<PAGE>
SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement [_] Confidential, for Use of the
Commission Only (as permitted by
[_] Definitive Proxy Statement Rule 14a-6(e)(2))
[X] Definitive Additional Materials
[_] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
McNeil Real Estate Fund XXI, L.P.
(Name of Registrant as Specified in Its Charter)
Not Applicable
(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[_] No fee required.
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total Fee Paid:
[X] Fee paid previously with preliminary materials.
An aggregate fee of $394.30 was previously paid in connection with the
filing by the Partnership on August 3, 1999, of the Partnership's
Preliminary Proxy Statement on Schedule 14A, and the filing by the
Partnership on December 14, 1999, of the Partnership's Definitive Proxy
Statement on Schedule 14A.
[_] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the form or schedule and the date of its filing.
(1) Amount previously paid:
(2) Form, Schedule or Registration Statement no.:
(3) Filing Party:
(4) Date Filed:
<PAGE>
McNeil Partners, L.P.
13760 Noel Road, Suite 600, LB70
Dallas, Texas 75240
January 13, 2000
To the Limited Partners of
McNeil Real Estate Fund XXI, L.P.:
In December 1999, we mailed to you a Proxy Statement in connection with the
Whitehall transaction and asked you to send in your proxies voting on, among
other things, the merger proposal described in the Proxy Statement. It is very
important that you have all necessary information so that you are in a position
to make an informed decision. Therefore, we have enclosed a supplement to the
Proxy Statement to let you know about some recent developments with respect to
the Partnership.
You should be aware that on January 11, 2000, the special committee and
McNeil Partners received from Bond Purchase, LLC letters containing proposals
for the acquisition by Bond Purchase of (1) the limited partner units in Hearth
Hollow at a price of $43,000 per unit, (2) the limited partner units in Midwest
Properties at a price of $26,500 per unit, (3) the limited partner units in
Fund XX at a price of $100 per unit, (4) the current income units in Fund XXI
at a price of $105 per unit, (5) the current income units in Fund XXII at a
price of $0.28 per unit and (6) the growth shelter units in Fund XXII at a
price of $0.03 per unit. The foregoing per unit prices are the aggregate
amounts of consideration which would be paid by Bond Purchase under its
proposals for such units. Such per unit prices should be compared to the
estimated per unit aggregate amount (consisting of both the merger
consideration and the estimated special cash distribution) to be received by
holders of such units in the Whitehall transaction. In addition, Bond Purchase
has stated that such proposals are superior acquisition proposals, in the
context of the no-solicitation provision of the Master Agreement, entitling
Bond Purchase to access to the books and records of the McNeil Partnerships
subject to such proposals. The text of Bond Purchase's letters are set forth in
the accompanying Proxy Statement Supplement.
The special committee, in consultation with its legal and financial
advisors, reviewed Bond Purchase's proposals in the aforementioned letters and
has determined that at this time the special committee is unable to conclude
that any of such proposals constitutes an acquisition proposal superior to the
Whitehall transaction with respect to such McNeil Partnerships. Among other
things, the special committee:
. has expressed concern regarding whether Bond Purchase has the financial
resources necessary to consummate all such proposals and to satisfy all
of the financial obligations imposed upon the McNeil Partnerships
subject to such proposals upon a change of control of such McNeil
Partnerships;
. questions whether Bond Purchase's proposals are conditioned on Bond
Purchase's apparent need to complete due diligence on the applicable
McNeil Partnerships prior to consummating such proposals;
. has expressed concern that Bond Purchase has not disclosed the
conditions to its proposals; and
. recognizes that in contrast to Bond Purchase's proposals, the Whitehall
transaction is not subject to any substantive conditions which have not
been fulfilled, other than approval of the transaction by the limited
partners of each of the McNeil Partnerships.
The limited partners of the McNeil Partnerships will vote on the Whitehall
transaction at meetings to be held next week on January 20, 2000 and January
21, 2000, and the Whitehall transaction is scheduled to close promptly
thereafter.
On January 12, 2000, the special committee sent a letter to Bond Purchase
advising Bond Purchase of the special committee's determination and outlining
the special committee's rationale for its conclusions. The text of the January
12 letter from the special committee is set forth in the accompanying Proxy
Statement Supplement.
<PAGE>
The letters from Bond Purchase follow several weeks of settlement
discussions among Bond Purchase, the special committee and McNeil Partners. In
mid-December 1999, Bond Purchase filed litigation against McNeil Partners,
Fund XX, Fund XXI, Hearth Hollow, Midwest Properties and Regency North
seeking, among other things, to inspect the books and records of such
partnerships and to obtain a copy of the list of holders of limited
partnership units in such partnerships. For the past several weeks, McNeil
Partners engaged in extensive discussions with Bond Purchase with respect to
Bond Purchase's interest in settling the litigation and the special committee
engaged in discussions with Bond Purchase with respect to Bond Purchase's
interest in making offers for limited partner units in certain McNeil
Partnerships as part of such settlement.
McNeil Partners and the special committee each remains committed to the
Whitehall transaction and continues to believe that the Whitehall transaction
is fair to, and in the best interests of, the Partnership and its limited
partners. Accordingly, the McNeil Investors board of directors continues to
recommend that limited partners of the Partnership vote FOR the merger
proposal and FOR the adjournment proposal described in the Proxy Statement.
The meeting to consider and vote on these proposals is scheduled for
Friday, January 21, 2000. The Whitehall transaction is scheduled to close
promptly thereafter.
We have enclosed with the accompanying Proxy Statement Supplement a
duplicate proxy with respect to the Whitehall transaction. This proxy is
identical to the proxy previously sent to you.
If you have not already voted, whether or not you plan to attend the
meeting, please complete, date, sign and promptly return the enclosed proxy or
the proxy previously sent to you with respect to the Whitehall transaction.
On behalf of McNeil Partners, I thank you for your continued support and
consideration of these matters.
McNeil Partners, L.P.
By: McNeil Investors, Inc., its
General Partner
/s/ Ron K. Taylor
Ron K. Taylor
President
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McNEIL REAL ESTATE FUND XXI, L.P.
----------------
PROXY STATEMENT SUPPLEMENT
----------------
This Proxy Statement Supplement is furnished by McNeil Partners, L.P., the
general partner of McNeil Real Estate Fund XXI, L.P. (the "Partnership"), in
connection with the meeting of the limited partners of the Partnership to be
held on Friday, January 21, 2000, at 8:30 a.m., local time, at R.R. Donnelley
Financial, Reverchon Plaza, 3500 Maple Avenue, 8th Floor, Dallas, Texas 75219-
3901.
This Proxy Statement Supplement amends and supplements the Proxy Statement
of the Partnership dated December 14, 1999, which was first mailed to limited
partners of the Partnership on or about December 14, 1999. This Proxy Statement
Supplement should be read together with the Proxy Statement. Capitalized terms
used in this Proxy Statement Supplement and not otherwise defined in this Proxy
Statement Supplement have the respective meanings assigned to those terms in
the Proxy Statement. The transaction described in the Proxy Statement is
referred to in this Proxy Statement Supplement as the "Whitehall transaction."
This Proxy Statement Supplement is first being mailed to limited partners of
the Partnership on or about January 13, 2000.
RECENT DEVELOPMENTS--
SPECIAL COMMITTEE REJECTS BOND PURCHASE PROPOSALS
On January 11, 2000, the special committee and McNeil Partners received from
Bond Purchase, LLC letters containing proposals for the acquisition by Bond
Purchase (1) the limited partner units in Hearth Hollow at a price of $43,000
per unit, (2) the limited partner units in Midwest Properties at a price of
$26,500 per unit, (3) the limited partner units in Fund XX at a price of $100
per unit, (4) the current income units in Fund XXI at a price of $105 per unit,
(5) the current income units in Fund XXII at a price of $0.28 per unit and (6)
the growth shelter units in Fund XXII at a price of $0.03 per unit. The
foregoing per unit prices are the aggregate amounts of consideration which
would be paid by Bond Purchase under its proposals for such units. Such per
unit prices should be compared to the estimated per unit aggregate amount
(consisting of both the merger consideration and the estimated special cash
distribution) to be received by holders of such units in the Whitehall
transaction. In addition, Bond Purchase has stated that such proposals are
superior acquisition proposals, in the context of the no-solicitation provision
of the Master Agreement, entitling Bond Purchase to access to the books and
records of the McNeil Partnerships subject to such proposals. The text of Bond
Purchase's letters are set forth in this Proxy Statement Supplement in the
section entitled "Recent Developments--Bond Purchase Litigation and Proposals--
Bond Purchase proposals."
The special committee, in consultation with its legal and financial
advisors, reviewed Bond Purchase's proposals in the aforementioned letters and
has determined that at this time the special committee is unable to conclude
that any of such proposals constitutes an acquisition proposal superior to the
Whitehall transaction with respect to such McNeil Partnerships. Among other
things, the special committee:
. has expressed concern regarding whether Bond Purchase has the financial
resources necessary to consummate all such proposals and to satisfy all
of the financial obligations imposed upon the McNeil Partnerships
subject to such proposals upon a change of control of such McNeil
Partnerships;
. questions whether Bond Purchases proposals are conditioned on Bond
Purchase's apparent need to complete due diligence on the applicable
McNeil Partnerships prior to consummating such proposals;
. has expressed concern that Bond Purchase has not disclosed the
conditions to its proposals; and
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. recognizes that in contrast to Bond Purchase's proposals, the Whitehall
transaction is not subject to any substantive conditions which have not
been fulfilled, other than approval of the transaction by the limited
partners of each of the McNeil Partnerships.
The limited partners of the McNeil Partnerships will vote on the Whitehall
transaction at meetings to be held next week on January 20, 2000 and January
21, 2000, and the Whitehall transaction is scheduled to close promptly
thereafter.
On January 12, 2000, the special committee sent a letter to Bond Purchase
advising Bond Purchase of the special committee's determination and outlining
the special committee's rationale for its conclusions. The text of the January
12 letter from the special committee is set forth on the following page.
* * * * * *
2
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January 12, 2000
Via Facsimile and Mail
Mr. David L. Johnson
Bond Purchase, LLC
1100 Main, Suite 2100
Kansas City, MO 64105
Re: McNeil Partnerships
Dear Mr. Johnson:
We have been asked by Mr. Paul B. Fay, Jr., who constitutes the Special
Committee (the "Special Committee") of the Board of Directors of McNeil
Investors, Inc., the general partner of McNeil Partners, L.P. ("McNeil"), which
in turn is the general partner of McNeil Real Estate Fund XX, L.P. ("Fund XX"),
McNeil Real Estate Fund XXI, L.P. ("Fund XXI"), McNeil Real Estate Fund XXII,
L.P. ("Fund XXII"), Hearth Hollow Associates, L.P. ("Hearth Hollow") and McNeil
Midwest Properties I, L.P. ("Midwest") to respond to your letter of January 10,
2000 and your two letters of January 11, 2000 to McNeil and the Special
Committee with respect to Fund XX, Fund XXI, Fund XXII, Hearth Hollow and
Midwest (hereafter the "Partnerships"). After receipt yesterday of your
letters, the Special Committee met extensively by telephone with us, as its
counsel, and with Eastdil Realty Company, its financial advisor, to review your
proposals.
As you know, each of the Partnerships is a party to a Master Agreement with
WXI/McN Realty LLC ("Whitehall"), which provides for the acquisition by
Whitehall of all of the limited partnership interests (the "Units") in each of
the Partnerships, among others. At this point, the Master Agreement represents
a contractual commitment by Whitehall to acquire all of the Units in the
Partnerships for a specified cash amount payable to the holders of those Units
(the "Holders"), which commitment is not subject to any material conditions
which have not already been fulfilled, other than approval of the transaction
by Holders representing a majority of the Units in each of the Partnerships. As
you also know, proxies are currently being solicited by McNeil from the Holders
for vote upon the Whitehall transaction at a special meeting of Holders of each
of the Partnerships to be held on January 20 or 21, 2000. It is expected that,
subject to the requisite approval by Holders at the special meeting, the
transaction will be consummated as to each of the Partnerships within a few
days thereafter.
The Master Agreement contains a prohibition on providing any confidential
information or data to any third party unless the general partner of the
Partnership determines in good faith that a "Superior Acquisition Proposal"
could result. We assumed by your reference to a "Superior Acquisition Offer" in
your January 10 letter that you are attempting to formulate a proposal which
would constitute a Superior Acquisition Proposal, which is defined in the
Master Agreement as a bona fide acquisition proposal which the general partner
determines in good faith (a) to be more favorable to the Holders from a
financial point of view than the Whitehall transaction, and (b) to be
reasonably likely to be consummated.
After careful review of your letters, and in consideration of your prior
correspondence and our prior telephone conversations and those you have had
with McNeil and its counsel, including Monday's conference call, the Special
Committee, in consultation with its counsel and financial adviser, has
determined that at this time it is unable to conclude that the proposals made
in your letters constitute a Superior Acquisition Proposal with respect to any
of the Partnerships, and therefore declines to reconsider its prior
recommendation of the Whitehall transaction for each of those Partnerships. A
brief explanation of the Special Committee's rationale follows.
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1. Your letters do not constitute an offer to buy all of the Units in Fund
XX, Fund XXI or Fund XXII. With respect to each of these Partnerships, you have
not indicated how you would deal with any Units which are not tendered to you.
Inevitably in any tender for securities of a publicly held entity, a certain
amount of those securities will not or cannot be tendered, and a definitive
offer should indicate how the remainder will be dealt with--i.e., by back-end
merger or otherwise. Moreover, with respect to Fund XXI and Fund XXII, the
proposal in your January 10 letter was expressly limited to the current income
Units, and ignored entirely the Holders of the growth/shelter Units. In the
Whitehall transaction, Holders of growth/shelter Units will receive an
aggregate of approximately $331,000 for Fund XXI and $106,000 for Fund XXII.
Your separate January 11 letter regarding Fund XXII now indicates that you
would offer $0.03 per Unit for the growth/shelter Units in Fund XXII, but you
still have ignored the growth/shelter Units in Fund XXI.
2. Your proposal is not an unconditional offer. Notwithstanding the
statement in your January 11 letter that your "current Superior Acquisition
Prices are not conditioned on the books and records," the entire focus of these
letters and all of your prior letters has been the necessity for you to conduct
a due diligence review as a pre-condition to consummation of any offer,
presumably because you need appraisals to access your expanded bank credit
line. Moreover, the statement in the January 11 letter that the "Superior
Acquisition Prices" (emphasis added) are not conditioned suggests that other
terms of your proposal are so conditioned.
3. You have not presented to us any credible evidence that you have the
financial resources to be able to consummate a tender offer for any of the
Partnerships. When we spoke in a meeting by conference call on December 22,
1999, I asked for financial statements and other information regarding Bond
Purchase LLC, and was told that this would be forthcoming promptly. Counsel to
McNeil have advised that, both before and after that call, you had repeatedly
been asked for financial information. On December 23, 1999, you stated by
letter that Bond Purchase "has a current net worth over $10,000,000, most of
which is in tax exempt bonds." No financial statements have as yet been
provided, although in our telephone call yesterday, you advised that Bond
Purchase had $13,000,000 of readily available cash in an account with A.G.
Edwards, and your letter of January 10 reiterated that statement. We received
yesterday a letter from A.G. Edwards, but information regarding the terms of
the account under which the funds are held was not provided.
In order to assess properly the financial resources of Bond Purchase LLC (if
that entity is to be the buyer), we would need to receive a balance sheet of
Bond Purchase LLC as of a very recent date, an income statement for the most
recent two fiscal years ending with the balance sheet date (and any stub period
thereafter) and a cash flow statement for the same period. You advised us
Monday that no audited financial statements of Bond Purchase LLC are available,
but unaudited financial statements may suffice for our present purposes, if
they are certified by the chief executive officer or principal responsible
member of Bond Purchase LLC, as applicable.
Moreover, when we spoke Monday, you said that Bond Purchase LLC had
available a bank line of credit for $1,000,000, with up to an additional
$9,000,000 available if satisfactory appraisals could be obtained for
properties to be financed. The indicated total of $14,000,000 of readily
available funds falls short of funding the aggregate equity purchase price for
all Units, without regard to other up-front cash needs if your proposal were to
be implemented. We cannot adequately evaluate the true availability of funding
for these various offers without detailed information regarding all of your
undertakings and commitments.
4. In addition to the lack of evidence of financial resources to accomplish
the purchase of all of the Units covered by your proposals, your letters are
silent as to how you would fund the substantial other immediate cash demands
which would result from your becoming general partner of the Partnerships. As
set forth in the proxy material for the Partnerships, each of the properties in
the Partnerships is subject to existing mortgage debt, which debt in several
instances has been securitized. The terms of the debt instruments require
lender consent to a change in the general partner or property manager of the
Partnership borrower, and provide that failure to obtain such consent is a
default resulting in acceleration of maturity. We understand that the current
outstanding principal balance of this mortgage debt is approximately $2,590,000
for Fund XX, $12,254,000 for Fund XXI, $6,927,000 for Fund XXII, $2,114,000 for
Hearth Hollow and $8,823,000 for Midwest, plus applicable prepayment penalties
aggregating nearly $1,000,000. Consent of the lenders has already been
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obtained for the Whitehall transaction, and we understand that the consent
process required up to 60 days in some instances, especially since the
securitized debt also required rating agency approval of the substitute general
partner.
In addition to the mortgage debt and prepayment penalties, breakup fees
totalling approximately $1,606,000 would be payable to Whitehall, and accrued
management fees payable to McNeil aggregating approximately $9,964,000 would be
due and payable. In the Whitehall transaction, of course, no breakup fees would
be payable, and the accrued management fees would not be paid by the
Partnerships, but rather would be part of McNeil's equity contribution to the
new entity to be formed in the Whitehall transaction. Moreover, pursuant to the
limited partnership agreements of Fund XXI and Fund XXII, additional fees
aggregating approximately $457,000 are payable to McNeil if it is terminated as
the general partner.
The Special Committee has considered all of the foregoing factors relating
to your offer and has taken into account your stated proposed tender offer
prices for each of the Partnerships. The Special Committee has evaluated all
such factors and has compared the entirety of your proposal to the transactions
contemplated by the Master Agreement with respect to the Partnerships,
including (i) the fact that Whitehall is an extraordinarily strong
institutional purchaser, (ii) there are no financing conditions or
uncertainties, (iii) there are no remaining due diligence issues, (iv) there
are no remaining substantive conditions beyond the requisite approval of the
Holders, which approvals are expected on January 20 and 21, 2000 and (v) the
likelihood that the Whitehall acquisition of the Partnerships will be closed
prior to the end of this month. Based on the foregoing, the Special Committee
has concluded that your letters of January 10, 2000 and January 11, 2000 do not
constitute a Superior Acquisition Proposal with respect to any of the
Partnerships.
If you feel that the Special Committee has misunderstood your intentions,
and you are indeed able and willing to make unconditional and fully funded
offers to purchase the outstanding Units in the Partnerships, you are of course
free to file tender offer materials for Funds XX, XXI and XXII with the
Securities and Exchange Commission and commence cash tender offers, at the
prices you have suggested in your letters, in accordance with applicable
securities laws, and to make comparable offers with all appropriate disclosures
to the Holders in Hearth Hollow and Midwest. This would permit the Special
Committee to evaluate the tender offers on unambiguous terms and determine what
action is appropriate in accordance with its fiduciary duties to the Holders.
Very truly yours,
/s/ Ralph C. Walker
Ralph C. Walker
5
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RECENT DEVELOPMENTS--
BOND PURCHASE LITIGATION AND PROPOSALS
The letters received from Bond Purchase on January 11 follow several weeks
of settlement discussions among Bond Purchase, the special committee and McNeil
Partners. In mid-December 1999, Bond Purchase filed litigation against McNeil
Partners, Fund XX, Fund XXI, Hearth Hollow, Midwest Properties and Regency
North seeking, among other things, to inspect the books and records of such
partnerships and to obtain a copy of the list of holders of limited partnership
units in such partnerships. See "--Bond Purchase litigation" below.
For the past several weeks, McNeil Partners engaged in extensive discussions
with Bond Purchase with respect to Bond Purchase's interest in settling the
litigation and the special committee engaged in discussions with Bond Purchase
with respect to Bond Purchase's interest in making offers for limited partner
units in certain McNeil Partnerships as part of such settlement. See "--
Settlement discussions with Bond Purchase" below.
Bond Purchase litigation
Fund XX, Fund XXI, Hearth Hollow and Midwest Properties
On December 13, 1999, Bond Purchase filed a petition, entitled Bond
Purchase, LLC v. McNeil Properties, L.P. et al. (Case No. CV199-8411CC), in the
Circuit Court of Clay County, Missouri, against McNeil Partners, Fund XX, Fund
XXI, Hearth Hollow and Midwest Properties seeking a declaratory judgment that
Bond Purchase is entitled to inspect the books and records of such McNeil
Partnerships and to obtain a copy of the list of holders of limited partner
units in such McNeil Partnerships. On December 17, 1999, in connection with
this litigation, Bond Purchase filed an application for a temporary restraining
order and preliminary and permanent injunctive relief against the defendants to
compel each of the four McNeil Partnerships named in the litigation to produce
to plaintiffs the books and records, the list of holders of limited partner
units and a copy of the limited partnership agreement for each such McNeil
Partnership.
At a hearing held on December 30, 1999, the court ruled, with respect to
each of Funds XX and XXI, that Bond Purchase had a right to obtain a copy of
the list of holders of limited partner units but, because of the no
solicitation provision in the Master Agreement, Bond Purchase was not entitled
to inspect the books and records. The court also ruled that Bond Purchase must
provide McNeil Partners with an advance copy of any materials to be sent to the
limited partners of Fund XX or XXI. With respect to Hearth Hollow and Midwest
Properties, the court ruled that a full hearing would be held on Bond
Purchase's requests. Although the court has not yet scheduled the full hearing,
it is anticipated that the full hearing will be held sometime during the week
of January 17.
Regency North
On or about November 24, 1999, Bond Purchase wrote a letter to the limited
partners of Regency North requesting a vote on (1) an amendment to Regency
North's limited partnership agreement to allow removal of the general partner
with or without cause, (2) the removal of the current general partner and (3)
the election of KelCor, Inc., an affiliate of Bond Purchase, as the replacement
general partner. On December 6, 1999, Bond Purchase notified Robert A. McNeil,
the general partner of Regency North, of the proposed vote and alleged that
Bond Purchase had received votes from a majority of the limited partners to
amend Regency North's limited partnership agreement as described above, to
remove Robert A. McNeil as the current general partner and to elect KelCor as
the replacement general partner.
On December 8, 1999, Bond Purchase and KelCor filed a petition, entitled
Bond Purchase, LLC et al. v. Regency North Associates, L.P. et al. (Case No.
CV199-8317), in the Circuit Court of Clay County, Missouri, against Regency
North, The Pacific Income Plan Company of California (a former general partner
of Regency North) and Robert A. McNeil seeking declaratory judgment and money
damages. Specifically, plaintiffs seek
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declaratory judgment that Bond Purchase is entitled to inspect the books and
records of Regency North and to obtain a copy of the list of holders of limited
partner units in Regency North, that Regency North's limited partnership
agreement has been amended to allow removal of the general partner with or
without cause, that the current general partner has been removed and that
KelCor has been named as the replacement general partner. Plaintiffs also seek
money damages for alleged breach of contract as a result of defendants' alleged
failure to provide Bond Purchase with access to Regency North's books and
records and list of holders of limited partner units, money damages for alleged
breach of fiduciary duty by Regency North and the general partners in
connection with the transaction, and an order for a receivership and an
accounting. On December 17, 1999, in connection with such litigation, Bond
Purchase filed an application for a temporary restraining order and preliminary
and permanent injunctive relief against Regency North, The Pacific Income Plan
Company of California and Robert A. McNeil to compel Regency North to produce
to plaintiffs the books and records of Regency North, the list of holders of
limited partner units and a copy of the limited partnership agreement for
Regency North.
At a hearing held on December 30, 1999, the court ruled that a full hearing
would be held on Bond Purchase's requests with respect to Regency North.
Although the court has not yet scheduled the full hearing, it is anticipated
that the full hearing will be held sometime during the week of January 17.
Settlement discussions with Bond Purchase
Beginning on December 21, 1999 and continuing until January 10, 2000, McNeil
Partners engaged in extensive discussions with Bond Purchase with respect to
Bond Purchase's interest in settling the litigation, and the special committee
engaged in discussions with Bond Purchase with respect to Bond Purchase's
interest in making offers for limited partner units in certain McNeil
Partnerships as part of such settlement.
Bond Purchase proposed to the special committee and McNeil Partners that, as
part of a settlement of the litigation, Bond Purchase would dismiss the
litigation in exchange for, among other things, the following:
. Fund XX. McNeil Partners would agree to sell to Bond Purchase the
general partner interests in Fund XX, and Bond Purchase would commence a
tender offer for all of the limited partner units in Fund XX,
potentially subject to a minimum percentage condition, at a price of
$100 per limited partner unit. Prior to January 10, Bond Purchase had
informed the special committee and McNeil Partners that Bond Purchase
was unwilling to enter into an agreement with respect to Fund XX unless
Bond Purchase, the special committee and McNeil Partners also reached an
agreement with respect to both Hearth Hollow and Regency North.
. Hearth Hollow. Bond Purchase requested that McNeil Partners admit Bond
Purchase as a substituted limited partner under the limited partnership
agreement of Hearth Hollow and provide Bond Purchase with a copy of the
list of holders of limited partner units in Hearth Hollow. Bond Purchase
made several proposals to the special committee and McNeil Partners
regarding the structure and terms of such a tender offer. Bond Purchase
initially proposed to commence a tender offer for up to 45% of the
limited partner units in Hearth Hollow not owned by Bond Purchase at a
price of $43,500, with an agreement by Bond Purchase to acquire at the
same price the remaining 55% of the limited partner units in Hearth
Hollow within twelve months. In later discussions, Bond Purchase
proposed making two concurrent tender offers: (1) the 45% tender offer
described in the previous sentence and (2) a tender offer for 100% of
the limited partner units in Hearth Hollow at a price of $42,500 per
unit.
. Regency North. Bond Purchase requested that the general partner of
Regency North admit Bond Purchase as a substituted limited partner under
the limited partnership agreement of Regency North, recognize as valid
under the partnership agreement the previous actions taken by Bond
Purchase to purportedly amend the limited partnership agreement and
replace the general partner of Regency North, which actions currently
are the subject of the litigation described above under "--Bond Purchase
litigation--Regency North", and cooperate with Bond Purchase in its
efforts to replace the general partner of Regency North with an
affiliate of Bond Purchase.
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Following its receipt of Bond Purchase's settlement proposals, the special
committee held discussions with Bond Purchase with respect to the terms of each
such proposal and the benefits, if any, that such proposals would provide to
the limited partners of the subject McNeil Partnerships.
The special committee then considered, with the assistance of its legal and
financial advisors, each of the Bond Purchase settlement proposals. The special
committee rejected the Bond Purchase settlement proposals for each of Hearth
Hollow and Regency North because the special committee concluded that such
proposals were not in the best interests of the limited partners of such McNeil
Partnerships. On January 10, 2000, the special committee asked Bond Purchase
whether Bond Purchase would consider making any of the settlement proposals
individually. Bond Purchase replied that it would be willing to do so.
In the case of Fund XX, the special committee informed Bond Purchase that it
was willing to explore a possible transaction for Fund XX in connection with a
settlement and proposed to Bond Purchase a transaction whereby immediately
following the closing of the Whitehall transaction with respect to Fund XX,
WXI/McN Realty would sell to Bond Purchase either the property owned by or the
partnership interests in Fund XX, subject to certain conditions. The special
committee made this alternative proposal because the special committee believed
that under the transaction structure proposed by the special committee the
limited partners of Fund XX were guaranteed to receive a per unit price of
approximately $100 (including the estimated per unit special cash distribution)
even if Bond Purchase failed to consummate or otherwise defaulted on its
obligations to acquire the limited partner units in Fund XX. Bond Purchase
rejected the special committee's proposal.
Bond Purchase proposals
On January 11, 2000, the day following the break-down in settlement
discussions, the special committee and McNeil Partners received from Bond
Purchase a letter dated January 10, 2000 containing proposals for the
acquisition by Bond Purchase of (1) the limited partner units in Fund XX at a
price of $100 per unit, (2) the current income units in Fund XXI at a price of
$105 per unit and (3) the current income units in Fund XXII at a price of $0.28
per unit. The foregoing per unit prices are the aggregate amounts of
consideration which would be paid by Bond Purchase under its proposals for such
units. Such per unit prices should be compared to the estimated per unit
aggregate amount (consisting of both the merger consideration and the estimated
special cash distribution) to be received by holders of such units in the
Whitehall transaction. In addition, Bond Purchase has stated that such
proposals are superior acquisition proposals, in the context of the no-
solicitation provision of the Master Agreement, entitling Bond Purchase to
access to the books and records of the McNeil Partnerships subject to such
proposals. The text of Bond Purchase's January 10 letter is set forth on the
following page.
The January 10 letter was a follow-up to a letter sent on December 23, 1999
by Bond Purchase to the special committee and McNeil Partners in which Bond
Purchase stated that failing agreement on settlement, Bond Purchase was
prepared to make the proposals set forth in the January 10 letter, subject to
access to the books and records of such McNeil Partnerships.
Following the receipt of the January 10 letter, the special committee met
with its legal and financial advisors during the afternoon of January 11 to
consider the proposals set forth in such letter. While this meeting was taking
place, the special committee and McNeil Partners received from Bond Purchase
letters containing proposals for the acquisition by Bond Purchase of (1) the
limited partner units in Hearth Hollow at a price of $43,000 per unit, (2) the
limited partner units in Midwest Properties at a price of $26,500 per unit and
(3) the growth shelter units in Fund XXII at a price of $0.03 per unit. As
described above, the foregoing per unit prices are the aggregate amounts of
consideration which would be paid by Bond Purchase under its proposals for such
units. Again, Bond Purchase stated that such proposals are superior acquisition
proposals, in the context of the no-solicitation provision of the Master
Agreement, entitling Bond Purchase to access to the books and records of the
McNeil Partnerships subject to such proposals. The text of Bond Purchase's
January 11 letters is set forth on the following pages.
* * * * *
8
<PAGE>
January 10, 2000
VIA FAX AND OVERNIGHT
ATTN.: Mr. Ron Taylor and Mr. Paul Fay
McNeil Partners, L.P. Special Committee
13760 Noel Road--Suite 700 McNeil Partners,
Dallas, TX 75240 L.P.
13760 Noel Road--
Suite 700
Dallas, TX 75240
Dear Mr. Taylor and Mr. Fay:
We have never received a response to our Superior Acquisition Offer presented
to you on December 23, 1999. Since then, we have made repeated requests for
books and records on:
McNeil XX
McNeil XXI
McNeil XXII
To date Ron Taylor has refused to provide us any records. We have literally
begged for a rent roll on Sterling Springs, but to date we have been refused.
Further evidencing what we believe are your efforts to frustrate and delay our
offers was the investor lists on McNeil XX and McNeil XXI you turned over on
Friday, January 8, 2000 under court order. As you know these lists did not
contain critical information (units held and type of unit, Growth or Income).
Further, you did not produce these on a disk which will cause us a delay as we
input these names at our mailing house.
Without the benefit of access to the assets or books and records we hereby make
the following offers:
<TABLE>
<CAPTION>
Total For
Partnership Price Units All Units
----------- ------- ---------- -----------
<S> <C> <C> <C>
McNeil XX $100.00 49,512 $ 4,951,200
McNeil XXI $105.00 24,863 2,610,615
McNeil XXII $ .28 19,493,088 5,458,064
-----------
TOTAL $13,019,879
</TABLE>
We have funds immediately available of $13,000,000. We will forward proof of
funds from A. G. Edwards to you tomorrow. This covers the proposed investment.
In addition to our higher prices, our offer is superior because we will not
force any limited partner to sell. Your current proxy forces out limited
partners if a majority votes in favor. If you really were following your
fiduciary duty, you would deal with us in good faith. As this constitutes a
Superior Acquisition Proposal, we request access to records under the Master
Agreement.
To date you have ignored our higher offers that are also more fair to limited
partners.
Very truly yours,
/s/ David L. Johnson
David L. Johnson
Member
9
<PAGE>
January 11, 2000
VIA FAX AND OVERNIGHT
ATTN.: Mr. Ron Taylor and Mr. Paul Fay
McNeil Partners, L.P. Special Committee
13760 Noel Road--Suite 700 c/o Ralph Walker
Dallas, TX 75240 McNeil Partners,
L.P.
13760 Noel Road--
Suite 700
Dallas, TX 75240
RE: McNeil Midwest
Regency North
Hearth Hollow
Dear Sirs:
Please find enclosed our proxy against the McNeil Merger for all 3 private
partnerships. Be advised that we have relied on representations from McNeil
that we are a limited partner is each of these partnerships. We have had a
variety of discussions with Ron Taylor about offers to purchase other limited
partners out of these. Despite numerous Superior Acquisition Proposals, we have
been refused access to the books and records. Be hereby advised that we are
making the following offers for:
<TABLE>
<CAPTION>
Partnership Price Units Total For All Units
----------- ----- ----- -------------------
<S> <C> <C> <C>
Hearth Hollow $43,000 25 $1,075,000
McNeil Midwest $26,500 68 1,802,000
----------
Total $2,877,000
</TABLE>
Be advised to show ability for this, we have arranged a $3,000,000 equity
contribution which is currently available in cash. We will provide you proof of
these funds tomorrow.
Be advised that we own or control the balance of units (10) on Hearth Hollow.
Be further advised that we own or control 12 units of McNeil Midwest and that
the balance of the units, 10, are owned by affiliates of Equity Resources who
we have been advised are voting against the merger and do not want to sell. As
a result, all remaining limited partners will be receiving this offer.
If we had access to the books and records, we believe we might have been able
to offer an even higher price. We look forward to a prompt response.
In light of these Superior Acquisition Offers and the purposeful delays
McNeil's General Partner has imposed upon us, we hereby request:
1) You inform our fellow limited partners of all information regarding our
attempts to contact them, offer a higher price, review the books and
records and encourage them to vote against the McNeil Proxy.
2) Delay the meeting so all limited partners are informed and have a
reasonable opportunity to consider a higher price fully funded, without
conditions.
Very truly yours,
/s/ David L. Johnson
David L. Johnson
Member
10
<PAGE>
January 11, 2000
VIA FAX AND OVERNIGHT
ATTN.: Mr. Ron Taylor and Mr. Paul Fay
McNeil Partners, L.P. Special Committee
13760 Noel Road--Suite 700 c/o Mr. Ralph Walker
Dallas, TX 75240 McNeil Partners,
L.P.
13760 Noel Road--
Suite 700
Dallas, TX 75240
RE: McNeil XX
McNeil XXI
McNeil XXII
Dear Sirs:
Yesterday, you received our Superior Acquisition Offer. Now please find
enclosed our proof of funds. We will escrow, at our title company, the funds
for each offer.
Be advised, we were extremely surprised to be told by Ralph Walker that the
Special Committee has not been involved in our repeated requests for access to
the books and records. Considering the multimillion dollar conflict of interest
Robert McNeil and Ron Taylor have, this is shocking.
We hereby request again immediate access to these records. We believe upon
review, we may be able to further increase our price. However improper the
prior refusal has been to allow this access, our current Superior Acquisition
Prices are not conditioned on the books and records.
Considering the obviously planned delays we have faced from McNeil, we now
hereby request the Special Committee:
1) Fully inform limited partners of all information. Although disclosed in
Regency North, McNeil Midwest and Hearth Hollow proxies, you have not
disclosed the litigation on McNeil XX and McNeil XXI to limited
partners. We also believe limited partners should be aware of our higher
fully funded offer. In fact, our offer has fewer conditions than the
Whitehall offer.
2) Delay the meeting and allow limited partners a reasonable time to
consider our higher prices.
Very truly yours,
/s/ David L. Johnson
David L. Johnson
Member
11
<PAGE>
January 11, 2000
VIA FAX AND OVERNIGHT
ATTN.: Mr. Ron Taylor and Mr. Paul Fay
McNeil Partners, L.P. Special Committee
13760 Noel Road--Suite 700 c/o Mr. Ralph Walker
Dallas, TX 75240 McNeil Partners, L.P.
13760 Noel Road--
Suite 700
Dallas, TX 75240
RE: McNeil XXII Growth
Dear Sirs:
Please be advised we have decided to make a Superior Acquisition Proposal for
McNeil XXII Growth units. We hereby offer $ .03 a unit. The total price would
be approximately $400,000.
We have a cash balance in excess of this. We will escrow these funds at our
title company and will offer this to limited partners as soon as we can file
with the SEC.
Very truly yours,
/s/ David L. Johnson
David L. Johnson
Member
12
<PAGE>
CONTINUED RECOMMENDATION OF
THE McNEIL INVESTORS BOARD OF DIRECTORS
IN FAVOR OF THE WHITEHALL TRANSACTION
On January 12, 2000, the special committee, after carefully considering the
Bond Purchase proposals and after consultation with its legal and financial
advisors, responded by letter to Bond Purchase, advising Bond Purchase of the
special committee's determination and outlining the special committee's
rationale for its conclusions. The text of the special committee's January 12
letter is set forth in this Proxy Statement Supplement in the section entitled
"Recent Developments--Special Committee Rejects Bond Purchase Proposals" above.
McNeil Partners and the special committee each remains committed to the
Whitehall transaction and continues to believe that the Whitehall transaction
is fair to, and in the best interests of, the Partnership and its limited
partners. Accordingly, the McNeil Investors board of directors continues to
recommend that limited partners of the Partnership vote FOR the merger proposal
and FOR the adjournment proposal described in the Proxy Statement.
The meeting to consider and vote on the proposals described in the Proxy
Statement is scheduled for Friday, January 21, 2000. The Whitehall transaction
is scheduled to close promptly thereafter.
The special committee and the McNeil Investors board of directors each
believes that by accepting any of Bond Purchase's proposals limited partners
will jeopardize their opportunity to participate in the Whitehall transaction.
Under the federal securities laws, the earliest date on which Bond Purchase
could complete a tender offer is February 10, 2000, assuming the tender offer
was commenced on January 13, 2000.
We have enclosed with this Proxy Statement Supplement a duplicate proxy with
respect to the Whitehall transaction. This proxy is identical to the proxy
previously sent to you.
If you have not already voted, whether or not you plan to attend the
meeting, please complete, date, sign and promptly return the enclosed proxy or
the proxy previously sent to you with respect to the Whitehall transaction.
----------------
The Proxy Statement is hereby supplemented
by the information set forth in this Proxy Statement Supplement.
13
<PAGE>
REVOCABLE PROXY
THIS PROXY IS SOLICITED ON BEHALF OF THE GENERAL PARTNER
The undersigned hereby appoints Ron K. Taylor, Barbara Smith and Robert A.
McNeil, or any of them, with full power of substitution, as attorneys, agents
and proxies (the "Proxies") to vote on behalf of the undersigned at the meeting
of limited partners of McNeil Real Estate Fund XXI, L.P. (the "Partnership") to
be held at 8:30 a.m., local time, on Friday, January 21, 2000, at R.R. Donnelley
Financial, Reverchon Plaza, 3500 Maple Avenue, 8th floor, Dallas, Texas 75219-
3901, or any adjournment or postponement of the meeting:
1. Proposal to approve the Master Agreement, dated as of June 24, 1999, as
amended as of December 2, 1999 and December 10, 1999 (as amended, the "Master
Agreement"), by and among WXI/McN Realty L.L.C., McNeil Real Estate Fund IX,
Ltd., McNeil Real Estate Fund X, Ltd., McNeil Real Estate Fund XI, Ltd., McNeil
Real Estate Fund XII, Ltd., McNeil Real Estate Fund XIV, Ltd., McNeil Real
Estate Fund XV, Ltd., McNeil Real Estate Fund XX, L.P., McNeil Real Estate Fund
XXI, L.P., McNeil Real Estate Fund XXII, L.P., McNeil Real Estate Fund XXIII,
L.P., McNeil Real Estate Fund XXIV, L.P., McNeil Real Estate Fund XXV, L.P.,
McNeil Real Estate Fund XXVI, L.P., McNeil Real Estate Fund XXVII, L.P., Hearth
Hollow Associates, L.P., McNeil Midwest Properties I, L.P., Regency North
Associates, L.P., Fairfax Associates II, Ltd., McNeil Summerhill I, L.P., McNeil
Partners, L.P., McNeil Investors, Inc., McNeil Real Estate Management, Inc.,
McNeil Summerhill, Inc. and Robert A. McNeil. This proposal, together with the
Master Agreement and all of the transactions contemplated by the Master
Agreement, is referred to in the accompanying Proxy Statement as the "merger
proposal." Approval of the merger proposal will also constitute approval of all
of the transactions contemplated by the Master Agreement, including:
o McNeil Partners' contribution of all of its general partner interests in
the Partnership to a newly formed limited liability company directly or
indirectly wholly owned by WXI/McN Realty and the appointment of this
subsidiary as the new general partner of the Partnership,
o the merger of a newly formed limited partnership directly or indirectly
wholly owned by WXI/McN Realty with and into the Partnership, and
o the payment to the holders of growth/shelter units in the Partnership of
cash merger consideration in an amount equal to $15 per growth/shelter
unit.
CURRENT INCOME UNITS [ ] FOR [ ] AGAINST [ ] ABSTAIN
GROWTH SHELTER UNITS [ ] FOR [ ] AGAINST [ ] ABSTAIN
2. Proposal to permit McNeil Partners to adjourn the meeting to permit
further solicitation of proxies in the event that there are not sufficient votes
at the time of the meeting to approve the merger proposal. This proposal is
referred to in the accompanying Proxy Statement as the "adjournment proposal."
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. In their discretion, the Proxies are authorized to vote on such other
business as may properly come before the meeting, or any adjournment or
postponement of the meeting.
THE GENERAL PARTNER RECOMMENDS A VOTE FOR THE MERGER PROPOSAL AND FOR THE
ADJOURNMENT PROPOSAL
This proxy when properly executed will be voted in the
manner directed herein by the undersigned limited partner.
If no direction is made on this card, this proxy will be voted FOR the merger
proposal and FOR the adjournment proposal.
INSTRUCTIONS FOR RETURNING PROXY
Please mark, sign, date and return this proxy promptly using the enclosed
postage paid envelope to:
McNeil Partners, L.P.
Investor Services
P. O. Box 800359
Dallas, TX 75380
OR
FAX: 1-877-638-5640 (Toll Free)
OR
BY HAND OR OVERNIGHT
DELIVERY TO:
McNeil Partners, L.P.
Investor Services
13760 Noel Road, Suite 600
Dallas, TX 75240
SIGNATURES
Dated:
-----------------------
- ------------------------------
(Signature)
- ------------------------------
(Signature of Joint Owner)
Title:
-----------------------
Please sign exactly as name appears hereon. When limited partner units are held
by joint tenants, both should sign. When signing as an attorney, executor,
administrator, trustee or guardian, please give full title of such. If a
corporation, please sign name by President or other authorized officer. If a
partnership, please sign partnership name by authorized person.
QUESTIONS AND INFORMATION
If you have questions regarding the merger proposal or need assistance in
completing your proxy, you may call: McNeil Partners, L.P., Investor Services at
1-800-576-7907
Please print or type the following information:
Name of Limited Partner
-------------------------------
Address of Limited Partner
---------------------------
- --------------------------------------------------------
Telephone No. of Limited Partner
(---------)---------------------------------------------
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY PROMPTLY AS INSTRUCTED ABOVE.
