<PAGE>1
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
(Amendment No. 3)
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to[Sec.] 240.14a-11(c) or[Sec.] 240.14a-12
EQUITABLE REAL ESTATE SHOPPING CENTERS, L.P.
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(Name of Registrant as Specified In Its Charter)
EQUITABLE REAL ESTATE SHOPPING CENTERS, L.P.
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
[ ] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(j)(2).
[ ] $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
[X] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) 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:*
$6,600,000, based on the proposed cash payment to securityholders
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
4) Proposed maximum aggregate value of transaction:
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
* Set forth the amount on which the filing fee is calculated and state
how it was determined.
[X] 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:
$1,320
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2) Form, Schedule or Registration Statement No.:
Preliminary Proxy Materials
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
3) Filing Party:
Equitable Real Estate Shopping Centers, L.P.
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
4) Date Filed:
May 27, 1994
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
<PAGE>2
PROXY MATERIALS
EQUITABLE REAL ESTATE SHOPPING CENTERS L.P.
(a Delaware limited partnership)
3 World Financial Center
New York, New York 10285
(212) 526-3237
SOLICITATION STATEMENT
This Solicitation Statement is being furnished to the unitholders
("Unitholders") of Equitable Real Estate Shopping Centers L.P., a Delaware
limited partnership (the "Partnership"), in connection with the solicitation
of votes by Midwest Centers Inc., a Delaware corporation (the "General
Partner"), on behalf of the Partnership, to consent to (i) the sale (the
"Northland Sale") of the Northland Center in Southfield, Michigan
("Northland") on the terms set forth herein, and (ii) an amendment (the
"Amendment") to the Agreement of Limited Partnership of the Partnership (the
"Partnership Agreement") to eliminate the requirement to obtain Unitholder
consents to the contemplated future sale of Brookdale Center in Brooklyn
Center, Minnesota ("Brookdale"). Such consents are being solicited and shall
be voted upon as a unified proposal. The consents are being solicited in
connection with a plan to sell substantially all of the Partnership's assets
and to dissolve and liquidate the Partnership in an orderly manner.
The Partnership has entered into an Agreement with The Equitable Life
Assurance Society of the United States ("Equitable"), as of March 25, 1994, as
amended on April 21, 1994, for the sale of Northland to Equitable (the
"Northland Agreement"). Pursuant to the Partnership Agreement, the sale of
all or substantially all of the Partnership's assets, which under the
Partnership Agreement will result in the dissolution and ultimately the
liquidation of the Partnership, generally must be approved by holders of a
majority of the Units. The approval of the Unitholders to the Northland Sale
is being sought because the Northland Sale is the first step in a planned
liquidation of the Partnership. It is further contemplated that the
Partnership will seek to sell its remaining property, Brookdale, and
thereafter liquidate the Partnership on an orderly basis. The Amendment is
being proposed to facilitate the anticipated sale of Brookdale, enhance
Brookdale's marketability and save the Partnership the expense and potential
delay of a separate Unitholder consent solicitation in connection with such
sale. The effect of the Amendment will be to authorize the General Partner to
dispose of Brookdale (and Northland if the Northland Sale is not consummated)
upon terms acceptable to the General Partner, in its sole discretion, without
requiring the General
<PAGE>3
Partner to obtain a separate consent from the Unitholders. Under the
Partnership Agreement, the Amendment also requires the approval of holders of
a majority of the Units. If Unitholder consent is not obtained, the Northland
Sale will not be consummated in its present form and the Partnership will have
to re-solicit Unitholders to approve any future sale of all or substantially
all of the Partnership's assets. In such case, the Partnership's ability to
sell the Properties may be limited and the likelihood of a default under the
Notes and a subsequent foreclosure on the Properties will be increased.
The approximate date on which this Solicitation Statement and the
enclosed form of ballot (the "Ballot") are first being mailed to Unitholders
is June 8, 1994. Only persons who were Unitholders on June 7, 1994 (the
"Record Date") will be entitled to submit Ballots with respect to the
proposal. The proposal will be adopted and effective when the General Partner
has received executed Ballots approving the proposal from the holders of more
than 5,350,000 Units, representing a majority of the Units outstanding on the
Record Date. The solicitation will remain open until 5:00 p.m. on June 28,
1994 (the "Approval Date"), unless extended (the "Expiration Date").
Unitholders may revoke any previous Ballot by submitting to the Partnership,
at any time prior to the Expiration of the vote shown on the Ballot or a duly
executed Ballot bearing a later date.
Ballots should be completed, signed and returned promptly to: Service
Data Corporation, 2424 South 130th Circle, Omaha, Nebraska 68144. A
self-addressed, prepaid envelope for return of the Ballots is included with
this Solicitation Statement. This Solicitation Statement is accompanied by a
separate Ballot.
THE GENERAL PARTNER RECOMMENDS THAT UNITHOLDERS CONSENT TO THE NORTHLAND
SALE AND THE AMENDMENT. ANY DULY EXECUTED BALLOT ON WHICH A VOTE IS NOT
INDICATED (EXCEPT BROKER NON-VOTES EXPRESSLY INDICATING A LACK OF
DISCRETIONARY AUTHORITY TO CONSENT) WILL BE DEEMED A CONSENT TO THESE
PROPOSALS. PLEASE SIGN, DATE AND MAIL YOUR BALLOT TODAY!
If you have any questions or need any assistance in connection with the
voting procedures, please call Service Data Corporation ("Solicitor"), which
is assisting the Partnership, at 1-800-223-3464 or the General Partner at 212-
526-3237 (ask to speak with Joan Berkowitz or Robert Hellman).
This Solicitation Statement is dated June 7, 1994.
<PAGE>4
TABLE OF CONTENTS
SUMMARY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
CERTAIN CONSIDERATIONS . . . . . . . . . . . . . . . . . . . . . . . . . 9
THE PLAN TO LIQUIDATE . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Background . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Reasons for the Liquidation . . . . . . . . . . . . . . . . . . . . 17
Disposition and Financing Efforts . . . . . . . . . . . . . . . . . 20
Effect of the Liquidation . . . . . . . . . . . . . . . . . . . . . 23
THE NORTHLAND SALE . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Summary of Terms of the Northland Sale Agreement . . . . . . . . . . 24
Termination of EREIM Asset Management Agreement . . . . . . . . . . 28
Fairness of the Transaction . . . . . . . . . . . . . . . . . . . . 28
Accounting Treatment . . . . . . . . . . . . . . . . . . . . . . . . 30
Federal Income Tax Consequences . . . . . . . . . . . . . . . . . . 30
Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Impact on Future Distributions . . . . . . . . . . . . . . . . . . . 33
Reasons for Obtaining Unitholder Approval . . . . . . . . . . . . . 34
THE AMENDMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Existing Provision . . . . . . . . . . . . . . . . . . . . . . . . . 35
Reasons for the Amendment . . . . . . . . . . . . . . . . . . . . . 35
Effect of the Amendment . . . . . . . . . . . . . . . . . . . . . . 35
Reason for Obtaining Unitholder Approval . . . . . . . . . . . . . . 36
SELECTED HISTORICAL FINANCIAL DATA . . . . . . . . . . . . . . . . . . . 37
RECOMMENDATION OF GENERAL PARTNER . . . . . . . . . . . . . . . . . . . . 42
VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF . . . . . . . . . . . . . 42
MARKET PRICES FOR THE PARTNERSHIP'S UNITS . . . . . . . . . . . . . . . . 42
VOTING PROCEDURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE . . . . . . . . . . . . . 43
FURTHER INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
OTHER MATTERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
<PAGE>5
SUMMARY
The following is a summary description of the Partnership, the
General Partner, the Partnership's business and properties, the Partnership's
plan to liquidate (including the background to such plan), the Northland Sale
and the Amendment, the economic effect of the Northland Sale and the
liquidation on Unitholders, the General Partner's recommendation, and the
consent procedures with respect to this consent solicitation. This summary is
intended to assist Unitholders in reviewing the more detailed information
contained elsewhere in this Solicitation Statement. THE SUMMARY IS QUALIFIED
IN ITS ENTIRETY BY THE MORE DETAILED INFORMATION CONTAINED HEREIN.
Background
Equitable Real Estate Shopping Centers L.P. is a Delaware limited
partnership (the "Partnership") formed in December 1986. Its Units are listed
on the New York Stock Exchange.
The General Partner of the Partnership is Midwest Centers Inc.
(formerly known as Shearson ESC/GP Inc.), a Delaware corporation (the "General
Partner"). The General Partner is an indirect wholly owned subsidiary of
Lehman Brothers, Inc. ("Lehman Brothers").
The Partnership was formed to acquire from The Equitable Life
Assurance Society of the United States ("Equitable") two regional shopping
malls which Equitable had owned since 1978: Northland Center, located in
Southfield (Oakland County), Michigan ("Northland") and Brookdale Center,
located in Brooklyn Center (Hennepin County), Minnesota ("Brookdale")
(together the "Properties").
Northland is a 1,680,000 square foot regional shopping mall located
approximately eleven miles northwest of the central business district of
Detroit. Northland is anchored by three major department stores -- J.C.
Penney, Hudson's and Kohl's.
Brookdale is a 996,000 square foot regional shopping mall located
approximately five miles northwest of the central business district of
Minneapolis. Brookdale is anchored by five major department stores -- Sears,
J.C. Penney, Dayton's, Carson's and Kohl's.
On December 30, 1986, the Partnership completed an offering of
$107,000,000 of limited partnership securities
<PAGE>6
("Units," the holders of which are referred to as "Unitholders") representing
assignments of limited partnership interests in the Partnership (the "Public
Offering").
The Partnership acquired the Properties on December 30, 1986 for a
total purchase price of $130,025,000 ($81,025,000 for Northland and
$49,000,000 for Brookdale). Equitable provided approximately $40,850,000 of
the financing with respect to the Partnership's acquisition of the Properties
($25,675,000 with respect to Northland and $15,175,000 with respect to
Brookdale), which financing was secured by first mortgages on each of the
Properties and by an assignment of the Properties' leases and rents. The
financing was provided in the form of two "zero coupon" notes (the "Notes") on
which interest has accrued but has not been paid since their issuance. As of
March 31, 1994, the Northland Note had an accreted balance of $52,859,956 and
the Brookdale Note had an accreted balance of $31,242,448.
The Proposal to Liquidate
The General Partner believes it is in the best interests of the
Partnership and the Unitholders for the Partnership to dispose of its assets
and dissolve and liquidate in an orderly manner. The General Partner is
therefore proposing that the Unitholders consent to (i) the sale of Northland
to Equitable pursuant to the terms of the Northland Agreement; and (ii) an
amendment to the Partnership Agreement which will enable the Partnership to
dispose of Brookdale without having to incur the cost and potential delay of a
separate solicitation of Unitholder consents in connection with such sale.
The General Partner believes that simplified disposition procedures for
Brookdale will also enhance its marketability. The Unitholders' consent to
the foregoing proposals is being solicited and shall be voted upon as a single
proposal. The Unitholders' consent to the foregoing proposals is being
solicited in connection with a plan to sell substantially all of the
Partnership's assets and to dissolve and liquidate the Partnership in an
orderly manner. If the proposal is adopted, the General Partner intends to
seek to sell Brookdale and dissolve and liquidate the Partnership as promptly
as possible thereafter. If Unitholder consent is not obtained, the Northland
Sale will not be consummated in its present form and the Partnership will have
to re-solicit Unitholders to approve any future sale of all or substantially
all of the Partnership's assets. In such case, the Partnership's ability to
sell the Properties may be limited and the likelihood of a default under the
Notes and a subsequent foreclosure on the Properties will be increased.
<PAGE>7
Reasons for the Proposal to Liquidate. The General Partner believes
it is in the Partnership's best interests to liquidate for the following
reasons:
1. The Notes mature on June 30, 1995, at which time they will have
an aggregate outstanding balance of approximately $95,000,000. The maturity
date may be accelerated if, under the terms of the Notes, the Partnership's
Loan-to-Value Ratio (the ratio of the accreted balance due under either of the
Notes to the annual appraised value of the Property securing such Note) is
more than 90%. Based on recent appraisals obtained by the Partnership with
respect to the Northland Sale, Northland would have complied with its required
Loan-to-Value Ratio as of January 1, 1994, however it may be unable to comply
with such Ratio in the future. The General Partner does not believe that the
Partnership will, at any time prior to the Notes' scheduled or accelerated
maturity, have sufficient cash resources available to repay the Notes, nor
does the General Partner believe, based on current market conditions, that the
Partnership will be able to refinance the Notes prior to their scheduled or
accelerated maturity. A default by the Partnership in repaying the Notes
could result in the Partnership's bankruptcy, the foreclosure by Equitable
under the mortgages securing the Notes, and the ultimate loss by the Partner-
ship of any interest in the Properties.
2. In recent years, the Properties' value has been adversely
affected by the generally adverse climate for real estate values. The recent
economic recession has also had a significant adverse effect on retailers,
including certain of the Properties' tenants. As a result, occupancy at
Northland has been declining since 1990 and at Brookdale since 1992, which
declines may continue. One of the anchor operating agreements at Brookdale
has expired and most of the others expire within the next three years. The
principal anchor at Northland has sent a notice of default under its operating
agreement to the Partnership. The Properties have been experiencing other
adverse operating trends, including increased tenant bankruptcies, a decline
in the quality of the tenant mix at Northland, and consequently, reduced net
operating income. Although the General Partner cannot predict with certainty
the future occupancy and operating trends at the Properties, the General
Partner does not believe that occupancy and operating results at the
Properties can, prior to the Notes' scheduled maturity, be significantly
improved. The General Partner believes that the Properties' value may become
permanently impaired if occupancy rates and operating results continue to
decline.
<PAGE>8
3. The Properties' performance has been, and continues to be,
adversely impacted by their age and condition. Neither of the Properties has
had a major renovation in the last ten years, although Northland's gross
leasable area ("GLA") was expanded to include a food court and certain other
amenities in 1991 (which expansion was financed on a short-term basis by
Equitable), and both Properties were expanded to include a Kohl's department
store in 1988. Such renovation, as well as the other capital improvements
necessary to attract additional anchors and new or replacement tenants, will
typically require significant capital expenditures on the part of the
Partnership. The General Partner does not believe that the Partnership has,
nor in the immediate future will it have, access to independent sources of
capital with which to finance such capital expenditures.
4. The Properties' performance has been, and continues to be,
adversely impacted by the competing properties in the Properties' trade areas.
Certain of these properties are newer than the Properties or have been
recently renovated. The General Partner believes that unless the Properties
are renovated, additional or alternative anchors are attracted to the
Properties, and sophisticated marketing and leasing programs are implemented,
the Properties' competitive position will further erode over time which may
permanently impair their value.
5. The liquidation of the Partnership at this time is consistent
with the Partnership's scheduled investment horizon of eight and one-half
years as contemplated in the Public Offering.
The Northland Sale
Purchase Price. Under the terms of the Northland Agreement, the
Partnership will sell Northland to Equitable for a cash purchase price of
$6,600,000 and Equitable's release of the Partnership from the Note and
mortgage encumbering Northland. As of March 31, 1994, the aggregate balance
of principal and accrued interest payable under such Note was $52,859,956.
Prorations will be computed from January 1, 1994. Additionally, if the sale
should close, any positive cash flows generated by Northland from January 1,
1994 to closing would belong to Equitable. The Partnership will generally be
required to pay all closing costs associated with the transaction, except for
the costs of Equitable's environmental, appraisal, valuation and engineering
reports as well as Equitable's legal expenses.
Termination of Asset Management Agreement. Equitable Real Estate
Investment Management, Inc., an affiliate of Equitable ("EREIM"), terminated
its asset management agreement with the Partnership (the "EREIM Asset
Management Agreement").
<PAGE>9
Under the EREIM Asset Management Agreement, EREIM, as asset manager, had the
responsibility to monitor and supervise operational results of Northland and
Brookdale, evaluate the performance of the Properties, and manage and consult
with the Partnership regarding all strategic property decisions. The General
Partner anticipates that the termination of EREIM's asset management services
will result in approximately $1,500,000 of expense savings to the Partnership
through the scheduled maturity of the Notes. In addition, there will be a
savings of 0.75% of the gross proceeds from the sale of both Properties
because of the termination of the disposition fee in the EREIM Asset
Management Agreement. As a result of the termination of the EREIM Asset
Management Agreement, the Partnership will be required to change its name to
cease using the words "Equitable" and "Equitable Real Estate". EREIM will
also waive its "right of first offer" with respect to a future sale of
Brookdale.
Defeasance Fees. The defeasance requirement of the Note with regard
to Northland is being waived in connection with the Northland Sale. In
addition, the remaining Note will be amended to provide for a waiver of the
defeasance requirement upon the sale of Brookdale, the imposition of a
defeasance fee, and the waiver of such fee under certain circumstances.
Releases. Under the terms of the Northland Agreement, the
Partnership and Equitable will exchange general releases at the closing of the
transaction, pursuant to which each of the parties will release the other from
all obligations other than (i) those arising in connection with the Northland
Sale, (ii) the Partnership's obligations under the Note and mortgage
encumbering Brookdale, which Note and mortgage will be ratified and confirmed
by the Partnership, and (iii) liabilities for cross-claims or third party
claims in the event that an action is brought against the releasing party. In
addition, the Partnership, Equitable and EREIM will enter into agreements
which will provide, among other things, that the Partnership will not
encourage any limited partner of the Partnership to initiate any claim against
Equitable or EREIM.
Closing Conditions. Equitable's obligation to close the Northland
Sale is subject to certain conditions, including among others: (i)
Equitable's entering into a satisfactory agreement with Hudson's for the
continued operation of its store at Northland after the Northland Sale, (ii)
Equitable's entering into a satisfactory agreement with Montgomery Ward and
Company ("Ward's") for the construction and operation of a new Ward's
department store at Northland, (iii) receipt by Equitable of the consent of
EML Associates ("EML"), an affiliate of Equitable, which is a participant in
the Notes, (iv) receipt by Equitable of
<PAGE>10
certain ground lessor and tenant consents, and (v) satisfactory environmental
and other studies being conducted by Equitable. The Partnership's obligation
to close under the Northland Sale is subject to certain conditions, including
its receipt of written consent from Unitholders holding more than 50% in
interest of the Partnership.
Use of Proceeds
In accordance with the terms of the Partnership Agreement, the net
proceeds from the sale of the Properties, after payment of associated
transaction costs and all Partnership indebtedness and the establishment of
reserves in the discretion of the General Partner, are anticipated to be
distributed 99% to the Unitholders and 1% to the General Partner.
The net proceeds of the Northland Sale, after payment of the
associated closing and other transaction costs, applicable prorations, and the
establishment of certain reserves for Northland-related liabilities, are
estimated to be approximately $5,144,131. The Unitholders will be entitled to
receive 99% of such proceeds, (approximately $5,092,689), or approximately
$.48 per Unit. The Partnership will seek to distribute such net proceeds
within 30 days following the closing of the Northland Sale.
Impact on Future Distributions
In 1993, the Partnership generated aggregate cash flow before
financing activities of approximately $10,465,000, which included a deferred
income item of $1,250,000 and a $1,060,000 expense item for the asset
management fees payable to EREIM. The Partnership repaid a short-term
$3,000,000 second mortgage from Equitable and made distributions to the
Unitholders aggregating $5,417,550 ($.50 per Unit). The balance of the
Partnership's cash flow was added to Partnership reserves. On a pro-forma
basis, after giving effect to the Northland Sale as if it had occurred on
January 1, 1993 and excluding the deferred income item and the EREIM asset
management fee, the Partnership generated cash flow before distributions of
approximately $3,268,883 in 1993.
The amount of future distributions will be affected by a number of
factors, including: (i) the anticipated decline in Partnership cash flow as a
result of the Northland Sale, partially offset by the elimination of EREIM's
asset management fee; (ii) the timing and net proceeds (if any) received from
the proposed sale of Brookdale; and (iii) the Partnership's reduced cash
reserve requirements as a result of the Northland Sale and
<PAGE>11
the Partnership's plans to liquidate. As of December 31, 1993, the
Partnership had available cash reserves of approximately $5,897,000. The
General Partner does not currently anticipate a need to significantly increase
such reserves, nor does the General Partner anticipate distributing such
reserves prior to the sale of Brookdale. The General Partner cannot, however,
predict with certainty the amount of any future Partnership distributions.
Accounting Treatment
The Northland Sale is not expected to result in a loss for financial
reporting purposes in 1994, because of the approximately $23,500,000 aggregate
write-downs in Northland's value taken in the 1992 and 1993 fiscal years.
Federal Income Tax Consequences
For federal income tax purposes the sale of Northland will result in
a loss of approximately $8,992,338 or $0.83 per Unit in 1994. This will be a
loss governed by Section 1231 of the Internal Revenue Code of 1986 (the
"Code") which, under certain circumstances can be treated as an ordinary loss,
rather than a capital loss. The Partnership will also incur an expense of
approximately $600,000 in Michigan Single Business Taxes.
The losses from the foregoing items will be passive activity losses
that will be suspended for individuals and other Unitholders that are subject
to the passive activity loss limitation rules of Code Section 469. For such
Unitholders, the suspended passive activity losses can only be used upon a
Unitholder's disposition of his Unit or the Partnership's sale of Brookdale
and its final liquidation.
Fairness Opinion
The Partnership has received from Bear, Stearns & Co., Inc., an
investment banking firm (the "Advisor"), an opinion as to the fairness of the
Northland Sale, from a financial point of view, to the Unitholders. The full
text of the Advisor's opinion is attached as an exhibit to this Proxy
Statement.
The Amendment
Section 7.03(c)(iii) of the Partnership Agreement provides that the
General Partner generally may not, without the prior majority vote of the
Unitholders, cause the Partnership to sell all or substantially all of the
Partnership's assets (the "Selling Limitation"). The General Partner, on
behalf of the
<PAGE>12
Partnership, proposes to eliminate the Selling Limitation by deleting Section
7.03(c)(iii) and all references thereto from the Partnership Agreement so that
all remaining Partnership assets, including Brookdale, may be sold without the
expense and potential delay of a separate Unitholder consent solicitation
statement. The General Partner believes that elimination of the Selling
Limitation will also simplify the procedures associated with the sale of
Brookdale and therefore enhance Brookdale's marketability.
Approval of the Amendment is not conditioned upon the closing of the
Northland Sale. Accordingly, if approved by the requisite majority of the
Units, the Amendment will be effective whether or not the Northland Sale is
ultimately consummated as set forth herein. The effect of the Amendment will
be to authorize the General Partner to dispose of Brookdale (and Northland if
the Northland Sale is not consummated) upon terms acceptable to the General
Partner, in its sole discretion, without requiring the General Partner to
obtain a separate consent from the Unitholders.
Reason for Obtaining Unitholder Consents
The Northland Sale represents the first step in a contemplated sale
by the Partnership of substantially all of its assets and accordingly, under
the terms of the Partnership Agreement, requires the approval of holders of a
majority of the outstanding Units. The Amendment similarly requires, under
the terms of the Partnership Agreement, the approval of holders of a majority
of the outstanding Units. If Unitholder consent is not obtained, the
Northland Sale will not be consummated in its present form and the Partnership
will have to re-solicit Unitholders to approve any future sale of all or
substantially all of the Partnership's assets. In such case, the
Partnership's ability to sell the Properties may be limited and the likelihood
of a default under the Notes and a subsequent foreclosure on the Properties
will be increased.
General Partner's Recommendation
The General Partner recommends that Unitholders CONSENT to the
Northland Sale and the Amendment.
<PAGE>13
CERTAIN CONSIDERATIONS
Unitholders should consider the following additional matters prior
to submitting their Ballots:
Appraisal. Cushman & Wakefield, Inc. ("Cushman & Wakefield"), an
independent appraisal firm retained by the Partnership to appraise Northland
in connection with the Northland Sale, appraised the Property pursuant to an
appraisal, dated April 11, 1994 (the "April Appraisal"), at $58,000,000 as of
January 1, 1994. The April Appraisal appraised Northland on as "as-is" basis,
which assumed that Ward's would not be a tenant at Northland. On May 11,
1994, Cushman & Wakefield submitted a letter update (the "May Update") to the
April Appraisal. The May Update contained a special assumption that Ward's
takes occupancy as an anchor tenant at July 1, 1995, as is contemplated by the
Northland Agreement (see "The Northland Sale - Conditions Precedent to the
Obligations of Equitable"), and also appraised Northland at $58,000,000 as of
January 1, 1994. The requirement that the Partnership submit an appraisal of
Northland under the Northland Note was deferred by Equitable until 30 days
after termination of the Northland Agreement by either party.
Cushman & Wakefield also appraised Brookdale at $47,500,000 as of
January 1, 1994. This appraisal has been submitted to Equitable under the
terms of the Brookdale Note. Under the Brookdale Note, as of January 1, 1993,
Brookdale was appraised at $55,000,000.
The General Partner believes that appraisals are only estimates of
current value and actual values realizable upon a sale may be significantly
different. A significant factor in establishing an appraised value is the
actual selling price for properties which the appraiser believes are
comparable. Because of the nature of the Properties, and the limited market
for properties of such type, there can be no assurance that the other
properties reviewed by the appraiser are comparable. Under the Northland
Note, as of January 1, 1993, Northland was appraised at $75,000,000 (the "1993
Appraisal"). The 1993 Appraisal assumed certain favorable developments at the
Property, which developments did not subsequently materialize, and did not
project certain adverse developments which did, in fact, occur at the
Property.
Relationships with Equitable. An affiliate of Lehman Brothers and
the General Partner is the general partner of Properties, L.P., a public
limited partnership which owns four Marriott Hotels. Equitable holds first
mortgages in the aggregate amount of approximately $80,000,000 on such
properties,
<PAGE>14
and EREIM performs asset management services for that partnership which are
similar to the asset management services which it performed for the
Partnership. An affiliate of Lehman Brothers and the General Partner is the
General Partner of Capital Growth Mortgage Investors, L.P., a public limited
partnership which specializes in mortgages. Equitable holds a first mortgage
on a property in the aggregate amount of approximately $36,000,000 for which
Capital Growth holds a second mortgage in the aggregate amount of
approximately $33,000,000.
Affiliates of Equitable own three malls which are located in the
vicinity of the Properties: in the Minneapolis area, Southdale, located
approximately 10 miles south of Brookdale, which is not a direct competitor of
Brookdale, and Rosedale Center, located approximately 10 miles southeast of
Brookdale, which is a direct competitor of Brookdale and contains 1,400,000
square feet of GLA; and in the Detroit area, Eastland Center, located
approximately 13 miles east of Northland, which contains 1,310,383 square feet
of GLA. The General Partner does not believe that Eastland Center's primary
trade area overlaps that of Northland.
<PAGE>15
THE PLAN TO LIQUIDATE
Background
Description of the Partnership and the Partners. The Partnership is
a Delaware limited partnership formed as of October 28, 1986. The term of the
Partnership expires June 30, 2000 unless the term of the Partnership is
extended or the Partnership is sooner dissolved. The Partnership maintains
its principal offices at 3 World Financial Center, New York, New York 10285.
The original name of the General Partner was Shearson ESC/GP Inc., a
Delaware corporation. On July 31, 1993, Shearson Lehman Brothers, Inc. sold
certain of its domestic retail brokerage and asset management business to
Smith Barney, Harris Upham Co., Incorporated ("Smith Barney"). The
transaction did not affect the ownership of the General Partner. However, the
assets acquired by Smith Barney included the name "Shearson." Accordingly,
subsequent to the sale, Shearson Lehman Brothers Inc. changed its name to
Lehman Brothers, Inc. and the General Partner changed its name to Midwest
Centers, Inc., to delete any references to "Shearson." The General Partner is
an indirect wholly owned subsidiary of Lehman Brothers.
Midwest Centers Depositary, Inc. (formerly: Shearson ESC Corp.)
(the "Assignor Limited Partner"), an affiliate of Lehman Brothers, is the sole
limited partner of the Partnership. The Units represent assignments of
limited partnership interests from the Assignor Limited Partner. Pursuant to
the terms of the Partnership Agreement, the Assignor Limited Partner will vote
its limited partnership interests in the Partnership in accordance with the
Ballots received from the Unitholders. As of the Record Date there were
10,700,000 Units outstanding and entitled to cast Ballots in connection with
the proposals set forth herein.
The Properties were purchased on December 30, 1986 from Equitable.
The Properties consist of two regional shopping malls known as Northland
Center ("Northland"), located in Southfield, Oakland County, Michigan; and
Brookdale Center ("Brookdale"), located in Brooklyn Center, Hennepin County,
Minnesota. Equitable had owned the Properties since 1978.
Northland. Northland is a regional shopping mall located approxi-
mately eleven miles northwest of the central business district of Detroit.
Northland is anchored by three major department stores -- J.C. Penney,
Hudson's and Kohl's, all located on a site of approximately 129 acres.
Northland contains approximately 1,680,000 square feet of retail space, of
which
<PAGE>16
approximately 876,647 square feet is owned by the anchors, and 301,658 square
feet is secondary storage space which is largely unleased. Northland has
parking for approximately 9,700 automobiles. Northland was originally
constructed in 1954. The mall was enclosed, modernized and expanded in 1974
and further expanded in 1981. A food court and other amenities were added in
1991.
The General Partner believes that the anchors at its Properties are
a critical factor to the Properties' success. The public's identification
with a retail property typically focuses on its anchors. Although the
Properties derive most of their operating income from their mall stores rather
than from their anchors, strong anchors play an important part in generating
customer traffic and making the Properties desirable locations for mall store
tenants. The anchors either own their stores, the land under them and
adjacent parking areas, or enter into long-term leases with respect to their
stores at rates that are significantly lower than the rents charged to mall
store tenants. Each anchor which owns its own store has entered into a
reciprocal easement agreement with the Partnership covering, among other
things, operating covenants, reciprocal easements and Property operations.
Anchors typically pay a portion of their Property's common area maintenance
charges which generally is in proportion to the square footage in its store
with the Property's total retail space.
J.C. Penney owns its approximately 295,000 square foot store and
leases the land from a third party. Under its operating agreement, J.C.
Penney has agreed to continuously operate as a retail store under the name
under which a majority of J.C. Penney stores operate until October 26, 1997,
provided that the Hudson's store so continuously operates.
Hudson's owns its approximately 512,000 square foot store and the
underlying land. Hudson's operating agreement terminates on November 25,
2000. In March 1993, Hudson's sent a default notice to the Partnership
alleging that the vacancy rates at Northland represented a breach of the
Partnership's obligations under Hudson's operating agreement. Hudson's
conditionally agreed to terminate its default notice and to extend its
operating agreement until 2004 in exchange for the Partnership's agreement to
allow Hudson's to reduce the size of its store from 500,000 square feet to
300,000 square feet and other concessions. Prior to this proposed amendment
becoming effective, Hudson's alleged that certain conditions in the proposed
amendment, including the successful conclusion of negotiations with Ward's,
had not been satisfied. See "Disposition and Financing Efforts" below. As a
result, Hudson's
<PAGE>17
again threatened to cease operations at Northland. The Partnership believes
that the allegations in Hudson's default notice are without merit. If
Hudson's were to cease operations at its Northland store, it would have a
material adverse effect on that Property's operations and value.
Kohl's owns its approximately 71,000 square foot store and leases
the underlying land from the Partnership. Kohl's initial lease term expires
January 31, 2004. Kohl's has three successive options to extend the term of
the lease for additional periods of five years each.
Northland contains 435,252 square feet of mall store GLA (which
excludes anchor stores and outparcel stores owned by their occupants). The
following table sets forth (i) the percentage of mall store GLA leased, (ii)
the average mall store base rent per square foot, and (iii) the average sales
per square foot at "mature" mall stores (i.e., mall stores open and operating
out of the same store for more than 12 months) in each of the last three
years:
<TABLE>
<CAPTION>
Percentage GLA Leased Base Rent Per Square Foot Mature Tenant Sales Per Square Foot
Year
<S> <C> <C> <C>
1991 79% $18.91 $234
1992 73% $19.43 $265
1993 71% $18.42 $262
</TABLE>
The following table shows the scheduled mall store lease expirations
at Northland for the year ended December 31, 1994 and for the following three
years:
<TABLE>
<CAPTION>
Percent of GLA of
Number of Leases Base Rent of Expiring Average Base Rent Per Expiring Leases
Expiring Leases Square Foot
Year
<S> <C> <C> <C> <C>
1994 7 $237,030 16.19 3.36%
1995 13 $523,788 27.62 4.36%
1996 16 $788,751 17.00 10.66%
1997 14 $630,252 21.85 6.63%
</TABLE>
Northland's major competition comes from six suburban malls which
range in distance from five to fourteen miles from Northland. Three of these
shopping centers have recently undergone renovations, expansions and
remerchandising. Northland
<PAGE>18
also competes for customers with a variety of local shops and merchants.
Brookdale. Brookdale is a regional shopping mall located approxi-
mately five miles northwest of the central business district of Minneapolis.
Brookdale is anchored by five major department stores -- Sears, J.C. Penney,
Dayton's, Carson's and Kohl's, all located on a site of approximately 81
acres. Brookdale contains approximately 996,000 square feet of retail space,
of which approximately 784,000 square feet is owned or leased by the anchors.
Brookdale has parking for approximately 5,000 automobiles. Brookdale was
constructed in 1962, underwent major expansion in 1966, and was refurbished in
1970 and again in 1983.
Sears, which owns its approximately 181,000 square foot store and
underlying land, is subject to an operating agreement which requires it to
operate a Sears store in its main building until May 1997.
J.C. Penney leases its approximately 140,000 square foot building
and the land on which its building is constructed from a third party which
leases the land from the Partnership until July 27, 2015; however, it has the
option to terminate the lease on either July 27, 1995 or July 27, 2005.
Pursuant to its operating agreement, J.C. Penney is generally required to
operate a J.C. Penney-type department store until July 27, 1995.
An affiliate of Carson's owns the approximately 144,000 square foot
store and underlying land and Carson's leases from the Partnership an
additional 15,952 square feet of space at the mall entrance to Carson's store.
Under the terms of an agreement concluded with the Partnership in 1993,
following the bankruptcy of Carson's parent company, (i) Carson's lease
expiration was accelerated to 1994, (ii) Carson's operating agreement with
respect to its owned space was extended to 2003, (iii) the Partnership agreed
to reconfigure the mall entrance to Carson's store, and (iv) Carson's paid the
Partnership $1,250,000, representing the amount budgeted for the
reconfiguration of Carson's mall entrance and lease space following the
accelerated termination of Carson's lease.
Dayton's approximately 195,000 square foot store and underlying land
are owned by Dayton Development Company ("DDC"), an affiliate of Dayton's,
which leases the land and building to Dayton's. DDC's lease to Dayton's runs
through July 31, 1996. DDC and Dayton's are subject to an operating agreement
that generally requires Dayton's to operate a Dayton's store in the Dayton's
building until July 31, 1996.
<PAGE>19
Kohl's owns its 75,000 square foot store and leases land from the
Partnership. Kohl's initial lease term expires January 31, 2010 with two
five-year renewal options. Kohl's obligation to operate a store terminated on
August 1, 1993.
Brookdale contains 205,842 square feet of mall store GLA plus 4,993
square feet of storage space. The following table sets forth (i) the
percentage of mall store GLA leased, (ii) the average mall store base rent per
square foot, and (iii) average sales per square foot at "mature" mall stores
in each of the last three years:
<TABLE>
<CAPTION>
Percentage GLA Leased Base Rent Per Square Foot Mature Tenant Sales Per Square Foot
Year
<S> <C> <C> <C>
1991 98% $21.02 $255
1992 96% $29.39 $282
1993 83% $21.22 $285
</TABLE>
The following table shows the scheduled mall store lease expirations
at Brookdale for the year ended December 31, 1994 and for the following three
years:
<TABLE>
<CAPTION>
Percent of GLA of
Number of Leases Base Rent of Expiring Average Base Rent Per Expiring Leases
Expiring Leases Square Foot
Year
<S> <C> <C> <C> <C>
1994 11 $451,104 34.83 6.31%
1995 5 $147,288 38.05 1.89%
1996 10 $339,964 20.20 8.20%
1997 7 $286,032 22.77 6.12%
</TABLE>
The Minneapolis-St. Paul metropolitan area contains 17 regional
shopping centers containing a total of 14 million square feet of retail space.
Brookdale, which is located in a northern suburb of Minneapolis, competes
directly with three shopping centers - Northtown Mall, Rosedale Center and
Ridgedale Center. Brookdale also competes for customers with a variety of
local shops and merchants.
On August 11, 1992, a super-regional center, Mall of America, opened
in Bloomington, approximately 8.25 miles from downtown Minneapolis and
approximately 14.25 miles southeast of Brookdale. The 4.2 million square foot
center is anchored by Nordstrom's, Bloomingdale's, Sears and R.H. Macy & Co.,
Inc., among others. Although the General Partner believes that Mall of
<PAGE>20
America has had a substantial adverse effect on many of the regional shopping
centers within its trade area, the General Partner cannot predict its long-
term impact, if any, on sales at Brookdale which the General Partner does not
believe to be within the mall's primary trade area.
Financing of the Partnership. The Partnership acquired the
Properties for a total purchase price of $130,025,000 ($49,000,000 for
Brookdale and $81,025,000 for Northland). To finance the acquisition, the
Partnership issued to Equitable on December 30, 1986, a note (the "Northland
Note") in the initial principal amount of $25,675,000 and a note (the
"Brookdale Note," and, together with the Northland Note, the "Notes") in the
initial principal amount of $15,175,000. Both of the Notes have an interest
rate of 10.2% per annum, compounded semiannually. The Notes are so called
"zero coupon" notes on which interest accrues but, at the election of the
Partnership, is not currently payable until June 30, 1995, their maturity
date, at which time a balloon payment of principal and accrued interest will
be due and payable. To date, the Partnership has made no payment of interest
or principal on account of the Notes. Assuming the Partnership makes no
payment of interest or principal on account of the Notes prior to their
maturity date, the amount due on the maturity date under the Northland Note
and Brookdale Note will be $59,841,061 and $35,368,573, respectively.
Each of the Notes is secured by a first mortgage on its respective
Property and by an assignment of such Property's leases and rents. The Notes
are otherwise non-recourse to the Partnership's other assets, partners and
Unitholders. Each of the Note's principal and accrued but unpaid interest is
due upon the sale of its encumbered Property or an event of default under the
Note. Each of the Notes contains various covenants of the Partnership which,
among other things, require the maintenance of a Loan-to-Value Ratio (the
ratio of the accreted value of the Note to the respective Property's annual
appraised value) of not greater than 90%, restrict the use of proceeds from
the sale of the Property securing the Notes, restrict the incurrence of
additional indebtedness by the Partnership and other liens on the Property,
and restrict certain changes in the General Partner. Failure by the
Partnership to satisfy any of a Note's covenants represents a default under
such Note (subject, in certain cases, to notices of default and applicable
cure periods). The Notes are cross-defaulted, so that a default under the
Northland Note will constitute a default under the Brookdale Note. The Notes
are not cross-collateralized so that the Northland Note is secured only by
Northland and the Brookdale Note is secured only by Brookdale.
<PAGE>21
The Notes currently provide that they may be defeased by depositing
an amount in a separate account or with a fiduciary cash or government
securities which is assured of having a value, as of the maturity date of the
Note being defeased, equal to the principal balance and all accrued but unpaid
interest as of such maturity date.
Reasons for the Liquidation
The General Partner believes that it is in the best interests of the
Partnership and the Unitholders for the Partnership to dispose of its assets
and dissolve and liquidate in an orderly manner. The specific factors which
the General Partner considered in arriving at such conclusion include the
following:
Maturation of Partnership Indebtedness. On their scheduled maturity
date, the Notes will have an aggregate outstanding balance of approximately
$95,000,000. The General Partner does not believe that the Partnership will,
at any time prior to the Notes' scheduled maturity, have sufficient cash
resources available to repay the Notes, and the General Partner believes,
based on current market conditions and its prior efforts to obtain financing
for the Partnership, that it is unlikely that the Partnership will be able to
refinance the Notes prior to their scheduled maturity. A default by the
Partnership in repaying the Notes could result in the Partnership's
bankruptcy, the foreclosure by Equitable under the mortgages securing the
Notes, and the ultimate loss by the Partnership of any interest in the
Properties.
Furthermore, the Notes provide that their maturity date will be
accelerated in the event the Partnership's Loan-to-Value Ratio is more than
90%. The Properties' values, and related Note balances, are appraised for
this purpose on or before February 15th of each loan year. Cushman and
Wakefield, the independent appraisal firm retained by the Partnership to
appraise Northland in connection with the Northland Sale, appraised the
Property at $58,000,000. The requirement that the Partnership submit an
appraisal of Northland under the Northland Note was deferred until 30 days
after the termination of the Northland Agreement by either party. Based on
the accreted value of the Northland Note on January 1, 1994 ($51,545,545),
Northland would have complied with its required Loan-to-Value Ratio on January
1, 1994. However, if the Northland Sale is not consummated, Northland's
appraised value may fail to satisfy the required Loan-to-Value Ratio based
upon the accreted value of the Northland Note in the future. Under the terms
of the Northland Note, the Partnership may post cash or government securities
as substitute collateral
<PAGE>22
in order to satisfy the Loan-to-Value requirement. If the Partnership failed
to restore the Loan-to-Value Ratio, Equitable could seek to accelerate the
Northland Note. A default by the Partnership under the Northland Note would
trigger a cross-default under the Brookdale Note.
Decline in Occupancy and Operating Results. In recent years, the
value of the Properties has been negatively affected by the generally adverse
climate for real estate values. The recent economic recession has also had a
significant adverse effect on retailers, including certain of the Properties'
tenants. For example, in 1993 alone, six Northland tenants representing
27,731 square feet of mall store GLA, and two Brookdale tenants representing
12,398 square feet of mall store GLA, filed for bankruptcy. As a result,
occupancy rates and, consequently, net operating income at each of the Proper-
ties has declined significantly since 1991, and such decline may continue.
Base rents have also declined since 1992, and such decline is likely to
continue as above-average base rent leases expire. Leases representing
approximately 24% of Northland's mall store GLA and 21% of Brookdale's mall
store GLA are scheduled to expire through 1997.
An additional factor in the Properties' operating results has been
the gradual change in Northland's tenant mix resulting from the growing number
of lease terminations by national retailers. National retailers typically
represent high-credit, high-profile and "traffic-generating" tenants.
Most of the anchors' operating agreements at Brookdale expire or may
be terminated by the anchor within the next three years, including the J.C.
Penney and Dayton's operating agreements. Kohl's operating agreement at
Brookdale expired in 1993. The expiration of such operating agreements would
allow the anchors, among other things, to cease operating their stores, which
would likely result in a decline in mall traffic and cash flow, as well as
have a material adverse effect on future mall store leasing efforts.
Hudson's, the principal anchor at Northland, has sent a notice of
default under its operating agreement to the Partnership. If Hudson's were to
cease operating its Northland store, it would have a material adverse effect
on the operations of the Property and its value. If Hudson's were to cease
operating its Northland store, J.C. Penney's operating agreement at Northland
could be terminated and many other tenants could terminate their leases if
Hudson's and J.C. Penney's were to close. The General Partner believes that
it would be extremely difficult to
<PAGE>23
effectively replace Hudson's as an anchor because of its size and location in
the Property's configuration.
Although the General Partner cannot predict with certainty the
future occupancy and operating trends at the Properties, the General Partner
does not believe that occupancy and operating results at the Properties can,
prior to the Notes' scheduled maturity, be significantly improved. The
General Partner believes that the Properties' value will continue to decline
in the immediate future and may become permanently impaired if occupancy rates
and operating results continue to decline.
Capital Requirements. The Properties' performance has been
adversely affected by their age and condition. Neither of the Properties has
had a major renovation in the last ten years, although Northland was expanded
to include a food court and certain other amenities in 1991 and both
Properties were expanded to include a Kohl's department store in 1988. The
General Partner believes that the ability to fund such renovation, as well as
to bear site preparation, construction, tenant improvements and related
capital costs and leasing commissions, will be necessary in order to attract
additional anchors and new or replacement tenants to the Properties. The food
court expansion at Northland was financed with a short-term $3,000,000 second
mortgage from Equitable, which second mortgage was repaid out of the
Partnership's operating cash flow in 1993. As of March 31, 1994, the
Partnership had available cash reserves of approximately $7,180,377 which the
General Partner does not believe would be sufficient to complete a meaningful
renovation program at either of the Properties. Based on current market
conditions and its experience in seeking to secure financing for the
Partnership, the General Partner does not believe that the Partnership has,
nor in the immediate future will it have, access to independent sources of
capital with which to finance such capital expenditures.
Competition. The Properties' performance has been adversely
impacted by the many competing properties in the Properties' trade areas.
Certain of these properties are newer than the Properties or have been
recently renovated. The General Partner believes that unless the Properties
are renovated, additional or alternative anchors are attracted to the
Properties, and sophisticated marketing and leasing programs are implemented,
the Properties' competitive position will further erode over time which may
permanently impair their value.
Scheduled Liquidation. The Partnership's acquisition of the
Properties, and the financing of such acquisition, were
<PAGE>24
structured so as to require the Partnership to sell or refinance the
Properties on or before June 30, 1995, the scheduled maturity date of the
Notes. Accordingly, the Partnership's prospectus with respect to the Public
Offering contemplated that the Partnership would likely seek to hold the
Properties for approximately eight and one-half years after the Public
Offering, which was completed at the end of 1986. Moreover, under the
Partnership Agreement, the Partnership's term was to expire on June 30, 2000
(subject to extension in certain events), in connection with which the
Partnership's assets were to be sold and the Partnership was to be liquidated.
Thus, the liquidation of the Partnership at this time is consistent with the
Partnership's scheduled investment horizon.
Disposition and Financing Efforts
On July 30, 1990, the General Partner announced in a press release
that it was exploring the possible sale of one or both of the Properties.
With the approval of the General Partner's outside directors, the Partnership
engaged Lehman Brothers, an affiliate of the General Partner, to advise and
assist the Partnership in connection with the possible sales. In connection
with such engagement, the General Partner had not yet decided to seek the
liquidation of the Partnership, but rather, was seeking to ascertain whether
one or both of the Properties could be sold at an acceptable price, consistent
with the Partnership's objective of seeking to achieve long-term appreciation
in value from its investments. Lehman Brothers solicited indications of
interest from numerous prospective buyers, and received several for Brookdale,
none of which the General Partner believed to be acceptable. No indications
of interest were received for Northland. Lehman Brothers' engagement
terminated on May 15, 1991 and the disposition effort was abandoned.
Commencing in September 1992, and through the first three quarters
of 1993, the General Partner sought to conclude arrangements with Ward's to
convert approximately 120,000 square feet of Northland mall store space into
anchor space for Ward's. The total budget for this project was approximately
$20,000,000, which included the costs of a Property renovation program as well
as costs associated with relocating a tenant in the mall store space
designated for Ward's. The General Partner then approached Equitable with the
proposal that Equitable (i) finance the project, (ii) add the financing
proceeds to the amounts due under the Northland Note and (iii) extend the
maturity of both Notes until June 30, 1997. Equitable agreed to the proposal
subject to (1) interest under the Notes becoming payable, rather than
accruing, during the extension period, and (2) the Partnership
<PAGE>25
securing an extension of Hudson's operating covenants until 2004 or the
Partnership investing 25% of the project costs as additional equity in
Northland. The General Partner determined to reject Equitable's proposal
because it would require a significant depletion of the Partnership's cash
reserves and would effectively preclude the Partnership from making cash
distributions after June 1995, without the assurance of a commensurate long-
term economic return to the Partnership. Accordingly, in the first quarter of
1994, the Partnership has also suspended its negotiations with Ward's.
As of September 30, 1993, Equitable ceased accruing interest income
from the Northland Note. Equitable's action has no effect on the Part-
nership's obligations under the Northland Note.
On October 25, 1993, the Partnership, with the approval of the
General Partner's outside directors, again retained Lehman Brothers to advise
and assist the Partnership in connection with a possible sale of the
Properties and the liquidation of the Partnership. The selection of Lehman
Brothers was based on, among other things, its past association with the
Properties and its familiarity with their operations. Lehman Brothers was not
instructed by the General Partner to seek a minimum price for any of the
Properties. Lehman Brothers made suggestions to the General Partner as to the
minimum price ranges which the General Partner should anticipate for the
Properties.
Lehman Brothers advised the General Partner that Lehman Brothers did
not believe that a broad marketing effort with respect to Northland would be
successful based upon Lehman Brothers' prior marketing experience with respect
to the Property and based upon the continued deterioration in Northland's
occupancy and operating results since that time. Instead, Lehman Brothers
recommended that it approach Equitable to acquire the Property as a means of
protecting the value of Equitable's investment in the Northland Note and the
Property. Lehman Brothers recommended that Brookdale be broadly marketed,
including to Equitable. The General Partner approved Lehman Brothers'
marketing strategy.
Accordingly, Lehman Brothers and the General Partner met with
representatives of Equitable in November 1993. Equitable agreed that it was
interested in reacquiring the Property so as to preserve its investment, and
that it would be prepared to incur the necessary additional capital
expenditures with respect to the Property provided that (a) Hudson's would
withdraw its default notice and agree to the extension of its operating
agreement as originally proposed by the Partnership, and (b) the
<PAGE>26
negotiations with Ward's could be successfully concluded. The suggestion that
Equitable also acquire Brookdale was similarly discussed, however Equitable
has to date given no indication of its interest to acquire that Property, and
EREIM has waived its right of first offer under the EREIM Asset Management
Agreement.
In December 1993, Hudson's again threatened to cease operations at
Northland.
Representatives of Lehman Brothers, the General Partner and
Equitable continued to negotiate the principal terms of an agreement. On
January 19, 1994, Equitable and the Partnership entered into a non-binding
letter of intent with respect to Equitable's proposed acquisition of Northland
(the "Letter of Intent"). The Partnership immediately published a press
release and filed with the Securities and Exchange Commission ("SEC") a notice
on Form 8-K with respect to the Letter of Intent. The Partnership's press
release and filing on Form 8-K contained copies of the Letter of Intent and
clearly indicated that it was non-binding pending the satisfaction of certain
conditions, including the execution of definitive transaction documents.
Subsequent to the execution of the Letter of Intent, representatives
of the parties and their counsel worked towards concluding a definitive
agreement embodying the terms of the Letter of Intent. Equitable and the
Partnership executed the Northland Agreement as of March 25, 1994. Between
the date of the Partnership's press release with respect to the Letter of
Intent and the execution of the Northland Agreement, the Partnership received
no indications of interest to acquire Northland from any other party.
The General Partner believes that, since the execution of the
Northland Agreement, Equitable has commenced negotiations with Hudson's and
Ward's in an effort to satisfy the conditions of the Northland Agreement.
Since the November 1993 meeting with Equitable, Lehman Brothers has
continued to seek prospective purchasers for Brookdale. Lehman Brothers has
advised the General Partner that the Partnership may be able to maximize the
value received for Brookdale through the exchange of the Property for the
securities of a publicly-traded real estate investment trust ("REIT"). To
date, however, no proposals to acquire the Property have been received by the
General Partner.
If the Northland Sale is consummated, Lehman Brothers will receive a
sales commission of $508,774, equal to 0.875% of the aggregate purchase price
of that Property. An additional fee
<PAGE>27
equal to 0.875% of the purchase price will be payable to Lehman Brothers in
the event a sale of Brookdale is consummated through Lehman Brothers' efforts.
The Lehman Brothers fee arrangements have, pursuant to the provisions of the
Partnership Agreement, been approved by the General Partner's independent
directors which found the terms of such arrangement to be fair to the
Partnership and not less favorable to the Partnership than those generally
prevailing with respect to comparable transactions between related parties.
In considering the fairness of the fee, the independent directors considered,
among other things, Lehman Brother's assistance in obtaining various
concessions from Equitable, including the waiver of the Brookdale defeasance
requirement and the waiver of EREIM's asset management fee and right of first
offer with respect to Brookdale. Neither Lehman Brothers, nor any of its
affiliates, will receive any other compensation or benefit from the Partner-
ship as a result of the Partnership's liquidation, other than the benefits to
be derived by the General Partner through its partnership interest in the
Partnership.
Effect of the Liquidation
After the sales of Northland and Brookdale, the Partnership will,
under the terms of the Partnership Agreement, be dissolved. The General
Partner will become the Liquidating Trustee for the Partnership. Pursuant to
the Partnership Agreement, the General Partner, as Liquidating Trustee, will
apply and distribute the Partnership's available cash balances in the
following order of priority: (a) to pay (or make provision for the payment
of) all creditors of the Partnership, other than the Partners; (b) to pay, on
a pro rata basis, all creditors of the Partnership that are Partners, and (c)
after the payment (or the provision for payment) of all debts, liabilities and
obligations of the Partnership, to the General Partner and Unitholders in
accordance with their respective capital account balances, as adjusted for all
Partnership operations up to and including the liquidation.
The Partnership will terminate when (a) all the assets of the
Partnership have been converted into cash, (b) the liquid assets of the
Partnership, after payment or due provision for all debts, liabilities and
obligations of the Partnership, have been distributed to the Partners as set
forth above, and (c) the Certificate of Limited Partnership of the Partnership
has been cancelled in the manner required under Delaware law.
<PAGE>28
THE NORTHLAND SALE
Summary of Terms of the Northland Sale Agreement
General
The Partnership entered into the Northland Agreement with Equitable
as of March 25, 1994. Exhibits to the Agreement continue to be finalized.
The consideration to be paid by Equitable is $6,600,000 plus the release and
discharge of the Northland Note which, as of March 31, 1994, had a balance of
$52,859,956 (as of December 31, 1993 - $51,545,545). The $6,600,000 cash
portion of the purchase price represented approximately the present value of
the funds available for distribution from Northland which the General Partner
estimates would have been generated prior to the maturity of the Northland
Note on June 30, 1995, but for the Northland Sale. Equitable is waiving the
obligation of the Partnership to defease the Northland Note. The closing date
is scheduled to be no later than June 15, 1994, subject to certain rights of
extension to June 30, 1994, but the effective date of the sale will be January
1, 1994 with respect to all prorations of rent and other items of income and
expense.
Conditions Precedent to the Obligations of Equitable
The obligations of Equitable to acquire Northland are subject to
numerous conditions which Equitable must use its good faith efforts to
satisfy. Certain of these conditions involve negotiations with third parties,
and there can therefore be no assurance that these conditions will be
satisfied. As discussed elsewhere, Hudson's has notified the Partnership that
it is in default under Hudson's operating agreement. One of the conditions to
Equitable's obligations under the Northland Agreement is Equitable's
successful resolution of that dispute, a release of any claims against the
Partnership and a long-term extension of Hudson's Operating Agreement on terms
acceptable to Equitable in its sole discretion.
Equitable's obligations are also conditioned upon Ward's agreeing to
open another anchor store occupying more than 120,000 square feet at Northland
on terms and conditions acceptable to Equitable in its sole discretion. The
Partnership has been informed by Equitable that Ward's has conditioned any
such agreement upon all work with respect to the store being completed in time
sufficient to allow its Northland store to open by November 1994. Another
condition is the consent of EML to join with Equitable in the acquisition of
Northland on terms acceptable to Equitable. EML is a participant with
Equitable in
<PAGE>29
the Northland Note, and Equitable is seeking EML's participation in the
Northland acquisition in the same proportion as EML retains in the Note. To
obtain the consent of EML, Equitable will have to obtain the consent of EML's
partners, ML/EQ Real Estate Portfolio, L.P., a public partnership affiliated
with Merill Lynch, Pierce Fenner & Smith Incorporated ("ML/EQ"), and the
partners thereof, and EREIM. The Partnership has also been informed by
Equitable that ML/EQ is conditioning its consent to such transaction upon
first obtaining an independent "fairness opinion" with respect to the
transaction's terms.
Finally, the Northland Agreement is conditioned upon the
satisfactory completion prior to the closing of any due diligence which
Equitable deems necessary. Any engineering, environmental, valuation or other
reports required to satisfy Equitable shall be paid by Equitable.
Conditions Precedent to the Obligations of the Partnership
The obligation of the Partnership to close on the Northland
Agreement is conditioned upon the Partnership receiving the consent of holders
of a majority of the Units. In the event that the consent of such majority
of the Unitholders is not obtained, the Partnership can and will terminate the
Northland Agreement. The General Partner believes that the Northland Sale is
entitled to a bona fide debt workout exemption from the Hart-Scott-Rodino
Antitrust Improvement Act of 1976.
Costs and Expenses
The Partnership is required to pay all ordinary and reasonable costs
incurred in closing the sale of Northland, including a broker's commission to
Lehman Brothers, transfer taxes, recording taxes, title insurance and a
certified survey. A detailed estimate of these expenses is set forth under
"Use of Proceeds." Equitable must pay for its own attorneys, engineer,
environmental consultant and any other expert employed by Equitable.
Representations, Warranties and Covenants of the Partnership
The Partnership has made customary representations and warranties
including, among others, that (i) the Partnership has the power and authority
to enter into the Northland Agreement and sell the Property, (ii) except as
noted, Northland is in compliance with all material laws, (iii) to the best
knowledge of the Partnership, all licenses and permits necessary for Northland
to operate its business have been obtained, (iv) through the closing, the
Partnership will maintain Northland in substantially
<PAGE>30
the same condition, (v) that all leases are properly described and, except as
noted, no leases are in default and no claims exist against the Partnership by
tenants, (vi) Northland is and will remain insured until closing, (vii) all
service contracts on Northland have been properly described and are not in
default, (viii) to the best of the Partnership's knowledge, there are no
hazardous materials on or about the Property except for those that exist in
accordance with applicable laws, (ix) the Partnership will disclose to
Equitable all material adverse changes prior to closing and the Partnership
has received no notice of violations except as set forth in the Northland
Agreement. The Partnership is not liable for any matters known to Equitable
or EREIM (either in their capacity as lender or asset manager), or existing
prior to the Partnership's acquisition of Northland.
A number of the Partnership's representations and warranties, such
as those relating to environmental issues and property assessments, will not
survive the closing. Other representations, such as those relating to the
authority of the Partnership to enter into the transaction, will survive
indefinitely. The majority of the representations and covenants will survive
until June 30, 1995.
Equitable's Right to Make Capital Improvements and to Bind the Partnership to
"Revenue Neutral" Leases
In order to facilitate the opening of Ward's by November 1994 and to
accommodate the relocation and other needs of certain tenants, the Northland
Agreement provides that Equitable has the right to enter into certain leases
and lease amendments prior to closing, which leases would be binding upon the
Partnership even if the property transfer to Equitable does not occur,
provided that (i) Equitable, and not the Partnership, is responsible for
satisfying all capital improvements and other landlord obligations under such
leases, (ii) the Partnership is compensated by Equitable for any decreases in
net rent revenue resulting from the execution of such leases so that the
overall economic effect is "revenue neutral," and (iii) Equitable indemnifies
the Partnership from any losses, unfinished capital improvements or other
expenses resulting from the execution of such leases. If the Northland Sale
does not close, then Equitable's expenditures in satisfying the capital
improvements and other landlord obligations under such leases are to be added
to the balance of the Northland Note.
Right to Extend Closing
The Northland Agreement provides that the closing will take place on
or before June 15, 1994, but the closing date may
<PAGE>31
be extended to June 30, 1994 by either party. The Partnership intends to
extend the closing to allow the completion of the Solicitation. The Northland
Agreement is also subject to completion through the attachment of exhibits
thereto, which exhibits must be acceptable to the Partnership and Equitable.
Closing Adjustments
All adjustments and prorations for items of income and expense shall
be made as of January 1, 1994. To the extent that basic or minimum rent from
tenants is past due, upon collection, such rents shall be deemed to be
applicable to the most recently past due rent first, and then shall be applied
in inverse order from the newest delinquency to the oldest delinquency.
Equitable shall use reasonable efforts to collect all delinquencies. On
November 1, 1994, Equitable shall pay to the Partnership all arrearages
collected which are attributable to the period prior to January 1, 1994,
except for $500,000 of such amounts which Equitable shall retain. The General
Partner anticipates that, in accordance with this provision, Equitable will be
entitled to retain up to $500,000 in receivables collected relating to the
period the Partnership owned Northland. An appropriate reserve for this
purpose will be established from the net proceeds of the Northland Sale.
Waiver of Brookdale Defeasance Requirement
At the closing, the Partnership and Equitable will modify the
existing first mortgage and first mortgage note on Brookdale to waive the
defeasance requirement and permit prepayment in full on the date Brookdale is
sold by the Partnership to an unaffiliated third party for an amount equal to
the sum of outstanding principal and accrued interest on such date, plus a
defeasance fee for certain sales. The defeasance fee on the Brookdale Note
shall be waived in full if the Sale Price (as defined) is less than
$45,000,000.
Releases
At the closing the Partnership and Equitable shall exchange general
releases, releasing each other from all obligations other than (i) obligations
under the Northland Agreement, (ii) obligations of the Partnership under any
loan documents on Brookdale, and (iii) liabilities arising with respect to any
cross claims or third party claims in the event that an action is brought
against the releasing party by any third party. Equitable and the Partnership
will also enter into an agreement that (a) neither the Partnership nor
Equitable will pursue against the other any claims arising out of facts
existing
<PAGE>32
as of such date except as provided under (i) or (iii) above, (b) the
Partnership will not encourage any Unitholder to initiate any claim against
Equitable, and (c) notwithstanding the foregoing, neither party shall be
precluded from asserting cross claims or third party claims against the other
in the event that an action is brought against it by an unrelated third party.
Indemnification
The Partnership indemnifies Equitable from any expense resulting
from any action relating to Northland prior to the closing. Equitable
indemnifies the Partnership from any event relating to Northland after the
closing date.
Termination of EREIM Asset Management Agreement
The Partnership and EREIM have entered into an agreement (the "EREIM
Termination Agreement") terminating the EREIM Asset Management Agreement
effective as of January 1, 1994. As a result, the Partnership will be freed
from paying any future asset management or disposition fee with respect to its
Properties to EREIM. Under the EREIM Termination Agreement, EREIM will also
waive its right of first offer to acquire Brookdale, which the General Partner
believes will facilitate the sale of that Property. Finally, the EREIM
Termination Agreement will include the exchange of certain releases similar to
those being exchanged by the Partnership and Equitable.
Fairness of the Transaction
The General Partner believes that the terms and conditions contained
in the Northland Agreement are fair to the Partnership and Unitholders based
upon the conditions currently prevailing in the real estate market, the issues
described herein under "Reasons for the Liquidation", the recent operating
results at Northland, the results of the prior effort to dispose of the
Properties and the market capitalization, and implied Property values, of the
Partnership's Units. In determining that the Northland Sale is fair to the
Partnership and Unitholders, the General Partner assigned particular weight to
the proximity of the Notes' maturity date, the potential acceleration of such
maturity date, and the significant capital investment required to renovate
Northland and attract additional anchor and mall store tenants.
The Partnership has retained the Advisor to render an opinion as to
the fairness of the Northland Sale, from a financial point of view, to the
Unitholders. The Advisor is an internationally recognized investment banking
firm regularly
<PAGE>33
engaged in analyzing the fairness from a financial point of view of financial
transactions, including real estate transactions, for a variety of purposes.
The full text of the Advisor's opinion is attached as an exhibit to
this Proxy Statement. Reference is made to the opinion for a description of
the procedures followed, matters considered and assumptions made by the
Advisor in rendering its opinion. Unitholders are urged to read the Advisor's
opinion in its entirety.
No limitations were imposed by the General Partner on the scope of
the Advisor's investigation or the procedures followed by the Advisor in
rendering its opinion. The Advisor was not requested to, and did not, make
any recommendation to the General Partner as to the amount of consideration to
be received by the Partnership for Northland. The amount of such
consideration was determined through arm's-length negotiations between the
Partnership and Equitable.
After (i) review of this Solicitation Statement, (ii) review of the
Partnership's 1992 and 1993 annual reports and its quarterly report for the
quarter ended March 31, 1994, (iii) meeting with the manager of Northland and
with representatives of the General Partner to discuss Northland's business
and future prospects, (iv) visiting Northland and the Detroit mall market (v)
reviewing the most recent appraisals of Northland and (vi) conducting such
other analyses, inquiries and investigations as it deemed appropriate, it was
the opinion of the Advisor that the Northland Sale is fair, from a financial
point of view, to the Unitholders. In the course of its review, the Advisor
relied upon and assumed without independent verification the accuracy and
completeness of the financial and other information provided to the Advisor,
and further relied upon the assurances of the General Partner and the
management of Northland that they were unaware of any facts that would make
the information incomplete or misleading. The Advisor did not perform an
independent appraisal of Northland.
The Advisor has received a fee from the Partnership of $150,000 for
rendering the fairness opinion. In addition, the Partnership has agreed to
reimburse the Advisor for all reasonable out-of-pocket expenses (up to an
aggregate amount of $20,000) incurred in connection with the services provided
by the Advisor, and to indemnify and hold harmless the Advisor and its
affiliates from and against certain liabilities in connection with its
engagement and the rendering of its opinion.
<PAGE>34
The Advisor has, in the past, rendered no other services to the
Partnership and the Partnership has made no commitment to, and has no
understanding with, the Advisor with respect to any future services.
Accounting Treatment
The Northland Sale is not expected to result in a loss for
accounting purposes in 1994, because of the approximately $23,500,000
aggregate write-downs in Northland's value taken in the 1992 and 1993 fiscal
years.
Federal Income Tax Consequences
The following is a brief discussion of certain federal income tax
considerations relating to the Northland Sale. Each Unitholders should
consult his or her own tax advisor regarding the specific tax consequences of
the approval of the Northland Sale in the Unitholder's particular
circumstance.
For federal income tax purposes the sale of Northland will result in
a loss in 1994 of approximately $8,992,338 or $0.83 per Unit. This will be a
loss governed by Code Section 1231. The Partnership will also incur an
expense of approximately $600,000 or $.05 per Unit in Michigan Single Business
Taxes.
This loss and expense will be passive activity losses under Code
Section 469. For Unitholders that are subject to the passive activity loss
limitations of Code Section 469, losses realized through the Partnership can
only be used: (a) to the extent of passive activity income realized through
the Partnership, (b) upon a disposition of all of the Unitholder's interest in
the Partnership to an unrelated person in a taxable transaction, and (c) upon
the Partnership's sale of Brookdale and its liquidation.
When the Code Section 1231 loss becomes usable, it is first offset
against 1231 gains and capital gains realized for that year by the Unitholder
separately or through the Partnership. Generally, a Section 1231 gain or loss
results from a disposition of depreciable property used in a trade or
business. If any Code Section 1231 loss remains, it is taken as an ordinary
loss. Generally, Section 1231 gains are taxed as capital gains. However, if
the Unitholder realizes a net Code Section 1231 gain in any of the next 5
years, such gain shall be treated as ordinary income to the extent of the
prior Code Section 1231 loss was treated as ordinary.
<PAGE>35
The distribution of the approximately $.48 per Unit proceeds from
the Northland Sale will first reduce a Unitholder's federal income tax basis
in his Unit and the amount of the distribution in excess of that basis will be
taxed as a long-term or short-term capital gain, depending on how long the
Unit has been held. Those who purchased their Units in the initial offering
will not recognize gain on the distribution. To them the distribution will be
an untaxed return of capital that reduces their bases in their Units.
A person who acquired an outstanding Unit may recognize gain on the
distribution, if the distribution exceeds his basis in his Unit which is the
sum of (a) the amount paid for the Unit plus (b) his share of approximately
$2.94 per Unit of the Brookdale Note balance minus (c) distributions received
from the Partnership and minus (d) the cumulative net tax losses allocated to
him by the Partnership, whether or not he was able to deduct them for tax
purposes. However, any gain realized will permit the Unitholder to deduct an
equal amount of suspended losses to the extent such losses have been allocated
to him by the Partnership.
Under the Partnership Agreement, the loss on the Northland Sale will
be allocated to the Unitholders who receive the distribution of the proceeds
from the sale. The Michigan Single Business Tax shall be allocated, with the
Partnership's other income and loss, on the basis of the number of days during
a year each Unitholder was considered to be the record owner of his Units.
On a sale of Brookdale, the Partnership will recognize a Section
1231 gain to the extent the cash proceeds of sale and the then balance on the
Brookdale Note exceed the Partnership's federal tax basis in the Property. On
the June 30, 1995, maturity of the Brookdale Note, the note balance will be
$35,368,572 and the basis of Brookdale is projected to be approximately
$31,552,999.
On the subsequent liquidation of the Partnership, a Unitholder would
recognize gain, or loss, depending upon the extent to which the amounts
distributed to him in liquidation was more than, or less than, his basis in
his Units. At that point his basis in a Unit would be equal to the sum of (a)
the amount paid for the Unit plus (b) his share of Partnership income and gain
allocated to him minus (c) distributions received from the Partnership and
minus (d) tax losses allocated to him by the Partnership, whether or not he
was able to deduct them for tax purposes. Upon a liquidation of the
Partnership, a Unitholder
<PAGE>36
would be able to deduct any suspended passive activity losses that had been
allocated to him by the Partnership.
If the Partnership were to continue to hold Northland and Brookdale
until the maturity of the Notes on June 30, 1995, and if the Partnership were
unable to pay the approximately $95,000,000 balance of the Notes, then
Equitable would presumably foreclose with the result that the Partnership
would recognize a taxable gain. The Partnership's basis in the properties is
projected to be approximately $500,000 less than the balance of the Notes.
This gain would be increased by the amount of cash, if any, that the
Partnership might realize on a foreclosure sale. On the subsequent
liquidation of the Partnership, a Unitholder would recognize gain, or loss,
depending upon the extent to which the amounts, if any, distributed to him in
liquidation was more than, or less than, his basis in his Units. The
liquidation would permit a Unitholder to deduct any suspended passive activity
losses that had been allocated to him by the Partnership.
Use of Proceeds
The Northland Sale will provide the Partnership with cash proceeds
of approximately $6,600,000. The net proceeds to the Partnership, after fees
and expenses in connection with the Northland Sale, are anticipated to be
approximately $5,144,131, based upon the following calculation:
<TABLE>
<CAPTION>
Sale Proceeds $6,600,000
<S> <C> <C>
Less Closing Costs and other transaction costs:
Sales Commission 508,774
Transfer Taxes 55,000
Appraisal 15,000
Title Insurance 60,000
Survey 5,000
Fairness Opinion 150,000
Michigan Single Business Taxes 600,000
Expenses of Proxy Solicitation 30,000
Legal Fees and Expenses 350,000
Expenses in Obtaining Ground Lessor
Approval 2,500
Accounting Fees 20,000 (1,796,274)
Prorations
Accounts Receivable 24,999
Prepaid Expenses 1,462,453
Accounts Payable (647,047)
<PAGE>37
Buyer's Proation of Receivables (500,000) 340,405
Net Proceeds of Northland Sale $5,144,131
</TABLE>
Impact on Future Distributions
In accordance with the Partnership Agreement, all of proceeds from
the sale of any Property, after payment of the associated transaction costs
and Partnership indebtedness, and the establishment of reserves in the
discretion of the General Partner, are generally to be distributed 99% to the
Unitholders and 1% to the General Partner.
The net proceeds of the Northland Sale, after payment of the
associated transaction costs, and net of the General Partner's share of the
sale proceeds, are estimated to be approximately $5,092,689, or approximately
$.48 per Unit. The distribution will represent a return of capital for
federal income tax purposes to the extent that it does not exceed a
Unitholder's tax basis in his Unit. The General Partner's share of the net
proceeds will be $51,442. The Partnership will seek to distribute such net
proceeds as promptly as practicable following the closing of the Northland
Sale.
In the year ended December 31, 1993, the Partnership generated
aggregate cash flow before financing activities of approximately $10,465,000,
which included a deferred income item of $1,250,000 and a $1,060,000 expense
item for the asset management fees payable to EREIM. The Partnership repaid a
short-term $3,000,000 second mortgage from Equitable and made distributions to
the Unitholders aggregating $5,417,550 ($.50 per Unit). The balance of the
Partnership's cash flow (a total of $2,533,000) was added to Partnership
reserves.
On a pro-forma basis, after giving effect to the Northland Sale as
if it had occurred prior to January 1, 1993 and excluding the deferred income
item and the EREIM asset management fee, the Partnership generated cash flow
before distributions of approximately $3,268,883 in 1993.
The amount of future distributions will be affected by a number of
factors including: (i) the anticipated decline in Partnership cash flow as a
result of the Northland Sale, partially offset by the elimination of EREIM's
asset management fee; (ii) the timing and net proceeds (if any) received from
the proposed sale of Brookdale; and (iii) the Partnership's reduced cash
reserve requirements as a result of the Northland Sale and the Partnership's
plans to liquidate. The Partnership will also incur in 1994 anticipated
capital expenditures of approximately
<PAGE>38
$1,250,000 with respect to the required reconfiguration of the Carson's store
at Brookdale, however and such expenditures are anticipated to be funded from
the $1,250,000 payment received from Carson's in 1993 and added to Partnership
reserves, not from operating cash flow. The General Partner believes that,
following the Northland Sale and pending the sale of Brookdale and the
maturity of the Brookdale Note, the Partnership will generate sufficient cash
flow with which to fund its normal operating expenses and to make
distributions to the Unitholders. The General Partner cannot, however,
predict with certainty the amount of future Partnership distributions.
Reasons for Obtaining Unitholder Approval
Pursuant to Section 7.03(c)(iii) of the Partnership Agreement, the
sale of all or substantially all of the Partnership's assets must be approved
by holders of a majority of the outstanding Units. Northland's real estate
value for financial reporting purposes as of March 31, 1994 ($55,737,857),
represented approximately 48.8% of the value of all Partnership assets for
financial reporting purposes as of such date ($113,447,674). In addition,
Northland's gross income for the year ended December 31, 1993 (approximately
$18,891,663) represented 63% of the Partnership's total gross income for such
period ($30,311,526). Northland's gross income for the three-month period
ended March 31, 1994 (approximately $4,861,496) represented 61.4% of the
Partnership's total gross income for such period ($7,916,236). Finally, the
Northland Sale represents the first step in the Partnership's plan to dispose
of Brookdale and liquidate and dissolve the Partnership, and accordingly, the
General Partner resolved to seek the consent of the Unitholders to the
Northland Sale.
Under the terms of the Partnership Agreement, if the Northland Sale
is approved by holders of a majority of the outstanding Units, the General
Partner will promptly notify, in writing, all Unitholders who did not consent
to the sale. Dissenting Unitholders are not entitled to appraisal rights
under the Partnership Agreement.
If Unitholder consent is not obtained, the Northland Sale will not
be consummated in its present form and the Partnership will have to re-solicit
Unitholders to approve any future sale of all or substantially all of the
Partnership's assets. In such case, (i) the likelihood of a foreclosure on
Northland is substantially increased, (ii) the ability to sell Brookdale is
reduced and its price may be adversely impaired, and (iii) the possibility of
a default under the Brookdale Note is increased.
<PAGE>39
THE AMENDMENT
Existing Provision
Section 7.03(c)(iii) of the Partnership Agreement provides that the
General Partner generally may not, without the consent of holders of a
majority of the Units, cause the Partnership to:
". . . sell all or substantially all the Partnership Assets
(provided that such approval need not be based upon an actual sale
transaction if (A) approval is sought for an all cash sale at a
specified minimum price and (B) an all cash sale (provided that
payment of the purchase price may include the assumption of, or
taking subject to, Partnership indebtedness) for at least the
specified minimum price is consummated within 180 days following
such approval). . ."
Reasons for the Amendment
The General Partner is actively seeking to sell Brookdale. In order
to facilitate such anticipated sale, the General Partner proposes to delete
Section 7.03(c)(iii) of the Partnership Agreement and all references thereto,
so that it may pursue potential purchasers of Brookdale without incurring the
expense and potential delay of another Unitholder consent solicitation. The
General Partner believes that simplified disposition procedures for Brookdale
will also enhance its marketability, since this may assist a prospective
purchaser to obtain acquisition financing or otherwise reduce the costs to
purchaser of such financing.
Effect of the Amendment
The General Partner is actively seeking to sell Brookdale. If the
Northland Sale is not consummated, the General Partner will seek to sell
Northland to Equitable on other terms and conditions or will seek to sell
Northland to another purchaser. If a sale of both Properties cannot be
accomplished in a timely or economical manner, in the General Partner's
discretion, the General Partner will take such other action with respect to
the Properties as the General Partner deems advisable under the circumstances.
If the Amendment is adopted, then the Selling Limitation set forth
in Section 7.03(c)(iii) of the Partnership Agreement and all references to
Section 7.03(c)(iii) in the
<PAGE>40
Partnership Agreement will be eliminated. The effect of the Amendment will be
to authorize the General Partner to dispose of Brookdale (and Northland if the
Northland Sale is not consummated) upon terms acceptable to the General
Partner, in its sole discretion, without requiring the General Partner to
obtain a separate consent from the Unitholders.
The General Partner will notify all Unitholders upon the final
adoption or rejection of the Amendment.
Reason for Obtaining Unitholder Approval
Under the Partnership Agreement, the consent of holders of a
majority of the Units is required for the adoption of any amendments to the
Partnership Agreement. If Unitholder consent is not obtained, the Partnership
will have to re-solicit Unitholders to approve any future sale of all or
substantially all of the Partnership's assets, which delay might impair any
such future sale.
<PAGE>41
SELECTED HISTORICAL FINANCIAL DATA
The following selected historical financial data for each of the
years in the five-year period ended December 31, 1993, has been derived from
the Partnership's financial statements audited by KPMG Peat Marwick,
independent certified public accountants. The selected financial data with
respect to the balance sheets at March 31, 1993 and March 31, 1994, and the
statements of operations for each of the three months then ended, is
unaudited. The unaudited interim financial statements from which this data is
derived include all adjustments, consisting of normal recurring accruals,
which the General Partner considers necessary for a fair presentation of the
financial position and results of operations for these periods. The selected
financial data set forth below should be read in conjunction with the audited
and unaudited financial statements and related notes included in the
Partnership's Annual report on Form 10-K/A for the fiscal year ended December
31, 1993 and the Partnership's Quarterly Report on Form 10-Q for the Fiscal
quarter ended March 31, 1994.
<TABLE>
For the three-months For the years ended December 31,
ended
______________________ ______________________________________________________________
<S> <C> <C> <C> <C> <C> <C> <C>
March 31, March 31,
1994 1993 1993 1992 1991 1990 1989
Operating Data:
Income
Rental Income 7,638,141 7,169,365 30,053,750 31,099,325 30,047,485 29,060,827 30,432,178
Interest and other income 278,095 98,296 257,776 304,431 335,901 420,856 221,072
Total Income 7,916,236 7,267,661 30,311,526 31,403,756 30,383,386 29,481,683 30,653,250
Expenses
Property operating expenses 2,918,993 2,768,622 13,025,506 13,254,011 13,049,409 11,877,395 12,063,482
Loss on write-down of real estate (A) -- -- 16,163,153 7,256,151 -- -- --
Real estate taxes 1,522,882 1,431,450 5,705,170 5,386,056 4,950,219 4,453,307 3,946,681
Interest expense 2,091,283 1,945,030 7,857,584 7,245,703 6,396,879 5,762,181 5,216,526
Depreciation and amortization 868,168 952,757 3,854,330 3,674,346 3,342,451 3,275,371 3,234,777
General and administrative 48,973 349,419 1,289,480 1,342,731 1,314,459 1,476,932 1,257,379
Management fee 156,882 148,558 563,654 570,627 564,506 553,528 589,712
Professional fees 24,038 34,587 229,616 183,491 376,014 323,540 86,187
Total Expenses 7,631,219 7,630,423 48,688,493 38,913,116 29,993,937 27,722,254 26,394,744
Income (Loss) from Operations 285,017 (362,762) (18,376,967) (7,509,360) 389,449 1,759,429 4,258,506
Loss on sale of property (B) -- -- -- (325,000) -- -- --
Operating income payable to Equitable(C) (1,741,363) -- - -- -- -- --
Net Income (Loss) (1,456,346) (362,762) (18,376,967) (7,834,360) 389,449 1,759,429 4,258,506
Net Income (Loss) Allocated
To the General Partner (14,563) (3,628) (183,770) (75,094) 3.895 17,594 42,585
To the Limited Partners (1,441,783) (359,134) (18,193,197) (7,759,266) 385,554 1,741,835 4,215,921
Per Limited Partnership Security
(10,700,000 securities outstanding) (0.13) (0.03) (1.70) (.73) .04 .16 .39
Other Data:
Capital Expenditures 93,703 996,952 2,322,045 3,137,121 4,039,639 1,699,983 757,738
Balance Sheet Data:
Working Capital 8,865,214 9,667,124 8,212,378 8,926,668 6,286,461 3,381,472 4,377,907
Total Assets 114,292,966 131,654,149 113,447,674 131,082,900 136,879,392 132,003,571 135,858,244
Total Debt 84,102,404 79,138,265 82,011,121 77,245,017 70,217,593 60,849,420 55,087,239
Accounts Payable & Accrued Expenses 3,328,571 2,432,332 3,420,236 2,027,049 1,626,075 1,103,836 1,077,595
Distribution Payable 756,566 1,351,010 1,351,010 1,364,520 1,351,010 1,351,010 2,810,101
Distributions Declared Per LP Security $0.07 $0.125 $0.50 $0.50 $0.50 $0.92 $1.04
(10,700,000 securities outstanding)
</TABLE>
___________________
(A) In 1992, Northland was written down to market value.In 1993, the carrying
value was further reduced to reflect the terms of the proposed sale.
(B) Loss on sale of property is attributable to the sale of the Telcom parcel
at Northland.
(C) Represents positive cash flow generated by Northland since January 1,
1994 which is owed to Equitable if the Northland Sale closes.
<PAGE>42
Unaudited Pro Forma Balance Sheet as of March 31, 1994
This unaudited Pro Forma Balance Sheet is presented as if the Northland Sale
had occurred on March 31, 1994. In management's opinion, all adjustments
necessary to reflect the Northland Sale have been made. This unaudited Pro
Forma Balance Sheet is not necessarily indicative of what the actual balance
sheet amounts of the Partnership would have been had the sale been completed
as of March 31, 1994, nor does it purport to represent the balance sheet for
future periods.
<TABLE>
Assets Historical Adjustments (A) Proforma
<S> <C> <C> <C>
Property held for disposition: $ 99,522,957 $(55,737,857) $ 43,785,100
Cash 12,918,544 __ 12,918,544
Accounts receivable, net 781,706 __ 781,706
Due from affiliates, net 125,845 __ 125,845
Deferred charges (D) 166,628 (83,314) 83,314
Prepaid assets (B) 777,286 (705,877) 71,409
Due from Buyer (B) __ 6,805,877 6,805,877
Total Assets $ 114,292,966 $(49,721,171) $ 64,571,795
Liabilities and Partner's Capital
Liabilities:
Accounts payable and accrued expenses (C) $ 2,078,571 $1,796,274 $3,874,845
Deferred Income 1,250,000 __ 1,250,000
Mortgage notes payable 84,102,404 (52,859,956) 31,242,448
Due to Buyer (E) 1,653,030 __ 1,653,030
Distribution payable 756,566 __ 756,566
Total Liabilities 89,840,571 (51,063,682) 38,776,889
Partners' Capital:
General Partner (F) (741,395) 13,425 (728,558)
Limited Partners (F) 25,194,378 1,329,086 26,523,464
Total Partners' Capital 24,452,395 1,342,511 25,794,906
Total Liabilities and Partners' Capital $ 114,292,966 $(49,721,171) $ 64,571,795
Book Value Per Unit
(10,700,000 units outstanding) $2.35 __ $2.51
</TABLE>
<PAGE>43
_________________
(A) To reflect the Northland Sale as if it had occurred on March 31, 1994.
(B) The Due from Buyer amount of $6,805,877 is comprised of the $6,600,000
agreed to be paid by the Buyer in excess of the December 31, 1993 debt on
the Northland Note and prepaid assets consisting of prepaid real estate
taxes and insurance expenses totalling $705,877, less amounts transferred
for certain receivables to Equitable totalling $500,000.
(C) The $1,796,274 represents closing costs, as estimated as of March 31,
1994, associated with the Northland Sale consisting of the following:
Commissions $ 508,744
Transfer Taxes 55,000
Appraisal 15,000
Title Insurance Premium 60,000
Survey 1,000
Michigan Single Business Tax 600,000
Legal Costs 350,000
Accounting Fees 20,000
Ground Lessor Approval 2,500
Expense of Proxy Solicitation 30,000
Fairness Opinion 150,000
Total Closing Costs $1,796,274
(D) Reflects the write-off of Northland's remaining unamortized deferred
charges associated with its mortgage.
(E) The $1,653,030 represents Northland's positive cash flow generated for
the period ended March 31, 1994 totalling $1,741,363 netted with the
January 1994 Asset Management fee totalling $88,333 paid to EREIM by the
Partnership prior to the termination of the Asset Management Agreement
effective December 31, 1993. When the Northland Sale closes, the
$1,653,030 is due to Equitable.
(F) The change in capital reflects the write-off of Northland's remaining
unamortized deferred charges, first quarter 1993 depreciation expense,
first quarter 1994 interest expense and additional closing costs.
<PAGE>44
Unaudited Pro Forma Statement of Operations for the year ended December 31,
1994
This unaudited Pro Forma Statement of Operations is presented as if the
Northland Sale had occurred on January 1, 1993. In management's opinion, all
adjustments necessary to reflect the Northland Sale have been made. This
unaudited Pro Forma Statement of Operations is not necessarily indicative of
what actual results of operations of the Partnership would have been had the
sale been completed as of January 1, 1993, nor does it purport to represent
the results of operations for future periods.
<TABLE>
Income Historical Adjustments Proforma
<S> <C> <C> <C>
Rental income (A) $12,622,285 $ (7,494,000) $ 5,128,285
Escalation income (A) 17,226,821 (11,295,177) 5,931,644
Interest income (A) 257,776 (103,843) 153,933
Miscellaneous income (A) 204,644 (88,643) 116,001
Total Income 30,311,526 (18,981,663) 11,329,863
Expenses
Property operating expenses (A) 13,025,506 (10,346,731) 2,678,775
Loss on write-down of real estate (B) 16,163,153 (16,163,153) __
Real estate taxes (A) 5,705,170 (2,426,923) 3,278,247
Interest expense (A) 7,857,584 (4,972,623) 2,884,961
Depreciation and amortization (A) 3,854,330 (2,534,500) 1,319,830
General and administrative (C) 1,289,480 (661,990) 627,490
Management fee (D) 563,654 (324,814) 238,840
Professional fees 229,616 __ 229,616
Total Expenses 48,688,493 (37,430,734) 11,257,759
Net Loss (18,367,967) 18,449,071 72,104
Per Limited Partnership Security
(10,700,000 securities outstanding) $ (1.70) $(0.00)
</TABLE>
(A) To reflect the decrease in property operations, depreciation and
amortization, and interest expense associated with Northland during 1993
as if the sale took place on January 1, 1993 and to eliminate the loss on
write down of real estate.
(B) The Partnership wrote down the carrying value of Northland to its net
realizable value as of December 31, 1993. The net realizable value of
$56,148,271 was calculated as the aggregate sales price of $58,145,545
less closing costs of $1,497,274 and certain receivables transferred to
Equitable of $500,000 contributing to a loss on write-down of real estate
of $16,163,153.
(C) To reflect the decrease in the asset management fee paid to EREIM
associated with Northland totalling $661,990 annually. As of December
31, 1993, the EREIM Agreement has been terminated.
(D) To reflect the decrease in the property management fee paid to General
Growth for 1993 for Northland totalling $324,814.
<PAGE>45
Unaudited Pro Forma Statement of Operations for the period ended March 31,
1994
This unaudited Pro Forma Statement of Operations is presented as if the
Northland Sale had occurred on January 1, 1993. In management's opinion, all
adjustments necessary to reflect the Northland Sale have been made. This
unaudited Pro Forma Statement of Operations is not necessarily indicative of
what actual results of operations of the Partnership would have been had the
sale been completed as of January 1, 1993, nor does it purport to represent
the results of operations for future periods.
<TABLE>
Income Historical Adjustments Proforma
<S> <C> <C> <C>
Rental income (A) $ 3,148,705 $ (1,893,129) $ 1,255,576
Escalation income (A) 4,489,436 (2,925,035) 1,564,401
Interest income (A) 52,772 (18,333) 34,439
Miscellaneous income (A) 225,323 (24,999) 200,324
Total Income 7,916,236 (4,861,496) 3,054,740
Expenses
Property operating expenses (A) 2,918,993 (2,417,277) 501,716
Real estate taxes (A) 1,522,882 (608,227) 914,655
Interest expense (A) 2,091,283 (1,314,411) 776,872
Depreciation and amortization (A) 868,168 (496,720) 371,448
General and administrative 48,973 __ 48,973
Management fee (B) 156,882 (94,629) 62,253
Professional fees 24,038 __ 24,038
Total Expenses 7,631,219 (4,931,264) 2,699,955
Net Income (Loss) from operations $ 285,017 $ 69,768 $ 354,785
Operating income payable to Buyer (C) (1,741,363) 1,741,363 __
Net Income (Loss) (1,456,346) 1,811,131 354,785
Per Limited Partnership Security
(10,700,000 securities outstanding) $ (0.13) $ 0.03
</TABLE>
(A) To reflect the decrease in property operations, depreciation and
amortization, and interest expense associated with Northland during 1993
as if the sale took place on January 1, 1993.
(B) To reflect the decrease in the property management fee paid to General
Growth for 1994 for Northland totalling $94,629.
(C) The $1,741,363 represents positive cash flow generated by Northland for
the period ended March 31, 1994 which is owed to Equitable upon the
closing of the Northland Sale.
<PAGE>46
RECOMMENDATION OF GENERAL PARTNER
The General Partner recommends that the Unitholders CONSENT to the
Northland Sale and the Amendment. Any duly executed Ballot on which a vote is
not indicated will be deemed to be a CONSENT to the Northland Sale and the
Amendment.
VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF
On the Record Date (June 7, 1994) there were 10,700,000 Units issued
and outstanding and entitled to vote.
As of the Record Date, no person was known by the Partnership to be
the beneficial owner of more than five percent of the Units.
As of the Record Date, neither the General Partner nor any officer
or director thereof owned any Units.
MARKET PRICES FOR THE PARTNERSHIP'S UNITS
The Units are listed on the New York Stock Exchange under the symbol
"EQM." On January 18, 1994, the trading day immediately preceding
announcement of the signing of the Letter of Intent, the closing price of the
Units, as indicated on the New York Stock Exchange ("NYSE") Composite Tape,
was $2.375. On June 2, 1994, the closing price of the Units, as indicated on
the NYSE Composite Tape, was $1.375.
VOTING PROCEDURES
Each Unitholder shall be entitled to one vote for each Unit owned of
record by such Unitholder on the Record Date. Approval of the Amendment
requires the affirmative votes of Unitholders holding a majority of the Units
(a minimum of 5,350,001 Units) outstanding on the Record Date. Abstentions
(Units for which a duly executed Ballot has been submitted but on which a vote
is not indicated) will be deemed a consent to the proposals set forth herein,
except that broker non-votes (Units held by a broker or nominee for which a
Ballot is submitted but with respect to which such broker or nominee expressly
indicates that it does not have discretionary authority to consent to the
proposals) will be treated as negative votes.
The Unitholders' consent to the proposed Northland Sale and
Amendment are being solicited and may only be voted upon as a
<PAGE>47
unified proposal. Accordingly, a Unitholder may not consent to or withhold
consent from the Northland Sale without similarly consenting to or withholding
consent from the Amendment.
Ballots should be completed, signed and returned promptly to:
Service Data Corporation, 2424 South 130th Circle, Omaha, Nebraska 68144. A
self-addressed, prepaid envelope for return of the Ballots is included with
this Solicitation Statement. This Solicitation Statement is accompanied by a
separate Ballot.
Any Unitholders delivering a Ballot pursuant to this Solicitation
Statement has the power to change the vote shown on the Ballot at any time
prior to the earlier of the Approval Date or the Expiration Date by giving
written notice of such change to Service Data Corporation (the "Solicitor") or
by executing a Ballot bearing a later date and delivering it to the Solicitor.
Unless the Solicitor receives written notice of a change of the vote shown on
the Ballot or a duly executed Ballot bearing a later date, the Ballot will be
voted in the manner specified therein.
This solicitation will be made through the mail, and officers,
directors and regular employees of the General Partner and its affiliates may
solicit votes by telephone, telegram and personal interview. Such persons
will receive no additional compensation for such services. In addition, the
Partnership has retained the Solicitor to assist in the solicitation of votes
from brokers, bank nominees institutional holders and certain individual
holders of record. The Solicitor will receive a fee from the Partnership
estimated at $25,000 for its services, plus reimbursement for its
out-of-pocket expenses (payable without regard to how an Unitholder votes).
All additional expenses of the solicitation of votes for the approval of the
Amendment, including the cost of mailing, will be borne by the Partnership.
The General Partner and the Solicitor intend to request persons holding Units
in their name or custody, or in the name of nominees, to send solicitation
materials to their principals and request authority for the execution of the
Ballots, and the Partnership will reimburse such persons for their expense in
so doing.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The Partnership hereby incorporates by reference into this
Solicitation Statement Part II, Items 7 and 9 of both the Annual Report on
Form 10-K/A of the Partnership for the fiscal year ended December 31, 1993
(the "Form 10-K/A") and the
<PAGE>48
Quarterly Report on Form 10-Q (the "Form 10-Q") for the fiscal quarter ended
March 31, 1994, and the Partnership's Form 8-K dated January 19, 1994 (the
"Form 8-K"). The financial statements contained in the Form 10-K/A and Form
10-Q also are incorporated herein by reference. With the exception of
information specifically incorporated by reference, however, the Form 10-K/A
and the Form 10-Q are not deemed to be filed as part of this Solicitation
Statement.
FURTHER INFORMATION
This Solicitation Statement does not purport to be a complete
description of all agreements and matters relating to the condition of the
Partnership, its properties and the transactions described herein.
Accompanying this Solicitation Statement are the Form 10-K/A and the Form 10-Q
which provide additional information regarding the Partnership and the
Northland Agreement. With respect to statements contained in this
Solicitation Statement as to the content of any contract or other document
filed as an exhibit to the Form 10-K/A, the Form 10-Q and the Form 8-K, each
such statement is qualified in all respects by reference to such exhibit and
the schedules thereto which may be obtained without charge upon written
request to the Partnership. If making such a request, please send it to:
Equitable Real Estate Shopping Centers L.P., c/o Midwest Centers, Inc., 3
World Financial Center, New York, New York 10285, Attn: Joan Berkowitz or
Robert Hellman.
<PAGE>49
OTHER MATTERS
The Partnership is not aware of any additional matters not set forth
in this Solicitation Statement that will be presented for consideration by
Unitholders.
By Order of the General Partner
MIDWEST CENTERS INC.
General Partner
/s/PAUL L. ABBOTT
<PAGE>50
YOUR VOTE IS IMPORTANT!
PLEASE SIGN, DATE AND MAIL YOUR BALLOT PROMPTLY
IN THE ENCLOSED POSTAGE-PREPAID ENVELOPE.
Any questions or requests for assistance or additional copies of
the materials used in this solicitation (including the Solicitation Statement
and the Ballot), may be directed to either Service Data Corporation at 1-800-
223-3464 or the General Partner at 212-526-3237 (ask to speak with Joan
Berkowitz or Robert Hellman). You may also contact your broker, dealer,
commercial bank or trust company for assistance concerning the solicitation.
Service Data Corporation
CALL TOLL-FREE (800)-223-3464
<PAGE>1
[Solicitation Letter]
[Letterhead of Partnership]
June 7, 1994
The enclosed solicitation statement is being sent to the unitholders
("Unitholders") of Equitable Real Estate Shopping Centers L.P. (the
"Partnership") in connection with the solicitation of votes by Midwest
Centers, Inc. (the "General Partner"), on behalf of the Partnership, to
consent to the sale of substantially all of the assets of the Partnership.
Consent to the sale of all of assets will include (i) consent to the sale of
the Northland Center in Southfield, Michigan ("Northland") on the terms set
forth in the accompanying proxy, and (ii) approval of an amendment (the
"Amendment") to the partnership agreement of the Partnership to simplify the
contemplated future sale of Brookdale Center and avoid the possibility of the
need for a future consent from the limited partners of the Partnership.
The Partnership has entered into a contract of sale (the "Northland
Agreement") to sell Northland to The Equitable Life Assurance Society of the
United States ("Equitable"). The Northland Agreement is conditioned upon,
among other things, (i) the consent of a majority of the Unitholders to this
proxy, (ii) certain other agreements by an anchor and a proposed tenant of
Northland and a participant in Northland's mortgage, and (iii) the outcome of
certain environmental studies of Northland by Equitable. The sale price is
approximately $6,600,000 above the existing mortgage balance for Northland,
subject to numerous adjustments. Please see the accompanying proxy for a full
description of the terms of the Northland Agreement. There can be no
assurance that the conditions in the contract will be met and the sale will
close.
Under the terms of the partnership agreement of the Partnership, the
sale of all or substantially all of the Partnership's assets generally must be
approved by a majority of the Unitholders. The approval of the Unitholders is
being sought because the sale of Northland is the first step in the planned
liquidation of the Partnership. It is contemplated that in the near future
the Partnership will be able to sell its remaining property, Brookdale Center,
and liquidate the Partnership. The Amendment is being proposed to facilitate
the anticipated sale of Brookdale and save the Partnership the expense of a
separate solicitation in connection with such sale.
Under the Partnership's prospectus and organizational documents it
was contemplated that the Partnership would liquidate on or before June 30,
1995, when the mortgages on the Partnership's property would mature and become
due. In recent
<PAGE>2
years the Partnership's ability to refinance the mortgages has been adversely
impacted by the depressed market for shopping centers and real estate
generally, as well as adverse economic and competitive factors affecting the
Partnership's properties specifically. As a result, the General Partner
believes the Partnership should proceed to sell the properties as
expeditiously as possible especially in view of the uncertainty of refinancing
such mortgages. The General Partner further believes the sale of Northland to
Equitable on the terms set forth in the Contract to be extremely favorable to
the Partnership and that the Amendment is in the best interests of the
Partnership because it will facilitate the sale of Brookdale at the best price
available, all as explained in more detail in the proxy.
Based on the foregoing, the General Partner strongly recommends that
the Unitholders "CONSENT" to sale of Northland and the Amendment. The General
Partner also recommends that the Unitholders read the accompanying proxy
materials carefully and cast their ballot as soon as possible to avoid losing
the sale of Northland and incurring additional costs of resoliciting
Unitholders. Please sign, date and return your proxy card as soon as possible
to the address listed on the back of the enclosed solicitation statement. Any
inquiries should be directed to Service Data Corporation at 1-800-223-3454 or
the General Partner at (212) 526-3237 (ask to speak with Joan Berkowitz or
Robert Hellman).
Sincerely,
Midwest Centers, Inc.
By: /s/ PAUL L. ABBOTT
<PAGE>1
CONFIDENTIAL, FOR USE OF THE COMMISSION ONLY
[FORM OF CONSENT]
[Side 1]
EQUITABLE REAL ESTATE SHOPPING CENTERS, L.P.
CONSENT SOLICITED BY THE GENERAL PARTNER
The undersigned, acting with regard to all units of limited
partnership securities held in Equitable Real Estate Shopping Centers, L.P
(the "Partnership") which the undersigned is entitled to vote in all
capacities on the Record Date, hereby consents or abstains from consenting,
all as indicated on the reverse side hereof, to approve the sale of Northland
Center in connection with the Agreement between The Equitable Life Assurance
Society of America and the Partnership and to approve an amendment to the
Partnership's agreement of limited partnership to delete Section 7.03(c)(iii)
thereof to eliminate the requirement to obtain Unitholder consent to the
future sale of Brookdale (the "Proposals").
The undersigned also appoints Robert Hellman and Joan Berkowitz as
agents (with full power of substitution) to execute and deliver a written
consent to the Proposals with respect to all Units of the Partnership which
the undersigned held as of the Record Date.
SEE REVERSE SIDE. If you wish to vote in accordance with the General
Partner's recommendations, just sign on the reverse side. You need not mark
any boxes. If no specification is made, the proxies intend to "CONSENT" to
the Proposals. The Board of Directors recommends that you "CONSENT" to the
Proposals.
<PAGE>2
[Side 2]
PLEASE MARK, SIGN, DATE AND RETURN THIS CONSENT PROMPTLY, USING THE ENCLOSED
ENVELOPE.
<TABLE>
TO APPROVE THE SALE OF NORTHLAND CENTER IN CONNECTION WITH
THE AGREEMENT BETWEEN THE EQUITABLE LIFE ASSURANCE SOCIETY
OF AMERICA AND THE PARTNERSHIP
AND
<S> <C>
TO APPROVE AN AMENDMENT TO THE PARTNERSHIP'S AGREEMENT OF Consent Withhold Abstain
LIMITED PARTNERSHIP TO DELETE SECTION 7.03(c)(iii) THEREOF / / Consent / /
/ /
</TABLE>
The undersigned acknowledges receipt of the Solicitation Statement dated
June 7, 1994.
Please sign exactly as your name appears hereon. Joint owners should
each sign. When signing as attorney, executor, trustee or guardian, please
give full title as such.
Signature: _____________________
Date: _____________________
Signature: _____________________
Date: _____________________
<PAGE>1
Exhibit A
[LETTERHEAD OF BEAR STEARNS]
May 20, 1994
Midwest Centers Inc. as General Partner
c/o Equitable Real Estate Shopping Centers L.P.
3 World Financial Center
New York, New York 10285
Gentlemen:
We understand that The Equitable Life Assurance Society of the United States
("Equitable") holds two zero coupon mortgages as security for its loans to
Equitable Real Estate Shopping Centers L.P. ("ERM"), which owns Northland
Center in Southfield, Michigan ("Northland"), and Brookdale Center, located in
Brooklyn Center, Minnesota. You have advised us that ERM proposes to sell
Northland Center to Equitable in a transaction (the "Transaction") which
entails the cancellation of the existing Equitable mortgage encumbering
Northland, the modification of the Asset Management Agreement between ERM and
Equitable Real Estate Investment Management, Inc. ("EREIM"). You have
provided us with copies of the executed Sale Agreement between ERM and
Equitable, the executed Release and Termination Agreement between ERM and
EREIM, the proposed Brookdale Letter Agreement and the preliminary proxy
statement in substantially the form to be sent tot he public limited
partnership unitholders (the "Unitholders") of ERM (the "Proxy Statement").
You have asked us to render an opinion to Midwest Centers Inc., the sole
General Partner of ERM, as to the fairness of the Transaction, from a
financial point of view, to the Unitholders.
In the course of our analysis for our opinion, we have:
1. reviewed the Proxy Statement;
2. reviewed ERM's Annual Reports on Form 10-K for the fiscal years ended
December 31, 1992 and 1993, and Quarterly Report on Form 10-Q for the
quarter ended March 31, 1994; and
3. met with both the manager of Northland and with representatives of the
General Partner to discuss Northland's business and future prospects; and
4. visited Northland and the Detroit mall market; and
5. reviewed the Updated Report and Appraisal of Northland, dated April 11,
1994, and the Letter Report Appraisal of Northland, dated May 11, 1994,
prepared by Cushman & Wakefield; and
<PAGE>2
6. conducted such other analysis, inquiries and investigations as we deemed
appropriate.
In the course of our review, we have relied upon and assumed without
independent verification, the accuracy and completeness of the financial and
other information provided to us, and have further relied upon the assurances
of the General Partner and the management of Northland that they are unaware
of any facts that would make the information incomplete or misleading. We
have not performed an independent appraisal of Northland.
Based on the foregoing, it is our opinion that the Transaction is fair, from a
financial point of view, to the Unitholders.
Very truly yours,
BEAR, STEARNS & CO. INC.
By:/s/GILBERT E. MATTHEWS
Managing Director
<PAGE>1
Exhibit 23.1
[LETTERHEAD OF KPMG PEAT MARWICK]
Consent of Independent Auditors
The Partners
Equitable Real Estate Shopping Centers L.P.:
We consent to the use of our reports incorporated herein by reference.
/s/ KPMG PEAT MARWICK
Boston Massachusetts
June 6, 1994
