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 II 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: $6,134,000
5) Total fee paid: $1,227
[ ] 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 II 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 II Limited Partnership ("RAL II" 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 II (the "RAL II Interests") would receive,
within 60 days after the closing of the sale, approximately $689 for each RAL II
Interest. Holders of RAL II Interests may subsequently receive one or two
additional distributions, subject to certain contingencies, of indeterminable
amounts at any time within the first seven years following the closing of the
sale. The Partnership will be dissolved as soon as practicable following the
closing of the sale of the Partnership's assets and a trust will be established
to distribute any future contingent payments, if any, to former holders of RAL
II Interests.
The proposed amendment to RAL II'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
II's assets to Great Lakes and the proposed amendment to RAL II's Limited
Partnership Agreement, subject, in each case, to the consent of the holders of a
majority of outstanding RAL II Interests. The General Partners of the
Partnership recommend that you vote your RAL II 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 II
Limited Partnership
PLEASE COMPLETE, SIGN, DATE AND RETURN
THE ENCLOSED REPLY CARD TODAY
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RAL-Yield Equities II 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 II Limited Partnership, a
Wisconsin limited partnership ("RAL II" 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 II's Limited Partnership Agreement,
dated March 16, 1984 (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
$689 for each limited partnership interest in the Partnership (the "RAL II
Interests") (which amount does not include possible subsequent distributions,
which are subject to certain contingencies, as described herein). 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 II 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 II Limited Partnership,
/s/ Robert A. Long
Robert A. Long
General Partner
Waukesha, Wisconsin
____________ ____, 1998
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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.
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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
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CONSENT SOLICITATION
This Consent Solicitation Statement is being furnished by the General
Partners of RAL II 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
II 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 II
Interest is entitled to one vote with respect to each of the proposals. As of
the Record Date, there were 8,301.5 RAL II 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 II
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 III 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.
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Together with the Affiliated Partnerships, the Partnership will bear,
pro rata (based on each partnership's respective base, non-contingent 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 II will not exceed
$90,000, which includes printing costs, postage, fees of the proxy solicitation
firm, and legal and accounting fees. Of such amount, the General Partners of RAL
II expect that the fees of the proxy solicitation firm attributable to RAL II
will not exceed $6,000.
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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 III 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 $689 per RAL II 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 $6,134,000. As described
below, upward adjustments to the purchase price may be made if RAL II leases the
site of a former restaurant in West Allis, Wisconsin prior to the closing of the
Sale or if Great Lakes sells or leases such parcel within seven years following
the closing of the Sale.
In addition, the base purchase price cited above 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 $511,000
in closing costs, attorneys' fees and other obligations, and (ii) the net
(repayment)/receipt of obligations, increasing cash available for distribution
by approximately $126,000, resulting in estimated net proceeds from the sale of
approximately $5,749,000, or $689 per Interest. Such net proceeds will be
distributed to the Limited Partners within 60 days of the closing of the Sale.
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Upon the closing of the Sale, in addition to such distribution, the
Limited Partners will also receive the right to receive one or two final
distributions of indeterminable amounts (each a "Conditional Future
Distribution") which may be made if and when the site of a former restaurant in
West Allis, Wisconsin (the "West Allis Property"), included in the Real
Property, is either leased or sold by Great Lakes within seven years following
the closing of the Sale. If a lease is entered into during such period, Great
Lakes will pay RAL II an amount determined by capitalizing average annual net
rent payable on the West Allis Property during the shorter of the entire lease
term or the first five years of the lease term at 11% per year, less $200,000.
In addition, regardless of whether Great Lakes has made any further payment to
RAL II as a result of such lease, if Great Lakes sells the West Allis Property
within seven years following the closing, Great Lakes will make an additional
payment to RAL II equal to the sale price of the West Allis Property, less Great
Lakes' selling expenses, the amount of any previous additional payment upon the
leasing of the West Allis Property as aforesaid, and $200,000. Any such amounts
will be distributed to the Limited Partners of record on the Record Date, pro
rata, within 60 days of their receipt by RAL II or, if RAL II has then been
dissolved, by a trustee to be appointed for such purpose prior to dissolution.
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.
Currently, there can be no estimate of the amount of any Conditional
Future Distribution to Limited Partners of RAL II, if any, nor of the date on
which any such Conditional Future Distribution will be made.
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 II 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 I, Inc. FFRM has also been
responsible for performing partnership administration services for each of the
Partnerships since 1993.
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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 park. 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 park. Based on the purchase price
offered for the mobile home park 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 park was slightly higher than the price allocated to the mobile home
park 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, excluding possible
Conditional Future Distributions;
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.
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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 non-contingent base purchase prices), will be approximately
$72,000 ($20,000 of which will be payable by RAL II). None of RAL II 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 II, 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:
o Audited financial statements for the Partnership for the years
1993 through 1997.
o Unaudited financial statements and other internal financial
analysis for the individual owned properties that constituted the
Real Property for the years 1993 through 1997.
o Market data pertaining to the current real estate market in the
neighborhoods of the Real Property.
o Demographic and economic histories and projections for the
neighborhoods in which the Real Property is located.
o 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:
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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:
o Buyer and seller are typically motivated;
o Both parties are well informed or well advised, and acting in
what they consider their best interests;
o A reasonable time is allowed for exposure in the open market;
o Payment is made in terms of cash in U.S. dollars or in terms of
financial arrangements comparable thereto; and
o 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.
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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 park. 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 $1,624 $1,644 $1,673 $1,709 $1,750
Expenses* 999 1,025 1,053 1,082 1,111
Net Income 625 619 620 627 639
Year 2003 2004 2005 2006 2007
Revenue $1,780 $1,810 $1,860 $1,914 $1,952
Expenses* 1,141 1,162 1,203 1,236 1,269
Net Income 639 639 657 678 683
*Including Capital Expenditures
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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 9.0% to 12.0%.
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 11.0% to 15.0%, with an
average of 12.0%. 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.
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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 $6,134,000 for the assets of RAL II
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 any for rent concessions made by the Partnership and possible costs of
environmental remediation as outlined in the Purchase Agreement, aggregate cash
consideration of $6,134,000 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;
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(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 II 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.
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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 I, 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 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 the 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 II, 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 II 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 II 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
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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 $80,256,
which amount will be distributed equally among the five General Partners.
The General Partners of RAL II 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. In the case of RAL II, only Mr.
Heston is entitled to such payment, which the General Partners expect will not
exceed $______. Mr. Heston is not entitled to any such payment in connection
with the Related Transactions.
Certain of the General Partners own small numbers of RAL II Interests.
See "THE PARTNERSHIP -- Security Ownership of Certain Beneficial Owners and
Management."
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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.
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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
15
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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.
16
<PAGE>
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 II 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 initial
distributions to Limited Partners will total approximately $689 per Interest,
not including any Conditional Future Distribution.
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. Information regarding Conditional Future Distributions will be
sent to Limited Partners at least annually until all such Conditional Future
Distributions have been made or the seven-year period in which they may accrue
has expired, although 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, except the right to receive Conditional Future
Distributions, if any. 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.
17
<PAGE>
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 II 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 II
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.
18
<PAGE>
THE PARTNERSHIP
Selected Historical Financial and Operating Data
The following selected financial information of RAL II for the years
ended December 31, 1997, 1996, 1995, 1994 and 1993 has been derived from RAL
II'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 II, 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 1,625,397 1,650,595 1,575,619 1,498,653 1,286,016 362,894 411,088
Operating Income 450,761 566,485 568,817 498,788 272,541 96,829 121,893
Net Income 523,995 643,133 654,540 566,968 331,268 112,647 142,255
Per-Interest Data:
Net Income per Interest 62.49 76.70 78.06 67.61 39.51 13.43 16.96
Financial Condition:
Total Assets 4,507,221 4,786,990 5,199,217 5,212,005 5,275,948 4,385,922 4,723,171
Bond, Notes and Capitalized
Lease Obligations -- -- -- -- -- -- --
Partners' Capital 4,321,704 4,601,294 5,024,493 5,012,074 5,040,009 4,233,455 4,542,653
Distributions per Interest:
First Quarter 24.20 55.02 18.20 17.06 14.50 24.20 24.20
Second Quarter 24.20 25.03 18.20 18.20 14.50
Third Quarter 24.20 24.20 18.20 18.20 14.56
Fourth Quarter 24.20 24.20 22.75 18.20 16.49
</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 II is a Wisconsin Limited Partnership formed on March 30, 1984
under the Wisconsin Revised Uniform Limited Partnership Act. RAL II was
organized to acquire, for cash (no debt), real estate projects, including real
estate for restaurants, mobile home communities and other commercial properties.
RAL II sold $8,301,500 in Limited Partnership Interests (8,301.5 Interests at
$1,000 per Interest) from March 30, 1984 through June 30, 1985. RAL II has
registered with the Securities and Exchange Commission a total of 8,301.5
Interests held by the public.
19
<PAGE>
Properties
As of June 30, 1998, RAL II owned the following properties:
Property Approximate Size
Rocky Rococo Restaurant
and Business 3,200 square-foot building on approximately
Wauwatosa, Wisconsin 20,591 square feet of land
Vacant Restaurant 4,000 square-foot building on approximately
West Allis, Wisconsin 34,000 square feet of land
Pizza Hut Restaurant 4,000 square-foot building on approximately
Waterloo, Iowa 34,000 square feet of land
Wendy's Restaurant 3,600 square-foot building on approximately
Wauwatosa, Wisconsin 56,000 square feet of land
Spacious Acres Mobile Home Park* 182 mobile home pads on 63.5 acres of land
Town of Concord, Wisconsin
Wendy's Restaurant 3,900 square-foot building on approximately
Eden Prairie, Minnesota 62,000 square feet of land
Rocky Rococo Restaurant 3,900 square-foot building on approximately
Racine, Wisconsin 79,025 square feet of land
- -----------------
* 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 Spacious Acres Mobile Home
Park, RAL II's only property whose revenues are greater than 10% of total
revenues of RAL II 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 Ended Three Months Ended
1997 1996 1995 1994 1993 March 31, 1998 March 31, 1997
---- ---- ---- ---- ---- -------------- --------------
99% 99% 99% 99% 99% 99% 99%
20
<PAGE>
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
Three Months Three Months
Ended Ended
1997 1996 1995 1994 1993 March 31, 1998 March 31, 1997
---- ---- ---- ---- ---- -------------- --------------
$2,786 $2,670 $2,539 $2,447 $2,335 $ $
Depreciation. Depreciation information for the mobile home park is as
follows:
Type of Asset Rate Method Depreciable Life
- ------------- ---- ------ ----------------
Land Improvements SL ACRS 15/20 Years
Building SL ACRS 18/19/40 Years
Equipment DDB ACRS/MACRS 5/7/12 Years
Taxes. Following is certain tax information for the mobile home park
for each of the last three years and for the periods ended March 31, 1998 and
1997.
<TABLE>
<CAPTION>
Three Months Ended Three Months Ended
1997 1996 1995 1994 1993 March 31, 1998 March 31, 1997
---- ---- ---- ---- ---- -------------- --------------
<S> <C> <C> <C> <C> <C> <C> <C>
Tax Rate(per 1,000) .017869 .018925 .020455 .029525 .030346 .017869 .017869
Real Estate Taxes $33,597 $35,735 $38,626 $43,331 $44,095 $8,399 $8,399
</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 II, with the lessee being responsible for
occupancy costs such as maintenance, insurance, taxes and utilities. The Rocky
Rococo Restaurant and Business in Wauwatosa is currently being operated directly
by RAL II. Any excess cash flow is for the benefit of the Partnership. The
vacant restaurant property in West Allis, Wisconsin was leased to a Hardee's
Restaurant franchisee that became insolvent and went through an informal
reorganization. The lessee vacated the premises in December 1996. The property
has been reclassified in RAL II's financial statements as property held for sale
or release as of March 31, 1998 and December 31, 1997 and 1996. The mobile home
park receives 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 II.
Security Ownership of Certain Beneficial Owners and Management
As of the date of this Consent Solicitation Statement, there were
8,301.5 RAL II 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 II to own
beneficially more than 5% of the outstanding RAL II Interests.
21
<PAGE>
Certain of the General Partners own less than 1% of the RAL II
Interests outstanding: Thomas R. Brophy beneficially owns 17 RAL II Interests;
Robert A. Long beneficially owns six RAL II Interests and disclaims beneficial
ownership of two RAL II Interests beneficially owned by his wife; and Bart Starr
beneficially owns eight RAL II Interests.
Comparative Per-Interest Data
The following sets forth certain data concerning the historical net
earnings, distributions and book value per Interest for RAL II.
<TABLE>
<CAPTION>
Year Ended December 31, Three Months Ended
1997 1996 1995 1994 1993 March 31, 1998
---- ---- ---- ---- ---- --------------
<S> <C> <C> <C> <C> <C>
Net Income (Loss) Per Interest 62.49 76.70 78.06 67.61 39.51
Cash Distribution Per Interest 96.80 128.45 77.35 71.66 60.05
Book Value Per Interest 513.15 547.46 599.22 598.51 602.56
</TABLE>
Market Price Data
There is no established public trading market for the RAL II Interests.
Nevertheless, the General Partners become aware of some transfers of RAL II
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 $331 per RAL II
Interest to a high price of $560 per RAL II Interest. At June 30, 1998, RAL II
had 1,262 Limited Partners of record who held 8,301.5 RAL II 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 II Interests contained in the Partnership's Registration Statement on
Form 10, filed with the Commission on May 1, 1986.
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.
22
<PAGE>
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.
23
<PAGE>
[FRONT]
RAL-YIELD EQUITIES II 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 II 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 March 16, 1984 (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)
<PAGE>
[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.
