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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14D-9/A
Amendment No. 1 to Solicitation/Recommendation
Statement Pursuant to Section 14(d)(4)
of the Securities Exchange Act of 1934
T. Rowe Price Realty Income Fund II, America's Sales-Commission-
Free Real Estate Limited Partnership
(Name of Subject Company)
T. Rowe Price Realty Income Fund II, America's Sales-Commission-
Free Real Estate Limited Partnership
(Name of Person Filing Statement)
Units of Limited Partnership Interests
(Title of Class of Securities)
None
(CUSIP Numbers of Classes of Securities)
Henry H. Hopkins, Esq.
T. Rowe Price Associates, Inc.
100 E. Pratt Street
Baltimore, Maryland 21201
(410) 345-6640
(Name, Address, and Telephone Number of Person Authorized to
Receive Notices and Communications on Behalf of the Person(s)
filing Statement)
Copies to:
Judith D. Fryer, Esq. Ellisa O. Habbart, Esq.
Greenberg, Traurig, Hoffman, Lipoff, Ronald A. Brown, Esq.
Rosen & Quental Prickett, Jones, Elliott,
153 E. 53rd Street Kristol & Schnee
New York, NY 10022 1310 King Street
Wilmington, DE 19899
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THE PURPOSE OF THIS AMENDMENT IS TO FILE THIS SCHEDULE IN A
MANNER WHICH WILL CAUSE THE BODY OF THE SCHEDULE TO BE INCLUDED
IN THE EDGAR SYSTEM.
Item 1. Security and Subject Company
The subject company is T. Rowe Price Realty Income Fund
II, America's Sales-Commission-Free Real Estate Limited
Partnership, a Delaware limited partnership (the "Partnership").
The address of the principal executive offices of the Partnership
and of T. Rowe Price Realty Income Fund II Management, Inc., a
Maryland corporation, the general partner of the Partnership
("General Partner"), is 100 E. Pratt Street, Baltimore, Maryland
21202. The title of the class of equity securities to which this
statement relates is the outstanding units of limited partnership
interest (the "Units") of the Partnership.
Item 2. Tender Offer of the Bidder
This statement relates to the unsolicited tender offer
("Offer to Purchase") being made by Lido Associates, L.L.C. (the
"Bidder") disclosed in a Tender Offer Statement on Schedule 14D-
1, dated December 10, 1996, (the "Schedule 14D-1"), to purchase
from holders of Units ("Limited Partners") up to 38,000 Units
constituting approximately 45% of the outstanding Units of the
Partnership at $324 per Unit, upon the terms and subject to the
conditions set forth in the Offer to Purchase dated December 10,
1996, and the related Letter of Transmittal (collectively with
the Offer to Purchase, the "Lido Offer"). The Partnership did
not solicit the Lido Offer. The Schedule 14D-1 states that the
address of the principal office of Lido is 4343 Von Karman
Avenue, Newport Beach, CA 92660.
Item 3. Identity and Background
(a) The name and business address of the Partnership,
which is the person filing this statement, is set forth in Item 1
above.
(b)(1) The General Partner is the sole general partner
of the Partnership, and as such is solely responsible for the
management of the Partnership s business. The General Partner is
an indirect, wholly owned subsidiary of T. Rowe Price Associates,
Inc. ("Associates"). Except as described below, there are no
material contracts, agreements, arrangements and understandings
or any actual or potential conflicts of interest between the
General Partner or its affiliates and the Partnership and its
affiliates. The Partnership does not have any directors or
executive officers. The directors of the General Partner are
James S. Riepe, Alvin M. Younger, Henry H. Hopkins, Douglas O.
Hickman and Joseph P. Croteau, each of whom is also an officer of
Associates. Mr. Riepe is also Chairman of the Board and
President of the General Partner. Certain contracts, agreements,
arrangements and understandings between the Partnership and the
General Partner and affiliates of the General Partner are
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described in the Notes to Financial Statements in the
Partnership s Annual Report to Security-Holders for the fiscal
year ended December 31, 1995 ("Annual Report") in Note 1 -
"Organization" and Note 3 - "Transactions with Related Parties
and Other Entities", which report is filed with the Commission
herewith as Exhibit 9(c)(1). Notes 1 and 3 of such Notes to
Financial Statements are hereby incorporated herein.
(b)(2) The Partnership was compelled by applicable law
to deliver a list of the names of the Limited Partners to an
affiliate of the Bidder together with the Limited Partners'
addresses and number of Units held. However, the Partnership was
able to negotiate an agreement which substantially restricts the
Bidder's use of the list (Agreement for Delivery and Use of List
of Limited Partners - the "List Agreement," a copy of which is
attached hereto as Exhibit 9(c)(2). In order to permit the
Partnership to continue in an orderly manner with its previously
announced plan for the disposition of the Partnership's
properties, the Partnership also obtained the Bidder's agreement
to the following:
(i) to limit its purchase of the Units to 46% of the
outstanding Units;
(ii) to vote any and all Units owned by Bidder pro rata
to the vote of all other limited partners;
(iii) not to attempt to remove the General Partner from
its position as such; and
(iv) not to act to effect a change in control of the
Partnership.
(b)(3) The following may be deemed actual or potential
conflicts of interest between the Partnership and its executive
officers, directors or affiliates:
(A) Pursuant to the terms of Section 5.3 of the
Partnership s Amended and Restated Agreement of Limited
Partnership ("Partnership Agreement"), a copy of which Section is
attached hereto as Exhibit 9(c)(3) and hereby incorporated by
reference herein, the General Partner may under certain
circumstances be obligated to contribute to the capital of the
Partnership upon its liquidation an amount equal to the negative
balance in its Capital Account at that time, subject to certain
limitations. Based on current facts and circumstances, including
the current Estimated Unit Value (as hereinafter defined), the
Partnership believes the General Partner will be obligated to
make such a contribution, although the amount is not currently
determinable.
(B) Under the provisions of Article 21 of the
Partnership Agreement, a copy of which section is attached as
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Exhibit 9(c)(4) and hereby incorporated by reference herein, the
Partnership is obligated (subject to certain limitations set
forth therein) to indemnify, save harmless and pay all judgments
and claims against the General Partner, from any liability, loss,
or damage incurred by the General Partner, including attorneys'
fees and any amount expended in the settlement of any claim of
liability, loss, or damage.
Item 4. The Solicitation or Recommendation
(a) Following the Partnership s receipt of the Lido
Offer, the Partnership reviewed and considered the Lido Offer and
explored various possible alternative courses of action that
might be available in response to the Lido Offer. Based on its
analysis, the Partnership, in light of all relevant
circumstances, determined that the Lido Offer is inadequate, and
may not be in the best interests of the Limited Partners. The
Partnership makes no recommendation as to whether Limited
Partners should accept or reject the Lido Offer, but recommends
that Limited Partners become as fully informed as possible about
the current and prospective value of their investment, and
consider carefully whether acceptance of the Lido Offer is in
their best interests. Limited Partners with a pressing need for
liquidity may want to consider accepting the Lido Offer, but in
doing so they will be foregoing future distributions of cash from
operations, as well as sales proceeds.
(b) The Partnership reached the conclusions set forth
in Item 4(a) after considering a variety of factors, including,
but not limited to, the following:
(i) The Partnership has conducted its annual formal
Unit valuation to determine the estimated value of a Unit as of
the end of 1995. This value (the "Estimated Unit Value") is
based on the Partnership s estimate of the price range in which
each property in the Partnership s portfolio would be likely to
be sold as of the date of the valuation ("Fair Market Value").
These Fair Market Value ranges are then combined to generate a
range of values for the real estate portfolio as a whole, and an
estimate of the value of the portfolio is made within this range.
This estimate is then combined with the Partnership s other
assets and its liabilities, and the result is divided by the
number of outstanding Units to produce the Estimated Unit Value.
After adjusting for distributions paid in November of
1996, the Estimated Unit Value is $448. The Bidder
inappropriately reduced the estimated Unit Value by $16 following
a writedown of one of the Partnership's properties for financial
statement purposes. In fact a lower property valuation had
already been factored in to the Estimated Unit Value. It should
be noted that the Estimated Unit Value does not represent an
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estimate by the Partnership of the price for which a Unit could
be sold at the present time.
(ii) In June 1996, recognizing that the Partnership was
approaching the end point of its expected investment life, the
Partnership announced that it had determined to begin the orderly
liquidation of all of its assets. Although there can be no
assurance made as to the timing of any liquidations due to real
estate market conditions, the general difficulty of disposing of
real estate, and other general economic factors, the Partnership
expects such liquidation to occur in the next two to three years.
The Partnership is presently marketing four properties for sale.
(iii) The Partnership anticipates that in addition to
proceeds from the sale of properties, Limited Partners will
continue to receive cash from operations over the life of the
Partnership. The amount of such distributions is not
determinable at this time, and is anticipated to decrease as the
Partnership liquidates its portfolio of properties.
Nevertheless, if a Limited Partner accepts the Lido Offer, the
Limited Partner will forego any such future distributions.
(iv) The Partnership believes that the full value of an
investment in the Units can only be realized by a Limited Partner
who retains his or her Units through the liquidation of the
Partnership.
(v) The Lido Offer is approximately 75% of the
Estimated Unit Value.
(vi) The Bidder is making the Lido Offer with a view to
making a profit. Accordingly, there is a conflict of interest
between its desire to purchase the Units at a low price and a
Limited Partner s desire to sell its Units at a high price. In
fact, the Bidder concedes that its own estimates of net asset
value per Unit are above the price it is offering for Units. The
Bidder believes it can make a profit on the Units while the
Partnership remains under current management. This is not a
situation where the offeror claims it can increase value for
investors by its actions. Rather the Lido Offer is simply an
attempt to buy, at a substantial discount, an asset the Bidder
believes will be liquidated in the near future, resulting in a
quick profit for the Bidder.
(vii) Like the recent offer from Fir Investors, LLC,
the price offered by the Bidder can be reduced by any partnership
distributions declared or made after November 25, 1996. Further,
the Lido Offer also entitles the Bidder to receive the amount of
such distribution.
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(viii) Section 13 of the Lido Offer contains numerous
conditions to which it is subject, all of which are by the
Bidder's own admission for the Bidder's sole benefit.
Item 5. Persons Retained, Employed, or to be Compensated
Neither the Partnership nor any person or entity acting
on its behalf has employed, retained or compensated any other
person to make solicitations or recommendations to Limited
Partners on its behalf concerning the Lido Offer, nor does it
presently intend to do so.
Item 6. Recent Transactions and Intent with Respect to
Securities
(a) Neither the Partnership, nor the General Partner
have effected any transactions in the Units during the past 60
days. The Partnership is not aware of any other transactions in
the Units during the past 60 days by any of the General Partner s
executive officers, directors, affiliates, or subsidiaries.
(b) Neither the Partnership nor, to the knowledge of
the Partnership, any of the General Partner s executive officers,
directors, affiliates, or subsidiaries intends to tender Units
owned by them in response to the Lido Offer.
Item 7. Certain Negotiations and Transactions by the Subject
Company
As mentioned in Item 4(b)(2)(v) above, prior to the
Lido Offer and other recent tender offers, the Partnership
announced its intention to begin the orderly disposition of the
Partnership's properties. No negotiation is being undertaken or
is under way by the Partnership in response to the Lido Offer
that relates to or would result in:
(1) An extraordinary transaction such as a merger or
reorganization, involving the Partnership;
(2) A purchase, sale or transfer of a material amount
of assets by the Partnership;
(3) A tender offer for or other acquisition of
securities by or of the Partnership; or
(4) Any material change in the present capitalization
or distribution policy of the Partnership.
(b) There has been no transaction, board resolution,
agreement in principle, or a signed contract in response to the
Lido Offer which relates to or would result in one or more of the
matters referred to in Item 7(a)(1),(2), (3) or (4), other than
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the one described pursuant to Item 3(b) of this statement, which
agreement proceeded the Lido Offer.
Item 8. Additional Information to be Furnished.
Restrictions on Transfers; Tax Termination
The Partnership intends that no transfer or assignment
of Units will be recognized, which, when considered with all
other transfers or assignments ("Transfers") during the
Partnership s taxable year, would cause more than 5% of the
Partnership s Units to be so transferred or assigned, unless the
Partnership receives from the proposed transferor or transferee
an opinion satisfactory to the General Partner from reputable
counsel that the recognition of the proposed transfer will not
cause the Partnership to be treated as a "publicly traded
partnership" as defined in Section 7704 of the Internal Revenue
Code of 1986, as amended. For the taxable year commencing
January 1, 1996, the Partnership has received Transfers through
December 17, 1996 totaling 2.9%.
The Partnership also intends that no Transfer of Units
will be recognized which, when considered with all other
Transfers during the twelve-month period ending with such
transfer or assignment, would, in the opinion of counsel to the
Partnership, cause a termination of the Partnership for federal
income tax purposes (which termination may occur when 50% or more
of the total interest in the Partnership capital and profits is
transferred by sale or exchange in a twelve-month period). The
Partnership will not process any requests for Transfers of Units
during such twelve-month period which the Partnership believes
would cause a tax termination. Because of this tax-related
transfer restriction, in no event will an aggregate of 50% or
more of the Units be accepted for Transfer by the Partnership
pursuant to the Lido Offer (reduced to the extent of any prior
transfers of Units within the preceding twelve months).
In addition to the Lido Offer, the Partnership is aware
of one other tender offer for Units which is pending as of the
date of this Schedule by Fir Investors, LLC. Other tender offers
may be made in the future. Depending upon the number of Units
sold by Limited Partners pursuant to the Lido Offer or other
tender offers or otherwise, including sales on the secondary
market, certain Transfers may not be recognized. In particular,
recognition of Transfers for the twelve-month period following
completion of the Lido Offer may be limited.
Item 9. Material to be Filed as Exhibits.
(a) Letter from James S. Riepe to Limited Partners
dated December 20, 1996 regarding the Lido Offer.
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(b) None.
(c) (1) Annual Report of the Partnership to Limited
Partners for the Year Ended December 31, 1995.
(2) Agreement for Delivery and Use of List of
Limited Partners between an affiliate Bidder and the Partnership.
(3) Section 5.3 of the Partnership s Amended and
Restated Agreement of Limited Partnership.
(4) Article 21 of the Partnership s Amended and
Restated Agreement of Limited Partnership.
SIGNATURE
After reasonable inquiry and to the best of my
knowledge and belief, I certify that the information set forth in
this statement is true, complete and correct.
Dated: January 24, 1997 T. Rowe Price Realty Income
Fund II, America's Sales-
Commission-Free Real Estate
Limited Partnership
By: T. Rowe Price Realty
Income Fund II Management,
Inc., General Partner of the
Partnership
By: /s/Lucy B. Robins
Lucy B. Robins
Vice-President
