SCHEDULE 14A INFORMATION
Consent Solicitation Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
(Amendment No. ____)
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[X] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or Section
240.14a-12
RAL Yield + Equities III Limited Partnership
(Name of Registrant as Specified in its Charter)
(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[ ] No fee required.
[X] 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: $4,229,000
5) Total fee paid: $846
[ ] Fee paid previously with preliminary materials.
[ ] 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:
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RAL-Yield + Equities III Limited Partnership
20875 Crossroads Circle, Suite 800
Waukesha, Wisconsin 53186
____________, 1998
Dear Limited Partner:
The enclosed materials solicit the consent of Limited Partners of
RAL-Yield + Equities III Limited Partnership ("RAL III" or the
"Partnership") to (i) the sale of substantially all of the operating
assets of the Partnership to Great Lakes Investors LLC ("Great Lakes") and
the distribution of the Partnership's remaining assets to its partners,
and (ii) the amendment of the Partnership's Limited Partnership Agreement
to delete a requirement that the final report distributed to limited
partners following liquidation of the Partnership be audited.
If the sale of the Partnership's assets is approved by the requisite
vote and consummated, the General Partners anticipate that the holders of
limited partnership interests of RAL III (the "RAL III Interests") would
receive, within 60 days after the closing of the sale, approximately $301
for each RAL III Interest. The Partnership will be dissolved as soon as
practicable following the closing of the sale of the Partnership's assets.
The proposed amendment to RAL III's Limited Partnership Agreement is
intended to reduce costs associated with the dissolution of the
Partnership and thereby increase the amount of assets available for
distribution to partners.
Additional information about the proposed sale of the Partnership's
assets and the proposed amendment to the Partnership's Limited Partnership
Agreement is set forth in the accompanying Consent Solicitation Statement,
which the General Partners advise you to carefully review.
The General Partners of the Partnership have approved the sale of RAL
III's assets to Great Lakes and the proposed amendment to RAL III's
Limited Partnership Agreement, subject, in each case, to the consent of
the holders of a majority of outstanding RAL III Interests. The General
Partners of the Partnership recommend that you vote your RAL III Interests
to consent to (i) the sale of the Partnership's assets and for its
dissolution as soon as practicable thereafter for the reasons set forth
under "PROPOSED SALE OF PARTNERSHIP ASSETS AND SUBSEQUENT DISSOLUTION OF
THE PARTNERSHIP - Background and Reasons for the Sale" in the attached
Consent Solicitation Statement, and (ii) the proposed amendment to the
Partnership's Limited Partnership Agreement for the reasons set forth
under "PROPOSED AMENDMENT TO THE PARTNERSHIP'S LIMITED PARTNERSHIP
AGREEMENT - Reasons for the Proposed Amendment" in the attached Consent
Solicitation Statement.
PLEASE SIGN, DATE AND MAIL THE ENCLOSED REPLY CARD IN THE ENCLOSED
POSTAGE-PAID ENVELOPE. Your vote may be revoked or changed at any time
prior to ___________ ____, 1998, the date set for the tabulation of the
vote on the two proposals, by providing written notice to the Partnership,
c/o RAL Asset Management Group, 20875 Crossroads Circle, Suite 800,
Waukesha, Wisconsin 53186, or by executing and returning a Reply Card
bearing a later date.
Very truly yours,
/s/ Robert A. Long
Robert A. Long
On behalf of each of the General Partners of
RAL-Yield + Equities III Limited Partnership
PLEASE COMPLETE, SIGN, DATE AND RETURN
THE ENCLOSED REPLY CARD TODAY
<PAGE>
RAL-Yield + Equities III Limited Partnership
SOLICITATION OF CONSENT OF LIMITED PARTNERS
This Consent Solicitation Statement is Dated ___________ ____, 1998
Voting on the Proposals Described Below
Will Close on ____________ ____, 1998
The General Partners of RAL-Yield + Equities III Limited Partnership,
a Wisconsin limited partnership ("RAL III" or the "Partnership") hereby
solicit the written consent of the limited partners of the Partnership
(the "Limited Partners"):
1. To approve the Asset Purchase Agreement, dated
February 17, 1998, as amended (the "Purchase
Agreement") by and between the Partnership and Great
Lakes Investors LLC ("Great Lakes"), to approve the
sale of substantially all of the assets of the
Partnership to Great Lakes pursuant to the Purchase
Agreement (the "Sale"), the distribution of the
Partnership's net assets following the closing of the
Sale, and the dissolution the Partnership as soon as
practicable thereafter, all as set forth in this
Consent Solicitation Statement; and
2. To approve an amendment to RAL III's Limited
Partnership Agreement, dated April 29, 1985 (the
"Partnership Agreement"), to delete the requirement
that the final report distributed to the Limited
Partners following liquidation of the Partnership be
audited (the "Amendment").
The General Partners anticipate, based on certain assumptions
described in this Consent Solicitation Statement, including the approval
by the Limited Partners of the Amendment, that the approximate total cash
distribution to the Limited Partners resulting from the Sale will be equal
to approximately $301 for each limited partnership interest in the
Partnership (the "RAL III Interests"). The General Partners have fixed
_____________, 1998 as the record date for determining the Limited
Partners having the right to receive notice of, and to vote on, the
proposals described herein. Each RAL III Interest shall be entitled to
one vote on each of the proposals. A list of Limited Partners entitled to
vote on the proposals will be available during ordinary business hours at
the Partnership's executive offices, 20875 Crossroads Circle, Suite 800,
Waukesha, Wisconsin 53186, from the date hereof through ______________
____, 1998, for examination by any Limited Partner for purposes germane to
the consent solicitation. The telephone number of the Partnership's
principal executive offices is (414) 798-0900.
By Order of the General Partners of
RAL-Yield + Equities III Limited
Partnership,
/s/ Robert A. Long
Robert A. Long
General Partner
Waukesha, Wisconsin
____________ ____, 1998
THE GENERAL PARTNERS UNANIMOUSLY RECOMMEND THAT YOU VOTE "YES" TO APPROVE
THE PURCHASE AGREEMENT, THE SALE AND THE SUBSEQUENT DISSOLUTION OF THE
PARTNERSHIP AND "YES" TO APPROVE THE PROPOSED AMENDMENT TO THE PARTNERSHIP
AGREEMENT.
YOUR VOTE, WHICH IS BEING SOLICITED BY THE GENERAL PARTNERS OF THE
PARTNERSHIP, IS IMPORTANT. PLEASE SIGN AND MAIL THE ENCLOSED REPLY CARD
TODAY. A RETURN ENVELOPE, WHICH REQUIRES NO POSTAGE IF MAILED IN THE
UNITED STATES, IS ENCLOSED FOR THAT PURPOSE.
<PAGE>
TABLE OF CONTENTS
Page
CONSENT SOLICITATION . . . . . . . . . . . . . . . . . . . . . . . . .
Voting in the Consent Solicitation . . . . . . . . . . . . . . . .
Related Transactions with Great Lakes . . . . . . . . . . . . . .
Solicitation Expenses . . . . . . . . . . . . . . . . . . . . . .
PROPOSED SALE OF PARTNERSHIP ASSETS
AND SUBSEQUENT DISSOLUTION OF THE PARTNERSHIP . . . . . . . . . . . .
General Overview . . . . . . . . . . . . . . . . . . . . . . . . .
Conditions to Closing of the Sale . . . . . . . . . . . . . . . .
Purchase Price; Anticipated Distributions . . . . . . . . . . . .
Vote Required . . . . . . . . . . . . . . . . . . . . . . . . . .
Recommendation of the General Partners . . . . . . . . . . . . . .
Background and Reasons for the Sale . . . . . . . . . . . . . . .
Opinion of Valuation Advisor . . . . . . . . . . . . . . . . . . .
The Purchase Agreement . . . . . . . . . . . . . . . . . . . . . .
Interests of Certain Persons in the Transaction . . . . . . . . .
TAX CONSIDERATIONS . . . . . . . . . . . . . . . . . . . . . . . . . .
Taxation of Partnerships in General . . . . . . . . . . . . . . .
Basis of Partnership Interests . . . . . . . . . . . . . . . . . .
Allocation of Income, Gain, Loss and Deduction Among the
Partners . . . . . . . . . . . . . . . . . . . . . . . . . .
Sales Of Partnership Properties . . . . . . . . . . . . . . . . .
Liquidation of the Partnership . . . . . . . . . . . . . . . . . .
Alternative Minimum Tax . . . . . . . . . . . . . . . . . . . . .
Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . .
ADDITIONAL INFORMATION FOR LIMITED PARTNERS . . . . . . . . . . . . . .
Dissenters' Rights . . . . . . . . . . . . . . . . . . . . . . . .
Receipt of Distribution After the Sale . . . . . . . . . . . . . .
Operations Following the Sale and Effect of the Sale on Limited
Partners . . . . . . . . . . . . . . . . . . . . . . . . . .
PROPOSED AMENDMENT TO THE PARTNERSHIP AGREEMENT . . . . . . . . . . . .
Description of the Proposed Amendment . . . . . . . . . . . . . .
Reasons for the Proposed Amendment . . . . . . . . . . . . . . . .
Vote Required . . . . . . . . . . . . . . . . . . . . . . . . . .
Recommendation of the General Partners . . . . . . . . . . . . . .
THE PARTNERSHIP . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Selected Historical Financial and Operating Data . . . . . . . . .
Description of Business . . . . . . . . . . . . . . . . . . . . .
Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . .
Security Ownership of Certain Beneficial Owners and Management . .
Comparative Per-Interest Data . . . . . . . . . . . . . . . . . .
Market Price Data . . . . . . . . . . . . . . . . . . . . . . . .
EXPERTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE . . . . . . . . . . .
LIST OF APPENDICES
ASSET PURCHASE AGREEMENTS, AS AMENDED . . . . . . . . . . . . APPENDIX A
FAIRNESS OPINION OF VALUATION RESEARCH CORPORATION . . . . . APPENDIX B
<PAGE>
CONSENT SOLICITATION
This Consent Solicitation Statement is being furnished by the General
Partners of RAL III to the Limited Partners for the solicitation of
written consents from the Limited Partners in connection with proposals
(i) to sell substantially all of the operating assets of the Partnership
to Great Lakes and to dissolve the Partnership as soon as practicable
thereafter, and (ii) to amend the Partnership Agreement to delete the
requirement that the final report distributed to the Limited Partners
following dissolution of the Partnership be audited, all as described in
greater detail herein.
This Consent Solicitation Statement is first being mailed to the
Limited Partners on __________, 1998.
Voting in the Consent Solicitation
Record Date; Interests Entitled to Vote. Only holders of record of
RAL III Interests at the close of business on ________ ____, 1998 (the
"Record Date") are entitled to notice of and to vote on each of the
proposals. Each RAL III Interest is entitled to one vote with respect to
each of the proposals. As of the Record Date, there were 13,725 RAL III
Interests outstanding and entitled to notice of and to vote on the
proposals.
Vote Required. Pursuant to the Partnership Agreement, the
affirmative consent of the holders of a majority of the issued and
outstanding RAL III Interests as of the Record Date must be received by
___________ ___, 1998, the date set by the General Partners for
tabulating the consents, or by such later date as may be determined by the
General Partners. Therefore, abstentions and broker non-votes will have
the same effect as a vote against the proposals described herein.
Reply Cards. All properly executed Reply Cards, returned to the
General Partners, c/o RAL Asset Management Group, will be voted in
accordance with the specifications thereon, or, if no specifications are
made, will be voted FOR approval of each proposal described herein. Any
Reply Card may be revoked by a Limited Partner prior to __________, 1998
by delivering written notice to the General Partners stating that the
Reply Card is revoked or by execution and delivery of a Reply Card bearing
a later date.
Related Transactions with Great Lakes
The General Partners of the Partnership are also General Partners of
four other limited partnerships (the "Affiliated Partnerships") that have
each entered into agreements to sell substantially all of their operating
assets to Great Lakes (the "Related Transactions"). The Sale is
conditioned on the closing of the Related Transactions with three of the
Affiliated Partnerships (RAL Yield Equities II Limited Partnership, RAL
Yield + Equities IV Limited Partnership, and RAL Income + Equity Growth V
Limited Partnership), each of which transactions is contingent on the
approval of the limited partners of such partnerships. The closing of the
Sale is not contingent on closing or approval of the sale of the fourth
Affiliated Partnership, RAL Germantown/Monroe Income Limited Partnership.
See "Interests of Certain Persons in the Transaction."
Solicitation Expenses
In addition to solicitation by mail, the employees of the Partnership
and the Affiliated Partnerships and their representatives may solicit
consents from limited partners by telephone, fax or in person. Such
persons will not be additionally compensated, but will be reimbursed for
their reasonable, out-of-pocket expenses incurred in connection with such
solicitation. Arrangements will also be made with brokerage firms,
nominees, fiduciaries and other custodians for the forwarding of
solicitation materials to the beneficial owners of limited partnership
interests held of record by such entities and the Partnership and the
Affiliated Partnerships will reimburse such persons for their reasonable
out-of-pocket expenses in connection therewith. In addition, the General
Partners of the Partnership and the Affiliated Partnerships intend to
obtain, collectively, the services of a proxy solicitation firm.
Together with the Affiliated Partnerships, the Partnership will bear,
pro rata (based on each partnership's respective base purchase price), the
costs of the solicitation of consents from the Limited Partners and the
limited partners of the Affiliated Partnerships. The General Partners
estimate that the portion of such costs attributable to RAL III will not
exceed $60,000, which includes printing costs, postage, fees of the proxy
solicitation firm, and legal and accounting fees. Of such amount, the
General Partners of RAL III expect that the fees of the proxy solicitation
firm attributable to RAL III will not exceed $14,000.
PROPOSED SALE OF PARTNERSHIP ASSETS
AND SUBSEQUENT DISSOLUTION OF THE PARTNERSHIP
General Overview
The following is a brief summary of the material aspects of the
Purchase Agreement and the Sale. This summary is qualified in all
respects by the text of the Purchase Agreement, which is attached as
Appendix A to this Consent Solicitation Statement and is incorporated
herein by this reference. Limited Partners are advised to read the
Purchase Agreement carefully in its entirety.
The Purchase Agreement provides for the sale to Great Lakes of
substantially all of the Partnership's assets, principally its interest in
real estate owned by the Partnership (the "Real Property"), lease
contracts relating to the Real Property, and the personal property and
intangible assets related to the operation of the Partnership. The
Partnership will retain any cash on hand at the time the Sale is
completed.
Conditions to Closing of the Sale
The closing of the Sale is subject to a number of conditions,
including: (i) the approval of the Sale by the Limited Partners, (ii) the
closing of the Related Transactions involving RAL Yield Equities II
Limited Partnership, RAL Yield + Equities IV Limited Partnership and RAL
Income + Equity Growth V Limited Partnership, (iii) the remediation of any
defects in title to the Real Property that may be revealed by surveys to
be ordered by Great Lakes, (iv) remediation of any defects in the Real
Property that may be revealed by environmental assessments to be ordered
by Great Lakes, and (v) the receipt of consents of certain third parties
to the assignment of the Partnership's contractual rights to Great Lakes.
Until the satisfaction or waiver of such conditions, the Sale will not
occur, except that, in the event that environmental assessments of certain
parcels of Real Property reveal defects, then Great Lakes may elect to
proceed with the Sale, but with a price adjustment designed to reflect the
costs of remediation of such defects. The estimated distributions to
Limited Partners of approximately $301 per RAL III Interest assume no such
adjustment. As of the date of this Consent Solicitation Statement, no
approvals of any state or federal regulatory agencies are required to
consummate the Sale. See "- The Purchase Agreement - Conditions to
Closing."
Purchase Price; Anticipated Distributions
Pursuant to the Purchase Agreement, the aggregate base purchase price
to be paid for the assets of the Partnership will be $4,229,000. Such
base purchase price will be adjusted, as of the closing of the Sale, for
proratable items, such as current and prepaid rent, real estate and other
taxes and utility charges. In addition, Great Lakes will receive a credit
for any rent concessions granted by the Partnership to its existing
tenants. The General Partners believe that none of the adjustments to the
purchase price described in this paragraph are likely to materially affect
distributions to the Limited Partners.
Based on the General Partners' analysis of the Purchase Agreement,
taking into account all liabilities or obligations which must be paid by
the Partnership prior to its dissolution and assuming that the proposed
Amendment will be approved by the requisite vote of the Limited Partners,
the General Partners believe that the portion of the sales consideration
available for distribution to Limited Partners will be affected by (i) an
estimated $99,290 in closing costs, attorneys' fees and other obligations,
and (ii) the net (repayment)/receipt of obligations, decreasing cash
available for distribution by approximately $10,000, resulting in
estimated net proceeds from the sale of approximately $4,020,000, or $301
per Interest. Such net proceeds will be distributed to the Limited
Partners within 60 days of the closing of the Sale.
The per-Interest amount of the distribution to Limited Partners
described above is an estimate only. Actual distributions will be based
on the amount of consideration to be received for the Partnership's
assets, as adjusted for prorated items and any credits for rent
concessions, and the Partnership's cash reserves as of date of the closing
of the Sale, in addition to the amount of the Partnership's indebtedness
and expenses associated with the Sale.
Vote Required
The approval of the Purchase Agreement, the Sale and the subsequent
dissolution of the Partnership as soon as practicable requires the
affirmative consent of holders of a majority of RAL III Interests
outstanding at the Record Date. Therefore, abstentions and broker non-
votes will have the same effect as a vote against the proposal.
Recommendation of the General Partners
As described in further detail below, the General Partners believe
that the terms of the Sale are fair and reasonable and are in the best
interests of the Partnership and the Limited Partners. Therefore, the
General Partners of the Partnership have unanimously approved the Sale and
recommend that the Limited Partners of the Partnership consent to the
Purchase Agreement, the Sale, and the subsequent dissolution of the
Partnership.
Background and Reasons for the Sale
Background. The business plan of the Partnership has always provided
that the Partnership will seek to sell properties within seven to ten
years of their acquisition and whenever the Partnership is presented with
an offer reflecting attractive valuations and other transaction terms that
are in the interests of the Partnership and its Limited Partners. The
General Partners of the Partnership believe that the value to be realized
by the Limited Partners may be maximized by grouping all of the Real
Property, as well as the real property owned by the Affiliated
Partnerships, into a series of related sales with a single buyer, in large
part, because such a sale may involve considerably lower transaction
costs, for both buyer and sellers, compared with the sale of each of the
properties in separate transactions.
The General Partners have been discussing the terms of a sale of the
Partnership's assets to Great Lakes for the past several years. Douglas
C. Heston, one of Great Lakes' members, is also a shareholder, director
and officer of First Financial Realty Management, Inc. ("FFRM"). Since
1993, FFRM has been responsible for managing the Real Property pursuant to
a Property Management Subcontract with Midwest Property Management II,
Inc. FFRM has also been responsible for performing partnership
administration services for each of the Partnerships since 1993.
As a result of FFRM's property management and partnership
administration services, the General Partners have believed that Mr.
Heston, or an entity in which he was a principal, would be a knowledgeable
buyer of the Partnership's assets, able to evaluate the peculiar
attributes of the Real Property and to offer an aggregate purchase price
and other transaction terms that would maximize the value to be realized
by the Limited Partners. In particular, the General Partners have placed
great emphasis on finding a buyer, such as Great Lakes, that is willing to
purchase the Real Property on an "as-is, where-is" basis. See "- The
Purchase Agreement - Representations and Warranties."
Early in the negotiations with Mr. Heston for the sale of the
Partnership's assets, another potential buyer expressed an interest in
purchasing all of the Real Property. That potential buyer and its
principals were the owners of numerous mobile home parks located
throughout the United States. Because of the perceived advantage in a
sale of all of the Real Property to a single buyer, and in order to
receive an offer that was at least as favorable to the offer from Great
Lakes, the General Partners told such prospective buyer that it should
consider making an offer to purchase all of the Real Property, not just
the Partnership's mobile home parks. Despite its agreement to submit such
an offer, ultimately that potential buyer submitted a draft of a non-
binding letter of intent, rather than a binding offer, to purchase only
the Partnership's mobile home parks. Based on the purchase price offered
for the mobile home parks and the likely effect of such a transaction on
negotiations with Great Lakes for the sale of all of the Real Property,
the General Partners did not continue negotiations with that potential
buyer. However, since the purchase price proposed by that potential buyer
for the mobile home parks was slightly higher than the price allocated to
the mobile home parks in Great Lakes' original proposal, the General
Partners insisted that Great Lakes increase its offer to match the price
offered by that potential buyer, which Great Lakes agreed to do.
The terms of the Sale were approved by the General Partners of the
Partnership at a meeting held on February 12, 1998. At the meeting, the
General Partners received presentations concerning, and reviewed carefully
the terms and conditions of, the proposed Sale with legal counsel. In
considering whether to recommend approval of the Purchase Agreement and
the Sale to the Limited Partners, the General Partners considered, among
other things, the historical trading prices and trading information for
the Interests and information presented by Valuation Research Corporation,
including an analysis of other comparable real estate being sold, an
analysis of comparable publicly-traded real estate partnerships and an
asset analysis. The General Partners also discussed the Partnership's
results of operations for 1996 and 1997, as well as its growth potential
for succeeding years.
Reasons for Entering into the Purchase Agreement with Great Lakes.
In approving the final Purchase Agreement and the Sale and recommending
approval thereof to the Limited Partners, the General Partners considered
the following principal factors in addition to the factors listed above:
1. The base consideration and the estimated distributions to be
received by the Limited Partners of the Partnership within 60
days of the closing of the Sale;
2. Information concerning the financial strength and business
reputation of Great Lakes and its principals;
3. The terms, other than the financial terms, of the Purchase
Agreement;
4. The relative strengths and weaknesses of other prospective
buyers of some or all of the Real Property;
5. The difficulties and costs that would be faced by the
Partnership in identifying and taking advantage of new
opportunities in the relevant real estate markets if the Sale
was not consummated; and
6. The opinion of Valuation Research Corporation that the
consideration to be received by the Partnership pursuant to the
Purchase Agreement is fair from a financial point of view.
Opinion of Valuation Advisor
Background. The General Partners of the Partnership engaged
Valuation Research Corporation ("VRC") to render an opinion with respect
to the fairness, from a financial point of view, of the consideration to
be received by the Partnership pursuant to the Sale. VRC is a nationally-
recognized firm engaged in the valuation of businesses and their
securities in connection with acquisitions and mergers, negotiated
underwritings, private placements, and valuations for corporate and other
purposes. The General Partners selected VRC primarily because of its
expertise and reputation, and secondarily because of its cost
competitiveness. Each of the Affiliated Partnerships have similarly
retained VRC to provide an opinion as to the fairness, from a financial
point of view, of the consideration to be received under their respective
asset purchase agreements with Great Lakes. The aggregate fees of VRC for
the Partnership and the Affiliated Partnerships, which are collectively
payable by the partnerships, pro rata (based on base purchase prices),
will be approximately $72,000 ($14,000 of which will be payable by RAL
III). None of RAL III or the Affiliated Partnerships has ever retained
VRC for any other purpose in the past.
On ___________, 1998, VRC delivered its fairness opinion (the
"Fairness Opinion") to the General Partners of RAL III, to the effect
that, as of such date, the consideration to be received by the Partnership
as set forth in the Purchase Agreement was fair to the Partnership from a
financial point of view. The Fairness Opinion, which sets forth
assumptions made and matters considered, appears as Appendix B to this
Consent Solicitation Statement and is incorporated herein by reference.
The Limited Partners are urged to read the Fairness Opinion in its
entirety. VRC's Fairness Opinion was delivered for the information of the
Partnership and does not constitute a recommendation as to how any Limited
Partner should vote on the proposed Sale and subsequent dissolution of the
Partnership. The following summary of the Fairness Opinion is qualified
in its entirety by reference to the full text of the Fairness Opinion.
VRC was not requested to serve as a financial advisor to the General
Partners or the Partnership, or to assist the General Partners or the
Partnership in determining a purchase price for the Partnership's assets.
The General Partners did not place any limitation on the scope of VRC's
investigation or review. In addition, VRC was not requested to and did
not analyze or give any effect to the impact of any federal, state or
local income taxes to the Partnership or the Limited Partners arising out
of the Sale. The Partnership has agreed to indemnify VRC against certain
liabilities arising out of its engagement to prepare and deliver the
Fairness Opinion.
In rendering the Fairness Opinion, VRC held discussions with the
General Partners and became familiar with the assets involved in the
proposed Sale. In addition, VRC examined extensive data provided by the
Partnership and published market data pertaining to the underlying assets
of the Partnership. This included, but was not limited, to the following:
- Audited financial statements for the Partnership for the years
1993 through 1997.
- Unaudited financial statements and other internal financial
analysis for the individual owned properties that constituted
the Real Property for the years 1993 through 1997.
- Market data pertaining to the current real estate market in the
neighborhoods of the Real Property.
- Demographic and economic histories and projections for the
neighborhoods in which the Real Property is located.
- Review of comparable sales and lease data for the Real Property.
The basis of VRC's Fairness Opinion is the current market value of
the underlying assets of the Partnership. VRC did not take into
consideration any other assets that may be owned by the Partnership nor
any liabilities or debt associated with any of the Real Property. For
purposes of its Fairness Opinions, VRC defines "market value" as:
The most probable price that a property should bring in a competitive
and open market under all conditions requisite to a fair sale, the
buyer and seller each acting prudently and knowledgeably, and
assuming the price is not affected by undue stimulus. Implicit in
this definition is the consummation of a sale as of a specified date
and the passing of title from seller to buyer under conditions
whereby:
- Buyer and seller are typically motivated;
- Both parties are well informed or well advised, and acting in
what they consider their best interests;
- A reasonable time is allowed for exposure in the open market;
- Payment is made in terms of cash in U.S. dollars or in terms of
financial arrangements comparable thereto; and
- The price represents the normal consideration for the property
sold, unaffected by special or creative financing or sales
concessions granted by anyone associated with the sale.
To determine the value of the Real Property, VRC relied primarily on
the income approach. Typically, appraisers use up to three approaches in
valuing real property: the cost approach, the direct sales comparison
approach and the income approach. These approaches are based,
respectively, on the cost to replace assets, the market exchanges of
comparable properties, and the capitalization of income. In VRC's
analysis, all three methods of valuation were considered; however, because
of the income-producing nature of the Real Property and the current real
estate market, VRC placed more emphasis on the income approach and used
the direct sales comparison approach and the cost approach as a check on
the reasonableness of the results obtained using the income approach.
VRC also considered the highest and best use of the property. The
valuation of real estate is based on its most profitable likely use. The
highest and best use is arrived at by testing potential uses of the
property, both as improved and as though vacant, to find the use that is
physically possible, legally permitted, financially feasible and produces
the highest price or value. In each case, VRC found the current use of
the Real Property to be the highest and best use of the property.
The following paragraphs summarize the significant quantitative and
qualitative analyses performed by VRC in arriving at the Fairness Opinion.
VRC considered all such quantitative and qualitative analyses in
connection with its valuation analysis but has relied more on the income
capitalization approach than the other two.
Income Capitalization Approach. VRC believes that the "income
capitalization approach" to valuation of income-producing real estate is
still the primary factor in investment decisions for real estate
investors. The basic premise of the income approach is that the earning
power of a real estate investment is the critical element affecting its
value. Income capitalization methods, techniques, and procedures
represent attempts to quantify the present worth of anticipated future
income.
The two accepted methods of applying the income approach are defined
below:
Direct Capitalization - a method by which an estimate of a single
year's income expectancy or an annual average of several years'
income expectancies are converted to an indication of value by one
direct step, either by dividing the income estimate by an appropriate
rate or by multiplying the income estimate by an appropriate factor.
Discounted Cash Flow Analysis - A set of procedures in which the
quantity, variability, timing, and duration of periodic income, as
well as the quantity and timing of reversions, are specified and
discounted to a present value at a specified yield rate.
Value is created by the expectation of benefits to be derived in the
future, and value may be defined as the present worth of all rights to
future benefits. All income capitalization methods, techniques, and
procedures represent attempts to quantify expected future benefits. With
adequate information and proper use, direct capitalization and yield
capitalization methods should produce similar value indications. In
choosing which of the two (or both) methods to apply, the appraiser
considers the typical investor's view of market value.
The first step in both income approaches is the determination of a
proper rental or revenue stream that one would expect to be able to obtain
from the subject property, based on actual historical operations and a
study of comparable rental properties. A similar analysis of typical
operating expenses, along with expected vacancy and collection losses,
aids in constructing an operating statement that results in a net
operating income for the first and subsequent years. The estimated first-
year net operating income can then be converted into an indicated property
value through the overall direct capitalization process, while the
estimated future cash flows can be converted into an indicated value by
discounting those individual yearly amounts to a present value.
VRC's analysis began with an estimate of each subject market's rent
potential, based on an analysis of the actual rentals in place with the
subject property and market information pertaining to comparable rental
rates in the subject's area. Using this information, a potential gross
income estimate was made. This estimated potential gross income was
projected to grow over the course of the projection period (10 years) at
various rates, based on current and forecasted economic conditions in each
of the subject areas.
Secondly, allowances for vacancy and collection losses were made,
based on market surveys in each of the subject areas and actual historical
performance of the subject properties. This adjustment ranged from a low
of 0% for the leased fast-food restaurants to 2% for the mobile home
parks. The result of subtracting the vacancy and collection loss estimate
from the estimated gross income is the effective gross income. It is this
effective gross income that is used to pay for any operating expenses
associated with the operation of the subject properties. The estimate of
the operating expenses was based on a combination of historical expenses
of the subject and published market surveys. These operating expenses
were projected to grow at a projected 2.5% to 3.0% inflation rate per year
over the course of the 10-year projection period. In addition to the
normal operating expenses, an estimate of the cost and timing of major
capital improvements was made and used as an added expense. The basis for
this capital improvement expense adjustment was the actual age and size of
each subject property and the projected amount and timing of replacements
for such major items as roadway repair, sewer and water line maintenance,
roofing, heating, ventilating and air conditioning units, etc.
The net operating income is the cash flow that accrues to the owner
of the property, after deductions for the above expenditures and
allowances. It is this net operating income that was converted into an
estimate of value.
The following table set forth the estimated aggregate revenues,
expenses and net operating income of the Real Property for each of the
twelve-month periods ending December 31, 1998 through December 31, 2007
that were included in the financial forecasts used by VRC in connection
with the preparation of the Fairness Opinion.
Estimated Aggregate Revenues, Expenses and Net Operating Income
(In Thousands of Dollars)
Year 1998 1999 2000 2001 2002
Revenue $1,451 $1,485 $1,520 $1,570 $1,612
Expenses* 997 1,031 1,061 1,092 1,124
Net Income 454 454 459 478 488
Year 2003 2004 2005 2006 2007
Revenue $1,637 $1,679 $1,720 $1,763 $1,806
Expenses* 1,157 1,191 1,226 1,262 1,298
Net Income 480 488 494 501 508
*Including Capital Expenditures
In rendering the Fairness Opinion, VRC relied, without assuming
responsibility for independent verification, on the accuracy and
completeness of all financial and operating data, financial analyses,
reports and other information that were publicly available, compiled or
approved by or otherwise furnished or communicated to VRC by or on behalf
of the Partnership. With respect to the financial forecasts utilized by
VRC, VRC believes that the assumptions underlying the forecasts were
reasonable and that, consequently, there is a reasonable probability that
the projections would prove to be substantially correct. However, readers
should be aware that actual revenues, expenses and net operating income of
the properties owned by the Partnership would depend, to a large extent,
on a number of factors that cannot be predicted with certainty or that may
be outside of the control of the General Partners, including general
business, market and economic conditions, supply and demand for rental
properties in the areas in which the Real Property is located, future
operating expenses and capital expenditure requirements for the
properties, future occupancy rates, the ability of the General Partners
and property managers for the properties to maintain the attractiveness of
the properties to tenants, real estate tax rates, changes in tax laws and
other factors. As a result, actual results could differ significantly
from the forecasted results.
Capitalization Rate Valuation Analysis. The relationship between net
operating income and value can be expressed in its overall rate of return,
or capitalization rate. VRC abstracted capitalization rates from market
surveys conducted by reputable national firms for each of the major
metropolitan areas in which the subject properties are located, including
surveys conducted and reported by The National Real Estate Index, the
Korpacz Real Estate Investor Survey and the American Council of Life
Insurance. The indicated value for each property was derived from the net
operating income of each property, divided by the appropriate
capitalization rate. The capitalization rates used in this analysis
ranged from 10.0% to 12.0%, with an average of 10.5%.
Discounted Cash Flow Analysis. VRC also performed a discounted cash
flow analysis of (i) the present value of the forecasted cash flows form
future operations of the Real Property, and (ii) the present value of the
estimated proceeds of a sale of the property at the conclusion of the
forecast period. In completing this analysis, VRC utilized financial and
operating forecasts of each property's estimated cash flow for the twelve-
month periods ending December 31, 1998 to December 31, 2007 and applied
discount rates of 12.0% to 15.0%, with an average of 12.8%. The residual
value is based on capitalizing forecasted cash flow for the year 2008 at
10.5%. Since this discounted cash flow analysis assumes the immediate
sale of the properties to third parties, VRC did not take into account any
tax ramifications of the cash flow in this analysis, nor did VRC consider
any outstanding debt associated with the properties.
The Cost Approach. The cost approach is a valuation technique that
uses the concept of replacement as a value indicator. Replacement or
reproduction cost is estimated for the property being appraised, which is
then adjusted for losses in value (appraised depreciation) due to a
variety of factors. This process requires valuing the site as if vacant,
then adding the replacement cost of the improvements, based on market-
derived costs for similarly constructed properties. Then accrued
depreciation from physical deterioration and obsolescence is estimated and
subtracted from the replacement cost to arrive at the present value. VRC
believes this approach provided a good check on the estimated value
obtained using the income approach for the fast-food restaurant properties
owned by the Partnerships, but it was not used for the mobile home park.
The Direct Sales Comparison Approach. The sales comparison approach
is a valuation technique in which the value is estimated on the basis of
market prices in actual transactions. The technique consists of studying
available market comparable information and adjusting for differences.
This process is essentially that of comparison and correlation.
Differences always exist between properties, even though they may be
almost identical and, therefore, adjustments for these differences must be
made. Some adjustments that may prove important are: (i) conditions of
the sale, (ii) financing terms, (iii) market conditions (time),
(iv) location, (v) physical characteristics, and (vi) income
characteristics. VRC believes that, for those properties currently
encumbered by a long-term lease, the direct sales comparison approach is
not an appropriate methodology to use, but that, for those properties that
have yearly lease renewals, it serves as a good check on the
reasonableness of the value obtained using the income approach.
Conclusion of Value. Based on the foregoing methodology and on such
other matters as VRC considered, it was VRC's opinion that, as of the date
of its Fairness Opinions, the purchase price of $4,229,000 for the assets
of RAL III represented a fair value, from a financial point of view, for
such assets.
The Purchase Agreement
General. The Purchase Agreement provides that, upon approval of the
Sale by a majority in interest of the Limited Partners and satisfaction or
waiver of the other conditions to the Sale, the Partnership will sell, and
Great Lakes will purchase, substantially all of the operating assets of
the Partnership, including the Real Property, all buildings and
improvements thereon, and the personal and intangible property used in
connection with the business of the Partnership, including equipment,
vehicles, furniture, fixtures, inventories and supplies, books, records,
licenses, franchises, permits, favorable leases and trade names. As part
of the Sale, Great Lakes will assume certain contractual obligations of
the Partnership. The Purchase Agreement is reproduced in its entirety as
Appendix A to this Consent Solicitation Statement and all references in
this Consent Solicitation Statement to the Purchase Agreement are
qualified by reference thereto.
Closing of the Sale. The closing of the Sale (the "Closing") will
occur as promptly as practical after the requisite Limited Partner
approval has been obtained and all the conditions thereto, as set forth in
the Purchase Agreement, have been satisfied or waived. It is currently
anticipated that all conditions, other than required consents of the
limited partners of the Partnership and the Affiliated Partnerships and
deliveries to be made at the Closing, will have been satisfied prior to
the date on which the tabulation of Limited Partners' consents is to be
made. If the Limited Partners and the limited partners of each of the
Affiliated Partnerships approve the Sale, the General Partners expect the
Closing to occur on or before ___________, 1998.
Consideration. At the Closing, Great Lakes will pay the Partnership,
subject to certain adjustments based on typical prorations, credits to
Great Lakes for any rent concessions made by the Partnership and possible
costs of environmental remediation as outlined in the Purchase Agreement,
aggregate cash consideration of $4,229,000 for the Partnership's operating
assets. The Partnership will use a portion of the proceeds to pay
Partnership obligations.
Representations and Warranties. The Purchase Agreement contains
representations and warranties of the Partnership that the Partnership
owns its property without undisclosed liens or encumbrances.
Operations Pending Closing. Pursuant to the Purchase Agreement, the
Partnership has agreed that, during the period following the date of the
Purchase Agreement and prior to the Closing, it will:
(a) Provide Great Lakes with access to the Real Property, certain
documents, information and updates of certain information
concerning the Real Property and the operation of the
Partnership's business;
(b) Enter into no new lease or modify any existing lease, except in
the ordinary course of business;
(c) Take no action to transfer any of the assets to be sold to Great
Lakes by the Partnership, except as permitted by the Purchase
Agreement;
(d) Create no liens or other encumbrances affecting the Real
Property;
(e) Settle no lawsuits affecting the assets to be sold to Great
Lakes by the Partnership;
(f) Maintain the Real Property in a manner consistent with past
practice;
(g) Remove no improvements or personal property from the Real
Property;
(h) Maintain adequate fire and extended-coverage and rent-loss
insurance; and
(i) Not enter into new or modify any old employment agreements.
Conditions to Closing. The obligations of the Partnership and Great
Lakes to consummate the Sale are subject to a number of conditions,
including, among others:
(a) Approval of the Sale by the holders of more than 50% of the RAL
III Interests and approval of more than 50% of the Limited
Partnership interests of three of the Affiliated Partnerships;
(b) Completion of title surveys for each parcel of Real Property
(the cost of which will be paid by the Partnership at the
Closing) and the remedy or waiver by Great Lakes of any defects
revealed by such surveys;
(c) The receipt, by the Partnership and at its expense, of written
commitments of title insurance companies to issue title
insurance policies, with only exceptions permitted by the
Purchase Agreement, as to each parcel of the Real Property;
(d) Completion of written environmental assessments of each parcel
of Real Property (the cost of which will be paid by Great Lakes
at the Closing) and the remedy or waiver by Great Lakes of any
defects revealed by such assessments; and
(e) Receipt of any required approval of the Securities and Exchange
Commission and any state securities commission.
If a property survey described in clause (b) above reveals a title defect
to which Great Lakes objects and which the Partnership cannot remedy,
Great Lakes may either accept the property subject to such defect or
refuse the affected parcel and receive a decrease in the purchase price of
the Partnership's assets equal to the amount allocated to such property.
In such event, the complete distribution of Partnership assets to the
Limited Partners and the dissolution of the Partnership will not be
possible until the affected property is disposed of in another
transaction. If an environmental assessment described in clause (d) above
reveals a defect, (i) Great Lakes may refuse the affected parcel and
receive a decrease in the purchase price of the relevant Partnership's
assets equal to the portion of the purchase price allocated to such
parcel, (ii) Great Lakes may purchase the defective parcel and offset the
cost of remediation (subject to certain limitations) against the purchase
price (which may delay distribution of the disputed portion of the
purchase price until such costs of remediations are realized), or
(iii) Great Lakes may defer purchase of the defective parcel and lease
such parcel from the relevant Partnership at nominal cost until
remediation of the defects is completed, with the Partnership paying
toward such remediation up to the lesser of 10% of the purchase price
allocated to such parcel and $100,000 (which deferral may also jeopardize
or delay distribution of a disputed portion of the purchase price for the
Partnership's assets). If the Sale is consummated, but one or more
parcels of the Real Property are retained by the Partnership pursuant to
the foregoing, distributions of net proceeds will still be made to the
Limited Partners within 60 days of the Closing, but the Partnership will
not be dissolved and final distributions to the Limited Partners will not
be made unless and until a buyer can be found to purchase the retained
Real Property on commercially reasonable terms.
Consummation of Other Asset Sales. The closing under the Purchase
Agreement is also conditioned upon the closing of the sale of the
operating assets of three of the Affiliated Partnerships to Great Lakes.
Great Lakes and the General Partners negotiated the cross-closing
contingency because Great Lakes desires to purchase substantially all of
the operating assets of the Partnership and the Affiliated Partnerships
and is not willing to purchase them separately for the overall
consideration offered. The General Partners agreed to the cross-closing
contingency because, based on their experience in negotiating the sale of
real estate assets, they believed that they would be unable to find
purchasers for the individual assets of the Partnerships that would be
willing to pay as much for the individual assets as Great Lakes was
willing to pay for them as part of the larger transaction and because
multiple transactions were likely to require significantly greater
aggregate transaction costs.
Remedies Upon Failure to Close. If the Sale does not close due to
breach of the Purchase Agreement by Great Lakes, then the Partnership
will, in lieu of other legal remedies that might be available to the
Partnership, retain the benefit of (i) $10,000 deposited with the
Partnership by Great Lakes, (ii) a promissory note of Great Lakes, which
has been delivered to the Partnership, in the amount of $100,000, (iii) a
letter of credit for the benefit of the Partnership, to be delivered after
the satisfaction of the conditions to the Partnership's obligation to
close, in the amount of $100,000, and (iv) a cash amount equal to the
Partnership's out-of-pocket expenses incurred in connection with the
proposed Sale.
If the Sale does not close due to a breach of the Purchase Agreement
by the Partnership, other than a defect in title to any of the Real
Property that Great Lakes is unwilling to waive, then all up-front
payments as described above will be returned and Great Lakes may pursue
any other legal remedies available to it. In addition, failure to close
due to the Partnership's breach, other than for an unwaived title defect
or failure of the Limited Partners to approve the Sale, will entitle Great
Lakes to receive, in the event of a sale of the Partnership's assets
within 12 months of the Partnership's default, a termination fee equal to
the lesser of (a) 6% of the purchase price set forth in the Purchase
Agreement or (b) 25% of the amount by which the purchase price to be paid
by the new buyer exceeds the purchase price set forth in the Purchase
Agreement.
Indemnification. The Purchase Agreement provides that the
Partnership will indemnify and hold Great Lakes harmless from and against
any liability or claim relating to the Real Property and arising prior to
the Closing or arising as a result of the Partnership's breach under the
Purchase Agreement. Notwithstanding the foregoing, however, Great Lakes
has agreed that it shall be responsible for the first $50,000 of claims
against the Partnership. The Partnership's obligation to indemnify Great
Lakes will expire on the first anniversary of the Closing (except in the
case of the Partnership's obligation to indemnify due to fraud or
intentional misrepresentation).
The Purchase Agreement also provides that Great Lakes will indemnify
the Partnership from and against any liability or claim relating to Real
Property and arising after the Closing. Great Lakes has also agreed to
indemnify the Partnership against claims arising as a result of Great
Lakes' investigations of the Real Property prior to the Closing and any
liabilities or claims arising after the Closing and relating to the
Property Management Agreement, dated as of June 1, 1993 between the
Partnership and Midwest Property Management II, Inc., which agreement will
be assigned by the Partnership to Great Lakes as of the Closing.
Interests of Certain Persons in the Transaction
Douglas C. Heston, a member of Great Lakes, is a shareholder,
director and officer of First Financial Realty Management, Inc. ("FFRM").
FFRM currently provides property management and partnership administration
services for the Partnership and the Affiliated Partnerships. FFRM has
also entered into similar arrangements with each of the Affiliated
Partnerships. Mr. Heston is also a former General Partner of one of the
Affiliated Partnerships, RAL-Yield Equities II Limited Partnership ("RAL
II"). In connection with his withdrawal as a General Partner of RAL II,
Mr. Heston retained certain economic benefits associated with having been
a General Partner, including the right to receive a portion of any real
estate commissions paid by RAL II to its General Partners or their
affiliates.
Mr. Heston is also a shareholder, director and officer of First
Financial Realty Advisors, Inc. ("FFRA"). In 1995, FFRA purchased from
Robert A. Long, a General Partner of RAL III, certain economic benefits
which would otherwise accrue to Mr. Long, including the right to receive a
portion of any distributions of cash flow and sales or refinancing
proceeds from the Partnership to the General Partners and the right to
receive a portion of any real estate commissions paid by the Partnership
to the General Partners or their affiliates. FFRA has entered into
similar arrangements with Mr. Long with regard to each of the Affiliated
Partnerships, of which Mr. Long is also a General Partner.
RAL III and each of the Affiliated Partnerships have entered into a
Nonexclusive Listing Agreement with RAL-RV Brokerage Co., Inc. ("RAL-RV"),
a corporation owned by the General Partners, pursuant to which RAL-RV will
be paid a 6% real estate brokerage commission by RAL III and each of the
Affiliated Partnerships, if allowed by the relevant limited partnership
agreement. With the exception of RAL II, the right of the General
Partners or their affiliates to receive a real estate commission is
subordinated to the Limited Partners first receiving an amount equal to
100% of their original capital contributions, plus 6% of the original
capital contributions per annum, on a cumulative basis. In connection
with the Sale, it is anticipated that RAL-RV will be paid a real estate
commission only by RAL II.
Pursuant to the Partnership Agreement, the General Partners will
receive an amount equal to their aggregate net capital accounts of
$54,345, which amount will be distributed equally among the five General
Partners.
The General Partners of RAL III and the Affiliated Partnerships have
certain contractual obligations to several former General Partners of the
partnerships, which require the General Partners to share a portion of
real estate commissions and/or distributions of cash flow and/or sale or
refinancing proceeds with those former General Partners. Mr. Heston is
entitled to such payment only in the case of RAL II, which the General
Partners expect will not exceed $______.
Certain of the General Partners own small numbers of RAL III
Interests. See "THE PARTNERSHIP - Security Ownership of Certain
Beneficial Owners and Management."
TAX CONSIDERATIONS
Taxation of Partnerships in General
An entity classified as a partnership for federal income tax purposes
is not subject to federal income tax. Instead, income or loss "flows
through" from the partnership to its partners who are taxable in their
individual capacities on their allocable shares of partnership income,
gain, loss, deduction and credit ("taxable income or loss"). However, the
partnership is a tax reporting entity that must make an annual return of
partnership taxable income or loss. The tax treatment of partnership
items of taxable income or loss is generally determined at the partnership
level. Each partner is required to treat partnership items on its income
tax return (if required) in a manner consistent with the treatment of such
items on the partnership return and may be penalized for intentional
disregard of the consistency requirement. This consistency requirement
may be waived if the partner files a statement identifying the
inconsistency or shows that it resulted from an incorrect schedule
furnished by the partnership.
Each partner generally must account for its allocable share of
partnership taxable income or loss in computing its income tax, whether or
not any actual cash distribution is made to such partner during its
taxable year. A partner's basis in its partnership interest is increased
by its allocable share of partnership taxable income. It is this basis
increase that generally allows distributions of cash or property to the
partners to be made without recognition of gain, since the basis increase
generally offsets corresponding decreases in basis that result from such
distributions. As a result, a partner is generally not taxed on
distributions of cash or property received from a partnership, except to
the extent that any money distributed exceeds the partner's adjusted basis
in its partnership interest immediately before the distribution.
Basis of Partnership Interests
A partner's basis in its interest is equal to its cost for such
interest (i.e. the amount of money actually contributed by the partner to
the partnership or paid to another to purchase the interest), reduced (but
not below zero) by its allocable share of partnership distributions,
taxable losses and expenditures of the partnership not deductible in
computing its taxable income and not properly chargeable to its capital
account, and increased by its allocable share of partnership taxable
profits, income of the partnership exempt from tax and additional
contributions to the partnership. For purposes of determining basis, an
increase in a partner's share of partnership liabilities is treated as a
contribution of money by that partner to the partnership. Conversely, a
decrease in its share of partnership liabilities is treated as a
distribution of money to it.
Generally, a limited partner may not take liabilities into account in
determining its basis except to the extent of any additional capital
contribution it is required to make under the partnership agreement.
However, in the case of a limited partnership, if a partnership asset is
subject to a liability for which no partner has any personal liability (a
"nonrecourse liability"), in general, the partner's allocable share of the
non-recourse liability will be taken into account to determine basis.
Allocation of Income, Gain, Loss and Deduction Among the Partners
A partner's distributive share of a partnership's taxable income or
loss generally is determined by reference to the allocation of such items
in the partnership agreement. However, if the allocation under the
partnership agreement is determined not to have "substantial economic
effect," then the partnership agreement may not govern, and the partner's
allocable share will be determined according to the partner's interest in
the partnership taking into account all the facts and circumstances. An
allocation is considered to have "substantial economic effect" if the
allocation may actually affect the dollar amount of the partner's shares
of the total partnership income or loss independent of tax consequences.
The General Partners believe that the allocations made under the
Partnership Agreements for the Partnership have substantial economic
effect.
Sales Of Partnership Properties
The sale of the Partnership's assets will be a taxable event to the
Partnership and to its partners. Gain or loss on the sale is measured by
the difference between the adjusted basis of the assets disposed of and
the amount realized. On a sale, the amount realized is the sum of any
money received, plus the fair market value of any property received, plus
the amount of liabilities from which the Partnership is discharged as a
result of the sale or disposition (which includes the amount of any
nonrecourse liability to which the transferred property is subject). The
adjusted basis of such property is generally its cost less deductions,
allowed or allowable, for depreciation. In general, gains from the sale
or other disposition of partnership properties that are treated as long-
term capital gains are taxed at the partner level at a lower rate than
ordinary income and short-term capital gains.
Since a partnership's gain on a sale of property will be measured by
the difference between the sales proceeds (including the amount of any
indebtedness to which the property is subject) and the adjusted basis of
the property, the amount of tax payable by a partner in respect of its
share of such gain may in some cases exceed its share of the cash proceeds
therefrom.
A substantial portion of the assets to be sold (including buildings,
land, furniture, fixtures and equipment) that were held for more than one
year and are not "dealer property," are expected to be treated as "section
1231 assets." Section 1231 assets are property used in the trade or
business of a character which is subject to the allowance for
depreciation, held for more than one year, and real property used in the
trade or business held for more than one year. Gains or losses from the
sale of section 1231 assets would be combined with any other section 1231
gains or losses incurred in that year, and the section 1231 gains or
losses would be allocated to the partners as provided in the partnership
agreement and combined with any other section 1231 gains or losses
incurred by the partner in that year. The partner's net section 1231
gains or losses would be taxed as capital gains or constitute ordinary
losses. If a partnership is deemed a "dealer" and its investment in any
property that constitutes the partnership is considered not to be a
capital asset or section 1231 asset, any gain or loss on the sale of such
property would be treated as ordinary income or loss. The Partnership has
attempted to operate in such a manner so as not to be deemed a "dealer."
A portion of a partner's gain recognized on disposition of a
partnership's buildings and furniture, fixtures and equipment may be
subject to recapture as ordinary income under the provisions of sections
1245 or 1250 of the Internal Revenue Code of 1986, as amended. Such
recapture gain will be recognized in the year of the disposition.
A non-corporate partner's share of any losses from the sale of
Partnership properties that is treated as a capital loss is deductible in
any year only to the extent of the partner's long and short-term capital
gains for that year. Any excess of capital losses over capital gains is
deductible by a non-corporate partner up to $3,000 ($1,500 in the case of
a separate return for a married individual) although the unused portion of
such capital losses could be carried over to later years, and deducted as
a long-term or short-term capital loss until fully exhausted.
Liquidation of the Partnership
Generally, upon the liquidation of a partnership, gain will be
recognized by and taxable to a partner to the extent the amount of cash
and marketable securities distributed to it exceeds its basis in the
partnership at the time of the distribution. Gain or loss on the
liquidation of a partnership interest generally is considered to be
capital gain or loss.
An exception to such treatment is provided in Code section 751, which
states that the proceeds of a sale, exchange or liquidation of a
partnership interest will be considered an amount realized from the sale
or exchange of property other than a capital asset to the extent that such
proceeds are attributable to the partnership's "unrealized receivables" or
to "substantially appreciated inventory." The term "unrealized
receivables" includes amounts not previously includable in income under
the partnership's method of accounting, rights to payment for services
rendered or to be rendered and for goods delivered or to be delivered and
a partner's pro rata share of any potential Code section 1245 or 1250
income, short-term obligations, market discount bonds, franchises,
trademarks and trade names and several other categories of property which
would be treated as amounts received from the sale or exchange of property
other than a capital asset. Thus, the difference between the amount
realized that is attributable to a partnership's "section 751 property"
and the adjusted basis to the partner of such "section 751 property" is
treated as ordinary income or loss to the partner. The difference between
the remainder, if any, of the partner's adjusted basis for its partnership
interest and the balance, if any, of the amount realized, is the partner's
capital gain or loss on the liquidation of the partnership interest.
Capital loss will be recognized in the event only cash and unrealized
receivables are distributed, and only to the extent the partner's adjusted
basis for its interest exceeds the sum of money distributed and the
partnership's adjusted basis for unrealized receivables.
In addition, each partner may be in receipt of income or loss from
the normal operations of a partnership
during the year of dissolution. Such income may constitute ordinary
income or loss.
There are three commonly encountered limitations on a partner's
ability to take into account its share of a partnership's loss in
computing its individual tax liability. A partner is entitled to deduct
its share of the partnership's loss only after satisfying all three rules.
A partner's deductible share of losses is limited to its basis in its
partnership interest. The at-risk rules limit a partner's deductible
share of losses to the amount it is considered to be economically at-risk
in the venture. If a partner's share of the partnership's losses are
considered "passive losses," the partner must combine them with its
passive losses from other sources and is allowed to deduct the total only
to the extent of its passive income from all sources. Losses that are
disallowed due to any of these three limitations are deductible in the
year of the termination of a partnership interest and would offset any
gain from liquidation.
Alternative Minimum Tax
The above summary of the federal income tax provisions relating to
the proposed transactions has not taken into account the federal
alternative minimum tax. This tax was designed to ensure that at least
some tax is paid by high income taxpayers who obtain benefits from large
exemptions and deductions. A taxpayer's alternative minimum tax liability
is determined by adjusting its regular tax liability for alternative
minimum tax preference items. Both of the proposed transactions may
result in alternative minimum tax preference items flowing through to the
partners.
Conclusion
The preceding is intended only as a summary of income tax
consequences relating to the sale of assets by partnerships and
partnerships' liquidation generally. The Limited Partners should consult
their own tax advisors with respect to all matters discussed herein and
their own particular tax circumstances.
THE FOREGOING DISCUSSION IS INTENDED ONLY AS A SUMMARY OF THE
MATERIAL FEDERAL INCOME TAX CONSEQUENCES OF THE SALE AND DOES NOT PURPORT
TO BE A COMPLETE ANALYSIS OR LISTING OF ALL POTENTIAL TAX EFFECTS RELEVANT
TO A DECISION OF WHETHER TO VOTE IN FAVOR OF THE SALE. THE DISCUSSION
DOES NOT ADDRESS THE TAX CONSEQUENCES THAT MAY BE RELEVANT TO A PARTICULAR
LIMITED PARTNER WHO IS SUBJECT TO SPECIAL TREATMENT UNDER CERTAIN FEDERAL
INCOME TAX LAWS NOR ANY CONSEQUENCES ARISING UNDER THE LAWS OF ANY STATE,
LOCALITY OR FOREIGN JURISDICTION. THE DISCUSSION IS BASED UPON THE
INTERNAL REVENUE CODE OF 1986, AS AMENDED, TREASURY REGULATIONS THEREUNDER
AND ADMINISTRATIVE RULINGS AND COURT DECISIONS AS OF THE DATE HEREOF. ALL
OF THE FOREGOING ARE SUBJECT TO CHANGE, AND ANY SUCH CHANGE COULD AFFECT
THE CONTINUING VALIDITY OF THIS DISCUSSION. THE LIMITED PARTNERS ARE
URGED TO CONSULT AND RELY ON THEIR OWN TAX ADVISORS CONCERNING THE
FEDERAL, STATE, LOCAL AND FOREIGN TAX CONSEQUENCES OF THE PROPOSED SALE TO
THEM.
ADDITIONAL INFORMATION FOR LIMITED PARTNERS
Dissenters' Rights
Under Wisconsin law and the Partnership Agreement, no Limited Partner
is entitled to exercise dissenters' rights with respect to the Sale and
subsequent dissolution of the Partnership.
Receipt of Distributions After the Sale
Upon consummation of the Sale, the Limited Partners will be entitled
to receive, within 60 days of the Closing, the cash consideration outlined
in "PROPOSED SALE OF PARTNERSHIP ASSETS AND SUBSEQUENT DISSOLUTION OF THE
PARTNERSHIP - Anticipated Distributions." Since certificates representing
the RAL III Interests have not been issued to the Limited Partners, it
will not be necessary for the Limited Partners to return certificates in
order to receive distributions following the Sale.
Operations Following the Sale and Effect of the Sale on Limited Partners
Upon consummation of the Sale, the Partnership will use proceeds of
the Sale to pay off its debt and other payables associated with the
operation of the Partnership and the Real Property. Based on the existing
obligations of the Partnership, the anticipated expenses related to the
Sale and current and historical accounts payable, the General Partners
believe that distributions to Limited Partners will total approximately
$301 per Interest.
In order to reduce expenses and maximize the distribution to the
Limited Partners, the Partnership will begin to wind down its affairs
following consummation of the Sale. Great Lakes has agreed that, after
the closing of the Sale, it will cause its affiliate, First Financial
Realty Management, Inc., to provide certain partnership administration
services to the Partnership until it can be dissolved. While the General
Partners anticipate that distributions of annual and quarterly reports to
Limited Partners containing financial statements will be discontinued
following the closing of the Sale, the Partnership will continue to
maintain books and records and file tax returns until the affairs of the
Partnership have been settled.
Following the consummation of the Sale and the distribution of net
proceeds available therefor, the Limited Partners will not have any
interest in the Real Property or Great Lakes. If, however, after the
Closing, any parcel of the Real Property is retained by the Partnership
due to the results of title and environmental surveys which have yet to be
conducted, a distribution to the Limited Partners of available funds will
still be made; however, the Partnership will not be dissolved and the
Limited Partners will continue to be Limited Partners of the Partnership
until the affected property can be sold on commercially reasonable terms.
PROPOSED AMENDMENT TO THE PARTNERSHIP AGREEMENT
Description of the Proposed Amendment
Currently, Section 17.09 of the Partnership Agreement requires that,
within a reasonable time following the liquidation of the Partnership, the
General Partners will deliver an audited final report to the Limited
Partners that sets forth detailed information about assets available for
distribution to the Limited Partners and the General Partners. The
proposed Amendment would be to adopt a new Section 17.09 that is otherwise
identical to the existing provision but deletes reference to the
requirement that such final report be audited, so that the amended Section
17.09 would read in its entirety as follows:
17.09 Final Report. Within a reasonable time following the
completion of the liquidation of the Partnership, the
General Partners shall supply to each of the Partners a
statement, which shall set forth the assets and the
liabilities of the Partnership as of the date of complete
liquidation, each Partner's pro rata portion of
distributions pursuant to Paragraph 17.07 and the amount
paid to the General Partners pursuant to said Paragraph.
Reasons for the Proposed Amendment
While the General Partners believe that RAL III should provide a
final report to the Limited Partners after liquidation of the Partnership,
detailing the assets and liabilities of the Partnership as of the
liquidation date and a calculation of the distributions to the Limited
Partners and the General Partners, the General Partners believe that the
cost of an audit of such report would measurably decrease the proceeds of
the Sale available for distribution. As a result, the General Partners
have unanimously proposed the Amendment, which they believe to be in the
best interests of the Partnership and its Limited Partners.
Vote Required
Under the terms of the Partnership Agreement, the approval of the
Amendment requires the affirmative consent of holders of a majority of RAL
III Interests outstanding at the Record Date. Therefore, abstentions and
broker non-votes will have the same effect as a vote against the proposal.
Recommendation of the General Partners
For the reasons described above, the General Partners have
unanimously proposed the Amendment, believe that the Amendment is in the
best interests of the Partnership and the Limited Partners and recommend
that the Limited Partners consent to approval of the Amendment.
THE PARTNERSHIP
Selected Historical Financial and Operating Data
The following selected financial information of RAL III for the years
ended December 31, 1997, 1996, 1995, 1994 and 1993 has been derived from
RAL III's financial statements, which have been audited by Kolb Lauwasser
& Co., S.C. for such periods. The following selected financial
information for each of the three months ended March 31, 1998 and 1997 are
unaudited but, in the opinion of the General Partners of RAL III, include
all adjustments (consisting only of normal, recurring adjustments)
necessary for a fair presentation of the results of such periods.
<TABLE>
<CAPTION>
Year Ended December 31, Period Ended March 31,
1997 1996 1995 1994 1993 1998 1997
<S> <C> <C> <C> <C> <C> <C> <C>
Summary of Operations:
Total Revenue $1,381,569 $1,817,357 $1,546,286 $1,115,256 $1,830,302 348,658 334,016
Operating Income 279,872 723,842 375,972 (159,898) 866,901 80,213 63,783
Net Income 324,969 785,968 417,054 (120,028) 913,991 90,023 79,436
Per-Interest Data:
Net Income per Interest 23.44 56.69 30.08 (8.66) 66.48 6.49 5.73
Financial Condition:
Total Assets 4,276,486 4,509,092 6,111,282 6,308,733 8,633,811 4,221,376 4,445,385
Bond, Notes and Capitalized
Lease Obligations -- -- -- -- -- -- --
Partners' Capital 4,104,266 4,370,927 5,854,581 6,079,637 8,403,303 4,046,381 4,302,455
Distributions per Interest:
First Quarter 10.78 12.67 10.72 112.56 15.00 10.78 10.78
Second Quarter 10.78 12.67 11.69 11.90 15.00
Third Quarter 10.78 129.24 11.70 25.38 87.86
Fourth Quarter 10.77 10.78 12.67 10.72 49.17
</TABLE>
Additional financial data is included in the Partnership's annual
report to Limited Partners for the year ended December 31, 1997 and the
Partnership's Quarterly Report on Form 10-Q for the three months ended
March 31, 1998, a copy of each of which is enclosed with this Consent
Solicitation Statement.
Description of Business
RAL III is a Wisconsin Limited Partnership formed on April 29, 1985
under the Wisconsin Revised Uniform Limited Partnership Act. RAL III was
organized to acquire, for cash (no debt), real estate projects, including
real estate for restaurants, mobile home communities and other commercial
properties. RAL III sold $13,725,000 in Limited Partnership Interests
(13,725 Interests at $1,000 per Interest) from August 27, 1985 through
December 12, 1986. RAL III has registered with the Securities and
Exchange Commission a total of 15,000 RAL III Interests held by the
public.
Properties
As of June 30, 1998, RAL III owned the following properties:
Property Approximate Size
Pizza Hut Restaurant 2,800 square-foot building on
Minnetonka, Minnesota approximately 46,200 square feet of land
Rocky Rococo Restaurant 3,400 square-foot building on
and Business approximately 21,000 square feet of land
Milwaukee, Wisconsin
Forest Junction Mobile 82 mobile home sites on 35 acres of land
Home Park*
Brillion, Wisconsin
Pizza Hut Restaurant 3,467 square-foot building on
Normal, Illinois approximately 37,400 square feet of land
Wendy's Restaurant 3,700 square-foot building on
Waukesha, Wisconsin approximately 48,500 square feet of land
Shamrock Mobile Home Park 31 mobile home sites on 4 acres of land
Albany, Minnesota
Cloverleaf Mobile Home 172 mobile home sites on 25 acres of land
Park*
St. Cloud, Minnesota
_________________
* Denotes a material property, having gross revenues greater than 10% of
total revenues.
All of the Real Property was unencumbered as of June 30, 1998. In
the opinion of the General Partners, all of the Real Property is
adequately covered by insurance.
Material Properties
Following is information with respect to the Cloverleaf Mobile Home
Park and the Forest Junction Mobile Home Park, RAL III's only properties
whose revenues are greater than 10% of total revenues of RAL III as
denoted above.
Occupancy Rates. Following is a listing of the approximate average
physical occupancy rates during each of the last five years and for the
periods ended March 31, 1998 and 1997.
Occupancy Rates
Three Months Three Months
1997 1996 1995 1994 1993 Ended Ended
March 31, March 31,
1998 1997
Cloverleaf 91% 88% 89% 91% 93% 97% 91%
Forest Junction 93% 90% 97% 98% 100% 97% 93%
Rental Rates. Following is a listing of the approximate average per-
unit rental rates during each of the last five years and for the periods
ended March 31, 1997 and 1998.
Rental Rates
<TABLE>
<CAPTION>
Three Months Three Months
1997 1996 1995 1994 1993 Ended Ended
March 31, March 31,
1998 1997
<S> <C> <C> <C> <C> <C> <C> <C>
Cloverleaf $2,525 $2,467 $2,401 $2,288 $2,270 $ $
Forest Junction $1,846 $1,776 $1,668 $1,610 $1,554 $ $
</TABLE>
Depreciation. Depreciation information for the mobile home parks is
as follows:
Type of Asset Rate Method Depreciable Life
Land Improvements SL ACRS 15/19/20 Years
Building SL ACRS 19/31.5/39/40 Years
Equipment DDB ACRS/MACRS 5/7/12 Years
Taxes. Following is certain tax information for the mobile home
parks for each of the last three years and for the periods ended March 31,
1998 and 1997.
<TABLE>
<CAPTION>
Three Months Three Months
Ended Ended
March 31, March 31,
1997 1996 1995 1994 1993 1998 1997
<S> <C> <C> <C> <C> <C> <C> <C>
Cloverleaf
Tax Rate (per 1,000) .033230 .032333 .029511 .027649 .025407 .033230 .033230
Real Estate Taxes $36,154 $35,178 $34,286 $29,951 $28,252 $9,039 $9,039
Forest Junction
Tax Rate (per 1,000) .023332 .033311 .035714 .0313714 .032500 .023332 .023332
Real Estate Taxes $10,042 $11,762 $13,493 $13,285 $13,191 $2,511 $2,511
</TABLE>
Leases on Investment Properties
The restaurant properties are leased under 20-year leases with two
five-year options to renew the leases at the end of the original term.
Rent, which is payable monthly, generally is equal to the greater of 6.50%
or 6.75% of gross sales, depending on the lease, or a minimum base rent
stated in the lease. All of the tenants are currently paying rent based
on the minimum base rental. The leases are "triple net" to RAL III, with
the lessee being responsible for occupancy costs such as maintenance,
insurance, taxes and utilities. The Rocky Rococo Restaurant and Business
in Milwaukee is currently being operated directly by RAL III. Any excess
cash flow is for the benefit of the Partnership. The mobile home parks
receive income on a monthly basis from tenant leases that normally have
lease terms of one year or less.
Legal Proceedings
As of June 30, 1998, there were no material pending legal actions
affecting RAL III.
Security Ownership of Certain Beneficial Owners and Management
As of the date of this Consent Solicitation Statement, there were
13,725 RAL III Interests outstanding, each entitled to one vote on the
Sale and the proposed Amendment.
As of June 30, 1998, no person or group is known by RAL III to own
beneficially more than 5% of the outstanding RAL III Interests.
Certain of the General Partners own less than 1% of the RAL III
Interests outstanding: Thomas R. Brophy beneficially owns 14 RAL III
Interests; affiliates of John A. Hanson beneficially own an aggregate of
12 RAL III Interests; Robert A. Long and his affiliates beneficially own
an aggregate of 23.5 RAL III Interests; and Bart Starr beneficially owns
five RAL III Interests.
Comparative Per-Interest Data
The following sets forth certain data concerning the historical net
earnings, distributions and book value per Interest for RAL III.
Year Ended December 31, Three
Months
Ended
1997 1996 1995 1994 1993 March 31,
1998
Net Income 23.44 56.69 30.08 (8.66) 66.48
(Loss) Per
Interest
Cash 43.10 165.36 46.78 160.56 167.03
Distribution
Per Interest
Book Value Per 295.35 315.02 423.69 440.39 609.61
Interest
Market Price Data
There is no established public trading market for the RAL III
Interests. Nevertheless, the General Partners become aware of some
transfers of RAL III Interests after they occur as a result of a review of
transfer documents submitted to the Partnership from the purchaser or
broker, which documents sometimes include the applicable sale price. The
General Partners believe that such prices may, but do not necessarily,
include various transfer fees and commissions.
For the period from January 1997 through June 1998, the General
Partners are aware of several trades, from a low price of $332 per RAL III
Interest to a high price of $422 per RAL III Interest. At June 30, 1998,
RAL III had 2,051 Limited Partners of record who held 13,725 RAL III
Interests.
EXPERTS
The audited consolidated financial statements of the Partnerships as
of December 31, 1997 and for each of the years in the three-year period
then ended, have been incorporated by reference herein in reliance an the
report of Kolb Lauwasser & Co., S.C., independent certified public
accountants, and upon the authority of such firm as experts in accounting
and auditing.
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
The Partnership incorporates herein by reference the following
documents, filed by the Partnership with the Securities and Exchange
Commission (the "Commission") pursuant to the Securities Exchange Act of
1934, as amended, and the rules promulgated thereunder (the "Exchange
Act"): (i) the Partnership's Annual Report on Form 10-K for the fiscal
year ended December 31, 1997; (ii) the Partnership's Quarterly Report on
Form 10-Q for the quarter ended March 31, 1998; (iii) the Partnership's
Current Report on Form 8-K, dated July ___, 1998; (iv) all other reports
filed by the Partnership pursuant to Section 13(a) or 15(d) of the
Exchange Act since December 31, 1997; and (v) the description of the RAL
III Interests contained in the Partnership's Registration Statement on
Form 8-A, filed with the Commission on April 29, 1987.
All documents filed by the Partnership pursuant to Section 13(a),
13(c), 14, or 15(d) of the Exchange Act subsequent to the date of this
Consent Solicitation Statement and prior to __________, 1998 shall be
deemed to be incorporated by reference in this Consent Solicitation
Statement and to be part hereof from the date of filing of such documents.
All information appearing in this Consent Solicitation Statement is
qualified in its entirety by the information and financial statements
(including notes thereto) appearing in the documents incorporated by
reference herein.
Any statement contained in a document incorporated or deemed to be
incorporated by reference herein shall be modified or superseded, for
purposes of this Consent Solicitation Statement, to the extent that a
statement contained herein or in any subsequently filed document that is
deemed to be incorporated herein modifies or supersedes any such
statement. Any statement so modified or superseded shall not be deemed,
except as so modified or superseded, to constitute a part of this Consent
Solicitation Statement.
[FRONT]
RAL YIELD + EQUITIES III LIMITED PARTNERSHIP
CONSENT SOLICITATION
THIS CONSENT IS SOLICITED ON BEHALF OF THE GENERAL PARTNERS
The following proposals are submitted for approval by written consent
to the holders of limited partnership interests (the "Interests") of RAL
Yield + Equities III Limited Partnership (the "Partnership") by the
General Partners of the Partnership:
1. To approve the Asset Purchase Agreement, as amended (the "Purchase
Agreement") by and between the Partnership and Great Lakes Investors
LLC ("Great Lakes"), to sell substantially all of the assets of the
Partnership to Great Lakes pursuant to the Purchase Agreement and to
distribute the Partnership's net assets and dissolve the Partnership
as soon as practicable thereafter, all as set forth in the Consent
Solicitation Statement.
The undersigned Limited Partner hereby votes his or her Interests on
such proposal as follows:
[_] FOR [_] AGAINST [_] ABSTAIN
2. To approve an amendment to the Partnership's Limited Partnership
Agreement, dated April 29, 1985 (the "Partnership Agreement"),
to delete the requirement that the final report distributed to
the Limited Partners following liquidation of the Partnership be
audited.
The undersigned Limited Partner hereby votes his or her Interests on
such proposal as follows:
[_] FOR [_] AGAINST [_] ABSTAIN
(Continued on reverse side)
[BACK]
(Continued from obverse side)
A properly executed and dated Reply Card must be received by _______,
1998 to be included in the tabulation of consents. THE GENERAL PARTNERS
URGE THE LIMITED PARTNERS TO CONSENT TO EACH OF THE ABOVE PROPOSALS.
The undersigned hereby acknowledges receipt of the Consent
Solicitation Statement relating to the above proposals, the Partnership's
1997 Annual Report to Limited Partners and the Partnership's Quarterly
Report on Form 10-Q for the three months ended March 31, 1998.
Dated: _____________________________, 1998
Signed ___________________________________
___________________________________
Signature(s) of Shareholder(s)
PLEASE SIGN EXACTLY AS YOUR NAME APPEARS
HEREON. When shares are held by joint
tenants, both should sign. When signing as
attorney, executor, administrator, trustee
or guardian, please give your full title as
such. If a corporation, please sign in full
corporate name by the president or other
authorized officer. If a partnership,
please sign in partnership name by
authorized person.
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY CARD TODAY USING THE
ENCLOSED ENVELOPE.