PRELIMINARY PROXY MATERIALS
SCHEDULE 14A INFORMATION
Proxy 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
Commission only
( ) Definitive Proxy Statement (as permitted by Rule 14a-
6(e)(2))
( ) Definitive Additional Materials
( ) Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
PRIME MOTOR INNS LIMITED PARTNERSHIP
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(Name of Registrant as Specified in its Charter)
PRIME-AMERICAN REALTY CORP.
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(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
Payment of Filing Fee (Check the appropriate box):
(X) No fee required.
( ) Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
<TABLE>
CALCULATION OF FILING FEE
<CAPTION>
<S> <C> <C> <C> <C>
Title of Each Class of Aggregate Number of Per Unit Price or Proposed Maximum Amount of Filing
Securities to which Securities to which Other Underlying Aggregate Value of Fee
Transaction Applies Transaction Applies Value of Transaction
Transaction
</TABLE>
( ) 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: _____________
PRELIMINARY PROXY MATERIALS
PRIME-AMERICAN REALTY CORP.
P.O. BOX 230
HAWTHORNE, NEW JERSEY 07507
January __, 1998
To the Holders of Units of Limited Partnership Interest:
You have previously received a notice of Special Meeting of Limited
Partners of Prime Motor Inns Limited Partnership (the "Partnership"), which
will be held on January 29, 1998 at 2:30 P.M., local time, at the Holiday
Inn, Harmon Meadows Sportsplex, 300 Plaza Drive, Secaucus, New Jersey 07094.
You have also previously received a proxy statement and form of proxy from
Davenport Management Corporation ("DMC") soliciting your vote (a) to remove
Prime-American Realty Corp. ("PARC") as General Partner of the Partnership,
(b) to elect DMC as the replacement General Partner of the Partnership, (c)
to request that PARC prepare and submit to the Limited Partners a proposal
for the conversion of the Partnership to a corporation and (d) to adjourn the
Special Meeting if there are not sufficient votes to remove PARC so that DMC
can solicit additional votes. DMC's proxy statement also set out what DMC
characterized as the "Plan of Action" that it would seek to implement if PARC
were removed, and DMC were elected, as General Partner of the Partnership.
THE GENERAL PARTNER BELIEVES THAT THE DMC PROPOSALS INVOLVE GRAVE RISKS TO
THE UNITHOLDERS AND ARE NOT IN THE BEST INTERESTS OF THE UNITHOLDERS. THE
GENERAL PARTNER URGES YOU TO VOTE AGAINST EACH OF THE DMC PROPOSALS.
The DMC proposals, and the General Partner's reasons for urging
rejection of those proposals, are more completely described in the
accompanying Proxy Statement. I urge you to review carefully the Proxy
Statement.
Sincerely,
PRIME-AMERICAN REALTY CORP.
By: _______________________________
S. Leonard Okin, Vice President
PRELIMINARY PROXY MATERIALS
PRIME-AMERICAN REALTY CORP.
P.O. BOX 230
HAWTHORNE, NEW JERSEY 07507
SPECIAL MEETING OF LIMITED PARTNERS
of
PRIME MOTOR INNS LIMITED PARTNERSHIP
January 29, 1998
PROXY STATEMENT
___________________________
This Proxy Statement is being furnished to holders of units of limited
partnership interest ("Units") in Prime Motor Inns Limited Partnership, a
Delaware limited partnership (the "Partnership"), by Prime-American Realty
Corp., a Delaware corporation ("PARC"), as the general partner of the
Partnership (the "General Partner"), in connection with PARC's solicitation
of Unitholders to vote against, or abstain from voting in connection with, or
to revoke proxies previously given for, proposals made by Davenport
Management Corporation ("DMC") to be considered at the Special Meeting of
Limited Partners (the "Special Meeting") to be held on January 29, 1998, at
2:30 P.M. local time, at the Holiday Inn, Harmon Meadows Sportsplex, 300
Plaza Drive, Secaucus, New Jersey 07094, and any adjournments or
postponements thereof.
At the Special Meeting, the Limited Partners will be asked to consider
and vote on (i) the removal of PARC as General Partner, (ii) the election of
DMC as the replacement General Partner, (iii) the request that PARC prepare
and submit to the Limited Partners a proposal for the conversion of the
Partnership to a corporation and (iv) the adjournment of the Special Meeting
if there are not sufficient votes to remove PARC (so that DMC may solicit
additional votes).
All information contained in this Proxy Statement concerning the
Partnership, AMI and the operations and properties of AMI has been furnished
by the General Partner. No person is authorized to make any representation
with respect to the matters described in this Proxy Statement other than
those contained herein and, if given or made, such information or
representation must not be relied upon as having been authorized by the
Partnership or the General Partner or any other person.
_____________________________________
THIS PROXY STATEMENT IS FIRST BEING MAILED OR DELIVERED TO THE LIMITED
PARTNERS AND UNITHOLDERS ON OR ABOUT JANUARY __, 1998. A SOLICITATION WAS
FIRST MAILED OR DELIVERED TO THE LIMITED PARTNERS AND UNITHOLDERS PURSUANT TO
RULES 14A-11 AND 14A-12 UNDER THE SECURITIES EXCHANGE ACT OF 1934 ON OR ABOUT
JANUARY 16, 1998.
_____________________________________
THE DATE OF THIS PROXY STATEMENT IS JANUARY __, 1998.
PRELIMINARY PROXY MATERIALS
TABLE OF CONTENTS Page
----
THE SPECIAL MEETING . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Matters to Be Considered . . . . . . . . . . . . . . . . . . . . . . . 1
Recommendations of the Board of Directors . . . . . . . . . . . . . . 1
Record Date; Units Entitled to Vote . . . . . . . . . . . . . . . . . 1
Vote Required . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Effect of Abstentions . . . . . . . . . . . . . . . . . . . . . . . . 2
Proxies; Proxy Solicitation . . . . . . . . . . . . . . . . . . . . . 2
No Appraisal Rights . . . . . . . . . . . . . . . . . . . . . . . . . 2
THE DMC PROPOSALS AND ITS "PLAN OF ACTION" . . . . . . . . . . . . . . . . 3
DMC's Incomplete Description of the Partnership's Condition . . . . . 3
DMC's Inaccurate Statements about the "Holiday Inns" Franchises . . . 4
The DMC "Plan of Action" . . . . . . . . . . . . . . . . . . . . . . . 4
DMC's Financing Plans . . . . . . . . . . . . . . . . . . . . . . . . 4
DMC's Plan to Sell and Replace Properties . . . . . . . . . . . . . . 5
DMC's Plan to Renegotiate "Holiday Inn" Arrangements . . . . . . . . . 5
DMC's Plan to Remove PARC as General Partner . . . . . . . . . . . . . 6
DMC's Plan for Immediate Conversion of the Partnership to a Corporation
6
The Real Beneficiary of DMC's Plan . . . . . . . . . . . . . . . . . . 7
The Consequences to the Unitholders . . . . . . . . . . . . . . . . . 7
AN ALTERNATIVE TRANSACTION . . . . . . . . . . . . . . . . . . . . . . . . 8
THE SPECIAL MEETING
GENERAL
This Proxy Statement is being furnished to the Unitholders in connection
with the solicitation by PARC of votes against, abstentions in connection
with, or the revocation of proxies previously given for, the proposals made
by DMC that are to be considered at the Special Meeting to be held on January
29, 1998 at 2:30 p.m., local time, at the Holiday Inn, Harmon Meadows
Sportsplex, 300 Plaza Drive, Secaucus, New Jersey 07094, and at any
adjournment or postponement thereof. This Proxy Statement is first being
mailed to Limited Partners and Unitholders on or about January __, 1998. A
solicitation was first mailed or delivered to the Limited Partners and
Unitholders pursuant to Rules 14a-11 and 14a-12 under the Securities Exchange
Act of 1934 on or about January 16, 1998.
MATTERS TO BE CONSIDERED
At the Special Meeting, the Limited Partners will consider and vote on
the removal of PARC as General Partner, (ii) the election of DMC as the
replacement General Partner, (iii) the request that PARC prepare and submit
to the Limited Partners a proposal for the conversion of the Partnership to a
corporation and (iv) the adjournment of the Special Meeting if there are not
sufficient votes to remove PARC (so that DMC may solicit additional votes).
The proposals submitted by DMC, and DMC's reasons for its proposals, are set
forth in a proxy statement first distributed by DMC on or about December 23,
1997.
RECOMMENDATIONS OF THE BOARD OF DIRECTORS
The Board of Directors of PARC, as General Partner, has unanimously
concluded that the DMC proposals involve grave risks to the Unitholders and
are not in the best interests of the Unitholders. THE BOARD OF DIRECTORS
UNANIMOUSLY RECOMMENDS THAT UNITHOLDERS VOTE AGAINST APPROVAL OF EACH OF THE
DMC PROPOSALS. The Board of Directors also recommends that the Unitholders
not take any action until they have considered the proposal for the sale of
the Partnership's principal asset and the subsequent dissolution of the
Partnership, to be described in other proxy solicitation materials to be
distributed to the Limited Partners and the Unitholders as soon as
practicable. See "An Alternative Transaction" below.
RECORD DATE; UNITS ENTITLED TO VOTE
The General Partner, at the request of DMC, fixed the close of business
on December 5, 1997 as the record date (the "Record Date") for determining
the Unitholders who are entitled to notice of, and to vote on the matters to
be acted on at, the Special Meeting. As of the Record Date, 4,000,000 Units
were outstanding.
VOTE REQUIRED
Pursuant to the Partnership Agreement, the approval of DMC's proposal to
remove PARC as General Partner requires the consent of Limited Partners who
collectively hold the right to vote more than 80% of all Units and the
approval of DMC's other proposals requires the consent of Limited Partners
who collectively hold the right to vote more than 50% of all Units.
PRELIMINARY PROXY MATERIALS
EFFECT OF ABSTENTIONS
For purposes of determining approval of the DMC proposals at the Special
Meeting, abstentions will have the same legal effect as a vote "against" the
proposals.
PROXIES; PROXY SOLICITATION
The voting of proxies in favor of the DMC proposals is described in the
proxy statement and form of proxy distributed by DMC. Unitholders who do not
support a DMC proposal can vote "AGAINST" or "ABSTAIN" on the form of proxy
distributed by DMC or can abstain (which has the same effect as voting
against the DMC proposals) by not returning the DMC proxy. Unitholders who
have voted for the DMC proposals and wish to change their vote can do so by
giving written notice of the revocation of their proxy to DMC c/o Regan &
Associates, Inc., 15 Park Row, New York, NY 10038, by giving Regan &
Associates, Inc. a later-dated proxy showing a vote "AGAINST" or "ABSTAIN",
or by attending the Special Meeting in person and casting a ballot.
This Proxy Statement is being distributed on behalf of PARC and officers
and directors of PARC may solicit Unitholders to vote against the DMC
proposals, to abstain from voting in connection with, or to revoke proxies
previously given for the DMC proposals. Such solicitation may be made by
personal interview, telephone, telegram, mail or other means of
communication. The Partnership will bear the expenses of such solicitation.
The officers and directors of PARC will not be additionally compensated for
their solicitation of consents, but may be reimbursed for their out-of-pocket
expenses incurred in connection with such solicitation. Record holders of
Units who forward soliciting material to the beneficial owners of Units held
of record by them will be reimbursed for their reasonable expenses incurred
in forwarding such material.
NO APPRAISAL RIGHTS
If the owners of more than the required percentage of the outstanding
Units consent to vote to approve the DMC proposals, all Unitholders will be
bound by such approval (including Unitholders who do not vote to approve).
Non-consenting Unitholders are not entitled to any rights of appraisal or
similar rights that may be available to dissenting shareholders in a
corporation.
PRELIMINARY PROXY MATERIALS
THE DMC PROPOSALS AND ITS "PLAN OF ACTION"
In its proxy statement, DMC makes a number of statements about the
history and condition of the Partnership's properties and operations that
PARC believes are either incomplete or inaccurate. In addition, DMC proposes
what it calls a "Plan of Action" that PARC thinks reflects a lack of
preparation or appreciation of the business and position of the Partnership
and is potentially dangerous to the Partnership and to the Unitholders'
interests.
DMC'S INCOMPLETE DESCRIPTION OF THE PARTNERSHIP'S CONDITION
DMC recounts at some length in its proxy statement the "troubled
history" and "extremely poor condition of the Partnership's business,
operations and financial condition," which, DMC asserts, has resulted in "the
diminishment of Unitholder value." This, DMC suggests, is the fault of PARC.
The facts are quite different.
In 1990, PARC and Winegardner & Hammons, Inc. ("W&H") took over
operation of the sixteen motor hotels (the "Inns") owned by the Partnership
through its 99%-owned subsidiary, AMI Operating Partners, L.P. ("AMI"). They
found that the physical condition of the Inns, and customer satisfaction, had
deteriorated seriously. In addition, approximately one-third of the Inns
were older properties which, being highway-oriented and having exterior
corridors, had a dated appearance. Most of these older Inns were also in
less favorable highway locations than many of their competitors, many of
which were newer and more attractive.
As a result of the physical condition of the Inns; the depressed economy
in the Northeast; the depressed state of the travel and hospitality
industries; and the depressed state of the real estate markets, in 1991 AMI
was required to write down the value of the Inns from more than $106 million
to $55,270,000. The carrying value of the Inns after that write-down was
almost $10 million less than the $64,341,000 outstanding balance of and
accrued interest on AMI's mortgage loan at December 31, 1991. That write-
down reflected that the Unitholders did not have any remaining equity in the
Inns.In early 1992, as part of its "pre-packaged" bankruptcy reorganization,
AMI restructured its existing mortgage loan (the "Mortgage Loan") and
arranged an additional loan (the "Priming Loan") to fund capital improvements
and provide working capital. Since that time, AMI has made more than $20
million of capital improvements and refurbishments to the Inns, in addition
to normal maintenance and repairs. AMI has been able to increase the average
room rate at the Inns each since 1991, from $54.81 in 1991 to $72.56 in 1997.
Revenues have increased each year, as have earnings before interest,
depreciation and amortization ("EBIDA"), a common measure of operating profit
in partnerships. AMI has had positive EBIDA every year since its
reorganization.
PRELIMINARY PROXY MATERIALS
DMC'S INACCURATE STATEMENTS ABOUT THE "HOLIDAY INNS" FRANCHISES
DMC asserts that Holiday Hospitality Corporation ("HHC") the franchisor
of the Inns, "has informed the Partnership that it might not renew the
franchise agreements for a majority of the Inns because the Inns no longer
meet the required standards under the franchise agreement." In fact, the
Inns had met, and continue to meet, all requirements under the franchise
agreements. HHC did determine that it did not want to include in the
"Holiday Inn" system five of the older, highway-oriented Inns, but had agreed
to renew the franchises of the remaining Inns whose franchises were to expire
in 1997. (As previously reported to the Unitholders, even before HHC's
determination the General Partner had already listed for sale several Inns,
including the Inns that HHC did not want in the system, because those Inns
were not sufficiently profitable to justify the additional investment
required to remain in the "Holiday Inn" system).
THE DMC "PLAN OF ACTION"
PAARC believes that DMC's own description in its proxy statement of its
"Plan of Action" makes clear that DMC has not performed the analysis and
review of the operations of the Partnership sufficient to support its
election as the General Partner. DMC states:
- "... Neither DMC nor any person acting on its behalf has
performed or caused to be performed any analysis of the extent
to which (Partnership) expense reduction and control could be
effected."
- "... DMC has not conducted such review (of the W&H Management
Agreement and the Consulting Services Agreement) and cannot
predict the outcome of the review, if conducted."
- While DMC lists its "Plan of Action", it admits that "...
there can be no assurance that any of the objectives could be
attained."
DMC'S FINANCING PLANS
DMC proposes, as part of its "Plan of Action," to refinance or
restructure AMI's existing indebtedness and anticipates that that
restructuring or refinancing might include the conversion of some of the
existing indebtedness to equity. However, DMC does not put before the
Unitholders any actual financing proposal. DMC does not even report having
any indication of interest by any financing source to provide such financing,
nor does DMC indicate the terms on which such financing might be arranged (or
the effect on the Unitholders of such arrangements--particularly the possible
dilutive effect of the conversion of debt to equity). DMC says only that
"based on the tenor of (Jerome Sanzo's) informal discussions and his
knowledge of both the capital markets and of the hotel industry and hotel
finance, . . . obtaining such financing might be possible..." (emphasis
added).
PRELIMINARY PROXY MATERIALS
PARC, however, has been in discussions with AMI's existing lenders and
other debt and equity investors since mid-1995 seeking to arrange financing
for the product improvement programs ("PIPs") and franchise renewal fees to
maintain AMI's expiring "Holiday Inn" franchises and/or to refinance AMI's
existing indebtedness on terms that would provide financing for the franchise
renewals or would enable AMI to generate internally the required funding.
AMI's existing lenders have declined to provide additional financing, have
refused to convert any portion of the existing debt to equity or to sell the
existing debt at a discount, have refused to allow any of net proceeds of
sale of Inns to be applied to fund PIPs or other franchise renewal fees, and
have not agreed to permit any additional indebtedness.
Despite extensive efforts from 1995 through the end of September, 1997,
PARC did not receive any financing proposals that it considered adequate or
in the best interests of the Unitholders. While PARC did receive some
financing proposals, those proposals were in the nature of preliminary
indications of interest, rather than definitive proposals. In any event,
those proposals were contingent upon the existing debt being purchased at a
discount (which the existing lenders have said they will not consider) and
required that the new lenders be given a substantial equity interest in the
Partnership or AMI. PARC believed that such proposals did not provide
sufficient financing and were disadvantageous to the Unitholders. Based on
its experience, PARC believes that it is unlikely that DMC will be able to
arrange adequate financing on terms that are not disadvantageous to the
Unitholders. And without financing, the Unitholders face the imminent loss
of the Inns and their entire investment.
DMC'S PLAN TO SELL AND REPLACE PROPERTIES
Though DMC states in its proxy statement that the replacement of
underperforming Inns is "a key element of revamping the Partnership's
operations," DMC merely repeats PARC's existing plans for the sale of
underperforming Inns. Furthermore, DMC does not address the fact that the
net proceeds of the sale of Inns must be applied to the repayment of existing
debt and cannot be used to acquire replacement properties. DMC appears to
assume that the Partnership, after being converted to a corporation, could
acquire additional properties either with additional debt (leveraging the new
property 100%) or simply by issuing additional equity in the new corporation.
Though DMC states that the Partnership is over-leveraged, it does not give
any indication of the impact of 100% leverage (if that financing is in fact
available) for its new acquisition. Nor does DMC give any indication of how
badly the existing Unitholders would be diluted by the issuance of additional
equity for acquisitions (though common sense suggests that the interests of
existing Unitholder would probably be substantially diluted).
DMC'S PLAN TO RENEGOTIATE "HOLIDAY INN" ARRANGEMENTS
DMC states in its proxy statement that it will "attempt to negotiate
appropriate arrangements with (HHC)," including short-term franchise
extensions for Inns that will be sold, long-term extensions for the retained
Inns and an agreement regarding the PIPs. DMC never suggests what
"appropriate arrangements" it might negotiate or how those arrangements would
differ from those that PARC has already negotiated. HHC was willing to
permit the Inns that are to be sold to remain in the "Holiday Inn" system for
PRELIMINARY PROXY MATERIALS
a reasonable period, not beyond June, 1998, in order to permit an orderly
sale; HHC had agreed to franchise renewals for the other Inns, subject to
payment of renewal fees and the availability of funding for required PIPs;
HHC had reached substantial agreement with PARC on the nature and magnitude
of, and the schedule for, the PIPs for the renewed Inns; and HHC granted AMI
extensions of the franchises to allow time for the previously-announced
transaction with Servico, Inc. to be considered by the Unitholders.
Based on PARC's extensive negotiations with HHC and HHC's consistent
policies and practices, PARC thinks that there is no reason to believe that
DMC will be able to negotiate terms different from those already negotiated
by PARC. Further, PARC believes, also based on its extensive negotiations
with HHC and HHC's consistent policies and practices, that if DMC is not able
to demonstrate its ability to provide assured financing for the PIPs and
franchise renewal fees, HHC will not grant further extensions of the expiring
franchises. Based on DMC's apparent lack of any firm financing plan, PARC
believes that if the DMC "Plan of Action" is implemented, the Unitholders
face the very real risk of the loss of the "Holiday Inn" franchises (and the
loss of the Unitholders' equity) in the near term.
DMC'S PLAN TO REMOVE PARC AS GENERAL PARTNER
DMC proposes to remove PARC as the general partner of the Partnership
and AMI. Removal and replacement of the general partner of either the
Partnership or AMI requires the consent of the Required Lenders under the
Priming Loan and the Required Holders under the Mortgage Loan. However,
while DMC's proxy statement states that "DMC anticipates that the requisite
consents...would be sought" before the replacement of PARC, DMC appears not
to have discussed the matter with the lenders or to have any sense as to
whether the requisite lenders would consent to DMC's being the general
partner of the Partnership or AMI. Replacement of PARC without the requisite
consent of the lenders will constitute an Event of Default under the Priming
and Mortgage Loans and could result in acceleration of those Loans.
DMC'S PLAN FOR IMMEDIATE CONVERSION OF THE PARTNERSHIP TO A CORPORATION
DMC recites at some length in its proxy statement the desirability of
converting the Partnership to corporate form (in some measure merely
repeating what PARC had already reported to Unitholders in Quarterly Reports
in 1997). However, there is no tax benefit to the conversion and many of the
purported benefits (such as the statement that the new corporation would have
greater access to the capital markets) are asserted without support and
appear intended merely to provide a justification or basis for other elements
of DMC's "Plan of Action."
The formulation of the structure of the new corporation and the
development of the most tax-efficient mechanism for the conversion, and the
submission of the proposal to the Unitholders and the lenders for their
approval, will cost the Partnership time and money. However, as has been
reported by the Partnership to the Unitholders, the Partnership has entered
into an agreement with Servico, Inc. to sell the Partnership's interest in
AMI to a subsidiary of Servico and to dissolve. If the Unitholders approve
that sale and dissolution, there would not be any purpose for expending
Partnership funds to consider conversion or in converting to corporate form.
PRELIMINARY PROXY MATERIALS
THE REAL BENEFICIARY OF DMC'S PLAN
DMC's proxy statement states that, as part of DMC's plan to replace
"underperforming Inns," Jerome Sanzo, President of DMC, had "explored certain
hotel properties ... as potential acquisition candidates" and "has had
discussions with Martin W. Field ... concerning several profitable hotels
owned or controlled by him." That proxy statement indicates that certain of
DMC's proxy solicitation expenses have been advanced to DMC by Martin W.
Field and that "DMC may seek reimbursement from the Partnership for such fees
and expenses, and ... does not intend to seek limited partner approval for
such reimbursement ... unless such approval is required under Delaware law."
In addition, the DMC proxy statement says that "in view of Mr. Field's
experience and his present ownership of hotels, ... DMC might consider
engaging the services of Mr. Field either directly or through entities
controlled by Mr. Field, to manage or participate in the management of the
Partnership's Inns." Finally, DMC says in its proxy statement that, if the
Partnership converts to corporate form, "Mr. Field may be considered as a
potential candidate to serve on the Board of Directors of (the new
corporation) or as a consultant to (the new corporation)." During the summer
and early fall of 1997 Mr. Field and his wife acquired an approximately 4%
stake in the Partnership, and a trust established by Mr. Field for his
children acquired an approximately 3% stake in the Partnership. All in all,
it appears to PARC that a principal consequence of the DMC "Plan of Action"
is that Mr. Field and his affiliates will take over operation of the
Partnership and management of the Inns, with the prospect that they will seek
to sell their properties to the Partnership.
The judgment dockets of State and Federal Courts in New York and Florida
show that the Federal Deposit Insurance Corporation recovered a judgment
against Mr. Fields in the amount of $6 million for loans on which Mr. Field
defaulted in connection with a real estate venture and that the New York City
Department of Finance obtained several judgments against Mr. Fields, totaling
several hundred thousands dollars, for occupancy taxes unpaid by a real
estate venture.
THE CONSEQUENCES TO THE UNITHOLDERS
PARC believes that DMC's proposal to acquire properties will subject the
Unitholders to the risks of excess leverage and/or substantial dilution of
their interests. If DMC does not arrange financing in time to retain the
"Holiday Inn" affiliation (and PARC believes that there is no indication that
DMC will be able to raise financing on a timely basis, if at all), not only
will the loss of the "Holiday Inn" franchise have an extremely adverse impact
on the operations and value of the affected Inns, but the loss will
constitute an Event of Default under the Priming and Mortgage Loans.
PRELIMINARY PROXY MATERIALS
AN ALTERNATIVE TRANSACTION
As reported to the Unitholders in the Quarterly Report on Form 10-Q for
the third quarter of 1997, PARC concluded that, because AMI had been unable
to raise the financing needed to finance the renewal of the "Holiday Inn"
franchises, there was an immediate risk of loss of the "Holiday Inn"
affiliation, decline in the value of the Inns and default under the Priming
and Mortgage Loans. In order to preserve Unitholder value, the Partnership
entered into an agreement to sell its limited partnership interest in AMI to
an affiliate of Servico, Inc. for $8,000,000 in cash. Immediately following
that transaction (and as required by the terms of the agreement with
Servico), the Partnership is to dissolve and distribute the sale proceeds
(net only of any taxes on the sale) to the Unitholders.
The sale of the Partnership's interest in AMI and the Partnership's
subsequent dissolution both are subject to the consent of the Unitholders.
The Partnership will distribute proxy materials to the Unitholders in the
near future in connection with the solicitation of consents to that sale and
dissolution.
