<PAGE>
SCHEDULE 14A
Information Required in Proxy Statement
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
(Amendment No. 1)
[X ] Filed by the Registrant
[ ] Filed by a Party other than the Registrant
Check the appropriate box:
[X ] Preliminary Proxy Statement
[ ] Confidential, For Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to SS240.14a-11(c) or SS240.14a-12
BRAUVIN HIGH YIELD FUND L.P.
----------------------------
(Name of Registrant as Specified In Its Charter)
_______________________________________________________________________________
(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[ ] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), 14a-6(i)(2) of
Item 22(a)(2) of Schedule 14A.
[ ] $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:
Units of Limited Partnership Interests
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2) Aggregate number of securities to which transactions applies:
2,627,503.23 Units of Limited Partnership Interests
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3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:
Based upon the aggregate cash to be paid for the Registrant's assets
($23,198,450) which are the subject of this Schedule 14A, the
Registrant is paying a filing fee of $4,639.69 (one-fiftieth of one
percent of this
<PAGE>
aggregate of the cash and the value of securities (other than its own)
and other property to be received by the Registrant in the subject
transaction.)
---------------------------------------------------------------------
4) Proposed maximum aggregate value of transaction:
$23,198,450
---------------------------------------------------------------------
5) Total fee paid:
$4,639.69
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[X ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offering 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:
$4,639.69
---------------------------------------------------------------------
2) Form Schedule or Registration Statement No.:
Schedule 14A
---------------------------------------------------------------------
3) Filing Party:
Brauvin High Yield Fund L.P.
---------------------------------------------------------------------
4) Date Filed:
May 28, 1996
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<PAGE>
First Revised Preliminary Proxy Materials
-----------------------------------------
BRAUVIN HIGH YIELD FUND L.P.
150 SOUTH WACKER DRIVE
SUITE 3200
CHICAGO, ILLINOIS 60606
July __, 1996
To the Interest Holders of
Brauvin High Yield Fund L.P.:
We are pleased to inform you that Brauvin High Yield Fund L.P. (the
"Partnership") has entered into an agreement through which the Partnership has
agreed to merge with and into another entity, the effect of which will be that
each Interest Holder will receive approximately $9.26 in cash for each of their
units of limited partnership interest of the Partnership (the "Units").
Consummation of this transaction is subject to your approval. Interest Holders
holding a majority of the Units must approve the transaction and an amendment to
the Restated Limited Partnership Agreement of the Partnership, described below,
by voting "FOR" on the enclosed proxy card in order for the Partnership to
accept this all cash offer. If the transaction and the amendment are approved
by the Interest Holders and certain other conditions are met, the transaction
will be consummated, the Partnership will cease to exist and your Units will be
redeemed entirely for approximately $9.26 per Unit in cash. The redemption
price is based on the fair market value of the assets of the Partnership which
has been determined by an independent appraiser to be $23,198,450, plus all
remaining cash of the Partnership, less expenses incurred in connection with the
transaction and other Partnership obligations. The independent appraiser has
delivered an opinion that this transaction is fair to the Interest Holders from
a financial point of view.
The General Partners will not receive any payment in exchange for the
redemption of their general partnership interests nor will they receive any fees
from the Partnership in connection with the transaction. However, the
transaction is subject to certain conflicts of interest, as described in the
enclosed Proxy Statement, including the fact that the entity into which the
Partnership will be merged is affiliated with Mr. Jerome J. Brault and Brauvin
Realty Advisors, Inc., two of the General Partners of the Partnership, due to
the minority ownership interest of Mr. Brault (who is also an executive officer
and the director of Brauvin Realty Advisors, Inc.) and his son, James L. Brault
(who is an executive officer of Brauvin Realty Advisors, Inc.) in such entity.
<PAGE>
In addition to the approval by the Interest Holders holding a majority of
the Units, Delaware law provides that a merger must also be approved by the
general partners of a partnership, unless the partnership agreement provides
otherwise. As described in the enclosed Proxy Statement, the Partnership's
Partnership Agreement is silent on this matter and not all of the General
Partners are recommending the proposed transaction. The Interest Holders are,
therefore, being asked to adopt an amendment to the Partnership Agreement to
allow the vote of the Interest Holders owning a majority of the Units to
determine the outcome of the transaction without a vote of the General Partners.
Failure to approve this amendment would likely preclude the consummation of the
transaction even if the transaction were approved by the Interest Holders
holding a majority of the Units.
The Partnership is soliciting your proxy in connection with the transaction
and the amendment. Included with this letter is a Notice of Special Meeting of
the Interest Holders to be held August __, 1996, at 9:00 a.m., local time, at
the offices of the Partnership, 150 South Wacker Drive, Chicago, Illinois 60606,
for the purpose of considering and voting on the transaction and the amendment.
Also enclosed herewith is a Proxy Statement dated July __, 1996, which contains
information relating to the proposed transaction and the amendment, together
with a proxy card which authorizes Jerome J. Brault, the Managing General
Partner, to vote your Units with respect to the transaction and the amendment at
the special meeting of the Interest Holders and any adjournment thereof. The
Interest Holders who hold Units of record on the books of the Partnership at the
close of business on _________________, 1996, are entitled to notice of, and to
vote at, the special meeting or any adjournments thereof. There are no quorum
requirements with respect to the special meeting of the Interest Holders (the
"Special Meeting"), however, if Interest Holders holding a majority of the Units
do not submit a proxy or vote in person at the Special Meeting neither the
transaction nor the amendment can be approved.
Regardless of whether you expect to be present in person at the Special
Meeting, please complete and promptly return the enclosed proxy card in the
enclosed, postage-prepaid envelope or by facsimile to (214) 999-9323 or (214)
999-9348 so that your Units may be represented and voted. A proxy may be
revoked at any time prior to its exercise by submitting a revocation or a later-
dated proxy to the Partnership's Information Agent, The Herman Group, Inc. or by
attending the Special Meeting and voting in person. Proxies properly executed
and returned, and not revoked, will be voted in accordance with instructions as
indicated thereon.
As both the transaction and the amendment require the approval of the
Interest Holders holding a majority of the Units, failure to return a proxy in a
timely manner or to vote at the Special Meeting will have the same effect as a
vote "AGAINST" the transaction and "AGAINST" the amendment. Likewise,
abstentions and broker non-votes will have the same effect as a vote "AGAINST"
the transaction
<PAGE>
and "AGAINST" the amendment. Any proxy cards which are returned and on which a
choice is not indicated will be voted "FOR" the transaction and "FOR" the
amendment. In view of the importance of the Special Meeting, it is requested
that you sign, mark and return the enclosed proxy card in the enclosed, postage-
prepaid envelope or by facsimile to (214) 999-9323 or (214) 999-9348 no later
than August __, 1996. When voting your proxy by facsimile, both sides of the
proxy card must be transmitted.
The transaction is one of a series of related transactions whereby the
purchaser seeks to acquire the assets of the Partnership and the assets of
certain affiliates of the Partnership. The approval of the limited partners
holding a majority in interest of each such limited partnership is a condition
to the effectiveness of the transaction, which condition may be waived by the
purchaser.
Cezar M. Froelich, one of the general partners of the Partnership gave
notice of his intent to resign as an individual General Partner of the
Partnership on May 23, 1996. Pursuant to the terms of the Partnership
Agreement, Mr. Froelich's resignation will become effective on the 90th day
following notice to the Interest Holders, which notice was dated June 20, 1996.
Questions and requests for assistance may be directed to the Partnership's
Information Agent, The Herman Group, Inc. at (800) 992-6145.
Very truly yours,
BRAUVIN REALTY ADVISORS, INC.,
Corporate General Partner
By: _______________________________
Title: ____________________________
___________________________________
Jerome J. Brault, Managing General
Partner
JEROME J. BRAULT, THE MANAGING GENERAL PARTNER OF THE PARTNERSHIP AND
BRAUVIN REALTY ADVISORS, INC., THE CORPORATE GENERAL PARTNER OF THE PARTNERSHIP,
WHICH IS CONTROLLED BY MR. BRAULT, HAVE DETERMINED THAT THE TRANSACTION AND THE
AMENDMENT ARE FAIR AND REASONABLE TO THE INTEREST HOLDERS AND, THEREFORE,
RECOMMEND THAT THE INTEREST HOLDERS VOTE "FOR" THE TRANSACTION AND "FOR" THE
AMENDMENT. HOWEVER, SUCH GENERAL PARTNERS ARE SUBJECT TO CERTAIN CONFLICTS OF
INTEREST WITH RESPECT TO THE TRANSACTION. CEZAR M. FROELICH AND DAVID M.
STROSBERG, TWO OF THE INDIVIDUAL GENERAL PARTNERS, ARE NOT RECOMMENDING THE
TRANSACTION FOR THE REASONS STATED IN THE ENCLOSED PROXY STATEMENT.
<PAGE>
NOTICE OF SPECIAL MEETING OF THE INTEREST HOLDERS OF
BRAUVIN HIGH YIELD FUND L.P.
TO BE HELD AUGUST __, 1996
To the Interest Holders
of Brauvin High Yield Fund L.P.:
NOTICE IS HEREBY GIVEN, that a special meeting (the "Special Meeting") of
the Interest Holders of Brauvin High Yield Fund L.P., a Delaware limited
partnership (the "Partnership") will be held at the offices of the Partnership,
150 South Wacker Drive, Suite 3200, Chicago, Illinois 60606 on ______, August
__, 1996, at 9:00 a.m. local time, for the following purposes:
1. To approve the merger of the Partnership with and into Brauvin Real
Estate Funds L.L.C., a Delaware limited liability company (the
"Purchaser"), the effect of which will be that each Interest Holder
will receive approximately $9.26 per Unit in cash for their
partnership interests. The Purchaser is affiliated with Mr. Jerome J.
Brault and Brauvin Realty Advisors, Inc., two of the general partners
of the Partnership. Because the merger will result in a transfer of
the Partnership's assets to an affiliate of these general partners, by
approving the merger, the Interest Holders are automatically approving
an amendment of the Partnership's Restated Limited Partnership
Agreement, as amended, allowing the Partnership to sell property to
affiliates.
2. To adopt an amendment to the Partnership's Restated Limited
Partnership Agreement, as amended, which will allow the majority vote
of the Interest Holders to determine the outcome of the merger without
the vote of the General Partners. Upon approval of the amendment the
vote of the Interest Holders holding a majority of the Units will be
the only vote necessary to approve this transaction. Failure to
approve this amendment would likely preclude the consummation of the
merger even if the merger were approved by the Interest Holders
holding a majority of the Units.
3. To transact such other business as may properly come before the
Special Meeting or any adjournment or postponement thereof.
Information concerning the matters to be acted upon at the Special Meeting
is set forth in the accompanying Proxy Statement.
JEROME J. BRAULT, THE MANAGING GENERAL PARTNER OF THE PARTNERSHIP (THE
"MANAGING GENERAL PARTNER"), AND BRAUVIN REALTY
<PAGE>
ADVISORS, INC., THE CORPORATE GENERAL PARTNER OF THE PARTNERSHIP (THE "CORPORATE
GENERAL PARTNER" AND WITH THE MANAGING GENERAL PARTNER, THE "OPERATING GENERAL
PARTNERS"), WHICH IS CONTROLLED BY MR. BRAULT, HAVE DETERMINED THAT THE
TRANSACTION AND THE AMENDMENT ARE FAIR AND REASONABLE TO THE INTEREST HOLDERS
AND, THEREFORE, RECOMMEND THAT THE INTEREST HOLDERS VOTE "FOR" THE TRANSACTION
AND "FOR" THE AMENDMENT. HOWEVER, THE OPERATING GENERAL PARTNERS ARE SUBJECT TO
CERTAIN CONFLICTS OF INTEREST WITH RESPECT TO THE TRANSACTION. CEZAR M.
FROELICH AND DAVID M. STROSBERG, TWO OF THE INDIVIDUAL GENERAL PARTNERS, ARE NOT
RECOMMENDING THE TRANSACTION FOR THE REASONS STATED IN THE ENCLOSED PROXY
STATEMENT.
You are invited to attend the Special Meeting. Even if you intend to
attend the Special Meeting, you are requested to sign and date the accompanying
proxy card and return it promptly in the enclosed, postage-prepaid envelope or
by facsimile to (214) 999-9323 or (214) 999-9348. When voting your proxy by
facsimile, both sides of the proxy card must be transmitted. If you attend the
Special Meeting, you may, if you wish, vote in person regardless of whether you
have given your proxy. In any event, a proxy may be revoked at any time before
it is exercised.
The close of business on _________, 1996 has been fixed as the record date
for determination of the Interest Holders entitled to notice of and to vote at
the Special Meeting. There are no quorum requirements with respect to the
Special Meeting, however, if Interest Holders holding a majority of the Units do
not submit a proxy or vote in person at the Special Meeting neither the
Transaction nor the amendment can be approved.
BRAUVIN REALTY ADVISORS, INC., Corporate
General Partner
By:___________________________
Title:________________________
______________________________
Jerome J. Brault, Managing General Partner
Chicago, Illinois
July __, 1996
YOUR VOTE IS VERY IMPORTANT. IN ORDER TO ENSURE THAT YOUR INTERESTS WILL
BE REPRESENTED, WHETHER YOU INTEND TO BE PRESENT AT THE SPECIAL MEETING OR NOT,
PLEASE SIGN THE ENCLOSED PROXY CARD AND MAIL IT PROMPTLY IN THE ENCLOSED,
POSTAGE-PREPAID ENVELOPE OR BY FACSIMILE TO (214) 999-9323 OR (214) 993-9348.
<PAGE>
WHEN VOTING YOUR PROXY BY FACSIMILE, BOTH SIDES OF THE PROXY CARD MUST BE
TRANSMITTED. FAILURE TO RETURN A PROXY CARD, ABSTENTION FROM VOTING AND BROKER
NON-VOTES WILL EACH BE THE SAME AS A VOTE "AGAINST" THE TRANSACTION AND
"AGAINST" THE AMENDMENT. ANY PROXY CARDS ON WHICH A CHOICE IS NOT INDICATED
WILL BE VOTED "FOR" THE TRANSACTION AND "FOR" THE AMENDMENT.
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
Page
<S> <C>
SUMMARY............................................... 3
The Transaction.................................. 4
Related Transactions............................. 4
Amendment to the Partnership Agreement........... 5
The Special Meeting; Votes Required.............. 5
Purpose of and Reasons for the Transaction....... 5
Effects of the Transaction....................... 6
Valuation of the Assets; Fairness Opinion........ 7
Recommendations of the General Partners.......... 7
Conflicts of Interest............................ 8
SPECIAL MEETING OF THE INTEREST HOLDERS............... 9
Special Meeting; Record Date..................... 9
Procedures for Completing Proxies................ 9
Votes Required................................... 11
Solicitation Procedures.......................... 11
Revocation of Proxies............................ 11
TERMS OF THE TRANSACTION.............................. 12
The Merger Agreement............................. 12
Representations and Warranties of the Parties.... 13
Additional Agreements............................ 14
Conditions to Closing the Transaction............ 15
Determination of Redemption Price................ 18
Termination of the Merger Agreement.............. 18
Amendment of the Merger Agreement................ 19
Amendment of Partnership Agreement............... 20
Related Transactions............................. 20
INCOME TAX CONSEQUENCES OF THE TRANSACTION............ 21
Certain Federal Income Tax Consequences.......... 21
Differing Tax Treatment of the Interest Holders.. 24
SPECIAL FACTORS....................................... 25
Purpose of and Reasons for the Transaction....... 25
Alternatives to the Transaction.................. 29
Effects of the Transaction....................... 31
Valuation of the Assets; Fairness Opinion........ 33
Recommendations of the General Partners.......... 38
Appraisal Rights................................. 42
Costs Associated with the Transaction............ 42
CONFLICTS OF INTEREST................................. 43
Interests in the Purchaser....................... 43
Purchaser Fees................................... 43
Indemnification under the Partnership Agreement.. 44
Indemnification by the Purchaser................. 45
</TABLE>
i
<PAGE>
<TABLE>
<S> <C>
CERTAIN INFORMATION ABOUT THE PARTNERSHIP, ITS GENERAL
PARTNERS AND THEIR AFFILIATES 45
The Partnership.................................. 45
The General Partners............................. 47
Description of the Assets........................ 48
Distributions.................................... 55
Ownership of Units............................... 56
Market for the Units............................. 56
Legal Proceedings................................ 57
Independent Certified Public Accountants......... 57
Available Information............................ 57
CERTAIN INFORMATION CONCERNING THE PURCHASER.......... 58
SELECTED FINANCIAL DATA............................... 59
INCORPORATION BY REFERENCE............................ 59
</TABLE>
ANNEX I - VALUATION
ANNEX II - FAIRNESS OPINION
0171991.11
ii
<PAGE>
BRAUVIN HIGH YIELD FUND L.P.
150 SOUTH WACKER DRIVE
SUITE 3200
CHICAGO, ILLINOIS 60606
PROXY STATEMENT
FOR THE SPECIAL MEETING OF THE INTEREST HOLDERS
TO BE HELD AUGUST __, 1996
This proxy statement (the "Proxy Statement") and the enclosed proxy card
are being first mailed to the beneficial owners of the limited partnership
interests (the "Interest Holders") of Brauvin High Yield Fund L.P., a Delaware
limited partnership (the "Partnership") on or about July __, 1996 by the
Partnership to solicit proxies for use at a special meeting of the Interest
Holders (the "Special Meeting") to be held at the offices of the Partnership,
150 South Wacker Drive, Chicago, Illinois 60606 on ______, August __, 1996 at
9:00 a.m., local time, or at such other place and time to which the Special
Meeting may be adjourned.
The purpose of the Special Meeting is to consider the approval of a merger
(the "Merger") of the Partnership with and into Brauvin Real Estate Funds
L.L.C., a Delaware limited liability company (the "Purchaser") that is
affiliated with the Operating General Partners, as hereinafter defined. Because
the Merger will result in a transfer of the Partnership's assets to an affiliate
of these general partners of the Partnership, by approving the Merger, the
Interest Holders are automatically approving an amendment of the Partnership
Agreement, as hereinafter defined, allowing the Partnership to sell or lease
property to affiliates (this amendment, together with the Merger shall be
referred to herein as the "Transaction"). The terms of the Merger are set forth
in an Agreement and Plan of Merger dated as of June 14, 1996 by and among the
Purchaser and the Partnership, Brauvin High Yield Fund L.P. II and Brauvin
Income Plus L.P. III (the "Merger Agreement"). Promptly upon consummation of
the Transaction, the Partnership will be merged with and into the Purchaser
through a merger of its partnership interests, the Partnership will cease to
exist and the Purchaser, as the surviving entity, will succeed to all of the
assets and liabilities of the Partnership. As a
- --------------------------------------------------------------------------------
THIS TRANSACTION HAS NOT BEEN APPROVED OR DISAPPROVED BY THE UNITED STATES
SECURITIES AND EXCHANGE COMMISSION (THE "COMMISSION") NOR HAS THE COMMISSION
PASSED UPON THE FAIRNESS OR MERITS OF SUCH TRANSACTION NOR UPON THE ACCURACY OR
ADEQUACY OF THE INFORMATION CONTAINED IN THIS DOCUMENT. ANY REPRESENTATION TO
THE CONTRARY IS UNLAWFUL.
<PAGE>
result of the Merger, all of the outstanding units of limited partnership
interest of the Partnership (each a "Unit" and collectively, the "Units") will
be redeemed by the Purchaser for approximately $9.26 per Unit in cash. This
redemption price is based on the fair market value of the properties of the
Partnership (the "Assets") which has been determined by an independent appraiser
to be $23,198,450, or $8.83 per Unit, plus all remaining cash of the Partnership
as of the effective time of the Merger (the "Effective Time"), less earnings of
the Partnership after July 31, 1996, less the Partnership's actual costs
incurred and accrued through the Effective Time, including reasonable reserves
in connection with: (i) the proxy solicitation; (ii) the Transaction (as
detailed in the Merger Agreement); and (iii) winding up of the Partnership,
including preparation of the final audit, tax return and K-1s (collectively, the
"Transaction Costs") and less all other Partnership obligations, which amount is
currently anticipated to be $.43 per Unit. The general partners of the
Partnership (the "General Partners") will not receive any payment in exchange
for the redemption of their general partnership interests nor will they receive
any fees from the Partnership in connection with the Transaction. However, the
Transaction is subject to certain conflicts of interest, as described herein,
including the fact that Mr. Jerome J. Brault, the Managing General Partner of
the Partnership (the "Managing General Partner") and an executive officer and
the director of Brauvin Realty Advisors, Inc. (the "Corporate General Partner")
and his son, James L. Brault, an executive officer of the Corporate General
Partner, have a minority ownership interest in the Purchaser. Cezar M. Froelich
and David M. Strosberg, two of the individual General Partners have no
affiliation with the Purchaser.
The affirmative vote of the Interest Holders holding a majority of the
Units (in excess of 50%) is necessary to approve the Transaction. In addition,
the Delaware Revised Uniform Limited Partnership Act (the "Act") provides that a
merger must also be approved by the general partners of a partnership, unless
the limited partnership agreement provides otherwise. Because the Restated
Limited Partnership Agreement of the Partnership, as amended (the "Partnership
Agreement") is silent on this matter and because not all of the General Partners
are recommending the Transaction, the Interest Holders are also being asked to
adopt an amendment (the "Amendment") to the Partnership Agreement which provides
that the vote of the General Partners is not required to approve the
Transaction. The affirmative vote of the Interest Holders holding a majority of
the Units is necessary to approve the Amendment. Upon approval of the Amendment,
the vote of the Interest Holders holding a majority of the Units will be the
only vote necessary to approve the Transaction. There are no quorum requirements
with respect to the Special Meeting, however, if the Interest Holders holding a
majority of the Units do not submit a proxy or vote in person at the meeting
neither the Transaction
2
<PAGE>
nor the Amendment can be approved. Neither the Act nor the Partnership Agreement
provide the Interest Holders not voting in favor of the Transaction or the
Amendment with dissenters' appraisal rights.
The close of business on ________________, 1996 has been established as
the record date (the "Record Date") for determining the Interest Holders
entitled to notice of, and to direct the vote of the Units at the Special
Meeting. As of the Record Date, the Partnership had outstanding and entitled to
vote 2,627,503.23 Units, held of record by 1,838 Interest Holders. Each Unit
entitles the holder to one vote on each matter submitted to a vote of the
Interest Holders.
All duly executed proxy cards received from the Interest Holders prior to
the Special Meeting will be voted in accordance with the choices specified
thereon. If a duly executed proxy card does not specify a choice, the Units
represented thereby will be voted "FOR" the Transaction and "FOR" the Amendment.
An Interest Holder who gives a proxy may revoke it at any time before it is
voted at the Special Meeting, as described herein.
The accompanying proxy is solicited on behalf of the Partnership to be
voted at the Special Meeting. The Partnership's principal executive offices are
located at 150 South Wacker Drive, Suite 3200, Chicago, Illinois 60606 and its
telephone number is (312) 443-0922. The Partnership has engaged The Herman
Group, Inc. to act as Information Agent in connection with the proxy
solicitation process. In addition to the original solicitation by mail, proxies
may be solicited by telephone, telegraph or in person. All expenses of this
solicitation, including the cost of preparing and mailing this Proxy Statement,
will be borne by the Partnership.
The Partnership is a Delaware limited partnership formed on January 6,
1987. The Partnership's Commission file number is 0-17563. The General
Partners are the Corporate General Partner, the Managing General Partner, Cezar
M. Froelich and David M. Strosberg. Mr. Froelich gave notice of his intent to
resign as an individual General Partner of the Partnership on May 23, 1996.
Pursuant to the terms of the Partnership Agreement, Mr. Froelich's resignation
will become effective on the 90th day following notice to the Interest Holders,
which notice was dated June 20, 1996. Mr. Strosberg has indicated his intent to
resign as an individual General Partner subsequent to approval of the
Transaction by the Interest Holders.
SUMMARY
Set forth below is a summary of certain information contained elsewhere in
this Proxy Statement. It is not intended
3
<PAGE>
to be a complete description of those matters which it covers and much of the
information contained in this Proxy Statement is not covered by this Summary.
The information contained in this Summary is qualified by the more complete
information contained elsewhere in this Proxy Statement or incorporated by
reference into this Proxy Statement. All Interest Holders are urged to read
this Proxy Statement in its entirety.
THE TRANSACTION
Pursuant to the terms of the Merger Agreement, the Partnership proposes to
merge with and into the Purchaser through a merger of its partnership interests.
Promptly upon consummation of the Transaction, the Partnership will cease to
exist and the Purchaser, as the surviving entity, will succeed to all of the
Assets and liabilities of the Partnership. As a result of the Merger, the
interests of the Interest Holders in the Partnership will be redeemed for
approximately $9.26 per Unit in cash. This redemption price is based on the
fair market value of the Assets which has been determined by an independent
appraiser to be $23,198,450, or $8.83 per Unit, as of April 1, 1996 plus all
remaining cash of the Partnership as of the Effective Time, less earnings of the
Partnership after July 31, 1996, less the Transaction Costs and less all other
Partnership obligations, which amount is currently anticipated to be $.43 per
Unit. Thus, the actual redemption price will be subject to adjustment based
upon changes in these amounts prior to the Effective Time. The independent
appraiser has also delivered an opinion that the Transaction is fair to the
Interest Holders from a financial point of view. The General Partners will not
receive any payment in exchange for the redemption of their general partnership
interests nor will they receive any fees from the Partnership in connection with
the Transaction. However, the Transaction is subject to certain conflicts of
interest as described herein, including the fact that the Managing General
Partner and his son, James L. Brault (collectively, the "Braults") have a
minority ownership interest in the Purchaser. Messrs. Froelich and Strosberg
have no affiliation with the Purchaser. See "Terms of the Transaction - The
Merger Agreement," "Terms of the Transaction - Determination of Redemption
Price" and "Conflicts of Interest."
RELATED TRANSACTIONS
The Transaction is one of a series of related transactions whereby the
Purchaser seeks to acquire the Assets of the Partnership and the assets, through
purchase or merger, of the Affiliated Limited Partnerships (as hereinafter
defined). The approval of a majority in interest of the limited partners of
each of the Affiliated Limited Partnerships to their respective Affiliated
Transactions, as hereinafter defined, is a condition to the effectiveness of the
Transaction, which condition may be
4
<PAGE>
waived by the Purchaser. See "Terms of the Transaction - Related Transactions."
AMENDMENT TO THE PARTNERSHIP AGREEMENT
Consummation of the Transaction is subject to approval by the Interest
Holders holding a majority of the Units (in excess of 50%). In addition, the
Act provides that a merger must also be approved by the general partners of a
partnership, unless the limited partnership agreement provides otherwise.
Because the Partnership Agreement is silent on this matter and because not all
of the General Partners are recommending the Transaction, the Interest Holders
are being asked to adopt the Amendment, which allows the vote of the Interest
Holders owning a majority of the Units to determine the outcome of the
Transaction without a vote of the General Partners. Upon approval of the
Amendment the vote of the Interest Holders holding a majority of the Units will
be the only vote necessary to approve the Transaction. Failure to approve the
Amendment would likely preclude the consummation of the Merger even if the
Merger were approved by the Interest Holders holding a majority of the
Units.
THE SPECIAL MEETING; VOTES REQUIRED
A Special Meeting of the Interest Holders will be held on August __, 1996,
to consider and vote upon the Transaction and the Amendment. It is a condition
to the closing of the Transaction that the Interest Holders holding a majority
of the Units (in excess of 50%) approve both the Transaction and the Amendment.
The Partnership is soliciting proxies from the Interest Holders to be used at
the Special Meeting and any adjournments thereof. See "Special Meeting of the
Interest Holders."
PURPOSE OF AND REASONS FOR THE TRANSACTION
The principal purpose of the Transaction is to cause the transfer of the
Assets and the liabilities to the Purchaser in return for cash proceeds which
will be distributed to the Interest Holders through the redemption of their
Units. The Transaction will result in the Interest Holders receiving the fair
market value for the Assets from a buyer that has the ability to quickly
consummate the Transaction and is willing to assume all of the Assets and
liabilities of the Partnership with limited representations and warranties.
This structure allows the Interest Holders to receive cash in exchange for their
Units based upon the current fair market value of the Assets, which cash can be
invested in alternative investments. See "Special Factors - Purpose of and
Reasons for the Transaction."
5
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EFFECTS OF THE TRANSACTION
If the Transaction and the Amendment are approved and the remaining
conditions to the Transaction are met or waived, the Merger will be effected and
in connection therewith, the Assets and liabilities of the Partnership will be
transferred to the Purchaser as the surviving entity in the Merger, the
Partnership will cease to exist and the Units of the Interest Holders will be
redeemed for approximately $9.26 per Unit in cash. Thereafter, Interest Holders
will cease to be owners of the Partnership and will no longer bear the costs or
benefits associated with such ownership. See "Special Factors - Effects of the
Transaction," "Special Factors - Purpose of and Reasons for the Transaction -
Costs and Risks Associated with Continued Ownership" and "Special Factors -
Purpose of and Reasons for the Transaction - Benefits of the Transaction."
The General Partners will not receive any payment in exchange for the
redemption of their general partnership interests nor will they receive any fees
from the Partnership in connection with the Transaction. However, the Braults
have a minority ownership interest in the Purchaser, which will own the Assets
following the consummation of the Transaction. In addition, each of Brauvin
Management Company and Brauvin Financial, Inc., corporations owned, in part, by
Cezar M. Froelich and an affiliate of Jerome J. Brault, will receive $40,860
from the Purchaser (not the Partnership) for advisory services rendered in
connection with the Transaction.
If the Transaction is not consummated, there can be no assurance as to
whether any future liquidation or disposition of the Assets, either in whole or
in part, will occur or on what terms they might occur. However, if not
approved, the Operating General Partners will continue to operate the
Partnership in accordance with the terms of the Partnership Agreement and in
fulfillment of their fiduciary duties, including the review of any third-party
offers to purchase any or all of the Assets, in an effort to enhance the
Partnership's value on behalf of the Interest Holders. In addition, the
Operating General Partners will continue to evaluate the various alternatives to
the Transaction, as described under the heading "Special Factors - Alternatives
to the Transaction" below. Such alternatives include: (i) continuing to hold
the Assets; (ii) individual property sales; (iii) an auction of any or all of
the properties; and (iv) solicitation of third-party bids. The Operating
General Partners have concluded that such options are not in the best interest
of the Interest Holders at this time, particularly in light of the Purchaser's
offer. The Operating General Partners do not intend to actively solicit bids
for the Assets in the immediate future.
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VALUATION OF THE ASSETS; FAIRNESS OPINION
Cushman & Wakefield Valuation Advisory Services ("Cushman & Wakefield"),
the largest real estate valuation and consulting organization in the United
States, was engaged by the Partnership to prepare an appraisal of the Assets.
Cushman & Wakefield was subsequently engaged to provide an opinion as to the
fairness of the Transaction to the Interest Holders from a financial point of
view. Cushman & Wakefield preliminarily valued the Assets at $22,600,000. The
Operating General Partners reviewed the initial valuation and concluded that the
values of the Assets set forth therein were lower than expected due to changes
and/or clarifications of certain property and/or financial information not
previously provided to or not considered by Cushman & Wakefield. As a result of
subsequent considerations presented by the Operating General Partners, the
valuation was increased to $23,198,450, which is the total cash consideration to
be paid by the Purchaser for the Assets in connection with the Transaction. In
addition, Cushman & Wakefield has advised the Partnership that in its opinion,
the Transaction is fair to the Interest Holders from a financial point of view.
See "Special Factors - Valuation of the Assets; Fairness Opinion."
RECOMMENDATIONS OF THE GENERAL PARTNERS
The Operating General Partners have determined that the terms of the
Transaction are fair to the Interest Holders and, therefore, recommend that the
Interest Holders vote "FOR" the Transaction and "FOR" the Amendment. The
recommendations of the Operating General Partners are, however, subject to
conflicts of interest as described herein. The Operating General Partners'
determination of fairness was based on the following factors in favor of the
Transaction: (i) use of an independent appraiser's valuation of the Assets as a
basis for the redemption price; (ii) the structure of the transaction as a
merger, whereby all of the Assets and the liabilities of the Partnership are
transferred to the Purchaser, thereby eliminating the need for the Partnership
to continue operations with the less salable or valuable properties; (iii)
avoidance of certain potential transaction costs, such as investment banking
fees or real estate brokerage commissions, which could have approximated
$700,000 to $1,400,000 in the aggregate; (iv) the willingness of the Purchaser
to effect an all cash transaction; (v) the independent fairness opinion rendered
in connection with the Transaction; (vi) the fact that the Partnership is at the
end of the originally anticipated holding period for the Assets; (vii) the fact
that the Transaction will be effected with minimal representations and
warranties by the Partnership, thereby eliminating the need to escrow funds;
(viii) the flexibility granted to the Operating General Partners in the Merger
Agreement to pursue subsequent offers that can produce a better return to the
Interest Holders; (ix) the fact that a majority in interest
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of the Interest Holders (in excess of 50%) is required to approve the
Transaction; (x) the average lease term of the Assets and other risks associated
with continuing to own the Assets; (xi) the high cost of operating a publicly-
held entity; (xii) the lack of an established trading market for the Units;
(xiii) the comparison of the per Unit redemption price to current and historical
market prices; (xiv) the expressed desire of certain Interest Holders to have
their investment in the Partnership liquidated; and (xv) the Operating General
Partners' industry knowledge regarding the marketability of properties with
lease terms similar to the Assets. In determining the fairness of the
Transaction, the Operating General Partners also considered the following
factors: (i) the affiliated nature of the Transaction and other conflicts of
interest; (ii) that there can be no assurance that the cash redemption price
received by the Interest Holders in connection with the Transaction can be
invested in alternative investments that will generate a return equal to or
greater than that generated by the investment in the Partnership; (iii) that the
Interest Holders will no longer have an ownership interest in the Assets and
thus will not share in any potential changes in their value; (iv) that there can
be no assurances that a better offer for the acquisition of the Assets may not
be available now or in the future; and (v) that the Interest Holders may incur
certain tax liabilities as a result of the Transaction. Messrs. Froelich and
Strosberg are not recommending the Transaction since they believe that the most
advantageous methodology for determining a fair price for the Assets would be to
seek third-party offers through an arm's-length bidding process. See "Special
Factors - Recommendations of the General Partners" for a discussion of the
foregoing factors.
Conflicts of Interest
The Transaction is subject to certain conflicts of interest as more fully
described under the heading "Conflicts of Interest" below. Such conflicts
include: (i) that the Operating General Partners are affiliated with the
Purchaser, due to the minority ownership interest of the Braults in such entity
and, therefore, they have an indirect economic interest in consummating the
Transaction that may be considered to be in conflict with the economic interests
of the Interest Holders; (ii) that each of Brauvin Management Company and
Brauvin Financial, Inc., which are owned, in part, by Cezar M. Froelich and an
affiliate of Jerome J. Brault, will receive $40,860 from the Purchaser (not the
Partnership) for advisory services rendered in connection with the Transaction;
and (iii) that the General Partners have been granted certain indemnification
rights by each of the Partnership and the Purchaser.
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SPECIAL MEETING OF THE INTEREST HOLDERS
Special Meeting; Record Date
Pursuant to the terms of the Partnership Agreement, the approval of the
Interest Holders holding a majority of the Units is required to approve the
Transaction and to approve the Amendment. A Special Meeting of the Interest
Holders will be held on August __, 1996, at the offices of the Partnership, 150
South Wacker Drive, Chicago, Illinois 60606, at 9:00 a.m., local time, to
consider and vote upon the Transaction and the Amendment. The Partnership
Agreement provides that the General Partners may call a special meeting of the
Interest Holders, which special meeting shall have a record date, for the
purpose of determining the Interest Holders entitled to vote, of not more than
60 days nor less than 20 days prior to the date when ballots are delivered to
the Interest Holders. In accordance therewith, the close of business on
________________, 1996 has been established as the Record Date. Under the terms
of the Partnership Agreement, only the Interest Holders holding Units of record
on the Record Date are eligible to vote those Units on the proposals set forth
in this Proxy Statement. An Interest Holder holding Units of record as of the
Record Date will retain the right to vote on the proposals set forth herein even
if such Interest Holder sells or transfers such Units after such date. As of the
Record Date, the Partnership had 2,627,503.23 Units outstanding and entitled to
vote, held of record by 1,838 Interest Holders. A list of the Interest Holders
entitled to vote at the special meeting will be available for inspection at the
executive offices of the Partnership at 150 South Wacker Drive, Suite 3200,
Chicago, Illinois 60606. There are no quorum requirements with respect to the
Special Meeting, however, if Interest Holders holding a majority of the Units do
not submit a proxy or vote in person at the Special Meeting, neither the
Transaction nor the Amendment can be approved.
All Interest Holders are invited to attend the Special Meeting. However,
even those Interest Holders intending to attend the Special Meeting are
requested to complete and return the enclosed proxy card promptly.
Procedures for Completing Proxies
Accompanying this Proxy Statement is a proxy card solicited by and on
behalf of the Partnership for use at the Special Meeting. When a proxy card is
returned, properly executed, the Units represented thereby will be voted at the
Special Meeting by the Managing General Partner in the manner specified on the
proxy card. It is important that you mark, sign and date your proxy card and
return it in the enclosed, postage-prepaid envelope or by facsimile to (214)
999-0323 or (214) 999-9348 as soon as possible. When voting your proxy by
facsimile, both sides of the
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proxy must be transmitted. Delivery of your proxy does not prohibit you from
attending the Special Meeting. To be properly executed, the proxy card must be
signed by and bear the date of signature of the Interest Holder voting the Units
represented thereby. All questions as to the form of documents and the validity
of consents will be determined by the Managing General Partner, which
determinations shall be final and binding. The Managing General Partner
reserves the right to waive any defects or irregularities in any proxy.
Each Unit entitles the holder thereof to one vote with respect to the
proxies solicited hereby. Only holders of Units of record on the record date may
grant a proxy with respect to those Units. IF UNITS STAND OF RECORD IN THE NAMES
OF TWO OR MORE PERSONS, ALL SUCH PERSONS MUST SIGN THE PROXY CARD. WHEN SIGNING
AS AN ATTORNEY, EXECUTOR, ADMINISTRATOR, TRUSTEE OR GUARDIAN, PLEASE GIVE THE
FULL TITLE OF SUCH. IF A CORPORATION, THE PROXY SHOULD BE SIGNED BY THE
PRESIDENT OR OTHER AUTHORIZED OFFICER. IF A PARTNERSHIP, PLEASE SIGN IN
PARTNERSHIP'S NAME BY AN AUTHORIZED PERSON. IF YOUR UNITS ARE HELD IN THE NAME
OF A BROKERAGE FIRM, BANK, NOMINEE OR OTHER INSTITUTION, ONLY SUCH INSTITUTION
CAN SIGN A PROXY WITH RESPECT TO YOUR UNITS AND CAN DO SO ONLY AT YOUR
DIRECTION. ACCORDINGLY, IF YOUR UNITS ARE SO HELD, PLEASE CONTACT YOUR ACCOUNT
REPRESENTATIVE AND GIVE INSTRUCTIONS FOR A PROXY TO BE SIGNED WITH RESPECT TO
YOUR UNITS.
An Interest Holder in favor of the Transaction and the Amendment should
mark the "FOR" boxes on the enclosed proxy card, date and sign the proxy and
mail it promptly in the enclosed postage-prepaid envelope or fax a copy to (214)
999-9323 or (214) 999-9348. When voting your proxy by facsimile, both sides of
the proxy card must be transmitted. If a proxy card is executed but no
indication is made as to what action is to be taken, it will be deemed to
constitute a vote "FOR" the Transaction and "FOR" the Amendment. By consenting
to the Transaction and the Amendment, the Interest Holders irrevocably appoint
the Managing General Partner, or his designee, as their attorney-in-fact to
execute and deliver such documents as are necessary to effect the Transaction
and the Amendment.
AS THE CONSENT OF THE INTEREST HOLDERS HOLDING A MAJORITY IN INTEREST OF
THE OUTSTANDING UNITS IS NECESSARY TO CONSUMMATE THE PROPOSED TRANSACTION AND TO
ADOPT THE AMENDMENT, FAILURE TO RETURN A PROXY IN A TIMELY MANNER OR TO VOTE AT
THE SPECIAL MEETING, ABSTENTION FROM VOTING OR A BROKER NON-VOTE WILL EACH HAVE
THE SAME EFFECT AS A VOTE "AGAINST" THE TRANSACTION AND "AGAINST" THE AMENDMENT.
Questions and requests for assistance or for additional copies of the Proxy
Statement and proxy card may be directed to the Partnership's Information Agent,
The Herman Group, Inc., 2121 San Jacinto Street, 26th Floor, Dallas, Texas
75201,
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(800) 992-6145. In addition to soliciting proxies by mail, proxies may be
solicited in person and by telephone or telegraph. You may also contact your
broker, dealer, commercial bank, trust company or other nominee for assistance
concerning the proxy solicitation.
Votes Required
Pursuant to the terms of the Partnership Agreement and the Act, the vote of
the Interest Holders owning a majority of the Units (in excess of 50%) is
necessary to approve the Transaction and the Amendment. Each Unit entitles the
holder to one vote on each matter submitted to a vote of the Interest Holders.
If a majority in interest of the Interest Holders consent to the Transaction and
the Amendment and certain other conditions are met, the Transaction will be
consummated. The Operating General Partners believe that if both the Transaction
and the Amendment are not approved by the Interest Holders owning a majority of
the Units, the Transaction will not be completed.
Solicitation Procedures
The Partnership has retained The Herman Group, Inc. to act as Information
Agent and for advisory services in connection with this proxy solicitation. In
connection therewith, The Herman Group, Inc. will be paid reasonable and
customary compensation and will be reimbursed for its reasonable out-of-pocket
expenses, as described herein. See "Special Factors - Costs Associated with the
Transaction." The Partnership has also agreed to indemnify The Herman Group,
Inc. against certain liabilities and expenses including, liabilities and
expenses under federal securities laws.
The Partnership will not pay any fees or commissions to any broker or
dealer or other person (other than to The Herman Group, Inc.) for soliciting
proxies pursuant to this solicitation. Banks, brokerage houses and other
custodians, nominees and fiduciaries will be requested to forward the
solicitation material to the customers for whom they hold Units, and the
Partnership will reimburse them for reasonable mailing and handling expenses
incurred by them in forwarding proxy materials to their customers.
Revocation of Proxies
A proxy executed and delivered by an Interest Holder may subsequently
be revoked by submitting written notice of revocation to the Partnership. A
revocation may be in any written form validly signed by an Interest Holder as
long as it clearly states that such Interest Holder's proxy previously given is
no longer effective. To prevent confusion, the notice of revocation must be
dated. Notices of revocation should be
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delivered to The Herman Group, Inc., 2121 San Jacinto Street, 26th Floor,
Dallas, Texas 75201, (800) 992-6145. An Interest Holder may also revoke its
proxy by attending the Special Meeting and voting in person. If an Interest
Holder signs, dates and delivers a proxy to the Partnership and, thereafter, on
one or more occasions dates, signs and delivers a later-dated proxy, the latest-
dated proxy card is controlling as to the instructions indicated therein and
supersedes such Interest Holder's prior proxy as embodied in any previously
submitted proxy card.
TERMS OF THE TRANSACTION
The Merger Agreement
The Partnership, Brauvin High Yield Fund L.P. II, a Delaware limited
partnership affiliated with the Partnership, and Brauvin Income Plus L.P. III, a
Delaware limited partnership affiliated with the Partnership, and the Purchaser
entered into the Merger Agreement as of June 14, 1996, pursuant to which the
Partnership has agreed to merge (through a merger of its partnership interests)
with and into the Purchaser, subject to the conditions set forth therein. The
summary of the Merger Agreement which is set forth below is qualified in its
entirety by reference to the complete form of Merger Agreement, which is
available for inspection and copying by any interested Interest Holder, or its
representative who has been so designated by the Interest Holder, at the
Partnership's principal executive offices during regular business hours. A copy
of the Merger Agreement shall also be sent to any Interest Holder or duly
designated representative thereof, at such Interest Holder's expense, upon
receipt of the written request of such Interest Holder.
The Merger Agreement provides, and the Purchaser intends, that as soon as
practicable after satisfaction or waiver of the conditions to the Transaction,
including approval thereof by the Interest Holders, the Purchaser shall file a
certificate of merger with the Secretary of State of Delaware and the
Partnership shall be merged with and into the Purchaser. The Transaction shall
become effective at such time as is specified in the certificate of merger.
Following the Transaction, the Purchaser shall continue as the surviving entity
and the Partnership shall cease to exist. The Purchaser, as the surviving
entity, shall succeed to and possess all of the rights, privileges and powers of
the Partnership, whose Assets shall vest in the Purchaser, who shall thereafter
be liable for all of the liabilities and obligations of or any claims or
judgments against the Partnership. The Articles of Organization of the Purchaser
shall thereafter be the Articles of Organization of the surviving entity. As a
result of the Transaction, all of the Units will be converted into the right to
receive approximately $9.26 per Unit in cash. The redemption price is based on
the fair market value
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of the Assets as determined by an independent appraiser, plus Available Cash, as
hereinafter defined, of the Partnership as of the Effective Time, less earnings
of the Partnership after July 31, 1996, less the Transaction Costs and less
liabilities of the Partnership not otherwise deducted in computing Available
Cash.
For purposes of this computation, "Available Cash" means the amount of
cash and cash equivalents held by or at the direction of the Partnership after
deducting any amounts then owned, accrued or reserved by the Partnership for
goods, services or liabilities of any nature or description.
The Purchaser and the Partnership will select a person or entity to act as
the redemption agent (the "Redemption Agent"). At the Effective Time, the
Purchaser shall deposit with the Redemption Agent an aggregate amount equal to
the aggregate redemption price in the Merger. The Redemption Agent shall deliver
to the Partnership all the funds held by it for purposes of the Merger. See
"Terms of the Transaction - Determination of Redemption Price" and "Special
Factors - Valuation of the Assets; Fairness Opinion."
If the Closing Conditions, as hereinafter defined, are met, the Transaction
is expected to be effected on or before September 15, 1996. Should the
Transaction not be consummated by September 15, 1996, the financing to
consummate the Transaction may not be available. In order to meet certain other
interim deadlines established by the Purchaser, the Transaction must be approved
by the Interest Holders no later than August 15, 1996.
Representations and Warranties of the Parties
Pursuant to the Merger Agreement, the Purchaser has represented and
warranted to the Partnership that: (i) it is a limited liability company duly
formed and in good standing under the laws of the State of Delaware with the
requisite authority to carry on the business it will conduct following the
Merger; (ii) it has the requisite power and authority to enter into the Merger
Agreement and perform its obligations thereunder; and (iii) all government
approvals and notices which are required for it to effect the Merger have been
obtained or been properly filed, except those approvals or filings where the
failure to make such filing or obtain authorization, consent or approval will
not have a material adverse affect on the Purchaser.
Pursuant to the Merger Agreement, the Partnership has represented and
warranted to the Purchaser that: (i) it is a limited partnership duly formed
and validly existing and in good standing under the laws of the State of
Delaware; (ii) it has the requisite power to carry on its business; (iii) it has
2,627,503.23 issued and outstanding Units; (iv) it has the
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requisite power and authority to enter into the Merger Agreement, subject to the
approval of the Interest Holders; (v) except as otherwise disclosed, entering
into the Merger Agreement will not violate, conflict with, or result in a breach
of any provision of, or constitute a default under, or result in the termination
of, or accelerate the performance required by, or result in a right of
termination or acceleration under, or result in the creation of any lien upon
any of the Assets under any of the terms, conditions or provisions of the
Partnership's organizational documents or Partnership Agreement, any note, bond,
mortgage, indenture, deed of trust, license, lease, agreement or other
instrument or obligation which the Partnership is a party to, or violate any
statute, rule or regulation or preclude the Partnership or any of its Assets,
except as otherwise disclosed; (vi) the Partnership has made all required
filings with the Securities and Exchange Commission; (vii) the Partnership has
no liabilities other than those disclosed on its balance sheet provided pursuant
to the Merger Agreement; (viii) there has been no adverse changes in the
Partnership's financial condition since the preparation of the financial
statements provided pursuant to the Merger Agreement; (ix) to the knowledge of
the Partnership there is no action or proceeding or investigation pending,
threatened against or involving the Partnership or any of its Assets or rights
of the Partnership and to the Partnership's knowledge, any liabilities which if
adversely determined would individually or in the aggregate have a material
adverse affect on the condition of the Partnership; and (x) the Partnership will
provide to the Purchaser a true, correct and complete set of all files,
documents and other written materials relating to each parcel of real property
held by the Partnership and all buildings and improvements thereon including,
without limitation, copies of environmental reports, letters of credit or other
credit enhancement instruments, title insurance policies, hazard insurance
policies, flood insurance policies and other insurance policies, all balance
sheets, operating statements and other financial statements, all existing
engineering reports, soil studies and reports, plans, specifications,
architectural and engineering drawings, completion agreements, arrangements,
warranties, commitments and other similar reports, studies and items, leases and
contracts, property management and leasing brokerage agreements and other
writings whatsoever.
Additional Agreements
The Partnership agreed to file a proxy statement soliciting approval of the
Interest Holders for both the Transaction and the Amendment and to hold a
meeting of the Interest Holders as soon as practicable thereafter.
The Operating General Partners have agreed that, if required pursuant
to their fiduciary obligation, they will respond to any
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unsolicited inquiry, contract or proposal made by a third party to the
Partnership (an "Alternative Proposal"), and nothing in the Merger Agreement
shall prohibit any of the General Partners from responding to such Alternative
Proposal, making any required disclosures under Federal securities laws or
providing information regarding the Partnership to the party making such
Alternative Proposal, negotiating with such party in good faith, terminating the
Merger Agreement or taking any other action, provided, however, that the
Partnership agrees to give the Purchaser reasonable notice of any such response,
negotiations or other matters, as well as a reasonable opportunity to respond,
taking into account in good faith that the facts and circumstances were valid at
the time of such response, negotiation or other matters. In the event the
Merger Agreement is terminated due to the consummation of an Alternative
Proposal, Purchaser shall be entitled to a fee equal to 1.0% of the merger
consideration.
Conditions to Closing the Transaction
The respective obligations of each party to effect the Transaction shall be
subject to the fulfillment at or prior to the Effective Time of each of the
following conditions which may be waived, in whole or in part, only by written
agreement of the Partnership and the Purchaser: (i) all approvals, notices,
filings, registrations and authorizations of any governmental authority required
for consummation of the Transaction shall have been obtained or made; (ii)
approval of the Transaction by Interest Holders holding a majority of Units
shall have been obtained; (iii) no preliminary or permanent injunction or other
order, decree or ruling issued by a court of competent jurisdiction or by a
governmental, regulatory or administrative agency or commission, nor any
statute, rule, regulation or executive order promulgated or enacted by a
governmental authority shall be in effect which would prevent the consummation
of the Transaction.
The obligation of the Partnership to effect the Transaction is also subject
to the fulfillment at or prior to the Effective Time of each of the following
conditions which may be waived, in whole or in part, by the Partnership: (i) the
Purchaser shall in all material respects have performed each obligation to be
performed by it under the Merger Agreement on or prior to the Effective Time;
(ii) the representations and warranties of the Purchaser set forth in the Merger
Agreement and described above shall be true and correct in all material respects
at and as of the Effective Time as if made at and as of such time, except to the
extent that any such representation or warranty is made as of a specified date,
in which case such representation or warranty shall have been true and correct
as of such date; (iii) the Partnership shall have received a certificate of the
Purchaser, dated the Closing Date, signed by the manager of the Purchaser,
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to the effect that the conditions specified in sections (i) and (ii) above have
been fulfilled; (iv) a favorable opinion of Cushman & Wakefield as to the
fairness of the redemption price to the Interest Holders, from a financial point
of view, shall have been delivered to the Partnership; and (v) no later than the
earlier of: (A) July 15, 1996; or (B) the date of the mailing of this Proxy
Statement, the Purchaser shall have delivered to the Partnership a commitment
letter executed by a financial institution or other financing source providing
for debt financing in an amount at least equal to $58,000,000 and on terms
commercially reasonable from the point of view of the Partnership as the selling
party in the Transaction.
The obligation of the Purchaser to effect the Transaction is also subject
to the fulfillment at or prior to the Effective Time, or such earlier date as
specified therein, of each of the following conditions which may be waived in
whole or in part by the Purchaser: (i) the Partnership shall in all material
respects have performed each obligation to be performed by it under the Merger
Agreement on or prior to the Effective Time; (ii) the Partnership shall have
cash available and not restricted equal to and replacement reserves estimated to
be $513,000 and $418,000, respectively; (iii) the Purchaser shall have received
certificates of the Partnership, dated the Closing Date, to the effect that the
conditions specified in sections (i) and (ii) have been fulfilled; (iv) the
Purchaser shall have received evidence, in form and substance reasonably
satisfactory to its counsel, that such licenses, permits, consents, approvals,
waivers, authorizations, qualifications and orders of domestic governmental
authorities and parties to contracts and leases with the Partnership as are
necessary in connection with the consummation of the transactions contemplated
in the Merger Agreement (excluding licenses, permits, consents, approvals,
authorizations, qualifications or orders, the failure to obtain which after the
consummation of the transactions contemplated hereby, in the aggregate, will not
have a material adverse effect on the condition of the Partnership); (v) no
action, suit or proceeding before any court or governmental authority shall have
been commenced and be pending by any person against the Partnership or the
Purchaser or any of their affiliates, partners, officers or directors seeking to
restrain, prevent, change or delay in any material respect any of the terms or
provisions of the Transaction or seeking material damages in connection
therewith; (vi) the Purchaser, its manager and its lenders shall have received
the favorable legal opinion of Holleb & Coff, counsel to the Partnership, and
Prickett, Jones, Elliott, Kristol & Schnee, special Delaware counsel to the
Partnership, with respect to certain corporate and partnership matters; (vii)
receipt by the Purchaser of debt and equity financing which in its sole
judgement is satisfactory; (viii) the Partnership shall not have undergone a
material adverse change in its condition or its ability to perform its
obligations under the
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Merger Agreement; (ix) the Purchaser shall have determined that the legal,
accounting and business due diligence investigation of the Partnership to be
conducted by or on behalf of the Purchaser, including, without limitation, any
information obtained from the Disclosure Schedule to be attached as an exhibit
to the Merger Agreement, has not revealed that proceeding with the Transaction
would be inadvisable or contrary to the Purchaser's best interests; (x) the
Partnership shall not have made a distribution of earnings with respect to any
Units from June 14, 1996 through the Effective Time; (xi) the Purchaser shall
have received from the Partnership an environmental assessment of each Asset,
and the Purchaser shall have completed its review of such Environmental Reports
and the Purchaser shall be satisfied in its reasonable discretion that: (A) the
Purchaser will not be exposed to unacceptable risk, liability or obligation as a
consequence of the Merger Agreement and the Transaction contemplated thereby;
and (B) the Purchaser will not be subject to any material adverse, unusual or
onerous agreements, conditions, liabilities or obligations to which the
Partnership is a party; (xii) the Purchaser shall have completed its review of
the assets and business of the Partnership and found them to be satisfactory to
it in its reasonable discretion; (xiii) the Partnership, at its own expense,
shall have ordered and delivered to the Purchaser an owner's title insurance
policy (ALTA Owner's Policy Form B-1970 (rev. 10/17/70 and 10/17/84)) if
available with respect to each Asset (or an endorsement of existing policies in
favor of the Purchaser), insuring the Purchaser and issued as of the Closing
Date by a title insurance company reasonably satisfactory to the Purchaser, in
such amount(s) as may be reasonably satisfactory to Purchaser, showing fee
simple title thereto to be vested in the Purchaser, subject in each case only to
permitted liens, with extended coverage over all general exceptions, if
available, a zoning endorsement in the form of ALTA endorsement Form 3.1 and
such other endorsements as the Purchaser shall reasonably request, if available;
(xiv) the Partnership, at its own expense, shall have ordered and delivered to
the Purchaser surveys of each Asset for which title insurance is being obtained,
dated not earlier than March 31, 1996, prepared by a licensed surveyor, and
certified to the Purchaser and the title insurance company, as having been
prepared in accordance with American Land Title Association land survey
standards, and showing all material improvements to be within lot, side lot,
rear lot and setback lines. Such surveys shall reveal no material encroachments
on each Asset and be sufficient to enable to title company issuing the title
policies described in section (xiii) above to issue same with full extended
coverage, if available; and (xv) the Partnership shall have delivered to the
Purchaser such further information, documents and instruments as the Purchaser
shall reasonably require.
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Determination of Redemption Price
The fair market value of the Assets as determined by Cushman & Wakefield,
an independent appraiser, is $23,198,450. As of June 19, 1996, cash on hand was
$1,352,050. The Operating General Partners have estimated that net earnings from
June 20, 1996 to July 31, 1996 will be approximately $227,300. The Operating
General Partners have also estimated that the Transaction Costs will be
approximately $322,200 of which $15,350 have been paid by the Partnership to
date and that other Partnership liabilities (excluding Transaction Costs) will
be approximately $126,200 as of the Effective Time. Therefore, the Operating
General Partners believe the estimated redemption price per Unit to be as
follows:
<TABLE>
<CAPTION>
<S> <C>
Appraised value of the Assets $ 23,198,450
Cash on hand as of June 19, 1996 1,352,050
Estimated net earnings through
July 31, 1996 227,300
=============
Available cash 1,579,350
Estimated Transaction Costs ( 322,200)
Other estimated Partnership
liabilities ( 126,200)
Estimated cash available for
distribution $ 24,329,400
=============
Number of Units 2,627,503.23
=============
Estimated redemption price per Unit $ 9.26
=============
</TABLE>
The redemption price per Unit will be adjusted for changes occurring prior
to the Effective Time in the items set forth above. The General Partners will
not receive any payment in exchange for the redemption of their general
partnership interests nor will they receive any fees from the Partnership in
connection with the Transaction. However, the Transaction is subject to certain
conflicts of interest, including the fact that the Braults have a minority
ownership interest in the Purchaser. See "Conflicts of Interest."
Termination of the Merger Agreement
The Merger Agreement may be terminated and the Transaction contemplated
hereby may be abandoned, by written notice promptly given to the other parties
hereto, at any time prior to the Effective Time, whether prior to or after
Interest Holder approval of the Transaction: (i) by mutual written consent of
the Purchaser and the Partnership; (ii) by either the Purchaser
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<PAGE>
or the Partnership, if a court of competent jurisdiction or governmental,
regulatory or administrative agency or commission shall have issued an order,
decree or ruling or taken any other action, in each case permanently
restraining, enjoining or otherwise prohibiting the transactions contemplated by
the Merger Agreement and such order, decree, ruling or other action shall have
become final and nonappealable; (iii) by either the Purchaser or the
Partnership, if the Effective Time shall not have occurred on or before the
Termination Date, unless the absence of such occurrence shall be due to the
failure of the party seeking to terminate the Merger Agreement to perform in all
material respects each of its obligations under the Merger Agreement required to
be performed by it prior to the Effective Time; (iv) by either the Purchaser or
the Partnership, if Interest Holder approval of the Transaction shall not be
obtained; (v) by the Purchaser, if the Partnership shall have withdrawn,
modified or amended in any respect its approval of the Transaction; (vi) by the
Purchaser, if the Partnership fails to perform in all material respects its
obligations under the Merger Agreement; (vii) by the Purchaser, if there shall
have occurred a material adverse change in the condition of the Partnership
since the date of the Merger Agreement; (viii) by the Partnership, if the
Purchaser fails to perform in all material respects its obligations under the
Merger Agreement; (ix) by the Purchaser, if the Partnership shall have settled
or compromised any lawsuit or other designated action without the prior written
consent of the Purchaser, unless such settlement or compromise: (A) requires
the payment of money by the Partnership in an amount which, when aggregated
with the amount of money paid or payable in connection with all other designated
actions, does not exceed $15,000; and (B) does not include any other material
term or condition to which the Purchaser shall reasonably object; (x) by the
Purchaser, if, prior to the Effective Time, the representations and warranties
of the Partnership set forth in the Merger Agreement shall not be true and
correct in all material respects at any time as if made as of such time, except
to the extent that any such representation or warranty is made as of a specific
date, in which case such representation or warranty shall have been true and
correct as of such date; or (xi) by the Partnership, if there shall have been a
failure of the Purchaser to obtain the necessary commitment for financing as
described herein. In the event the Merger Agreement is terminated due to the
confirmation of an Alternative Proposal, Purchaser shall be entitled to a fee
equal to 1.0% of the merger consideration.
Amendment of the Merger Agreement
The Merger Agreement may not be amended except by an instrument in writing
signed on behalf of each of the parties hereto; provided, however, that after
Interest Holder approval of the Transaction has been obtained, no amendment may
be made which changes the amount of cash to be paid for the Units, or effects
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<PAGE>
any change which would adversely affect the Interest Holders without further
Interest Holder approval.
Amendment of Partnership Agreement
Consummation of the Transaction is subject to approval by the Interest
Holders owning a majority of the Units. In addition, the Act provides that a
merger must also be approved by the general partners of a partnership, unless
the limited partnership agreement provides otherwise. Because the Partnership
Agreement is silent on this matter and because not all of the General Partners
are recommending the Transaction, the Interest Holders are being asked to adopt
the Amendment, which allows the vote of the Interest Holders owning a majority
of the Units to determine the outcome of the Transaction without a vote of the
General Partners. Upon approval of the Amendment, the vote of the Interest
Holders owning a majority of the Units will be the only vote necessary to
approve the Transaction. Failure to approve the Amendment would likely preclude
the consummation of the Merger even if the Merger were approved by the Interest
Holders holding a majority of the Units.
Related Transactions
In addition to the Transaction, the Purchaser has proposed a series of
mergers and an asset purchase (the "Affiliated Transactions") with Brauvin High
Yield Fund L.P. II, Brauvin Income Plus L.P. III and Brauvin Corporate Lease
Program IV L.P., which partnerships are affiliates of the Partnership (the
"Affiliated Limited Partnerships"). Each of the Affiliated Limited Partnerships
has investment objectives substantially identical to the Partnership and owns
property similar to the types of properties owned by the Partnership. The
Partnership is a joint venture partner with certain of the Affiliated Limited
Partnerships, which joint ventures own one or more properties. See "Certain
Information About the Partnership, Its General Partners and Their Affiliates -
Description of the Assets." The approval of the limited partners of each of the
Affiliated Limited Partnerships to the Affiliated Transactions is being
solicited concurrently with the Partnership's solicitation pursuant to this
Proxy Statement. It is a condition to the effectiveness of the Transaction that
the limited partners of each of the Affiliated Limited Partnerships approve the
Affiliated Transactions. This condition may be waived by the Purchaser in its
sole discretion.
20
<PAGE>
INCOME TAX CONSEQUENCES OF THE TRANSACTION
Certain Federal Income Tax Consequences
The following summary, based upon current law, is a general discussion of
certain material federal income tax consequences of the conversion of a Unit
into the right to receive cash pursuant to the Merger. This summary is based on
the Internal Revenue Code of 1986, as amended (the "Code"), applicable Treasury
regulations thereunder and administrative rulings and judicial authority as of
the date of this Proxy Statement. All of the foregoing are subject to change,
and any such change could affect the continuing accuracy of this summary. This
summary does not discuss all aspects of federal income taxation that may be
relevant to a particular Interest Holder in light of such Interest Holder's
specific circumstances or to certain types of Interest Holders subject to
special treatment under the federal income tax laws (for example, foreign
persons, dealers in securities, banks, insurance companies and tax-exempt
organizations), and it does not discuss any aspect of state, local, foreign or
other tax laws. No ruling has been (or will be) sought from the Internal Revenue
Service, and no opinion of legal counsel will be rendered, as to the anticipated
federal income tax consequences of the Merger. This summary is based on the
assumption that the Partnership is a partnership for federal income tax purposes
and that, although the Partnership is a "publicly traded partnership" within the
meaning of Section 7704 of the Code (i.e., subject to taxation as a
corporation), it is not currently subject to the operative provisions of Section
7704 of the Code under an effective date grandfathering provision.
The receipt of the right to receive cash pursuant to the Merger will be a
taxable transaction for federal income tax purpose and may also be a taxable
transaction under applicable state, local, foreign and other tax laws. For
federal income tax purposes, Interest Holders generally will recognize gain or
loss equal to the difference between: (i) the "amount realized" in respect of a
Unit in the Partnership that is converted into a right to receive cash pursuant
to the Merger; and (ii) the Interest Holder's adjusted tax basis in the Unit.
The "amount realized" with respect to a Unit will be equal to the sum of the
amount of cash to be received by the Interest Holder of the Unit pursuant to the
Merger plus the Interest Holder's allocable share of liabilities of the
Partnership attributable to the Unit as determined under Section 752 of the Code
and the Treasury regulations promulgated thereunder. An Interest Holder's
adjusted tax basis in a Unit (whether acquired by purchase or capital
contribution), in general, will be the original cost of the Unit adjusted to
reflect the allocable share of the Partnership's income and losses, minus
distributions to the Interest Holder with respect to the Unit, plus the Interest
Holder's allocable share of liabilities of the Partnership
21
<PAGE>
attributable to the Unit as determined under Section 752 of the Code. In
addition, the adjusted tax basis in a Unit owned by an Interest Holder that
participated in the Partnership's distribution reinvestment plan would in
general be increased by any amounts recontributed by such Interest Holder to the
Partnership pursuant to the distribution reinvestment plan. Any Interest Holder
that participated in the distribution reinvestment plan should contact his or
her own tax advisor to determine the adjusted tax basis in his or her Units.
In general, the amount realized by an Interest Holder on a disposition of a
Unit pursuant to the Merger less such Interest Holder's adjusted tax basis in
the Unit will be treated as a capital gain or loss if the Unit was held by the
Interest Holder as a capital asset. Any capital gain or loss will be treated as
long-term capital gain or loss if the Interest Holder's holding period for the
Unit exceeds one year. Under present law, long-term capital gains will generally
be taxed at a maximum federal marginal tax rate of 28% (in the case of
individuals) or 35% (in the case of corporations), whereas the maximum federal
marginal tax rate for ordinary income is 39.5% (in the case of individuals) or
35% (in the case of corporations). Certain limitations apply to the
deductibility of capital losses under the Code. In the case of a corporation,
capital losses are deductible only to the extent of capital gains. An individual
may deduct up to $3,000 of capital losses in excess of the amount of his or her
capital gains against ordinary income. Excess capital losses generally can be
carried forward to succeeding years (a corporation's carry forward period is
five years and an individual can carry forward such losses indefinitely); in
addition, corporations are allowed to carry back excess capital losses to the
third preceding taxable year.
However, under Section 751 of the Code, the difference between the portion
of the amount realized by an Interest Holder that is attributable to "unrealized
receivables" (which includes recapture of depreciation) and "substantially
appreciated inventory" over the portion of the Interest Holder's adjusted tax
basis in the Unit that is allocable to such items will be taxed as ordinary
income or loss rather than capital gain or loss. An Interest Holder's adjusted
tax basis in a Unit allocable to "unrealized receivables" and "substantially
appreciated inventory" will be determined by reference to the Partnership's tax
basis in these items, which amount could be less than the Interest Holder's
adjusted tax basis in the Unit otherwise allocable to these items. Because an
Interest Holder's adjusted tax basis in his or her Unit will be allocated to
"unrealized receivables" and "substantially appreciated inventory" based on the
Partnership's tax basis in these items. An Interest Holder may realize an
overall loss on the disposition of his or her Unit, but have to realize ordinary
income on the Section 751
22
<PAGE>
portion of the disposition, which will correspondingly increase the capital loss
on the remaining portion of the disposition.
Under Section 469 of the Code, a taxpayer that is an individual, estate,
trust, closely held corporation or personal service corporation generally can
deduct passive activity losses from a passive activity against passive activity
income received from other passive activities, but cannot deduct such losses
from other types of income. In the case of a publicly traded partnership
(including a publicly traded partnership that is not subject to the publicly
traded partnership provisions of the Code), the passive activity loss limitation
is applied separately to each publicly traded partnership. Accordingly, income
or gain realized by an Interest Holder from the Partnership cannot be offset by
passive losses generated by other passive activities of the Interest Holder.
However, upon a complete disposition by an Interest Holder of its Units pursuant
to the Merger, an Interest Holder's allocable share of the net losses (if any)
of the Partnership that were suspended under the passive loss rules of Section
469 of the Code generally would be currently deductible. In the absence of a
complete disposition of Units by an Interest Holder, the deductibility of such
suspended passive losses (if any) may be limited.
An Interest Holder (other than certain exempt Interest Holders including,
among others, all corporations and certain foreign individuals) who delivers a
Unit pursuant to the Merger may be subject to a 31% backup withholding unless
the Interest Holder provides a taxpayer identification number ("TIN") and
certifies that the TIN is correct or properly certifies that he is awaiting a
TIN. An Interest Holder who does not furnish a TIN may be subject to a penalty
imposed by the Internal Revenue Service. An Interest Holder may avoid backup
withholding by properly completing and signing a Form W-9. If backup withholding
applies to an Interest Holder, the Partnership is required to withhold 31% from
payments to such Interest Holder. Backup withholding is not an additional tax.
Rather, the amount of the backup withholding can be credited against the federal
income tax liability of the person subject to the backup withholding. If backup
withholding results in an overpayment of tax, a refund can be obtained by the
Interest Holder upon filing an income tax return.
Pursuant to Section 897 of the Code, gain or loss realized by a foreign
person on the disposition of an interest in a partnership is subjected to
federal income tax to the extent the amount realized on such sale is
attributable to United States real property interests. Under Section 1445 of the
Code, the transferee of a partnership interest held by a foreign person is
generally required to deduct and withhold a tax equal to 10% of the amount
realized on the disposition. The Partnership, however, will not be required to
withhold 10% of the amount
23
<PAGE>
realized by any Interest Holder if the Interest Holder furnishes an affidavit
stating, under penalty of perjury, the Interest Holder's TIN, that such Interest
Holder is not a foreign person and the Interest Holder's address.
Differing Tax Treatment of the Interest Holders
At the time of subscription, those Interest Holders not in need of passive
income elected to be classified as "Taxable Interest Holders." Investors that
were tax-exempt or seeking passive income to offset passive losses from other
investments elected to be classified as "Tax-Exempt Interest Holders." The
Partnership Agreement contains a special allocation provision which allocates
all of the depreciation allocable to the Interest Holders to the Taxable
Interest Holders. In all other respects, the Taxable Interest Holders and the
Tax-Exempt Interest Holders have been and will be treated alike. Due to the
special allocation of depreciation, which resulted in the Taxable Interest
Holders receiving certain benefits, such as increased amounts of depreciation
deductions and "tax-sheltered cash flow" (i.e., cash distributions in excess of
taxable income), in the early years of the Partnership's existence, the Taxable
Interest Holders were subject to certain risks, including: (i) allocation of a
greater amount of gain upon the sale of properties which, if such depreciation
deductions are used and not carried forward under the "passive loss rules," will
result in greater tax liability without receiving greater cash distributions;
and (ii) receipt of smaller cash distributions on the liquidation of the
Partnership and/or the sale of the Assets if there is a loss on the sale of the
Assets, which differ from those to which the Tax-Exempt Interest Holders will be
subject. Interest Holders are urged to consult with their tax advisors regarding
this issue.
As a result of the allocation of these losses to Taxable Interest Holders,
their tax basis in their Units was reduced. Therefore, these Interest Holders
will likely recognize more taxable income on the Transaction. However, a portion
of such additional income may be offset by prior losses which were limited under
the passive loss rules. The Tax-Exempt Interest Holders may or may not be
subject to tax on the Transaction. Interest Holders are urged to consult with
their tax advisors regarding this issue.
THE FEDERAL INCOME TAX CONSEQUENCES SET FORTH ABOVE ARE BASED UPON PRESENT
LAW, ARE FOR GENERAL INFORMATION ONLY AND DO NOT PURPORT TO BE A COMPLETE
ANALYSIS OR LISTING OF ALL POTENTIAL TAX EFFECTS WHICH MAY APPLY TO AN INTEREST
HOLDER. THE TAX CONSEQUENCES TO A PARTICULAR INTEREST HOLDER MAY BE DIFFERENT
FROM THE TAX CONSEQUENCES TO OTHER INTEREST HOLDERS, INCLUDING THE APPLICATION
AND EFFECT OF STATE, LOCAL AND OTHER TAX LAWS,
24
<PAGE>
AND THUS, INTEREST HOLDERS ARE URGED TO CONSULT THEIR OWN TAX ADVISORS AS TO THE
INCOME TAX CONSEQUENCES OF THE MERGER.
SPECIAL FACTORS
PURPOSE OF AND REASONS FOR THE TRANSACTION
The principal purpose of the Transaction is to cause the transfer of
the Assets and the liabilities of the Partnership to the Purchaser in return for
cash proceeds which will be distributed to the Interest Holders through the
redemption of their Units. Promptly upon consummation of the Transaction, the
Units of the Interest Holders will be redeemed for approximately $9.26 per Unit
in cash.
Background and Operational History of the Partnership
The Partnership is a Delaware limited partnership organized on January
6, 1987 to raise funds from investors to acquire debt-free ownership of
existing, free-standing, income-producing retail, office and industrial real
properties subject to predominantly triple-net leases. The Partnership
completed its public offering on May 19, 1988 and raised a total of $25,000,000.
As of December 31, 1995, the Partnership had also raised an additional
$2,816,104 through its distribution reinvestment plan. As of the date hereof,
the Partnership owns the land and buildings underlying 33 properties as well as
a 49% interest in a Scandinavian Health Spa, a 1% interest in a joint venture
which owns the land and buildings underlying six Ponderosa restaurants and a
23.4% interest in a joint venture which owns the land and building underlying a
CompUSA store. See "Certain Information about the Partnership, Its General
Partners and their Affiliates - Description of the Assets." All of the
properties of the Partnership are under lease.
Cash distributions to Interest Holders for 1995, 1994 and 1993 were
$2,600,149, $2,616,758 and $2,590,902, respectively. Because of the decision to
present the Transaction to the Interest Holders, the Operating General Partners
have determined that no further distributions of operating cash flow will be
made by the Partnership to the Interest Holders prior to consummation or
termination of the Transaction. The Operating General Partners have also
determined that the Partnership will not repurchase Units from Interest Holders
during this period. See "Certain Information About the Partnership, Its General
Partners and their Affiliates - Distributions."
The Partnership is the first of a series of affiliated limited
partnerships formed to acquire similar properties. Because the Partnership is
the first of the Affiliated Limited Partnerships to be formed, the properties
acquired by the
25
<PAGE>
Partnership are at the end of their anticipated holding periods. The
Partnership's Prospectus dated September 4, 1987 (the "Prospectus") states that
the anticipated holding period for the Partnership's properties is no more than
six to nine years. As a result, the Operating General Partners began
investigating options for the liquidation of the properties held by the
Partnership and the Affiliated Limited Partnerships.
Actions Resulting in the Transaction; Mitigation of
Conflicts
Over the past few years, in an attempt to enhance Interest Holder
value with respect to the Units, the Operating General Partners approached
several investment banking firms regarding various strategies and alternatives
available to the Partnership, including the liquidation of the Assets and return
the proceeds from such liquidation to the Interest Holders. Although numerous
meetings were held with representatives from such investment banks, no viable
value enhancement scenarios were formulated. During the past several months the
Operating General Partners increased their activity with respect to formulating
a liquidation strategy, as the Partnership is at the end of the anticipated
holding period of six to nine years for its properties. As a result of recent
conversations with persons familiar with the triple-net lease industry, it was
determined that the rapidly approaching termination dates for many of the leases
governing the Partnership's properties caused such properties to fall outside of
the acquisition parameters and standards of several organizations interested in
acquiring a portfolio of triple-net lease properties and thus limited the
salability of the Partnership's portfolio. As a result of the Operating General
Partners consideration of an exit strategy, the Braults began to actively pursue
the possibility of acquiring the Assets from the Partnership. In attempting to
obtain the necessary financing to effect this purchase, the Braults met with
various third-party debt and equity sources who negotiated and structured the
terms of the Transaction on behalf of the Purchaser so as to allow the Purchaser
to consummate the Transaction on an all cash basis. In connection with the
negotiation of the financing arrangements, the terms of the Transaction and the
ownership structure of the Purchaser, each party, including the Purchaser, the
Partnership, the debt and equity participants and the General Partners, were
represented by separate professionals experienced in transactions of this type.
The retention of such professionals was deemed to be important in order to
mitigate the potential conflicts of interest inherent in the Transaction. The
redemption price was based on the independent appraisal of Cushman & Wakefield,
who was retained by the Partnership in connection with the Partnership's annual
valuation of the Assets, prior to any discussions of the Transaction with
Cushman & Wakefield and the terms of the Transaction were negotiated with the
assistance of counsel to the
26
<PAGE>
Purchaser and counsel to the Partnership. In addition, Cushman & Wakefield was
retained to provide an opinion that the Transaction is fair to the Interest
Holders from a financial point of view.
Prospects of the Partnership
Pursuant to the terms of the Merger Agreement, the Purchaser has agreed to
pay approximately $9.26 per Unit in cash in connection with the Transaction,
which is based upon the fair market value of the Assets as determined by Cushman
& Wakefield. Due to the relatively fixed nature of the lease payments generated
by the Assets and the remaining lease terms, the fair market value may not
increase over the foreseeable future. To date, the Partnership has not been
presented with any firm offers for the purchase of the Assets, although it has
received and pursued a few expressions of interest from third parties. One
such expression of interest was for all of the Assets (together with the assets
of the Affiliated Limited Partnerships) but at an aggregate purchase price lower
than that proposed by the Purchaser, with higher transaction costs and other
factors, such as a lack of management ability, that led the Operating General
Partners to believe that this transaction would not be better for the Interest
Holders or the limited partners of the Affiliated Limited Partnerships.
However, the Operating General Partners did pursue this possible transaction
long enough to cause an increase in the offer price by approximately 6% from the
initial offer price. Another expression of interest was for only certain of the
Assets, which would result in an overall lesser return to the Interest Holders
and the need to continue to operate the Partnership and the Affiliated Limited
Partnerships and thus the proposal was not pursued. Although the Partnership
has not received any additional expressions of interest as a result of the proxy
solicitation process, Brauvin Income Plus L.P. III and Brauvin Corporate Lease
Program IV L.P., two of the Affiliated Limited Partnerships, have received an
expression of interest from an experienced owner of properties similar to those
owned by the Affiliated Limited Partnerships, as a result of their respective
proxy solicitation processes. Messrs. Froelich and Strosberg believe that the
Partnership should actively seek third-party offers through an arm's-length
bidding process to establish a fair price for the Assets. In this regard, the
Partnership has made, and will continue during the pendency of the proxy
solicitation process to make, all pertinent information pertaining to the
Partnership and the Assets available to other potential purchasers who have the
financial ability to acquire the Assets on an all cash basis. If the
Transaction is not approved, there can be no assurance as to whether any future
liquidation or disposition of the Assets will occur or on what terms they might
occur. Despite the Partnership obtaining both the Valuation and Fairness
Opinion from Cushman & Wakefield, there can be no assurance that a better offer
for the acquisition of the Assets may not be available.
27
<PAGE>
Costs and Risks Associated with Continued Ownership
The average remaining lease term for the Assets is 6.8 years. The longer
the Assets are held by the Partnership, the greater the risk to the Partnership
of lease rollover, renegotiation and non-renewal. Because many of the
Partnership's properties were designed for a particular type of operation, lease
default or non-renewal could result in the need for substantial capital
improvements or remodeling to attract new tenants. Eventually the Partnership
will be required to reserve against such risks. Lease defaults and non-
renewals, as well as reserves against such risks will eventually result in lower
distributions to the Interest Holders.
The Partnership incurs general and administrative costs related to its
status as a public reporting entity under the Federal securities laws. The
costs of preparing reports such as Annual Reports on Form 10-K and Quarterly
Reports on Form 10-Q, as well as the expenses of printing and mailing these
materials can be significant. The Partnership incurs significant legal and
accounting fees in complying with the Federal securities laws. Over the past
two years, the Partnership has spent approximately $133,805 and $129,068,
respectively on partnership administration expense, and legal, accounting and
tax advisory fees necessitated by the on-going Federal securities law
compliance. If the Partnership were not a publicly-held entity, many of these
costs could be eliminated, although such cost savings would not be of benefit to
the Interest Holders.
There is no established trading market for the Units. As a result, the
Interest Holders and the Partnership incur all of the costs associated with
public-entity status, but have little of the benefits. Since the Units are not
readily transferable, the Interest Holders are essentially locked into their
investment in the Units.
Benefits of the Transaction
As a result of the Transaction, the Interest Holders will receive $9.26 per
Unit in cash, which is equal to their proportionate share of the fair market
value of the Assets, as valued by an independent appraiser. Such proceeds can
then be reinvested by the Interest Holders in other investments that could
possibly yield a higher return than the investment in the Partnership. The
terms of the Transaction are viewed by the Operating General Partners to be
favorable to the Partnership and the Interest Holders in part because the cost
of the Transaction to the Partnership, which is estimated to equal approximately
1 1/2% of the total value of the Transaction, is believed to be below industry
standards for a transaction of this size. It is not unusual in similar types of
transactions to see investment banking fees or real estate brokers commissions
which alone
28
<PAGE>
exceed 3% of the value of a transaction. In addition, the structure of the
Transaction eliminates the need for the Partnership to reserve or hold back any
funds from distribution to the Interest Holders to satisfy any post-closing
liabilities.
Disadvantages and Risks of the Transaction
The Transaction is not without certain potential disadvantages and risks to
the Interest Holders. Such disadvantages and risks include the fact that: (i)
there can be no assurance that the cash redemption price received by the
Interest Holders in connection with the Transaction can be invested in
alternative investments that will generate a return equal to or greater than
that generated by the investment in the Partnership; (ii) the Interest Holders
will no longer have an ownership interest in the Assets and thus will not share
in any potential changes in their value; (iii) despite the Partnership obtaining
both the Valuation and the Fairness Opinion from Cushman & Wakefield, there can
be no assurances that a better offer for the acquisition of the Assets may not
be available now or in the future; and (iv) the Interest Holders may incur
certain tax liabilities as a result of the Transaction. Notwithstanding the
foregoing, the Operating General Partners concluded that, as with any
investment, such potential disadvantages and risks are speculative, are unable
to be quantified and do not outweigh the benefits of the Transaction.
ALTERNATIVES TO THE TRANSACTION
The Operating General Partners considered several alternatives to the
Transaction, including: (i) continuing to hold the Assets; (ii) individual
property sales; (iii) an auction of any or all of the properties; (iv)
solicitation of third-party bids; and (v) a sale of the Assets to the Purchaser.
Continuing to hold the Assets was rejected as the risk from ownership
increases the longer the properties are held and thus the value of the Assets
becomes less certain. This risk results from the approaching maturity dates for
each of the leases of the Assets (which average remaining lease is 6.8 years),
the costs of the renegotiation of such leases and the related risk of default or
non-renewal. A merger of the Partnership with and into the Purchaser will allow
the Interest Holders to avoid such increasing risks. Furthermore, the
Partnership's investment in the properties is approaching the outside of its
initial estimated holding periods and thus it is the General Partners duty to
look to the liquidation of the Assets.
Individual property sales were rejected as this option would likely result
in the Partnership's more salable or valuable properties being sold and the
Partnership being forced to retain the less salable or valuable properties.
Even if the more
29
<PAGE>
salable or valuable properties were sold on an all cash basis comparable to the
Transaction, the Partnership would likely be required to retain a substantial
portion of the proceeds of such sales to cover the expenses related to ongoing
administration of the Partnership. Because the Partnership's administrative
costs are relatively fixed, a sale of the more salable or valuable properties
would ultimately result in proportionally less cash being available for
distribution to the Interest Holders. Furthermore, it is the belief of the
Operating General Partners that costs associated with individual sales of the
properties would, in the aggregate, be greater than the costs associated with a
sale of all of the Assets, due in part to the need to negotiate with multiple
parties and the loss of economies of scale. These increased costs would further
result in less cash being available for distribution to the Interest Holders.
Finally, because the more salable or valuable properties will likely be sold
first, risks associated with lease defaults and non-renewals, as well as risks
associated with particular markets and industries will increase. Therefore, the
sale of the Assets in a single transaction eliminates the need for the
Partnership to remain in existence with a smaller, less diverse and more risky
portfolio.
An auction of all of the Assets was also rejected as it is the Operating
General Partners belief that real estate auctions (as opposed to a solicitation
of third-party bids through the use of investment bankers or real estate
brokers) are generally viewed as a sale method of last resort and the typical
buyer at such an auction is seeking below market price purchases. An auction of
individual assets would result in the same adverse effects as those resulting
from sales of individual properties.
A formal solicitation of third-party bids for the Assets was not undertaken
by the Operating General Partners prior to the date the Partnership entered into
the Merger Agreement. However, over the past few years the Operating General
Partners had approached several investment banking firms regarding various
strategies and alternatives available to the Partnership, including the
liquidation of the Assets. Although numerous meetings were held with
representatives from such investment banking firms, no viable value enhancement
scenarios were formulated. Furthermore, after recent conversations with persons
familiar with the triple-net lease industry, it was determined that the rapidly
approaching termination dates for many of the leases to which the Partnership's
properties were subject caused such properties to fall outside of the
acquisition parameters and standards of several organizations interested in
acquiring a portfolio of triple-net lease properties and thus limited the
salability of the Partnership's portfolio. Notwithstanding the fact that the
Operating General Partners did not believe that the solicitation of third-party
bids would result in a better offer for the Interest Holders, the Operating
General Partners required
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that the terms of the Merger Agreement permit the General Partners to terminate
the Transaction at any time should they receive an offer for the Assets which
they in good faith believe to be on terms preferable to the Transaction.
However, in accordance with the terms of the Merger Agreement, the Partnership
will not actively solicit third-party bids. Although there have been a few
expressions of interest from potential third-party purchasers generated by the
Purchaser's effort to secure financing, as described above, no party has made a
firm offer for the Assets. In conjunction with Messrs. Froelich and Strosberg's
belief that the solicitation of third-party offers through an arm's-length
bidding process would be the most advantageous method for determining a fair
price for the Assets, the Partnership continues to make available to prospective
purchasers all relevant materials necessary to conduct due diligence with
respect to the Assets. Until the Transaction is approved, the General Partners
will entertain any offers which can produce a comparable overall return to the
Interest Holders. Notwithstanding the foregoing, the Operating General Partners
have surveyed the market and have been unable to identify a strategic or
financial buyer that would be interested in purchasing the entire portfolio of
the Assets, on all cash basis. This is mainly the result of two factors: (i)
33% of the Assets have lease terms which provide the lessees with rights of
first refusal on any sale of the Assets, thereby significantly complicating the
negotiations or possible offers from third parties; and (ii) the average
remaining lease term of 6.8 years makes the Assets less attractive to such
purchaser.
The Purchaser was unwilling to structure the Transaction as a sale of the
Assets to the Purchaser, due in part to the additional costs that would be
incurred by the Purchaser in connection with such a sale (such as real estate
transfer taxes and other transfer related costs).
EFFECTS OF THE TRANSACTION
General
If the Transaction and the Amendment are approved and the remaining
conditions to the Transaction are met or waived, the Merger will be effected by
filing the Certificate of Merger with the Delaware Secretary of State and in
connection therewith the Assets and liabilities of the Partnership will be
transferred to the Purchaser as the surviving entity in the Merger and the
Partnership will cease to exist. Thereafter, the registration of the Units
under Section 12(g)(4) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act") will be terminated. Further, following the Transaction, the
Partnership will no longer be subject to the periodic reporting requirements of
the Exchange Act and will cease filing information with the Securities and
Exchange Commission (the "Commission"). The
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<PAGE>
Corporate General Partner intends to conclude the Transaction with and into the
Purchaser as soon as possible and no later than December 31, 1996.
Effects on the Interest Holders
As a result of the Transaction, the Units will be redeemed for
approximately $9.26 per Unit in cash. This redemption price is based on the
fair market value of the Assets which has been determined by Cushman & Wakefield
to be $23,198,450, or $8.83 per Unit, plus cash on hand as of the Effective
Time, less the Transaction Costs and less all other Partnership obligations,
which amount is currently anticipated to be $.43 per Unit. Thus, the actual
redemption price will be subject to adjustment based upon changes in these
amounts prior to the Effective Time.
Thereafter, the Interest Holders will cease being owners of the Partnership
and will no longer bear the costs and risks associated with such ownership. A
description of such risks and benefits is set forth above under the heading
"Special Factors -Purpose of and Reasons for the Transaction - Costs and Risks
Associated with Continued Ownership." However, the Interest Holders thereafter
will assume the risks associated with consummation of the Transaction. See
"Special Factors - Purposes of and Reasons for the Transaction - Costs and Risks
of the Transaction" above.
Effects on the General Partners
The General Partners will not receive any payment in exchange for the
redemption of their general partnership interests nor will they receive any fees
from the Partnership in connection with the Transaction. However, the Braults
have a minority ownership interest in the Purchaser and thus will become part
owners of the Assets following the consummation of the Transaction. In
addition, each of Brauvin Management Company and Brauvin Financial, Inc.,
corporations owned, in part, by Cezar M. Froelich and an affiliate of Jerome J.
Brault, will receive $40,860 from the Purchaser (not the Partnership) for
advisory services rendered in connection with the Transaction.
Effects of Failure to Approve the Transaction
If the Transaction is not consummated, there can be no assurance as to
whether any future liquidation or disposition of the Assets, either in whole or
in part, will occur or on what terms they might occur. However, if not
approved, the Operating General Partners will continue to operate the
Partnership in accordance with the terms of the Partnership Agreement and in
fulfillment of their fiduciary duties, including the review of any third-party
offers to purchase any or all of the Assets, in an effort to enhance the
Partnership's value on behalf of the
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Interest Holders. In addition, the Operating General Partners will continue to
evaluate the various alternatives to the Transaction, as described under the
heading "Special Factors -Alternatives to the Transaction" below. Such
alternatives include: (i) continuing to hold the Assets; (ii) individual
property sales; (iii) an auction of any or all of the properties; and (iv)
solicitation of third-party bids. The Operating General Partners have concluded
that such options are not in the best interest of the Interest Holders at this
time, particularly in light of the Purchaser's offer. The Operating General
Partners do not intend to actively solicit bids for the Assets in the immediate
future should the Transaction not be consummated.
VALUATION OF THE ASSETS; FAIRNESS OPINION
The Valuation Advisory Services Group of Cushman & Wakefield of Illinois,
Inc. ("Cushman & Wakefield") was engaged by the Partnership on March 15, 1996 to
value the Assets pursuant to the Partnership's obligation to provide a valuation
of the Units within 120 days after the end of the fiscal year to satisfy the
requirements of the Employee Retirement Income Security Act of 1974, as amended.
The Partnership subsequently engaged Cushman & Wakefield to provide an opinion
as to whether the Transaction is fair from a financial point of view (the
"Fairness Opinion"). Other than the engagements described herein, and the
engagement of Cushman & Wakefield by the Affiliated Limited Partnerships in
connection with the Affiliated Transactions, there has been no material
relationship between Cushman & Wakefield or its affiliates and the Partnership
or its affiliates, nor is any such relationship contemplated.
Copies of the Valuation and the Fairness Opinion are attached hereto as
Annex I and Annex II, respectively.
Experience of Cushman & Wakefield
Cushman & Wakefield is part of a national network of affiliated full
service real estate companies providing brokerage, management, consulting and
valuation services in the United States (the "C&W Affiliated Companies"). The
clients of the C&W Affiliated Companies include major commercial and investment
banks, Fortune 500 corporations, pension funds, advisory firms and government
agencies. The Valuation Advisory Services Group of the C&W Affiliated Companies
has 19 branch offices located in various geographic regions of the United
States. This large network of professionals provides local expertise in key
markets and sub-regions and enables Cushman & Wakefield to effectively handle
broad-based, multi-property assignments. Furthermore, the C&W Affiliated
Companies valuation network provides a large national database of market
information and ensures a consistent methodology for each property valuation.
The Operating General Partners considered several appraisal firms
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but ultimately chose Cushman & Wakefield based upon their expertise and industry
leadership.
Valuation
Pursuant to its engagement, Cushman & Wakefield reported to the Partnership
that the sum of the individual valuations of the Assets was $23,198,450 as of
April 1, 1996 (collectively, the "Valuation"). Certain of the assumptions,
qualifications and limitations to the Valuation are described below. The
summary set forth below does not purport to be a complete description of the
analysis employed by Cushman & Wakefield in preparing the Valuation. A copy of
the Valuation analysis will be made available to Interest Holders upon request.
The Partnership imposed no conditions or limitations on the scope of Cushman &
Wakefield's investigation or the methods and procedures to be followed in
preparing the Valuation. No other appraisals of the Assets were obtained by the
Partnership due to the significant cost involved and the Operating General
Partners' opinion that the Valuation was prepared according to industry
standards by a reliable and independent appraisal firm.
Factors Considered
In preparing the Valuation, Cushman & Wakefield: (i) conducted a physical
inspection of each property; (ii) considered the location and market area of
each property, with particular attention given to the submarket definition,
demand generators, competitive properties, trade area demographics and outlook;
(iii) reviewed property sales history where provided; (iv) analyzed site and
improvements with regard to quality, functionality and condition of improvements
toward existing use; and (v) considered the highest and best use of each site.
In addition, Cushman & Wakefield conducted a review and analysis of each
existing individual lease abstract, or leases where provided, affecting each of
the properties. In conducting their analysis, Cushman & Wakefield was provided
with, among other things: (i) certain information relating to the business,
earnings, operating cash flow and assets of the Partnership, including sales
performance of the Assets for 1993 through 1995, where provided, and estimates
for 1996; (ii) surveys, legal descriptions, current property tax statements, and
detailed lease abstracts; and (iii) such other information as Cushman &
Wakefield deemed necessary or appropriate. In addition, Cushman & Wakefield
personnel questioned the Operating General Partners about the markets in which
the Assets operate and the operating history of the Assets.
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Summary of Cushman & Wakefield's Methodology and Approaches to Value
Cushman & Wakefield's valuation of the Assets was based primarily on a
discounted cash flow analysis. Cushman & Wakefield believes that the valuation
resulting from the discounted cash flow analysis is the best indication of
value, as an investor in the type of property owned by the Partnership considers
its income producing capabilities as most important. A sales comparison
approach based on comparable sales was determined to be less reliable because of
the lack of comparable properties and recent sales data for many of the Assets.
Individual evaluation reports containing property specific information such
as location, competition, and market and trade area analysis, were prepared by
Cushman & Wakefield for each Asset. These evaluation reports formed the
foundation for Cushman & Wakefield's valuation analysis. In conducing its cash
flow analysis, Cushman & Wakefield performed an individual property-by-property
analysis to establish an anticipated cash flow to be received over a specified
holding period, typically of a ten-year duration, for a particular property.
Analysis as to cash flows takes into account the contractual rent and the terms
and conditions of each lease, plus reversion, as well as the credit associated
therewith.
Cushman & Wakefield also conducted an analysis of the reversionary
component of the cash flow analysis for each property, which values the property
at the end of a specified holding period, based on the estimated highest and
best use of the property, at reversion. The highest and best use of a property
was formulated based on a decision matrix which takes into account specific
property and location characteristics, demographic profile and outlook, sales
history and market position of the property relative to its competition. Where
the highest and best use of a property at reversion was estimated to be a
continuation of the existing use, the reversionary value of the property is
based on capitalizing the property's eleventh year's net operating income into
value by means of direct capitalization. Use of a ten-year investment holding
period within a discounted cash flow analysis represents typical investor
criteria within the market. The discounted cash flow method is an accepted
means within the market of analyzing and valuing properties similar to the
Assets, and is in conformance with the established and accepted valuation
procedures of the Appraisal Institute regarding properties of this type. Where
the anticipated highest and best use of a property differs from the existing
use, the reversionary value of the property was estimated based on a cost
approach methodology, which incorporates land value estimates and depreciated
replacement
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cost estimates for the improvement contribution, if any. Cushman & Wakefield
determined the current use of each property to be its highest and best use.
Pursuant to the discounted cash flow analysis, Cushman & Wakefield's
valuation of the Assets totalled $22,600,000. As a result of subsequent
considerations presented by the Operating General Partners the total of the
valuations was increased to $23,198,450, which is the amount allocated by the
Purchaser to the Assets in connection with the Transaction. The considerations
presented by the Operating General Partners included clarification of certain
lease provisions relating to existing and new tenants and sub-tenants, as well
as further discussions relating to yield rates and market and renewal rent
parameters as a function of gross sales volumes for the restaurant properties.
The Operating General Partners have reviewed and accept the final Valuation and
believe that it was prepared in accordance with appropriate professional
standards.
Assumptions, Limitations and Qualifications of Cushman & Wakefield's
Valuation
In preparing the Valuation, Cushman & Wakefield relied, without independent
verification, on the accuracy and completeness of all information supplied or
otherwise made available to it by or on behalf of the Partnership. In arriving
at the Valuation, Cushman & Wakefield assumed: (i) good and marketable title;
(ii) that each Asset was free and clear of all liens, unless otherwise stated;
(iii) responsible ownership and competent management of each Asset; (iv) no
hidden or unapparent conditions; (v) full compliance with zoning laws; (vi)
possession of all necessary licenses, certificates of occupancy and other
governmental consents; (vii) that no potentially hazardous or toxic materials
were located at or about the Assets; and (viii) compliance with the Americans
with Disabilities Act of 1990. Cushman & Wakefield did not conduct a legal
survey of the Assets. An appraisal is only an estimate of value, as of the
specific dates stated in the appraisal, and is subject to the assumptions and
limiting conditions stated in the report. An opinion is not a measure of
realizable value and may not reflect the amount which would be received if the
property was sold. Reference should be made to the entire appraisal report.
Fairness Opinion
Subsequent to its engagement in connection with the Valuation, Cushman &
Wakefield was engaged to provide an opinion as to the fairness of the
Transaction to the Interest Holders from a financial point of view. Cushman &
Wakefield was neither asked to make, nor did it make, any recommendation as to
the redemption price, although it did provide the Valuation on which the
redemption price was based. Cushman & Wakefield was not
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<PAGE>
asked to solicit offers from other interested parties nor was it asked to opine
on any aspects of the Transaction other than that specifically mentioned
above. In connection with rendering its opinion, Cushman & Wakefield reviewed
the information and conducted the analysis as described in its Fairness
Opinion.
Cushman & Wakefield has advised the Partnership through the Corporate
General Partner that in its opinion, the price per Unit reflected in the
Transaction is fair, from a financial point of view, to the Interest Holders.
In its opinion Cushman & Wakefield stated that the determination that a price is
"fair" does not mean that the price is the highest price which might be obtained
in the marketplace, but rather that based upon the sum of the appraised values
of the Assets, the price reflected in the Transaction is within a range that
Cushman & Wakefield believes is reasonable. Although there is no active market
in trading the Units, Cushman & Wakefield noted that for those Units that have
traded the price per Unit was at or below the price per Unit in the Transaction.
Cushman & Wakefield relied on its appraisal work as a basis for establishing the
fairness of the Transaction. Other methods could have been employed to test the
fairness of the Transaction and yielded different results. In rendering this
opinion, Cushman & Wakefield noted that it had not considered, and had not
addressed, market conditions and other factors (e.g., whether the sale of the
Assets as a portfolio rather than a series of sales of individual properties,
would produce a premium or a discounted selling price) that, in an open-market
transaction, could influence the selling price of the Assets and result in
proceeds to the Interest Holders greater or less than the proposed price per
Unit. Cushman & Wakefield also noted that it had not considered the price and
trading history of other publicly traded securities that might be deemed
relevant due to the relative small size of the Transaction and the fact that the
Units are not publicly traded. Furthermore, Cushman & Wakefield noted that it
had not compared the financial terms of the Transaction to the financial terms
of other transactions that might be deemed relevant, given that the Transaction
involves all cash to the Interest Holders.
Compensation
Cushman & Wakefield was paid a fee of $2,500 for each Asset valued in
connection with the Valuation, for an aggregate fee of $85,200 from the
Partnership, plus out-of-pocket expenses, and will be paid $8,900 by the
Partnership for the Fairness Opinion.
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In addition, the Affiliated Limited Partnerships will pay Cushman & Wakefield on
the same basis for services rendered to each of them in connection with the
Affiliated Transactions. Cushman & Wakefield is also entitled to reimbursements
for certain costs incurred in connection with providing their services to the
Partnership. The fees paid to Cushman & Wakefield in connection with the
Valuation and the Fairness Opinion were negotiated by the Operating General
Partners. The Partnership has agreed to indemnify Cushman & Wakefield against
certain liabilities arising out of its engagement to prepare and deliver the
Valuation and the Fairness Opinion.
RECOMMENDATIONS OF THE GENERAL PARTNERS
Factors Considered
The Operating General Partners have determined that the terms of the
Transaction are fair to the Interest Holders and, therefore, recommend that the
Interest Holders vote "FOR" the Transaction and "FOR" the Amendment. In
determining the fairness of the Transaction and their decision to recommend the
Transaction, the Operating General Partners considered each of the factors
discussed below. Although the Operating General Partners were unable to weigh
each factor precisely, the factors are set forth below in their approximate
order of importance:
Factors in Favor of the Transaction:
-----------------------------------
* The redemption price of the Transaction was based on the Valuation, which
was prepared by Cushman & Wakefield, an expert, independent appraiser that
is considered one of the best valuation firms in the industry in valuing
triple-net lease assets. The Valuation considered the current fair market
value of each and every Asset. See "Special Factors - Valuation of the
Assets; Fairness Opinion" for a detailed description of this Valuation. As
described herein, the Operating General Partners reviewed a preliminary
draft of the valuation and concluded that the values of the properties set
forth therein were lower than expected. As a result of subsequent
considerations presented by the Operating General Partners, the fair market
value as set forth in the Valuation was increased. In considering the
importance of this factor, the Operating General Partners considered that
Cushman & Wakefield was retained to conduct the Valuation on behalf of the
Partnership, not the Purchaser, and in connection with an annual valuation
of the assets. Since the Purchaser was willing to pay the current fair
market value of the Assets on an all cash basis, the Operating General
Partners concluded that such factor weighed heavily in favor of the
fairness of the Transaction.
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* The Transaction was structured as a merger, whereby the Purchaser will
acquire all of the Assets and liabilities of the Partnership, thereby
eliminating the need for the Partnership to continue operations with the
less salable or valuable properties. The Operating General Partners also
concluded that this factor weighed heavily in favor of the Transaction. As
described above under "Special Factors -Alternatives to the Transaction,"
there are significant detriments attached to sales of less than all of the
Assets.
* The avoidance of certain potential transaction costs, such as investment
banking fees or real estate brokerage commissions, which could have
approximated $700,000 to $1,400,000 in the aggregate. Such costs are not
atypical in transactions similar to the Transaction and the fact that
neither the Partnership nor the Purchaser would need to pay such costs was
deemed to be a significant benefit of the Transaction.
* The fact that the Purchaser was willing to consummate the Transaction on an
all cash basis, as opposed to an exchange of securities or other assets.
This all cash transaction will allow the full amount of the redemption
price to be paid to the Interest Holders in cash, which can thereafter be
reinvested by the Interest Holders in other investments. An all cash
transaction also significantly simplifies the transaction and lowers
transaction costs.
* The fact that an opinion was received from Cushman & Wakefield stating that
the Transaction is fair to the Interest Holders from a financial point of
view. See "Special Factors - Valuation of the Assets; Fairness Opinion"
above for a discussion of this Fairness Opinion. This opinion was one of
the items considered by the Operating General Partners in making their
recommendation to the Interest Holders as to the fairness of the
Transaction.
* The fact that the anticipated holding period for the Assets is near the end
of the six to nine year term originally contemplated in the Prospectus.
* The fact that in connection with the Transaction, the Partnership will only
be required to make limited representations and warranties to the Purchaser
as to the condition of the Assets, thereby eliminating the need to
establish an escrow of funds as is typically required in merger
transactions or asset sales. This will allow all of the redemption price
to be paid to the Interest Holders at the time of the Merger and thereafter
to be invested by the Interest Holders in other investments.
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* The fact that the Merger Agreement permits the General Partners to
terminate the Transaction at any time if they receive an offer for the
Assets which they in good faith believe to be on terms preferable to the
Transaction. Until the Transaction is approved by the Interest Holders,
the General Partners will continue to entertain any and all offers which
can produce a comparable overall return to the Interest Holders.
* The fact that the vote of a majority in interest of the Interest Holders is
required to approve the Transaction and the Amendment. As a result, the
Transaction can only be effected if it is approved by persons who are not
affiliated with the Purchaser and not subject to a conflict of
interest.
* The fact that the longer the Assets are held the greater the risk to the
Partnership of lease rollover, renegotiation and non-renewal. Similarly,
as a result of the average lease term for the Assets being 6.8 years, the
Assets may become more difficult to sell. These costs and risks are
highlighted above under the "Special Factors - Purpose of and Reasons for
the Transaction."
* The high cost of operating the Partnership as a publicly-held entity. Over
the past two years, the Partnership has spent $133,805 and $129,068 on
partnership administration expense and legal, accounting and tax advisory
fees necessitated, in part, by the on-going Federal securities law
compliance.
* The lack of an established exchange or market for the Units which makes it
extremely difficult for the Interest Holders to liquidate their investment.
Based on the May 1996 issue of The Stanger Report, the transaction price
per Unit for sales of Units in the "secondary" market ranged between $9.18
and $8.25, which represents transactions for 4,033 Units from December 1,
1995 through February 29, 1996. Over the past 12 months, 95,378.4 Units
were sold in private transactions in the "secondary" market.
* Comparison of the per Unit price to be paid in connection with the
Transaction to current and historical market prices of the Units indicates
that the per Unit redemption price is at the high end of such market
prices.
* The expressed desire of certain Interest Holders to have their investment
in the Partnership liquidated.
* The Operating General Partners' industry knowledge regarding the
marketability of the Assets.
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Factors Against the Transaction:
-------------------------------
* Since the Operating General Partners are affiliates of the Purchaser, their
recommendation is subject to a conflict of interest. See "Conflicts of
Interest." Furthermore, no unaffiliated representative was retained to act
solely on behalf of the Interest Holders for the purpose of negotiating the
Transaction. However, separate counsel was retained on behalf of each of
the Partnership, the Purchaser and the General Partners, the redemption
price was based on an independent appraisal and such party rendered an
opinion that the Transaction is fair to the Interest Holders from a
financial point of view.
* The Interest Holders may be unable to invest the cash redemption price
received by them in connection with the Transaction in alternative
investments that will generate a return equal to or greater than that
generated by the investment in the Partnership.
* The Interest Holders will no longer have an ownership interest in the
Assets and thus will not share in any potential changes in their value.
* There can be no assurances that a better offer for the acquisition of the
Assets may not be available now or in the future.
* The Interest Holders may incur certain tax liabilities as a result of the
Transaction. See "Income Tax Consequences of the Transaction."
The current value of the Assets as compared to their book value (of
$16,470,853 as reflected on the Partnership's financial statements as of March
31, 1996) was not a significant factor in the Operating General Partners'
determination of the fairness of the terms of the Transaction because, in real
estate transactions, book value is not considered an accurate representation of
underlying market value. Likewise, liquidation value was not deemed to be
applicable due to the finite life investment oriented nature of the
Partnership's Assets.
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Conclusion
After evaluation of each of the foregoing factors the Operating General
Partners concluded that the factors weighing in favor of the Transaction
outweighed the factors weighing against the Transaction. In particular, the
Operating General Partners concluded that, as with any investment decision, the
potential disadvantages and risks of the Transaction are speculative, are unable
to be quantified and do not outweigh the benefits of the Transaction.
Therefore, the Operating General Partners determined that the terms of the
Transaction are fair to the Interest Holders and recommend that the Interest
Holders vote "FOR" the Transaction and "FOR" the Amendment. Messrs. Froelich
and Strosberg are not recommending the Transaction because they believe that the
most advantageous methodology for determining a fair price for the Assets would
be to seek third-party offers through an arm's-length bidding process.
APPRAISAL RIGHTS
Neither the Partnership Agreement nor the Act, provide rights of appraisal
or similar rights to the Interest Holders who dissent from the vote of the
majority in approving the Transaction. As a result, if Interest Holders holding
a majority of the Units approve the Transaction and the Amendment and if the
Transaction is consummated, the Partnership will be merged with and into the
Purchaser and all Interest Holders, including those who do not approve the
Transaction, will receive the redemption price for their Units pursuant to the
terms of the Merger Agreement.
COSTS ASSOCIATED WITH THE TRANSACTION
The following is an itemized statement of the approximate amount of all
expenses incurred or to be incurred by the Partnership in connection with the
Transaction:
<TABLE>
<CAPTION>
<S> <C>
Legal fees $ 64,000
Fairness Opinion and related expenses 16,300
Printing and mailing costs 12,000
Accounting 13,600
Title, survey and environmental reports 133,000
Proxy solicitation fees 15,000
Other, including filing fees 68,300
--------
Total $322,200
--------
</TABLE>
All of the foregoing fees and expenses will be paid by the Partnership from
cash from operations. Of such fees and expenses $15,350 have been paid to date.
No part of such funds is expected to be borrowed. In addition, the Partnership
will pay the Valuation fees and related expenses of approximately $95,000
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of which $42,600 have been paid to date. The cost of the Valuation was a
necessary Partnership expense in accordance with the requirements of the
Partnership Agreement and, therefore, is not considered an expense of the
Transaction.
The fees and expenses of the Purchaser in connection with the Transaction
will be paid by the Purchaser. Certain of these fees and expenses to be paid by
the Purchaser (not the Partnership) include $40,860 payable to each of Brauvin
Management Company and Brauvin Financial, Inc. for advisory services. Brauvin
Management Company and Brauvin Financial, Inc. are owned, in part, by Mr.
Froelich and an affiliate of the Managing General Partner. None of these fees
are being paid out of the proceeds of the Partnership.
CONFLICTS OF INTEREST
INTERESTS IN THE PURCHASER
The Operating General Partners are affiliated with the Purchaser and,
therefore, they have an indirect economic interest in consummating the
Transaction that may be considered to be in conflict with the economic interests
of the Interest Holders. This affiliated status results from the Braults and
certain other members of the management of the Corporate General Partner being
minority equity participants in the Purchaser. The amount of such equity
participation in the Purchaser has not been finally determined, but will be
dependent on meeting certain performance standards and will range from 0% to
20%. To the extent such equity participation results in less than 10%
ownership, the Operating General Partners may not be considered "affiliates" of
the Purchaser pursuant to the Federal securities laws, although they would still
be subject to certain conflicts of interest. Although the "affiliate" status of
the Operating General Partners has not been finally determined, the Partnership
has complied with the Federal securities law requirements relating to
"affiliate" transactions, including the filing of a Schedule 13E-3.
Notwithstanding the Braults minority ownership interest in the Purchaser, the
Operating General Partners remain accountable to the Partnership as fiduciaries
and consequently must exercise good faith and fair dealing toward the Interest
Holders.
PURCHASER FEES
Each of Brauvin Management Company and Brauvin Financial, Inc., which are
owned, in part, by Cezar M. Froelich and an affiliate of Jerome J. Brault, will
receive $40,860 from the Purchaser (not the Partnership) for advisory services
rendered in connection with the Transaction.
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INDEMNIFICATION UNDER THE PARTNERSHIP AGREEMENT
Pursuant to the terms of the Partnership Agreement, the Partnership has
agreed to indemnify the General Partners and any of their affiliates, to the
maximum extent allowed by law, and to hold them harmless, and the Interest
Holders have agreed to make no claim against the General Partners and any
affiliates of the General Partners, for any loss suffered by the Partnership
which arises out of any action or inaction of the General Partners or their
affiliates if the General Partners, in good faith, determine that such course of
conduct was in the best interests of the Partnership and such course of conduct
did not constitute negligence or misconduct of the General Partners.
Furthermore, the General Partners and their affiliates are to be indemnified by
the Partnership, to the maximum extent allowed by law and by the Partnership
Agreement, against any losses, judgments, liabilities, expenses and amounts paid
in settlement of any claims sustained by them in connection with the
Partnership, provided that the same were not the result of negligence or
misconduct on the part of the General Partners and their affiliates, that the
General Partners and their affiliates made a good faith determination that their
actions were in the best interest of the Partnership and that the General
Partners and their affiliates were acting within the scope of the General
Partners' authority.
If a claim is made against the General Partners or their affiliates in
connection with their actions on behalf of the Partnership with respect to the
Transaction prior to the consummation thereof, the General Partners expect that
they and such affiliates will seek to be indemnified by the Partnership with
respect to such claim. Any expenses (including legal fees) incurred by the
General Partners and such affiliates in defending such claim shall be advanced
by the Partnership prior to the final disposition of such claim, subject to
receipt by the Partnership of an undertaking by the General Partners and such
affiliates to repay any amounts advanced if it is determined that the
indemnified person's actions constituted fraud, negligence, breach of fiduciary
duty or misconduct. As a result of these indemnification rights, an Interest
Holder's remedy with respect to claims against the General Partners and their
affiliates relating to the General Partners' or such affiliates' involvement in
the Transaction could be more limited than the remedies which would have been
available absent the existence of these rights in the Partnership Agreement. A
successful claim for indemnification, including the expenses of defending a
claim made, would reduce the Partnership's assets by the amount paid.
Notwithstanding the foregoing, the General Partners and their affiliates
shall not be indemnified by the Partnership for liabilities arising under
federal and state securities laws unless: (i) there has been a successful
adjudication on the
44
<PAGE>
merits of each count involving alleged securities law violations as to the
particular indemnitee and the court approves indemnification of litigation
costs; (ii) such claims have been dismissed with prejudice on the merits by a
court of competent jurisdiction as to the particular indemnitee and the court
approves indemnification of litigation costs; or (iii) a court of competent
jurisdiction approves the settlement of the claims as to the particular
indemnitee and finds that indemnification of settlement and related costs should
be made.
INDEMNIFICATION BY THE PURCHASER
Pursuant to the Merger Agreement, the Purchaser, as the surviving entity
shall provide the General Partners for their sole benefit, the indemnification
set forth in the Partnership Agreement as in effect on the date of the Merger
Agreement. Pursuant to the Merger Agreement, the Partnership and, following the
Transaction, the Purchaser, as the surviving entity and its affiliates, jointly
and severally release and discharge, subject to termination as discussed below,
Jerome J. Brault, Cezar M. Froelich and David M. Strosberg and their respective
heirs, executors, administrators and personal representatives (collectively, the
"Released Parties"), jointly and severally, from and against any and all claims
arising out of or relating in any way to any acts, omissions, transactions or
occurrences which took place, in whole or in part, prior to and including the
date of the Merger Agreement, whether known or unknown, suspected or
unsuspected, matured or unmatured, fixed or contingent, including, without
limitation, any which relate to or arise in any way out of the Transaction, but
not including the Released Parties' respective obligations under the Merger
Agreement or acts, omissions, transactions or occurrences which involve fraud or
criminal conduct with respect to the financial affairs of the Partnership. In
addition, the Merger Agreement provides that, if such Released Parties have
fully performed their respective obligations under the Merger Agreement to be
performed on or prior to the Effective Time, the release shall be extended to
cover the period prior to and including the Effective Time.
CERTAIN INFORMATION ABOUT THE PARTNERSHIP,
ITS GENERAL PARTNERS AND THEIR AFFILIATES
THE PARTNERSHIP
The Partnership was organized on January 6, 1987 as a limited partnership
under the Act. The Partnership is governed by the Partnership Agreement, which
vests exclusive management control over the Partnership in the General Partners,
subject to the rights of the Interest Holders to vote on certain limited
matters. The address of the Partnership's principal executive
45
<PAGE>
office is 150 South Wacker Drive, Suite 3200, Chicago, Illinois 60606, and the
telephone number is (312) 443-0922.
The Partnership was formed to acquire debt-free ownership of existing,
free-standing, income-producing retail, office and industrial real properties
subject to predominantly triple-net leases. The Partnership raised a total of
$25,000,000 through its offering to the public which commenced on September 4,
1987 and terminated on May 19, 1988, as well as an additional $2,816,104 through
its distribution reinvestment plan through December 31, 1995. The reinvestment
of distributions through the distribution reinvestment plan was suspended for
the May 15, 1996 distribution as the valuation of the Units was not completed at
such time. As of December 31, 1995, Units valued at $1,607,070 had been
purchased by the Partnership from Interest Holders liquidating their original
investment and such Units have been retired. The Partnership has utilized the
proceeds of its offering and the funds received through the sale of Units
through the distribution reinvestment plan to acquire the land and buildings
underlying 33 properties as well as a 49% interest in a Scandinavian Health Spa,
a 1% interest in a joint venture which owns the land and buildings underlying
six Ponderosa restaurants and a 23.4% interest in a joint venture which owns the
land and building underlying a CompUSA store. See the subsection entitled
"Description of the Assets," below. All of the Assets are under lease.
The original objectives of the Partnership were the: (i) distribution of
current cash flow from the Partnership's cash flow attributable to rental
income; (ii) capital appreciation; (iii) preservation and protection of
capital; (iv) the potential for increased income and protection against
inflation through escalation in the base rent or participation and growth in the
sales of the lessees of the Partnership's properties; (v) the production of
"passive" income to offset "passive" losses from other investments; and (vi) the
partial shelter of cash distributions for Taxable Interest Holders.
The Partnership acquired all of its properties prior to 1995. The
Partnership did not acquire any properties in 1995 or 1996. The Partnership
does not currently have sufficient funds available for additional property
acquisitions. The Partnership has made quarterly distributions of operating
cash flow as described in the subsection below entitled "Distributions." As
distributions of operating cash flow to the Interest Holders will be suspended
during the pendency of the proposed Transaction, the Partnership will not be
selling any additional Units to the Interest Holders pursuant to the terms of
the Partnership's distribution reinvestment plan and, therefore, no funds will
be raised for additional acquisitions.
46
<PAGE>
THE GENERAL PARTNERS
The Corporate General Partner is Brauvin Realty Advisors, Inc., an Illinois
corporation, with its principal business address at 150 South Wacker Drive,
Suite 3200, Chicago, Illinois 60606. The principal business of the Corporate
General Partner is to act as a general partner of the Partnership. The
directors and executive officers of the Corporate General Partner are Jerome J.
Brault, Chairman of the Board, President and Chief Executive Officer and James
L. Brault, Executive Vice President, Secretary, Treasurer and Chief Financial
Officer. The business address of the director and each of the executive
officers of the Corporate General Partner is 150 South Wacker Drive, Suite 3200,
Chicago, Illinois 60606. Each of the individual General Partners and the
directors and executive officers of the Corporate General Partner is a citizen
of the United States.
Jerome J. Brault is the Managing General Partner of the Partnership and a
beneficial owner of the Corporate General Partner. Mr. Brault is also a general
partner of a series of public limited partnerships affiliated with the
Partnership, including the Affiliated Limited Partnerships, and a director and
executive officer of various corporations affiliated with the Partnership and
said public limited partnerships. In addition, Mr. Brault is an executive
officer and a director of Brauvin Net Lease V, Inc., a publicly-held real estate
investment trust. Prior to his affiliation with the Brauvin organization in
1979, Mr. Brault was the Chief Operating Officer of Burton J. Vincent, Chesley &
Company, a New York Stock Exchange member firm. Jerome J. Brault has a minority
ownership interest in the Purchaser.
James L. Brault is an executive officer of various corporations affiliated
with the Partnership and a series of other public limited partnerships
affiliated with the Partnership, including the Affiliated Limited Partnerships.
In addition, Mr. Brault is an executive officer and a director of Brauvin Net
Lease V, Inc., a publicly-held real estate investment trust. Prior to joining
the Brauvin organization in May 1989, Mr. Brault was Vice President of the
Commercial Loan Division of The First National Bank of Chicago in Washington
D.C., where he had worked since 1983. While with The First National Bank of
Chicago, Mr. Brault was responsible for the origination and management of
commercial real estate loans, as well as the direct management of a loan
portfolio in excess of $150,000,000. Mr. Brault is the son of Jerome J. Brault.
James L. Brault has a minority ownership interest in the Purchaser.
Cezar M. Froelich is a principal with the Chicago law firm of Shefsky
Froelich & Devine Ltd., 444 North Michigan Avenue, Chicago, Illinois 60611,
which in the past has acted as counsel to the General Partners, the Partnership
and certain of their
47
<PAGE>
affiliates. Mr. Froelich is also a beneficial owner of the Corporate General
Partner. Mr. Froelich is an individual general partner in seven other affiliated
public limited partnerships, including the Affiliated Limited Partnership and is
a shareholder in Brauvin Management Company and Brauvin Financial Inc. Mr.
Froelich resigned as an individual General Partner of the Partnership on May 23,
1996, which resignation will become effective ninety days from June 20, 1996,
the date notice of such resignation was first given to the Interest Holders.
David M. Strosberg is the President of the Morningside Group, 223 West
Erie, 5th Floor, Chicago, Illinois 60610, and is an independent real estate
investor and developer. Mr. Strosberg is also a shareholder of the Corporate
General Partner and certain of its affiliates. Mr. Strosberg's organization
specializes in the development of for-sale, multi-family properties. Mr.
Strosberg is also an individual General Partner of Brauvin High Yield Fund L.P.
II. Mr. Strosberg has indicated his intent to resign as an individual General
Partner subsequent to the approval of the Transaction by the Interest Holders.
DESCRIPTION OF THE ASSETS
The Partnership currently owns 33 income-producing properties as well as a
49% interest in a Scandinavian Health Spa, a 1% interest in a joint venture
which owns the land and buildings underlying six Ponderosa restaurants and a
23.4% interest in a joint venture which owns the land and building underlying a
CompUSA store, predominantly all of which are subject to triple-net leases. The
Partnership is a landlord only and does not participate in the operations of any
of the properties discussed herein. All lease payments due the Partnership are
current. All properties are 100% occupied and were paid for in cash, without any
financing. A description of each of the properties owned by the Partnership
follows.
Taco Bells:
- ----------
Warner Robins, Georgia
- ----------------------
The property is located at 1998 Watson Boulevard. The building consists of
1,288 square feet situated on a 25,000 square foot parcel and was constructed in
1977 utilizing jumbo bricks.
Valdosta, Georgia
- -----------------
The property is located at 2918 North Ashley Street. The building consists
of 1,288 square feet situated on a 16,222 square foot parcel and was constructed
in 1982 utilizing jumbo bricks.
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<PAGE>
Albany, Georgia
- ---------------
The property is located at 1707 North Slappey Boulevard. The building
consists of 1,288 square feet situated on a 11,850 square foot parcel and was
constructed in 1982 utilizing jumbo bricks.
Alliance, Ohio
- --------------
The property is located at 110 West State Street. The building consists of
1,584 square feet situated on a 14,400 square foot parcel and was constructed in
1980 utilizing stucco over concrete block with a clay tile roof.
Dunedin, Florida
- ----------------
The property is located at 2296 State Route 580. The building consists of
1,584 square feet situated on a 21,021 square foot parcel and was constructed in
1980 utilizing jumbo bricks.
In February 1995, Taco Bell closed and vacated this restaurant. Taco Bell,
in accordance with the lease, continued to pay rent and certain occupancy costs
for this property. In March 1996, Taco Bell and the Partnership agreed to sub-
lease this property to a local tenant. Taco Bell continues to remain
responsible to the Partnership for all rents and certain occupancy expenses
through the original lease term.
Logansport, Indiana
- -------------------
The property is located at 3419 Highway 24 East. Highway 24 East is a two-
lane east-west road. The building consists of 1,566 square feet situated on a
19,200 square foot parcel and was constructed in 1980 utilizing stucco over
concrete block.
Dover, Ohio
- -----------
The property is located at 718 Boulevard Avenue. Boulevard Avenue is a
four-lane northwest-southwest highway. The building consists of 1,584 square
feet situated on a 20,500 square foot parcel and was constructed in 1980
utilizing stucco over concrete block.
Greenville, North Carolina
- --------------------------
The property is located at 319 East Greenville Boulevard. The building
consists of 1,584 square feet situated on a 22,788 square foot parcel and was
constructed in 1980 utilizing stucco over concrete block.
49
<PAGE>
Palm Bay, Florida
- -----------------
The property is located at 176 North Harris Avenue. Harris Avenue is a
frontage street to Palm Bay Road. The building consists of 1,584 square feet
situated on a 15,250 square foot parcel and was constructed in 1980 utilizing
jumbo bricks.
Sandusky, Ohio
- --------------
The property is located at 3306 Milan Road. The building consists of 1,584
square feet situated on a 33,000 square foot parcel and was constructed in 1980
utilizing stucco over concrete block.
Mesa, Arizona
- -------------
The property is located at 531 East Southern Avenue. The building consists
of 1,584 square feet situated on a 28,000 square foot parcel and was constructed
in 1980 utilizing stucco over concrete block.
Zanesville, Ohio
- ----------------
The property is located at 2460 North Maple Street. The building consists
of 1,584 square feet situated on a 17,934 square foot parcel and was constructed
in 1980 utilizing stucco over concrete block.
Ashtabula, Ohio
- ---------------
The property is located at 1226 West Prospect Avenue. The building
consists of 1,584 square feet situated on a 21,049 square foot parcel and was
constructed in 1980 utilizing stucco over concrete block.
Dalton, Georgia
- ---------------
The property is located at 1509 Walnut Avenue. The building consists of
1,584 square feet situated on a 18,275 square foot parcel and was constructed in
1980 utilizing stucco over concrete block.
Ashland, Ohio
- -------------
The property is located at 315 Claremont Avenue. The building consists of
1,584 square feet situated on a 16,000 square foot parcel and was constructed in
1980 utilizing stucco over concrete block.
50
<PAGE>
Martinez, California
- --------------------
The property is located at 11 Muir Road. The building consists of 1,584
square feet situated on a 13,940 square foot parcel and was constructed in 1981
utilizing concrete block over wood frame.
Phoenix, Arizona
- ----------------
The property is located at 1701 West Bell Street. The building consists of
1,584 square feet situated on a 9,375 square foot parcel and was constructed in
1981 utilizing stucco over concrete block.
Noblesville, Indiana
- --------------------
The property is located at 610 West Route 32. The building consists of
1,584 square feet situated on a 26,250 square foot parcel and was constructed in
1982 utilizing stucco over concrete block.
Spartanburg, South Carolina
- ---------------------------
The property is located at 800 North Pine Street. The building consists of
1,584 square feet situated on a 24,750 square foot parcel and was constructed in
1982 utilizing stucco over concrete block.
Winslow, Arizona
- ----------------
The property is located at 1605 North Park Drive. The building consists of
2,808 square feet situated on a 37,651 square foot parcel and was constructed in
1982 utilizing stucco over concrete block.
Ponderosas:
- ----------
Brandon, Florida
- ----------------
The property is located at 1449 West Brandon Boulevard. The building
consists of 6,376 square feet situated on a 50,094 square foot parcel and was
constructed in 1985 utilizing wood siding over concrete block.
Johnstown, New York
- -------------------
The property is located at Route 30-A and North Comrie Avenue. The
building consists of 5,833 square feet situated on a 50,094 square foot parcel
and was constructed in 1979 utilizing wood siding over concrete block.
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<PAGE>
Indianapolis, Indiana
- ---------------------
The property is located at 2915 South Madison Avenue. The building
consists of 7,040 square feet situated on a 79,645 square foot parcel and was
constructed in 1969 utilizing wood siding over concrete block.
Massena, New York
- -----------------
The property is located at St. Regis Boulevard and Main Street. The
building consists of 5,817 square feet situated on a 48,399 square foot parcel
and was constructed in 1979 utilizing wood siding over concrete block.
Chenango, New York
- ------------------
The property is located at 1261 Front Street. The building consists of
5,402 square feet situated on a 32,712 square foot parcel and was constructed in
1979 utilizing wood siding over concrete block and facebrick.
New Windsor, New York
- ---------------------
The property is located at 334 Windsor Highway. The building consists of
5,402 square feet situated on a 47,685 square foot parcel and was constructed in
1980 utilizing wood siding over concrete block.
Wadsworth, Ohio
- ---------------
The property is located at 135 Great Oaks Trail. The building consists of
5,800 square feet situated on a 43,560 square foot parcel and was constructed in
1986 utilizing stucco over concrete block.
Westerville, Ohio
- -----------------
The property is located at 728 South State Street. The building consists
of 4,528 square feet situated on a 46,478 square foot parcel and was constructed
in 1984 utilizing facebrick with wood siding frontage.
Grand Rapids, Michigan
- ----------------------
The property is located at 308 North Drake Road. The building consists of
5,088 square feet situated on a 95,383 square foot parcel and was constructed in
1970 utilizing wood siding over concrete block.
52
<PAGE>
Buffalo, New York
- -----------------
The property is located at 2060 Main Street. The building consists of
5,440 square feet situated on a 192,656 square foot parcel and was constructed
in 1980 and remodeled in 1987 utilizing wood siding over concrete block with a
sloped and shingled roof.
Westbourne, Ohio
- ----------------
The property is located at 3328 Westbourne Drive. The building consists of
5,400 square feet situated on a 48,000 square foot parcel and was constructed in
1974 using wood siding over wood frame.
Children's World Learning Centers:
- ---------------------------------
Troy, Michigan
- --------------
The property is a 6,175 square foot facility located at 1064 East Wattles.
The single-story building was constructed in 1985 utilizing a wood frame and a
pitched roof with asphalt shingles.
Sterling Heights, Michigan
- --------------------------
The property is a 5,005 square foot facility located at 35505 Schoenherr.
The single-story building was constructed in 1983 utilizing a wood frame and a
pitched roof with asphalt shingles.
Joint Venture Ponderosas: The Partnership owns a 1% interest in a joint venture
which owns the land and buildings underlying the following six Ponderosa
restaurants.
Louisville, Kentucky
- --------------------
The property is located at 4801 Dixie Highway. The building consists of
5,100 square feet situated on a 62,496 square foot parcel and was constructed in
1969 utilizing wood siding over concrete block with flagstone.
Cuyahoga Falls, Ohio
- --------------------
The property is located at 1641 State Road. The building consists of 5,587
square feet situated on a 40,228 square foot parcel and was constructed in 1973
utilizing wood siding over concrete block.
Tipp City, Ohio
- ---------------
The property is located at 135 South Garber. The building consists of
6,080 square feet situated on a 53,100 square foot
53
<PAGE>
parcel and was constructed in 1980 utilizing wood siding over concrete block.
Mansfield, Ohio
- ---------------
The property is located at 1075 Ashland Road. The building consists of
5,600 square feet situated on a 104,500 square foot parcel and was constructed
in 1980 utilizing wood siding over concrete block and flagstone.
Tampa, Florida
- --------------
The property is located at 4420 West Gandy Boulevard. The building
consists of 5,777 square feet situated on a 50,094 square foot parcel and was
constructed in 1986 utilizing wood siding over concrete block.
Mooresville, Indiana
- --------------------
The property is located at 499 South Indiana Street. The building consists
of 6,770 square feet situated on a 63,525 square foot parcel and was constructed
in 1981 utilizing wood siding over concrete block.
Scandinavian Health Spa:
- -----------------------
The following real property is the only real property that constitutes 10%
or more of the total assets or gross revenues of the Partnership.
On July 21, 1989, the Partnership and Brauvin High Yield Fund L.P. II
("BHYF II") formed a joint venture, Brauvin Funds Joint Venture ("Funds JV"),
that acquired the land and building underlying a Scandinavian Health Spa (the
"Health Spa") in Glendale, Arizona from an unaffiliated developer for
$5,250,000, plus closing costs. The Partnership contributed $2,585,608 (49%)
and BHYF II contributed $2,691,143 (51%) to Funds JV. The Joint Venture owns
the Health Spa on a fee simple basis. The Health Spa is not subject to any
material mortgages, liens or other encumbrances.
The Health Spa was constructed in 1988 and consists of a 36,556 square foot
health club located on a three acre parcel in Glendale, Arizona, a suburb of
Phoenix. The property is a two-story health and fitness workout facility
located within the 195,000 square foot Glendale Galleria Shopping Center and has
been 100% occupied during the last five years by the Health Spa.
The Health Spa is subject to a triple-net lease with the lessee,
Scandinavian U.S. Swim & Fitness, Inc., which is responsible for paying all
taxes, insurance premiums and maintenance costs. The lease terminates in 2009,
is subject to
54
<PAGE>
four five-year renewal options and is not subject to right of first refusal.
The 1995 rental income distributed to the Partnership from Funds JV was
$352,819, which is 12.1% of the total rental income of the Partnership. The
rent is payable in equal monthly installments and was increased by 11.5% on
February 1, 1994 and will be increased by 11.5% every five years thereafter.
The average effective annual rental per square foot for each of the last five
years is $21.57, $21.57, $20.83, $19.34 and $19.34, for the years ended 1995,
1994, 1993, 1992 and 1991, respectively.
The Federal income tax basis of the Health Spa is $3,868,342 and
depreciation is calculated on the straight line method which varies between 31
1/2 years and 40 years. Annual realty taxes were $51,786 for 1994, which were
paid in 1995.
The lease is guaranteed by Bally's Health and Tennis Corporation whose
financial statements reflected a net worth of approximately $275 million at the
time of the acquisition. The Operating General Partners believe that the Health
Spa is adequately covered by insurance.
CompUSA:
- -------
The Partnership owns a 23.4% interest in a joint venture with affiliated
public real estate limited partnerships that acquired the land and building
underlying a CompUSA store. The CompUSA store is a 25,000 square foot single
story building located on a 105,919 square foot parcel in Duluth, Georgia, a
suburb of Atlanta, in the Gwinnett Place Mall Shopping Area. The single story
building was completed in March 1993 utilizing a frame of steel and concrete
block.
DISTRIBUTIONS
Cash distributions to Interest Holders for 1995, 1994 and 1993 were
$2,600,149, $2,616,758 and $2,590,902, respectively of which $2,367,443,
$2,296,122 and $2,189,349, respectively, represented net income of the
Partnership. Cash distributions to Interest Holders for the first quarter of
1996 were $659,129. Distributions of operating cash flow, if available, were
paid four times per year, 45 days after the end of each calendar quarter. No
amount distributed in 1994, 1995 or 1996 was a result of a sale of assets. The
difference between cash distributions of the Partnership and the net income
earned is primarily the result of depreciation expense and, to a lesser extent,
differences between the accrual basis of accounting and the cash generated from
operations.
55
<PAGE>
Below is a table summarizing the historical data for the Partnership's
distribution per Unit rates per annum:
<TABLE>
<CAPTION>
Distribution
Date 1996 1995 1994 1993 1992
<S> <C> <C> <C> <C> <C>
February 15 $0.2500 $0.2500 $0.2500 $0.2500 $0.2500
May 15 0.2500 0.2500 0.2500 0.2500 0.2500
August 15 0.2500 0.2500 0.2500 0.2531
November 15 0.2500 0.2625 0.2625 0.2563
</TABLE>
Future changes in the Partnership's distributions would largely depend on
sales at the Assets resulting in changes to percentage rent and, to a lesser
extent, on rental increases or decreases which will occur due to changes in the
Consumer Price Index or scheduled changes in base rent and loss of rental
payments resulting from defaults and lease payment reductions due to lease
renegotiations. The Operating General Partners have determined that during the
pendency of the proxy solicitation no future distributions of operating cash
flow will be made to the Interest Holders. As of the date hereof, the
Partnership has no preferred return deficiency.
OWNERSHIP OF UNITS
No person (including any "group" as that term is used in Section 13(d)(3)
of the Exchange Act) is known to the Partnership to be the beneficial owner of
more than 5% of the outstanding Units as of April 30, 1996, and David M.
Strosberg is the only General Partner or director or executive officer of the
Corporate General Partner that beneficially owns any Units. Mr. Strosberg owns
500 Units or .02% of the Partnership.
MARKET FOR THE UNITS
The Units are not traded on any established trading market, nor has there
been such a market during the past two years. Thus, no information is available
as to high and low bid quotations or sales prices. It is not anticipated that
there will be a public market for the Units in the future. Furthermore, no
person has contacted the Partnership expressing an interest in purchasing Units.
Neither the General Partners nor the Partnership are obligated to redeem or
repurchase Units, but the Partnership may purchase Units under certain very
limited circumstances. The Partnership will not purchase Units during the
pendency of the proposed Transaction.
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<PAGE>
Below is a table summarizing purchases of Units made by the Partnership
during the last two fiscal years and the current fiscal year:
<TABLE>
<CAPTION>
Units Range Average
For the Quarter ended: Purchased of Prices Price
- ------------------------ ---------- --------- -------
<S> <C> <C> <C>
March 31, 1994 6,363.454 $10.00 $10.00
June 30, 1994 7,588.244 $10.00 $10.00
September 30, 1994 --- --- ---
December 31, 1994 19,000.000 $10.00 $10.00
March 31, 1995 --- --- ---
June 30, 1995 1,200.000 $10.00 $10.00
September 30, 1995 --- --- ---
December 31, 1995 --- --- ---
March 31, 1996 4,000.000 $10.00 $10.00
June 30, 1996 --- --- ---
</TABLE>
Purchases of the Units by the Partnership prior to receipt of the Valuation
were made at the initial public offering price. Should the Transaction not be
completed, any future purchases of Units by the Partnership will be at a price
equal to the then current valuation of the Units based on a third-party
valuation.
LEGAL PROCEEDINGS
The Partnership is not a party to any legal proceedings.
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Deloitte & Touche LLP, whose report on the Partnership's financial
statements as of December 31, 1995 and 1994 and for the three years in the
period ended December 31, 1995 appear in the Partnership's 1995 Annual Report on
Form 10-K, are the current independent auditors of the Partnership. No
representative of Deloitte & Touche LLP is expected to be present at the Special
Meeting.
AVAILABLE INFORMATION
The Units are registered pursuant to Section 12(g) of the Exchange Act. As
such, the Partnership is subject to the informational filing requirements of the
Exchange Act, and in accordance therewith, is obligated to file reports and
other information with the Commission relating to its business, financial
condition and other matters. Comprehensive financial information is included in
the Partnership's Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q,
and other documents filed by the Partnership with the Commission, including the
1995 Annual Report on Form 10-K, excerpts from which are included on
57
<PAGE>
Schedule I hereto, and the Quarterly Report on Form 10-Q for the period ended
March 31, 1996, excerpts from which are included on Schedule II hereto. Such
reports and other information should be available for inspection and copying at
the public reference facilities of the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549 and at the regional offices of the Commission located at
7 World Trade Center, New York, New York 10048 and Citicorp Center, 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661. Copies should be available
by mail upon payment of the Commission's customary charges by writing to the
Commission's principal offices at 450 Fifth Street, N.W., Washington, D.C.
20549.
The Corporate General Partner is a privately held company and is not
subject to the reporting requirements of the Exchange Act.
CERTAIN INFORMATION CONCERNING THE PURCHASER
The Purchaser is a Delaware limited liability company that was
recently formed to acquire the Assets and the assets of the Affiliated Limited
Partnerships. The Purchaser has not engaged in any business or activity of any
kind, or entered into any agreement or arrangement with any person or entity or
incurred, directly or indirectly, any material liabilities or obligations,
except in connection with its formation, the proposed Transaction and the
proposed Affiliated Transactions. Upon completion of the Transaction and the
Affiliated Transactions, the Purchaser will own and operate the Assets and the
assets owned by the Affiliated Limited Partnerships.
The Braults have a minority ownership position in the Purchaser. In
addition, certain other members of the Corporate General Partner's management
may participate in the ownership of the Purchaser. Neither Mr. Froelich nor Mr.
Strosberg have any affiliation with the Purchaser. The Purchaser is in the
process of securing equity and debt financing to consummate the Transaction and
the Affiliated Transactions. Thus, the ultimate ownership of the Purchaser will
not be known until the completion of these investment activities. It is
anticipated that the members of the Purchaser will be a number of unrelated,
accredited investors.
The Purchaser's principal executive office and place of business is
150 South Wacker Drive, Suite 3200, Chicago, Illinois 60606. Its telephone
number is (312) 443-0922. All information contained in this Proxy Statement
concerning the Purchaser is based upon statements and representations made by
the Purchaser or its representatives to the Partnership or its representatives.
58
<PAGE>
SELECTED FINANCIAL DATA
The tables attached hereto as Schedules I and II provide a summary of
certain financial data for the Partnership. Such selected financial data should
be read in conjunction with the detailed information and financial statements
included in the Partnership's Annual Report to Interest Holders which was
distributed to the Interest Holders on May 1, 1996 and are included in the
Partnership's Annual Report on Form 10-K for the year ended December 31, 1995,
the Partnership's Annual Report, as amended, on Form 10-K/A for the year ended
on December 31, 1995 and the Partnership's Quarterly Report on Form 10-Q for the
quarter ended March 31, 1996, which are incorporated herein by reference.
The Partnership's ratio of earnings to fixed charges for each of March
31, 1996, December 31, 1995 and December 31, 1994 was 0.00%, as the Partnership
has no fixed charges.
The foregoing information is derived from the audited financial
statements of the Partnership for 1994 and 1995 and the unaudited financial
statements of the Partnership for the first quarter of 1996.
Pro forma data disclosing the effect of the Transaction is not
material. The Purchaser is a newly formed entity and thus has no historical
financial data.
INCORPORATION BY REFERENCE
The following documents filed by the Partnership with the Commission
are incorporated in this Proxy Statement by reference and made a part hereof:
1. The Partnership's Annual Report on Form 10-K for the year ended
December 31, 1995;
2. The Partnership's Annual Report, as amended, on Form 10-K/A for the
year ended December 31, 1995;
3. The Partnership's Quarterly Report on Form 10-Q for the quarter ended
March 31, 1996; and
4. All reports filed by the Partnership with the Commission pursuant to
Section 13 or 15(d) of the Exchange Act since January 1, 1995 to the
date of the Special Meeting.
Any statement contained in a document incorporated by reference shall be
deemed to be modified or superseded for all purposes to the extent that a
statement contained in this Proxy Statement modifies or replaces such statement.
Any such statement so modified or superseded shall not be deemed, except
59
<PAGE>
as so modified or superseded, to constitute a part of this Proxy Statement.
The Partnership will provide without charge to each person to whom a copy
of this Proxy Statement is delivered, upon the written or oral request of any
such person, a copy of any or all of the documents incorporated herein by
reference (other than exhibits to such documents unless such documents are
specifically incorporated by reference into the information this Proxy Statement
incorporates). Written and telephone requests for such copies should be
addressed to the Partnership at its principal executive office.
0171991.11
60
<PAGE>
<TABLE>
SCHEDULE I
BRAUVIN HIGH YIELD FUND L.P.
(a Delaware limited partnership)
(not covered by Independent Auditor's Report)
<CAPTION>
Year Ended Year Ended Year Ended Year Ended Year Ended
December 31, December 31, December 31, December 31, December 31,
1995 1994 1993 1992 1991
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Selected Income Statement Date:
Rental Income $ 2,502,755 $ 2,494,203 $ 2,432,331 $ 2,429,983 $ 2,347,599
Interest Income 63,650 27,682 26,909 32,278 53,044
Net Income 2,367,443 2,296,122 2,189,394 2,117,417 2,099,314
Net Income Per Unit (a) $ 0.91 $ 0.87 $ 0.84 $ 0.82 $ 0.82
Selected Balance Sheet Data:
Cash and Cash Equivalents $ 1,363,085 $ 1,016,066 $ 857,383 $ 1,065,360 $ 924,437
Land, Buildings and Improvements 19,322,975 19,322,975 19,322,975 19,322,975 19,322,975
Investment in Brauvin High Yield Venture 33,746 34,179 36,494 37,644 38,621
Investment in Brauvin Funds Joint Venture 2,472,647 2,494,341 2,511,957 2,519,883 2,548,352
Investment in Brauvin Gwinnett County Venture 557,389 569,626 582,573 -------- -------
Total Assets 20,932,600 21,010,763 21,285,952 21,370,824 21,690,573
Cash Distributions to General Partners 52,869 53,233 52,853 39,264 -------
Cash Distributions to Interest Holders (b) 2,600,149 2,616,758 2,590,902 2,560,503 2,438,767
Cash Distributions to Interest Holders
Per Unit (a) $ 1.00 $ 1.01 $ 1.01 $ 1.01 $ 0.97
Book Value Per Unit (a) $ 7.90 $ 7.99 $ 8.15 $ 8.31 $ 8.51
NOTES:
(a) Net income per Unit, cash distributions to Interest Holders per Unit and
book value per Unit are based on the average Units outstanding during the year
since they were of varying dollar amounts and percentages based upon the dates
Interest Holders were admitted to the Partnership and additional Units were
purchased through the Partnership's distribution reinvestment plan.
(b) This includes $9,209, $8,342, $6,873, $5,934 and $7,840 paid to various
states for income taxes on behalf of all Interest Holders for the years 1995,
1994, 1993, 1992 and 1991 respectively.
</TABLE>
61
<PAGE>
SCHEDULE II
BRAUVIN HIGH YIELD FUND L.P.
(a Delaware limited partnership)
(not covered by Independent Auditor's Report)
<TABLE>
<CAPTION>
Three Months Three Months
Ended Ended
March 31, 1996 March 31, 1995
-------------- --------------
<S> <C> <C>
Selected Income Statement Data:
Rental Income 584,877 600,423
Interest Income 19,453 8,666
Net Income 604,477 609,313
Net Income Per Unit (a) 0.19 0.21
Selected Balance Sheet Data:
Cash and Cash Equivalents 1,358,899 971,194
Land, Buildings and 19,322,975 19,322,975
Improvements
Investment in Brauvin High 33,365 34,443
Yield Venture
Investment in Brauvin Funds 2,467,238 2,486,461
Joint Venture
Investment in Brauvin 555,789 562,439
Gwinnett County Venture
Total Assets 20,823,756 20,837,167
Cash Distributions to General 13,455 11,330
Partners
Cash Distributions to 659,129 555,184
Interest Holders
Cash Distributions to Interest 0.25 0.21
Holders Per Unit (a)
Book Value Per Unit (a) 7.84 7.96
- -------------------------------------
</TABLE>
(a) Net income per Unit, cash distributions to Interest Holders per Unit and
book value per Unit are based on the average Units outstanding during the
year since they were of varying dollar amounts and percentages based upon
the dates Interest Holders were admitted to the Partnership and
additional Units were purchased through the Partnership's distribution
reinvestment plan.
62
<PAGE>
YOUR VOTE IS EXTREMELY IMPORTANT
Regardless of the number of Units of Brauvin High Yield Fund L.P. you own,
please vote by taking these simple steps:
1. Please SIGN, MARK, DATE and MAIL the enclosed proxy card in the enclosed,
postage-paid envelope (or by facsimile) as soon as possible before the
Special Meeting on August __, 1996.
2. You may also transmit your proxy by facsimile to (214) 999-9323 or (214)
999-9348. When voting your proxy by facsimile, both sides of the proxy
card must be transmitted.
3. If you wish to vote "FOR" the Transaction and "FOR" the Amendment, you
must submit the enclosed proxy card.
4. If your Units are held for you in "street name" by a bank or broker, the
bank or broker may not give your proxy without your instruction. Please
call your bank or broker and instruct your representative to vote "FOR"
the Transaction. A broker non-vote is the equivalent of a vote "AGAINST"
the Transaction and the Amendment.
5. If you have any questions or require any additional information concerning
this Proxy Statement please contact either:
Investor Services Department
BRAUVIN HIGH YIELD FUND L.P.
150 South Wacker Drive
Chicago, Illinois 60606
CALL TOLL-FREE (800) 272-8846
or our solicitation agent who can also assist you in voting:
THE HERMAN GROUP, INC.
2121 San Jacinto Street
26th Floor
Dallas, Texas 75201
CALL TOLL-FREE (800) 992-6145
PLEASE SIGN, MARK, DATE AND RETURN YOUR PROXY CARD TODAY.
63
<PAGE>
<TABLE>
Brauvin High Yield Fund I - Annex I
<CAPTION>
UNIT % PROPERTY PROPERTY FOOT STREET
NO. OWNED TYPE NAME NOTES CITY ADDRESS ST.
<S> <C> <C> <C> <C> <C> <C> <C>
2200 100.00% FAST-FOOD TACO BELL SPARTANBURG 800 NORTH PINE STREET SC
726 100.00% DAY-CARE CHILDREN'S WORLD STERLING HTS 35505 SCHOENHERR ROAD MI
(3)
667 100.00% SIT-DOWN PONDEROSA BUFFALO 3060 MAIN STREET NY
673 100.00% SIT-DOWN PONDEROSA BINGHAMPTON 1261 FRONT STREET NY
819 100.00% DAY-CARE CHILDREN'S WORLD TROY 1064 EAST WATTLES ROAD MI
(3)
815 100.00% SIT-DOWN PONDEROSA WESTERVILLE 728 SOUTH STATE STREET OH
109 100.00% SIT-DOWN PONDEROSA INDIANAPOLIS 2915 SOUTH MADISON AVE. IN
782 100.00% SIT-DOWN PONDEROSA NEW WINDSOR 334 WINDSOR HIGHWAY NY
752 100.00% SIT-DOWN PONDEROSA MASSENA ST. REGIS BLVD. AND MAIN NY
ST.
778 100.00% SIT-DOWN PONDEROSA JOHNSTOWN ROUTE 30A/N. COMRIE AVE. NY
194 100.00% SIT-DOWN PONDEROSA KALAMAZOO 308 NORTH DRAKE ROAD MI
775 100.00% SIT-DOWN PONDEROSA WADSWORTH 135 GREAT OAKS TRAIL OH
1653 100.00% FAST-FOOD TACO BELL ALLIANCE 110 WEST STATE STREET OH
1915 100.00% FAST-FOOD TACO BELL SANDUSKY 3306 MILAN ROAD OH
2132 100.00% FAST-FOOD TACO BELL NOBLESVILLE 610 WEST ROUTE 32 IN
1994 100.00% FAST-FOOD TACO BELL ASHLAND 315 CLAREMONT AVENUE OH
1937 100.00% FAST-FOOD TACO BELL ASHTABULA 1226 WEST PROSPECT AVENUE OH
1929 100.00% FAST-FOOD TACO BELL ZANESVILLE 2460 NORTH MAPLE STREET OH
1871 100.00% FAST-FOOD TACO BELL GREENVILLE 319 EAST GREENVILLE NC
BOULEVARD
1856 100.00% FAST-FOOD TACO BELL DOVER 718 BOULEVARD AVENUE OH
409 100.00% SIT-DOWN PONDEROSA CINCINNATI 3328 WESTBOURNE DRIVE OH
1845 100.00% FAST-FOOD TACO BELL (8) LOGANSPORT 3419 U.S. ROUTE 24 EAST IN
2030 100.00% FAST-FOOD TACO BELL MARTINEZ 11 MUIR ROAD CA
1392 100.00% FAST-FOOD TACO BELL VALDOSTA 2918 NORTH ASHLEY STREET GA
2091 100.00% FAST-FOOD TACO BELL WINSLOW 1605 NORTH PARK DRIVE AZ
2069 100.00% FAST-FOOD TACO BELL PHOENIX 1702 WEST BELL ROAD AZ
1061 100.00% SIT-DOWN PONDEROSA BRANDON 1449 WEST BRANDON BLVD. FL
1450 100.00% FAST-FOOD TACO BELL ALBANY 1707 NORTH SLAPPEY DRIVE GA
1966 100.00% FAST-FOOD TACO BELL DALTON 1509 WEST WALNUT AVENUE GA
1835 100.00% FAST-FOOD TACO BELL (1) (8) DUNEDIN 2296 STATE ROUTE 580 FL
1925 100.00% FAST-FOOD TACO BELL MESA 531 EAST SOUTHERN AVENUE AZ
1389 100.00% FAST-FOOD TACO BELL WARNER ROBBINS 1998 WATSON BLVD. GA
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
1912 100.00% FAST-FOOD TACO BELL PALM BAY 2150 NORTH HARRIS AVENUE FL
</TABLE>
<PAGE>
<TABLE>
Brauvin High Yield Fund I
UNIT % PROPERTY PROPERTY FOOT BUILD LAND CUSHMAN AND WAKEFIELD VALUATION INDICATORS
NO. OWNED TYPE NAME NOTES SF SF BUILT C&W Value YR 1 $NOI OAR IRR OUT-OAR
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
2200 100.00% FAST-FOOD TACO BELL 1,584 24,750 1982 $480,000 $ 55,182 11.50% 12.50% 11.50%
726 100.00% DAY-CARE CHILDREN'S WORLD (3) 5,005 47,045 1983 $470,000 $ 50,278 10.70% 11.50% 11.50%
667 100.00% SIT-DOWN PONDEROSA 5,440 192,656 1977 $930,000 $121,449 13.06% 12.50% 11.50%
673 100.00% SIT-DOWN PONDEROSA 5,402 32,712 1979 $960,000 $121,455 12.65% 12.50% 11.50%
819 100.00% DAY-CARE CHILDREN'S WORLD (3) 6,193 65,776 1984 $760,000 $ 92,536 12.18% 11.50% 11.50%
815 100.00% SIT-DOWN PONDEROSA 4,528 46,478 1984 $730,000 $ 86,161 11.80% 12.50% 11.50%
109 100.00% SIT-DOWN PONDEROSA 5,606 79,382 1969 $880,000 $114,392 13.00% 12.50% 11.50%
782 100.00% SIT-DOWN PONDEROSA 5,402 47,685 1980 $770,000 $ 93,567 12.15% 12.50% 11.50%
752 100.00% SIT-DOWN PONDEROSA 5,817 48,399 1979 $730,000 $ 81,449 11.16% 12.50% 11.50%
778 100.00% SIT-DOWN PONDEROSA 5,833 50,094 1979 $940,000 $107,585 11.45% 12.50% 11.50%
194 100.00% SIT-DOWN PONDEROSA 5,058 50,965 1969 $790,000 $104,834 13.27% 12.50% 11.50%
775 100.00% SIT-DOWN PONDEROSA 5,800 43,560 1986 $840,000 $101,293 12.06% 12.50% 11.50%
1653 100.00% FAST-FOOD TACO BELL 1,584 14,400 1980 $570,000 $ 77,142 13.53% 12.50% 11.50%
1915 100.00% FAST-FOOD TACO BELL 1,584 33,000 1980 $690,000 $ 77,801 11.28% 11.00% 11.50%
2132 100.00% FAST-FOOD TACO BELL 1,584 26,250 1982 $510,000 $ 61,303 12.02% 12.50% 11.50%
1994 100.00% FAST-FOOD TACO BELL 1,584 16,000 1980 $470,000 $ 52,263 11.12% 11.00% 11.50%
1937 100.00% FAST-FOOD TACO BELL 1,584 21,049 1980 $710,000 $ 89,564 12.61% 11.00% 11.50%
1929 100.00% FAST-FOOD TACO BELL 1,586 17,934 1980 $400,000 $ 42,973 10.74% 12.50% 11.50%
1871 100.00% FAST-FOOD TACO BELL 1,584 22,788 1984 $470,000 $ 48,506 10.32% 12.50% 11.50%
1856 100.00% FAST-FOOD TACO BELL 1,584 20,500 1980 $620,000 $ 69,493 11.21% 11.00% 11.50%
409 100.00% SIT-DOWN PONDEROSA 5,250 48,119 1973 $870,000 $ 99,247 11.41% 12.50% 11.50%
1845 100.00% FAST-FOOD TACO BELL (8) 1,566 19,200 1980 $470,000 $ 55,334 11.77% 12.50% 11.50%
2030 100.00% FAST-FOOD TACO BELL 1,584 13,940 1981 $350,000 $ 44,623 12.75% 12.50% 11.50%
1392 100.00% FAST-FOOD TACO BELL 1,288 16,222 1982 $450,000 $ 52,687 11.71% 12.50% 11.50%
2091 100.00% FAST-FOOD TACO BELL 2,471 37,651 1982 $430,000 $ 48,723 11.33% 12.50% 11.50%
2069 100.00% FAST-FOOD TACO BELL 1,584 12,768 1981 $360,000 $ 39,181 10.88% 12.50% 11.50%
1061 100.00% SIT-DOWN PONDEROSA 6,376 55,363 1985 $950,000 $120,886 12.72% 12.50% 11.50%
1450 100.00% FAST-FOOD TACO BELL 1,775 11,850 1982 $430,000 $ 45,838 10.66% 12.50% 11.50%
1966 100.00% FAST-FOOD TACO BELL 1,584 18,275 1980 $340,000 $ 36,594 10.76% 12.50% 11.50%
1835 100.00% FAST-FOOD TACO BELL (1)(8) 1,584 21,021 1980 $280,000 $ 37,128 13.26% 11.00% 11.50%
1925 100.00% FAST-FOOD TACO BELL 1,584 2,831 1981 $520,000 $ 58,524 11.25% 12.50% 11.50%
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1389 100.00% FAST-FOOD TACO BELL 1,288 25,000 1977 $320,000 $ 34,871 10.90% 12.50% 11.50%
1912 100.00% FAST-FOOD TACO BELL 1,584 15,120 1980 $360,000 $ 38,159 10.60% 11.00% 11.50%
</TABLE>
FOOTNOTES:
<TABLE>
<C> <S>
(1) CURRENTLY BEING REMODELED FOR A CHINESE RESTAURANT. ALSO, NO PHOTOS OF CHILDREN.
(4) ON HOLD UNTIL FURTHER NOTICE.
(5) WAS A PONDEROSA. CURRENTLY CLOSED.
(6) SUBLEASED BY PONDEROSA.
(7) SUBLEASED BY PONDEROSA.
(8) SUBLEASED
(9) BRAUVIN HIGH-YIELD FUND L.P. OWNS 49% BRAUVIN HIGH-YIELD FUND II OWNS 51%.
(10) BRAUVIN HIGH-YIELD FUND L.P. OWNS 1% BRAUVIN HIGH-YIELD FUND II OWNS 99%.
(11) BRAUVIN HIGH-YIELD FUND L.P. OWNS 23.5%, BRAUVIN INCOME PLUS III L.P. OWNS 6.3% AND BRAUVIN CORPORATE LEASE
PROGRAM IV L.P. OWNS 70.2%.
(12) BRAUVIN HIGH-YIELD FUND L.P. OWNS 1% BRAUVIN HIGH-YIELD FUND II OWNS 99%.
</TABLE>
<PAGE>
Annex II
Preliminary Form and Content of
Cushman & Wakefield Fairness Opinion
------------------------------------
Cushman & Wakefield has advised the Partnership through its Corporate
General Partner that in its opinion, the price per Unit reflected in the
proposed Transaction is fair, from a financial point of view, to the Unit
holders. The determination that a price is "fair" does not mean that the price
is the highest price which might be obtained in the marketplace, but rather that
based upon the sum of the appraised values of the Assets, the price reflected in
the proposed Transaction is within a range that Cushman & Wakefield believes is
reasonable. Although there is no active market in trading the Units, for those
Units that have traded the price per Unit was at or below the price per Unit in
the proposed Transaction. Cushman & Wakefield relied on its appraisal work as a
basis for establishing the fairness of the proposed Transaction. Other methods
could have been employed to test the fairness of the proposed Transaction and
yielded different results. In rendering this opinion, Cushman & Wakefield has
not considered, and has not addressed, market conditions and other factors
(e.g., whether the sale of the Assets as a portfolio rather than a series of
sales of individual assets, would produce a premium or a discounted selling
price) that, in an open-market transaction, could influence the selling price of
the Assets and result in proceeds to Unit holders greater or less than the
proposed price per Unit. Cushman & Wakefield also has not considered the price
and trading history of other publicly traded securities that might be deemed
relevant due to the relative small size of the proposed Transaction and the fact
that the Units are not publicly traded. Furthermore, Cushman & Wakefield has
not compared the financial terms of the proposed Transaction to the financial
terms of other transactions that might be deemed relevant, given that the
proposed Transaction involves all cash to the Unit holders.
<PAGE>
BRAUVIN HIGH YIELD FUND L.P., 150 SOUTH WACKER DRIVE, SUITE 3200, CHICAGO,
ILLINOIS 60606
THIS PROXY IS SOLICITED ON BEHALF OF BRAUVIN HIGH YIELD FUND L.P.
The undersigned hereby appoints Jerome J. Brault, with full power of
substitution, the attorney and the proxy of the undersigned, to represent and to
vote, as designated below, all units of limited partnership interest ("Units")
of Brauvin High Yield Fund L.P., a Delaware limited partnership (the
"Partnership") that the undersigned is entitled to vote if personally present at
the Special Meeting of Limited Partners of the Partnership to be held on August
__, 1996, at 9:00 a.m. (Chicago time), at the offices of the Partnership, 150
South Wacker Drive, Suite 3200, Chicago, Illinois 60606 and at any
adjournment(s) or postponement(s) thereof. This proxy revokes all prior proxies
given by the undersigned.
(Please mark each proposal with an "X" in the appropriate box)
1. APPROVAL OF THE MERGER OF THE PARTNERSHIP WITH AND INTO BRAUVIN REAL
ESTATE FUNDS L.L.C., A DELAWARE LIMITED LIABILITY COMPANY, WHICH APPROVAL WILL
AUTOMATICALLY RESULT IN THE ADOPTION OF AN AMENDMENT TO THE PARTNERSHIP'S
RESTATED LIMITED PARTNERSHIP AGREEMENT, AS AMENDED, TO ALLOW THE PARTNERSHIP TO
SELL OR LEASE PROPERTY TO AFFILIATES.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
2. ADOPTION OF THE AMENDMENT OF THE PARTNERSHIP'S RESTATED LIMITED
PARTNERSHIP AGREEMENT, AS AMENDED, TO ALLOW THE MAJORITY VOTE OF THE INTEREST
HOLDERS TO DETERMINE THE OUTCOME OF THE TRANSACTION WITHOUT THE VOTE OF THE
GENERAL PARTNERS OF THE PARTNERSHIP.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. IN HIS DISCRETION, THE PROXY IS AUTHORIZED TO VOTE UPON SUCH OTHER
BUSINESS AS MAY PROPERLY COME BEFORE THE SPECIAL MEETING OR ANY ADJOURNMENT
THEREOF.
PLEASE SIGN, MARK, DATE AND RETURN YOUR PROXY CARD TODAY IN THE ENCLOSED
ENVELOPE.
SEE REVERSE SIDE
----------------
<PAGE>
This Proxy, when properly executed, will be voted in the manner directed
herein. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED "FOR" PROPOSALS 1 AND
2.
Please date and sign this proxy exactly as
your name appears hereon and return this
proxy in the enclosed postage prepaid
envelope.
_____________________________________________
(Signature)
_____________________________________________
(Signature, if held jointly)
_____________________________________________
(Title)
Dated:_______________________________________
When Units are held by joint tenants, both
should sign. When signing as attorney in
fact, executor, administrator, trustee,
guardian, corporate officer or partner,
please give full title as such. If a
corporation, please sign in corporate name by
President or other authorized officer. If a
partnership, please sign in partnership name
by authorized person.
