Offer with a view to making a profit. Accordingly, there is a conflict between the desire of the Purchaser to purchase Units at the lowest possible price and the desire of the Limited Partners to sell their Units at the highest possible price. o The Purchaser (together with an affiliate) currently owns approximately 5.5% of the outstanding Units and may thereby be in a position to influence voting decisions with respect to the Partnership, including, without limitation, decisions concerning amendments to the Partnership Agreement and removal and replacement of the Partnership's general partner. The acquisition of additional Units pursuant to the Offer would enhance such voting influence. As a result (i) those who remain Limited Partners after the expiration of the Offer could be prevented from taking action they desire but that the Purchaser opposes and (ii) the Purchaser may be able to take action desired by the Purchaser which may be opposed by, and which may not be in the best interests of, such remaining Limited Partners. Generally, however, voting decisions other than certain decisions concerning the removal and substitution of the Partnership's general partner require the consent of the Partnership's general partner prior to effectuation. Further, to the extent valid, Reorganization Transactions require a Supermajority Vote (as those terms are defined in the Partnership Agreement) and the consent of the Partnership's general partner prior to effectuation. See Section 10 of the Offer to Purchase. o The terms of the Partnership Agreement require the Partnership's general partner to begin to liquidate the Partnership's properties no later than October 9, 1998, and to use commercially reasonable efforts to liquidate and terminate the Partnership by December 31, 1999. If such a liquidation were to occur, Limited Partners who sell their Units to the Purchaser pursuant to the Offer will not participate in any such liquidation, which may be at a price higher than the Purchase Price. o Although the Purchaser is making the Offer for investment purposes and with a view toward making a profit, it may, based upon the number of Units it currently owns (together with an affiliate) and the number of Units it acquires pursuant to the Offer, be in a position to influence control of the business of the Partnership. If the Purchaser acquires a substantial number of the outstanding Units, the Purchaser will be in a position to influence voting decisions with respect to the Partnership and may seek to remove the Partnership's general partner and/or McREMI. Such removal may require the Partnership to pay a fee and other payments to the Partnership's general partner and/or its affiliates (including McREMI) and may result in acceleration of certain of the Partnership's debt obligations and/or the Partnership's incurrence of expenses pursuant to provisions of such debt obligations, which may have an adverse effect on the Partnership. See Section 8 of the Offer to Purchase. o The Purchase Price represents 75% of the liquidation value per Unit, and 66% of the net asset value per Unit, in each case, as estimated by the Purchaser. While the Purchaser believes that the actual current value 1 of a Unit may be substantially less than its estimate of liquidation value, there is a substantial likelihood that the value realizable in an orderly liquidation could be greater than the estimated liquidation value. The Purchaser's estimate of liquidation value was based predominantly on publicly available information relating to the Partnership and its properties in the Partnership's Form 10-K and its Form 10-Q for the period ended June 30, 1996 and, to a lesser extent, on the non-public Due Diligence Information provided to the Purchaser in 1995. The Purchaser's calculations are based on rough estimates and the values resulting therefrom may not be indicative of actual values to any extent. The Purchaser has not conducted any appraisal of the Partnership's properties and has no independent basis whatsoever for determining the accuracy or completeness of the Partnership's publicly filed financial information or the Due Diligence Information. See Section 13 of the Offer to Purchase. No representation is made by the Purchaser or any affiliate of the Purchaser with respect to the fairness of the Purchase Price. o As discussed in Section 6 of the Offer to Purchase, the sale of 50 percent or more of the Units in the Partnership over a period of twelve months will result in the termination of the Partnership for federal income tax purposes. Such a termination would result in lower depreciation deductions to the Partnership for the next few years. If the acquisition of Units pursuant to the Offer, when combined with other transfers within twelve months, results in a termination of the Partnership, non-tendering Limited Partners may, depending on their individual circumstances, have a greater tax liability with respect to the Partnership than they would have had in the absence of a termination. See Section 6 of the Offer to Purchase. The Purchaser. The Purchaser is a Delaware limited partnership, the general partner of which is Riverdale LLC, a New York limited liability company ("Riverdale"). Riverdale is controlled by Mr. Icahn. See Section 11 of the Offer to Purchase for a description of the Purchaser's business. Conditions. The Offer is not conditioned on financing or on any minimum number of Units being tendered. Certain other conditions, however, do apply. See Section 14 of the Offer to Purchase. Outstanding Units. According to publicly available information, there are 135,030 Units issued and outstanding, which, on February 16, were held by 6,971 Limited Partners. The Purchaser (together with an affiliate) beneficially owns 7,459 (or approximately 5.5% of the outstanding) Units. See Section 11 of the Offer to Purchase. Additional Information. The Partnership is subject to the information and reporting requirements of the Securities Exchange Act of 1934, as amended ("Exchange Act"), and in accordance therewith is required to file reports and other information with the Commission relating to its business, financial condition and other matters. Such reports and other information may be inspected at the public reference facilities maintained by the Commission at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, and are available for inspection and copying at the regional offices of the Commission located in Northwestern Atrium Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661 and at 7 World Trade Center, 13th Floor, New York, New York 10048. Copies of such material can also be obtained from the Public Reference Room of the Commission in Washington, D.C. at prescribed rates. ALL OF THE INFORMATION WITH RESPECT TO THE PARTNERSHIP CONTAINED IN THE OFFER TO PURCHASE HAS BEEN DERIVED FROM DOCUMENTS AND REPORTS PUBLICLY FILED BY THE PARTNERSHIP OR THE DUE DILIGENCE INFORMATION (AS DEFINED IN THE PORTION OF SECTION 13 OF THE OFFER TO PURCHASE ENTITLED "DETERMINATION OF THE PURCHASE PRICE"). ALTHOUGH THE PURCHASER HAS NO INFORMATION THAT ANY STATEMENTS OR INFORMATION CONTAINED IN THE OFFER TO PURCHASE BASED UPON SUCH DOCUMENTS, REPORTS AND DUE DILIGENCE INFORMATION ARE UNTRUE, THE PURCHASER CANNOT TAKE RESPONSIBILITY FOR THE ACCURACY OR COMPLETENESS OF THE INFORMATION CONCERNING THE PARTNERSHIP CONTAINED IN SUCH DOCUMENTS, REPORTS AND DUE DILIGENCE INFORMATION OR FOR ANY FAILURE BY THE PARTNERSHIP TO DISCLOSE EVENTS WHICH MAY HAVE OCCURRED AND MAY AFFECT THE SIGNIFICANCE OR ACCURACY OF ANY SUCH INFORMATION BUT WHICH ARE UNKNOWN TO THE PURCHASER. 2 THE OFFER SECTION 1. TERMS OF THE OFFER; EXPIRATION DATE. Upon the terms and subject to the conditions of the Offer, the Purchaser will accept (and thereby purchase) any and all Units that are validly tendered on or prior to the Expiration Date and not withdrawn in accordance with the procedures set forth in Section 4 of the Offer to Purchase. For purposes of the Offer, the term "Expiration Date" shall mean 12:00 midnight, New York City time, on October 18, 1996, unless the Purchaser in its sole discretion shall have extended the period of time for which the Offer is open, in which event the term "Expiration Date" shall mean the latest time and date on which the Offer, as extended by the Purchaser, shall expire. See Section 5 of the Offer to Purchase for a description of the Purchaser's right to extend the period of time during which the Offer is open and to amend or terminate the Offer. If, prior to the Expiration Date, the Purchaser increases the consideration offered to Limited Partners pursuant to the Offer, the increased consideration will be paid for all Units accepted for payment pursuant to the Offer, whether or not the Units were tendered prior to the increase in consideration. The Purchaser will, upon the terms and subject to the conditions of the Offer, accept for payment and pay for any and all of the Units so tendered and not properly withdrawn on or prior to the Expiration Date, with appropriate adjustments to avoid (i) purchases of fractional Units and (ii) purchases that would violate the Partnership Agreement and any relevant procedures or regulations promulgated by the Partnership's general partner. The Purchaser will purchase all Units so tendered and not withdrawn, upon the terms and subject to the conditions of the Offer. The Offer is not conditioned upon financing or upon a minimum number of Units being tendered, but is conditioned on satisfaction of certain other conditions. See Section 14 of the Offer to Purchase, which sets forth in full the conditions of the Offer. The Purchaser reserves the right (but in no event shall be obligated), in its sole discretion, to waive any or all of those conditions. If, on or prior to the Expiration Date, any or all of the conditions have not been satisfied or waived, the Purchaser reserves the right to (i) decline to purchase any of the Units tendered, terminate the Offer and return all tendered Units to tendering Limited Partners, (ii) waive all the unsatisfied conditions and, subject to complying with applicable rules and regulations of the Commission, purchase all Units validly tendered, (iii) extend the Offer and, subject to the right of Limited Partners to withdraw Units until the Expiration Date, retain the Units that have been tendered during the period or periods for which the Offer is extended, and (iv) amend the Offer. The Offer to Purchase and the related Assignment of Partnership Interest will be mailed pursuant to Rule 14d-5 under the Exchange Act. The Purchaser has requested that the Partnership furnish it with a list of holders of Units for the purpose of disseminating the Offer to such holders. If the Partnership complies with such request, then the Purchaser will cause such mailing to be made; otherwise, the Partnership is required by the Exchange Act and the rules thereunder to cause such mailing to be made. SECTION 2. ACCEPTANCE FOR PAYMENT AND PAYMENT FOR UNITS. Upon the terms and subject to the conditions of the Offer, the Purchaser will purchase by accepting for payment and will pay for any and all Units validly tendered and not withdrawn in accordance with the procedures specified in Section 4 of the Offer to Purchase, as promptly as practicable following the Expiration Date. A tendering beneficial owner of Units whose Units are owned of record by an Individual Retirement Account or other qualified plan will not receive direct payment of the Purchase Price; rather, payment will be made to the custodian of such account or plan. In all cases, payment for Units purchased pursuant to the Offer will be made only after timely receipt by the Depositary of a properly completed and duly executed Assignment of Partnership Interest (or facsimile thereof, if followed by the signed original) and any other documents required by the Assignment of Partnership Interest. See Section 3 of the Offer to Purchase. UNDER NO CIRCUMSTANCES WILL INTEREST BE PAID ON THE PURCHASE PRICE BY REASON OF ANY DELAY IN MAKING SUCH PAYMENT. For purposes of the Offer, the Purchaser will be deemed to have accepted for payment pursuant to the Offer, and thereby purchased, validly tendered Units, if, as and when the Purchaser gives verbal or written notice to the Depositary of the Purchaser's acceptance of those Units for payment pursuant to the Offer. If any tendered Units are not purchased for any reason, the Certificates associated with such Units will be returned, without expense to such tendering Limited Partner, as promptly as practicable following the expiration, 3 termination or withdrawal of the Offer. If for any reason, acceptance for payment of, or payment for, any Units tendered pursuant to the Offer is delayed or the Purchaser is unable to accept for payment, purchase or pay for Units tendered pursuant to the Offer, then, without prejudice to the Purchaser's rights under Section 14 of the Offer to Purchase, the Depositary may, nevertheless, on behalf of the Purchaser retain tendered Units, and those Units may not be withdrawn except to the extent that the tendering Limited Partners are entitled to withdrawal rights as described in Section 4 of the Offer to Purchase; subject, however, to the Purchaser's obligation under Rule 14e-1(c) under the Exchange Act to pay Limited Partners the Purchase Price in respect of Units tendered or return those Units promptly after termination or withdrawal of the Offer. The Purchaser reserves the right to transfer or assign, in whole or from time to time in part, to one or more persons, the right to purchase Units tendered pursuant to the Offer, but any such transfer or assignment will not relieve the Purchaser of its obligations under the Offer or prejudice the rights of tendering Limited Partners to receive payment for Units validly tendered and accepted for payment pursuant to the Offer. SECTION 3. PROCEDURE FOR TENDERING UNITS. Valid Tender. To validly tender Units, a properly completed and duly executed Assignment of Partnership Interest and any other documents required by the Assignment of Partnership Interest (or facsimiles thereof, if followed by a signed original) and the associated Certificates must be received by the Depositary, at its address set forth on the back cover of the Offer to Purchase, on or prior to the Expiration Date. Subject to the Minimum Units Requirements, a Limited Partner may tender any or all of the Units owned by that Limited Partner. No alternative, conditional or contingent tenders will be accepted. Signature Requirements. In all cases, the signature of the Limited Partner on the Assignment of Partnership Interest must be guaranteed by a member firm of a registered national securities exchange, a member of the National Association of Securities Dealers, Inc. or a commercial bank, savings bank, credit union, savings and loan association or trust company having an office, branch or agency in the United States. See Instruction 1 to the Assignment of Partnership Interest. In order for a tendering Limited Partner to participate in the Offer, its Units must be validly tendered and not withdrawn on or prior to the Expiration Date. THE METHOD OF DELIVERY OF THE ASSIGNMENT OF PARTNERSHIP INTEREST, ALL OTHER REQUIRED DOCUMENTS AND THE ASSOCIATED CERTIFICATES IS AT THE OPTION AND RISK OF THE TENDERING LIMITED PARTNER AND DELIVERY WILL BE DEEMED MADE ONLY WHEN ACTUALLY RECEIVED BY THE DEPOSITARY. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ASSURE TIMELY DELIVERY. Appointment as Proxy. By executing an Assignment of Partnership Interest, a tendering Limited Partner irrevocably appoints the Purchaser, its general partner, and its designees as the Limited Partner's attorneys-in-fact and proxies, in the manner set forth in the Assignment of Partnership Interest, each with full power of substitution, to the full extent of the Limited Partners's rights with respect to the Units tendered by the Limited Partner and accepted for payment by the Purchaser. Each such proxy shall be considered coupled with an interest in the tendered Units. Such appointment will be effective when, and only to the extent that, the Purchaser accepts the tendered Units for payment. Upon such acceptance for payment, all prior proxies given by the Limited Partner with respect to the Units will, without further action, be revoked, and no subsequent proxies may be given (and if given will not be effective). The Purchaser, its general partner and the designees of the Purchaser will, as to those Units, be empowered to exercise all voting and other rights of the Limited Partner as they, in their sole discretion, may deem proper at any meeting of Limited Partners, by written consent or otherwise. The Purchaser reserves the right to require that, in order for Units to be deemed validly tendered, immediately upon the Purchaser's acceptance for payment of the Units, the Purchaser must be able to exercise full voting rights with respect to the Units, including voting at any meeting of Limited Partners then scheduled or acting by written consent without a meeting. By executing the Assignment of Partnership Interest, a tendering holder of Units agrees to execute all such documents and take such other actions as shall be reasonably required to enable the Units tendered to be voted in accordance with the directions of the Purchaser. The proxy and power-of-attorney granted by a Limited Partner to the Purchaser upon his execution of the Assignment of Partnership Interest (and all related and associated rights, authority and power) shall be effective from acceptance for payment of the Units tendered and shall remain effective and be irrevocable until August 1, 2006. The Purchaser may assign such proxy and/or power-of-attorney to any person with or without assigning the related Units with respect to which such proxy and/or power-of-attorney was granted. 4 Assignment of Interest in Future Distributions. By executing an Assignment of Partnership Interest, a tendering Limited Partner irrevocably assigns to the Purchaser and its assigns all of the right, title and interest of the Limited Partner in and to any and all distributions in respect of the Units tendered and purchased pursuant to the Offer, other than those distributions declared or made between August 15, 1996 and the date of payment of the Purchase Price by the Purchaser. Power-of-Attorney. By executing and delivering the Assignment of Partnership Interest, a tendering Limited Partner also irrevocably appoints any person nominated by the Purchaser or any designee thereof (the "Agent") as the Limited Partner's attorney-in-fact with an irrevocable instruction to the Agent to execute all or any instruments of transfer and/or other documents in the Agent's discretion in relation to the Units tendered and to make all elections and do all such other acts and things as may be necessary in connection with the acceptance of the Offer by the Limited Partner and to vest in the Purchaser, or as it may direct, the tendered Units. Determination of Validity; Rejection of Units; Waiver of Defects; No Obligation to Give Notice of Defects. All questions as to the validity, form, eligibility (including time of receipt) and acceptance for payment of any tender of Units pursuant to the Offer will be determined by the Purchaser, in its sole discretion, which determination shall be final and binding on all parties. The Purchaser reserves the absolute right to reject any or all tenders of any particular Units determined by it not to be in proper form or if the acceptance of or payment for those Units may, in the opinion of the Purchaser's counsel, be unlawful. The Purchaser also reserves the absolute right to waive or amend any of the conditions of the Offer that it is legally permitted to waive as to the tender of any particular Units and to waive any defect or irregularity in any tender with respect to any particular Units of any particular Limited Partner. The Purchaser's interpretation of the terms and conditions of the Offer (including the Assignment of Partnership Interest) will be final and binding on all parties. No tender of Units will be deemed to have been validly made unless and until all defects and irregularities have been cured or waived. Neither the Purchaser, the Depositary nor any other person will be under any duty to give notification of any defects or irregularities in the tender of any Units or will incur any liability for failure to give any such notification. Backup Federal Income Tax Withholding. To prevent the possible application of backup federal income tax withholding of 31% with respect to payment of the Purchase Price, a tendering Limited Partner must provide the Purchaser with the Limited Partner's correct taxpayer identification number by completing the Substitute Form W-9 included in the Assignment of Partnership Interest. See the Instructions to the Assignment of Partnership Interest and Section 6 of the Offer to Purchase. FIRPTA Withholding. To prevent the withholding of federal income tax in an amount equal to 10% of the amount of the Purchase Price plus Partnership liabilities allocable to each Unit purchased, each tendering Limited Partner must complete the FIRPTA Affidavit included in the Assignment of Partnership Interest certifying the Limited Partner's taxpayer identification number and address and that the Limited Partner is not a foreign person. See the Instructions to the Assignment of Partnership Interest and Section 6 of the Offer to Purchase. A tender of Units pursuant to any of the procedures described above and the acceptance for payment of such Units will constitute a binding agreement between the tendering Limited Partner and the Purchaser on the terms set forth in the Offer. SECTION 4. WITHDRAWAL RIGHTS. Tenders of Units pursuant to the Offer are irrevocable, except that Units tendered pursuant to the Offer may be withdrawn at any time prior to the Expiration Date and, unless already accepted for payment as provided in the Offer to Purchase, may also be withdrawn at any time after November 18, 1996. For withdrawal to be effective, a written or facsimile transmission notice of withdrawal must be timely received by the Depositary at its address set forth on the back cover of the Offer to Purchase. Any such notice of withdrawal must specify the name of the person who tendered, the number of Units to be withdrawn and the name in which the Certificates are registered, if different from the person who tendered. In addition, the notice of withdrawal must be signed by the person(s) who signed the Assignment of Partnership Interest in the same manner as the Assignment of Partnership Interest was signed. If purchase of, or payment for, Units is delayed for any reason or if the Purchaser is unable to purchase or pay for Units for any reason, then, without prejudice to the Purchaser's rights under the Offer, tendered Units may be retained 5 by the Depositary and may not be withdrawn, except to the extent that tendering Limited Partners are entitled to withdrawal rights as set forth in this Section 4; subject, however, to the Purchaser's obligation, pursuant to Rule 14e-1(c) under the Exchange Act, to pay Limited Partners the Purchase Price in respect of Units tendered or return those Units promptly after termination or withdrawal of the Offer. Any Units properly withdrawn will be deemed not to be validly tendered for purposes of the Offer. Withdrawn Units may be re-tendered, however, by following the procedures described in Section 3 of the Offer to Purchase at any time prior to the Expiration Date. All questions as to the validity and form (including time of receipt) of notices of withdrawal will be determined by the Purchaser, in its sole discretion, which determination shall be final and binding on all parties. Neither the Purchaser, the Depositary nor any other person will be under any duty to give notification of any defects or irregularities in any notice of withdrawal or incur any liability for failure to give any such notification. SECTION 5. EXTENSION OF TENDER PERIOD; TERMINATION; AMENDMENT. The Purchaser expressly reserves the right, in its sole discretion, at any time and from time to time, (i) to extend the period of time during which the Offer is open and thereby delay acceptance for payment of, and the payment for, any Units, (ii) to terminate the Offer and not accept for payment any Units not theretofore accepted for payment or paid for, (iii) upon the occurrence of any of the conditions specified in Section 14 of the Offer to Purchase, to delay the acceptance for payment of, or payment for, any Units not already accepted for payment or paid for, and (iv) to amend the Offer in any respect (including, without limitation, by changing the consideration offered, the number of Units being sought, or both). Notice of any such extension, termination or amendment will promptly be disseminated to Limited Partners in a manner reasonably designed to inform Limited Partners of such change in compliance with Rule 14d-4(c) under the Exchange Act. In the case of an extension of the Offer, the extension will be followed by a press release or public announcement which will be issued no later than 9:00 a.m., New York City time, on the next business day after the scheduled Expiration Date, in accordance with Rule 14e-1(d) under the Exchange Act. If the Purchaser extends the Offer, or if the Purchaser (whether before or after its acceptance for payment of Units) is delayed in its payment for Units or is unable to pay for Units pursuant to the Offer for any reason, then, without prejudice to the Purchaser's rights under the Offer, the Depositary may retain tendered Units and those Units may not be withdrawn except to the extent tendering Limited Partners are entitled to withdrawal rights as described in Section 4 of the Offer to Purchase; subject, however, to the Purchaser's obligation, pursuant to Rule 14e-1(c) under the Exchange Act, to pay Limited Partners the Purchase Price in respect of Units tendered or return those Units promptly after termination or withdrawal of the Offer. If the Purchaser makes a material change in the terms of the Offer, or if it waives a material condition to the Offer, the Purchaser will extend the Offer and disseminate additional tender offer materials to the extent required by Rules 14d-4(c) and 14d-6(d) under the Exchange Act. The minimum period during which an offer must remain open following any material change in the terms of an offer, other than a change in price or a change in percentage of securities sought or a change in any dealer's soliciting fee, will depend upon the facts and circumstances, including the materiality of the change. With respect to a change in price or, subject to certain limitations, a change in the percentage of securities sought or a change in any dealer's soliciting fee, a minimum of ten business days from the date of such change is generally required to allow for adequate dissemination to holders of Units. Accordingly, if prior to the Expiration Date, the Purchaser changes the number of Units being sought, or increases or decreases the consideration offered pursuant to an offer, and if such offer is scheduled to expire at any time earlier than the tenth business day from the date that notice of such increase or decrease is first published, sent or given to holders of Units, such offer will be extended at least until the expiration of such ten business days. As used in the Offer to Purchase, "business day" means any day other than a Saturday, Sunday or a federal holiday, and consists of the time period from 12:01 a.m. through 12:00 midnight, New York City time. SECTION 6. CERTAIN FEDERAL INCOME TAX MATTERS. The following summary is a general discussion of certain of the federal income tax consequences of a sale of Units pursuant to the Offer. This summary is based on the Internal Revenue Code of 1986, as amended (the "Code"), applicable Treasury regulations thereunder, administrative rulings, practice and procedures and judicial authority, all as of the date of the Offer. All of the foregoing are subject to change, and any such change could affect the continuing 6 accuracy of this summary. This summary does not discuss all aspects of federal income taxation that may be relevant to a particular Limited Partner in light of such Limited Partner's specific circumstances or to certain types of Limited Partners subject to special treatment under the federal income tax laws (for example, foreign persons, dealers in securities, banks, insurance companies and tax-exempt organizations), nor (except as otherwise expressly indicated) does it describe any aspect of state, local, foreign or other tax laws. Sales of Units pursuant to the Offer will be taxable transactions for federal income tax purposes, and also may be taxable transactions under applicable state, local, foreign and other tax laws. LIMITED PARTNERS SHOULD CONSULT THEIR RESPECTIVE TAX ADVISORS AS TO THE PARTICULAR TAX CONSEQUENCES TO EACH SUCH LIMITED PARTNER OF SELLING UNITS PURSUANT TO THE OFFER. In general, a Limited Partner will recognize gain or loss on a sale of Units pursuant to the Offer equal to the difference between (i) the Limited Partner's "amount realized" on the sale and (ii) the Limited Partner's adjusted tax basis in the Units sold. The amount of a Limited Partner's adjusted tax basis in such Units will vary depending upon the Limited Partner's particular circumstances. Such adjusted tax basis will take into account the Partnership's liabilities allocable to the Units sold (as determined under Code Section 752 and the Treasury regulations promulgated thereunder), and will also be affected by allocations of income, gain or loss, and any cash distributions made by the Partnership with respect to the Units. The "amount realized" with respect to a Unit will be a sum equal to the amount of cash received by the Limited Partner for the Unit pursuant to the Offer (that is, the Purchase Price) plus the amount of the Partnership's liabilities allocable to the Unit (as determined under Code Section 752 and the Treasury regulations promulgated thereunder). The gain or loss recognized by a Limited Partner on a sale of a Unit pursuant to the Offer generally will be treated as a capital gain or loss if (as is generally expected to be the case) the Unit was held by the Limited Partner as a capital asset. That capital gain or loss will be treated as long-term capital gain or loss if the tendering Limited Partner's holding period for the Unit exceeds one year. Under current law, long-term capital gains of individuals and other non-corporate taxpayers are taxed at a maximum marginal federal income tax rate of 28%, whereas the maximum marginal federal income tax rate for ordinary income of such persons is 39.6%. Capital losses are deductible only to the extent of capital gains, except that non-corporate taxpayers may deduct up to $3,000 of capital losses in excess of the amount of their capital gains against ordinary income. Excess capital losses generally can be carried forward to succeeding years (a corporation's carryforward period is five years and a non-corporate taxpayer can carry forward such losses indefinitely); in addition, a corporation is permitted to carry back excess capital losses to the three preceding taxable years, provided the carryback does not increase or produce a net operating loss for any of those years. If any portion of the amount realized by a Limited Partner is attributable to "unrealized receivables" (which includes depreciation recapture) or "substantially appreciated inventory" as defined in Code Section 751, then a portion of the Limited Partner's gain or loss may be ordinary rather than capital. A tendering Limited Partner will be allocated a pro rata share of the Partnership's taxable income or loss for the year of sale with respect to the Units sold in accordance with the provisions of the Partnership Agreement concerning transfers of Units. Such allocation and any cash distributed by the Partnership to the Limited Partner for that year will affect the Limited Partner's adjusted tax basis in Units and, therefore, the amount of such Limited Partner's taxable gain or loss upon a sale of Units pursuant to the Offer. Under Code Section 469, a non-corporate taxpayer or personal service corporation generally can deduct "passive activity losses" in any year only to the extent of the person's passive activity income for that year. Closely held corporations may not offset such losses against so-called "portfolio" income (e.g., dividends or interest). Substantially all post-1986 losses of Limited Partners from the Partnership are passive activity losses. Limited Partners may have "suspended" passive activity losses from the Partnership (i.e., post-1986 net taxable losses in excess of statutorily permitted "phase-in" amounts and which have not been used to offset income from other passive activities). If a Limited Partner sells less than all of its Units pursuant to the Offer, a loss recognized by that Limited Partner can be currently deducted (subject to other applicable limitations) to the extent of the Limited Partner's passive income from the Partnership for that year plus any other passive activity income for that year, and a gain recognized by a Limited Partner upon the sale of Units can be offset by the Limited Partner's current or "suspended" passive activity losses (if any) from the Partnership and other sources. If, on the other hand, a Limited Partner sells 100% of its Units 7 pursuant to the Offer, any "suspended" losses and any losses recognized upon the sale of the Units will be offset first against any other net passive gain to the Limited Partner from the sale of the Units and any other net passive activity income from other passive activity investments, and the balance of any "suspended" net losses from the Units will no longer be subject to the passive activity loss limitation and, therefore, will be deductible by such Limited Partner from its other income (subject to any other applicable limitations). A tendering Limited Partner must sell all of its Units to receive these tax benefits. Section 708(b) of the Code provides that a partnership terminates for federal income tax purposes if there is a sale or exchange of 50 percent or more of the total interest in partnership capital and profits within a twelve-month period. Accordingly, it is possible that transfers made pursuant to the Offer, in combination with other transfers made within twelve months of the Offer, will result in a termination of the Partnership for federal income tax purposes. In the event of a termination, the Partnership would subsequently be treated for federal income tax purposes as a "new" partnership. Since the "new" partnership would be treated as having acquired its assets on the date of the termination, a new depreciation recovery period would begin on such date and the Partnership's properties would be required to be depreciated over a greater period than is currently being used, and accordingly, the aggregate present value of the Partnership's depreciation deductions would be reduced. Limited Partners (other than tax-exempt persons, corporations and certain foreign persons) who tender Units may be subject to 31% backup withholding unless those Limited Partners provide a taxpayer identification number ("TIN") and certify that the TIN is correct or properly certify that they are awaiting a TIN. A Limited Partner may avoid backup withholding by properly completing and signing the Substitute Form W-9 included as part of the Assignment of Partnership Interest. If a Limited Partner who is subject to backup withholding does not properly complete and sign the Substitute Form W-9, the Purchaser will withhold 31% from payments to such Limited Partner. A Limited Partner who tenders Units must file an information statement with his federal income tax return for the year of the sale which provides the information specified in Treasury Regulations Section 1.751-1(a)(3). The selling Limited Partner also must notify the Partnership of the date of the transfer and the names, addresses and TINs of the transferor and transferee within 30 days of the date of the transfer (or, if earlier, by January 15 of the following calendar year). Gain realized by a foreign Limited Partner on the sale of a Unit pursuant to the Offer will be subject to federal income tax. Under Code Section 1445, the transferee of an interest held by a foreign person in a partnership which owns United States real property generally is required to deduct and withhold a tax equal to 10% of the amount realized on the disposition. In order to comply with this requirement, the Purchaser will withhold 10% of the amount realized (which includes the Partnership's liabilities allocable to the tendered Units, as discussed above) by a tendering Limited Partner unless the Limited Partner properly completes and signs the FIRPTA Affidavit included as part of the Assignment of Partnership Interest certifying the Limited Partner's TIN, that such Limited Partner is not a foreign person and the Limited Partner's address. Amounts withheld would be creditable against a Limited Partner's federal income tax liability and, if in excess thereof, a refund could be obtained from the Internal Revenue Service by filing a U.S. income tax return. SECTION 7. EFFECTS OF THE OFFER. Effect on Trading Market; Registration Under Section 12(g) of the Exchange Act. If a substantial number of Units are purchased pursuant to the Offer, the likely result will be a reduction in the number of Limited Partners. In the case of certain kinds of securities, a reduction in the number of security-holders might be expected to result in a reduction in the liquidity and volume of activity in the trading market for the security. In this case, however, there is no established public trading market for the Units, and therefore, the Purchaser does not believe a reduction in the number of Limited Partners will materially further restrict the Limited Partners' abilities to find purchasers for their Units. The Units are registered under Section 12(g) of the Exchange Act, which means, among other things, that the Partnership is required to file periodic reports with the Commission and to comply with the Commission's proxy rules. The Purchaser does not expect or intend that consummation of the Offer will cause the Units to cease to be registered under Section 12(g) of the Exchange Act. If the Units were to be held by fewer than 300 persons, the Partnership could apply to de-register the Units under the Exchange Act. Because the Units are widely held, however, the Purchaser believes it is unlikely that the Units will be held of record by less than 300 persons following the purchase of Units tendered pursuant to the Offer. 8 In the Purchaser's capacity as a Limited Partner of the Partnership, the Purchaser will participate in any subsequent distributions to Limited Partners to the extent of the Units currently owned by the Purchaser and Units purchased pursuant to the Offer. SECTION 8. FUTURE PLANS OF THE PURCHASER. Future Plans. Although the Purchaser is making the Offer for investment purposes and with a view to making a profit, it may, based upon the number of Units it currently owns (together with an affiliate) and the number of Units it acquires pursuant to the Offer, be in a position to influence control of the Partnership and to influence voting decisions with respect to the Partnership. The Purchaser is currently assessing the feasibility of removing the Partnership's general partner and/or McREMI. Removal of the Partnership's general partner requires the vote of Limited Partners holding a majority of the Units. Removal of the Partnership's general partner and/or McREMI may, under certain circumstances, require the Partnership to make certain payments to the Partnership's general partner and/or its affiliates (including McREMI) (collectively, the "Termination Payments") and may result in acceleration of certain of the Partnership's debt obligations and/or the Partnership's incurrence of expenses pursuant to provisions of such debt obligations, which may have an adverse effect on the Partnership. If the Purchaser concludes that it is feasible to remove the Partnership's general partner and/or McREMI or otherwise take action which would result in the Partnership's general partner and/or McREMI ceasing to act in their current capacities (such removal or cessation, a "Termination") without the imposition of Termination Payments, it will seek to do so. Absent the feasibility of the foregoing, the Purchaser will consider whether or not to seek Termination of the Partnership's general partner and/or McREMI. In connection with any such determination, the Purchaser will consider the overall costs associated with such Termination. In connection with any attempted Termination of the Partnership's general partner or McREMI, the Purchaser will seek its appointment or the appointment of another party as the successor general partner of the Partnership or the property manager of the Partnership, as the case may be. The Purchaser has not previously acted as the general partner or property manager of a limited partnership, such as the Partnership, which is engaged in the business of owning real estate and has not, at this time, sought to negotiate any arrangements with other parties to act in such capacities. Following the completion of the Offer, the Purchaser and/or persons related to or affiliated with it may acquire additional Units or may sell Units. Any acquisition may be made through private purchases, through one or more future tender or exchange offers or by any other means deemed advisable. Any acquisition may be at a price higher or lower than the price to be paid for the Units purchased pursuant to the Offer, and may be for cash or other consideration. The Purchaser also may consider selling some or all of the Units it currently owns or acquires pursuant to the Offer to persons not yet determined, which may include the Partnership's general partner and/or an affiliate of the Partnership's general partner. The Schofield Litigation. James F. Schofield, Gerald C. Gillett and Donna S. Gillett have instituted class and derivative actions (collectively, the "Schofield Litigation") in Superior Court of the State of California for the County of Los Angeles and United States District Court for the Southern District of New York against the general partner of the Partnership, its corporate general partner, McREMI and Robert A. McNeil and Carole J. McNeil (the "McNeils"), the Chairman and Co-Chairman, respectively, of the corporate general partner of the Partnership's general partner (collectively, the "Defendants"), together with the Partnership and fourteen other related partnerships (collectively, the "Partnerships") as nominal defendants, alleging that the Defendants have breached their fiduciary duty. Specifically, the Plaintiffs allege that the Defendants have caused the Partnerships to enter into several wasteful transactions that have no business purpose or benefit to the Partnerships and that have rendered the Units highly illiquid and artificially depressed the prices that are available for Units on the limited resale market. Plaintiffs also allege that Defendants have engaged in a course of conduct to prevent the acquisition of Units by Mr. Icahn by disseminating false, misleading and inadequate information. Plaintiffs further allege that Defendants have acted to advance their own personal interests at the expense of the Partnerships' public Unit holders by failing to sell Partnership properties and failing to make distributions to holders of Units and, thereby, have breached the Partnership Agreements. The Purchaser entered into a letter agreement (the "August 2 Agreement") with Herbert Beigel, plaintiffs' counsel ("Plaintiffs' Counsel") in the Schofield Litigation, on August 2, 1996 and amended the August 2 Agreement on September 19, 1996 (the August 2 Agreement, as so amended, the "Letter Agreement"). Pursuant to the Letter 9 Agreement, among other things, the Purchaser agreed to commence tender offers (the "Tender Offers") within the next six months for any and all outstanding Units of the Partnership and eight of the other Partnerships. The Letter Agreement provides, among other things, that (i) the Purchaser will commence, as soon as possible, but in no event in more than six months, Tender Offers for any and all of the outstanding Units of such Partnerships at a price that is not less than 75% of the estimated liquidation value of the Units, which Tender Offers may be subject to such other terms and conditions as the Purchaser determines in its sole discretion; (ii) in the event that the Purchaser attains the positions of general partner in any of such Partnerships: (a) the Purchaser will take all actions necessary to cause a 25% reduction of fees of such Partnership(s), including the current management incentive distribution fee, (b) the Purchaser will not cause such Partnership(s) to take any action to discontinue the Schofield Litigation with respect to those claims asserted against the general partner which seek the receipt by the Partnerships of monies that the general partner claims it is owed by the Partnerships and monies previously paid by the Partnerships to the general partner and its affiliates for fees they claimed were owed under the Partnership Agreements (the "Receivable Claims"), and (c) the Purchaser and Plaintiffs' Counsel will in good faith execute an appropriate Stipulation of Settlement based upon the terms of the Letter Agreement, which stipulation shall not include a settlement or provide a release of the Receivable Claims; and (iii) from and after the date of the Letter Agreement, Plaintiffs' Counsel will not enter into any settlement of the claims asserted in the Schofield Litigation which does not provide for all of the consideration contained in that certain demand letter, dated June 24, 1996 (the "Demand Letter"), sent by Plaintiffs' Counsel to counsel for the Partnerships in the Schofield Litigation. Such consideration consists of: (a) the general partner or its affiliates causing a 25% reduction of all general partner fees, including the management distribution fees, that are currently payable by such Partnership(s) to the general partner of such Partnership(s) and/or its affiliates; (b) the general partners waiving all claims for outstanding receivables claimed to be owed to them by the Partnership(s) and returning to the Partnership(s) all receivables actually paid in the last two years; and (c) the Defendants in the Schofield Litigation providing a liquidity option for the Limited Partners of such Partnerships by commencing, or causing the general partners to take all steps to solicit third parties to commence, tender offers for any and all, but in no event less than 40%, of the outstanding Units of such Partnerships in an amount that exceeds the prices paid for the previous tender offers commenced by the Purchaser. The August 2 Agreement and Demand Letter were described in and filed as exhibits to an amendment to the Purchaser's Schedule 13D (the "Schedule 13D Amendment") relating to the Partnership filed with the Commission on August 5, 1996. See Section 13 of the Offer to Purchase. SECTION 9. CERTAIN INFORMATION CONCERNING THE PARTNERSHIP. Information contained in this Section 9 is based upon documents and reports publicly filed by the Partnership. Although the Purchaser has no information that any statements contained in this Section 9 are untrue, the Purchaser cannot take responsibility for the accuracy or completeness of any information contained in this Section 9 or for any failure by the Partnership to disclose events which may have occurred and may affect the significance or accuracy of any such information but which are unknown to the Purchaser. The Partnership was organized under the laws of the State of California. Its principal executive offices are located at 13760 Noel Road, Suite 700, LB70, Dallas, Texas 75240. Its telephone number is (214) 448-5800. The Partnership's primary business is real estate ownership and related operations. The primary purpose of the Partnership, as set forth in the Partnership Agreement, is "to invest in, hold, manage and dispose of real estate and real estate-related investments". Under the Partnership Agreement, the term of the Partnership will continue until December 31, 2010, unless sooner terminated as provided in the Partnership Agreement or by law. The terms of the Partnership Agreement require the Partnership's general partner to begin to liquidate the Partnership's properties no later than October 9, 1998, and to use commercially reasonable efforts to liquidate and terminate the Partnership by December 31, 1999. 10 At December 31, 1995, the Partnership's investment portfolio consisted of the following properties:
Net Basis 1995 Date Property Description of Property Debt Property Tax Acquired -------- ----------- ------------ ----------- ------------ -------- REAL ESTATE INVESTMENTS: Briarwood (1) Apartments Tucson, AZ 196 units $ 2,047,492 $ 2,159,913 $ 57,732 07/08 Cave Spring Corners Retail Center Roanoke, VA 165,547 sq. ft. 2,280,551 3,118,079 50,605 10/80 Coppermill (2) Apartments Tulsa, OK 544 units 4,338,594 5,022,484 83,188 10/80 Iberia Plaza Retail Center New Iberia, LA 136,766 sq. ft. 3,082,100 2,076,505 38,009 06/80 La Plaza Office Building Las Vegas, NV 104,230 sq. ft. 5,004,246 2,523,308 61,030 09/80 Lakeview Plaza Retail Center Lexington, KY 172,252 sq. ft. 3,759,754 4,249,492 9,522 07/80 Orchard (3) Apartments Lawrence, IN 378 units 3,392,218 6,288,171 215,846 12/80 Quail Meadows (4) Apartments Wichita, KS 440 units 4,491,104 5,967,225 84,482 06/80 Regency Park (5) Apartments Ft. Wayne, IN 226 units 1,793,099 2,421,645 91,254 06/80 Sandpiper (6) Apartments Westminster, CO 360 units 3,839,859 5,540,519 58,562 04/80 Spanish Oaks (7) Apartments San Antonio, TX 239 units 2,670,513 3,524,225 116,593 08/80 ----------- ----------- -------- $36,699,530 $42,891,566 $866,823 =========== =========== ======== ASSET HELD FOR SALE: Parkway Plaza Retail Center Lafayette, LA 135,682 sq. ft. $ 2,237,733 $ 2,362,750 $ 30,108 06/80 ----------- ----------- -------- $ 2,237,733 $ 2,362,750 $ 30,108 =========== =========== ========
- ------------ Total: Apartments--2,383 units Retail Centers--610,247 sq. ft. Office Building--104,230 sq. ft. (1) Briarwood Apartments is owned by Briarwood Fund X Limited Partnership, which is wholly-owned by the Partnership. (2) Coppermill Apartments is owned by Coppermill Fund X Limited Partnership, which is wholly-owned by the Partnership. (3) Orchard Apartments is owned by Orchard Fund X Limited Partnership, which is wholly-owned by the Partnership. (4) Quail Meadows Apartments is owned by Quail Meadows Fund X Limited Partnership, which is wholly-owned by the Partnership. (5) Regency Park Apartments is owned by Regency Park Fund X Associates, L.P., which is wholly-owned by the Partnership and the General Partner. (6) Sandpiper Apartments is owned by Sandpiper Fund X Limited Partnership, which is wholly-owned by the Partnership. (7) Subsequent to year end, the Partnership transferred Spanish Oaks Apartments to Spanish Fund X, Ltd. 11 ACCUMULATED DEPRECIATION SCHEDULE. The basis and accumulated depreciation of the Partnership's real estate investments held at December 31, 1995 and 1994 are set forth in the following tables:
Buildings and Accumulated Net Book 1995 Land Improvements Depreciation Value ---- ------------ ------------- ------------ ------------ Briarwood Tucson, AZ .............. $ 489,437 $ 5,044,948 $ (3,486,893) $ 2,047,492 Cave Spring Corners Roanoke, VA ............. 792,077 4,487,055 (2,998,581) 2,280,551 Coppermill Tulsa, OK ............... 1,176,980 12,061,904 (8,900,290) 4,338,594 Iberia Plaza New Iberia, LA .......... 836,792 4,965,167 (2,719,859) 3,082,100 La Plaza Las Vegas, NV ........... 2,761,441 6,361,255 (4,118,450) 5,004,246 Lakeview Plaza Lexington, KY ........... 1,554,404 7,262,788 (5,057,438) 3,759,754 Orchard Lawrence, IN ............ 366,938 9,169,739 (6,144,459) 3,392,218 Quail Meadows Wichita, KS ............. 754,551 10,794,946 (7,058,393) 4,491,104 Regency Park Ft. Wayne, IN ........... 280,131 5,070,196 (3,557,228) 1,793,099 Sandpiper Westminster, CO ......... 866,107 7,665,705 (4,691,953) 3,839,859 Spanish Oaks San Antonio, TX ......... 586,056 6,002,418 (3,917,961) 2,670,513 ------------ ------------ ------------ ------------ $ 10,464,914 $ 78,886,121 $(52,651,505) $ 36,699,530 ============ ============ ============ ============ Buildings and Accumulated Net Book 1994 Land Improvements Depreciation Value ---- ------------ ------------- ------------ ------------ Briarwood ............... $ 489,437 $ 4,940,758 $ (3,282,004) $ 2,148,191 Cave Spring Corners ..... 776,280 4,324,604 (2,840,426) 2,260,458 Coppermill .............. 1,176,980 11,938,789 (8,331,543) 4,784,226 Iberia Plaza ............ 836,792 4,260,110 (2,576,670) 2,520,232 La Plaza ................ 2,761,441 5,586,215 (3,904,450) 4,443,206 Lakeview Plaza .......... 1,554,404 7,248,152 (4,772,904) 4,029,652 Orchard ................. 366,938 8,989,936 (5,760,219) 3,596,655 Quail Meadows ........... 754,551 10,608,253 (6,635,031) 4,727,773 Regency Park ............ 280,131 4,842,550 (3,345,852) 1,776,829 Sandpiper ............... 866,107 7,501,138 (4,367,651) 3,999,594 Spanish Oaks ............ 586,056 5,785,918 (3,633,897) 2,738,077 ------------ ------------ ------------ ------------ $ 10,449,117 $ 76,026,423 $(49,450,647) $ 37,024,893 ============ ============ ============ ============
During 1994, the General Partner placed The Courts Apartments and Parkway Plaza Shopping Center on the market for sale. The Courts Apartments was sold September 14, 1995. The Courts Apartments is classified as an asset held for sale at December 31, 1994. Parkway Plaza is classified as an asset held for sale at Decem- ber 31, 1995 and 1994. 12 The Partnership leases its commercial properties under various non-cancelable operating leases. In most cases, the Partnership expects that in the normal course of business these leases will be renewed or replaced by other leases. Future minimum rents to be received from commercial properties as of December 31, 1995, are as follows: Real Estate Assets Held Investments For Sale ----------- ---------- 1996...................................... $ 2,312,000 $ 558,000 1997...................................... 2,059,000 509,000 1998...................................... 1,768,000 481,000 1999...................................... 1,577,000 412,000 2000...................................... 1,291,000 330,000 Thereafter................................ 3,654,000 606,000 ----------- ---------- $12,661,000 $2,896,000 =========== ========== Future minimum rents do not include contingent rents based on sales volume of tenants. Contingent rents amounted to $86,571, $99,514 and $77,899 for the years ended December 31, 1995, 1994 and 1993, respectively. Future minimum rents also do not include expense reimbursements for common area maintenance, property taxes, and other expenses. The expense reimbursements amounted to $177,095, $399,360, and $318,444 for the years ended December 31, 1995, 1994 and 1993, respectively. The Partnership's real estate investments are encumbered by mortgage indebtedness. SCHEDULE OF MORTGAGES. The following table sets forth the mortgage notes payable of the Partnership at December 31, 1995 and 1994. All mortgage notes payable are secured by real estate investments.
Annual Monthly December 31, Mortgage Lien Interest Payments/ ------------------------------ Property Position (a) Rates % Maturity Date 1995 1994 -------- -------- ------- ---------------------- ----------- ----------- Briarwood First 8.150 $ 18,340 07/03 (h) $ 2,213,347 $ 2,251,332 Discount (g) (53,434) (58,904) ----------- 2,159,913 2,192,428 Cave Spring Corners First 9.500 27,958 06/98 (h) 3,118,079 3,155,412 Coppermill First (b) 10.405 45,800 01/02 (h) 5,022,484 5,046,000 The Courts First 10.875 (c) -- 6,655,775 Improvement 7.500 (d) -- 149,992 ----------- District Liens 7.850 -- 6,805,767 Iberia Plaza First Discount (g) 9.250 27,137 11/98 (h) 2,204,675 2,320,507 (128,170) (172,031) ----------- 2,076,505 2,148,476 La Plaza First 10.125 31,386 03/97 (h) 2,523,308 2,638,061 Lakeview Plaza First 9.125 38,815 06/08 3,449,492 3,593,299 Orchard First Discount (g) 8.150 53,393 07/03 (h) 6,443,726 6,554,315 (155,555) (171,494) ----------- 6,288,171 6,382,821 Parkway Plaza Wrap (e) 9.250 34,054 08/96 (h) 2,642,502 2,798,778 Discount (g) (279,752) (318,756) ----------- 2,362,750 2,480,022 Quail Meadows First Discount (g) 8.150 50,634 07/03 (h) 6,110,762 6,215,636 (143,537) (160,657) ----------- 5,967,225 6,054,979 Regency Park First Discount (g) 8.375 23,382 10/17 2,808,581 2,851,951 (386,936) (402,017) ----------- 2,421,645 2,449,934 Sandpiper First Discount (g) 8.150 47,046 07/03 (h) 5,677,715 5,775,158 (137,196) (151,166) ----------- 5,540,519 5,623,992 Spanish Oaks First (f) 10.000 31,392 08/95 (h) 3,524,225 3,533,351 ----------- Discount (g) -- (25,692) ----------- ----------- 3,524,225 3,507,659 ----------- ----------- $44,454,316 $52,078,850 =========== =========== (Footnotes on next page)
13 - --------------- (a) The debt is non-recourse to the Partnership. (b) The Partnership refinanced the Coppermill mortgage note on December 8, 1994. (c) The Partnership sold the Courts Apartments on September 14, 1995, and the first lien was retired using proceeds from the sale. (d) The Courts Apartments were subject to several improvement district liens. The Partnership sold the Courts Apartments on September 14, 1995, and the improvement district liens were assumed by the purchaser. (e) The holder of the Parkway Plaza mortgage note had an option to call the Parkway Plaza mortgage note upon giving 180 days notice to the Partnership, for a period of one year beginning November 1995. On December 1, 1995, the holder exercised the option and set the maturity date of the Parkway Plaza mortgage note at August 1, 1996. (f) The Spanish Oaks mortgage note matured in August 1995. Subsequent to August 1995, the Partnership continued to make monthly debt service payments which were accepted by the holder of the Spanish Oaks mortgage note. The Partnership succeeded in refinancing the Spanish Oaks mortgage note on January 26, 1996. (g) Discounts for the Iberia Plaza, Parkway Plaza and Spanish Oaks mortgage notes are based on effective interest rates of 10% to 13%. The discount for the Regency Park mortgage note is based on an effective interest rate of 10.375%. Discounts for the Briarwood, Orchard, Quail Meadows and Sandpiper mortgage notes are based on an effective interest rate of 8.622%. (h) Balloon payments on the Partnership's mortgage notes are due as follows: Property Balloon Payment Date -------- --------------- ---- Parkway Plaza........................ $2,544,466 08/96 La Plaza............................. 2,362,599 03/97 Cave Spring Corners.................. 3,007,722 06/98 Iberia Plaza......................... 1,812,114 11/98 Coppermill........................... 4,798,763 01/02 Spanish Oaks......................... 3,689,221 01/03 Briarwood............................ 1,804,449 07/03 Orchard.............................. 5,253,301 07/03 Quail Meadows........................ 4,981,860 07/03 Sandpiper............................ 4,628,805 07/03 Scheduled principal maturities of the Partnership's mortgage notes under existing agreements, before consideration of discounts of $1,284,580, are as follows: 1996.......................................... $ 3,580,546 1997.......................................... 3,286,768 1998.......................................... 5,738,374 1999.......................................... 835,951 2000.......................................... 909,755 Thereafter.................................... 31,863,277 ----------- $46,214,671 =========== Based on borrowing rates currently available to the Partnership for mortgage loans with similar terms and average maturities, the fair value of the Partnership's mortgage notes payable was approximately $45,756,000 at December 31, 1995. 14 AVERAGE ANNUAL RENTAL RATE AND OCCUPANCY. The following table sets forth the occupancy rate and rent per square foot of the Partnership's properties for each of the last five years:
1995 1994 1993 1992 1991 ---- ---- ---- ---- ---- REAL ESTATE INVESTMENTS: - ------------------------ Briarwood Occupancy Rate ............ 92% 99% 99% 96% 95% Rent Per Square Foot ...... $ 9.91 $ 9.62 $ 8.58 $ 8.07 $ 7.53 Cave Spring Corners Occupancy Rate ............ 98% 100% 99% 95% 95% Rent Per Square Foot ...... $ 4.75 $ 4.53 $ 3.92 $ 3.93 $ 3.94 Coppermill Occupancy Rate ............ 94% 92% 92% 89% 86% Rent Per Square Foot ...... $ 5.46 $ 5.28 $ 4.99 $ 4.73 $ 4.37 Iberia Plaza Occupancy Rate ............ 98% 94% 90% 88% 89% Rent Per Square Foot ...... $ 3.71 $ 3.90 $ 3.59 $ 3.41 $ 4.21 La Plaza Occupancy Rate ............ 77% 97% 99% 95% 96% Rent Per Square Foot ...... $10.10 $13.97 $12.56 $12.58 $12.63 Lakeview Plaza Occupancy Rate ............ 98% 100% 100% 95% 96% Rent Per Square Foot ...... $ 4.71 $ 5.69 $ 5.35 $ 4.97 $ 5.47 Orchard Occupancy Rate ............ 98% 94% 93% 89% 91% Rent Per Square Foot ...... $ 7.25 $ 6.95 $ 6.24 $ 6.20 $ 6.13 Quail Meadows Occupancy Rate ............ 94% 89% 77% 92% 89% Rent Per Square Foot ...... $ 5.80 $ 5.62 $ 5.53 $ 5.99 $ 5.79 Regency Park Occupancy Rate ............ 92% 94% 89% 86% 86% Rent Per Square Foot ...... $ 5.45 $ 5.09 $ 4.46 $ 4.64 $ 4.48 Sandpiper Occupancy Rate ............ 94% 95% 94% 98% 97% Rent Per Square Foot ...... $ 9.29 $ 8.93 $ 8.33 $ 7.46 $ 6.59 Spanish Oaks Occupancy Rate ............ 90% 91% 96% 95% 89% Rent Per Square Foot ...... $ 6.18 $ 5.97 $ 5.64 $ 5.23 $ 4.77 ASSETS HELD FOR SALE: - --------------------- Parkway Plaza Occupancy Rate ............ 100% 97% 95% 95% 95% Rent Per Square ........... $ 5.25 $ 5.19 $ 4.89 $ 5.76 $ 5.72
Occupancy rate represents all units or square footage leased divided by the total number of units or square footage of the property as of December 31 of the given year. Rent per square foot represents all revenue, except interest, derived from the properties' operations divided by the leasable square footage of the property. 15 SELECTED FINANCIAL DATA. Set forth below is a summary of certain financial information with respect to the Partnership, which has been excerpted or derived from the Form 10-K and the Partnership's Quarterly Report on the Form 10-Q for the six months ended June 30, 1996.
Years Ended December 31, ------------------------------------------------------------------------------ Statement of Operations 1995 1994 1993 1992 1991 - ----------------------- ----------- ----------- ----------- ----------- ----------- Rental revenue ..................... $16,878,076 $17,375,904 $16,217,889 $16,023,798 $15,745,075 Gain on involuntary conversion ..... -- -- 268,434 192,168 -- Gain on disposition of real estate ............................. 3,183,698 -- -- -- 251,314 Total revenue ...................... 20,258,594 17,428,487 16,542,802 16,283,680 16,097,573 Loss on replacement of assets ...... -- -- -- (675,420) -- Income (loss) before extraordinary items ............... 2,193,164 (1,199,904) (1,693,057) (2,101,133) (2,208,424) Extraordinary items ................ -- 292,539 (1,078,519) -- 900,508 Net income (loss) .................. 2,193,164 (907,365) (2,771,576) (2,101,133) (1,307,916) Net income (loss) per limited partnership unit: Income (loss) before extraordinary items ............. $ 15.43 $ (10.25) $ (15.62) $ (24.66) $ (15.52) Extraordinary items .............. -- 2.06 (7.58) -- 6.33 ----------- ----------- ----------- ----------- ----------- Net income (loss) ................ $ 15.43 $ (8.19) $ (23.20) $ (24.66) $ (9.19) =========== =========== =========== =========== =========== December 31, ------------------------------------------------------------------------------ Balance Sheets 1995 1994 1993 1992 1991 - -------------- ----------- ----------- ----------- ----------- ----------- Real estate investments, net........ $36,699,530 $37,024,893 $45,705,474 $44,968,959 $46,339,058 Assets held for sale................ 2,237,733 7,215,032 Total assets........................ 43,538,649 48,379,933 50,632,244 48,958,917 49,620,579 Mortgage notes payable, net......... 44,454,316 52,078,850 54,484,455 49,141,717 45,966,025 Partners' equity (deficit).......... (6,313,367) (7,442,274) (5,900,107) (2,304,044) 547,965
Six Months Ended June 30, ------------------------- Statements of Operations: 1996 1995 - ------------------------- ---------- --------- Rental revenue............................................ $8,017,638 $8,699,158 Income (loss) before extraordinary items.................. 60,553 (378,767) Extraordinary gain on extinguishment of debt.............. 269,596 -- Net income (loss)......................................... 330,149 (378,767) Net income (loss) per limited partnership unit: Income (loss) before extraordinary items.................. .42 (2.66) Extraordinary gain on extinguishment of debt.............. 1.90 -- ---------- ---------- Net income (loss)......................................... 2.32 (2.66) ========== ==========
As of June 30, Balance Sheets: 1996 - --------------- ----------- Real estate investments, net ....................... $35,730,807 Assets held for sale ............................... 2,242,450 Total assets ....................................... 44,455,080 Mortgage notes payable, net ........................ 44,467,844 Partners' equity (deficit) ......................... (6,505,377) COMPETITIVE CONDITIONS. Students at nearby University of Arizona make up 91% of the tenants at Briarwood Apartments. The property commands rents $100 to $150 higher per month than its competition due to its excellent location near the university 16 and a bike route to the university. Due to the heavy student-tenant profile, occupancy at the property typically drops during the summer months, giving Briarwood an average occupancy rate four to five percentage points below market averages. Planned developments in the area may have a short-term impact on the property, but long-term impact is expected to be negligible due to Briarwood's excellent location. The major exterior renovation currently underway at Cave Spring Corners Shopping Center has allowed the Partnership to increase market rental rates up to area averages. Occupancy remains high due to a good location. Competing properties have also been renovated during the past five to six years. The economic outlook for the Roanoke area is expected to be positive, and should allow Cave Spring Corners to maintain its high occupancy through 1997. The average occupancy rate at Coppermill Apartments mirrors the local area average of 92%. Area occupancy rates are expected to be stable in the 92% to 93% range. Most properties in the immediate area, including Coppermill, were built by the same developer using identical floor plans. Thus, the local market is very price-sensitive. The average monthly rent per square foot city-wide is $.54 per square foot. Because Coppermill's monthly rental rates average $.48 per square foot, there is some room for rental rate increases, but usually only with units that have upgraded amenities that differentiate the units from the competition. Iberia Plaza gained a new anchor tenant during 1995. The property remained 97% leased, but the proportion of the space that was "dark" or vacant decreased from 84% to 19% during 1995. The new tenant, a grocery store, has greatly increased the amount of traffic into the property. In connection with the new anchor tenant lease, the Partnership invested over $700,000 in capital improvements to replace the asphalt, roof, exterior lighting and HVAC equipment. The primary competition for the property is a retail center constructed in 1991 across the street from Iberia Plaza. The new retail center charges an average rental rate of $8 to $10 per square foot as opposed to $6 at Iberia Plaza. La Plaza Business Center had two major tenants vacate or down-size their space requirements during 1995. Occupancy fell from 97% at the beginning of 1995 to 77% at the end of 1995. The decrease in occupancy has prompted the Partnership to update the appearance of the property. Additional substantial tenant improvement costs are expected to be incurred to convert the property to a more leasable configuration and to bring the property into compliance with local building codes. The Partnership intends to fund the tenant improvements as lease negotiations proceed with new tenants. Demand for office space in Las Vegas is expected to be strong in 1996. New construction is aimed at the high-end of the market, and is not expected to compete with La Plaza. Lakeview Plaza is 98% leased. However, one of the property's anchor tenants vacated its space in mid-1995. The tenant anticipates sub-leasing its space by mid-1996. The local market area appears to be strong, with several national retailers looking for sites for additional stores in the area. There are also several, newer competing properties in very close proximity to Lakeview Plaza that have adversely affected sales of Lakeview Plaza's tenants. In 1993, the Partnership invested $660,000 of capital improvements at Orchard Apartments. The property, as a result, has benefitted from improved curb appeal and improved financial performance. Orchard's occupancy rate is usually two percentage points above the 93% average occupancy rate of competitors in the Indianapolis submarket where Orchard is located. Rental rates at Orchard are comparable to its competitors. Recent and impending layoffs by major area employers are a concern. Parkway Plaza has a good location on the north side of Lafayette, Louisiana. There is no room for additional development in the immediate area; consequently, new developments are located across town from Parkway Plaza. The property is 100% leased, but the property's main anchor tenant has vacated its space. Although lease payments continue to be made, the vacant space generates no percentage rents and does not pull in shoppers to the property. The Partnership placed Parkway Plaza on the market for sale in December 1994. Quail Meadows Apartments is one of the nicer properties in the Wichita area. Both interiors and exteriors of the property are above average relative to the competition. However, the market in the Wichita area is soft. Area occupancy rates have decreased for the past three years and rental rates have been flat. Quail Meadows has maintained occupancy rates higher than market averages, but has not been able to increase rental rates despite significant capital improvements. The property relies on tenants from nearby McConnell Air Force Base, which has recently constructed new housing facilities and faces the possibility of congressional military cutbacks. Occupancy rates in the Regency Park Apartments market area average 94%, slightly better than Regency Park's occupancy rate. Rental rates realized at Regency Park are also lower than its competitors. The property competes with 17 numerous properties, some of which are newer or have more appeal to prospective tenants. Capital improvements made by the Partnership during 1993, 1994 and 1995 have allowed the property to close some of the gap between Regency Park and its competitors. The rental market in the area, however, remains price sensitive. Improvements in operating results generally are coming through improved occupancy rather than rate increases. Capital improvements placed in service since 1992 have allowed Sandpiper Apartments to increase its rent per square foot by 41% in the past four years. Occupancy and rental rates are above market averages. Since 1992, the income level of Sandpiper's tenants has increased substantially. There is significant new construction under development in the market area. It is expected that the new construction will put downward pressure on market rent levels, but management expects that well-maintained Sandpiper will continue to compete effectively. Average occupancy rates at Spanish Oaks Apartments have decreased two percentage points during the past two years due to competition with new construction, older properties that have been renovated, and rate hikes at Spanish Oaks. Net income from the property has continued to rise due to increased rental rates, but rental rates at Spanish Oaks remain below market averages. The interiors at Spanish Oaks will need to be updated to allow the property to raise its rents to current market levels. Also of concern is the reliance upon personnel employed or stationed at Fort Sam Houston Army Base for many of the property's tenants. Additional information concerning the Partnership, its assets, operations and management is contained in its annual reports on the Form 10-K and quarterly reports on the Form 10-Q and other filings with the Commission. Such reports and filings are available for inspection at the Commission's principal office in Washington, D.C., and at its regional offices in New York, New York and Chicago, Illinois. SECTION 10. VOTING BY THE PURCHASER. Based upon the number of Units it currently owns (together with an affiliate) and the number of Units it acquires pursuant to the Offer, the Purchaser may be in a position to influence control of the Partnership and to influence voting decisions with respect to the Partnership and the Purchaser may seek to remove the Partnership's general partner. Under the Partnership Agreement, Limited Partners holding a majority of the Units are entitled to remove the Partnership's general partner at any time for cause and, beginning on October 9, 1995, without cause. Such removal may require the Partnership to pay a fee and other payments to the Partnership's general partner and/or its affiliates and may result in acceleration of certain of the Partnership's debt obligations and/or the Partnership's incurrence of expenses pursuant to provisions of such debt obligations, which may have an adverse effect on the Partnership. See Section 8 of the Offer to Purchase. In addition, Limited Partners holding a majority of the Units, with the concurrence of the Partnership's general partner, are entitled to take action with respect to a variety of matters, including dissolution of the Partnership and most types of amendments to the Partnership Agreement, but the Purchaser has no present intention of doing so. Reorganization Transactions require a Supermajority Vote (as those terms are defined in the Partnership Agreement) and the consent of the Partnership's general partner prior to effectuation. Generally, "Reorganization Transactions" are defined as transactions in connection with which any Limited Partners will be issued securities of any other entity in exchange for, or as a distribution with respect to, Units; "Supermajority Vote" is defined as the vote of the Limited Partners who own more than 80% of the total outstanding Units excluding Units held by Interested Persons; and "Interested Persons" are defined as, among others, persons who beneficially own 10% or more of the outstanding Units, excluding certain affiliates of the Partnership's general partner. SECTION 11. INFORMATION CONCERNING THE PURCHASER AND CERTAIN AFFILIATES OF THE PURCHASER. Riverdale is the general partner of the Purchaser, and Mr. Icahn is the controlling member of Riverdale. Unicorn Associates Corporation ("Unicorn") is a New York corporation indirectly wholly-owned by Mr. Icahn and of which he is the sole director. Unicorn purchased Units in the 1995 Offer from Limited Partners resident in California, pursuant to an assignment from the Purchaser of the right to purchase such Units. The business address of Mr. Icahn is 114 W. 47th Street, New York, New York 10036. The address of the principal office of each of the Purchaser, Riverdale and Unicorn is 100 South Bedford Road, Mount Kisco, New York 10549. Each of the Purchaser and Unicorn is primarily engaged in the business of investing in securities. Riverdale is primarily engaged in the business of investing in securities, including interests in real estate limited partnerships, and 18 acting as general partner of the Purchaser. Mr. Icahn's present principal occupation or employment is set forth on Schedule I attached hereto and is incorporated herein by reference. The name, position, citizenship, business address, present principal occupation or employment, material occupations, positions or employments during the past five years and the principal business address of any business corporation or other organization in which such occupation, position or employment was carried on, of each executive officer/manager of Riverdale and each executive officer of Unicorn are set forth on Schedule I attached hereto and are incorporated herein by reference. Neither the Purchaser, Riverdale, Unicorn, Mr. Icahn, nor any executive officer/manager of Riverdale or executive officer of Unicorn has, during the past five years, (a) been convicted in a criminal proceeding (excluding traffic violations or similar misdemeanors) or (b) been a party to a civil proceeding of a judicial or administrative body of competent jurisdiction and as a result of such proceeding was or is subject to a judgment, decree or final order enjoining future violations of, or prohibiting activities subject to, federal or state securities laws or a finding of any violation of such laws. Except as set forth below and in Sections 8 and 13 of the Offer to Purchase, neither the Purchaser, Riverdale, Unicorn nor, to the best of the Purchaser's knowledge, any of the Persons listed on Schedule I nor any affiliate of the foregoing (i) beneficially owns or has a right to acquire any Units, (ii) has effected any transaction in the Units in the past 60 days, or (iii) has any contract, arrangement, understanding or relationship with any other persons with respect to any securities of the Partnership, including, but not limited to, contracts, arrangements, understandings or relationships concerning the transfer or voting thereof, joint ventures, loan or option arrangements, puts or calls, guarantees of loans, guarantees against loss or the giving or withholding of proxies. The Purchaser and Unicorn currently own 7,459 (representing approximately 5.5% of the outstanding) Units. Of such Units, 6,030 are owned by the Purchaser and the balance are owned by Unicorn. Such Units were purchased pursuant to the 1995 Offer. 19 Set forth below is financial information with respect to the Purchaser. The Purchaser is not subject to periodic reporting requirements under the Exchange Act. The financial information set forth below is unaudited. The Purchaser does not prepare audited financial statements in the ordinary course of its business and, accordingly, such audited financial statements were not available or obtainable without unreasonable cost or expense. HIGH RIVER LIMITED PARTNERSHIP BALANCE SHEET JUNE 30, 1996 (UNAUDITED) (IN 000'S) ASSETS: Cash and Cash Equivalents...................................... $ 10,689 Marketable Securities.......................................... 419,409 Investment in Partnerships--Real Estate L.P.................... 17,279 Investment in Partnership--Other............................... 833 -------- Total Assets................................................. $448,210 ======== LIABILITIES: Due to Brokers................................................. $162,614 Securities Sold Not Yet Purchased @ Market Value............... 4,045 -------- Total Liabilities............................................ $166,659 PARTNERS' CAPITAL............................................... 281,551 -------- TOTAL LIABILITIES AND PARTNERS' CAPITAL......................... $448,210 ======== 20 HIGH RIVER LIMITED PARTNERSHIP STATEMENT OF INCOME SIX MONTHS ENDED JUNE 30, 1996 (UNAUDITED) (IN 000'S) INCOME: Interest.......................................................... $ 99 Capital Gains..................................................... 4,542 Dividends......................................................... 7,532 Unrealized Loss on Securities..................................... (3,152) ------- 9,021 ------- EXPENSE: Interest.......................................................... $ 4,079 Other............................................................. 29 ------- 4,108 ------- NET INCOME......................................................... $ 4,913 ======= 21 SECTION 12. SOURCE OF FUNDS. The Purchaser expects that approximately $10,907,320 will be required to purchase 127,571 Units (consisting of the aggregate number of outstanding Units as of February 16, 1996, net of Units owned by the Purchaser and its affiliate), if tendered (exclusive of related fees and expenses). The Purchaser will obtain all of those funds from its liquid assets. SECTION 13. BACKGROUND OF THE OFFER. Prior Contacts with the Partnership. On or about July 27, 1995, the McNeils and Mr. Icahn spoke by telephone. Mr. Icahn told the McNeils that he had been informed that they were interested in selling the Partnership's general partner. The McNeils said that they were not interested in selling the Partnership's general partner but urged Mr. Icahn to contact their counsel, Scott Wallace. In the conversation with the McNeils, Mr. Icahn indicated that he intended to make a tender offer for Units and a joint tender offer was discussed. No agreements were reached. In the days that followed up to on or about August 1, 1995, Mr. Icahn participated in several telephone conversations with Mr. Wallace. The same subjects were explored and Mr. Icahn confirmed his intention to conduct a tender offer for Units. Again, no agreements were reached. One of these conversations, which took place on or about August 1, 1995 among Scott Wallace, Mr. Icahn and a former counsel for the Partnership, became a subject of the litigation described below. The Purchaser commenced a tender offer to purchase Units in the Partnership and nine other Partnerships on August 4, 1995 (the "1995 Offer" and together with the Purchaser's tender offers to purchase Units of the other Partnerships, the "1995 Offers"). On August 9, 1995, the McNeils delivered a letter to the Purchaser claiming that the former counsel divulged confidential information concerning the McNeils' personal tax situation during the August 1, 1995 telephone conversation, that the 1995 Offers were based on confidential information and that the Partnership would not mail the 1995 Offers unless the Purchaser and Mr. Icahn signed a certificate concerning the purported confidential information. On August 10, 1995, the Purchaser commenced an action in the United States District Court for the Southern District of New York (the "District Court") against the Partnership's general partner, its corporate general partner, and the McNeils (collectively "Management"), as well as the Partnership and the other Partnerships (collectively with Management, the "Defendants") alleging Management breaches of fiduciary duty and that the Defendants' failure to mail the 1995 Offers violated the Securities and Exchange Commission's Rule 14d-5. On that same day, the District Court, upon the Purchaser's application, issued a preliminary injunction against the Defendants and ordered the Defendants to either furnish the Purchaser with a list of the names and addresses of the Limited Partners or mail the Offer to the Limited Partners on the Purchaser's behalf. The Defendants elected to mail. On August 16, 1995, the Partnership, through its counsel, declined the Purchaser's request for a list of the Limited Partners, stating that the list was confidential and since the Purchaser was not a Limited Partner, such information was not required to be provided under applicable law. On August 17, 1995, the Purchaser sent a letter to the Partnership's general partner requesting that the general partner agree to cooperate in satisfying certain conditions of the 1995 Offers and to facilitate the transfer of Units. On August 18, 1995, the Defendants served and filed a Counterclaim and Answer (the "Counterclaim"). Defendants' Counterclaim sought an injunction and alleged that the 1995 Offers were made in violation of federal securities laws because, among other things, they failed to disclose that the Purchaser based its Offers on confidential information. This action was dismissed without prejudice in November 1995. In November 1995, the Purchaser filed a second complaint in the District Court alleging, among other things, that the Schedule 14d-9 filed by the Partnership's general partner in connection with the 1995 Offers was materially false and misleading in violation of federal securities laws and that the general partner wrongfully refused to admit the Purchaser as a limited partner to the Partnership and other Partnerships and asserting certain derivative claims on behalf of the Partnership and certain of the other Partnerships. The general partner subsequently admitted the Purchaser as a limited partner of the Partnership and such other Partnerships. This action was dismissed without prejudice on January 31, 1996. On August 22 and 23, 1995, Mr. Icahn and a representative met with the McNeils and their representatives regarding possible settlement of the pending litigation respecting the 1995 Offers. Those discussions involved, among other things, the possibility of a transaction pursuant to which Mr. Icahn or his affiliates would acquire substantially all of the interest in the Partnership's general partner and would acquire McREMI. In connection with those settlement discussions, the Partnership's general partner and the Purchaser agreed to a standstill arrangement whereby, among other things, the Purchaser agreed to extend the expiration date of the 1995 22 Offers and the Purchaser and its affiliates were permitted to conduct reasonable due diligence (the "Due Diligence") with respect to the Partnership's general partner, the Partnerships and their affiliates (subject to certain confidentiality obligations). The Purchaser, Mr. Icahn and their affiliates also agreed, subject to certain exceptions, that, prior to August 24, 1996, they would not attempt to acquire any securities of partnerships (other than the Partnerships) controlled by Robert A. McNeil, or propose to enter into business combinations with them or make proxy solicitations with respect thereto. From late August through September 19, 1995, representatives of Mr. Icahn engaged in a "due diligence" review of certain non-public information regarding McREMI, the Partnership's general partner, the Partnerships and their affiliates, involving meetings with senior management and others, telephone conferences and the exchange and review of documents. Between August 24 and September 19, 1995, Mr. Icahn and representatives of Mr. Icahn and his affiliates (including the Purchaser) and the McNeils, the Partnership's general partner and their representatives engaged in ongoing negotiations involving, among other things, discussion of: (i) a transaction in which an affiliate of Mr. Icahn would acquire substantially all of the interests in the Partnership's general partner and would acquire McREMI; (ii) potential modifications to the outstanding 1995 Offers; (iii) cooperation to be provided by the Partnership's general partner to facilitate the 1995 Offers; and (iv) agreements with respect to settlement of outstanding litigation, both among the parties and against the Partnership's general partner, McREMI and Mr. and Mrs. McNeil, among others, instituted following the commencement of the 1995 Offers. The negotiations and due diligence review involved extensive discussion of and negotiation concerning many facets of the financial condition, tax aspects, operations, and business of McREMI, the Partnership's general partner, the Partnerships and their affiliates. On September 19, 1995, these negotiations reached an impasse and were discontinued. Additional conversations after that date failed to result in a resumption of negotiations. On August 12, 1996, in anticipation of the commencement of the Offer and Tender Offers for Units of certain other Partnerships, the Purchaser sent a letter to the Partnership and the other Partnerships requesting lists of the names, current residence or business addresses and certain other information concerning the Limited Partners of the Partnership and such other Partnerships. On August 19, 1996, the Partnerships commenced an action against the Purchaser, Mr. Icahn and certain of their affiliates (collectively, the "Purchaser Defendants") in United States District Court for the Central District of California (the "California Federal Action") seeking, among other things, to declare that the Partnerships are not required to provide the Purchaser with a current list of the Limited Partners on the grounds that the Purchaser Defendants commenced a tender offer in violation of the federal securities laws by filing the Schedule 13D Amendment on August 5, 1996. See Section 8 of the Offer to Purchase. On August 19, 1996, the Partnerships, through their counsel, responded to the Purchaser's August 12 letter by refusing to provide the Purchaser with a current list of the Limited Partners for the reasons set forth above. On August 23, 1996, the Purchaser Defendants filed, among other documents, (a) an answer to the Partnerships' complaint in the California Federal Action denying the allegations contained therein and asserting four affirmative defenses; (b) a counterclaim seeking, among other things, injunctive relief requiring the Partnerships to either make available to the Purchaser a copy of the lists of Limited Partners or grant the Purchaser permission to inspect and copy such lists; and (c) an application for a temporary restraining order ("TRO") and a preliminary injunction seeking access to the lists of Limited Partners. On September 6, 1996, the Purchaser Defendants' TRO application was denied. On September 12, 1996, the Partnerships filed an answer to the Purchaser Defendants' counterclaim asserting six affirmative defenses and alleging that the Purchaser Defendants were denied access to the lists of Limited Partners because their requests for the lists were in connection with illegal tender offers. Discovery is currently underway in the California Federal Action and the matter is expected to go to trial in mid-October 1996. Trading History of the Units. The Trading Summary for the period April 1, 1996 through May 30, 1996 ("Summary Period") appearing in the May/June 1996 issue of the Partnership Spectrum ("Trading Summary") indicated that, during the Summary Period, an aggregate of 166 Units were traded in a total of 11 trades at a price range of $75 to $87 per Unit and at a weighted average of $77.22 per Unit. Limited Partners should be aware that the Form 10-K states as follows: "[t]here is no established public trading market for limited partnership units nor is one expected to develop." Therefore, the prices reflected in the Trading Summary may not accurately reflect the value of the Partnership's assets or of Units, and Limited Partners may or may not be able to sell their Units independently of the Offer at the prices reflected in the Trading Summary. Limited Partners should be aware that the Purchase Price in 23 the Offer is approximately 10.7% higher than the weighted average price for the Summary Period, as reflected in the Trading Summary. Determination of the Purchase Price. As described in Section 8 of the Offer to Purchase, the Purchaser agreed, in the Letter Agreement, to commence a Tender Offer for any and all Units of the Partnership (and certain other Partnerships) at a price that is not less than 75% of the estimated liquidation value of the Units. The Purchase Price represents 75% of the Purchaser's estimate of the Units' liquidation value, as determined using the methodology described below. In estimating liquidation value per Unit, the Purchaser first estimated net asset value ("NAV Estimate"). The Purchaser prepared its NAV Estimate based on a hypothetical sale (without taking into account any transaction costs) of all of the Partnership's properties at their estimated aggregate value and the distribution to the partners of the gross proceeds of that sale (net of existing indebtedness), together with the Partnership's cash and proceeds from temporary investments. The NAV Estimate prepared by the Purchaser does not take into account: (i) real estate transaction costs that would be incurred on a sale of the Partnership's properties, such as brokerage commissions and other selling and closing expenses; (ii) timing considerations; or (iii) costs associated with winding up the Partnership. The Purchaser estimated the aggregate value of the Partnership's properties in a hypothetical sale by reviewing publicly available financial information relating to the Partnership for the fiscal year ended December 31, 1995 and six months ended June 30, 1996, in order to determine an adjusted net income (reduced by an amount intended to reflect normal capital expenditures and operating expenses) of $7,142,543, and then capitalized that amount at 11%, which the Purchaser believes represents an appropriate capitalization rate for a real estate portfolio such as the Partnership's. As a result of that review process, the Purchaser derived an NAV Estimate of $17,510,144, or $129.68 per Unit (which includes cash and cash equivalents equal to approximately $2,636,882 or $19.53 per Unit). It should be noted that, while the Purchaser has access to certain non-public information ("Due Diligence Information") relating to the Partnership and its properties provided to it in 1995 in connection with its Due Diligence (as described above in this Section 13 under "Prior Contacts with the Partnership"), the Purchaser does not have access to more current information concerning the Partnership or its properties, other than information that is publicly available, that the Purchaser's calculations are based on rough estimates and that the values resulting therefrom may not be indicative of actual values to any extent. It should also be noted that investors may disagree as to the appropriate capitalization rate to be applied, and Limited Partners are advised that the utilization of a lower capitalization rate results in a higher estimate of aggregate value. In estimating liquidation value per Unit, the Purchaser adjusted its NAV Estimate by deducting from that amount a reserve equal to 4% of the projected property selling prices, which represents the Purchaser's estimate of the estimated costs of brokerage commissions, title costs, legal fees, real estate transfer taxes and other disposition expenses (assuming no prepayment penalties on indebtedness encumbering the properties). The Purchaser further adjusted its NAV Estimate to reflect the Partnership's other assets (excluding prepaid and deferred expenses) and liabilities. Specifically, the Purchaser added the amounts of cash segregated for security deposits, insurance proceeds receivables, accounts receivable and escrow deposits shown on the Partnership's unaudited balance sheet at June 30, 1996 and subtracted accounts payable, accrued property taxes, accrued interest, other accrued expenses and security deposits and deferred rental revenue. The result of $113.96 per Unit represents the Purchaser's estimate of the aggregate net liquidating proceeds (before provision for the costs described in the following sentence) that could be realized in an orderly liquidation of the Partnership, based on the assumptions implicit in the calculations described above. The Purchaser did not deduct any amounts in respect of the costs of conducting a consent solicitation in order to obtain the Limited Partners' approvals for the sales, as may be required by the Partnership Agreement, or winding up the Partnership, because of the difficulty of estimating those amounts. The Purchaser's analysis of liquidation value described above is merely theoretical and does not itself reflect the value of the Units because (i) there is no assurance that any such liquidation in fact will occur in the foreseeable future and (ii) any liquidation in which the estimated fair market values described above might be realized would take an extended period of time (at least a year, and quite possibly significantly longer), during which the Partnership and its partners would continue to be exposed to the risk of fluctuations in asset values because of changing market conditions and other factors. For any property sales in which the Partnership is required to indemnify the buyer for matters arising after the closing, a portion of the sales proceeds could be held by the Partnership until all possible claims were satisfied, further extending the delay in the receipt by the Limited Partners of liquidating proceeds. Because of these factors, the Purchaser believes the actual current value of a Unit may be substantially less than its 24 estimate of the liquidation value. Conversely, there is a substantial likelihood that the value realizable in an orderly liquidation could be greater than the estimated liquidation value. A reduction in either operating expenses or capital expenditures would result in a higher liquidation value under the method described above. Similarly, a higher liquidation value would result if a buyer applied lower capitalization rates (reflecting a willingness to accept a lower rate of return on its investment) to the net operating income generated by the Partnership's properties than the capitalization rates applied by the Purchaser. Furthermore, the analysis described above is based on a series of assumptions, some of which may not be correct. Accordingly, this analysis should be viewed merely as indicative of the Purchaser's approach to valuing Units and not as any way predictive of the likely result of any future transactions. SECTION 14. CONDITIONS OF THE OFFER. Notwithstanding any other term of the Offer, the Purchaser will not be required to accept for payment or to pay for any Units tendered if all authorizations, consents, orders or approvals of, or declarations or filings with, or expiration of waiting periods imposed by, any court, administrative agency or commission or other governmental authority or instrumentality, domestic or foreign, necessary for the consummation of the transactions contemplated by the Offer shall not have been filed, occurred or been obtained. Furthermore, notwithstanding any other term of the Offer and in addition to the Purchaser's right to withdraw the Offer at any time before the Expiration Date, the Purchaser will not be required to accept for payment or pay for any Units not theretofore accepted for payment or paid for and may terminate or amend the Offer as to such Units if, at any time on or after the date of the Offer and before the acceptance of such Units for payment or the payment therefor, any of the following conditions exists: (a) a preliminary or permanent injunction or other order of any federal or state court, government or governmental authority or agency shall have been issued and shall remain in effect which (i) makes illegal, delays or otherwise directly or indirectly restrains or prohibits the making of the Offer or the acceptance for payment, purchase of or payment for any Units by the Purchaser, (ii) imposes or confirms limitations on the ability of the Purchaser effectively to exercise full rights of ownership of any Units, including, without limitation, the right to vote any Units acquired by the Purchaser pursuant to the Offer or otherwise on all matters properly presented to the Partnership's Limited Partners, (iii) imposes or confirms limitations on the ability of the Purchaser to fully exercise the voting rights conferred pursuant to its appointment as proxy in respect of all tendered Units which it accepts for payment, (iv) requires divestiture by the Purchaser of any Units, (v) causes any material diminution of the benefits to be derived by the Purchaser as a result of the transactions contemplated by the Offer, or (vi) might materially adversely affect the business, properties, assets, liabilities, financial condition, operations, results of operations or prospects of the Purchaser or the Partnership; (b) there shall be any action taken, or any statute, rule, regulation or order proposed, enacted, enforced, promulgated, issued or deemed applicable to the Offer by any federal or state court, government or governmental authority or agency, which might, directly or indirectly, result in any of the consequences referred to in clauses (i) through (v) of paragraph (a) above; (c) any change or development shall have occurred or been threatened since the date of the Offer to Purchase, in the business, properties, assets, liabilities, financial condition, operations, results of operations, or prospects of the Partnership, which is outside the ordinary course of the Partnership's business or may be materially adverse to the Partnership, or the Purchaser shall have become aware of any fact that does or may have a material adverse effect on the value of the Units; (d) there shall have occurred (i) any general suspension of trading in, or limitation on prices for, securities on any national securities exchange or in the over-the-counter market in the United States, (ii) a declaration of a banking moratorium or any suspension of payments in respect of banks in the United States, (iii) any limitation by any governmental authority on, or other event which might affect, the extension of credit by lending institutions or result in any imposition of currency controls in the United States, (iv) a commencement of a war or armed hostilities or other national or international calamity directly or indirectly involving the United States, (v) a material change in United States or other currency exchange rates or a suspension or a limitation on the markets thereof, or (vi) in the case of any of the foregoing existing at the time of the commencement of the Offer, a material acceleration or worsening thereof; (e) the Partnership's general partner shall not have consented in writing to, and shall not have taken all other action that the Purchaser deems necessary, in the Purchaser's judgment, for the admission of the Purchaser 25 to the Partnership, simultaneously with the consummation of the Offer, as a substitute Limited Partner in respect of the Units purchased in accordance with the Partnership Agreement and applicable law; (f) the Partnership's general partner shall not have furnished to the Purchaser such information as is necessary, in the Purchaser's judgment, to verify that the person purporting to transfer Units to the Purchaser pursuant to the Offer is in fact the owner of such Units as reflected on the Partnership's books and records; (g) the Partnership's general partner shall have caused the Partnership to impose unreasonable transfer, substitution or similar fees, including, without limitation, those that would otherwise apply to: (i) the tender of Units by holders pursuant to the Offer, (ii) the transfer of such Units to the Purchaser and (iii) the admission of the Purchaser as a substitute Limited Partner in respect of such Units; (h) there shall have been threatened, instituted or pending any action or proceeding before any court or governmental agency or other regulatory or administrative agency or commission or by any other person, challenging the acquisition of any Units pursuant to the Offer or otherwise directly or indirectly relating to the Offer, or otherwise, in the judgment of the Purchaser, adversely affecting the Purchaser or the Partnership; (i) the Partnership shall have (i) issued, or authorized or proposed the issuance of, any partnership interests of any class, or any securities convertible into, or rights, warrants or options to acquire, any such interests or other convertible securities, (ii) issued or authorized or proposed the issuance of any other securities, in respect of, in lieu of, or in substitution for, all or any of the presently outstanding Units, or (iii) declared or paid any distribution, other than in cash, on any of its partnership interests, or (iv) the Partnership or any of the Partnership's general partner shall have authorized, proposed or announced its intention to propose any merger, consolidation or business combination transaction, acquisition of assets, disposition of assets or material change in its capitalization, or any comparable event not in the ordinary course of business; (j) a tender offer or exchange offer for some or all of the Units is made or publicly announced or proposed to be made, supplemented or amended by any person other than the Purchaser; or (k) the general partner of the Partnership shall have modified, or taken any step or steps to modify, in any way, the procedures or regulations applicable to the registration of Units or transfers of Units on the books and records of the Partnership or the admission of transferees of Units as Limited Partners. The foregoing conditions are for the sole benefit of the Purchaser and may be asserted by the Purchaser regardless of the circumstances giving rise to such conditions or may be waived by the Purchaser in whole or in part at any time and from time to time in its sole discretion. Any determination by the Purchaser concerning the events described above will be final and binding upon all parties. If the Purchaser, in its sole discretion, waives the condition contained in the foregoing paragraph (g), then the Purchaser will, to the extent of such waiver, pay all applicable fees referred to in such paragraph. No assurance can be given that the Partnership's general partner will voluntarily take the actions referred to in paragraphs (e) and (f). Accordingly, in order to cause the Partnership's general partner to take such actions, the Purchaser may be required to take appropriate actions, including, without limitation, the commencement of litigation, the effect of which may be to delay payment for tendered Units (except to the extent, if any, that the Purchaser waives the applicable conditions). SECTION 15. CERTAIN LEGAL MATTERS. General. Except as set forth in this Section 15, the Purchaser is not, based on its review of publicly available filings by the Partnership with the Commission and other publicly available information regarding the Partnership, aware of any licenses or regulatory permits that would be material to the business of the Partnership, taken as a whole, and that might be adversely affected by the Purchaser's acquisition of Units as contemplated herein, or any filings, approvals or other actions by or with any domestic or foreign governmental authority or administrative or regulatory agency that would be required prior to the acquisition of Units by the Purchaser pursuant to the Offer as contemplated herein. While there is no present intent to delay the purchase of Units tendered pursuant to the Offer pending receipt of any such additional approval or the taking of any such action, there can be no assurance that any such additional approval or action, if needed, would be obtained without substantial conditions or that adverse consequences might not result to the Partnership's business, or that certain parts of the Partnership's business might not have to be disposed of or other substantial conditions complied with in order to obtain such approval or action, any of which could cause 26 the Purchaser to elect to terminate the Offer without purchasing Units thereunder. The Purchaser's obligation to purchase and pay for Units is subject to certain conditions, including conditions related to the legal matters discussed in this Section 15 of the Offer to Purchase. Antitrust. The Purchaser does not believe that the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, is applicable to the acquisition of Units contemplated by the Offer. Margin Requirements. The Units are not "margin securities" under the regulations of the Board of Governors of the Federal Reserve System and, accordingly, those regulations generally are not applicable to the Offer. State Laws. The Purchaser is not aware of any jurisdiction in which the making of the Offer is not in compliance with applicable law. If the Purchaser becomes aware of any jurisdiction in which the making of the Offer would not be in compliance with applicable law, the Purchaser will make a good faith effort to comply with any such law. If, after such good faith effort, the Purchaser cannot comply with any such law, the Offer will not be made to (nor will tenders be accepted from or on behalf of) Limited Partners residing in such jurisdiction. In those jurisdictions whose securities or blue sky laws require the Offer to be made by a licensed broker or dealer, the Offer shall be made on behalf of the Purchaser, if at all, only by one or more registered brokers or dealers licensed under the laws of that jurisdiction. SECTION 16. FEES AND EXPENSES. Except as set forth in this Sec- tion 16, the Purchaser will not pay any fees or commissions to any broker, dealer or other person for soliciting tenders of Units pursuant to the Offer. The Purchaser has retained IBJ Schroder Bank & Trust Company to act as Depositary and Beacon Hill Partners, Inc. to act as Information Agent in connection with the Offer. The Purchaser will pay the Depositary and Information Agent reasonable and customary compensation for their services in connection with the Offer, plus reimbursement for out-of-pocket expenses, and will indemnify the Depositary and Information Agent against certain liabilities and expenses in connection therewith, including liabilities under the federal securities laws. The Purchaser will also pay all costs and expenses of printing and mailing the Offer and its legal fees and expenses. No person has been authorized to give any information or to make any representation on behalf of the Purchaser not contained herein or in the Assignment of Partnership Interest and, if given or made, such information or representation must not be relied upon as having been authorized. The Purchaser has filed with the Commission a Tender Offer Statement on Schedule 14D-1 (including exhibits), pursuant to Rule 14d-3 under the Exchange Act, furnishing certain additional information with respect to the Offer, and may file amendments thereto. The Schedule 14D-1 and any amendments thereto, including exhibits, may be inspected and copies may be obtained at the same places and in the same manner as set forth in the Introduction of the Offer to Purchase (except that they will not be available at the regional offices of the Commission). HIGH RIVER LIMITED PARTNERSHIP September 20, 1996, as amended through September 25, 1996 27 SCHEDULE I Set forth below are the name and position of: (i) the controlling member and each executive officer/manager of Riverdale LLC ("Riverdale"); and (ii) the controlling stockholder and sole director and the executive officer of Unicorn Associates Corporation ("Unicorn"). The business address of each of the controlling member and each executive officer/manager of Riverdale and the controlling stockholder and sole director and the executive officer of Unicorn is 114 W. 47th Street, New York, New York 10036. The controlling member and each executive officer/manager of Riverdale and the controlling stockholder and sole director and the executive officer of Unicorn are each citizens of the United States of America. Name Position - ---- -------- Carl C. Icahn...................... Member (Riverdale); Controlling Stockholder and Sole Director (Unicorn) Edward E. Mattner.................. President/Manager (Riverdale); President, Secretary and Treasurer (Unicorn) Robert J. Mitchell................. Vice President and Treasurer/Manager (Riverdale) The following sets forth the (a) name, (b) present principal occupation or employment and the name, principal business and address of any corporation or other organization in which such employment or occupation is conducted and (c) material occupations, positions, offices or employments during the last five years, giving the starting and ending dates of each and the name, principal business and address of any business corporation or other organization in which such occupation, position, office or employment was carried on, of: (i) the controlling member and each executive officer/manager of Riverdale; and (ii) the controlling stockholder and sole director and the executive officer of Unicorn. Principal Occupations for the Name Last Five Years - ---- ------------------------------ CARL C. ICAHN............. Mr. Icahn's present principal occupation is acting as President and a Director of Icahn Holding Corporation, a Delaware corporation ("IHC"), and Chairman of the Board and a Director of various of IHC's subsidiaries, including ACF Industries, Incorporated, a New Jersey corporation ("ACF"). IHC is primarily engaged in the business of holding, either directly or through subsidiaries, a majority of the common stock of ACF and its address is 100 South Bedford Road, Mount Kisco, N.Y. 10549. ACF is primarily engaged in the business of leasing, selling and manufacturing railroad freight and tank cars and its address is 3301 Rider Trail South, Earth City, Missouri 63045. Mr. Icahn has been President and a Director of IHC since August 1982 and has been a director of ACF since June 1984 and Chairman of the Board of ACF since October 1984. Mr. Icahn also maintains similar positions with various of ACF's affiliates, including: (i) since 1968, Mr. Icahn has been Chairman of the Board, President and a Director of Icahn & Co., Inc., a Delaware corporation (collectively with its predecessor companies by merger, ("Icahn & Co."), which is a registered broker-dealer and a member firm of the New York Stock Exchange, Inc. and whose address is 1 Wall Street Court, New York, N.Y. 10005; (ii) since November 1990, Mr. Icahn has been Chairman of the Board and a Director of American Property Investors, Inc., a Delaware corporation ("API") which is primarily engaged in the business of acting as general partner of American Real Estate Partners, L.P., and whose address is 90 South Bedford Road, Mount Kisco, N.Y. 10549; and (iii) from 1986 until January 1993, when he resigned, Mr. Icahn was a Director and Chairman of the Board of Trans World Airlines, Inc. ("TWA"), whose address is One City Centre, 515 N. Sixth Street, St. Louis, Missouri 63101. Since June 1993, Mr. Icahn has also served as a Director of Astrum International Corp., a Delaware holding company ("Astrum") whose principal subsidiaries are Samsonite Corporation, a manufacturer and distributor of luggage, Culligan International Company, a manufacturer of water purification and treatment equipment and McGregor Corporation, a manufacturer and distributor of apparel products and a licensor of apparel brand names. Astrum's address is 40301 Fisher Island Drive, Fisher Island, Florida 33129. I-1 EDWARD E. MATTNER......... Mr. Mattner's present principal occupation is acting as a securities trader for various affiliates of Mr. Icahn. Mr. Mattner has served in this capacity since May 1976. ROBERT J. MITCHELL........ Mr. Mitchell's present principal occupation is acting as Senior Vice President Finance of ACF. ACF is primarily engaged in the business of leasing, selling and manufacturing railroad freight and tank cars and its address is 3301 Rider Trail South, Earth City, Missouri 63045. Mr. Mitchell has served as Executive Vice President Finance since March 1995 and also served as Secretary of ACF since August 1993, Treasurer from December 1984 to March 1995 and Assistant Secretary from September 1986 to August 1993. Mr. Mitchell has also served as Treasurer (since May 1988) and Chief Financial Officer (since March 1995) of American Railcar Industries, Inc., a subsidiary of ACF which is primarily engaged in the business of repairing, refurbishing, painting and maintaining railcars and in manufacturing and selling parts for railcars and other industrial purposes. The address of American Railcar Industries, Inc. is 3301 Rider Trail South, Earth City, Missouri 63045. Mr. Mitchell became the Treasurer of TWA, whose address is One City Centre, 515 N. Sixth Street, St. Louis, Missouri 63101, in 1987 and held that position until he resigned, effective as of January 5, 1993. From March 1982 until November 1984, Mr. Mitchell was a Vice President-Department Head of National Westminster Bank, USA, located at 175 Water Street, New York, N.Y. 10038. I-2 EXHIBIT A 12. ISSUANCE, TRANSFER, AND EXCHANGE OF CERTIFICATES 12.2. Registration Units; Registration of Transfer and Ex- change. (c) Limited Partners shall have the right to assign 5 or more whole Units, provided, however, unless prohibited by any applicable state securities law, 1 Unit may be acquired or retained by IRA or Keogh Plans, and provided further that a Limited Partner must assign all of his Units if he would otherwise retain less than the minimum amount. Every Certificate surrendered for registration of transfer or exchange shall be duly endorsed on the reverse side thereof, or be accompanied by a written instrument of transfer in form satisfactory to the General Partner or the Transfer Agent, as the case may be, duly executed by the Limited Partner or such Limited Partner's attorney duly authorized in writing. Every Certificate surrendered for registration of transfer shall be accompanied by a General Partner or the Transfer Agent, as the case may be, duly executed by the transferee or such transferee's attorney duly authorized in writing. Notwithstanding anything to the contrary in this Paragraph 12, the General Partner, in its discretion and upon notice to the Limited Partners, may adopt an alternative procedure for the registration of Units and transfers of Units, including, without limitation, providing for uncertificated securities. A-1 Manually signed facsimile copies of the Assignment of Partnership Interest will be accepted. The Assignment of Partnership Interest, the Certificates and any other required documents should be sent or delivered by each Limited Partner or such Limited Partner's broker, dealer, bank, trust company or other nominee to the depositary as set forth below. The Depositary for the Offer is: IBJ SCHRODER BANK & TRUST COMPANY By Mail: P.O. Box 84 Bowling Green Station New York, New York 10274-0084 Attn: Reorganization Operations Department By Hand/Overnight Delivery: One State Street New York, New York 10004 Attn: Securities Processing Window, Subcellar One, (SC-1) By Facsimile: (212) 858-2611 Confirm by Telephone: (212) 858-2103 Questions and requests for assistance or for additional copies of the Offer to Purchase and the Assignment of Partnership Interest may be directed to the Information Agent at its telephone number and address listed below. You may also contact your broker, dealer, bank, trust company or other nominee for assistance concerning the Offer. The Information Agent for the Offer is: BEACON HILL PARTNERS 90 Broad Street New York, New York 10004 (212) 843-8500 (Collect) or (800) 253-3814 (Toll Free) EX-23 3 POWER OF ATTORNEY POWER OF ATTORNEY KNOW EVERYONE BY THESE PRESENTS, which are intended to constitute a Power of Attorney, that I, CARL C. ICAHN, residing at Museum Towers, 15 W. 53rd Street, Apt. 51C, New York, New York, do hereby appoint THEODORE ALTMAN, residing at 94 Haights Cross Road, Chappaqua, New York MY ATTORNEY-IN-FACT TO ACT: As Attorney-In-Fact for the limited purpose of executing amendments to statements on Schedule 14D-1 in connection with those certain tender offers (the "McNeil Tender Offers") with respect to each of McNeil Pacific Investors Fund 1972, McNeil Real Estate Fund IX, Ltd., McNeil Real Estate Fund X, Ltd., McNeil Real Estate Fund XI, Ltd., McNeil Real Estate Fund XIV, Ltd., McNeil Real Estate Fund XV, Ltd., McNeil Real Estate Fund XX, L.P., McNeil Real Estate Fund XXIV, L.P., McNeil Real Estate Fund XXV, L.P., McNeil Real Estate Fund XXVI, L.P. and McNeil Real Estate Fund XXVII, L.P. To induce any third party to act hereunder, I hereby agree that any third party receiving a duly executed copy or facsimile of this instrument may act hereunder, and that revocation or termination hereof, shall be ineffective as to such third party unless and until actual notice or knowledge of such revocation or termination shall have been received by such third party. IN WITNESS WHEREOF, I have hereunto signed my name this 25th day of September, 1996. /s/ CARL C. ICAHN -------------------------- Carl C. Icahn STATE OF NEW YORK } COUNTY OF NEW YORK } On September 25, 1996 before me, Alice Blumberg, the undersigned officer, personally appeared CARL C. ICAHN, known personally to me to be the individual described in and who executed the foregoing instrument and acknowledged that he executed the same. /s/ ALICE BLUMBERG -------------------------- Notary Public [Signature Page to Power of Attorney for McNeil Partnerships] -----END PRIVACY-ENHANCED MESSAGE-----