<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-------------------------------------------------------------
SCHEDULE 14D-1
Tender Offer Statement Pursuant to Section
14(d)(1) of the Securities Exchange Act of 1934
and
Amendment No. 20 to Schedule 13D
--------------------------------------------------------------
AMERICAN REAL ESTATE PARTNERS, L.P.
(Name of Subject Company [Issuer])
LEYTON LLC
HIGH COAST LIMITED PARTNERSHIP
BECKTON CORP.
CARL C. ICAHN
(Bidders)
DEPOSITARY UNITS REPRESENTING
LIMITED PARTNER INTERESTS
(Title of Class of Securities)
029169109
(CUSIP Number of Class of Securities)
-------------------------------------------------
Keith L. Schaitkin, Esq.
Gordon Altman Butowsky
Weitzen Shalov & Wein
114 West 47th Street
New York, New York 10036
(212) 626-0800
(Name, Address and Telephone Number of Person Authorized to
Receive Notices and Communications on Behalf of Bidder)
- --------------------------------------------------------------------------------
Calculation of Filing Fee
- --------------------------------------------------------------------------------
Transaction Amount of
Valuation*: $105,000,000 Filing Fee: $21,000
- --------------------------------------------------------------------------------
*For purposes of calculating the filing fee only. This amount assumes
the purchase of up to 10 million Units of the subject company for $10.50 per
Unit in cash.
[ ] Check box if any part of the fee is offset as provided by Rule
0-11(a)(2) and identify the filing with which the offsetting fee was previously
paid. Identify the previous filing by registration statement number, or the Form
or Schedule and the date of its filing.
Amount Previously Paid: ______________________________________
Form or Registration No.: ______________________________________
Filing Party: __________________________________________________
<PAGE>
Dated Filed: __________________________________________________
*The remainder of this cover page shall be filled out for a reporting person's
initial filing on this form with respect to the subject class of securities, and
for any subsequent amendment containing information which would alter the
disclosures provided in a prior cover page.
The information required on the remainder of this cover page shall not
be deemed to be "filed" for the purpose of Section 18 of the Securities Exchange
Act of 1934 (the "Act") or otherwise subject to the liabilities of that section
of the Act but shall be subject to all other provisions of the Act (however, see
the Notes).
<PAGE>
_______________________________________________________________________________
CUSIP No. 029169109 SCHEDULE 14D-1
_______________________________________________________________________________
1 NAME OF REPORTING PERSONS
S.S OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Leyton LLC
______________________________________________________________________________
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) [X]
(See Instructions) (b) [ ]
______________________________________________________________________________
3 SEC USE ONLY
______________________________________________________________________________
4 SOURCE OF FUNDS (See Instructions)
AF
______________________________________________________________________________
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDING IS REQUIRED
PURSUANT TO ITEMS 2(e) OR 2(f) [ ]
______________________________________________________________________________
6 CITIZENSHIP OR PLACE OR ORGANIZATION
Delaware
_______________________________________________________________________________
7 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
N/A
_______________________________________________________________________________
8 CHECK IF THE AGGREGATE AMOUNT IN ROW (7) EXCLUDES CERTAIN SHARES
(See Instructions) [ ]
_______________________________________________________________________________
9 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (7)
_______________________________________________________________________________
10 TYPE OF REPORTING PERSON (See Instructions)
OO
______________________________________________________________________________
<PAGE>
_______________________________________________________________________________
CUSIP No. 029169109 SCHEDULE 14D-1
_______________________________________________________________________________
1 NAME OF REPORTING PERSONS
S.S OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
High Coast Limited Partnership
______________________________________________________________________________
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) [X]
(See Instructions) (b) [ ]
______________________________________________________________________________
3 SEC USE ONLY
______________________________________________________________________________
4 SOURCE OF FUNDS (See Instructions)
AF
______________________________________________________________________________
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDING IS REQUIRED
PURSUANT TO ITEMS 2(e) OR 2(f) [ ]
______________________________________________________________________________
6 CITIZENSHIP OR PLACE OR ORGANIZATION
Delaware
_______________________________________________________________________________
7 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
31,515,044
_______________________________________________________________________________
8 CHECK IF THE AGGREGATE AMOUNT IN ROW (7) EXCLUDES CERTAIN SHARES
(See Instructions) [ ]
_______________________________________________________________________________
9 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (7)
68.4%
_______________________________________________________________________________
10 TYPE OF REPORTING PERSON (See Instructions)
PN
_______________________________________________________________________________
<PAGE>
_______________________________________________________________________________
CUSIP No. 029169109 SCHEDULE 14D-1
_______________________________________________________________________________
1 NAME OF REPORTING PERSONS
S.S OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Beckton Corp.
______________________________________________________________________________
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) [X]
(See Instructions) (b) [ ]
______________________________________________________________________________
3 SEC USE ONLY
______________________________________________________________________________
4 SOURCE OF FUNDS (See Instructions)
AF
______________________________________________________________________________
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDING IS REQUIRED
PURSUANT TO ITEMS 2(e) OR 2(f) [ ]
______________________________________________________________________________
6 CITIZENSHIP OR PLACE OR ORGANIZATION
Delaware
_______________________________________________________________________________
7 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
31,515,044
_______________________________________________________________________________
8 CHECK IF THE AGGREGATE AMOUNT IN ROW (7) EXCLUDES CERTAIN SHARES
(See Instructions) [ ]
Excludes all depositary units owned of record by API Nominee Corp.
_______________________________________________________________________________
9 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (7)
68.4%
_______________________________________________________________________________
10 TYPE OF REPORTING PERSON (See Instructions)
CO
______________________________________________________________________________
<PAGE>
_______________________________________________________________________________
CUSIP No. 029169109 SCHEDULE 14D-1
_______________________________________________________________________________
1 NAME OF REPORTING PERSONS
S.S OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Carl C. Icahn
______________________________________________________________________________
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) [X]
(See Instructions) (b) [ ]
______________________________________________________________________________
3 SEC USE ONLY
______________________________________________________________________________
4 SOURCE OF FUNDS (See Instructions)
AF
______________________________________________________________________________
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDING IS REQUIRED
PURSUANT TO ITEMS 2(e) OR 2(f) [ ]
______________________________________________________________________________
6 CITIZENSHIP OR PLACE OR ORGANIZATION
United States of America
_______________________________________________________________________________
7 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
31,515,044
_______________________________________________________________________________
8 CHECK IF THE AGGREGATE AMOUNT IN ROW (7) EXCLUDES CERTAIN SHARES
(See Instructions) [ ]
Excludes all depositary units owned of record by API Nominee Corp.
_______________________________________________________________________________
9 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (7)
68.4%
_______________________________________________________________________________
10 TYPE OF REPORTING PERSON (See Instructions)
IN
______________________________________________________________________________
<PAGE>
SCHEDULE 14D-1
ITEM 1. SECURITY AND SUBJECT COMPANY.
(a) The name of the subject company is American Real Estate
Partners, L.P., a Delaware limited partnership (the "Partnership"), which has
its principal executive offices at 100 South Bedford Road, Mt. Kisco, New York
10549.
(b) This Schedule relates to the offer by Leyton LLC, a
Delaware limited liability company (the "Purchaser"), to purchase up to 10
million of the issued and outstanding depositary units representing limited
partner interests ("Units") of the Partnership at a purchase price of $10.50 per
Unit, net to the seller in cash (the "Purchase Price"), without interest, upon
the terms and subject to the conditions set forth in the Offer to Purchase,
dated November 20, 1998 (the "Offer to Purchase"), and the related Letter of
Transmittal, copies of which are attached hereto as Exhibits (a)(1) and (a)(2),
respectively. The information concerning the Units set forth in the Offer to
Purchase in "INTRODUCTION" is incorporated herein by reference.
This schedule also constitutes Amendment No. 20 to the
Schedule 13D of High Coast Limited Partnership, Beckton Corp. and Carl C. Icahn,
the last amendment to which was filed on November 17, 1998.
(c) The information set forth in the Offer to Purchase in
Section 12 "PRICE RANGE OF UNITS" is incorporated herein by reference.
ITEM 2. IDENTITY AND BACKGROUND.
(a)-(d) The Purchaser is a Delaware limited liability company,
the sole member of which is High Coast Limited Partnership, a Delaware limited
partnership ("High Coast"), the general partner of which is Beckton Corp., a
Delaware corporation ("Beckton"), which is wholly-owned by Carl C. Icahn, a
citizen of the United States of America. The information set forth in the Offer
to Purchase in Section 10 "INFORMATION CONCERNING THE PURCHASER AND CERTAIN
AFFILIATES OF THE PURCHASER" and Schedule II of the Offer to Purchase is
incorporated herein by reference.
(e)-(f) During the last five years, neither the Purchaser,
High Coast, Beckton nor, to the best of their knowledge, any of the persons
listed in Schedule II of the Offer to Purchase or referred to in Section 10
"INFORMATION CONCERNING THE PURCHASER AND CERTAIN AFFILIATES OF THE PURCHASER"
of the Offer to Purchase (i) has been convicted in a criminal proceeding
(excluding traffic violations or similar misdemeanors) or (ii) was a party to a
civil proceeding of a judicial or administrative body of competent jurisdiction
and as a result of such proceeding was or is subject to a judgment, decree or
final order enjoining future violations of, or prohibiting activities subject
to, Federal or State securities laws or finding any violation of such laws.
(g) The information set forth in Schedule II of the Offer to
Purchase is incorporated herein by reference.
ITEM 3. PAST CONTACTS, TRANSACTIONS OR NEGOTIATIONS WITH THE SUBJECT COMPANY.
(a) The information set forth in the Offer to Purchase in
Section 9 "CERTAIN INFORMATION CONCERNING THE PARTNERSHIP" is incorporated
herein by reference.
(b) The information set forth in the Offer to Purchase in
Section 8 "FUTURE PLANS OF THE PURCHASER," Section 9 "CERTAIN INFORMATION
CONCERNING THE PARTNERSHIP" and Section 10 "INFORMATION CONCERNING THE PURCHASER
AND CERTAIN AFFILIATES OF THE PURCHASER" is incorporated herein by reference.
ITEM 4. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
(a) The information set forth in the Offer to Purchase in
Section 11 "SOURCE OF FUNDS" is incorporated herein by reference.
<PAGE>
(b)-(c) Not applicable.
ITEM 5. PURPOSE OF THE TENDER OFFER AND PLANS OR PROPOSALS OF THE BIDDER.
(a)-(d) The information set forth in the Offer to Purchase in
"INTRODUCTION" and Section 8 "FUTURE PLANS OF THE PURCHASER" is incorporated
herein by reference.
(e)-(g) The information set forth in the Offer to Purchase in
Section 7 "EFFECTS OF THE OFFER" is incorporated herein by reference.
ITEM 6. INTEREST IN SECURITIES OF THE SUBJECT COMPANY.
(a)-(b) The information set forth in the Offer to Purchase in
Section 15 "INTEREST IN THE SECURITIES OF THE PARTNERSHIP" is incorporated
herein by reference.
ITEM 7. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH
RESPECT TO THE SUBJECT COMPANY'S SECURITIES.
The information set forth in the Offer to Purchase in Section
9 "CERTAIN INFORMATION CONCERNING THE PARTNERSHIP" and Section 10 "INFORMATION
CONCERNING THE PURCHASER AND CERTAIN AFFILIATES OF THE PURCHASER" is
incorporated herein by reference.
ITEM 8. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED.
The information set forth in the Offer to Purchase in
"INTRODUCTION" and Section 17 "FEES AND EXPENSES" is incorporated herein by
reference.
ITEM 9. FINANCIAL STATEMENTS OF CERTAIN BIDDERS.
The information set forth in the Offer to Purchase in Section
10 "INFORMATION CONCERNING THE PURCHASER AND CERTAIN AFFILIATES OF THE
PURCHASER" and Section 11 "SOURCE OF FUNDS" is incorporated herein by reference.
ITEM 10. ADDITIONAL INFORMATION.
(a) The information set forth in the Offer to Purchase in
Section 10 "INFORMATION CONCERNING THE PURCHASER AND CERTAIN AFFILIATES OF THE
PURCHASER" is incorporated herein by reference.
(b)-(d) The information set forth in the Offer to Purchase in
Section 16 "CERTAIN LEGAL MATTERS" is incorporated herein by reference.
(e) The information set forth in the Offer to Purchase in
Section 9 "CERTAIN INFORMATION CONCERNING THE PARTNERSHIP" is incorporated
herein by reference
(f) Reference is hereby made to the Offer to Purchase and the
related Letter of Transmittal, copies of which are attached hereto as Exhibits
(a)(1) and (a)(2) respectively, and which are incorporated herein in their
entirety by reference.
ITEM 11. MATERIAL TO BE FILED AS EXHIBITS.
<PAGE>
(a)(1) Offer to Purchase, dated November 20, 1998.
(a)(2) Letter of Transmittal and Related Instructions, dated November
20, 1998.
(a)(3) Letter to Clients, dated November 20, 1998, for use by
Brokers, Dealers, Commercial Banks, Trust Companies and Other
Nominees.
(a)(4) Letter to Brokers, Dealers, Commercial Banks, Trust Companies
and other Nominees dated November 20, 1998.
(a)(5) Notice of Guaranteed Delivery.
(a)(6) Guidelines for Certification of Taxpayer Identification Number
on Substitute Form W-9.
(a)(7) Form of Tombstone Advertisement, dated November 20, 1998.
(a)(8) Press Release, dated November 16, 1998.
(b) Not applicable.
(c)(1) Indemnity Undertaking of Starfire, dated November 20, 1998.
(d)-(f) Not applicable.
<PAGE>
SIGNATURES
After due inquiry and to the best of my knowledge and belief, I certify
that the information set forth in this statement is true, complete and correct.
Dated: November 20, 1998
LEYTON LLC
By: HIGH COAST LIMITED PARTNERSHIP,
Member
By: BECKTON CORP.,
General Partner
By: /s/ Carl C. Icahn
--------------------
Name: Carl C. Icahn
Title: Chairman of the Board
HIGH COAST LIMITED PARTNERSHIP
By: BECKTON CORP.,
General Partner
By: /s/ Carl C. Icahn
--------------------
Name: Carl C. Icahn
Title: Chairman of the Board
BECKTON CORP.
By: /s/ Carl C. Icahn
--------------------
Name: Carl C. Icahn
Title: Chairman of the Board
/s/ Carl C. Icahn
---------------------------
CARL C. ICAHN
[Signature Page for American Real Estate Partners, L.P., Schedule 14D-1]
<PAGE>
INDEX TO EXHIBITS
EXHIBIT
NUMBER DESCRIPTION
- -------- ----------------------------
(a)(1) Offer to Purchase, dated November 20, 1998.
(a)(2) Letter of Transmittal, dated November 20, 1998.
(a)(3) Letter to Clients, dated November 20, 1998, for use by Brokers,
Dealers, Commercial Banks, Trust Companies and Other Nominees.
(a)(4) Letter to Brokers, Dealers, Commercial Banks, Trust Companies and
other Nominees dated November 20, 1998.
(a)(5) Notice of Guaranteed Delivery.
(a)(6) Guidelines for Certification of Taxpayer Identification Number on
Substitute Form W-9.
(a)(7) Form of Tombstone Advertisement, dated November 20, 1998.
(a)(8) Press Release, dated November 16, 1998.
(c)(1) Indemnity Undertaking of Starfire, dated November 20, 1998.
<PAGE>
Exhibit (a)(1)
Offer to Purchase for Cash
Up to 10 Million Depositary Units
Representing Limited Partner Interests
in
AMERICAN REAL ESTATE PARTNERS, L.P.
(CUSIP: 029169109)
for
$10.50 Net Per Unit
by
LEYTON LLC
|-------------------------------------------------------|
|THE OFFER, WITHDRAWAL RIGHTS AND PRORATION PERIOD WILL |
| EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, |
| ON DECEMBER 18, 1998, UNLESS THE OFFER IS EXTENDED. |
|-------------------------------------------------------|
IMPORTANT
Leyton LLC, a Delaware limited liability company (the "Purchaser"), is
offering to purchase up to 10 million of the outstanding depositary units
representing limited partner interests ("Units") in American Real Estate
Partners, L.P., a Delaware limited partnership (the "Partnership"), at a
purchase price of $10.50 per Unit (the "Purchase Price"), net to the seller in
cash, without interest, upon the terms and subject to the conditions set forth
in the Offer to Purchase and in the related Letter of Transmittal, including the
Instructions thereto, as it may be supplemented or amended from time to time
(the "Letter of Transmittal" which, collectively with the Offer to Purchase,
constitute the "Offer"). As a result of the relationship of Carl C. Icahn,
Beckton Corp. and High Coast Limited Partnership with the Purchaser each of them
may be deemed to be a "co-bidder" with the Purchaser. Holders of Units
("Holders") who tender their Units will not be obligated to pay any sales
commissions. The 10 million Units sought represent approximately 21.7% of the
total units outstanding as of November 1, 1998.
Holders are urged to consider the following factors:
* The Purchaser's sole member, High Coast Limited Partnership, a
Delaware limited partnership ("High Coast") has a majority
interest in the Partnership and is an affiliate of and is
under common control with the Partnership's general partner,
American Property Investors, Inc. ("API"). Mr. Icahn, as the
indirect owner of more than 99% of the ownership interest in
API and the Purchaser, respectively, has substantial conflicts
of interest with respect to the Offer. Additionally, as a
result the position of Mr. Icahn, the Purchaser has access to
certain non-public information regarding the Partnership.
* The last sales price of the Units on the last full trading day
prior to the date of announcement of the Offer, as reported by
the New York Stock Exchange ("NYSE") Composite Tape (as
reported by The Wall Street Journal) was $7 1/4 per Unit. (See
Section 12 - "Price Range of Units"). As of November 1, 1998,
the liquidation value of the Partnership's assets was
estimated by the Purchaser to be $18.36 per Unit or $16.45 per
Unit on a fully diluted basis. The Purchaser's analysis of
liquidation value described herein is merely theoretical,
assumes the availability of a willing buyer and may not itself
reflect the value of the Units because, among
<PAGE>
other things: (i) there is no assurance that any such
liquidation could occur in the foreseeable future; and (ii)
any liquidation in which the estimated values contemplated
herein might be realized could take an extended period of time
(at least a year and quite possibly significantly longer, with
the exception of cash and marketable securities) during which
the Partnership and its partners would continue to be exposed
to the risk of fluctuations in asset values because of
changing market conditions and other factors. (See Section 13
- "Purchase Price Considerations").
* The Purchase Price was established by the Purchaser and is not
the result of arm's length negotiations.
* No independent person has been retained by the Purchaser to
evaluate or render any opinion with respect to the fairness of
the Purchase Price.
* The Purchaser (which is an affiliate of and is under common
control with the Partnership's general partner, API) is making
the Offer with a view to making a profit. Accordingly, there
is a conflict between the desire of the Purchaser to purchase
Units at a low price and the desire of the Holders to sell
their Units at a high price.
THE OFFER IS NOT CONDITIONED UPON ANY MINIMUM AMOUNT OF UNITS BEING
TENDERED. THE OFFER IS SUBJECT TO CERTAIN CONDITIONS. If, as of the Expiration
Date (as defined in Section 1 - "Terms of the Offer; Expiration Date;
Proration"), more than 10 million Units are validly tendered and not properly
withdrawn, the Purchaser will accept for purchase on a pro rata basis only 10
million Units, subject to the term and conditions set forth herein. (See Section
14 - "Conditions of the Offer").
Any Holder desiring to tender all or any portion of such Holder's Units
should either: (i) complete and sign the Letter of Transmittal (or a manually
signed facsimile thereof) in accordance with the instructions in the Letter of
Transmittal and mail or deliver the Letter of Transmittal (or such manually
signed facsimile) together with the depositary receipt evidencing the tendered
Units and any other required documents to the Depositary (as defined below), or
tender such Units pursuant to the procedures for book-entry transfer set forth
in Section 3 "Procedure for Tendering Units"; or (ii) request such Holder's
broker, dealer, commercial bank, trust company or other nominee to effect the
transaction for such Holder. A Holder whose Units are registered in the name of
a broker, dealer, commercial bank, trust company or other nominee must contact
such broker, dealer, commercial bank, trust company or other nominee if such
Holder desires to tender such Units.
Questions and requests for assistance or for additional copies of the
Offer to Purchase and the Letter of Transmittal may be directed to the
Information Agent (as defined below) at the address and telephone number set
forth below and on the back cover of the Offer to Purchase. No soliciting dealer
fees or other payments to brokers for tenders are being paid by the Purchaser.
For More Information or for Further Assistance,
Please Call the Information Agent:
BEACON HILL PARTNERS, INC.
90 Broad Street
New York, New York 10004
(212) 843-8500 (Collect)
or
(800) 792-2829 (Toll Free)
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
Page
----
<S> <C> <C>
INTRODUCTION......................................................................................................1
SECTION 1. TERMS OF THE OFFER; EXPIRATION DATE; PRORATION.........................................3
SECTION 2. ACCEPTANCE FOR PAYMENT AND PAYMENT FOR UNITS...........................................4
SECTION 3. PROCEDURE FOR TENDERING UNITS..........................................................6
SECTION 4. WITHDRAWAL RIGHTS......................................................................8
SECTION 5. EXTENSION OF TENDER PERIOD; TERMINATION; AMENDMENT.....................................9
SECTION 6. CERTAIN FEDERAL INCOME TAX CONSEQUENCES TO HOLDERS....................................10
SECTION 7. EFFECTS OF THE OFFER..................................................................12
SECTION 8. FUTURE PLANS OF THE PURCHASER.........................................................13
SECTION 9. CERTAIN INFORMATION CONCERNING THE PARTNERSHIP........................................14
SECTION 10. INFORMATION CONCERNING THE PURCHASER AND CERTAIN
AFFILIATES OF THE PURCHASER.........................................................22
SECTION 11. SOURCE OF FUNDS.......................................................................27
SECTION 12. PRICE RANGE OF UNITS..................................................................29
SECTION 13. PURCHASE PRICE CONSIDERATIONS.........................................................29
SECTION 14. CONDITIONS OF THE OFFER...............................................................32
SECTION 15. INTEREST IN THE SECURITIES OF THE PARTNERSHIP.........................................34
SECTION 16. CERTAIN LEGAL MATTERS.................................................................34
SECTION 17. FEES AND EXPENSES.....................................................................35
SECTION 18. MISCELLANEOUS.........................................................................35
SCHEDULE I
DESCRIPTION OF REAL ESTATE.............................................................................I-1
SCHEDULE II
EXECUTIVE OFFICERS AND DIRECTOR OF BECKTON CORP. .....................................................II-1
</TABLE>
i
<PAGE>
To the Holders of Depositary
Units Representing Limited Partner
Interests in American Real Estate Partners, L.P.
INTRODUCTION
The Purchaser hereby offers to purchase up to 10 million Units at a
purchase price of $10.50 per Unit (the "Purchase Price"), net to the seller in
cash, upon the terms and subject to the conditions set forth in the Offer.
Holders who tender their Units in response to the Offer will not be obligated to
pay any sales commissions. The Purchaser has retained Beacon Hill Partners, Inc.
to act as Information Agent (the "Information Agent") and Harris Trust Company
of New York to act as Depositary (the "Depositary") in connection with the
Offer. The Purchaser will pay all charges and expenses in connection with the
services of the Information Agent and the Depositary. The Offer is not
conditioned on any minimum number of Units being tendered.
Some Factors To Be Considered By Holders. In considering the Offer,
Holders may wish to consider the following:
* The Purchaser's sole member, High Coast has a majority
interest in the Partnership and is an affiliate of and is
under common control with the Partnership's general partner,
API. Mr. Icahn, as the indirect owner of substantially all of
the ownership interest in API and the Purchaser, respectively,
has substantial conflicts of interest with respect to the
Offer. Additionally, as a result the position of Mr. Icahn,
the Purchaser has access to certain non-public information
regarding the Partnership.
* The last sales price of the Units on the last full trading day
prior to the date of the announcement of the Offer, as
reported by the New York Stock Exchange Composite Tape (as
reported by The Wall Street Journal) was $7 1/4 per Unit. (See
Section 12 - "Price Range of Units"). As of November 1, 1998,
the liquidation value of the Partnership's assets was
estimated by the Purchaser to be $18.36 per Unit or $16.45 per
Unit on a fully diluted basis.1 The Purchaser's analysis of
liquidation value described herein is merely theoretical,
assumes the availability of a willing buyer and may not itself
reflect the value of the Units because, among other things:
(i) there is no assurance that any such liquidation could
occur in the foreseeable future; and (ii) any liquidation in
which the estimated values contemplated herein might be
realized could take an extended period of time (at least a
year and quite possibly significantly longer with the
exception of cash and marketable securities) during which the
Partnership and its partners would continue to be exposed to
the risk of fluctuations in asset values because of changing
market conditions and other factors. (See Section 13 -
"Purchase Price Considerations").
* The Purchaser Price was established by the Purchaser and is
not the result of arm's length negotiations.
* No independent person has been retained by the Purchaser to
evaluate or render any opinion with respect to the fairness of
the Purchase Price.
- --------
1 In estimating the diluted liquidation value per Unit in the Offer, the
Purchaser divided the estimated net liquidation value attributable to
limited partner interests by the number of Units and Unit equivalents
outstanding. For this purpose, Preferred Units (as defined below) were
treated as Unit equivalents based on the methodology for the redemption
of Preferred Units in exchange for Units as set forth in the
Partnership Agreement (as defined below).
<PAGE>
* The Purchaser (which is an affiliate of and is under common
control with the Partnership's general partner, API) is making
the Offer with a view to making a profit. Accordingly, there
is a conflict between the desire of the Purchaser to purchase
Units at a low price and the desire of the Holders to sell
their Units at a high price.
* Entities directly or indirectly owned by Mr. Icahn that are
under common control or members of a controlled group, in each
case within the meaning of Section 4001 of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA")
and Section 414 of the Internal Revenue Code of 1986, as
amended (the "Code") and the rules and regulations promulgated
thereunder (the "Controlled Group"), are subject to liability
under ERISA and the Code. If more than approximately 4.4
million Units are tendered to the Purchaser and accepted for
payment, the Partnership may be deemed to be included in the
Controlled Group. If the Partnership is deemed to be a member
of the Controlled Group, it would become jointly and severally
liable with the members of that group for potential pension
plan minimum funding and termination liabilities and would be
subject to certain advance reporting requirements to the
Pension Benefit Guaranty Corporation ("PBGC"). If the
Purchaser acquires pursuant to the Offer a number of Units
such that the Partnership is deemed to be a member of the
Controlled Group, Starfire Holding Corporation, a Delaware
corporation ("Starfire") which is directly 100% owned by Mr.
Icahn, has undertaken to indemnify the Partnership from losses
resulting from any imposition of such termination or minimum
funding liabilities on the Partnership or its assets. (See
Section 10 - "Information Concerning the Purchaser and Certain
Affiliates of the Purchaser; Pension Liability
Considerations").
* Holders may no longer wish to continue with their investment
in the Partnership for a number of reasons, including:
The Offer represents a premium over the current
market price for Units. (See Section 12 - "Price
Range of Units").
The Offer will provide Holders with an immediate
opportunity to liquidate their investment in the
Partnership without the usual transaction costs
associated with market sales.
Holders may disagree (and in the past certain Holders
have communicated to the Partnership indicating they
do disagree) with the Partnership's stated position
regarding distributions and the use of cash. The
Partnership has stated its belief in its public
filings that excess cash should be used to enhance
long-term Holder value through investments in assets
and companies with assets undervalued by the market.
(See Section 13 - "Purchase Price Considerations").
The Offer gives Holders the ability to make an
individual determination on whether to tender their
Units at the Purchase Price.
The Offer may be attractive to certain Holders who
wish in the future to avoid the expenses, delays and
complications in filing complex income tax returns
which result from an ownership of Units.
To the extent that any losses recognized by Holders
for tax purposes with respect to the Partnership in
prior years were considered "suspended" losses from a
passive activity, such losses may, depending on a
Holder's particular circumstances, be available to
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offset all or a portion of any gain recognized by
such Holder on the sale of Units. (See Section 6 -
"Certain Federal Income Tax Consequences to
Holders").
Holders should consult with their respective advisors about the
financial, tax, legal and other implications of accepting the Offer. Holders are
urged to read the Offer to Purchase and the related materials carefully and in
their entirety before deciding whether to tender their Units.
The Purchaser makes no recommendation to any Holder as to whether to
tender or to refrain from tendering Units.
The Purchaser reserves the right to transfer or assign, in whole or
from time to time in part, to one or more persons, the right to purchase Units
tendered pursuant to the Offer, but any such transfer or assignment will not
relieve the Purchaser of its obligations under the Offer or prejudice the rights
of tendering Holders to receive payment for Units validly tendered and accepted
for payment pursuant to the Offer.
The Purchaser. The Purchaser is a Delaware limited liability company,
formed in November, 1998. The sole member of the Purchaser is High Coast Limited
Partnership, a Delaware limited partnership ("High Coast"). The general partner
of High Coast, Beckton Corp., a Delaware corporation ("Beckton"), is directly
100% owned by Mr. Icahn and the limited partners of High Coast, ACF Industries,
Incorporated, a New Jersey corporation, ("ACF") and Tortoise Corp., a New York
corporation, ("Tortoise") are each indirectly, more than 99% owned by Mr. Icahn.
The Purchaser's principal office is located at 100 South Bedford Road, Mt.
Kisco, N.Y. 10549.
Conditions. The Offer is not conditioned on any minimum number of Units
being tendered. Certain other conditions, however, do apply. (See Section 14 -
"Conditions of the Offer").
Outstanding Units. As of November 1, 1998, there were 46,098,284 Units
issued and outstanding, which were held of record by approximately 15,000
Holders. High Coast beneficially owns 31,515,044 Units. (See Section 15 -
"Interest in the Securities of the Partnership").
Additional Information. The Partnership is subject to the information
and reporting requirements of the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), and in accordance therewith is required to file reports
and other information with the Commission relating to its business, financial
condition and other matters. Such reports and other information may be inspected
at the public reference facilities maintained by the Commission at Room 1024,
Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, and are
available for inspection and copying at the regional offices of the Commission
located in Northwestern Atrium Center, 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661 and at 7 World Trade Center, 13th Floor, New York, New
York 10048 and at the Commission's World Wide Website at http://www.sec.gov.
Copies of such material can also be obtained from the Public Reference Room of
the Commission in Washington, D.C. at prescribed rates. In addition, the
Purchaser will provide such material to Holders upon request at the cost of the
Purchaser.
SECTION 1. TERMS OF THE OFFER; EXPIRATION DATE; PRORATION.
Upon the terms and subject to the conditions of the Offer, the
Purchaser will accept (and thereby purchase) up to 10 million Units that are
validly tendered on or prior to the Expiration Date and not withdrawn in
accordance with the procedures set forth in Section 4 - "Withdrawal Rights". For
purposes of the Offer, the term "Expiration Date" shall mean 12:00 midnight, New
York City time, on December 18, 1998, unless the Purchaser in its sole
discretion shall have extended the period of time for which the Offer is open,
in which event the term "Expiration Date" shall mean the latest time and date on
which the Offer, as extended by the Purchaser,
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shall expire. See Section 5 - "Extension of Tender Period; Termination;
Amendment", for a description of the Purchaser's right to extend the period of
time during which the Offer is open and to amend or terminate the Offer.
If, prior to the Expiration Date, the Purchaser increases the
consideration offered to Holders pursuant to the Offer, the increased
consideration will be paid for all Units accepted for payment pursuant to the
Offer, whether or not the Units were tendered prior to the increase in
consideration.
If more than 10 million Units are validly tendered and not properly
withdrawn on or prior to the Expiration Date, the Purchaser will, upon the terms
and subject to the conditions of the Offer, accept for payment and pay for an
aggregate of 10 million of the Units so tendered, pro rata according to the
number of Units validly tendered by each Holder and not properly withdrawn on or
prior to the Expiration Date, with appropriate adjustments to avoid purchase of
fractional Units. If the number of Units validly tendered and not properly
withdrawn on or prior to the Expiration Date is less then or equal to 10 million
Units, the Purchaser will purchase all Units so tendered and not properly
withdrawn, upon the terms and subject to the conditions of the Offer, subject to
the adjustments referred to in the preceding sentence.
If proration of tendered Units is required, because of the difficulty
of determining the number of Units validly tendered and not withdrawn, the
Purchaser may not be able to announce the final results of such proration until
at least approximately seven business days after the Expiration Date. Subject to
the Purchaser's obligation under Rule 14e-1(c) under the Exchange Act to pay
Holders the Purchase Price in respect of Units tendered or return those Units
promptly after the termination of withdrawal of the Offer, the Purchaser does
not intend to pay for any Units accepted for payment pursuant to the Offer until
the final proration results are known. NOTWITHSTANDING ANY SUCH DELAY IN
PAYMENT, NO INTEREST WILL BE PAID ON THE PURCHASE PRICE.
The Offer is conditioned on satisfaction of certain conditions. See
Section 14 - "Conditions of the Offer", which sets forth in full the conditions
of the Offer. Except as otherwise specified in Section 14 hereof, the Purchaser
reserves the right (but in no event shall be obligated), in its sole discretion,
to waive any or all of those conditions. If, on or prior to the Expiration Date,
any or all of the conditions have not been satisfied or waived, the Purchaser
reserves the right to: (i) decline to purchase any of the Units tendered,
terminate the Offer and return all tendered Units to tendering Holders; (ii)
waive all the unsatisfied conditions (subject to the terms of Section 14 hereof)
and, subject to complying with applicable rules and regulations of the
Commission, purchase all Units validly tendered; (iii) extend the Offer and,
subject to the right of Holders to withdraw Units until the Expiration Date,
retain the Units that have been tendered during the period or periods for which
the Offer is extended; and (iv) amend the Offer.
The Partnership has provided the Purchaser with a list of Holders for
the purpose of making the Offer, and the Offer to Purchase, the Letter of
Transmittal and, if required, any other relevant materials are being mailed to
the Holders to the extent their names and addresses are on such list.
SECTION 2. ACCEPTANCE FOR PAYMENT AND PAYMENT FOR UNITS.
Upon the terms and subject to the conditions of the Offer, the
Purchaser will purchase by accepting for payment and will pay for Units validly
tendered and not withdrawn in accordance with the procedures specified in
Section 4 - "Withdrawal Rights", as promptly as practicable following the
Expiration Date. A tendering beneficial owner of Units whose Units are owned of
record by an Individual Retirement Account or other qualified plan will not
receive direct payment of the Purchase Price; rather, payment will be made to
the custodian of such account or plan.
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In all cases, payment for Units tendered and accepted for payment
pursuant to the Offer will be made only after timely receipt by the Depositary
of: (i) the depositary receipts evidencing such Units (the "Depositary
Receipts,") or timely confirmation (a "Book-Entry Confirmation") of a book-entry
transfer of such Units, if such procedure is available, into the Depositary's
account at The Depositary Trust Company (the "Book-Entry Transfer Facility")
pursuant to the procedures set forth in Section 3; (ii) the Letter of
Transmittal (or a facsimile thereof), properly completed and duly executed with
the required signature guarantees, if any, or an Agent's Message (as defined
below) in connection with a book-entry transfer; and (iii) any other documents
required by the Letter of Transmittal.
The term "Agent's Message" means a message from the Book-Entry Transfer
Facility transmitted to, and received by, the Depositary forming a part of a
Book-Entry Confirmation, which states that the Book-Entry Transfer Facility has
received an express acknowledgment from the participant in the Book-Entry
Transfer Facility tendering the Units that are the subject of the Book-Entry
Confirmation that: (i) the participant has received and agrees to be bound by
the terms of the Letter of Transmittal and (ii) the Purchaser may enforce such
agreement against the participant.
For purposes of the Offer, the Purchaser will be deemed to have
accepted for payment (and thereby purchased) Units validly tendered and not
properly withdrawn if, as and when the Purchaser gives oral or written notice to
the Depositary of the Purchaser's acceptance of such Units for payment pursuant
to the Offer. Upon the terms and subject to the conditions of the Offer, payment
for Units accepted for payment pursuant to the Offer will be made by deposit of
the purchase price therefor with the Depositary, which will act as agent for
tendering shareholders for the purpose of receiving payments from the Purchaser
and transmitting those payments to Holders whose Units have been accepted for
payment. Under no circumstances will interest on the purchase price for Units be
paid, regardless of any extension of the Offer or any delay in making such
payment.
If any tendered Units are not purchased for any reason, the Letter of
Transmittal shall be effective to transfer to the Purchaser only that number of
the Holder's Units as is accepted for payment and thereby purchased by the
Purchaser. If, for any reason, acceptance for payment of, or payment for, any
Units tendered pursuant to the Offer is delayed or the Purchaser is unable to
accept for payment, purchase or pay for Units tendered pursuant to the Offer,
then, without prejudice to the Purchaser's rights under Section 14 - "Conditions
of the Offer", the Depositary may, nevertheless, on behalf of the Purchaser
retain tendered Units, and those Units may not be withdrawn except to the extent
that the tendering Holders are entitled to withdrawal rights as described in
Section 4 - "Withdrawal Rights"; subject, however, to the Purchaser's obligation
under Rule 14e-1(c) under the Exchange Act to pay Holders the Purchase Price in
respect of Units tendered or return those Units promptly after termination or
withdrawal of the Offer.
If any tendered Units are not accepted for payment for any reason or if
Depositary Receipts are submitted for more Units than are tendered, Depositary
Receipts evidencing unpurchased or untendered Units will be returned (or, in the
case of Units tendered by book-entry transfer into the Depositary's account at
the Book-Entry Transfer Facility pursuant to the procedures set forth in Section
3, such Units will be credited to an account maintained at the Book-Entry
Facility), without expense to the tendering shareholder, as promptly as
practicable following the expiration, termination or withdrawal of the Offer.
The Purchaser reserves the right to transfer or assign, in whole or
from time to time in part, to one or more persons, the right to purchase Units
tendered pursuant to the Offer, but any such transfer or assignment will not
relieve the Purchaser of its obligations under the Offer or prejudice the rights
of tendering Holders to receive payment for Units validly tendered and accepted
for payment pursuant to the Offer.
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SECTION 3. PROCEDURE FOR TENDERING UNITS.
Valid Tender. Except as set forth below, in order for Units to be
validly tendered pursuant to the Offer, the Letter of Transmittal (or a manually
signed facsimile thereof), properly completed and duly executed, together with
the required signature guarantees, or an Agent's Message in connection with a
book-entry delivery of Units, and any other documents required by the Letter of
Transmittal, must be received by the Depositary at one of its addresses set
forth on the back cover of this Offer to Purchase on or prior to the Expiration
Date and either: (i) Depositary Receipts evidencing tendered Units must be
received by the Depositary at such address or such Units must be tendered
pursuant to the procedure for book-entry transfer described below and a
Book-Entry Confirmation must be received by the Depositary, in each case on or
prior to the Expiration Date; or (ii) the guaranteed delivery procedures
described below must be complied with. Tender of fractional Units will not be
permitted, except by a Holder who is tendering all of the Units owned by that
Holder. No alternative, conditional or contingent tenders will be accepted.
Book-Entry Transfer. The Depositary will establish an account with
respect to the Units at the Book- Entry Transfer Facility for purposes of the
Offer within two business days after the date of this Offer to Purchase. Any
financial institution that is a participant in the system of the Book-Entry
Transfer Facility may make book-entry delivery of Units by causing the
Book-Entry Transfer Facility to transfer such Units into the Depositary's
account at the Book-Entry Transfer Facility in accordance with the Book-Entry
Transfer Facility's procedures for such transfer. However, although delivery of
Units may be effected through book-entry transfer at the Book- Entry Transfer
Facility, the Letter of Transmittal (or a manually signed facsimile thereof),
properly completed and duly executed, together with any required signature
guarantees, or an Agent's Message in connection with a book-entry transfer, and
any other documents required by the Letter of Transmittal, must in any case be
received by the Depositary at one of its addresses set forth on the back cover
of this Offer to Purchase on or prior to the Expiration Date, or the guaranteed
delivery procedures described below must be complied with. Delivery of documents
to the Book-Entry Transfer Facility in accordance with the Book-Entry Transfer
Facility's procedures does not constitute delivery to the Depositary.
THE METHOD OF DELIVERY OF DEPOSITARY RECEIPTS AND ALL OTHER REQUIRED
DOCUMENTS, INCLUDING DELIVERY THROUGH THE BOOK-ENTRY TRANSFER FACILITY, IS AT
THE OPTION AND RISK OF THE TENDERING HOLDER AND THE DELIVERY WILL BE DEEMED MADE
ONLY WHEN ACTUALLY RECEIVED BY THE DEPOSITARY (INCLUDING, IN THE CASE OF
BOOK-ENTRY TRANSFER, BY BOOK-ENTRY CONFIRMATION). IF DELIVERY IS BY MAIL,
REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY INSURED, IS RECOMMENDED.
IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ENSURE TIMELY DELIVERY.
Signature Guarantees. No signature guarantee is required if either: (a)
the Letter of Transmittal is signed by the registered holder of the Units (which
term, for purposes hereof, shall include any participant in the Book-Entry
Transfer Facility whose name appears on a security position listing as the owner
of such Units) tendered hereby and payment and delivery are to be made directly
to such owner and such owner has not completed the box entitled "Special Payment
Instructions" or the box entitled "Special Delivery Instructions" in the Letter
of Transmittal; or (b) such Units are tendered for the account of a bank,
broker, dealer, credit union, savings association or other entity which is a
member in good standing of the Securities Transfer Agents Medallion Program
(each of the foregoing constituting an "Eligible Institution").
If the Depositary Receipts are registered in the name of a person other
than the signer of the Letter of Transmittal, or if payment is to be made to a
person other then the registered holder, the Depositary Receipts must be
endorsed or accompanied by appropriate stock powers, in either case, signed
exactly as the name of the
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registered holder appears on such depositary receipt, with the signatures on
each certificate or stock powers guaranteed as aforesaid.
If Depositary Receipts are forwarded separately to the Depositary, a
properly completed and duly executed Letter of Transmittal (or a manually signed
facsimile thereof) must accompany each such delivery.
Guaranteed Delivery. If a Holder desires to tender Units pursuant to
the Offer and such Holder's Depositary Receipts are not immediately available,
or such stockholder cannot deliver the Depositary Receipts and all other
required documents to reach the Depositary on or prior to the Expiration Date,
or such Holder cannot complete the procedure for delivery by book-entry transfer
on a timely basis, such Depositary Receipts may nevertheless be tendered,
provided that all of the following conditions are satisfied:
(i) such tender is made by or through an Eligible Institution;
(ii) a properly completed and duly executed Notice of
Guaranteed Delivery substantially in the form made available by the
Purchaser is received by the Depositary as provided below on or prior
to the Expiration Date; and
(iii) the Depositary Receipts (or a Book-Entry Confirmation),
representing all tendered Units in proper form for transfer, together
with the Letter of Transmittal (or a manually signed facsimile thereof)
properly completed and duly executed, with any required signature
guarantees (or, in the case of a book-entry transfer, an Agent's
Message) and any other documents required by the Letter of Transmittal
are received by the Depositary within three NYSE trading days after the
date of execution of such Notice of Guaranteed Delivery.
The Notice of Guaranteed Delivery may be delivered by hand or
transmitted by facsimile transmission or mail to the Depositary and must include
a guarantee by an Eligible Institution and a representation that the Holder owns
the Units tendered within the meaning of, and that the tender of the Units
effected thereby complies with, Rule 14e-4 under the Exchange Act, each in the
form set forth in such Notice of Guaranteed Delivery.
Notwithstanding any other provision hereof, payment for Units accepted
for payment pursuant to the Offer will in all cases be made only after timely
receipt by the Depositary of Depositary Receipts for, or of Book- Entry
Confirmation with respect to, such Units, a properly completed and duly executed
Letter of Transmittal (or a manually signed facsimile thereof), together with
any required signature guarantees (or, in the case of a book-entry transfer, an
Agent's Message), and any other documents required by the Letter of Transmittal.
Appointment As Proxy. By executing a Letter of Transmittal, a tendering
Holder irrevocably appoints the Purchaser, and any designees of the Purchaser as
the Holder's true and lawful agents and attorneys-in-fact and proxies, in the
manner set forth in the Letter of Transmittal, each with full power of
substitution, to the full extent of the Holders's rights with respect to the
Units tendered by the Holder and accepted for payment by the Purchaser. The
Purchaser, and the designees of the Purchaser will, as to those Units, be
empowered to exercise all voting and other rights with respect to such Units,
including, without limitation, to assign such power of proxy and/or
power-of-attorney to any person without assigning the related Units with respect
to which the such proxy and power-of-attorney was granted, to deliver such Units
and transfer ownership of such Units on the Partnership books maintained by the
general partners of the Partnership, to become a substituted Holder and to
receive all benefits and otherwise exercise all rights of beneficial ownership
of such Units and as a Holder of the Partnership, all in accordance with the
terms of the Offer. Each such power of attorney and proxy shall be considered
coupled with an interest in the tendered Units and is irrevocable. Such
appointment is subject to and effective upon acceptance for payment of the Units
tendered by the Holder. Upon such acceptance for payment, all prior proxies
given by the Holder with respect to the Units will, without further action, be
revoked, and no subsequent proxies
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<PAGE>
may be given (and if given will not be effective). The Purchaser reserves the
right to require that, in order for Units to be deemed validly tendered,
immediately upon the Purchaser's acceptance for payment of the Units, the
Purchaser must be able to exercise full voting rights with respect to the Units,
including voting at any meeting of Holders then scheduled or acting by written
consent without a meeting. By executing the Letter of Transmittal, a tendering
holder of Units agrees to execute all such documents and take such other actions
as shall be reasonably required to enable the Units tendered to be voted in
accordance with the directions of the Purchaser.
Determination Of Validity; Rejection Of Units; Waiver Of Defects; No
Obligation To Give Notice Of Defects. All questions as to the validity, form,
eligibility (including time of receipt) and acceptance for payment of any tender
of Units pursuant to the Offer will be determined by the Purchaser, in its sole
discretion, which determination shall be final and binding on all parties. The
Purchaser reserves the absolute right to reject any or all tenders of any
particular Units determined by it not to be in proper form or if the acceptance
of or payment for those Units may, in the opinion of the Purchaser's counsel, be
unlawful. The Purchaser also reserves the absolute right to waive or amend any
of the conditions of the Offer that it is legally permitted to waive as to the
tender of any particular Units and to waive any defect or irregularity in any
tender with respect to any particular Units of any particular Holder. The
Purchaser's interpretation of the terms and conditions of the Offer (including
the Letter of Transmittal) will be final and binding on all parties. No tender
of Units will be deemed to have been validly made unless and until all defects
and irregularities have been cured or waived. Neither the Purchaser, the
Depositary nor any other person will be under any duty to give notification of
any defects or irregularities in the tender of any Units or will incur any
liability for failure to give any such notification.
Backup Federal Income Tax Withholding. To prevent the possible
application of backup federal income tax withholding of 31% with respect to
payment of the Purchase Price, a tendering Holder must provide the Purchaser
with the Holder's correct taxpayer identification number by completing the
Substitute Form W-9 included in the Letter of Transmittal. (See Section 6 -
"Certain Federal Income Tax Consequences to Holders" and the Instructions to the
Letter of Transmittal.)
FIRPTA Withholding. To prevent the withholding of federal income tax in
an amount equal to 10% of the amount of the Purchase Price plus Partnership
liabilities allocable to each Unit purchased, each tendering Holder must
complete the FIRPTA Affidavit included in the Letter of Transmittal certifying
the Holder's taxpayer identification number and address and that the Holder is
not a foreign person. ( See Section 6 - "Certain Federal Income Tax Consequences
to Holders" and the Instructions to the Letter of Transmittal).
A tender of Units pursuant to any of the procedures described above and
the acceptance for payment of such Units will constitute a binding agreement
between the tendering Holder and the Purchaser on the terms set forth in the
Offer.
SECTION 4. WITHDRAWAL RIGHTS.
Tenders of Units pursuant to the Offer are irrevocable, except that
Units tendered pursuant to the Offer may be withdrawn at any time prior to the
Expiration Date and, unless already accepted for payment as provided in the
Offer to Purchase, may also be withdrawn at any time after January 18, 1999.
For a withdrawal to be effective, a written or facsimile transmission
notice of withdrawal must be timely received by the Depositary at the addresses
set forth on the back cover of the Offer to Purchase. Any notice of withdrawal
must specify the name of the person who tendered the Units to be withdrawn, the
number of Units to be withdrawn and the name of the registered holder, if
different from that of the person who tendered such Units. If Depositary
Receipts evidencing Units to be withdrawn have been delivered or otherwise
identified to the Depositary, then, prior to the physical release of such
depositary receipts, the serial numbers shown on such
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depositary receipts must be submitted to the Depositary and the signature(s) on
the notice of withdrawal must be guaranteed by an Eligible Institution, unless
such Units have been tendered for the account of an Eligible Institution. If
Units have been tendered pursuant to the procedure for book-entry transfer as
set forth in Section 3 - "Procedure for Tendering Units" any notice of
withdrawal must specify the name and number of the account at the Book-Entry
Transfer Facility to be credited with the withdrawn Units.
If purchase of, or payment for, Units is delayed for any reason or if
the Purchaser is unable to purchase or pay for Units for any reason, then,
without prejudice to the Purchaser's rights under the Offer, tendered Units may
be retained by the Depositary and may not be withdrawn, except to the extent
that tendering Holders are entitled to withdrawal rights as set forth in this
Section 4; subject, however, to the Purchaser's obligation, pursuant to Rule
14e-1(c) under the Exchange Act, to pay Holders the Purchase Price in respect of
Units tendered or return those Units promptly after termination or withdrawal of
the Offer.
Any Units properly withdrawn will be deemed not to be validly tendered
for purposes of the Offer. Withdrawn Units may be re-tendered, however, by
following the procedures described in Section 3 - "Procedure for Tendering
Units" at any time prior to the Expiration Date.
All questions as to the validity and form (including time of receipt)
of notices of withdrawal will be determined by the Purchaser, in its sole
discretion, which determination shall be final and binding on all parties.
Neither the Purchaser, the Depositary nor any other person will be under any
duty to give notification of any defects or irregularities in any notice of
withdrawal or incur any liability for failure to give any such notification.
SECTION 5. EXTENSION OF TENDER PERIOD; TERMINATION; AMENDMENT.
The Purchaser expressly reserves the right, in its sole discretion, at
any time and from time to time: (i) to extend the period of time during which
the Offer is open and thereby delay acceptance for payment of, and the payment
for, any Units; (ii) to terminate the Offer and not accept for payment any Units
not theretofore accepted for payment or paid for; (iii) upon the occurrence of
any of the conditions specified in Section 14 - "Conditions of the Offer", to
delay the acceptance for payment of, or payment for, any Units not already
accepted for payment or paid for; and (iv) to amend the Offer in any respect
(including, without limitation, by increasing or decreasing the consideration
offered, the number of Units being sought, or both). Notice of any such
extension, termination or amendment will promptly be disseminated to Holders in
a manner reasonably designed to inform Holders of such change in compliance with
Rule 14d-4(c) under the Exchange Act. In the case of an extension of the Offer,
the extension will be followed by a press release or public announcement which
will be issued no later than 9:00 a.m., New York City time, on the next business
day after the scheduled Expiration Date, in accordance with Rule 14e-1(d) under
the Exchange Act.
If the Purchaser extends the Offer, or if the Purchaser (whether before
or after its acceptance for payment of Units) is delayed in its payment for
Units or is unable to pay for Units pursuant to the Offer for any reason, then,
without prejudice to the Purchaser's rights under the Offer, the Depositary may
retain tendered Units and those Units may not be withdrawn except to the extent
tendering Holders are entitled to withdrawal rights as described in Section 4 -
"Withdrawal Rights"; subject, however, to the Purchaser's obligation, pursuant
to Rule 14e-1(c) under the Exchange Act, to pay Holders the Purchase Price in
respect of Units tendered or return those Units promptly after termination or
withdrawal of the Offer.
If the Purchaser makes a material change in the terms of the Offer, or
if it waives a material condition to the Offer, the Purchaser will extend the
Offer and disseminate additional tender offer materials to the extent required
by Rules 14d-4(c) and 14d-6(d) under the Exchange Act. The minimum period during
which an offer must remain open following any material change in the terms of an
offer, other than a change in price or a change
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in percentage of securities sought or a change in any dealer's soliciting fee,
will depend upon the facts and circumstances, including the materiality of the
change. With respect to a change in price or, subject to certain limitations, a
change in the percentage of securities sought or a change in any dealer's
soliciting fee, a minimum of ten business days from the date of such change is
generally required to allow for adequate dissemination to holders of Units.
Accordingly, if prior to the Expiration Date, the Purchaser increases (other
than increases of not more than two percent of the outstanding Units) or
decreases the number of Units being sought, or increases or decreases the
consideration offered pursuant to an Offer, and if such Offer is scheduled to
expire at any time earlier than the tenth business day from the date that notice
of such increase or decrease is first published, sent or given to holders of
Units, such Offer will be extended at least until the expiration of such ten
business days. As used in the Offer to Purchase, "business day" means any day
other than a Saturday, Sunday or a federal holiday, and consists of the time
period from 12:01 a.m. through 12:00 midnight, New York City time.
SECTION 6. CERTAIN FEDERAL INCOME TAX CONSEQUENCES TO HOLDERS.
The following summarizes certain of the federal income tax consequences
of a sale of Units pursuant to the Offer by a typical Holder. This summary is
based on the Code, applicable Treasury regulations thereunder, administrative
rulings, practice and procedures and judicial authority, all as of the date of
the Offer. 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
Holder in light of such Holder's specific circumstances or to certain types of
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), nor (except as otherwise expressly indicated) does it
describe any aspect of state, local, foreign or other tax laws. Sales of Units
pursuant to the Offer will be taxable transactions for federal income tax
purposes, and also may be taxable transactions under applicable state, local,
foreign and other tax laws. Holders should consult their respective tax advisors
as to the particular tax consequences to each such Holder of selling units
pursuant to the Offer.
In general, a Holder will recognize gain or loss on a sale of Units
pursuant to the Offer equal to the difference between: (i) the Holder's "amount
realized" on the sale; and (ii) the Holder's adjusted tax basis in the Units
sold. The "amount realized" with respect to a Unit will be a sum equal to the
amount of cash received by the Holder for the Unit pursuant to the Offer (that
is, the Purchase Price) plus the Holder's share of the Partnership's liabilities
allocable to the Units (as determined under Code Section 752).
The amount of a Holder's adjusted tax basis in such Units will vary
depending upon the Holder's particular circumstances. Generally, a Holder's
basis in the Units will be equal to cash paid for such Units, increased by: (i)
his share of the Partnership's liabilities allocable to the Unit (as determined
under Code Section 752); and (ii) his share of items of partnership income and
gain, and reduced, but not below zero, by: (a) his share of items of Partnership
loss and deduction; and (b) any cash distributions received by such Holder from
the Partnership. If a Holder tenders pursuant to the Offer less than all of his
or her Units, then such Holder's adjusted tax basis in Units is determined by
allocating between the tendered shares and the shares retained (including any of
the 5% cumulative pay-in-kind redeemable preferred units representing limited
partner interest (the "Preferred Units")). Generally, the IRS takes the position
that a partner has a single aggregate basis in all of the partner's partnership
interests and that, to determine gain or loss upon a sale of a part of such
partnership interests, the portion of the partner's basis allocated to the
interests being sold equals the partner's share of partnership liabilities
transferred in the sale plus the partner's aggregate tax basis (excluding basis
attributable to partnership liabilities) multiplied by the ratio of the fair
market value of the interests sold to the fair market value of all of the
partner's partnership interests. It is not clear whether the IRS's ruling
position applies to interests in publicly traded partnerships represented by
separate certificates.
10
<PAGE>
The gain or loss recognized by a Holder on a sale of a Unit pursuant to
the Offer generally will be treated as a capital gain or loss if (as is
generally expected to be the case) the Unit was held by the Holder as a capital
asset. That capital gain or loss will be treated as long-term capital gain or
loss if the tendering Holder's holding period for the Unit exceeds 12 months.
Under current law, long-term capital gains of individuals and other
non-corporate taxpayers are taxed at a maximum marginal federal income tax rate
of 20%, whereas the maximum marginal federal income tax rate for ordinary income
of such persons is 39.6%. Corporate taxpayers are taxed at a maximum federal
income tax rate of 35% on both long-term capital gains and ordinary income.
Capital losses are deductible only to the extent of capital gains, except that
non-corporate taxpayers may deduct up to $3,000 of capital losses in excess of
the amount of their 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 a non-corporate taxpayer may carry forward such
losses indefinitely); in addition, a corporation is permitted to carry back
excess capital losses to the three preceding taxable years, provided the
carryback does not increase or produce a net operating loss for any of those
years.
If any portion of the amount realized by a Holder is attributable to
"unrealized receivables" (which includes depreciation recapture) or "inventory"
as defined in Code Section 751, then a portion of the Holder's gain or loss will
be ordinary rather than capital.
A tendering Holder will be allocated a portion of the Partnership's
taxable income or loss for the year of sale with respect to the Units sold in
accordance with the provisions of the Partnership Agreement concerning transfers
of Units. Such allocation and any cash distributed by the Partnership to the
Holder for that year will affect the Holder's adjusted tax basis in Units and,
therefore, the amount of such Holder's taxable gain or loss upon a sale of Units
pursuant to the Offer.
Under Code Section 469(k), the passive activity rules apply separately
to items attributable to each publicly traded partnership such as the
Partnership. Therefore, under Code Section 469, a non-corporate taxpayer or
personal service corporation generally can deduct "passive activity losses" (if
any) from a publicly traded partnership or loss on a sale of Units in any year
only to the extent of the person's passive activity income for that year from
such publicly traded partnership. Closely held corporations may not offset such
losses against so-called "portfolio" income from any publicly traded
partnerships or other sources. Substantially all post-1986 losses (if any) of
Holders from the Partnership are passive activity losses. To the extent that the
Partnership incurred losses or a Holder disposed of Units at a loss, Holders may
have "suspended" passive activity losses from the Partnership (i.e., post-1986
net taxable losses in excess of statutorily permitted "phase-in" amounts and
which have not been used to offset income from the Partnership).
If a Holder sells Units pursuant to the Offer and after the Expiration
Date, the Holder owns no Units or Preferred Units, either actually or
constructively (within the meaning of Code Sections 267(b) or 707(b)(1)), any
"suspended" losses (if any) and any losses realized by the Holder upon the sale
of the Units, will first be allowed as a deduction against any other net passive
gain to the Holder from the sale of the Units and any other net passive activity
income attributable to the Units or other passive activity investments, and the
balance of any "suspended" net losses (if any) from the Units will no longer be
subject to the passive activity loss limitation and, therefore, will be
deductible by such Holder against his other income (subject to any other
applicable limitations).
If a Holder who participates in the Offer owns, either actually or
constructively, Units or Preferred Units after the Expiration Date, a loss
recognized by that Holder will be allowed as a deduction (subject to other
applicable limitations) only to the extent of the Holder's passive income from
the Partnership for that year, and if a gain is recognized by a Holder upon the
sale of Units, such Holder's current or "suspended" passive activity losses (if
any) from the Partnership will be allowed as a deduction against such gain. If
such Holder subsequently disposes of his Units or Preferred Units in a taxable
transaction, and, as a result, no longer owns any Units or
11
<PAGE>
Preferred Units, then any remaining "suspended" losses and any losses realized
by the Holder upon the sale of Units or Preferred Units will generally be
allowed in the manner provided in the preceding paragraph.
Holders who tender Units may be subject to 31% backup withholding
unless those Holders provide a taxpayer identification number ("TIN") and
certify that the TIN is correct or properly certify that they are awaiting a
TIN. A Holder may avoid backup withholding by properly completing and signing
the Substitute Form W-9 included as part of the Assignment of Partnership
Interest. If a Holder who is subject to backup withholding does not properly
complete and sign the Substitute Form W-9, the Purchaser will withhold 31% from
payments to such Holder.
A Holder who tenders Units must file an information statement with his
federal income tax return for the year of the sale which provides the
information specified in Treasury Regulation ss.1.751-1(a)(3). The selling
Holder also must notify the Partnership of the date of the transfer and the
names, addresses and TINs of the transferor and transferee within 30 days of the
date of the transfer (or, if earlier, by January 15 of the following calendar
year).
Gain realized by a foreign Holder on the sale of a Unit pursuant to the
Offer will be subject to federal income tax. Under Code Section 1445, the
transferee of an interest held by a foreign person in a partnership which owns
United States real property generally is required to deduct and withhold a tax
equal to 10% of the amount realized on the disposition. In order to comply with
this requirement, the Purchaser will withhold 10% of the amount realized by a
tendering Holder unless the Holder properly completes and signs the FIRPTA
Affidavit included as part of the Assignment of Partnership Interest certifying
the Holder's TIN, that such Holder is not a foreign person and the Holder's
address. Amounts withheld would be creditable against a foreign Holder's federal
income tax liability and, if in excess thereof, a refund could be obtained from
the Internal Revenue Service by filing a U.S. income tax return.
SECTION 7. EFFECTS OF THE OFFER
(i) Holders. In exchange for the Purchase Price, each tendering
Holder will give up its rights as a Holder with respect to all Units purchased,
including, without limitation, the right to receive distributions from the
Partnership or to derive any benefit from any appreciation in the value of the
Units. The Partnership has not made any distributions of cash during the past 4
years. Mr. Icahn, the indirect owner of all of the ownership interest of API,
the general partner of the Partnership, believes that the Partnership should
continue to hold and invest, rather than distribute cash. (See Section 8 -
"Future Plans of the Purchaser").
(ii) Partnership. The Controlled Group is subject to liability
under ERISA and the Code with respect to certain pension plan funding
obligations and liabilities for underfunding. If more than approximately 4.4
million Units are tendered to the Purchaser and accepted for payment, the
Partnership may be deemed to be included in the Controlled Group. If the
Partnership is deemed a member of the Controlled Group, it would become jointly
and severally liable with the members of that group for potential pension plan
minimum funding and termination liabilities and would be subject to certain
advance reporting requirement to the PBGC. If the Purchaser acquires pursuant to
the Offer a number of Units such that the Partnership is deemed to be a member
of the Controlled Group, Starfire which is directly 100% owned by Mr. Icahn, has
undertaken to indemnify the Partnership from losses resulting from any
imposition of such termination or minimum funding liabilities on the Partnership
or its assets. (See Section 10 - "Information Concerning the Purchaser and
Certain Affiliates of the Purchaser; Pension Liability Considerations").
12
<PAGE>
(iii) Market for Units. If a substantial number of Units are
purchased pursuant to the Offer, the likely result will be a reduction in the
number of Holders. Such a reduction in the number of Holders may result in a
reduction in the liquidity and volume of activity in the trading market for the
Units.
SECTION 8. FUTURE PLANS OF THE PURCHASER.
The purpose of the Offer is to enable Mr. Icahn to increase his already
significant interest in the Partnership based on his belief that the Units
represent an attractive long term investment at the Purchase Price.
There can be no assurance, however, that the Purchaser's judgment is correct,
and, as a result, ownership of Units (either by the Purchaser or Holders who
retain their Units) will remain a speculative investment.
The Partnership has previously disclosed: (i) that it may consider the
acquisition of, or seek to effect control of, land development companies and
other real estate operating companies; (ii) that from time to time the
Partnership has discussed, and in the future may discuss, and may make such
acquisitions from Mr. Icahn or his affiliates, provided that the terms thereof
are fair and reasonable to the Partnership; and (iii) that in this regard, in
1997 an offer was made by the Partnership, acting through the audit committee of
API, to purchase a land development company owned by Mr. Icahn for approximately
$48.5 million, which offer was not accepted.
At a meeting of the Board of Directors of API held on November 15,
1998, a member of the audit committee raised the issue of whether the
Partnership should again consider the purchase of Mr. Icahn's land development
company, Bayswater Realty and Capital Corp. ("Bayswater"), in light of the
Partnerships consideration of land development activities, and in particular the
possibility that Raleigh may acquire the general partner interest, and
additional limited partnership interest, in Arvida. (See Section 10 -
"Information Concerning the Partnership; Certain Transactions; ARVIDA
Transaction"). Arvida is principally engaged in the development of planned
resort and primary home communities. Mr. Icahn indicated that he would be
willing to engage in discussions regarding such a transaction. Any such
transaction could involve cash, Units or a combination thereof. There can be no
assurance whether any such transaction will be pursued. If such transaction is
not completed, Mr. Icahn may discuss the possibility of the Partnership
utilizing the services of Bayswater in connection with the Partnership's land
development and property management activities.
The Partnership has not made any distributions to Holders for the last
four years (other than in connection with the 1997 Rights Offering (see Section
9 - "Certain Information Concerning the Partnership") and a similar rights
offering conducted by the Partnership in March, 1995). The Partnership has
stated its belief in its public filings that excess cash should be used to
enhance long-term Holder value through investments in assets and companies with
assets undervalued by the market. Mr. Icahn, the indirect owner of all of the
ownership interest in API, the general partner of the Partnership, believes that
the Partnership should continue to hold and invest, rather than to distribute,
cash and that the cash assets of the Partnership should be applied prudently to:
(i) enhance the Partnerships existing properties; (ii) support the Partnership's
existing debt and property maintenance obligations; and (iii) provide to the
Partnership the opportunity to engage in additional investments in and relating
to real property, including, without limitation, land and land development
projects, and securities, including, without limitation, high yield bonds, on a
domestic and international basis, as appropriate opportunities arise. In
addition, Mr. Icahn does not believe that it is an appropriate time for any
substantial dispositions of the Partnership's real property assets.
Except to the extent set forth above, the Purchaser does not have any
present plans or proposals which relate to or would result in (but reserves the
right to engage in transactions that may relate to or result in) an
extraordinary transaction, such as a merger, reorganization or liquidation,
involving the Partnership or any of its subsidiaries; a sale or transfer of a
material amount of the Partnership's or any of its subsidiaries' assets; any
changes in composition of the Partnership's senior management or personnel or
their compensation; any changes
13
<PAGE>
in the Partnership's present capitalization or dividend policy; or any other
material changes in the Partnership's corporate structure or business. In
addition, the Purchaser reserves the right to and/or to have persons related to
or affiliated with it to, acquire additional Units or sell Units. Any such
acquisition may be made through private purchases, through open market
purchases, through one or more future tender or exchange offers or by any other
means deemed advisable. Any acquisition may be at a price higher or lower than
the price to be paid for the Units purchased pursuant to the Offer, and may be
for cash or other consideration. The Purchaser also reserves the right to sell
some or all of its Units that it owns from time to time.
SECTION 9. CERTAIN INFORMATION CONCERNING THE PARTNERSHIP.
The Partnership's Assets and Business. The Partnership is a limited
partnership formed in 1987 under the laws of the State of Delaware. Its
principal executive offices are located at 100 South Bedford Road, Mt.
Kisco, New York 10549. Its telephone number is (914) 242-7700.
The Partnership's general partner is API, which is wholly-owned by
Beckton, which is wholly-owned by Mr. Icahn. Mr. Icahn is the indirect
beneficial owner of 31,515,044 Units and 6,642,067 Preferred Units. The
Partnership's business is conducted through a subsidiary limited partnership
American Real Estate Holding Limited Partnership ("AREH"), in which the
Partnership owns more than a 99% limited partnership interest. References to the
Partnership herein include AREH, unless the context otherwise requires. API also
acts as the general partner for AREH.
The Partnership has not made any distributions to Holders for the last
four years (other than in connection with the 1997 Rights Offering and a similar
rights offering conducted by the Partnership in March 1995).
The Partnership is primarily engaged in the business of acquiring and
managing real estate and activities related thereto. On August 16,1996, the
amendment (the "Amendment") to the Partnership's limited partnership agreement
(the "Partnership Agreement") became effective which permits the Partnership to
make non-real estate related investments in addition to its real estate
activities. Pursuant to the Partnership Agreement as amended, the Partnership,
while continuing to pursue suitable investments in the real estate markets, may
invest a portion of its funds in securities of issuers that are not necessarily
engaged as one of their primary activities in the ownership, development or
management of real estate. Such investments may include equity and debt
securities of domestic and foreign issuers. The investment objective of the
Partnership with respect to such investments will be to purchase undervalued
securities, so as to maximize total return consisting of current income and/or
capital appreciation. Undervalued securities are those which the Partnership
believes may have greater inherent value than indicated by their then current
trading price and/or may lend themselves to "activist" shareholder involvement.
The equity securities in which the Partnership may invest may include common
stocks, preferred stocks and securities convertible into common stocks, as well
as warrants to purchase such securities. The debt securities in which the
Partnership may invest may include bonds, debentures, notes, mortgage-related
securities and municipal obligations. Certain of such securities may include
lower rated securities which may provide the potential for higher yields and
therefore may entail higher risk. The Partnership has stated that it will
conduct its investment activities in such a manner so as not to be deemed an
investment company under the 1940 Act.
The Partnership's primary investment strategy in recent periods has
been to seek to acquire undervalued assets including residential development
projects, land parcels for future residential and commercial development,
commercial properties, non-performing loans and securities of entities which
own, manage or develop significant real estate assets, including limited
partnership units and securities issued by real estate investment trusts. In
addition to holding real property, the Partnership may consider the acquisition
or seek effective control of land development companies and other real estate
operating companies which may have significant assets under
14
<PAGE>
development and may enhance its ability to develop and manage the Partnership's
properties. The Partnership may originate or purchase mortgage loans including
non-performing mortgage loans. The Partnership will normally acquire
non-performing mortgage loans with a view to acquiring title to or control over
the underlying properties. The Partnership also may retain purchase money
mortgages in connection with its sale of portfolio properties, with such terms
as API deems appropriate at the time of sale. Certain of the Partnership's
investments may be owned by special purpose subsidiaries formed by the
Partnership or by joint ventures (including joint ventures with affiliates of
API).
Properties. As of September 30, 1998, the Partnership held interests in
198 separate real estate assets (primarily consisting of fee and leasehold
interests and, to a limited extent, interests in real estate mortgages) in 32
states. Approximately 91% of the Partnership's properties are currently
net-leased, 2% are operating properties, 2% are in the process of being
developed and 5% are vacant and being marketed for sale. The following table
summarizes the type, number per type and average net effective rent per square
foot of the Partnership's properties:
<TABLE>
<CAPTION>
Number Average Net Effective
Type of Property of Properties Rent Per Square Foot
---------------- ------------- --------------------
<S> <C> <C>
Retail 91 $4.78(1)
Industrial 22 $2.37(1)
Office 28 $7.36(1)
Supermarkets 19 $3.37(1)
Banks 7 $4.85(1)
Other:
Properties That
Collateralize Purchase
Money Mortgages 9 N/A
Land 14 N/A
Truck Terminals 4 $3.72(1)
Hotels 3 N/A
Apartment Complexes 1 N/A
</TABLE>
---------------------------
(1) Based on net-lease rentals.
The following table summarizes the number of the Partnership's
properties in each region specified below:
Location of Property Number of Properties
-------------------- --------------------
United States:
Southeast 90
Northeast 41
South Central 9
Southwest 13
North Central 41
Northwest 4
Additional detailed information concerning the real property of the
Partnership is set forth on Schedule I hereto and incorporated herein by
reference.
15
<PAGE>
From January 1, 1997 through December 31, 1997, the Partnership sold or
otherwise disposed of 24 properties. In connection with such sales and
dispositions, The Partnership received an aggregate of approximately $37,643,000
in cash, net of closing costs and amounts utilized to satisfy mortgage
indebtedness which encumbered such properties. As of December 31, 1997, the
Partnership owned seven properties that were being actively marketed for sale.
The aggregate net realizable value of such properties is estimated to be
approximately $4,164,000.
From January 1, 1998 through September 30, 1998, the Partnership sold
or otherwise disposed of 11 properties. In connection with such sales and
dispositions, the Partnership received an aggregate of approximately $22,000,000
in cash, net of closing costs and amounts utilized to satisfy mortgage
indebtedness which encumbered such properties. As of September 30, 1998, the
Partnership owned seven properties that were being actively marketed for sale.
The aggregate net realizable value of such properties is estimated to be
approximately $4,049,000.
On January 7, 1997 the Partnership sold three properties tenanted by
Federal Realty Investment Trust ("FRIT") for a total selling price of
approximately $9,363,000. Two first mortgages with principal balances
outstanding of approximately $878,000 were repaid at closing. In addition,
closing costs of approximately $40,000 were incurred. As a result, the
Partnership recognized a gain of approximately $1,778,000 in 1997. In addition,
on January 7, 1997, FRIT made a loan to the Partnership in the approximate
amount of $8,759,000 secured by a fourth property tenanted by FRIT located in
Broomal, Pennsylvania. Concurrently with this loan, the Partnership granted and
FRIT exercised an option to purchase the Broomal property with a closing to
occur on or about June 30, 1998. The purchase price is the unpaid balance of the
mortgage loan of approximately $8,500,000 at the closing date. The nonrecourse
mortgage loan bears interest at the rate of 8% per annum and requires monthly
debt service payments of approximately $72,000.
On January 16, 1997, the Partnership sold the Travelodge Hotel it had
been operating since January 18, 1996 when the former tenant, Forte Hotels, Inc.
entered into a Lease Termination and Mutual Release Agreement. The selling price
was approximately $2,165,000 net of closing costs. A gain of $1,403,000 was
recorded in 1997.
In April 1997, the Partnership sold the hotel property located in
Phoenix, Arizona. The selling price was approximately $15,525,000 net of
approximately $250,000 of closing costs. A gain of approximately $7,863,000 was
recognized in 1997.
On December 12, 1997, the Partnership sold the property tenanted by
Hancock Bank located in Baton Rouge, Louisiana. The selling price was $5,075,000
and closing costs of approximately $84,000 were incurred.
As a result, the Partnership recognized a gain of approximately $1,345,000.
On February 19, 1998, the Partnership sold a property located in Palo
Alto, California to its tenant, Lockheed Missile and Space Company, for a
selling price of approximately $9,400,000. As a result, the Partnership
recognized a gain of approximately $4,130,000 in the nine months ended September
30, 1998.
On May 21, 1998, the Partnership sold a property located in Atlanta,
Georgia tenanted by AT&T, Corp. for a selling price of $8,600,000. As a result,
the Partnership recognized a gain of approximately $1,266,000 in the nine months
ended September 30, 1998.
In accordance with a previously executed option agreement, the
Partnership sold a property located in Broomal, Pennsylvania to its tenant
Federal Realty Investment Trust. The consideration received by the Partnership
was a satisfaction of mortgage payable in the amount of approximately
$8,500,000. A gain of approximately $2.6 million was recorded in the nine months
ended September 30, 1998.
16
<PAGE>
In 1997, the Partnership acquired mortgages for approximately $16
million secured by certain real property in Cape Cod, Massachusetts. The
properties are part of a master planned community and golf resort known as New
Seabury. The debtor filed a Chapter 11 petition in the United States Bankruptcy
Court, District of Massachusetts. In June 1998, a Chapter 11 plan of
reorganization proposed by the Partnership was approved by the Bankruptcy Court.
In late July 1998, the Partnership acquired substantially all of the debtor's
assets including two golf courses, other recreational facilities, a villa rental
program, condominium and time share units and land for future development. The
Partnership assumed mortgage debt of approximately $3.5 million.
For each of the years ended December 31, 1997, 1996 and 1995 and for
the nine months ended September 30, 1998, no single real estate asset or series
of assets leased to the same lessee accounted for more than 10% of the gross
revenues of the Partnership. However, at December 31, 1997, 1996 and 1995, and
for the nine months ended September 30, 1998, PGEC occupied a property, which
represented more than 10% of the Partnership's total real estate assets. PGEC is
an electric utility engaged in the generation, purchase, transmission,
distribution and sale of electricity, whose shares are traded on the NYSE.
The PGEC Property is an office complex consisting of three buildings
containing an aggregate of approximately 803,000 square feet on an approximate
2.7 acre parcel of land located in Portland, Oregon. A Predecessor Partnership
originally purchased the PGEC Property on September 11, 1978 for a price of
approximately $57,143,000.
The PGEC Property is net-leased to a wholly owned subsidiary of PGEC
for forty years, with two ten-year and one five-year renewal options. The annual
rental is $5,137,309 until 2003, $4,973,098 until 2018 and $2,486,549 during
each renewal option. PGEC has guaranteed the performance of its subsidiary's
obligations under the lease. The lessee has an option to purchase the PGEC
Property in September of 2003, 2008, 2013 and 2018 at a price equal to the fair
market value of the PGEC Property determined in accordance with the lease and is
required to make a rejectable offer to purchase the PGEC Property in September
2018 for a price of $15,000,000. A rejection of such offer will have no effect
on the lease obligations or the renewal and purchase options.
On December 5, 1997 the Partnership executed a mortgage loan with
Principal Mutual Life Insurance Company in the original principal amount of
approximately $46.3 million, secured by, among other things, a first deed of
trust, security agreement and assignment of rents on the PGEC Property. The loan
replaced the existing mortgage loan on the complex with an outstanding principal
balance of approximately $24.2 million, bearing interest at 8.5% and maturing in
2002. The interest rate is fixed at 7.51%. The entire net annual rent payable by
PGEC of approximately $5,137,000 is required to be applied toward the debt
service on the loan. The refinancing has a maturity date of September 10, 2008,
at which time a remaining principal payment of approximately $20 million will be
due from the Partnership.
17
<PAGE>
Selected Financial Data. Set forth below is a summary of certain
financial data for the Partnership which has been excerpted from the
Partnership's public filings and reports. More comprehensive financial and other
information is included in such reports and other documents filed by the
Partnership with the Commission, and the following summary is qualified in its
entirety by reference to such reports and other documents and all the financial
information and related notes contained therein.
AMERICAN REAL ESTATE PARTNERS L.P.
SELECTED FINANCIAL STATEMENTS
( Dollars in Thousands except per Unit amounts)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
----------------------------
1998* 1997*
----------------------------
(unaudited)
<S> <C> <C>
Total revenues $ 69,718 $ 48,876
============ ============
Earnings before property
and securities transactions $ 46,253 $ 25,867
Gain on sales and disposition
of real estate 9,760 13,288
Gain on sales of marketable
equity securities -- 29,188
Provision for loss on mortgages
receivable -- --
Provision for loss on real estate (602) (705)
------------ ------------
Net earnings $ 55,411 $ 67,638**
============ ============
Net earnings per limited
partnership unit:
Basic:
Earnings before property
and securities transactions .92 .91
Net gain from property and
securities transactions .19 1.57
------------ ------------
Net earnings $ 1.11 $ 2.48
============ ============
Weighted average limited
partnership units outstanding 46,198,284 26,117,8853
============ ============
Diluted:
Earnings before property
and securities transactions $ .84 $ .90
Net gain from property and
securities transactions .17 1.45
------------ ------------
Net earnings $ 1.01 $ 2.35
============ ============
Weighted average limited partners
units and equivalent partnership
units outstanding 53,918,593 28,230,2653
============ ============
Distributions to partners $-- $--
At end of period:
Real estate leased to others $ 389,587 $ 381,019
Hotel operating properties $ 33,031 $ 4,881
Investment in treasury bills $ 422,600 $--
Mortgages and note receivable $ 87,444 $ 69,633
Total assets $ 1,088,123 $ 966,144
Senior indebtedness $-- $ 11,308
Mortgages payable $ 187,514 $ 141,305
Partners' equity $ 862,183 $ 801,580
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Year Ended December 31,
-------------------------------------------------------------------------
1997* 1996* 1995* 1994* 1993*
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Total revenues $ 70,918 $ 71,774 $ 69,920 $ 61,551 $ 60,157
============ ============ ============ ============ ============
Earnings before property
and securities transactions $ 41,020 $ 34,240 $ 30,833 $ 19,577 $ 18,379
Gain on sales and disposition
of real estate 16,051 24,517 5,091 4,174 4,760
Gain on sales of marketable
equity securities 29,188 -- -- -- --
Provision for loss on mortgages
receivable (9,790) -- -- -- --
Provision for loss on real estate (1,085) (935) (768) (582) (462)
------------ ------------ ------------ ------------ ------------
Net earnings $ 75,384 $ 57,822 $ 35,156 $ 23,169 $ 22,677
============ ============ ============ ============ ============
Net earnings per limited
partnership unit:
Basic:
Earnings before property
and securities transactions $ 1.19 $ 1.27 $ 1.30 $ 1.39 $ 1.30
Net gain from property and
securities transactions 1.08 .90 .19 .25 .30
------------ ------------ ------------ ------------ ------------
Net earnings $ 2.27 $ 2.17 $ 1.49 $ 1.64 $ 1.60
============ ============ ============ ============ ============
Weighted average limited
partnership units outstanding 31,179,246 25,666,640 22,703,180 13,812,800 13,812,800
============ ============ ============ ============ ============
Diluted:
Earnings before property
and securities transactions $ 1.16 $ 1.20 $ 1.17 $ 1.39 $ 1.30
Net gain from property and
securities transactions .97 .82 .16 .25 .30
------------ ------------ ------------ ------------ ------------
Net earnings $ 2.13 $ 2.02 $ 1.33 $ 1.64 $ 1.60
============ ============ ============ ============ ============
Weighted average limited partners
units and equivalent partnership
units outstanding 34,655,395 28,020,392 27,538,840 13,812,800 13,812,800
============ ============ ============ ============ ============
Distributions to partners $-- $-- $-- $-- $ 7,078
At end of period:
Real estate leased to others $ 387,252 $ 357,184 $ 412,075 $ 437,699 $ 444,409
Hotel operating properties $ 5,002 $ 12,955 $ 13,362 $ 13,654 $ 14,070
Investment in treasury bills $ 372,165 $-- $-- $-- $--
Mortgages and note receivable $ 59,970 $ 15,226 $ 15,056 $ 8,301 $ 20,065
Total assets $ 991,230 $ 641,310 $ 620,880 $ 492,868 $ 502,981
Senior indebtedness $ 11,308 $ 22,616 $ 33,923 $ 45,231 $ 55,231
Mortgages payable $ 156,433 $ 115,911 $ 163,968 $ 174,096 $ 195,274
Partners' equity $ 809,325 $ 485,559 $ 404,189 $ 259,237 $ 236,068
</TABLE>
- ------------
* To the extent financial information pertaining to the Partnership is
reflected, such information is consolidated for the Partnership and AREH.
** Includes extraordinary item (early extinguishment of debt).
18
<PAGE>
Certain Transactions.
Rights Offering. On September 25, 1997, the Partnership completed a
rights offering (the "1997 Offering"), pursuant to which it raised approximately
$267 million, net of related expenses. Pursuant to the terms of the 1997
Offering, Holders on the record date received one transferable subscription
right (each a "Right") for each five Units held. Each Right was exercisable at a
subscription price of $52 for a combination of securities consisting of four
Units and one Preferred Unit. High Coast acted as guarantor of the 1997
Offering. In consideration of acting as guarantor, High Coast was granted three
demand and unlimited piggyback registration rights with respect to the Units.
Initially, High Coast acquired 11,116,568 Units and 2,779,142 Preferred Units as
a result of exercising Rights received based upon its ownership of Units. In
addition, the Purchaser exercised an over-subscription privilege and pursuant to
the foregoing and its subscription guaranty it acquired a total of 6,502,764
additional Units and 1,625,691 additional Preferred Units; as a result, the 1997
Offering was fully subscribed.
Stratosphere. Stratosphere Corp. is a Nevada corporation which owns and
operates the Stratosphere Tower, Casino and Hotel in Las Vegas, Nevada
("Stratosphere"). Stratosphere recently completed a reorganization under Chapter
11 of the United States Bankruptcy Code. Pursuant to Stratosphere's Restated
Second Amended Plan of Reorganization (the "Plan of Reorganization"),
Stratosphere's currently outstanding equity interests were surrendered, and a
certain class of Stratosphere's outstanding debt securities ("Stratosphere
Bonds") was converted into 100% of the equity interests in Stratosphere.
Prior to the effective date of the Plan of Reorganization, AREH owned an
aggregate of 48.5% of the Stratosphere Bonds. As a result of applicable
licensing requirements of the Nevada Gaming Commission and the City of Las
Vegas, AREH was required to obtain licenses to own and operate the Stratosphere
Casino prior to the conversion of its Stratosphere Bonds into equity securities
pursuant to the Plan of Reorganization.
In an effort to ensure compliance with such licensing requirements, on
June 5, 1998, AREH entered into a certain Repurchase Agreement and an associated
Letter Agreement (together, the "Repurchase Agreement") with Nevar LLC, a
newly-formed New York limited liability company wholly owned and operated by Mr.
Icahn. AREH entered into the Repurchase Agreement with Nevar because both
parties anticipated that Nevar would obtain licensing to own and operate the
Stratosphere Casino prior to the effective date of the Plan of Reorganization,
while AREH would not. This expectation was based on the premise that
investigations conducted by governmental authorities in connection with the
licensing process would be less time-consuming with respect to Nevar because,
whereas AREH's application for licensing would require the investigation of
AREH's multiple officers, directors and affiliates, the investigation by the
licensing authorities of Nevar, which is owned and operated solely by Mr. Icahn,
would require the investigation of Mr. Icahn only.
The Repurchase Agreement provides, among other things, that AREH would
sell all of its Stratosphere Bonds to Nevar if: (i) Stratosphere's Plan of
Reorganization, converting Stratosphere Bonds to equity interests, became
effective before AREH obtained licensing to own and operate the Stratosphere
Casino; and (ii) Nevar had obtained licensing to own and operate the
Stratosphere Casino by such time. The Repurchase Agreement further provides that
if AREH obtains all licensing necessary to own and operate the Stratosphere
Casino within 18 months of the sale of its Stratosphere Bonds to Nevar, Nevar
will sell back to AREH, at the same purchase price Nevar paid to AREH, plus
interest per annum of 150 basis points over Citibank's prime rate and
reimbursement of certain of Nevar's costs during such term, all of the equity
interests which AREH's Stratosphere Bonds were converted into, along with AREH's
proportionate share of all sale proceeds, stock rights, acquired shares and
other benefits which have accreted to such equity interests or have been
purchased by Nevar during the term of Nevar's ownership.
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By August 28, 1998, Nevar was fully licensed to own and operate the
Stratosphere Casino. On October 14, 1998, Stratosphere's Plan of Reorganization
became effective. As of the effective date of Stratosphere's Plan of
Reorganization AREH had not yet obtained licensing to own and operate the
Stratosphere Casino and, pursuant to the Repurchase Agreement, AREH sold all of
its Stratosphere Bonds to Nevar.
AREH is currently in the process of seeking to obtain licensing which
will permit it to repurchase its interest in Stratosphere back from Nevar, as
provided for in the Repurchase Agreement.
Phillips Services. AREH and High River Limited Partnership ("High
River"), a Delaware limited partnership of which Mr. Icahn owns more than 99%,
have recently acquired from third parties a position in the bank debt of Philip
Services Corp. and Philip Services (Delaware), Inc. (collectively "Philip"), and
has the status of a lender under Philip's credit facility with Canadian Imperial
Bank of Commerce and certain other lenders (the "Credit Facility"). As of the
date hereof, High River owns approximately 14% of the common shares of Philip,
which were acquired by High River in various purchases made since May 1998.
ARVIDA Transaction. Raleigh Capital Associates, L.P. ("Raleigh"), is a
Delaware limited partnership the sole general partner of which is Zephyr
Partners ("Zephyr"), a New York partnership, and the sole limited partner of
which is Boreas Partners, L.P. ("Boreas"), a Delaware limited partnership. The
partners of Zephyr are GP Aeolus, Inc., a New York corporation wholly-owned by
Mr. Icahn, and AREHGP, Inc. ("AREHGP"), a Delaware corporation wholly-owned by
AREH. The general partners of Boreas are Bayswater and AREHGP, and the limited
partners of Boreas are AREH, Bayswater, Stanmore LLC and Northholt LLC. Stanmore
LLC and Northholt LLC are Delaware limited liability companies, the sole member
of which is AREH. On October 30, 1998, Bayswater, Stanmore LLC and Northholt LLC
subscribed for $40.5 million, $60 million and $34.5 million, respectively, of
capital of Boreas, payable on the earlier of (i) five days after written request
or (ii) April 15, 1999. AREH indirectly owns a 70% interest in Raleigh and Mr.
Icahn indirectly owns a 30% interest in Raleigh. Prior to May 1998, several
entities unaffiliated with AREH or Mr. Icahn were also general or limited
partners of Raleigh. In May 1998, Raleigh redeemed the partnership interests of
all of its partners other than Zephyr and Boreas (the "Redemption"), leaving
Zephyr and Boreas as Raleigh's sole general partner and limited partner. Raleigh
acquired 79,696 units of limited partnership interest ("Arvida Units") in
Arvida/JMB Partners, L.P. ("Arvida") for an aggregate purchase price of
approximately $36.7 million pursuant to a tender offer which expired on August
1, 1996. Raleigh acquired an additional 26,405 Arvida Units for an aggregate
purchase price of approximately $11.6 million pursuant to a subsequent tender
offer which expired on April 29, 1997. Raleigh currently beneficially owns
106,747 Arvida Units, constituting approximately 26.4% of the issued and
outstanding Arvida Units.
Raleigh, Arvida /JMB Managers, Inc., the general partner of Arvida (the
"Arvida General Partner"), The St. Joe Company, a Florida corporation (the
"Arvida Unit Purchaser"), and the Partnership have entered into a Buy/Sell
Agreement, dated as of November 6, 1998 (the "Agreement"), pursuant to which,
among other things (and subject to various conditions and limitations set forth
therein): (i) Raleigh must elect, on or prior to December 10, 1998, either (a)
to sell all of its Arvida Units to the Arvida Unit Purchaser at a price
determined by the Arvida General Partner (the "Buy/Sell Price") (a "Sale
Election") or (b) to purchase substantially all of the assets of the Arvida
General Partner, including its general partner interest and the interests of the
Associate Limited Partners in Arvida (collectively, the "GP Assets")(a "Purchase
Election"). If Raleigh makes a Purchase Election, it must also make a tender
offer (the "Raleigh Tender Offer") for any and all outstanding Arvida Units at a
price determined by Raleigh which is equal to or greater than the Buy/Sell
Price, which Raleigh Tender Offer would close contemporaneously with the closing
of the purchase and sale of the GP Assets. As of the closing of such purchase
and sale, Raleigh would become the general partner of Arvida. Nothing herein
shall be deemed to commence a Raleigh Tender Offer for Arvida Units, which
Raleigh Tender Offer would be commenced by Raleigh only following its making a
Purchase Election pursuant to, and subject to the terms and conditions set forth
in, the Agreement. Raleigh is currently conducting a "due diligence"
investigation of Arvida and the Arvida
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General Partner to enable it to determine whether to make a Sale Election or a
Purchase Election. No such determination has yet been made. The Partnership has
guaranteed Raleigh's obligations under the Agreement. If Raleigh makes a
Purchase Election and all outstanding Arvida Units not already owned by Raleigh
were tendered pursuant to the Raleigh Tender Offer, the aggregate purchase price
for such Arvida Units and the GP Assets would be in excess of $150 million. As a
condition to the obligation of the Arvida General Partner to sell the GP Assets,
Raleigh is required to obtain the consent of Arvida's senior lenders to such
transaction or arrange for the re-financing of Arvida's senior secured debt
(approximately $61.8 million as of September 30, 1998). In addition, if Raleigh
makes a Purchase Election, at the closing of the purchase and sale of the GP
Assets, the Arvida General Partner will assign to Raleigh a promissory note in
the principal amount of approximately $21 million issued to the Arvida General
Partner by an affiliate in exchange for the assignment by Raleigh to the Arvida
General Partner of a promissory note of like principal amount to be issued to
Raleigh by the Partnership.
In connection with the execution and delivery of the Agreement, Mr. Icahn
has agreed to cause High River, to indemnify the Partnership and its
wholly-owned subsidiary entities against any claims, losses and liabilities
incurred by any of them relating to Raleigh ("Raleigh Losses"), and the
Partnership has agreed to indemnify Mr. Icahn and entities wholly-owned by Mr.
Icahn against any Raleigh Liabilities incurred by any of them, so that all such
Raleigh Liabilities are shared by the Partnership, on the one hand, and Mr.
Icahn, on the other hand, ratably in accordance with their respective ownership
interests in Raleigh.
Kahn Litigation. On or about September 9, 1997, Amanda Heather Kahn and
Kimberly Robin Kahn commenced a litigation captioned Amanda Heather Kahn and
Kimberly Robin Kahn v. Carl C. Icahn, American Property Investors, Inc.,
Bayswater Realty and Capital Corp., Alfred D. Kingsley, John P. Saldarelli,
William A. Leidesdorf, Jack G. Wasserman and American Real Estate Partners, L.
P. in the Delaware Chancery Court in New Castle County (the "Court") (C.A. no.
15916). The plaintiffs' complaint purports to state derivative claims on behalf
of American Real Estate Partners, L.P. claiming breach of fiduciary duty, breach
of the duty of loyalty and usurpation of partnership opportunities arising out
of investments in Stratosphere and Arvida. On or about April 3, 1998, the
defendants moved to dismiss the complaint. On November 12, 1998, the Court
granted the defendants' motion to dismiss the complaint. Plaintiffs have until
December 16, 1998 to appeal the Court's grant of the defendants' motion to
dismiss.
Miller Litigation. On November 18, 1998, Ruth Ellen Miller filed a Class
Action Complaint bearing the caption Ruth Ellen Miller, on behalf of herself and
all others similarly situated v. American Real Estate Partners, L.P., High Coast
Limited Partnership, American Property Investors, Inc. Carl C. Icahn, Alfred
Kingsley, Mark H. Rachesky, William A. Leidesdorf, Jack G. Wasserman and John P.
Saldarelli in the Delaware Chancery Court in New Castle County (Civil Action No.
16788NC) (the "Complaint"). The Complaint purports to state claims on behalf of
a putative class of all holders of Units sounding in breach of fiduciary duty,
aiding and abetting breaches of fiduciary duty, injunction and breach of the
Partnership Agreement. The Complaint seeks to have Ms. Miller appointed as class
representative and that the putative class be certified. The Complaint also
seeks an unspecified amount in damages and injunctive relief: (i) dissolving the
Partnership; (ii) enjoining API from continuing to act as general partner of the
Partnership; (iii) enjoining the Partnership from engaging in any transaction in
which Icahn has either a direct or indirect interest, absent an affirmative vote
of a majority of the outstanding Units held by the putative class, including
this Offer; and (iv) ordering API to exercise its fiduciary obligations. The
Complaint also seeks costs and attorneys' fees.
Other Transactions. In May 1995, the Partnership and an affiliate of API
("Affiliate") entered into an agreement with the third-party landlord of its
leased executive office space. The agreement provided for the Partnership and
the Affiliate to relocate their offices to an adjacent building also owned by
the landlord which relocation occurred in September 1995. In accordance with the
agreement, the Partnership entered into a lease, expiring in 2001, for 7,920
square feet of office space, at an annual rental of approximately $153,000. The
Partnership has sublet to certain affiliates of API 3,205 square feet at an
annual rental of approximately $62,000,
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resulting in a net annual rental of approximately $91,000. Affiliates of API
reimbursed the Partnership for approximately $62,000 in rent paid by the
Partnership on its behalf during 1997 in connection with the new lease. The
prior lease, which was terminated, provided for approximately 6,900 square feet
at an annual rental of $155,000 to the Partnership. In addition, the Partnership
and the Affiliate received a lease termination fee of $350,000 allocated
$175,000 to the Partnership and $175,000 to the Affiliate. Such allocations and
the terms of the sublease were reviewed and approved by API's board of
directors' Audit Committee (the "Audit Committee"). In addition, in 1997 the
Partnership entered into a license agreement for a portion of office space from
an affiliate of API. The license agreement dated as of February 1, 1997 expires
May 22, 2004 unless sooner terminated in accordance with the agreement. Pursuant
to the license agreement, the Partnership has the non-exclusive use of
approximately 3,547 square feet of office space and common areas (of an
aggregate 21,123 rentable square feet sublet by such affiliate) for which it
pays $17,067.78 per month, together with 16.79% of certain "additional rent". In
1997, the Partnership paid an affiliate of API $68,747 of rent in connection
with this licensing agreement. In connection with the build-out of the space,
the Partnership reimbursed such affiliate $486,989, representing the
Partnership's allocable share of such costs net of a pro rata share of the
sub-lessor's allowance for such build-out. The terms of such sublease were
reviewed and approved by the Audit Committee. The Partnership was paid by API
for payroll and certain other expenses $34,000 and $50,000 in 1997 and 1996,
respectively.
Additional Information. The Partnership is subject to the information and
reporting requirements of the Exchange Act, and in accordance therewith is
required to file reports and other information with the Commission relating to
its business, financial condition and other matters. Such reports and other
information may be inspected at the public reference facilities maintained by
the Commission at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W.,
Washington, D.C. 20549, and are available for inspection and copying at the
regional offices of the Commission located in Northwestern Atrium Center, 500
West Madison Street, Suite 1400, Chicago, Illinois 60661 and at 7 World Trade
Center, 13th Floor, New York, New York 10048 and at the Commission's World Wide
Website at http://www.sec.gov. Copies of such material can also be obtained from
the Public Reference Room of the Commission in Washington, D.C. at prescribed
rates. In addition, the Purchaser will provide such material to Holders upon
request at the cost of the Purchaser.
SECTION 10. INFORMATION CONCERNING THE PURCHASER AND CERTAIN AFFILIATES
OF THE PURCHASER.
The Purchaser is a Delaware limited liability company, formed in November
1998. The Purchaser has no assets and has engaged in no transactions prior to
the date hereof. The sole member of the Purchaser is High Coast. High Coast's
sole assets consist of approximately $800,000 in cash and its ownership of
31,515,044 Units and 6,642,067 Preferred Units and its does not currently have
any other interests or liabilities. The general partner of High Coast, Beckton
is directly 100% owned by Mr. Icahn and the limited partners of High Coast, ACF
and Tortoise are indirectly, more than 99% owned by Mr. Icahn. Beckton is a
Delaware corporation, formed in November 1998. Beckton has no assets other than
its interest in High Coast and its ownership of all of the stock of API and has
engaged in no transactions prior to the date hereof.
Funding for the Offer will be provided by Unicorn Associates
Corporation. (See Section 11 - "Source of Funds").
The address of the principal office of the Purchaser, Beckton and High
Coast is 100 South Bedford Road, Mount Kisco, New York 10549. Mr. Icahn's
business address is c/o Icahn & Co., Inc., One Wall Street Court, New York, New
York 10005.
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Mr. Icahn's present principal occupation or employment is set forth on
Schedule II attached hereto and is incorporated herein by reference. Also set
forth on Schedule II and incorporated herein by reference are Mr. Icahn's
material occupations, positions, offices or employments during the past five
years, including the principal business and address of any business, corporation
or other organization in which such occupation, position, office or employment
was carried on.
Neither the Purchaser nor High Coast has any executive officer or
director. The name, position, citizenship, business address, present principal
occupation or employment, material occupations, positions, offices or
employments during the past five years and the principal business address of any
business corporation or other organization in which such occupation, position,
office or employment was carried on, of each executive officer and director of
Beckton, the sole general partner of High Coast, are set forth on Schedule II
attached hereto and are incorporated herein by reference.
Neither the Purchaser, High Coast, Beckton, Mr. Icahn, nor any executive
officer or director of any of the foregoing, has been, during the past five
years, (a) convicted in a criminal proceeding (excluding traffic violations or
similar misdemeanors) or (b) a party to a civil proceeding of a judicial or
administrative body of competent jurisdiction and as a result of such proceeding
was or is subject to a judgment, decree or final order enjoining future
violations of, or prohibiting activities subject to, federal or state securities
laws or a finding of any violation of such laws.
Except as set forth in this Offer to Purchase: (i) neither the Purchaser,
High Coast, Beckton, Mr. Icahn nor, to the best of the Purchaser's knowledge,
any of the persons listed on Schedule II, nor any affiliate of the foregoing
beneficially owns or has a right to acquire any Units; (ii) neither the
Purchaser, High Coast, Beckton, Mr. Icahn nor, to the best of the Purchaser's
knowledge, any of the persons listed on Schedule II, nor any affiliate of the
foregoing has effected any transaction in the Units within the past 60 days;
(iii) neither the Purchaser, High Coast, Beckton, Mr. Icahn nor, to the best of
the Purchaser's knowledge, any of the persons listed on Schedule II nor any
affiliate of the foregoing has any contract, arrangement, understanding or
relationship with any other person with respect to any securities of the
Partnership, including, but not limited to, contracts, arrangements,
understandings or relationships concerning the transfer or voting thereof, joint
ventures, loan or option arrangements, puts or calls, guarantees of loans,
guarantees against loss or the giving or withholding of proxies; (iv) there have
been no transactions or business relationships which would be required to be
disclosed under the rules and regulations of the Commission between any of the
Purchaser, High Coast, Beckton, Mr. Icahn or, to the best of the Purchaser's
knowledge, any of the persons listed on Schedule II, on the one hand, and the
Partnership or its affiliates, on the other hand; and (v) since the commencement
of the Partnership's third full fiscal year preceding the date of this Offer to
Purchase there have been no contracts, negotiations, or transactions between the
Purchaser, High Coast, Beckton, Mr. Icahn or, to the best of the Purchaser's
knowledge, any of the persons listed on Schedule II, on the one hand, and the
Partnership or its affiliates, on the other hand, concerning a merger,
consolidation or acquisition, tender offer or other acquisition of securities,
an election of directors or a sale or other transfer of a material amount of
assets.
Pension Liability Considerations. ERISA and the Code require that a
contributing sponsor ("Sponsor") of a defined benefit pension plan ("Pension
Plan") subject to ERISA and the Code make certain minimum funding contributions
to fund the benefits that participants accrue under the Pension Plan. Upon
termination of a Pension Plan, its Sponsor is liable for any unfunded benefit
liabilities that exist at the time of termination ("Termination Liabilities").
Liability for minimum funding contributions and Termination Liabilities under a
Pension Plan extends, jointly and severally, to each member of a Sponsor's
"controlled group" (generally defined to include parent entities and their 80%
owned subsidiaries and certain brother-sister entities). Moreover, upon the
failure to make minimum funding contributions in excess of $1 million when due
or pay Termination Liabilities after demand by the Pension Benefit Guaranty
Corporation (the "PBGC"), liens in favor of the relevant Pension Plans or the
PBGC, respectively, would attach to the assets of all members of the Sponsor's
controlled group.
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If more than approximately 4.8 million Units are tendered to the
Purchaser and accepted for payment, Mr. Icahn will indirectly own more than an
80% interest in the Partnership and the Partnership will be deemed to be a
member of the Controlled Group which includes ACF Industries Incorporated
("ACF") and an ACF subsidiary, Pichin Corp. ("Pichin"), by virtue of Mr. Icahn's
direct and indirect ownership of at least 80% of such entities. However, the
determination of whether the Partnership will be deemed to be a member of the
Controlled Group involves some degree of uncertainty. For example, although the
foregoing analysis is based on the book value of the Units and Preferred Units,
it is possible that the determination of ownership interest should be made on
the basis of market values rather than on book values. If it is correct to base
such determination on an analysis of market values, then based on current market
prices Mr. Icahn may indirectly own more than 80% in the Partnership, and the
Partnership may be deemed a member of the Controlled Group, if approximately 4.4
million Units are tendered to the Purchaser and accepted for payment.
In addition, Mr. Icahn's failure to acquire 4.8 (or 4.4) million Units
may not preclude the Partnership from becoming a member of the Controlled Group
in the future. The ownership test for controlled group membership is based upon
an 80% ownership of either a partnership's capital or profits interest. Because
Mr. Icahn owns in excess of 80% of the Preferred Units, the Partnership may be
viewed as a member of the Controlled Group in any year in which distributions
with respect to the Preferred Units are a substantial portion of the
Partnership's profits, if such distributions are viewed as a profits interest.
Currently, the Partnership's profits are well in excess of the amount of
distributions with respect to the Preferred Units and, in any case, it is
uncertain that distributions on the Preferred Units would be viewed as a profits
interest for this purpose. Similarly, since the Partnership's equity held by
holders of Preferred Units increases every year as a result of the distributions
on the Preferred Units, if such equity increases disproportionately faster
relative to the equity of the Holders of Units, then even if Mr. Icahn does not
acquire more than 4.4 million units, the Partnership could still become a member
of the Controlled Group in a future year.
ACF and other members of the Controlled Group sponsor several Pension
Plans ("ACF Pension Plans") (not including the TWA Plans described below) which
are underfunded in the aggregate by approximately $26 million on an ongoing
actuarial basis as of the first day of each plan's current plan year, and by
approximately $91 million if each of the ACF Pension Plans would have been
terminated on such date and the PBGC's actuarial assumptions were applied. The
liability upon plan termination could be more or less than this amount depending
on future changes in promised benefits, investment returns, the assumptions used
to calculate the liability and the outcome of any litigation relating to the
amount of liability. If the Partnership becomes part of the Controlled Group,
the Partnership would be jointly and severally liable for any failure of ACF or
any other member of the Controlled Group to make minimum funding contributions
or pay Termination Liabilities with respect to the ACF Pension Plans. The PBGC
could demand that the Partnership pay the liabilities and could, at its
discretion, enforce against the assets of the Partnership the statutory liens
arising from any such failure.
Pursuant to a settlement (the "Settlement") entered into in 1993 by the
PBGC and TWA, among others, in connection with the Chapter 11 bankruptcy case of
TWA, as amended and revised to date, Pichin became the Sponsor directly liable
for minimum funding obligations of the Pension Plans for Trans World Airlines
("TWA") employees (the "TWA Plans"), which TWA Plans had theretofore been
frozen. If the Partnership is deemed to be a member of the Controlled Group it
would be jointly and severally liable, together with all other entities in the
Controlled Group, for minimum funding obligations of the TWA Plans. However,
Pichin has the right under the Settlement to terminate the obligation to make
minimum funding payments for future periods by causing a termination of the TWA
Plans. In the event of any such termination, under the Settlement payments for
any Termination Liabilities in respect of the TWA Plans ("Termination Payments")
are required to commence 18 months after the date of termination and are limited
to 8 annual payments of $30 million each. However, the PBGC's recourse under the
Settlement with respect to the Termination Payments is limited to the collateral
pledged to secure such Termination Payments. Control over making the minimum
funding payments and the determination of whether to seek termination of the TWA
Plans ultimately will be in the control of Mr. Icahn.
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Because of the current underfunded status of the ACF Pension Plans and
the TWA Plans, certain members of the Controlled Group, which may include the
Partnership if more than approximately 4.4 million Units are tendered to the
Purchaser pursuant to the Offer and accepted for payment, are subject to 30-day
advance reporting to the PBGC of certain corporate transactions that are deemed
to be "reportable events" under ERISA. Such reportable events include, among
other things, any transaction which would result in a Controlled Group member
leaving the Controlled Group, and certain extraordinary dividends and stock
redemptions. Thus, any transaction in which the Partnership would cease to be a
member of the Controlled Group after having become such a member (such as the
issuance of additional Units so as to dilute Mr. Icahn's interest below 80%),
and certain extraordinary distributions and redemptions with respect to the
Units, would be subject to the 30-day advance reporting requirements. Generally,
while the PBGC has no authority to enjoin any such reportable event, the PBGC
could institute proceedings to terminate one or more of the ACF Pension Plans
and/or the TWA Plans, thus triggering Termination Liabilities for members of the
Controlled Group, if it reasonably expects that any such event presents an
unreasonable increase in the possible long-run loss of the PBGC with respect to
such plans.
In connection with the Offer, Starfire , which is directly 100% owned by
Mr. Icahn, delivered to API an undertaking (the "Indemnity"), pursuant to which
it would undertake to indemnify and hold the Partnership harmless from all
losses, costs and expenses resulting from the imposition of any minimum funding
or termination liabilities, as described above, on the Partnership or its
assets. The Indemnity provides, among other things, that so long as such
contingent liabilities exist and could be imposed on the Partnership, Starfire
will not make any distributions to its stockholders that would reduce its net
worth to less than $250 million. Starfire is permitted to delegate its duties
under the Indemnity (and therefore cease to be obligated thereunder) to Mr.
Icahn, or to any entity affiliated with Mr. Icahn provided that such entity has
a net worth of greater than the lesser of: (i) $250 million, or (ii) the net
worth of Starfire (or the person then obligated under the Indemnity) at the time
of such delegation. The Indemnity provides that it will become effective if the
Purchaser acquires, pursuant to the Offer, a number of Units such that the
Partnership is deemed under ERISA or the Code to be a member of the Controlled
Group.
Set forth below is audited financial information with respect to Starfire
and its consolidated subsidiaries. Starfire is not subject to periodic reporting
requirements under the Exchange Act.
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STARFIRE HOLDING CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
December 31, 1997
(Dollars in millions)
- --------------------------------------------------------------------------------
ASSETS
Current Assets:
Cash and cash equivalents (including reverse repurchase
agreements of $343 in 1997) $ 551
Marketable securities, at market value 80
Receivables:
Trade receivables, net of allowance for doubtful
accounts (52 in 1997) 59
Receivable from brokers and dealers 117
Interest and dividends 15
Inventories 59
Prepaid expenses and other assets 40
-------
Total current assets 921
-------
Property, plant and equipment:
Land 2
Manufacturing facilities 118
Specialized railroad cars leased to others 1,670
Other 11
-------
1,801
Less accumulated depreciation and amortization 677
-------
Net property, plant and equipment 1,124
-------
Investments in other partnerships 978
Amounts due from affiliates 211
Investment in sales-type lease 170
Total assets $3,404
=======
LIABILITIES AND SHAREHOLDER'S EQUITY
Current liabilities:
Short-term debt $ 497
Securities sold, not yet purchased 83
Note payable 1
Trade payables 64
Accrued expenses:
Salaries, wages and employee benefits 5
Interest 19
Other 41
-------
Total current liabilities 710
Long-term debt 1,309
Deferred income taxes, net 292
Phase-out reserve, less current portion 73
Other liabilities 122
-------
Total liabilities 2,506
-------
Shareholder's equity:
Common stock, voting, $.10 par; authorized 10,000
shares, issued 579 shares --
Retained earnings 920
Minimum pension liability adjustment, net of taxes (13)
Common stock held in treasury, 15 shares (1)
Unrealized gains (losses) on marketable securities, net of
taxes of $(5) in 1997 (8)
-------
Total shareholder's equity 898
-------
Total liabilities and shareholder's equity $ 3,404
=======
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STARFIRE HOLDING CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
Year Ended December 31, 1997
(Dollars in millions)
- --------------------------------------------------------------------------------
Revenues:
Railcar rentals and services $ 205
Ticket sales 201
Manufacturing operations 297
Equity in earnings of partnerships 160
Gain on sales-type lease 154
Investment income, net 63
Other 46
--------
Total revenues 1,126
========
Costs and expenses:
Fleet operating expenses 27
Cost of ticket sales 151
Cost of manufacturing 264
Selling, administrative and other expenses 93
Depreciation and amortization 52
Interest 128
Phase-out reserve expense 1
--------
Total costs and expenses 716
--------
Income before income taxes and extraordinary item 410
--------
Income tax expense 146
--------
Income before extraordinary item 264
Early extinguishment of debt, net of taxes of $15 20
--------
Net income $ 244
-------
SECTION 11. SOURCE OF FUNDS.
The Purchaser is a newly formed entity. The Purchaser expects that
approximately $105,000,000 (exclusive of fees and expenses) will be required to
purchase 10 million Units, if tendered. The Purchaser will obtain the funds
necessary to complete the Offer from a capital contribution from High Coast.
High Coast will obtain such funds from a capital contribution from its limited
partner, Tortoise which will in turn receive the same as an indirect capital
contribution from Unicorn Associates Corporation ("Unicorn"). Mr. Icahn, the
direct or indirect owner of more than 99% of the ownership interest of the above
entities, will cause the capital contributions referred to above to be made.
Set forth below is financial information with respect to Unicorn and
its consolidated subsidiaries. Unicorn is not subject to periodic reporting
requirements under the Exchange Act. The financial information set forth below
with respect to Unicorn is unaudited. Unicorn does not prepare audited financial
statements in the ordinary course of its business and, accordingly, such audited
financial statements were not available or obtainable without unreasonable cost
or expense.
27
<PAGE>
UNICORN ASSOCIATES CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
September 30, 1998
(in millions)
(unaudited)
- -------------------------------------------------------------------------------
ASSETS
Cash and cash equivalents $ 197.5
Marketable securities 72.0
Receivables:
Accrued interest 0.2
Notes 17.9
Amounts due from brokers 79.1
Investments in partnerships 1,038.1
Amounts due from affiliates 89.1
Deferred charges, deposits and other assets 1.0
----------
Total assets 1,494.9
==========
LIABILITIES AND SHAREHOLDER'S EQUITY
Liabilities
Income taxes payable 25.6
Securities sold, not yet purchased 52.3
Deferred income taxes 10.0
----------
Total liabilities 87.9
----------
Shareholder's equity:
Common stock, no par value per share, 3,000 shares
authorized. 1,002 shares issued and outstanding 1,157.8
Retained earnings 293.4
Unrealized holding losses on marketable securities
net of taxes of $16.8 million (44.2)
----------
Total shareholder's equity 1,407.0
----------
Total liabilities and shareholder's equity $ 1,494.9
==========
CONSOLIDATED STATEMENT OF OPERATIONS
Nine Months Ended September 30, 1998
(in millions)
(unaudited)
- -------------------------------------------------------------------------------
Nine Months Ended
September 30, 1998
------------------
Revenues
Interest and other income $ 31.1
Equity in earnings of partnerships 50.2
Net realized gains 5.9
---------
Total revenues 87.2
---------
Cost and expenses:
Interest expense 5.1
Other expenses 0.3
---------
Total cost and expenses 5.4
---------
Income before income tax expense 81.8
Income tax expense 31.1
---------
Net income $ 50.7
========
28
<PAGE>
SECTION 12. PRICE RANGE OF UNITS
The Units are traded on the NYSE under the symbol "ACP." Trading on the
NYSE commenced July 23, 1987, and the range of high and low market prices for
the Depositary Units on the New York Stock Exchange Composite Tape (as reported
by The Wall Street Journal) from March 31, 1996 through September 30, 1998 is as
follows:
Quarter Ended: High Low
- -------------- ---- ---
March 31, 1996 $ 9.375 $ 8.625
June 30, 1996 9.125 8.875
September 30, 1996 9.125 8.625
December 31, 1996 9.25 8.875
March 31, 1997 11.75 9.125
June 30, 1997 14.25 9.875
September 30, 1997 13.625 10.625
December 31, 1997 11.375 9.4375
March 31, 1998 11.50 9.8125
June 30, 1998 10.75 9.75
September 30, 1998 10.25 8.0625
The last sales price of the Units on the last full trading day prior to
the date of announcement of the Offer, as reported by the New York Stock
Exchange Composite Tape (as reported by The Wall Street Journal) was $7 1/4 per
Unit.
SECTION 13. PURCHASE PRICE CONSIDERATIONS.
Background. The Purchaser has set the Purchase Price at $10.50 net per
Unit. The Purchase Price represents the price at which the Purchaser is willing
to purchase Units. No independent person has been retained by the Purchaser to
evaluate or render any opinion with respect to the fairness of the Purchase
Price and no representation is made by the Purchaser or any affiliate of the
Purchaser as to such fairness. Limited Partners are urged to consider carefully
all of the information contained in the Offer to Purchase and related documents
and consult with their own advisors, tax, financial or otherwise, in evaluating
the terms of the Offer, before deciding whether to tender Units.
The Purchaser is making the Offer because it believes that the Units
represent an attractive long-term investment at the Purchase Price, which has
been established by the Purchaser. There can be no assurance, however, that this
judgment is correct, and, as a result, ownership of Units (either by the
Purchaser or Holders who retain their Units) will remain a speculative
investment.
The Partnership has not made any distributions to Holders for the last
four years (other than in connection with the 1997 Rights Offering (see Section
9 - "Certain Information Concerning the Partnership") and a similar rights
offering conducted by the Partnership in March, 1995). The Partnership has
stated its belief in its public filings that excess cash should be used to
enhance long-term Holder value through investments in assets and companies with
assets undervalued by the market. Mr. Icahn, the indirect owner of all of the
ownership interest of API, the general partner of the Partnership, believes the
Partnership should continue to hold and invest, rather than distribute, cash and
that the cash assets of the Partnership should be applied prudently to: (i)
enhance the Partnerships existing properties; (ii) support the Partnership's
existing debt and property maintenance obligations; and (iii) provide
opportunities to the Partnership for additional investments in and
29
<PAGE>
relating to real property, including, without limitation, land and land
development, and securities, including, without limitation, high yield bonds, on
a domestic and international basis, as appropriate opportunities arise. In
addition, Mr. Icahn does not believe that it is an appropriate time for any
substantial dispositions of the Partnership's real property assets.
The Purchaser believes, based on communications received by the
Partnership, that certain Holders may disagree with the Partnership's plans
regarding distributions and the use of cash outlined above or may otherwise
desire to derive cash from their investment in the near term. The Offer gives
Holders the opportunity to sell their Units at a premium over the current market
price for the Units.
Assistance by Partnership Employees. The Purchaser was assisted in its
updating, gathering and review of data and in its preparation, analysis,
calculations and estimations of the values set forth in the Offer to Purchase by
certain employees of the Partnership. Any reference herein to any updating,
gathering and review of data, or any preparation, analysis, calculation,
estimation or similar activity by the Purchaser, includes the activities of such
persons. The Purchaser will reimburse the Partnership for all costs, salary and
related items incurred by the Partnership in respect of such employees based
upon the time spent providing such assistance to the Purchaser.
Estimate of Liquidation Value. In connection with the Offer, the
Purchaser estimated the liquidation value of the Partnerships assets to be
$18.36 per Unit or $16.45 per Unit on a fully diluted basis.1 The Purchaser's
estimate of liquidation value per Unit is based on a hypothetical sale of all of
the Partnership's properties and the distribution to the Holders and API of the
gross proceeds of such sales, net of related indebtedness, together with the
Partnership's cash, proceeds from security investments including stocks, bonds,
and limited partnership interests and all other assets that are believed to have
liquidation value, after provision in full for all of the Partnership's other
known liabilities and after giving effect to the estimated costs associated with
winding up the Partnership, which may include real estate transaction costs such
as brokerage commissions, legal fees, title costs, closing expenses etc.
Additionally, estimated brokerage expenses incurred in selling securities and
the costs associated with winding up the Partnership were deducted.
The Purchaser's analysis of liquidation value described herein is
merely theoretical, assumes the availability of a willing buyer and may not
itself reflect the value of the Units because, among other things: (i) there is
no assurance that any such liquidation could occur in the foreseeable future;
and (ii) any liquidation in which the estimated values contemplated herein might
be realized could take an extended period of time (at least a year and quite
possibly significantly longer, with the exception of cash and marketable
securities) during which the Partnership and its partners would continue to be
exposed to the risk of fluctuations in asset values because of changing market
conditions and other factors. For any property sales in which the Partnership
would be required to indemnify the buyer for matters arising after the closing,
a portion of the sales proceeds could be held by the Partnership until all
possible claims were satisfied, further extending the delay in the receipt by
the Holders of liquidating proceeds. Because of these factors, the Purchaser
believes the actual current value of a Unit may be less then its estimate of the
liquidation value. Conversely, there is a possibility that the value realizable
in an orderly liquidation could be greater then the estimated liquidation value.
A reduction in operating expenses or an increase in rental revenues would result
in a higher liquidation value under the method described above. Similarly, a
higher liquidation value would result if a buyer applied lower capitalization
rates (reflecting a willingness to accept a lower rate of return on its
investment) to the net operating income generated by the
- --------
1 In estimating the diluted liquidation value per Unit in the Offer,
the Purchaser divided the estimated net liquidation value attributable to
limited partner interests by the number of Units and Unit equivalents
outstanding. For this purpose, the Preferred Units were treated as Unit
equivalents based on the methodology for the redemption of Preferred Units in
exchange for Units as set forth in the Partnership Agreement.
30
<PAGE>
Partnership's properties than the capitalization rates applied by the Purchaser
as discussed below. Additionally, stocks, bonds and other securities may be
subject to significant market swings. The analysis described in this Section 13,
is based on a series of assumptions, some of which may not be correct.
Accordingly, this analysis should be viewed as indicative of the Purchaser's
approach to valuing Units and not as any way predictive of the likely result of
any future transaction.
Methodology To Determine Gross Real Estate Value. In arriving at the liquidation
value, the Purchaser reviewed the actual lease terms, property cash flow history
and performance measures, any other existing file information (property
descriptions, photographs, site and/or building plans, third-party appraisals
(if any), internal engineering inspection reports, market studies, etc.) where
available, for each specific property.
The Purchaser generally contacted a real estate professional
(commercial sales broker, leasing broker, investor or appraiser) at the time of
the valuation in each local market who was familiar with the subject property's
location and the local real estate marketplace to update the file on market
conditions. Often time, this local professional had previously been contacted
and may have inspected the property or site location previously. These
professionals were consulted for their opinions regarding market rents,
capitalization rates and/or other valuation parameters for similar properties in
the local market, and for information regarding neighborhood trends, demographic
data and trends, adjacent uses, visibility and accessibility issues, supply and
demand trends for the property type and the market under review, or other
significant attributes of the property or market area, to the extent they had
such knowledge.
Utilizing the information generated from internal sources and files and
market information from local real estate professionals, the Purchaser made a
judgement as to the appropriate methodology and parameters for the valuation of
each individual property (capitalization rates, discount rates, market rents,
renewal assumptions, etc) and, utilizing existing lease or property cash flow
information, came to a value conclusion. In the majority of cases, the "Income
Capitalization Approach" to value was utilized (either direct capitalization or
discounted cash flow analysis) to determine the gross value of the Partnership's
real estate assets (the "Gross Real Estate Value"). The Income Capitalization
Approach derives an estimate of value by converting the anticipated economic
benefits of owning property into a value estimate through capitalization. This
approach is based on the principle of "anticipation," which holds that investors
recognize the relationship between an asset's income and its value. In order to
value the economic benefits of a property, potential income and expenses must be
estimated, and the most appropriate capitalization method must be selected. The
two most common methods of converting net income into value are direct
capitalization and discounted cash flow analysis. In direct capitalization, net
operating income is divided by an overall rate extracted from market sales to
indicate a value. In the discounted cash flow method, anticipated future net
income streams and a reversionary value are discounted to an estimate of net
present value at a chosen discount rate (internal rate of return).
Since most of the portfolio real estate assets are single-tenanted,
net-leased transactions, a direct capitalization approach was often the basis
for the analysis (applying a capitalization rate typically between 9% and 12% to
current or projected net operating income). In situations where the rent was
approximately the same as the market rent for the property, the capitalization
rate reflected the quality of the tenant, length of the lease, quality of the
physical asset and site, and market conditions (including level of investor
activity). In certain situations the current lease payments were determined to
be significantly greater then the market rent, in which case a discounted cash
flow analysis was employed so that the valuation would reflect the premium value
of the above-market lease as well as the new lower rent projected upon
re-leasing and the financial risks associated with the expiration of the lease
(leasing commissions, allowances for tenant improvements, capital improvements
to the building and rent loss during re-tenanting). The discount rate utilized
in this discounted cash flow analysis was generally between 11% and 13%.
31
<PAGE>
In situations where current contractual rent was significantly below
market rent, the capitalization rate was adjusted downward from the perceived
market capitalization rate for the subject property to account for the increase
in cash flow that may materialize at lease expiration when either the current
tenant renews or a new tenant is procured at the increased rental rate. However,
most of the below-market leases in the portfolio have long-term renewal options
at the same contractual rent, a reduced contractual rent, or a stepped up rent
that will still be significantly below the perceived market rent; in these
cases, the tenants leasehold interest has continuing economic value and the
tenant is motivated to exercise these renewal options, reducing the "upside" or
opportunity for the landlord to increase cash flow. In these cases, the direct
capitalization rate was generally employed where a capitalization rate of
usually 9-10% was applied to existing rent. A higher capitalization rate was
sometimes used if the tenant was not deemed to have a strong credit profile and
the property was potentially difficult to re-tenant (if the tenant were to
default or choose not to exercise their option(s)).
For properties that were purchased within the past twelve months, the
actual purchase price funded by the Partnership was generally used as the
primarily tool in determining the current value unless there were significant
developments affecting the property's value since the acquisition date.
Multi-tenanted property valuations generally utilized the 1998 budgeted
cash flow or actual operating results (generally defined as gross rent
collections less an allowance for bad debt minus operating expenses and reserves
for capital expenditures), and applied a capitalization rate which was
consistent with the quality of the property and property type, resulting in a
value by the direct capitalization approach.
Land held for future development was valued based on either third-party
appraisals or information provided by local brokers as to the potential proceeds
which would be generated by a bulk sale of the remaining residential lots. A
discount would be incorporated for land for which all development approvals have
not yet been obtained.
Determination of Liquidation Value. In estimating the liquidation value
per Unit, the Purchaser adjusted the Gross Real Estate Value estimate,
determined in the manner set forth above, of $511,925,000 to reflect the
Partnership's other assets and liabilities. Specifically, the Purchaser added
the amounts of cash, treasury bills, stocks and bonds, limited partnership
interest, accounts receivable ($654,213,600) and subtracted the debt encumbering
the Partnership's assets including the face value of the Preferred Units
($261,734,182) and all other liabilities as of November 1, 1998 ($11,499,000).
The Purchaser then deducted $29,153,465, representing a reserve equal to 2.5% of
the total asset estimate (which represents the Purchaser's estimate of the
probable costs of brokerage commissions, real estate transfer taxes, pre-payment
penalties, legal and other expenses relating to the termination of the
Partnership). The net result, $863,751,953, was further adjusted for the 1.99%
interest which is required to be allocated to API in accordance with the
Partnership Agreement. This resulted in an aggregate value of $846,563,289
resulting in a net liquidation value of: $18.36 per Unit or $16.45 per Unit on a
fully diluted basis. This represents the Purchaser's estimate of the aggregate
net liquidation proceeds which could be realized on an orderly liquidation of
the Partnership, based on the assumptions implicit in the calculations described
above.
SECTION 14. CONDITIONS OF THE OFFER.
Notwithstanding any other term of the Offer, the Purchaser will not be
required to accept for payment or to pay for any Units tendered if all
authorizations, consents, orders or approvals of, or declarations or filings
with, or expiration of waiting periods imposed by, any court, administrative
agency or commission or other governmental authority or instrumentality,
domestic or foreign, necessary for the consummation of the transactions
contemplated by the Offer shall not have been filed, occurred or been obtained.
Furthermore, notwithstanding any other term of the Offer and in addition to the
Purchaser's right to withdraw or amend the Offer at any time before the
Expiration Date, the Purchaser will not be required to accept for payment or pay
for
32
<PAGE>
any Units not theretofore accepted for payment or paid for and may terminate the
Offer as to such Units if, at any time on or after the date of the Offer and
before the acceptance of such Units for payment or the payment therefor, any of
the following conditions exists:
(a) a preliminary or permanent injunction or other order of
any federal or state court, government or governmental authority or
agency shall have been issued and shall remain in effect which: (i)
makes illegal, delays or otherwise directly or indirectly restrains or
prohibits the making of the Offer or the acceptance for payment,
purchase of or payment for any Units by the Purchaser; (ii) imposes or
confirms limitations on the ability of the Purchaser effectively to
exercise full rights of ownership of any Units, including, without
limitation, the right to vote any Units acquired by the Purchaser
pursuant to the Offer or otherwise on all matters properly presented to
the Partnership's Holders; (iii) imposes or confirms limitations on the
ability of the Purchaser to fully exercise the voting rights conferred
pursuant to its appointment as proxy in respect of all tendered Units
which it accepts for payment; or (iv) requires divestiture by the
Purchaser of any Units (except, in any such case, as expressly
contemplated by the Agreement);
(b) there shall be any action taken, or any statute, rule,
regulation or order proposed, enacted, enforced, promulgated, issued or
deemed applicable to the Offer by any federal or state court,
government or governmental authority or agency, which might, directly
or indirectly, result in any of the consequences referred to in clauses
(i) through (iv) of paragraph (a) above;
(c) any change or development shall have occurred or been
threatened since the date of the Offer to Purchase, in the business,
properties, assets, liabilities, financial condition, operations,
results of operations, or prospects of the Partnership, which is
outside the ordinary course of the Partnership's business or may be
materially adverse to the Partnership, or the Purchaser shall have
become aware of any fact that does or may have a material adverse
effect on the value of the Units;
(d) there shall have occurred: (i) any general suspension of
trading in, or limitation on prices for, securities on any national
securities exchange or in the over-the-counter market in the United
States; (ii) a declaration of a banking moratorium or any suspension of
payments in respect of banks in the United States; (iii) any limitation
by any governmental authority on, or other event which might affect,
the extension of credit by lending institutions or result in any
imposition of currency controls in the United States; (iv) a
commencement of a war or armed hostilities or other national or
international calamity directly or indirectly involving the United
States; (v) a material change in United States or other currency
exchange rates or a suspension or a limitation on the markets thereof;
or (vi) in the case of any of the foregoing existing at the time of the
commencement of the Offer, a material acceleration or worsening
thereof;
(e) there shall have been threatened, instituted or pending
any action or proceeding before any court or governmental agency or
other regulatory or administrative agency or commission or by any other
person, challenging the acquisition of any Units pursuant to the Offer
or otherwise directly or indirectly relating to the Offer, or
otherwise, in the judgment of the Purchaser, adversely affecting the
Purchaser or the Partnership or causing any material diminution of the
benefits to be derived by the Purchaser as a result of the transactions
contemplated by the Offer;
(f) a tender offer or exchange offer for some or all of the
Units is made or publicly announced or proposed to be made,
supplemented or amended by any person other than the Purchaser; or
33
<PAGE>
(g) in the Purchaser's judgment, the purchase of Units
pursuant to the Offer would be reasonably likely to: (i) cause the
Units to be held of record by less than 300 persons; or (ii) cause the
Units to be delisted from the NYSE.
The foregoing conditions are for the sole benefit of the Purchaser and
may be asserted by the Purchaser regardless of the circumstances giving rise to
such conditions or may be waived by the Purchaser in whole or in part at any
time and from time to time in its sole discretion. Any determination by the
Purchaser concerning the events described above will be final and binding upon
all parties.
SECTION 15. INTEREST IN THE SECURITIES OF THE PARTNERSHIP
The Purchaser's sole member, High Coast, owns 31,515,044 Units or
approximately 68.4% of the Units outstanding and 6,642,067 Preferred Units or
approximately 86.5% of the Preferred Units outstanding. To the best knowledge of
the Purchaser no officer or director of the Partnership or its general partner
owns any Units, other than Mr. Icahn.
The Partnership purchased 100,000 Units on October 16, 1998 at a price
of $73/8 per Unit pursuant to its repurchase program through a block trade on
the NYSE. Other than as provided in the preceding sentence, no transaction has
been effected in the Units by the Purchaser or its affiliates (including Mr.
Icahn and his affiliates) or any officer, director or associate of the
Purchaser, in the last 60 days.
SECTION 16. CERTAIN LEGAL MATTERS.
General. Except as set forth in this Section 16, the Purchaser is not
aware of any licenses or regulatory permits that would be material to the
business of the Partnership, taken as a whole, and that might be adversely
affected by the Purchaser's acquisition of Units as contemplated herein, or any
filings, approvals or other actions by or with any domestic or foreign
governmental authority or administrative or regulatory agency that would be
required prior to the acquisition of Units by the Purchaser pursuant to the
Offer as contemplated herein. While there is no present intent to delay the
purchase of Units tendered pursuant to the Offer pending receipt of any such
additional approval or the taking of any such action, there can be no assurance
that any such additional approval or action, if needed, would be obtained
without substantial conditions or that adverse consequences might not result to
the Partnership's business, or that certain parts of the Partnership's business
might not have to be disposed of or other substantial conditions complied with
in order to obtain such approval or action, any of which could cause the
Purchaser to elect to terminate the Offer without purchasing Units thereunder.
The Purchaser's obligation to purchase and pay for Units is subject to certain
conditions, including conditions related to the legal matters discussed in this
Section 16.
Antitrust. Under the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended (the "HSR Act"), and the rules and regulations that have been
promulgated thereunder by the Federal Trade Commission (the "FTC"), certain
acquisition transactions may not be consummated until certain information and
documentary material is filed with the FTC and the Antitrust Division of the
Department of Justice, and certain waiting period requirements have been
satisfied. The Purchaser does not believe any filing is required under the HSR
Act with respect to its acquisition of Units contemplated by the Offer.
State Laws. The Purchaser is not aware of any jurisdiction in which the
making of the Offer is not in compliance with applicable law. If the Purchaser
becomes aware of any jurisdiction in which the making of the Offer would not be
in compliance with applicable law, the Purchaser will make a good faith effort
to comply with any such law. If, after such good faith effort, the Purchaser
cannot comply with any such law, the Offer will not
34
<PAGE>
be made to (nor will tenders be accepted from or on behalf of) Holders residing
in any such jurisdiction. In those jurisdictions whose securities or blue sky
laws require the Offer to be made by a licensed broker or dealer, the Offer
shall be made on behalf of the Purchaser, if at all, only by one or more
registered brokers or dealers licensed under the laws of that jurisdiction.
SECTION 17. FEES AND EXPENSES.
Except as set forth in this Section 17, the Purchaser will not pay any
fees or commissions to any broker, dealer or other person for soliciting tenders
of Units pursuant to the Offer. The Purchaser has retained Harris Trust Company
of New York to act as Depositary and Beacon Hill Partners, Inc. to act as
Information Agent in connection with the Offer. The Purchaser will pay the
Depositary and Information Agent reasonable and customary compensation for their
services in connection with the Offer, plus reimbursement for out-of-pocket
expenses, and will indemnify the Depositary and Information Agent against
certain liabilities and expenses in connection therewith, including liabilities
under the federal securities laws. The Purchaser will also reimburse the
Partnership in respect of certain amounts in connection with the assistance
provided by employees of the Partnership to the Purchaser. (See Section 13 -
"Purchase Price Considerations). The Purchaser will also pay all costs and
expenses of printing and mailing the Offer and its legal fees and expenses.
SECTION 18. MISCELLANEOUS
The Purchaser has filed with the Commission a Tender Offer Statement on
Schedule 14D-1 (including exhibits), pursuant to Rule 14d-3 under the Exchange
Act, furnishing certain additional information with respect to the Offer, and
may file amendments thereto. The Schedule 14D-1 and any amendments thereto,
including exhibits, may be inspected and copies may be obtained at the same
places and in the same manner as set forth in the Introduction of the Offer to
Purchase (except that they will not be available at the regional offices of the
Commission).
No person has been authorized to give any information or to make any
representation on behalf of the Purchaser not contained herein or in the Letter
of Transmittal and, if given or made, such information or representation must
not be relied upon as having been authorized.
LEYTON LLC
November 20, 1998
35
<PAGE>
SCHEDULE I
DESCRIPTION OF REAL ESTATE
<PAGE>
DESCRIPTION OF PROPERTIES
(Alphabetical by Tenant)
<TABLE>
<CAPTION>
TYPE
OF
DATE OF OWNER-
TENANT LOCATION PURCHASE SHIP(1)
- --------------------------------------- ----------------------- ------------------- --------
<S> <C> <C> <C>
COMMERCIAL PROPERTY LAND AND BUILDING
Acme Markets, Inc. and FPBT of Penn. PA 07/25/77 FO
Alabama Power Company 5 Alabama locations 06/04/75 FOS
American Stores and The Fidelity Bank PA 10/18/79 FO
American Stores, Grace & Schottenstein
Stores NJ 10/01/79 FO
American Recreation Group, Inc. NC 7/31/73 FO
Best Products VA 12/30/74 FO
Caldor, Inc. MA 07/27/78 FO
Chesebrough-Pond's, Inc. CT 07/23/80 FO
Chomerics, Inc. MA 07/22/81 FO
Collins Foods International, Inc. 3 Oregon locations 09/16/73 FO
Collins Foods International, Inc. CA 09/16/73 FO
David Miller of California CA 02/28/74 FO
Dillon Companies, Inc. MO 09/05/73 FO
Dillion Companies, Inc. 6 Louisiana locations 09/04/80 FO
Duke Power Co. NC 03/29/76 FOS
European American Bank and Trust Co. NY 03/17/77 FO
Farwell Building MN 06/30/77 FOS
First National Supermarkets, Inc. CT 11/07/79 FOS
First Union National Bank NC 12/30/74 FO
Fisher Scientific Company IL 06/30/77 FO
Forte Hotels International, Inc. NJ 05/06/75 FO
Fox Grocery Company WV 11/14/77 FOS
Gino's Inc. MO 08/14/74 FO
Gino's Inc. CA 08/14/74 FO
Gino's Inc. OH 08/14/74 FO
Gino's, Inc. IL 08/14/74 FO
Golf Road IL 09/26/97 FOS
Grand Union Co. NJ 04/08/75 FO
Grand Union Co. MD 12/09/77 FO
Grand Union Co. 3 New York locations 04/08/75 FO
Grand Union Co. NY 04/09/73 FO
Grand Union Co. VA 12/09/77 FO
Grand Union Co. NY 01/12/79 FOS
Gunite IN 06/03/77 FOS
G.D. Searle & Co. MD 08/13/79 FO
G.D. Searle & Co. AL 10/30/79 FO
G.D. Searle & Co. IL 01/21/80 FO
G.D. Searle & Co. MN 06/11/80 FO
G.D. Searle & Co. IL 06/27/78 FO
G.D. Searle & Co. TN 01/05/79 FO
G.D. Searle & Co. MD 10/30/79 FO
Haverty Furniture GA 04/11/79 FO
Haverty Furniture FL 04/11/79 FO
Haverty Furniture VA 04/11/79 FO
Integra A Hotel and Restaurant Co. AL 12/31/81 & 4/1/82 FO
Integra A Hotel and Restaurant Co. IL 10/29/81 FO
Integra A Hotel and Restaurant Co. IN 08/01/88 FO
Integra A Hotel and Restaurant Co. OH 12/31/81 FO
Integra A Hotel and Restaurant Co. MO 10/14/81 FO
Integra A Hotel and Restaurant Co. TX 04/23/82 FO
Intermountain Color KY 03/05/75 FO
J.C. Penney Co. MA 12/20/77 FO
Kelley Springfield Tire Co. TN 01/31/77 FO
K-Mart Corporation LA 11/01/79 FO
K-Mart Corporation WI 03/27/81 FO
K-Mart Corporation FL 05/28/80 FO
K-Mart Corporation MN 02/21/81 FOS
K-Mart Corporation FL 05/14/80 FO
K-Mart Corporation IA 07/02/81 FO
K-Mart Corporation FL 05/09/80 FO
K-Mart Corporation IL 12/09/77 FOS
Kobacker Stores, Inc. 4 Michigan locations 12/29/79 FO
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
BLDG.
TENANT USE SQ. FT. LEASE EXP.
- --------------------------------------- -------------------------------------------- ----------- --------------------
<S> <C> <C> <C>
COMMERCIAL PROPERTY LAND AND BUILDING
Acme Markets, Inc. and FPBT of Penn. Supermarket and bank branch 47,994 7/31/02 & 5/31/04
Alabama Power Company Division offices 276,980 6/30/05
American Stores and The Fidelity Bank Supermarket and bank branch 38,600 10/31/99 & 6/30/00
American Stores, Grace & Schottenstein
Stores Supermarket sub-l'd retail & vacant retail 94,144 9/30/99
American Recreation Group, Inc. Vacant printing press & office 76,050 n/a
Best Products Vacant industrial building 500,000 n/a
Caldor, Inc. Mall anchor retail store 83,104 10/31/02
Chesebrough-Pond's, Inc. Warehouse & distribution facility 186,000 4/30/05
Chomerics, Inc. Office & learning center 80,000 1/31/05
Collins Foods International, Inc. Fast-food restaurants 5,865 12/31/01
Collins Foods International, Inc. Fast-food restaurant 2,075 12/31/01
David Miller of California Master leased shopping center 28,625 2/28/99
Dillon Companies, Inc. Supermarket 39,483 7/31/03
Dillion Companies, Inc. Convenience store/gas stations 18,289 9/30/00 & '03 & '05
Duke Power Co. R&D/office/warehouse 300,000 3/31/01
European American Bank and Trust Co. Bank branch and retail 46,350 8/31/04
Farwell Building Multi-tenanted warehouse/distribution 441,133 Various
First National Supermarkets, Inc. Warehouse & distribution 1,022,296 11/30/09
First Union National Bank Bank & offices 18,000 12/31/99
Fisher Scientific Company Warehouse & office 74,784 11/14/10
Forte Hotels International, Inc. 239 room hotel 161,625 4/30/10
Fox Grocery Company Food warehouse 244,000 8/31/04
Gino's Inc. Sub-leased to fabric store 5,852 8/31/99
Gino's Inc. 'Dark' 5,000 8/31/99
Gino's Inc. 'Dark' 5,000 8/31/99
Gino's, Inc. Sub-leased to fast-food restaurant 5,000 8/31/99
Golf Road Two retail stores 103,125 1/31/13 & 9/30/12
Grand Union Co. Supermarket 25,000 4/7/00
Grand Union Co. Sub-leased to hardware store 16,830 4/30/01
Grand Union Co. Supermarket 84,240 4/7/00
Grand Union Co. Partially leased cold storage warehouse 51,000 11/30/98
Grand Union Co. Supermarket 25,740 4/30/01
Grand Union Co. 'Dark' distribution center 535,000 2/29/04
Gunite Manufacturing & office 120,310 12/31/02
G.D. Searle & Co. Retail optical store 1,600 8/31/99
G.D. Searle & Co. Vacant retail store 1,700 n/a
G.D. Searle & Co. Retail store 2,470 2/28/00
G.D. Searle & Co. Retail store 1,500 5/31/00
G.D. Searle & Co. Retail store 1,881 7/30/03
G.D. Searle & Co. Retail store 1,736 11/30/98
G.D. Searle & Co. Retail optical store 1,600 9/30/99
Haverty Furniture Retail furniture store 42,990 4/30/99
Haverty Furniture Retail furniture store 27,000 4/30/99
Haverty Furniture Retail furniture store 28,500 4/30/99
Integra A Hotel and Restaurant Co. Restaurants 27,179 3/31/02 & 2/28/03
Integra A Hotel and Restaurant Co. Restaurant 8,000 10/31/01
Integra A Hotel and Restaurant Co. Restaurant 10,400 2/28/03
Integra A Hotel and Restaurant Co. Restaurant 10,250 4/30/02
Integra A Hotel and Restaurant Co. Restaurant 10,200 10/31/01
Integra A Hotel and Restaurant Co. Restaurant 10,397 10/31/02
Intermountain Color Printing facility 28,000 1/31/02
J.C. Penney Co. Mail anchor retail store 120,598 1/31/02
Kelley Springfield Tire Co. Sub-leased to tire store 2,184 10/6/00
K-Mart Corporation 'Dark' 60,842 11/30/04
K-Mart Corporation Sub-leased to Penda Corp. 52,320 4/30/05
K-Mart Corporation Partial sub-lease to supermarket 112,700 7/31/01
K-Mart Corporation Mall anchor retail store 55,552 2/28/05
K-Mart Corporation Multi-tenanted shopping Center 133,385 Various
K-Mart Corporation Retail store 38,301 6/30/06
K-Mart Corporation Retail stores 228,300 2/28/01
Sub-l'd to furniture store &
K-Mart Corporation office call center 39,797 10/31/02
Kobacker Stores, Inc. Retail shoe stores (one sub-'d to rest) 16,678 1/31/06
</TABLE>
I-1
<PAGE>
<TABLE>
<CAPTION>
TYPE
OF
DATE OF OWNER-
TENANT LOCATION PURCHASE SHIP1
- ----------------------------------- ------------------------ ----------- --------
<S> <C> <C> <C>
Kobacker Stores, Inc. KY 12/29/79 FO
Kobacker Stores, Inc. 5 Ohio locations 12/29/79 FO
Landmark Bancshares Corporation MO 12/29/82 FO
Levitz Furniture Corporation NY 07/18/73 FO
Lockheed Corporation CA 06/12/81 FO
Louisiana Power & Light Company 8 Louisiana locations 10/30/80 FOS
Louisiana Power & Light Company 7 Louisiana locations 10/30/80 FOS
Marsh Supermarkets, Inc. IN 03/30/84 FO
Montgomery Ward, Inc. PA 05/11/80 FO
Montgomery Ward, Inc. NJ 05/14/80 FO
Morrison, Inc. AL 02/24/82 FO
Morrison, Inc. GA 12/16/81 FO
Morrison, Inc. FL 04/02/82 FO
04/28/82 &
Morrison Inc. VA 4/25/82 FO
5 South Carolina
North Carolina National Bank locations 12/15/82 FO
Occidental Petroleum Corp. CA 12/22/76 FOS
Ohio Power Co., Inc. OH 10/11/79 FO
Park West International KY 12/31/97 FOS
Penske Corp. OH 06/14/79 FOS
Pneumo Corp. OH 05/03/74 FOS
Portland General Electric Company OR 09/11/78 FOS
Rouse Company MD 06/30/77 FOS
Safeway Stores, Inc. LA 07/31/72 FO
Sams MI 06/26/89 FOS
Smith's Management Corp. NV 06/04/78 FOS
Southland Corporation 5 Florida locations 12/23/80 FO
Staples NY 11/02/92 FO
Stone Container WI 08/18/98 FO
Stop 'N Shop Co., Inc. NY 05/09/80 FO
Stop 'N Shop Co., Inc. VA 05/09/80 FOS
Super Foods Services MI 6/28/78 FOS
SuperValu Stores, Inc. MN 02/15/89 JV
SuperValu Stores, Inc. OH 02/15/89 JV
SuperValu Stores, Inc. GA 02/15/89 JV
SuperValu Stores, Inc. IN 02/15/89 JV
Telecom Properties, Inc. KY 05/25/78 FO
Telecom Properties, Inc. OK 07/24/78 FO
The A&P Company MI 09/07/77 FO
The TJX Companies, Inc. IL 11/17/77 FO
Toys 'R Us TX 11/14/78 FOS
USA Petroleum SC 04/26/79 FO
USA Petroleum OH 04/26/79 FO
USA Petroleum GA 04/26/79 FO
Waban NY 11/02/92 FOS
Watkins MO 05/07/75 FO
Webcraft Technologies MD 11/08/78 FOS
Wetterau, Inc. PA 10/21/80 FO
Wetterau, Inc. NJ 04/03/80 FO
Wickes Companies, Inc. 3 California locations 12/28/79 FOS
RESIDENTIAL PROPERTY LAND AND BUILDING
Crown Cliffs AL 06/01/94 1
COMMERCIAL PROPERTY -- LAND
Easco Corp. NC 10/31/77 LF
Fooderama Supermarkets, Inc. NY 02/15/73 LF
Fooderama Supermarkets, Inc. PA 01/01/73 LF
Gino's, Inc. PA 07/31/72 LF
Gino's, Inc. MI 07/31/72 LF
Gino's, Inc. MA 07/31/72 LF
Gino's, Inc. NJ 07/31/72 LF
J.C. Penney Company, Inc. NY 06/01/73 LF
Levitz Furniture Corporation CA 05/09/72 LF
Levitz Furniture Corporation KS 01/08/73 LF
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
BLDG.
TENANT USE SQ. FT. LEASE EXP.
- ----------------------------------- --------------------------------------------- ----------- --------------------
<S> <C> <C> <C>
Kobacker Stores, Inc. Retail shoe stores 20,800 1/31/06
Kobacker Stores, Inc. Retail shoe store 4,160 1/31/06
Landmark Bancshares Corporation Office 29,600 12/31/07
Levitz Furniture Corporation Showroom & office 177,178 7/31/01
Lockheed Corporation R&D 165,600 8/31/06
Louisiana Power & Light Company Office & warehouse 227,402 9/30/00
Louisiana Power & Light Company Office & warehouse 144,529 11/30/00
Marsh Supermarkets, Inc. Supermarket 51,618 9/30/99
Montgomery Ward, Inc. Retail store w/subtenants 131,400 3/31/00
Montgomery Ward, Inc. Retail store; partial sbls'd to supermarket 109,000 8/1/03
Morrison, Inc. Restaurant 10,400 6/30/02
Morrison, Inc. Restaurant 10,500 6/30/02
Morrison, Inc. Restaurant 10,400 6/30/02
Morrison Inc. Restaurants 20,800 6/30/02
North Carolina National Bank Bank branches (3 are 'dark') 28,885 3/31/03
Occidental Petroleum Corp. Land zoned for retail use 7.5 acres n/a
Ohio Power Co., Inc. Office/computer center 22,500 12/31/09
Park West International 3 bldg. multi-tenanted industrial park 1,199,600 Various
Penske Corp. Manufacturing facility 48,420 7/31/01
Pneumo Corp. Manufacturing plant 270,520 4/30/02
Portland General Electric Company 3 bldg. office complex 460,000 9/30/18
Rouse Company Office bldg. 100,000 3/31/04
Safeway Stores, Inc. Supermarket 36,196 7/31/02
Sams Warehouse club 101,000 6/30/07
Smith's Management Corp. Sub-leased to a flea market 28,800 12/31/03
Southland Corporation Convenience store/gas station 12,786 11/30/00
Staples Retail Store 24,234 8/31/11
Stone Container Manufacturing facility 202,500 4/30/09
Stop 'N Shop Co., Inc. 'Dark' mall anchor 123,000 4/30/00
Stop 'N Shop Co., Inc. Retail 132,400 5/31/02
Super Foods Services Distribution/warehouse 599,987 9/30/10
SuperValu Stores, Inc. Supermarket 63,944 6/30/03
SuperValu Stores, Inc. Supermarket 62,425 12/06/03
SuperValu Stores, Inc. Supermarket 78,571 5/14/05
SuperValu Stores, Inc. Supermarket 60,494 8/31/03
Telecom Properties, Inc. Sub-leased to package distributor 9,080 6/30/03
Telecom Properties, Inc. Sub-leased to trucking operator 6,290 8/31/03
The A&P Company Strip center + 'dark' supermarket 119,165 7/31/03
The TJX Companies, Inc. Retail furniture store 53,550 8/31/03
Toys 'R Us Retail store 41,659 1/31/12
USA Petroleum Gas stations 750 4/30/99
USA Petroleum 'Dark' (no improvements) n/a 4/30/99
USA Petroleum 'Dark' and sub-leased to tire store 537 4/30/99
Waban Retail store 115,660 5/31/13
Watkins Trucking facility w/office 32,718 2/28/03
Webcraft Technologies Printing plant/office/ warehouse 66,000 7/8/00
Wetterau, Inc. 'Dark' 37,100 9/30/00
Wetterau, Inc. Supermarkets 46,440 3/31/99 & 4/30/99
Retail hardware store, flea market
Wickes Companies, Inc. and vacant 107,186 12/31/06 & 12/31/06
RESIDENTIAL PROPERTY LAND AND
BUILDING
Crown Cliffs Apartments 240 units n/a
COMMERCIAL PROPERTY -- LAND
Bldg. utilized as tool manufacturing
Easco Corp. facility 178,854 10/31/03
Fooderama Supermarkets, Inc. Building subleased to supermarket n/a 12/31/99
Fooderama Supermarkets, Inc. Building sub-leased to office user n/a 12/31/99
Gino's, Inc. Building tenant d/b/a restaurant n/a 12/31/98
Gino's, Inc. Building tenant d/b/a restaurant n/a 12/31/98
Gino's, Inc. Building tenant d/b/a restaurants n/a 12/31/98
Gino's, Inc. Building tenant d/b/a video store n/a 12/31/98
J.C. Penney Company, Inc. Building utilized for retail 189,296 8/31/02
Levitz Furniture Corporation Bldg. sub-l'd to furniture store and vacant n/a 6/1/02 & 7/31/07
Levitz Furniture Corporation Building utilized for retail 170,637 12/31/02
</TABLE>
I-2
<PAGE>
<TABLE>
<CAPTION>
TYPE
OF
DATE OF OWNER-
TENANT LOCATION PURCHASE SHIP1
- --------------------------------- ---------- ----------- --------
<S> <C> <C> <C>
COMMERCIAL PROPERTY -- BUILDING
Bank South GA 09/23/76 2
06/18/72 &
Harwood Square IL 11/22/82 LI
Holiday Inn FL 04/21/80 LI
Safeway Stores CA 12/29/72 LI
Toys 'R Us, Inc. RI 09/25/79 LI
United Life & Accident Ins. Co. NH 12/16/77 LI
Wickes Companies, Inc. PA 10/23/75 LI
Weigh-Tronix, Inc. CA 04/20/77 LI
Baptist Hospital 1 TN 06/30/97 LI
Baptist Hospital 2 TN 06/30/97 LI
DEVELOPMENT PROPERTY
Dellwood NY 05/18/95 FO
Grassy Hollow NY 08/30/94 FO
Kimco Realty NY 11/02/92 LF
HOTEL AND DEVELOPMENT PROPERTY
New Seabury MA 07/23/98 FOS
<CAPTION>
BLDG.
TENANT USE SQ. FT. LEASE EXP.
- --------------------------------- ---------------------------------- ----------- -----------
<S> <C> <C> <C>
COMMERCIAL PROPERTY -- BUILDING
Bank South Bank offices & operations center 103,700 8/31/06
Harwood Square Multi-tenanted shopping center 137,662 Various
Holiday Inn 214 room hotel 125,031 n/a
Safeway Stores Supermarket 30,885 12/31/02
Toys 'R Us, Inc. Retail store 42,889 5/31/10
United Life & Accident Ins. Co. Office 91,946 10/31/06
Wickes Companies, Inc. Retail store 153,017 4/29/07
Weigh-Tronix, Inc. Manufacturing & office 157,000 12/31/98
Baptist Hospital 1 Medical office building 216,227 12/31/98
Baptist Hospital 2 Medical office building 80,786 12/31/18
DEVELOPMENT PROPERTY
Dellwood Land zoned for residential use 248 acres n/a
Grassy Hollow 16 lot approved sub-division 92 acres n/a
Building under construction
Kimco Realty for donut store 3,000 3/31/19
HOTEL AND DEVELOPMENT PROPERTY
New Seabury Master planned community n/a
</TABLE>
FO = Fee Ownership
FOS = Fee Ownership subject to first mortgage
JV = 50% interest in joint venture which has fee ownership
LF = Leased Fee
LI = Leasehold interest in improvement subject to a ground lease.
- ----------
1 70% interest in joint venture which has fee ownership subject to first and
second mortgages
2 99.7083% interest in joint venture which has leasehold interest in
improvements subject to ground lease
I-3
<PAGE>
SCHEDULE OF MORTGAGES
(Alphabetical by Tenant)
<TABLE>
<CAPTION>
Principal Principal
Balance at Stated Period Balance
September Interest Amortized Maturity Due at
Tenant/Location 30, 1998 Rate (Yrs.) Date Maturity
- ------------------------------------------------------- ------------- ---------- ----------- ---------- -------------
<S> <C> <C> <C> <C> <C>
Alabama Power Co./Anniston, AL ..................... $ 858,142 9.250% 30.00 5/31/00 $ 704,618
Alabama Power Co./Eufala, AL ....................... 360,005 9.250 30.00 5/31/00 295,598
Alabama Power Co./Mobile, AL ....................... 955,120 9.250 30.00 5/31/00 784,245
Alabama Power Co./Montgomery, AL ................... 906,331 9.250 30.00 5/31/00 729,921
Alabama Power Co./Tuscaloosa, AL ................... 898,184 9.250 30.00 5/31/00 737,497
Baptist Hospital/Nashville, TN .....................
Building 1 ...................................... 22,653,010 7.840 21.50 12/31/18 0
Building 2 ...................................... 8,407,763 7.840 21.50 12/31/18 0
Brown Cliffs/Hoover, AL ............................
1st Mortgage .................................... 8,132,588 7.690 30.00 10/15/07 4,026,461
2nd Mortgage .................................... 204,698 8.300 5.00 10/15/00 0
Duke Power Co./Toddville, NC ....................... 2,662,599 9.750 25.00 2/28/01 1,770,574
Farwell Bldg./So. St. Paul, MN ..................... 759,916 8.625 23.83 7/31/01 0
First National Supermarkets, Inc./Windsor
Locks, CT ......................................... 13,443,046 9.500 16.00 11/30/09 0
Fox Grocery Co./Milton, WV ......................... 1,073,130 9.000 24.00 11/30/03 0
Golf Road/Schaumburg, IL ........................... 7,121,773 7.250 30.00 4/30/08 6,208,473
Grand Union Co./Mt. Kisco, NY ...................... 4,387,601 10.125 35.00 1/31/14 0
Gunite/Elkhart, IN ................................. 111,453 9.250 22.00 9/30/00 0
K-Mart Corporation/Canton, IL ...................... 232,524 8.750 25.00 1/31/03 0
K-Mart Corporation/Shakopee, MN .................... 480,000 8.250 15.00 1/31/06 0
Louisiana Power & Light Company/Luling, LA 70,582 8.790 8.50 10/31/00 0
LP&L/Amite, LA ..................................... 61,228 8.790 8.50 10/31/00 0
LP&L/Bastrop, LA ................................... 81,637 8.790 8.50 10/31/00 0
LP&L/Chalmette, LA ................................. 107,998 8.790 8.50 10/31/00 0
LP&L/Ferriday, LA .................................. 54,569 8.790 8.50 10/31/00 0
LP&L/Gretna (Gov. Hall), LA ........................ 482,590 8.790 8.50 10/31/00 0
LP&L/Gretna (Virgil), LA ........................... 616,951 8.790 8.50 10/31/00 0
LP&L/Hammond, LA ................................... 123,730 8.790 8.50 10/31/00 0
LP&L/Houma, LA ..................................... 82,912 8.790 8.50 10/31/00 0
LP&L/Jefferson, LA ................................. 734,728 8.790 8.50 10/31/00 0
LP&L/New Orleans (Elmira), LA ...................... 57,400 8.790 8.50 10/31/00 0
LP&L/New Orleans (Delaronde), LA ................... 1,137,808 8.790 8.50 10/31/00 0
LP&L/Reserve, LA ................................... 92,266 8.790 8.50 10/31/00 0
LP&L/Westwego, LA .................................. 94,817 8.790 8.50 10/31/00 0
LP&L/W. Monroe, LA ................................. 451,126 8.790 8.50 10/31/00 0
New Seabury, MA .................................... 8,452,332 Prime +1 ?? 10/1/98 8,452,332
(Repaid in Full 10/30/98) .......................
Occidental Petroleum Corp./Bakersfield, CA ......... 1,761,095 9.250 30.00 5/31/07 0
Park West/Hebron, KY ...............................
Buildings A & B ................................. 12,529,384 7.210 30.00 6/30/08 10,847,908
UPS Building .................................... 19,432,371 7.080 25.00 6/30/08 15,442,651
Penske Corp./Maineville, OH ........................ 10,298 8.613 20.00 6/30/99 0
Pneumo Corp./Cleveland, OH ......................... 752,420 9.250 28.00 5/31/02 0
Portland General Electric Co./Portland, OR ......... 44,893,928 7.510 10.83 8/31/08 20,144,417
Rouse Co./Columbia, MD ............................. 3,023,278 9.500 12.00 4/30/04 0
Sam's Madison Heights, MI .......................... 5,485,135 9.625 10.00 10/31/99 5,444,164
Smith's Management Corp./Las Vegas, NV ............. 346,907 9.500 25.00 11/30/03 125,727
</TABLE>
I-4
<PAGE>
<TABLE>
<CAPTION>
Principal Principal
Balance at Stated Period Balance
September Interest Amortized Maturity Due at
Tenant/Location 30, 1998 Rate (Yrs.) Date Maturity
- --------------------------------------------------- --------------- ---------- ----------- ---------- -------------
<S> <C> <C> <C> <C> <C>
Stop 'N Shop Co., Inc./Norfolk, VA ............. $ 753,629 9.000% 22.00 4/30/02 $ 115,229
Super Foods Services/Bridgeport, MI ............ 6,405,347 8.250 16.67 8/31/10 0
Toys 'R Us, Inc./Arlington, TX ................. 825,128 7.080 18.00 12/31/11 0
Waban/E. Syracuse, NY .......................... 3,523,026 8.250 20.00 11/1/98 $3,523,026
(Repaid in full 10/30/98) ...................
Webcraft Technologies/Salisbury, MD ............ 442,590 9.500 10.83 2/28/04 0
Wickes Companies, Inc./Hacienda Heights, CA 439,623 9.375 26.33 3/31/06 0
Wickes Companies, Inc./Santa Clara, CA ......... 506,180 9.375 26.33 3/31/06 0
TOTAL: .................................... $187,480,896
</TABLE>
I-5
<PAGE>
AMERICAN REAL ESTATE PARTNERS, LP
a limited partnership
<TABLE>
<CAPTION>
No. of Amount of
State Locations Encumberances
------- ----------- ---------------
<S> <C> <C> <C>
COMMERCIAL
PROPERTY LAND
AND BUILDING
Acme Markets, Inc. and
FPBT of Penn. PA 1
Alabama Power Company AL 5 $ 3,977,783
Amer Stores and The
Fidelity Bank PA 1
Amer Stores, Grace, &
Shottenstein Stores NJ 1
American Recreation
Group, Inc. NC 1
Amterre Ltd. Partnership PA 1
Best Products Co., Inc. VA 1
Caldor, Inc. MA 1
Chesebrough-Pond's Inc. CN 1
Chomerics, Inc. MA 1
Collins Foods Interna-
tional, Inc.(3) OR 3
Collins Foods Interna-
tional, Inc. CA 1
David Miller of California CA 1
Dillon Companies, Inc. MO 1
Dillon Companies, Inc. LA 6
Druid Point Bldg. GA 1
Duke Power Co. NC 1 2,662,598
European American Bank
and Trust Co. NY 1
Farwell Bldg. MN 1 759,916
Federated Department
Stores, Inc. CA 1
First National
Supermarkets, Inc. CT 1 13,443,046
First Union National Bank NC 1
Fisher Scientific Company IL 1
Forte Hotels International,
Inc. NJ 1
Forte Hotels International,
Inc. TX 1
Fox Grocery Company WV 1 1,073,130
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
REAL ESTATE OWNED AND REVENUES EARNED
------------------------------------------------------------------------------------------------
Real estate owned at September 30, 1998
------------------------------------------------------------------------------------------------
Amount
Carried
Initial Cost Cost of at close Reserve for Depreciation Depreciation
to Company Improvements of period Depreciation Range in years Method
-------------- -------------- ------------- -------------- ---------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
COMMERCIAL
PROPERTY LAND
AND BUILDING
Acme Markets, Inc. and
FPBT of Penn. $2,004,393 $2,004,393 $1,417,707 25 COMPONENT
Alabama Power Company
Amer Stores and The
Fidelity Bank
Amer Stores, Grace, &
Shottenstein Stores 2,043,567 2,043,567 1,538,648 35 COMPONENT
American Recreation
Group, Inc. 300,000 300,000 HFS
Amterre Ltd. Partnership SOLD
Best Products Co., Inc. 3,303,553 3,303,553 20 STRAIGHT LINE
Caldor, Inc.
Chesebrough-Pond's Inc. 1,549,805 1,549,805 1,124,710 20-45 COMPONENT
Chomerics, Inc.
Collins Foods Interna-
tional, Inc.(3) 169,048 169,048 SOLD
Collins Foods Interna-
tional, Inc. 87,810 87,810
David Miller of California 1,036,681 1,036,681 510,210 25 STRAIGHT LINE
Dillon Companies, Inc. 546,681 546,681 319,765 30 STRAIGHT LINE
Dillon Companies, Inc. 1,555,112 1,555,112 863,186 30 COMPONENT
Druid Point Bldg. SOLD
Duke Power Co.
European American Bank
and Trust Co. 1,355,210 1,355,210 1,284,888 20 STRAIGHT LINE
Farwell Bldg. 5,226,279 5,226,279 1,276,321 15-20 STRAIGHT LINE
Federated Department
Stores, Inc. SOLD
First National
Supermarkets, Inc.
First Union National Bank
Fisher Scientific Company 597,806 597,806 159,719 20 STRAIGHT LINE
Forte Hotels International,
Inc.
Forte Hotels International,
Inc. SOLD
Fox Grocery Company
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Net Total
Investment revenue
Financing applicable
Method(G) to period(G) Tax Basis
------------- -------------- ------------
<S> <C> <C> <C>
COMMERCIAL
PROPERTY LAND
AND BUILDING
Acme Markets, Inc. and
FPBT of Penn. $ 184,416 875,617
Alabama Power Company $ 7,260,519 577,905 8,277,149
Amer Stores and The
Fidelity Bank 583,570 56,653 245,599
Amer Stores, Grace, &
Shottenstein Stores 107,051 504,919
American Recreation
Group, Inc. 70,700 481,568
Amterre Ltd. Partnership 288,480 0
Best Products Co., Inc. 1,959,295
Caldor, Inc. 1,817,545 130,046 1,099,018
Chesebrough-Pond's Inc. 105,927 425,095
Chomerics, Inc. 6,038,965 577,441 3,117,517
Collins Foods Interna-
tional, Inc.(3) 81,764 24,367 225,187
Collins Foods Interna-
tional, Inc. 46,444 13,235 119,695
David Miller of California 47,611 673,882
Dillon Companies, Inc. 45,553 296,973
Dillon Companies, Inc. 137,504 692,078
Druid Point Bldg. 620,625 0
Duke Power Co. 4,460,155 341,768 5,826,979
European American Bank
and Trust Co. 131,250 472,101
Farwell Bldg. 739,041 2,797,448
Federated Department
Stores, Inc. 25,497 0
First National
Supermarkets, Inc. 23,310,063 1,617,220 6,423,138
First Union National Bank 546,706 38,067 388,163
Fisher Scientific Company 122,250 1,421,165
Forte Hotels International,
Inc. 6,309,531 431,578 3,779,022
Forte Hotels International,
Inc. 0
Fox Grocery Company 3,147,397 212,410 1,700,297
</TABLE>
I-6
<PAGE>
<TABLE>
<CAPTION>
No. of Amount of
State Locations Encumberances
------- ----------- ---------------
<S> <C> <C> <C>
Gino's, Inc. MO 1
Gino's, Inc. CA 1
Gino's, Inc. OH 1
Gino's, Inc. IL 1
Golf Road IL 1 7,121,773
Grand Union Co. NJ 1
Grand Union Co. MD 1
Grand Union Co. NY 3
Grand Union Co. NY 1
Grand Union Co. VA 1
Grand Union Co. NY 1 4,387,601
Gunite IN 1 111,453
G.D. Searle & Co. MD 1
G.D. Searle & Co. MN 1
G.D. Searle & Co. AL 1
G.D. Searle & Co. IL 1
G.D. Searle & Co. MN 1
G.D. Searle & Co. IL 1
G.D. Searle & Co. TN 1
G.D. Searle & Co. MD 1
Haverty Furniture
Companies, Inc. GA 1
Haverty Furniture
Companies, Inc. FL 1
Haverty Furniture
Companies, Inc. VA 1
Integra A Hotel and
Restaurant Co. AL 2
Integra A Hotel and
Restaurant Co. IL 1
Integra A Hotel and
Restaurant Co. IN 1
Integra A Hotel and
Restaurant Co. OH 1
Integra A Hotel and
Restaurant Co. MO 1
Integra A Hotel and
Restaurant Co. TX 1
Integra A Hotel and
Restaurant Co. MI 1
Intermountain Color KY 1
J.C. Penney Company,
Inc. MA 1
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
REAL ESTATE OWNED AND REVENUES EARNED
----------------------------------------------------------------------------------------------
Real estate owned at September 30, 1998
----------------------------------------------------------------------------------------------
Amount
Carried
Initial Cost Cost of at close Reserve for Depreciation Depreciation
to Company Improvements of period Depreciation Range in years Method
-------------- -------------- ----------- -------------- ---------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Gino's, Inc. 209,213 209,213
Gino's, Inc. 225,100 225,100
Gino's, Inc. 201,938 201,938
Gino's, Inc. 235,972 235,972
Golf Road 9,292,656 (8,921) 9,283,735 223,024 35 STRAIGHT LINE
Grand Union Co. 430,664 430,664
Grand Union Co. 372,383 372,383 253,487 30 COMPONENT
Grand Union Co. 1,091,020 (7,000) 1,084,020
Grand Union Co. 1,988,704 1,988,704 1,233,582 HFS
Grand Union Co. 266,468 266,468 181,684 30 COMPONENT
Grand Union Co.
Gunite 1,134,565 1,134,565 1,065,034 30 COMPONENT
G.D. Searle & Co. 299,229 299,229 149,862 20-35 COMPONENT
G.D. Searle & Co. SOLD
G.D. Searle & Co. 146,781 146,781 91,627 HFS
G.D. Searle & Co. 256,295 256,295 165,722 20-35 COMPONENT
G.D. Searle & Co. 339,358 339,358 151,429 20-35 COMPONENT
G.D. Searle & Co. 323,559 323,559 226,870 30 COMPONENT
G.D. Searle & Co. 214,421 214,421 149,067 20-35 COMPONENT
G.D. Searle & Co. 325,891 325,891 150,823 20-35 COMPONENT
Haverty Furniture
Companies, Inc.
Haverty Furniture
Companies, Inc.
Haverty Furniture
Companies, Inc.
Integra A Hotel and
Restaurant Co. 245,625 245,625
Integra A Hotel and
Restaurant Co. 198,392 198,392
Integra A Hotel and
Restaurant Co. 231,513 231,513
Integra A Hotel and
Restaurant Co.
Integra A Hotel and
Restaurant Co. 224,837 224,837
Integra A Hotel and
Restaurant Co. 228,793 228,793
Integra A Hotel and
Restaurant Co. 234,464 234,464
Intermountain Color 559,644 559,644 450,363 25 STRAIGHT LINE
J.C. Penney Company,
Inc. 2,484,262 2,484,262 1,647,948 25 STRAIGHT LINE
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Net Total
Investment revenue
Financing applicable
Method(G) to period(G) Tax Basis
------------ -------------- ------------
<S> <C> <C> <C>
Gino's, Inc. 147,837 24,076 255,459
Gino's, Inc. 140,765 31,045 285,589
Gino's, Inc. 125,900 28,442 255,478
Gino's, Inc. 130,855 33,328 293,221
Golf Road 565,070 7,166,491
Grand Union Co. 407,077 62,467 652,208
Grand Union Co. 25,313 159,580
Grand Union Co. 1,049,272 161,014 1,592,094
Grand Union Co. 63,750 1,138,226
Grand Union Co. 18,113 113,943
Grand Union Co. 7,129,847 494,040 4,543,643
Gunite 171,375 374,029
G.D. Searle & Co. 21,449 149,366
G.D. Searle & Co. 9,235 0
G.D. Searle & Co. 59,235
G.D. Searle & Co. 24,071 90,574
G.D. Searle & Co. 22,961 187,929
G.D. Searle & Co. 17,259 134,560
G.D. Searle & Co. 14,055 65,362
G.D. Searle & Co. 20,250 175,069
Haverty Furniture
Companies, Inc. 581,191 39,368 379,565
Haverty Furniture
Companies, Inc. 440,296 29,824 287,549
Haverty Furniture
Companies, Inc. 560,615 38,166 365,104
Integra A Hotel and
Restaurant Co. 1,321,773 173,202 1,001,495
Integra A Hotel and
Restaurant Co. 422,061 74,476 428,106
Integra A Hotel and
Restaurant Co. 570,728 88,393 505,683
Integra A Hotel and
Restaurant Co. 571,693 62,176 380,031
Integra A Hotel and
Restaurant Co. 430,163 78,067 453,886
Integra A Hotel and
Restaurant Co. 535,017 100,522 494,818
Integra A Hotel and
Restaurant Co. 543,099 100,831 491,470
Intermountain Color 62,927 236,951
J.C. Penney Company,
Inc. 187,683 1,151,668
</TABLE>
I-7
<PAGE>
<TABLE>
<CAPTION>
No. of Amount of
State Locations Encumberances
------- ----------- ---------------
<S> <C> <C> <C>
Kelley Springfield Tire
Company TN 1
K-Mart Corporation LA 1
K-Mart Corporation WI 1
K-Mart Corporation FL 1
K-Mart Corporation MN 1 480,000
K-Mart Corporation FL 1
K-Mart Corporation IA 1
K-Mart Corporation FL 1
K-Mart Corporation IL 1 232,524
Kobacker Stores, Inc. MI 4
Kobacker Stores, Inc. KY 1
Kobacker Stores, Inc. OH 5
Kraft, Inc. NC 1
Landmark Bancshares
Corporation MO 1
Levitz Furniture
Corporation NY 1
Lockheed Corporation CA 1
Louisiana Power and
Light Company LA 8 2,660,413
Louisiana Power and
Light Company LA 7 1,591,486
Marsh Supermarkets, Inc. IN 1
Montgomery Ward, Inc. PA 1
Montgomery Ward, Inc. NJ 1
Morrison, Inc. AL 1
Morrison, Inc. GA 1
Morrison, Inc. FL 1
Morrison, Inc. VA 2
North Carolina National
Bank(4) SC 2
North Carolina National
Bank SC 3
Occidental Petroleum
Corp. CA 1 1,761,095
Ohio Power Co. Inc. OH 1
Old National Bank of
Washington WA 1
Park West KY 1 12,529,384
Park West (UPS) KY 1 19,432,371
Penske Corp. OH 1 10,298
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
REAL ESTATE OWNED AND REVENUES EARNED
------------------------------------------------------------------------------------------------
Real estate owned at September 30, 1998
------------------------------------------------------------------------------------------------
Amount
Carried
Initial Cost Cost of at close Reserve for Depreciation Depreciation
to Company Improvements of period Depreciation Range in years Method
-------------- -------------- ------------- -------------- ---------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Kelley Springfield Tire
Company 120,946 120,946 75,200 20 STRAIGHT LINE
K-Mart Corporation
K-Mart Corporation
K-Mart Corporation
K-Mart Corporation
K-Mart Corporation 2,760,118 2,760,118 1,713,000 20-45 COMPONENT
K-Mart Corporation
K-Mart Corporation 2,636,000 2,636,000 1,793,300 20-45 COMPONENT
K-Mart Corporation
Kobacker Stores, Inc. 215,148 215,148
Kobacker Stores, Inc. 88,364 88,364
Kobacker Stores, Inc. 354,030 354,030
Kraft, Inc. SOLD
Landmark Bancshares
Corporation
Levitz Furniture
Corporation 988,463 988,463
Lockheed Corporation 2,449,469 2,449,469
Louisiana Power and
Light Company
Louisiana Power and
Light Company 3,491,431 3,491,431
Marsh Supermarkets, Inc. 5,001,933 5,001,933 2,307,293 35 STRAIGHT LINE
Montgomery Ward, Inc. 3,289,166 3,289,166 2,157,686 20-45 COMPONENT
Montgomery Ward, Inc.
Morrison, Inc. 324,288 324,288
Morrison, Inc. 347,404 347,404
Morrison, Inc. 375,392 375,392
Morrison, Inc. 363,059 363,059
North Carolina National
Bank(4) 1,450,047 1,450,047 516,136 40 STRAIGHT LINE
North Carolina National
Bank 949,334 949,334 434,689 HFS
Occidental Petroleum
Corp. 2,324,780 2,324,780 404,295 HFS
Ohio Power Co. Inc.
Old National Bank of
Washington SOLD
Park West 19,020,000 79,418 19,099,418 346,736 35 STRAIGHT LINE
Park West (UPS) 21,106,313 21,106,313 70,255 35 STRAIGHT LINE
Penske Corp.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Net Total
Investment revenue
Financing applicable
Method(G) to period(G) Tax Basis
------------ -------------- ------------
<S> <C> <C> <C>
Kelley Springfield Tire
Company 8,587 68,933
K-Mart Corporation 1,650,896 104,002 686,029
K-Mart Corporation 1,879,118 126,851 1,008,487
K-Mart Corporation 2,144,971 154,104 1,028,356
K-Mart Corporation 1,743,435 106,989 1,087,769
K-Mart Corporation 178,934 1,030,109
K-Mart Corporation 1,336,663 94,191 759,886
K-Mart Corporation 1,766,334 305,594 1,701,788
K-Mart Corporation 947,555 56,683 634,904
Kobacker Stores, Inc. 410,912 50,470 322,573
Kobacker Stores, Inc. 97,303 14,167 114,688
Kobacker Stores, Inc. 595,521 63,935 510,737
Kraft, Inc. 0
Landmark Bancshares
Corporation 4,509,058 474,683 2,096,229
Levitz Furniture
Corporation 2,040,968 257,713 2,968,530
Lockheed Corporation 4,046,716 625,428 3,645,085
Louisiana Power and
Light Company 12,024,382 1,132,791 5,084,554
Louisiana Power and
Light Company 4,128,974 736,323 3,984,337
Marsh Supermarkets, Inc. 407,349 3,113,565
Montgomery Ward, Inc. 235,710 1,131,392
Montgomery Ward, Inc. 1,528,169 137,498 682,206
Morrison, Inc. 693,984 98,133 720,377
Morrison, Inc. 663,483 98,293 722,911
Morrison, Inc. 701,771 103,837 776,557
Morrison, Inc. 1,731,966 201,643 1,481,263
North Carolina National
Bank(4) 108,803 1,147,417
North Carolina National
Bank 990,176
Occidental Petroleum
Corp. 4,407,409
Ohio Power Co. Inc. 3,890,408 272,023 1,266,073
Old National Bank of
Washington 225,741 0
Park West 1,358,621 16,265,005
Park West (UPS) 290,194 15,953,620
Penske Corp. 551,653 56,463 288,267
</TABLE>
I-8
<PAGE>
<TABLE>
<CAPTION>
No. of Amount of
State Locations Encumberances
------- ----------- ---------------
<S> <C> <C> <C>
Pneumo Corp. OH 1 752,420
Portland General Electric
Company OR 1 44,893,928
Rouse Company MD 1 3,023,278
Safeway Stores, Inc. LA 1
Sams MI 1 5,485,135
Smith's Management
Corp. NV 1 346,907
Southland Corporation FL 5
Staples NY 1
Stone Container WI 1
Stop 'N Shop Co., Inc. NY 1
Stop 'N Shop Co., Inc. VA 1 753,629
Super Foods Services, Inc. MI 1 6,405,347
SuperValu Stores, Inc. * MN 1
SuperValu Stores, Inc.* OH 1
SuperValu Stores, Inc.* GA 1
SuperValu Stores, Inc.* IN 1
Telecom Properties, Inc. OK 1
Telecom Properties, Inc. KY 1
The A&P Company MI 1
The TJX Companies, Inc. IL 1
Toys 'R' Us, Inc. TX 1 825,128
USA Petroleum
Corporation SC 2
USA Petroleum
Corporation OH 1
USA Petroleum
Corporation GA 2
Waban NY 1 3,523,026
Watkins MO 1
Webcraft Technologies MD 1 442,590
Wetterau, Inc. PA 1
Wetterau, Inc. NJ 2
Wickes Companies, Inc. CA 2 506,153
Wickes Companies, Inc. CA 1 439,650
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
REAL ESTATE OWNED AND REVENUES EARNED
----------------------------------------------------------------------------------------------
Real estate owned at September 30, 1998
----------------------------------------------------------------------------------------------
Amount
Carried
Initial Cost Cost of at close Reserve for Depreciation Depreciation
to Company Improvements of period Depreciation Range in years Method
-------------- -------------- ----------- -------------- ---------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Pneumo Corp.
Portland General Electric
Company
Rouse Company
Safeway Stores, Inc. 1,782,885 1,782,885 1,071,160 20-40 COMPONENT
Sams 8,844,225 8,844,225 1,492,811 40 STRAIGHT LINE
Smith's Management
Corp.
Southland Corporation 1,162,971 1,162,971 669,089 20-45 COMPONENT
Staples 2,457,582 2,457,582 65,942 35 STRAIGHT LINE
Stone Container 9,027,973 9,027,973 30 STRAIGHT LINE
Stop 'N Shop Co., Inc. 5,013,507 5,013,507 3,640,494 20-45 COMPONENT
Stop 'N Shop Co., Inc.
Super Foods Services, Inc.
SuperValu Stores, Inc. * 1,370,965 1,370,965 231,958 40 STRAIGHT LINE
SuperValu Stores, Inc.* 3,000,671 3,000,671 518,285 40 STRAIGHT LINE
SuperValu Stores, Inc.* 2,344,836 2,344,836 401,676 40 STRAIGHT LINE
SuperValu Stores, Inc.* 2,267,573 2,267,573 388,061 40 STRAIGHT LINE
Telecom Properties, Inc.
Telecom Properties, Inc. 281,253 281,253
The A&P Company
The TJX Companies, Inc.
Toys 'R' Us, Inc. 501,836 501,836
USA Petroleum
Corporation 163,161 163,161
USA Petroleum
Corporation 78,443 78,443
USA Petroleum
Corporation 138,062 138,062
Waban 8,378,095 8,378,095 582,901 15-35 COMPONENT
Watkins 965,741 7,504 973,245 96,904 25 STRAIGHT LINE
Webcraft Technologies 780,774 780,774 140,845 20 STRAIGHT LINE
Wetterau, Inc.
Wetterau, Inc.
Wickes Companies, Inc. 1,883,689 1,883,689 1,282,971 20-40 COMPONENT
Wickes Companies, Inc. 2,447,297 2,447,297 1,205,185 HFS
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Net Total
Investment revenue
Financing applicable
Method(G) to period(G) Tax Basis
------------ -------------- ------------
<S> <C> <C> <C>
Pneumo Corp. 2,181,589 160,301 1,322,020
Portland General Electric
Company 51,455,700 3,336,170 14,196,037
Rouse Company 6,214,362 412,120 3,160,809
Safeway Stores, Inc. 63,862 869,195
Sams 813,705 6,944,942
Smith's Management
Corp. 818,968 55,220 498,413
Southland Corporation 95,679 493,454
Staples 214,410 2,522,028
Stone Container 97,639 6,837,265
Stop 'N Shop Co., Inc. 340,609 1,373,013
Stop 'N Shop Co., Inc. 2,720,978 183,985 1,234,200
Super Foods Services, Inc. 10,069,888 802,850 5,511,051
SuperValu Stores, Inc. * 86,163 0
SuperValu Stores, Inc.* 239,876 0
SuperValu Stores, Inc.* 168,161 0
SuperValu Stores, Inc.* 145,250 0
Telecom Properties, Inc. 111,857 7,905 48,644
Telecom Properties, Inc. 96,539 27,426 330,062
The A&P Company 1,519,358 128,811 716,892
The TJX Companies, Inc. 2,587,577 177,240 1,381,919
Toys 'R' Us, Inc. 1,089,319 105,847 1,450,662
USA Petroleum
Corporation 150,994 28,261 169,597
USA Petroleum
Corporation 80,670 13,588 81,554
USA Petroleum
Corporation 132,383 23,916 143,548
Waban 515,118 7,762,546
Watkins 86,850 760,873
Webcraft Technologies 128,514 1,572,788
Wetterau, Inc. 779,357 62,664 386,069
Wetterau, Inc. 1,688,585 132,703 582,090
Wickes Companies, Inc. 441,023 1,682,810
Wickes Companies, Inc. 634,427
</TABLE>
I-9
<PAGE>
<TABLE>
<CAPTION>
No. of Amount of
State Locations Encumberances
------- ----------- ---------------
<S> <C> <C> <C>
RESIDENTIAL
PROPERTY LAND
AND BUILDING
Crown Cliffs* AL 1 8,337,286
COMMERCIAL
PROPERTY -- LAND
Easco Corp. NC 1
Foodarama supermarkets,
Inc. NY 1
Foodarama supermarkets,
Inc. PA 1
Gino's, Inc. MD 1
Gino's, Inc. PA 1
Gino's, Inc. MI 1
Gino's, Inc. MA 2
Gino's, Inc. NJ 1
J.C. Penney Company,
Inc. NY 1
Levitz Furniture
Corporation CA 2
Levitz Furniture
Corporation KS 1
COMMERCIAL
PROPERTY --
BUILDING
Bank South GA 1
Harwood Square IL 1
Holiday Inn FL 1
Lockheed Corporation CA 1
Safeway Stores, Inc. CA 1
Toys 'R' Us, Inc. RI 1
United Life & Accident
Ins. Co. NH 1
Wickes Companies, Inc. PA 1
Weigh-Tronix, Inc. CA 1
Baptist Hospital 1 TN 1 22,653,010
Baptist Hospital 2 TN 1 8,407,762
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
REAL ESTATE OWNED AND REVENUES EARNED
------------------------------------------------------------------------------------------------------
Real estate owned at September 30, 1998
------------------------------------------------------------------------------------------------------
Amount
Carried
Initial Cost Cost of at close Reserve for Depreciation Depreciation
to Company Improvements of period Depreciation Range in years Method
-------------- -------------- ------------------- -------------- ---------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
RESIDENTIAL
PROPERTY LAND
AND BUILDING
Crown Cliffs* 11,065,875 12,883 11,078,758(2) 1,485,218 5-27.5 STRAIGHT LINE
COMMERCIAL
PROPERTY -- LAND
Easco Corp. 157,560 157,560
Foodarama supermarkets,
Inc. 140,619 140,619
Foodarama supermarkets,
Inc. 112,554 112,554
Gino's, Inc. SOLD
Gino's, Inc. 36,271 36,271
Gino's, Inc. 71,160 71,160
Gino's, Inc. 102,048 102,048
Gino's, Inc. 61,050 61,050
J.C. Penney Company,
Inc. 51,009 51,009
Levitz Furniture
Corporation 1,134,836 1,134,836
Levitz Furniture
Corporation 460,490 460,490
COMMERCIAL
PROPERTY --
BUILDING
Bank South
Harwood Square 6,803,769 33,959 6,837,728 3,144,598 34.8 STRAIGHT LINE
Holiday Inn 7,203,982 416,726 7,620,708 2,633,146 5-39 COMPONENT
Lockheed Corporation SOLD
Safeway Stores, Inc. 558,652 558,652 529,442 27 STRAIGHT LINE
Toys 'R' Us, Inc.
United Life & Accident
Ins. Co.
Wickes Companies, Inc.
Weigh-Tronix, Inc.
Baptist Hospital 1
Baptist Hospital 2
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Net Total
Investment revenue
Financing applicable
Method(G) to period(G) Tax Basis
------------ -------------- ------------
<S> <C> <C> <C>
RESIDENTIAL
PROPERTY LAND
AND BUILDING
Crown Cliffs* 1,265,519 0
COMMERCIAL
PROPERTY -- LAND
Easco Corp. 9,300 157,560
Foodarama supermarkets,
Inc. 10,500 140,619
Foodarama supermarkets,
Inc. 9,000 114,022
Gino's, Inc. 3,571 0
Gino's, Inc. 5,357 81,159
Gino's, Inc. 5,357 71,160
Gino's, Inc. 10,714 102,048
Gino's, Inc. 5,357 61,846
J.C. Penney Company,
Inc. 4,125 51,009
Levitz Furniture
Corporation 103,924 1,134,836
Levitz Furniture
Corporation 35,257 460,490
COMMERCIAL
PROPERTY --
BUILDING
Bank South 3,681,454 279,551 1,594,696
Harwood Square 610,671 3,172,281
Holiday Inn 3,075,178 3,317,337
Lockheed Corporation 112,919 0
Safeway Stores, Inc. 20,175 168,728
Toys 'R' Us, Inc. 1,005,777 71,750 507,053
United Life & Accident
Ins. Co. 4,274,424 270,516 1,746,714
Wickes Companies, Inc. 3,158,494 335,628 1,185,738
Weigh-Tronix, Inc. 2,323,704 180,192 1,467,951
Baptist Hospital 1 25,059,603 1,483,880 19,535,134
Baptist Hospital 2 9,300,980 550,748 7,250,549
0
0
0
0
</TABLE>
I-10
<PAGE>
<TABLE>
<CAPTION>
No. of Amount of
State Locations Encumberances
------- ----------- ---------------
<S> <C> <C> <C>
DEVELOPMENT
PROPERTY
Dellwood NY 1
Grassy Hollow NY 1
East Syracuse NY 1
HOTEL AND DEVELOP-
MENT PROPERTY
New Seabury MA 1 8,484,332
---------
$187,514,452
============
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
REAL ESTATE OWNED AND REVENUES EARNED
---------------------------------------------------------------------------------------------
Real estate owned at September 30, 1998
---------------------------------------------------------------------------------------------
Amount
Carried
Initial Cost Cost of at close Reserve for Depreciation
to Company Improvements of period Depreciation Range in years
-------------- -------------- --------------------- -------------------- ----------------
<S> <C> <C> <C> <C> <C>
DEVELOPMENT
PROPERTY
Dellwood 3,120,317 3,120,317
Grassy Hollow 601,135 601,135
East Syracuse 138,108 138,108
HOTEL AND DEVELOP-
MENT PROPERTY
New Seabury 27,965,241 27,965,241
---------- ----------
$221,869,592 $534,569 $ 222,404,161(1) $ 44,034,952(1)
============ ======== ================ ===============
</TABLE>
<TABLE>
<CAPTION>
REAL ESTATE
OWNED AND
REVENUES
EARNED
--------------
Real estate
owned at
September
30, 1998
--------------
Net Total
Investment revenue
Depreciation Financing applicable
Method Method(G) to period(G) Tax Basis
-------------- --------------- -------------- ---------------
<S> <C> <C> <C> <C>
DEVELOPMENT
PROPERTY
Dellwood 3,120,317
Grassy Hollow 594,843
East Syracuse 138,108
HOTEL AND DEVELOP-
MENT PROPERTY
New Seabury 2,995,714 27,965,241
--------- ----------
$248,297,648 $38,126,065 $278,155,864
============ =========== ============
</TABLE>
- --------
(G) In accordance with Generally Accepted Accounting Principles.
(HFS) Held for sale -- Property no longer depreciated nor revenue earned.
Current net book value included.
(1) Amount shown includes hotel operating properties.
(2) The Company owns a 70% interest in the joint venture which owns this
property.
(3) Sold two locations in 1998.
(4) Sold one location in 1998.
(*) Treated as investment in joint venture for tax purposes.
I-11
<PAGE>
AMERICAN REAL ESTATE PARTNERS, LP
a limited partnership
<TABLE>
<CAPTION>
No. of
State Locations
------- -----------
<S> <C> <C>
COMMERCIAL
PROPERTY LAND
AND BUILDING
Acme Markets, Inc. and
FPBT of Penn. PA 1
Alabama Power Company AL 5
Amer Stores and The
Fidelity Bank PA 1
Amer Stores, Grace, &
Shottenstein Stores NJ 1
American Recreation
Group, Inc.(3) NC 1
Amterre Ltd. Partnership NJ 1
Amterre Ltd. Partnership PA 2
Amterre Ltd. Partnership PA 1
Best Products Co., Inc. VA 1
Caldor, Inc. MA 1
Chesebrough-Pond's Inc. CN 1
Chomerics, Inc. MA 1
Collins Foods Interna-
tional, Inc.(4) OR 3
Collins Foods Interna-
tional, Inc.(5) CA 1
David Miller of California CA 1
Dillon Companies, Inc. MO 1
Dillon Companies, Inc.(5) LA 6
Druid Point Bldg. GA 1
Duke Power Co. NC 1
European American Bank
and Trust Co. NY 1
Farwell Bldg. MN 1
Federated Department
Stores, Inc. CA 1
First National Supermar-
kets, Inc. CT 1
First Union National Bank NC 1
Fisher Scientific Company IL 1
Foodarama Supermarkets,
Inc. PA 1
Forte Hotels International,
Inc. NJ 1
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
REAL ESTATE OWNED AND REVENUES EARNED
-----------------------------------------------------------------------------------------------
Real estate owned at December 31, 1997
-------------------------------------------------------------------------------
Amount
Carried
Amount of Initial Cost Cost of at close Reserve for Depreciation
Encumbrances to Company Improvements of period Depreciation Range & Method
-------------- -------------- -------------- ------------- -------------- ----------------
<S> <C> <C> <C> <C> <C> <C>
COMMERCIAL
PROPERTY LAND
AND BUILDING
Acme Markets, Inc. and
FPBT of Penn. $2,004,393 $2,004,393 $1,389,613 25 yrs Comp
Alabama Power Company $ 4,292,790
Amer Stores and The
Fidelity Bank
Amer Stores, Grace, &
Shottenstein Stores 2,043,567 2,043,567 1,525,255 35 yrs Comp
American Recreation
Group, Inc.(3) 642,771 (342,771) 300,000 HFS (3)
Amterre Ltd. Partnership SOLD
Amterre Ltd. Partnership SOLD
Amterre Ltd. Partnership 8,581,485 SOLD
Best Products Co., Inc. 3,358,053 (54,500) 3,303,553 20 yrs S/L
Caldor, Inc.
Chesebrough-Pond's Inc. 1,549,805 1,549,805 1,110,025 20-45 yrs Comp
Chomerics, Inc.
Collins Foods Interna-
tional, Inc.(4) 169,048 169,048
Collins Foods Interna-
tional, Inc.(5) 87,810 87,810
David Miller of California 1,036,681 1,036,681 494,648 25 yrs S/L
Dillon Companies, Inc. 546,681 546,681 310,198 30 Yrs S/L
Dillon Companies, Inc.(5) 1,555,112 1,555,112 854,145 35 Yrs Comp
Druid Point Bldg. 6,139,692 114,890 6,254,582 883,216 SOLD
Duke Power Co. 2,903,279
European American Bank
and Trust Co. 1,355,210 1,355,210 1,284,888 20 Yrs S/L
Farwell Bldg. 939,773 5,073,279 5,073,279 1,088,188 15-20 yrs S/L
Federated Department
Stores, Inc. 363,342 363,342 SOLD
First National Supermar-
kets, Inc. 13,933,727
First Union National Bank
Fisher Scientific Company 597,806 597,806 143,004 20 yrs S/L
Foodarama Supermarkets,
Inc. SOLD
Forte Hotels International,
Inc. 216,914
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
REAL ESTATE OWNED AND REVENUES
EARNED
------------------------------
Real estate
owned at
December
31, 1997
---------------
1997
Financing Total
Method revenue
Net applicable
Investment(G) to period(G)
--------------- -------------
<S> <C> <C>
COMMERCIAL
PROPERTY LAND
AND BUILDING
Acme Markets, Inc. and
FPBT of Penn. $ 245,888
Alabama Power Company $ 7,517,553 797,599
Amer Stores and The
Fidelity Bank 633,667 81,172
Amer Stores, Grace, &
Shottenstein Stores 157,735
American Recreation
Group, Inc.(3) 48,164
Amterre Ltd. Partnership 0
Amterre Ltd. Partnership 0
Amterre Ltd. Partnership 5,958,448 597,424
Best Products Co., Inc. 109,134
Caldor, Inc. 1,873,574 167,527
Chesebrough-Pond's Inc. 141,236
Chomerics, Inc. 6,202,655 792,465
Collins Foods Interna-
tional, Inc.(4) 81,764 35,411
Collins Foods Interna-
tional, Inc.(5) 46,444 11,455
David Miller of California 63,482
Dillon Companies, Inc. 65,268
Dillon Companies, Inc.(5) 183,340
Druid Point Bldg. 1,351,918
Duke Power Co. 4,716,271 482,477
European American Bank
and Trust Co. 175,000
Farwell Bldg. 957,184
Federated Department
Stores, Inc. 208,036 63,418
First National Supermar-
kets, Inc. 23,685,974 2,194,767
First Union National Bank 577,217 53,820
Fisher Scientific Company 176,583
Foodarama Supermarkets,
Inc. 81,014
Forte Hotels International,
Inc. 6,412,979 585,869
</TABLE>
I-12
<PAGE>
<TABLE>
<CAPTION>
No. of
State Locations
------- -----------
<S> <C> <C>
Forte Hotels International,
Inc. TX 1
Fox Grocery Company WV 1
Gino's, Inc. MO 1
Gino's, Inc. CA 1
Gino's, Inc. OH 1
Gino's, Inc. IL 1
Gino's, Inc. NJ 1
Golf Road IL 1
Grand Union Co. NY
Grand Union Co. NJ 1
Grand Union Co. MD 1
Grand Union Co. NY 3
Grand Union Co. NY 1
Grand Union Co. VA 1
Grand Union Co. NY 1
Gunite IN 1
G.D. Searle & Co. MD 1
G.D. Searle & Co. MN 1
G.D. Searle & Co. AL 1
G.D. Searle & Co. IL 1
G.D. Searle & Co. FL 1
G.D. Searle & Co. MN 1
G.D. Searle & Co. IL 1
G.D. Searle & Co. TN 1
G.D. Searle & Co. TN 1
G.D. Searle & Co. MD 1
Hancock LA 1
Haverty Furniture Compa-
nies, Inc. GA 1
Haverty Furniture Compa-
nies, Inc. FL 1
Haverty Furniture Compa-
nies, Inc. VA 1
Holiday Inn AZ 1
Integra A Hotel and Res-
taurant Co. AL 2
Integra A Hotel and Res-
taurant Co. IL 1
Integra A Hotel and Res-
taurant Co. IN 1
Integra A Hotel and Res-
taurant Co. OH 1
Integra A Hotel and
Restaurant Co. MO 1
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
REAL ESTATE OWNED AND REVENUES EARNED
---------------------------------------------------------------------------------------------
Real estate owned at December 31, 1997
-----------------------------------------------------------------------------
Amount
Carried
Amount of Initial Cost Cost of at close Reserve for Depreciation
Encumbrances to Company Improvements of period Depreciation Range & Method
-------------- -------------- -------------- ----------- -------------- ----------------
<S> <C> <C> <C> <C> <C> <C>
Forte Hotels International,
Inc. SOLD
Fox Grocery Company 1,193,998
Gino's, Inc. 13,662 209,213 209,213
Gino's, Inc. 15,711 225,100 225,100
Gino's, Inc. 14,627 201,938 201,938
Gino's, Inc. 16,986 235,972 235,972
Gino's, Inc. SOLD
Golf Road 9,292,656 9,292,656 55,756 35 yrs S/L
Grand Union Co. HFS
Grand Union Co. 430,664 430,664
Grand Union Co. 372,383 372,383 249,742 30 yrs Comp
Grand Union Co. 1,110,120 (19,100) 1,091,020
Grand Union Co.
Grand Union Co. 266,468 266,468 178,999 30 yrs Comp
Grand Union Co. 4,473,221
Gunite 148,230 1,134,565 1,134,565 1,065,034 30 yrs Comp
G.D. Searle & Co. 299,229 299,229 145,833 20-35 yrs Comp
G.D. Searle & Co. 261,918 261,918 174,337 SOLD
G.D. Searle & Co. 0 0 0 HFS
G.D. Searle & Co. 256,295 256,295 161,229 20-35 yrs Comp
G.D. Searle & Co. 0 0 0 SOLD
G.D. Searle & Co. 339,358 339,358 147,266 20-35 yrs Comp
G.D. Searle & Co. 323,559 323,559 223,483 30 yrs Comp
G.D. Searle & Co. 214,421 214,421 145,172 20-35 yrs Comp
G.D. Searle & Co. 0 0 0
G.D. Searle & Co. 325,891 325,891 146,800 20-35 yrs Comp
Hancock SOLD
Haverty Furniture Compa-
nies, Inc. 245,234
Haverty Furniture Compa-
nies, Inc. 185,175
Haverty Furniture Compa-
nies, Inc. 232,724
Holiday Inn SOLD
Integra A Hotel and Res-
taurant Co. 245,625 245,625
Integra A Hotel and Res-
taurant Co. 198,392 198,392
Integra A Hotel and Res-
taurant Co. 231,513 231,513
Integra A Hotel and Res-
taurant Co.
Integra A Hotel and
Restaurant Co. 224,837 224,837
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
REAL ESTATE OWNED AND REVENUES
EARNED
------------------------------
Real estate
owned at
December 31,
1997
--------------
1997
Financing Total
Method revenue
Net applicable
Investment(G) to period(G)
--------------- -------------
<S> <C> <C>
Forte Hotels International,
Inc. (11,423)
Fox Grocery Company 3,258,447 290,442
Gino's, Inc. 165,655 33,514
Gino's, Inc. 151,721 42,735
Gino's, Inc. 135,210 39,120
Gino's, Inc. 137,724 45,689
Gino's, Inc. 33,010
Golf Road 108,494
Grand Union Co.
Grand Union Co. 427,410 85,502
Grand Union Co. 33,750
Grand Union Co. 1,101,687 220,389
Grand Union Co. 7,083
Grand Union Co. 24,150
Grand Union Co. 7,310,207 676,977
Gunite 208,080
G.D. Searle & Co. 27,000
G.D. Searle & Co. 22,162
G.D. Searle & Co. 0
G.D. Searle & Co. 23,013
G.D. Searle & Co. 0
G.D. Searle & Co. 30,614
G.D. Searle & Co. 28,319
G.D. Searle & Co. 18,740
G.D. Searle & Co. 0
G.D. Searle & Co. 28,598
Hancock 450,785
Haverty Furniture Compa-
nies, Inc. 616,002 55,885
Haverty Furniture Compa-
nies, Inc. 466,667 42,337
Haverty Furniture Compa-
nies, Inc. 594,370 54,193
Holiday Inn 2,138,010
Integra A Hotel and Res-
taurant Co. 1,397,060 239,858
Integra A Hotel and Res-
taurant Co. 461,675 103,757
Integra A Hotel and Res-
taurant Co. 604,563 121,983
Integra A Hotel and Res-
taurant Co. 620,765 89,986
Integra A Hotel and
Restaurant Co. 469,913 108,409
</TABLE>
I-13
<PAGE>
<TABLE>
<CAPTION>
No. of
State Locations
------- -----------
<S> <C> <C>
Integra A Hotel and
Restaurant Co. TX 1
Integra A Hotel and
Restaurant Co. MI 1
Intermountain Color KY 1
J.C. Penney Company,
Inc. MA 1
Kelley Springfield Tire
Company TN 1
K-Mart Corporation LA 1
K-Mart Corporation WI 1
K-Mart Corporation FL 1
K-Mart Corporation MN 1
K-Mart Corporation FL 1
K-Mart Corporation IA 1
K-Mart Corporation FL 2
K-Mart Corporation IL 1
Kobacker Stores, Inc. MI 4
Kobacker Stores, Inc. KY 1
Kobacker Stores, Inc. OH 5
Kraft, Inc. NC 1
Landmark Bancshares
Corporation MO 1
Levitz Furniture
Corporation NY 1
Lockheed Corporation CA 1
Louisiana Power and
Light Company LA 8
Louisiana Power and
Light Company LA 7
Macke Co. VA 1
Marsh Supermarkets, Inc. IN 1
Montgomery Ward, Inc. PA 1
Montgomery Ward, Inc. NJ 1
Morrison, Inc. AL 1
Morrison, Inc. GA 1
Morrison, Inc. FL 1
Morrison, Inc. VA 2
M.C.O. Properties CO 1
North Carolina National
Bank(7) SC 6
Occidental Petroleum
Corp. CA 1
Ohio Power Co. Inc. OH 1
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
REAL ESTATE OWNED AND REVENUES EARNED
---------------------------------------------------------------------------------------------
Real estate owned at December 31, 1997
-----------------------------------------------------------------------------
Amount
Carried
Amount of Initial Cost Cost of at close Reserve for Depreciation
Encumbrances to Company Improvements of period Depreciation Range & Method
-------------- -------------- -------------- ----------- -------------- ----------------
<S> <C> <C> <C> <C> <C> <C>
Integra A Hotel and
Restaurant Co. 228,793 228,793
Integra A Hotel and
Restaurant Co. 234,464 234,464
Intermountain Color 11,180 559,644 559,644 434,676 25 yrs S/L
J.C. Penney Company,
Inc. 2,484,262 2,484,262 1,588,326 25 yrs S/L
Kelley Springfield Tire
Company 120,946 120,946 75,200 20 yrs Comp
K-Mart Corporation
K-Mart Corporation
K-Mart Corporation
K-Mart Corporation 530,000
K-Mart Corporation 2,760,118 2,760,118 1,688,401 20-45 yrs Comp
K-Mart Corporation
K-Mart Corporation 2,636,000 2,636,000 1,765,878 20-45 yrs Comp
K-Mart Corporation 263,859
Kobacker Stores, Inc. 215,148 215,148
Kobacker Stores, Inc. 66,777 88,364 88,364
Kobacker Stores, Inc. 65,759 354,030 354,030
Kraft, Inc. SOLD
Landmark Bancshares
Corporation
Levitz Furniture
Corporation 988,463 988,463
Lockheed Corporation 2,449,469 2,449,469
Louisiana Power and
Light Company 3,464,338
Louisiana Power and
Light Company 2,075,693 3,491,431 3,491,431
Macke Co. SOLD
Marsh Supermarkets, Inc. 5,001,933 5,001,933 2,133,683 35 yrs S/L
Montgomery Ward, Inc. 3,289,166 3,289,166 2,120,374 20-45 yrs Comp
Montgomery Ward, Inc.
Morrison, Inc. 324,288 324,288
Morrison, Inc. 347,404 347,404
Morrison, Inc. 375,392 375,392
Morrison, Inc. 363,059 363,059
M.C.O. Properties SOLD
North Carolina National
Bank(7) 2,938,008 2,938,008 1,008,024 40 yrs S/L
Occidental Petroleum
Corp. 1,857,296 HFS
Ohio Power Co. Inc.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
REAL ESTATE OWNED AND REVENUES
EARNED
------------------------------
Real estate
owned at
December
31, 1997
---------------
1997
Financing Total
Method revenue
Net applicable
Investment(G) to period(G)
--------------- -------------
<S> <C> <C>
Integra A Hotel and
Restaurant Co. 576,867 139,420
Integra A Hotel and
Restaurant Co. 577,240 138,537
Intermountain Color 81,330
J.C. Penney Company,
Inc. 250,244
Kelley Springfield Tire
Company 11,449
K-Mart Corporation 1,684,293 141,806
K-Mart Corporation 1,919,517 173,164
K-Mart Corporation 2,224,386 213,781
K-Mart Corporation 1,780,445 146,038
K-Mart Corporation 236,480
K-Mart Corporation 1,367,760 128,806
K-Mart Corporation 1,831,105 413,734
K-Mart Corporation 977,099 78,194
Kobacker Stores, Inc. 423,743 62,971
Kobacker Stores, Inc. 100,094 19,192
Kobacker Stores, Inc. 613,834 92,644
Kraft, Inc. 50,414
Landmark Bancshares
Corporation 4,586,844 644,743
Levitz Furniture
Corporation 2,149,353 354,406
Lockheed Corporation 4,143,163 847,243
Louisiana Power and
Light Company 12,443,623 1,567,252
Louisiana Power and
Light Company 4,321,049 1,007,611
Macke Co. 74,516
Marsh Supermarkets, Inc. 506,300
Montgomery Ward, Inc. 314,280
Montgomery Ward, Inc. 1,570,578 147,710
Morrison, Inc. 720,862 134,559
Morrison, Inc. 690,199 134,750
Morrison, Inc. 728,153 142,096
Morrison, Inc. 1,785,553 276,296
M.C.O. Properties 12,974
North Carolina National
Bank(7) 224,823
Occidental Petroleum
Corp. 0
Ohio Power Co. Inc. 3,962,361 370,060
</TABLE>
I-14
<PAGE>
<TABLE>
<CAPTION>
No. of
State Locations
------- -----------
<S> <C> <C>
Old National Bank of
Washington WA 1
Park West KY 1
Penske Corp. OH 1
Pneumo Corp. OH 1
Portland General Electric
Company OR 1
Rouse Company MD 1
Safeway Stores, Inc. LA 1
Sams MI 1
Smith's Management
Corp. NV 1
Southland Corporation FL 5
Staples NY 1
Stop 'N Shop Co., Inc. NY 1
Stop 'N Shop Co., Inc. VA 1
Super Foods Services, Inc. MI 1
SuperValu Stores, Inc. MN 1
SuperValu Stores, Inc. OH 1
SuperValu Stores, Inc. GA 1
SuperValu Stores, Inc. IN 1
Telecom Properties, Inc. OK 1
Telecom Properties, Inc. KY 1
The A&P Company MI 1
The TJX Companies, Inc. IL 1
Toys "R" Us, Inc. MA 1
Toys "R" Us, Inc. IL 1
Toys "R" Us, Inc. NY 1
Toys "R" Us, Inc. TX 1
Toys "R" Us, Inc. MI 1
Toys "R" Us, Inc. TX 1
Trafalgar Industries, Inc. NY 1
USA Petroleum
Corporation SC 2
USA Petroleum
Corporation OH 1
USA Petroleum
Corporation GA 2
Waban NY 1
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
REAL ESTATE OWNED AND REVENUES EARNED
-----------------------------------------------------------------------------------------------
Real estate owned at December 31, 1997
-------------------------------------------------------------------------------
Amount
Carried
Amount of Initial Cost Cost of at close Reserve for Depreciation
Encumbrances to Company Improvements of period Depreciation Range & Method
-------------- -------------- -------------- ------------- -------------- ----------------
<S> <C> <C> <C> <C> <C> <C>
Old National Bank of
Washington 4,190,632 4,190,632 2,816,843 SOLD
Park West 19,020,000 19,020,000 35 yrs S/L
Penske Corp. 108,036
Pneumo Corp. 878,314
Portland General Electric
Company 46,177,752
Rouse Company 3,320,839
Safeway Stores, Inc. 1,782,885 1,782,885 1,061,233 20-45 yrs Comp
Sams 5,543,256 8,844,225 8,844,225 1,371,772 40 yrs S/L
Smith's Management
Corp. 371,047
Southland Corporation 1,162,971 1,162,971 657,550 20-45 yrs Comp
Staples 2,455,975 1,607 2,457,582 37,661 35 yrs S/L
Stop 'N Shop Co., Inc. 5,013,507 5,013,507 3,589,887 20-45 yrs Comp
Stop 'N Shop Co., Inc. 869,612
Super Foods Services, Inc. 6,635,566
SuperValu Stores, Inc. 1,370,965 1,370,965 211,948 40 yrs S/L
SuperValu Stores, Inc. 3,000,671 3,000,671 474,489 40 yrs S/L
SuperValu Stores, Inc. 2,344,836 2,344,836 367,453 40 yrs S/L
SuperValu Stores, Inc. 2,267,573 2,267,573 354,965 40 yrs S/L
Telecom Properties, Inc. 44,630
Telecom Properties, Inc. 115,678 281,253 281,253
The A&P Company
The TJX Companies, Inc.
Toys "R" Us, Inc. SOLD
Toys "R" Us, Inc. SOLD
Toys "R" Us, Inc. SOLD
Toys "R" Us, Inc. 856,725 501,836 501,836
Toys "R" Us, Inc. SOLD
Toys "R" Us, Inc. SOLD
Trafalgar Industries, Inc. SOLD
USA Petroleum
Corporation 163,161 163,161
USA Petroleum
Corporation 78,443 78,443
USA Petroleum
Corporation 138,062 138,062
Waban 3,608,807 8,378,095 8,378,095 500,930 30 yrs S/L
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
REAL ESTATE OWNED AND REVENUES
EARNED
------------------------------
Real estate
owned at
December
31, 1997
---------------
1997
Financing Total
Method revenue
Net applicable
Investment(G) to period(G)
--------------- -------------
<S> <C> <C>
Old National Bank of
Washington 677,222
Park West 0
Penske Corp. 573,940 84,821
Pneumo Corp. 2,272,594 223,429
Portland General Electric
Company 52,081,512 4,497,800
Rouse Company 6,362,762 563,969
Safeway Stores, Inc. 85,150
Sams 1,127,521
Smith's Management
Corp. 838,205 75,545
Southland Corporation 127,573
Staples 277,966
Stop 'N Shop Co., Inc. 454,145
Stop 'N Shop Co., Inc. 2,815,364 254,630
Super Foods Services, Inc. 10,213,426 1,087,412
SuperValu Stores, Inc. 114,885
SuperValu Stores, Inc. 319,834
SuperValu Stores, Inc. 224,215
SuperValu Stores, Inc. 193,024
Telecom Properties, Inc. 115,990 10,965
Telecom Properties, Inc. 101,212 37,044
The A&P Company 1,678,976 176,747
The TJX Companies, Inc. 2,661,258 238,968
Toys "R" Us, Inc. 82,445
Toys "R" Us, Inc. 101,865
Toys "R" Us, Inc. 104,136
Toys "R" Us, Inc. 1,107,437 108,188
Toys "R" Us, Inc. 77,087
Toys "R" Us, Inc. 142,913
Trafalgar Industries, Inc. 0
USA Petroleum
Corporation 167,972 39,312
USA Petroleum
Corporation 88,832 18,900
USA Petroleum
Corporation 146,749 33,264
Waban 659,262
</TABLE>
I-15
<PAGE>
<TABLE>
<CAPTION>
No. of
State Locations
------- -----------
<S> <C> <C>
Watkins MO 1
Webcraft Technologies MD 1
Wetterau, Inc. PA 1
Wetterau, Inc. NJ 2
Wickes Companies, Inc. (6) CA 3
RESIDENTIAL
PROPERTY LAND
AND BUILDING
Crown Cliffs AL 1
COMMERCIAL
PROPERTY--LAND
Easco Corp. NC 1
Foodarama supermarkets,
Inc. NY 1
Foodarama supermarkets,
Inc. PA 1
Gino's, Inc. MD 1
Gino's, Inc. PA 1
Gino's, Inc. MI 1
Gino's, Inc. MA 2
Gino's, Inc. NJ 1
J.C. Penney Company,
Inc. NY 1
Levitz Furniture
Corporation CA 2
Levitz Furniture
Corporation KS 1
COMMERCIAL
PROPERTY--
BUILDING
Bank South GA 1
Harwood Square IL 1
Holiday Inn FL 1
Lockheed Corporation CA 1
Safeway Stores, Inc. CA 1
Toys "R" Us, Inc. RI 1
United Life & Accident
Ins. Co. NH 1
Wickes Companies, Inc. PA 1
Weigh-Tronix, Inc. CA 1
Baptist Hospital 1 TN 1
Baptist Hospital 2 TN 1
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
REAL ESTATE OWNED AND REVENUES EARNED
-----------------------------------------------------------------------------------
Real estate owned at December 31, 1997
-------------------------------------------------------------------
Amount
Carried
Amount of Initial Cost Cost of at close Reserve for
Encumbrances to Company Improvements of period Depreciation
-------------- -------------- -------------- ------------------- --------------
<S> <C> <C> <C> <C> <C>
Watkins 965,741 965,741 81,047
Webcraft Technologies 487,877 780,774 780,774 117,371
Wetterau, Inc.
Wetterau, Inc.
Wickes Companies, Inc. (6) 1,507,459 2,447,297 2,447,297 1,250,994
RESIDENTIAL
PROPERTY LAND
AND BUILDING
Crown Cliffs 8,504,936 10,944,883 120,992 11,065,875(2) 1,173,049
COMMERCIAL
PROPERTY--LAND
Easco Corp. 157,560 157,560
Foodarama supermarkets,
Inc. 140,619 140,619
Foodarama supermarkets,
Inc. 112,554 112,554
Gino's, Inc. 86,027 86,027
Gino's, Inc. 36,271 36,271
Gino's, Inc. 71,160 71,160
Gino's, Inc. 102,048 102,048
Gino's, Inc. 61,050 61,050
J.C. Penney Company,
Inc. 51,009 51,009
Levitz Furniture
Corporation 1,134,836 1,134,836
Levitz Furniture
Corporation 460,490 460,490
COMMERCIAL
PROPERTY--
BUILDING
Bank South
Harwood Square 6,803,769 6,803,769 2,997,054
Holiday Inn 6,846,683 357,299 7,203,982 2,200,324
Lockheed Corporation
Safeway Stores, Inc. 558,652 558,652 513,925
Toys "R" Us, Inc.
United Life & Accident
Ins. Co.
Wickes Companies, Inc.
Weigh-Tronix, Inc.
Baptist Hospital 1 23,089,860
Baptist Hospital 2 8,569,902
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
REAL ESTATE OWNED AND REVENUES EARNED
------------------------------------------------
Real estate owned at December 31,
1997
---------------------------------
1997
Financing Total
Method revenue
Depreciation Net applicable
Range & Method Investment(G) to period(G)
---------------- --------------- -------------
<S> <C> <C> <C>
Watkins 25 yrs S/L 114,800
Webcraft Technologies 20 yrs S/L 171,353
Wetterau, Inc. 823,756 88,039
Wetterau, Inc. 1,780,342 187,312
Wickes Companies, Inc. (6) 20-45 yrs S/L 588,030
RESIDENTIAL
PROPERTY LAND
AND BUILDING
Crown Cliffs 5-27.5 yrs S/L 1,741,608
COMMERCIAL
PROPERTY--LAND
Easco Corp. 12,400
Foodarama supermarkets,
Inc. 14,000
Foodarama supermarkets,
Inc. 12,000
Gino's, Inc. SOLD 7,143
Gino's, Inc. 7,143
Gino's, Inc. 7,143
Gino's, Inc. 14,286
Gino's, Inc. SOLD 7,143
J.C. Penney Company,
Inc. 5,500
Levitz Furniture
Corporation 99,302
Levitz Furniture
Corporation 47,009
COMMERCIAL
PROPERTY--
BUILDING
Bank South 3,755,472 382,109
Harwood Square 34.8 yrs S/L 737,149
Holiday Inn 5-39 yrs S/L 3,959,694
Lockheed Corporation SOLD 5,293,023 676,617
Safeway Stores, Inc. 27 yrs S/L 26,900
Toys "R" Us, Inc. 1,027,896 98,014
United Life & Accident
Ins. Co. 4,396,908 372,115
Wickes Companies, Inc. 3,240,160 457,648
Weigh-Tronix, Inc. 2,501,135 259,859
Baptist Hospital 1 25,234,428 994,844
Baptist Hospital 2 9,365,708 369,279
</TABLE>
I-16
<PAGE>
<TABLE>
<CAPTION>
No. of
State Locations
------- -----------
<S> <C> <C>
DEVELOPMENT
PROPERTY
Dellwood NY 1
Grassy Hollow NY 1
East Syracuse NY 1
--
</TABLE>
<TABLE>
<CAPTION>
REAL ESTATE OWNED AND REVENUES EARNED
-------------------------------------------------------------------------------------------------------------
Real estate owned at December 31, 1997
---------------------------------------------------------------------------------------------
Amount
Carried
Amount of Initial Cost Cost of at close Reserve for Depreciation
Encumbrances to Company Improvements of period Depreciation Range & Method
-------------- -------------- -------------- --------------------- -------------------- ----------------
<S> <C> <C> <C> <C> <C> <C>
DEVELOPMENT
PROPERTY
Dellwood 3,120,317 3,120,317
Grassy Hollow 601,135 601,135
East Syracuse 138,108 138,108
------------ ------------ -------- -------------- -------------
$156,432,734 $168,789,822 $178,417 $ 168,968,239(1) $ 42,369,888(1)
============ ============ ======== ================ ===============
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
REAL ESTATE OWNED AND REVENUES
EARNED
------------------------------
Real estate
owned at
December
31, 1997
---------------
1997
Financing Total
Method revenue
Net applicable
Investment(G) to period(G)
--------------- -------------
<S> <C> <C>
DEVELOPMENT
PROPERTY
Dellwood 0
Grassy Hollow 0
East Syracuse 0
-
------------ -----------
$265,656,836 $47,857,010
============ ===========
</TABLE>
- --------
(G) In accordance with Generally Accepted Accounting Principles
(HFS) Held For Sale. No longer depreciated nor revenues earned. No net book
value for HFS at 12/31/97
(1) Amount shown includes hotel operating properties.
(2) The Company owns a 70% interest in the joint venture which owns this
property.
(3) Reclassified to Held For Sale in 1998
(4) Sold one property in 1998 and 2 properties in 1997
(5) Sold 1 property in 1998 and 1 in 1997
(6) One property in Held for Sale at 12/31/97 and 12/31/96
(7) One property sold in 1998 and 3 Held for Sale at 12/31/97
I-17
<PAGE>
AMERICAN REAL ESTATE PARTNERS, LP
a limited partnership
REAL ESTATE OWNED AND REVENUES EARNED
<TABLE>
<CAPTION>
Real estate owned at December 31, 1996
---------------------------------------------------------------------
No. of Amount of Initial Cost Cost of
State Locations Encumberances to Company Improvements
------- ----------- --------------- -------------- --------------
<S> <C> <C> <C> <C> <C>
COMMERCIAL
PROPERTY LAND
AND BUILDING
Acme Markets, Inc. and
FPBT of Penn. .......... PA 1 $2,004,393
Alabama Power Company AL 5 $ 4,680,325
Amer Stores and The
Fidelity Bank .......... PA 1
Amer Stores, Grace, &
Shottenstein Stores .... NJ 1 2,043,567
American Recreation
Group, Inc. ............ NC 1
Amterre Ltd. Partnership NJ 1 1,559,648
Amterre Ltd. Partnership PA 2 867,847 639,797
Amterre Ltd. Partnership PA 1 2,090,127
Best Products Co., Inc. VA 1
Caldor, Inc. ........... MA 1
Chesebrough-Pond's Inc. CN 1 1,549,805
Chomerics, Inc. ........ MA 1
Coldwell Banker & Co. .. CA 1
Coldwell Banker & Co. .. MN 1
Coldwell Banker & Co. .. VA 1
Coldwell Banker & Co. .. MO 1
Collins Foods Interna-
tional, Inc.(4) ........ OR 6 82,457 218,713
Collins Foods Interna-
tional, Inc.(5) ........ CA 3 131,970 87,810
Cordis Corporation ..... FL 1
David Miller of California CA 1 1,036,681
Dillon Companies, Inc. . MO 1 546,681
Dillon Companies, Inc.(5) LA 8 1,555,112
Druid Point Bldg. ...... GA 1 4,919,956 1,219,736
Duke Power Co. ......... NC 1 3,198,097
European American Bank
and Trust Co. .......... NY 1 1,355,210
Farwell Bldg. .......... MN 1 1,162,240 5,052,286 20,993
Federated Department
Stores, Inc. ........... CA 1 363,342
First National Supermar-
kets, Inc. ............. CT 1 14,536,079
First Union National Bank NC 1
Fisher Scientific Company IL 1 597,806
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Real estate owned at December
31, 1996
-----------------------------
Amount Financing Total
Carried Method revenue
at close Reserve for Depreciation Net applicable
of period Depreciation Method Investment(G) to period(G)
------------- -------------- ---------------- --------------- -------------
<S> <C> <C> <C> <C> <C>
COMMERCIAL
PROPERTY LAND
AND BUILDING
Acme Markets, Inc. and
FPBT of Penn. .......... $2,004,393 $1,352,155 25 yrs Comp $ 245,888
Alabama Power Company $ 7,833,206 825,971
Amer Stores and The
Fidelity Bank .......... 693,620 86,866
Amer Stores, Grace, &
Shottenstein Stores .... 2,043,567 1,507,397 35 yrs Comp 232,735
American Recreation
Group, Inc. ............ HFS 685,807 68,401
Amterre Ltd. Partnership 1,559,648 SOLD 3,331,346 459,735
Amterre Ltd. Partnership 639,797 SOLD 2,014,875 285,432
Amterre Ltd. Partnership SOLD 6,220,298 620,821
Best Products Co., Inc. 20 yrs S/L 3,418,326 338,557
Caldor, Inc. ........... 1,942,431 185,380
Chesebrough-Pond's Inc. 1,549,805 1,090,444 20-45 yrs Comp 141,236
Chomerics, Inc. ........ 6,398,366 814,924
Coldwell Banker & Co. .. SOLD 24,673
Coldwell Banker & Co. .. SOLD 71,909
Coldwell Banker & Co. .. SOLD 41,122
Coldwell Banker & Co. .. SOLD 0
Collins Foods Interna-
tional, Inc.(4) ........ 218,713 109,018 46,392
Collins Foods Interna-
tional, Inc.(5) ........ 87,810 46,444 53,826
Cordis Corporation ..... SOLD 713,383
David Miller of California 1,036,681 473,898 25 yrs S/L 63,482
Dillon Companies, Inc. . 546,681 297,442 30 Yrs S/L 63,753
Dillon Companies, Inc.(5) 1,555,112 842,444 35 Yrs Comp 183,340
Druid Point Bldg. ...... 6,139,692 661,844 SOLD 191,746
Duke Power Co. ......... 5,030,971 510,580
European American Bank
and Trust Co. .......... 1,355,210 1,271,504 20 Yrs S/L 175,000
Farwell Bldg. .......... 5,073,279 837,344 15-20 yrs S/L 938,078
Federated Department
Stores, Inc. ........... 363,342 SOLD 393,414 65,392
First National Supermar-
kets, Inc. ............. 24,148,717 2,235,207
First Union National Bank 614,834 57,047
Fisher Scientific Company 597,806 120,718 20 yrs S/L 163,000
</TABLE>
I-18
<PAGE>
<TABLE>
<CAPTION>
Real estate owned at December 31, 1996
---------------------------------------------------------------------
No. of Amount of Initial Cost Cost of
State Locations Encumberances to Company Improvements
------- ----------- --------------- -------------- --------------
<S> <C> <C> <C> <C> <C>
Foodarama Supermarkets,
Inc. ................... PA 1 1,317,844
Forte Hotels International,
Inc. ................... NJ 1 699,694
Forte Hotels International,
Inc. ................... TX 1
Fox Grocery Company .... WV 1 1,343,018
Gino's, Inc. ........... MO 1 61,942 209,213
Gino's, Inc. ........... CA 1 54,342 225,100
Gino's, Inc. ........... OH 1 57,160 201,938
Gino's, Inc. ........... IL 1 46,597 235,972
Gino's, Inc. ........... NJ 1 49,887 259,525
Gino's, Inc. & The A&P
Co. .................... PA 1
Grand Union Co. ........ NY 1
Grand Union Co. ........ NJ 1 430,664
Grand Union Co. ........ MD 1 372,383
Grand Union Co. ........ NY 3 1,110,120
Grand Union Co. ........ NY 1
Grand Union Co. ........ VA 1 266,468
Grand Union Co. ........ NY 1 4,577,761
Gunite ................. IN 1 193,475 1,134,565
G.D. Searle & Co. ...... MD 1 299,229
G.D. Searle & Co. ......
MN ..................... 1 261,918
G.D. Searle & Co. ...... AL 1 0
G.D. Searle & Co. ...... IL 1 256,295
G.D. Searle & Co. ...... FL 1 0
G.D. Searle & Co. ...... MN 1 339,358
G.D. Searle & Co. ...... IL 1 323,559
G.D. Searle & Co. ...... TN 1 214,421
G.D. Searle & Co. ...... TN 1 0
G.D. Searle & Co. ...... MD 1 325,891
Hancock ................ LA 1 2,284,232 4,484,256
Haverty Furniture
Companies, Inc. ........ GA 1 272,303
Haverty Furniture
Companies, Inc. ........ FL 1 205,616
Haverty Furniture
Companies, Inc. ........ VA 1 258,411
Holiday Inn ............ AZ 1 3,220,181 9,028,875 335,254
Integra A Hotel and
Restaurant Co. ......... AL 2 245,625
Integra A Hotel and
Restaurant Co. ......... IL 1 198,392
Integra A Hotel and
Restaurant Co. ......... IN 1 231,513
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Real estate owned at
December 31,
1996
---------------------------
Amount Financing Total
Carried Method revenue
at close Reserve for Depreciation Net applicable
of period Depreciation Method Investment(G) to period(G)
----------- -------------- ---------------- --------------- -------------
<S> <C> <C> <C> <C> <C>
Foodarama Supermarkets,
Inc. ................... 1,317,844 835,225 SOLD 120,516
Forte Hotels International
Inc. ................... 6,540,478 596,849
Forte Hotels International
Inc. ................... SOLD 2,619,501
Fox Grocery Company .... 3,395,645 305,550
Gino's, Inc. ........... 209,213 174,807 34,985
Gino's, Inc. ........... 225,100 166,443 44,136
Gino's, Inc. ........... 201,938 148,879 40,373
Gino's, Inc. ........... 235,972 154,733 46,992
Gino's, Inc. ........... 259,525 SOLD 191,535 49,627
Gino's, Inc. & The A&P
Co. .................... 185,702
Grand Union Co. ........ HFS
Grand Union Co. ........ 430,664 452,308 87,711
372,383
Grand Union Co. ........ 244,749 30 yrs Comp 33,750
Grand Union Co. ........ 1,110,120 1,165,869 226,083
Grand Union Co. ........ 0
Grand Union Co. ........ 266,468 175,421 30 yrs Comp 24,150
Grand Union Co. ........ 7,532,429 696,186
Gunite ................. 1,134,565 1,050,721 30 yrs Comp 204,000
G.D. Searle & Co. ...... 299,229 140,461 20-35 yrs Comp 27,000
G.D. Searle & Co. ......
MN ..................... 261,918 170,818 SOLD 22,162
G.D. Searle & Co. ...... 0 0 0
G.D. Searle & Co. ...... 256,295 155,239 20-35 yrs Comp 23,013
G.D. Searle & Co. ...... 0 0 SOLD 0
G.D. Searle & Co. ...... 339,358 141,715 20-35 yrs Comp 30,614
G.D. Searle & Co. ...... 323,559 218,967 30 yrs Comp 28,319
G.D. Searle & Co. ...... 214,421 139,979 20-35 yrs Comp 18,740
G.D. Searle & Co. ...... 0 0 0
G.D. Searle & Co. ...... 325,891 141,434 20-35 yrs Comp 28,598
Hancock ................ 4,484,256 729,669 SOLD 442,204
Haverty Furniture
Companies, Inc. ........ 659,017 59,473
Haverty Furniture
Companies, Inc. ........ 499,255 45,055
Haverty Furniture
Companies, Inc. ........ 636,081 57,671
Holiday Inn ............ 9,364,129 1,582,362 SOLD 5,970,105
Integra A Hotel and
Restaurant Co. ......... 245,625 1,478,067 247,756
Integra A Hotel and
Restaurant Co. ......... 198,392 505,753 107,664
Integra A Hotel and
Restaurant Co. ......... 231,513 641,103 124,887
</TABLE>
I-19
<PAGE>
<TABLE>
<CAPTION>
Real estate owned at December 31, 1996
---------------------------------------------------------------------
No. of Amount of Initial Cost Cost of
State Locations Encumberances to Company Improvements
------- ----------- --------------- -------------- --------------
<S> <C> <C> <C> <C> <C>
Integra A Hotel and
Restaurant Co. ....... OH 1
Integra A Hotel and
Restaurant Co. ....... MO 1 224,837
Integra A Hotel and
Restaurant Co. ....... TX 1 228,793
Integra A Hotel and
Restaurant Co. ....... MI 1 234,464
Intermountain Color .. KY 1 42,652 559,644
J.C. Penney Company,
Inc. ................. MA 1 2,484,262
Kelley Springfield Tire
Company .............. TN 1 120,946
K-Mart Corporation ... LA 1
K-Mart Corporation ... WI 1
K-Mart Corporation ... FL 1
K-Mart Corporation ... MN 1 580,000
K-Mart Corporation ... FL 1 2,756,998 3,120
K-Mart Corporation ... IA 1
K-Mart Corporation ... FL 1 2,636,000
K-Mart Corporation ... IL 1 302,575
Kobacker Stores, Inc. MI 4 215,148
Kobacker Stores, Inc. KY 1 71,607 88,364
Kobacker Stores, Inc. OH 5 70,906 354,030
Kobacker Stores, Inc. FL 1
Kraft, Inc. .......... NC 1 1,434,125
Landmark Bancshares
Corporation .......... MO 1
Levitz Furniture
Corporation .......... NY 1 1,648,463 (660,000)
Lockheed Corporation . CA 1 2,449,469
Lockheed Corporation . NJ 1
Louisiana Power and
Light Company ........ LA 8 4,469,597
Louisiana Power and
Light Company ........ LA 7 2,673,758 3,496,322 (4,891)
Macke Co. ............ VA 1 553,113
Marsh Supermarkets, Inc. IN 1 5,001,933
Montgomery Ward, Inc. PA 1 762,571 3,289,166
Montgomery Ward, Inc. NJ 1
Morrison, Inc. ....... AL 1 324,288
Morrison, Inc. ....... GA 2 347,404
Morrison, Inc. ....... FL 1 375,392
Morrison, Inc. ....... VA 2 363,059
M.C.O. Properties .... CO 1
North Carolina National
Bank(7) .............. SC 6 2,938,008
Occidental Petroleum
Corp. ................ CA 1 1,975,646 2,564,053
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Real estate owned at
December 31,
1996
---------------------------
Amount Financing Total
Carried Method revenue
at close Reserve for Depreciation Net applicable
of period Depreciation Method Investment(G) to period(G)
----------- -------------- ---------------- --------------- -------------
<S> <C> <C> <C> <C> <C>
Integra A Hotel and
Restaurant Co. ....... 674,639 96,555
Integra A Hotel and
Restaurant Co. ....... 224,837 514,167 112,159
Integra A Hotel and
Restaurant Co. ....... 228,793 621,382 143,690
Integra A Hotel and
Restaurant Co. ....... 234,464 613,076 141,595
Intermountain Color .. 559,644 413,759 25 yrs S/L 77,000
J.C. Penney Company,
Inc. ................. 2,484,262 1,508,829 25 yrs S/L 250,244
Kelley Springfield Tire
Company .............. 120,946 74,925 20 yrs Comp 11,449
K-Mart Corporation ... 1,725,687 145,127
K-Mart Corporation ... 1,969,353 177,408
K-Mart Corporation ... 2,321,964 222,498
K-Mart Corporation ... 1,826,407 149,630
K-Mart Corporation ... 2,760,118 1,655,604 20-45 yrs Comp 224,639
K-Mart Corporation ... 1,406,004 132,186
K-Mart Corporation ... 2,636,000 1,729,316 20-45 yrs Comp 1,911,191 420,360
K-Mart Corporation ... 1,013,873 80,977
Kobacker Stores, Inc. 215,148 439,493 63,420
Kobacker Stores, Inc. 88,364 103,511 19,514
Kobacker Stores, Inc. 354,030 636,305 94,689
Kobacker Stores, Inc. SOLD 3,715
Kraft, Inc. .......... 1,434,125 1,072,369 SOLD 150,042
Landmark Bancshares
Corporation .......... 4,678,726 656,654
Levitz Furniture
Corporation .......... 988,463 2,283,078 365,774
Lockheed Corporation . 2,449,469 SOLD 4,258,420 712,506
Lockheed Corporation . SOLD 0
Louisiana Power and
Light Company ........ 12,945,748 1,625,331
Louisiana Power and
Light Company ........ 3,491,431 4,551,301 1,034,036
Macke Co. ............ 553,113 357,209 SOLD 60,000
Marsh Supermarkets, Inc. 5,001,933 1,902,204 35 yrs S/L 566,537
Montgomery Ward, Inc. 3,289,166 2,070,624 20-45 yrs Comp 314,280
Montgomery Ward, Inc. 1,623,021 142,509
Morrison, Inc. ....... 324,288 752,983 138,345
Morrison, Inc. ....... 347,404 722,129 123,177
Morrison, Inc. ....... 375,392 759,682 145,812
Morrison, Inc. ....... 363,059 1,849,561 283,874
M.C.O. Properties .... SOLD 64,743
North Carolina National
Bank(7) .............. 2,938,008 957,698 40 yrs S/L 221,822
Occidental Petroleum
Corp. ................ 2,564,053 404,295 HFS 0
</TABLE>
I-20
<PAGE>
<TABLE>
<CAPTION>
Real estate owned at December 31, 1996
---------------------------------------------------------------------
No. of Amount of Initial Cost Cost of
State Locations Encumberances to Company Improvements
------- ----------- --------------- -------------- --------------
<S> <C> <C> <C> <C> <C>
Ohio Power Co. Inc. ..... OH 1
Old National Bank of
Washington .............. WA 1 4,190,632
Penske Corp. ............ NJ 2
Penske Corp. ............ OH 1 138,869
Penske Corp. ............ NY 1
Penske Corp. ............ MI 1
Pioneer Standard
Electronics, Inc. ....... NY 1
Pneumo Corp. ............ OH 1 1,033,195
Portland General Electric
Company ................. OR 1 24,820,228
Rouse Company ........... MD 1 3,686,118
Safeway Stores, Inc. .... LA 1 1,782,885
Sams .................... MI 1 5,614,527 8,844,225
Smith's Management
Corp. ................... NV 1 400,681
Southland Corporation ... FL 10 1,162,971
Sperry - Sun Drilling ... CAN 1
Staples ................. NY 1 2,455,975
Stop 'N Shop Co., Inc. .. NY 1 5,013,507
Stop 'N Shop Co., Inc. .. VA 1 1,012,607
Super Foods Services, Inc. MI 1 6,921,253
SuperValu Stores, Inc. .. MN 1 1,370,965
SuperValu Stores, Inc. .. OH 1 3,000,671
SuperValu Stores, Inc. .. GA 1 2,344,836
SuperValu Stores, Inc. .. IN 1 2,267,573
Telecom Properties, Inc. OK 1 50,452
Telecom Properties, Inc. KY 1 131,378 281,253
The A&P Company ......... MI 1
The TJX Companies, Inc. IL 1
Toys "R" Us, Inc. ....... MA 1 588,362 330,605
Toys "R" Us, Inc. ....... IL 1 763,033 427,993
Toys "R" Us, Inc. ....... NY 1 859,561 480,785
Toys "R" Us, Inc. ....... TX 1 896,334 501,836
Toys "R" Us, Inc. ....... MI 1 849,539
Toys "R" Us, Inc. ....... TX 1 606,814
Trafalgar Industries, Inc. NY 1
USA Petroleum
Corporation ............. SC 2 163,161
USA Petroleum
Corporation ............. OH 1 78,443
USA Petroleum
Corporation ............. GA 2 138,062
Waban ................... NY 1 3,715,255 8,298,301 79,794
Watkins ................. MO 1 965,741
Webcraft Technologies ... MD 1 543,470 780,774
Wetterau, Inc. .......... PA 1
Wetterau, Inc. .......... NJ 2
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Real estate owned at
December 31,
1996
---------------------------
Amount Financing Total
Carried Method revenue
at close Reserve for Depreciation Net applicable
of period Depreciation Method Investment(G) to period(G)
----------- -------------- ---------------- --------------- -------------
<S> <C> <C> <C> <C> <C>
Ohio Power Co. Inc. ..... 4,050,937 377,799
Old National Bank of
Washington .............. 4,190,632 2,323,660 677,222
Penske Corp. ............ SOLD 0
Penske Corp. ............ 601,293 58,550
Penske Corp. ............ 0
Penske Corp. ............ SOLD 248,691
Pioneer Standard
Electronics, Inc. ....... SOLD 49,990
Pneumo Corp. ............ 2,384,240 233,583
Portland General Electric
Company ................. 52,721,021 4,550,192
Rouse Company ........... 6,546,154 579,247
Safeway Stores, Inc. .... 1,782,885 1,047,998 20-45 yrs Comp 85,150
Sams .................... 8,844,225 1,210,387 40 yrs S/L 999,779
Smith's Management
Corp. ................... 861,937 77,566
Southland Corporation ... 1,162,971 642,164 20-45 yrs Comp 127,573
Sperry - Sun Drilling ... SOLD (3,693)
Staples ................. 2,455,975 35 yrs S/L 88,392
Stop 'N Shop Co., Inc. .. 5,013,507 3,522,410 20-45 yrs Comp 454,145
Stop 'N Shop Co., Inc. .. 2,931,886 264,457
Super Foods Services, Inc. 10,387,320 1,104,986
SuperValu Stores, Inc. .. 1,370,965 185,269 40 yrs S/L 114,885
SuperValu Stores, Inc. .. 3,000,671 416,095 40 yrs S/L 319,834
SuperValu Stores, Inc. .. 2,344,836 321,821 40 yrs S/L 224,215
SuperValu Stores, Inc. .. 2,267,573 310,838 40 yrs S/L 193,024
Telecom Properties, Inc. 121,075 11,412
Telecom Properties, Inc. 281,253 106,968 37,544
The A&P Company ......... 1,732,229 181,948
The TJX Companies, Inc. 2,752,407 240,906
Toys "R" Us, Inc. ....... 330,605 SOLD 748,757 107,419
Toys "R" Us, Inc. ....... 427,993 SOLD 965,125 123,662
Toys "R" Us, Inc. ....... 480,785 SOLD 1,077,629 126,520
Toys "R" Us, Inc. ....... 501,836 1,129,852 132,231
Toys "R" Us, Inc. ....... 1,068,425 94,219
Toys "R" Us, Inc. ....... SOLD 1,486,541 144,755
Trafalgar Industries, Inc. SOLD 0
USA Petroleum
Corporation ............. 163,161 288,980 41,032
USA Petroleum
Corporation ............. 78,443 138,932 19,727
USA Petroleum
Corporation ............. 138,062 244,525 34,720
Waban ................... 8,378,095 391,636 30 yrs S/L 659,262
Watkins ................. 965,741 59,904 25 yrs S/L 0 108,900
Webcraft Technologies ... 790,774 86,072 20 yrs S/L 171,353
Wetterau, Inc. .......... 872,586 92,460
Wetterau, Inc. .......... 1,892,310 198,118
</TABLE>
I-21
<PAGE>
<TABLE>
<CAPTION>
Real estate owned at December 31, 1996
---------------------------------------------------------------------
No. of Amount of Initial Cost Cost of
State Locations Encumberances to Company Improvements
------- ----------- --------------- -------------- --------------
<S> <C> <C> <C> <C> <C>
Wickes Companies, Inc.(6) CA 3 1,619,489 2,447,297
Weigh-Tronix .......... CA 1
DEVELOPMENT
PROPERTY
Dellwood .............. NY 1 3,104,793 15,524
Grassy Hollow ......... NY 1 598,145 2,990
East Syracuse ......... NY 1 138,108
------------ ------------ ----------
$115,911,504 $158,822,393 $1,290,247
============ ============ ==========
</TABLE>
<TABLE>
<CAPTION>
Real estate owned at December 31, 1996
-------------------------------------------
Amount Financing Total
Carried Method revenue
at close Reserve for Depreciation Net applicable
of period Depreciation Method Investment(G) to period(G)
--------------------- -------------------- -------------- --------------- -------------
<S> <C> <C> <C> <C> <C>
20-45 yrs
Wickes Companies, Inc.(6) 2,447,297 1,208,359 S/L,HFS 686,887
Weigh-Tronix .......... 2,719,614 280,323
DEVELOPMENT
PROPERTY
Dellwood .............. 3,120,317 0
Grassy Hollow ......... 601,135 0
East Syracuse ......... 138,108 0
-------------- ------------- ------------ -----------
$ 160,112,640(1) $ 43,754,936(1) $253,781,903 $58,823,724
================ =============== ============ ===========
</TABLE>
- --------
(G) In accordance with Generally Accepted Accounting Principles.
(HFS) Held For Sale. No longer depreciated nor revenues earned. No Net book
value of HFS at 12/31/96.
(1) Amount shows includes hotel operating properties.
(2) The Company owes a 70% interest is the joint venture which owns this
property.
(3) Reclassified to Held For Sale in 1998.
(4) Sold one property in 1998 and 2 properties in 1997.
(5) Sold 1 property in 1998 and 1 in 1997.
(6) One property in Held For Sale at 12/31/97 and 12/31/96.
(7) One Property Sold in 1998 and 3 Held for Sale at 12/31/97.
I-22
<PAGE>
SCHEDULE II
EXECUTIVE OFFICERS AND DIRECTOR OF BECKTON CORP.
The sole member of Beckton Corp. is High Coast Limited Partnership.
Beckton Corp. is the general partner of High Coast Limited Partnership. The name
and positions of the executive officers and directors of Beckton Corp. is set
forth below. Each such executive officer and director is a citizen of the United
States of America.
Name Position
- ---- --------
Carl C. Icahn Chairman of the Board and Director
Edward E. Mattner President, Treasurer and Secretary
The following sets forth with respect to each executive officer and
director of Beckton Corp. such person's (a) name, (b) present principal
occupation or employment and the name, principal business and address of any
corporation or other organization in which such employment or occupation is
conducted and (c) material occupations, positions, offices or employments during
at least the last five years, giving the starting and ending dates of each and
the name, principal business and address of any business corporation or other
organization in which such occupation, position, office or employment was
carried on.
Carl C. Icahn. Mr. Icahn is the Chairman of the Board and sole director of
Beckton Corp. Mr. Icahn has been Chairman of the Board of Directors of American
Property Investors, Inc. since November 15, 1990. Mr. Icahn is also President
and a director of Starfire Holding Corporation (formerly Icahn Holding
Corporation), a Delaware corporation ("SHC"), and Chairman of the Board and a
director of various of SHC's subsidiaries, including ACF Industries, Inc., a New
Jersey corporation ("ACF"). SHC is primarily engaged in the business of holding,
either directly or through subsidiaries, a majority of the common stock of ACF
and its address is 100 South Bedford Road, Mt. Kisco, New York 10549. Mr. Icahn
has also been Chairman of the Board of Directors of ACF since October 29, 1984
and a director of ACF since June 29, 1984. ACF is a railroad freight and tank
car leasing, sales and manufacturing company. He has also been Chairman of the
Board of Directors and President of Icahn & Company, Inc. since 1968. Icahn &
Company, Inc. is a registered broker-dealer and a member of the National
Association of Securities Dealers. In 1979, Mr. Icahn acquired control and
presently serves as Chairman of the Board of Directors of Bayswater Realty &
Capital Corp., which is a real estate investment and development company
("Bayswater"). ACF, Icahn & Company, Inc. and Bayswater are deemed to be
directly or indirectly owned and controlled by Mr. Icahn. Mr. Icahn was Chief
Executive Officer and a member of the Office of the Chairman of Trans World
Airlines ("TWA") from November 8, 1988 to January 8, 1993; Chairman of the Board
of Directors of TWA from January 3, 1986 to January 8, 1993; and a director of
TWA from September 27, 1985 to January 8, 1993. Mr. Icahn also has substantial
equity interests in and controls various partnerships and corporations which
invest in publicly traded securities. Mr. Icahn's business address is c/o Icahn
& Co., Inc., One Wall Street Court, New York, New York 10005.
Edward E. Mattner. Mr. Mattner is the President, Treasurer and Secretary of
Beckton Corp. Mr. Mattner is a securities trader for various affiliates of Mr.
Icahn. Mr. Mattner has served in this capacity since May 1976. Mr. Mattner's
business address is c/o Icahn & Co., Inc., One Wall Street Court, New York, New
York 10005.
II-1
Exhibit (a)(2)
<PAGE>
LETTER OF TRANSMITTAL
to Tender Depositary Units Representing Limited Partner Interests
in
American Real Estate Partners, L.P.
Pursuant to the Offer to Purchase
Dated November 20, 1998
As Amended From Time to Time
of
LEYTON LLC
================================================================================
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT,
NEW YORK CITY TIME, ON
DECEMBER 18, 1998, UNLESS THE OFFER IS EXTENDED.
================================================================================
Holders desiring to tender their depositary units representing limited
partner interests ("Units") should complete and sign this Letter of
Transmittal, and forward it to the Depositary at one of the addresses set forth
below together with all depositary receipts representing their interests in
Units tendered ("Depositary Receipts"). Instructions for completing this Letter
of Transmittal are included herein, along with a pre-addressed envelope to the
Depositary.
The Depositary for the Offer is:
HARRIS TRUST COMPANY OF NEW YORK
By Mail: To Confirm: By Hand/Overnight
Wall Street Station Delivery: Receive Window
P.O. Box 1023 (212) 701-7624 Wall Street Plaza
New York, NY 10268-1023 88 Pine Street, 19th Floor
New York, New York 10005
If you have any questions or need assistance in completing this Letter of
Transmittal, please call the Information Agent, Beacon Hill Partners, Inc. at
(212) 843-8500 (Collect) or (800) 792-2829 (Toll Free).
Capitalized terms used herein and not defined shall have the meanings
given to them in the Offer to Purchase For Cash Up to 10 million Depositary
Units Representing Limited Partner Interests in American Real Estate Partners,
L.P., dated November 20, 1998, as it may be amended from time to time, of
Leyton LLC (the "Offer to Purchase").
Delivery of this Letter of Transmittal or any other required documents to
an address other than those set forth above does not constitute valid delivery.
Holders wishing to tender pursuant to the tender offer must validly tender
their Units to the Depositary on or prior to the Expiration Date.
This Letter of Transmittal is to be used: (i) if Depositary Receipts are
to be physically delivered to the Depositary or (ii) unless an Agent's Message
(as defined in Section 2 of the Offer to Purchase) is utilized, if delivery of
Units is to be made by book-entry transfer to the account maintained by the
Depositary at The Depository Trust Company ("DTC" or "Book-Entry Transfer
Facility") pursuant to the procedure for tendering Units set forth in Section 3
to the Offer to Purchase. DELIVERY OF DOCUMENTS TO THE BOOK-ENTRY TRANSFER
FACILITY DOES NOT CONSTITUTE DELIVERY TO THE DEPOSITARY.
Holders whose Depositary Receipts are not available or who cannot deliver
their Depositary Receipts and all other documents required hereby to the
Depositary on or prior to the Expiration Date, or who cannot complete the
procedure for book-entry transfer on a timely basis, nevertheless may tender
their Units in accordance with the guaranteed delivery procedures set forth in
Section 3 of the Offer to Purchase.
<PAGE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
DESCRIPTION OF UNITS TENDERED
(See Instructions 8 and 17)
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Name(s) and Address(es) of Registered Holder(s)
(Please fill in, if blank, exactly as name(s) appear(s) Number ofUnits Tendered
on transfer books of Partnership) (Attach additional list, if necessary)
- --------------------------------------------------------------------------------------------------------------------------
Depositary No. of
Receipt Total No. of No. of Units DRIP Units
No.(s)* Units Owned* Tendered** Tendered**
---------------------------------------------------------
---------------------------------------------------------
---------------------------------------------------------
---------------------------------------------------------
---------------------------------------------------------
---------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Need not be completed by Holders tendering by book-entry transfer.
** Unless otherwise indicated, it will be assumed that all Units or DRIP Units
(as the case may be) described above are being tendered. See Instructions 8
and 17.
IMPORTANT: HOLDERS WHO WISH TO TENDER THEIR UNITS MUST COMPLETE THE BOX
BELOW ENTITLED "METHOD OF DELIVERY," COMPLETE THE BOX ABOVE ENTITLED
"DESCRIPTION OF UNITS TENDERED" AND SIGN IN THE APPROPRIATE BOXES. HOLDERS WHO
COMPLETE THIS LETTER OF TRANSMITTAL WILL BE DEEMED TO HAVE TENDERED ALL UNITS
LISTED IN THE ABOVE REFERRED TO BOXES.
<PAGE>
- -------------------------------------------------------------------------------
METHOD OF DELIVERY
[ ] CHECK HERE IF DEPOSITARY RECEIPTS FOR TENDERED UNITS ARE ENCLOSED HEREWITH.
[ ] CHECK HERE IF TENDERED UNITS ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER
MADE TO THE ACCOUNT MAINTAINED BY THE DEPOSITARY WITH THE BOOK-ENTRY
TRANSFER FACILITY AND COMPLETE THE FOLLOWING:
Name of Tendering
Institution: _____________________________________________________________
Account Number:_______________ Transaction Code Number:__________________
[ ] CHECK HERE IF TENDERED UNITS ARE BEING DELIVERED PURSUANT TO A NOTICE OF
GUARANTEED DELIVERY PREVIOUSLY SENT TO THE DEPOSITARY AND COMPLETE THE
FOLLOWING:
Name(s) of Registered Holder(s): _________________________________________
Window Ticket Number (if any): ___________________________________________
Date of Execution of Notice of Guaranteed Delivery: ______________________
Name of Eligible Institution which Guaranteed Delivery: __________________
- -------------------------------------------------------------------------------
NOTE: SIGNATURES MUST BE PROVIDED BELOW
(PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY)
Ladies and Gentlemen:
By execution hereof, the undersigned hereby tenders to Leyton LLC, a
Delaware limited liability company (the "Purchaser"), the number of the
undersigned's Units in American Real Estate Partners, L.P., a Delaware limited
partnership (the "Partnership"), at a price of $10.50 per Unit, net to the
seller in cash, without interest, upon the terms and subject to the conditions
set forth in the Offer to Purchase, receipt of which is hereby acknowledged,
and in this Letter of Transmittal (which, together with any supplements or
amendments, collectively constitute the "Offer"). The Purchaser reserves the
right to transfer or assign, in whole or from time to time in part, to one or
more persons, the right to purchase Units tendered pursuant to the Offer, but
any such transfer or assignment will not relieve the Purchaser of its
obligations under the Offer or prejudice the rights of tendering Holders to
receive payment for Units validly tendered and accepted for payment pursuant to
the Offer. Holders who tender their Units will not be obligated to pay any
sales commissions in connection with such tender.
The undersigned understands that if more than 10 million Units are validly
tendered prior to or on the Expiration Date and not properly withdrawn, the
Purchaser will, upon the terms of the Offer, accept for payment from among
those tendered Units 10 million Units on a pro rata basis based upon the number
of the tendered Units with adjustments to avoid purchases of certain fractional
Units.
Subject to and effective upon acceptance for payment of and payment for
the Units tendered hereby, the undersigned hereby sells, assigns, and transfers
to, or upon the order of, the Purchaser, all right, title, proxy and interest
in and to all of the Units tendered hereby, including, without limitation, all
rights in, and claims to, any voting rights, rights to be substituted as a
limited partner of the Partnership, Partnership profits and losses, cash
distributions and other benefits of any nature whatsoever distributable or
allocable to or otherwise associated with such tendered Units under the
Partnership Agreement; provided, that if any tendered Units are not purchased
for any reason as described in Section 2 of the Offer to Purchase, this Letter
of Transmittal shall be effective to transfer to the Purchaser only that number
of the undersigned's Units as are accepted for payment and thereby purchased by
the Purchaser. The undersigned understands that upon acceptance for payment of
and payment for the Units tendered by the undersigned, the Purchaser will seek
admission to the Partnership as a limited partner in substitution for the
undersigned as to all such Units tendered by the undersigned. If, however, the
Purchaser accepts for payment and purchases less than all of the undersigned's
Units tendered hereby, the undersigned may continue to be a limited partner
with respect to Units tendered by the undersigned that are not purchased. By
executing and delivering this Letter of Transmittal, the undersigned, being a
tendering Holder, expressly intends the Purchaser to become a limited partner.
By executing and delivering this Letter of Transmittal, a tendering Holder
irrevocably appoints the Purchaser and any designees of the Purchaser and of
each of them as such Holder's proxies and agents (all such persons
collectively, the "Proxies"), with full power of substitution, to the full
extent of such Holder's rights with respect to the Units tendered by such
Holder and accepted for payment by the Purchaser. All such Proxies shall be
considered irrevocable and coupled with an interest in the tendered Units. Such
appointment will be effective when, and only to the extent that, the Purchaser
accepts such Units for payment. Upon such acceptance for payment pursuant to
the Offer, all prior proxies given by such Holder with respect to such Units
will be revoked without further action, and no subsequent proxies may be given
nor any subsequent written consent executed (and, if given or executed, will
not be deemed effective). The Purchaser may assign such proxy to any person
with or without assigning the related Units with respect to which such
2
<PAGE>
proxy was granted. The Purchaser reserves the right to require that, in order
for a Unit to be deemed validly tendered, immediately upon the Purchaser's
payment for such Unit, the Purchaser must be able to exercise full voting
rights with respect to such Unit and other securities, including voting at any
meeting of limited partners.
By executing and delivering the Letter of Transmittal, a tendering Holder
also irrevocably constitutes and appoints the Purchaser and any designees of
the Purchaser as the Holder's attorneys-in-fact, each with full power of
substitution to the full extent of the Holder's rights with respect to the
Units tendered by the Holder and accepted for payment by the Purchaser. Such
appointment will be effective when, and only to the extent that, the Purchaser
accepts the tendered Units for payment. Upon such acceptance for payment, all
prior powers of attorney granted by the Holder with respect to such Units will,
without further action, be revoked, and no subsequent powers of attorney may be
granted (and if granted will not be effective). Pursuant to such appointment as
attorneys-in-fact, the Purchaser and any designees of the Purchaser each will
have the power, among other things, (i) to seek to transfer ownership of such
Units on the Partnership's books and execute and deliver any accompanying
evidences of transfer and authenticity any of them may deem necessary or
appropriate in connection therewith, (ii) upon receipt by the Depositary (as
the tendering Holder's agent) of the Purchase Price, to receive any and all
distributions made by the Partnership, and to receive all benefits and
otherwise exercise all rights of beneficial ownership of such Units in
accordance with the terms of the Offer, (iii) to execute and deliver to the
Partnership and/or its general partners a change of address form instructing
the Partnership to send any and all future distributions to which the Purchaser
is entitled pursuant to the terms of the Offer, in respect of tendered Units to
the address specified in such form, and (iv) to endorse any check payable to or
upon the order of such Holder representing a distribution to which the
Purchaser is entitled pursuant to the terms of the Offer, in each case on
behalf of the tendering Holder; and (v) to deliver Units and transfer ownership
of such Units on the Partnership's books maintained by the general partner, the
Partnership and the Partnership's depositary and transfer agent and to become a
substituted limited partner and to receive all benefits and otherwise exercise
all rights of beneficial ownership of such Units and as a limited partner of
the Partnership, all in accordance with the terms of the Offer. If legal title
to the Units is held through an IRA or KEOGH or similar account, the Holder
understands that this Letter of Transmittal must be signed by the custodian of
such IRA or KEOGH and the Holder hereby authorizes and directs the custodian of
such IRA or KEOGH to confirm this Letter of Transmittal. This power of attorney
shall not be affected by the subsequent mental disability of the Holder, and
the Purchaser shall not be required to post bond in any nature in connection
with this power of attorney. The Purchaser may assign such power of attorney to
any person with or without assigning the related Units with respect to which
such power of attorney was granted.
The undersigned hereby represents and warrants that the undersigned owns
the Units tendered hereby and has full power and authority to validly tender,
sell, assign and transfer the Units tendered hereby and that when the same are
accepted for payment by the Purchaser, the Purchaser will acquire good,
marketable and unencumbered title thereto, free and clear of all liens,
restrictions, charges, encumbrances, conditional sales agreements or other
obligations relating to the sale or transfer thereof, and such Units will not
be subject to any adverse claims and that the transfer and assignment
contemplated herein are in compliance with all applicable laws and regulations.
The undersigned further represents and warrants that the undersigned is a
"United States person," as defined in Section 7701(a)(30) of the Internal
Revenue Code of 1986, as amended (the "Code"), or if the undersigned is not a
United States person, the undersigned does not own beneficially or of record
more than 5% of the outstanding Units. Upon request, the undersigned will
execute and deliver any additional documents deemed by the Depositary or the
Purchaser to be necessary or desirable to complete the assignment, transfer and
purchase of Units tendered hereby and otherwise in order to complete the
transactions, transfers and admissions to the Partnership contemplated herein.
The undersigned understands that a tender of Units pursuant to the
procedures described in Section 3 of the Offer to Purchase and in the
Instructions hereto will constitute a binding agreement between the undersigned
and the Purchaser upon the terms and subject to the conditions of the Offer.
All authority herein conferred or agreed to be conferred shall survive the
death or incapacity of the undersigned, and any obligation of the undersigned
hereunder shall be binding upon the heirs, personal representatives, successors
and assigns of the undersigned. Except as stated in the Offer, this tender is
irrevocable.
The undersigned recognizes that under certain circumstances set forth in
the Offer to Purchase, the Purchaser may not be required to accept for payment
any of the Units tendered hereby. If any tendered Units are not purchased for
any reason, the Letter of Transmittal shall be effective to transfer to the
Purchaser only that number of Units as is accepted and thereby purchased by the
Purchaser, and the Depositary Receipts (or, if necessary, new Depositary
Receipts) representing such unpurchased Units shall be returned.
Upon acceptance of Units by the Purchaser, the Purchaser agrees to be
bound by all of the terms and provisions of the Partnership Agreement.
3
<PAGE>
SIGN HERE TO TENDER YOUR UNITS
------------------------------
(TO BE COMPLETED BY ALL TENDERING HOLDERS REGARDLESS OF
WHETHER DEPOSITARY RECEIPTS ARE BEING PHYSICALLY DELIVERED HEREWITH)
PLEASE BE SURE TO COMPLETE ALL APPLICABLE BLANKS
- --------------------------------------------------------------------------------
By executing this document in the space provided below, the undersigned
hereby: (i) evidences the Holder's agreement to and acceptance of all of the
terms, provisions and matters set forth in this Letter of Transmittal and in
the Offer to Purchase and (ii) tenders the number of Units specified below
pursuant to the terms of the Offer. The undersigned hereby acknowledges and
certifies, under penalty of perjury, to all of the foregoing and that the
information and representations set forth below and provided in Boxes A and B
of this Letter of Transmittal, which have been duly completed by the
undersigned, are true and correct as of the date hereof.
PLEASE SEE INSTRUCTION 3 REGARDING SIGNATURES ON LETTER OF TRANSMITTAL
X ___________________________ Address: __________________________
Signature of Holder -- Date
___________________________ ___________________________________
Printed Name of Holder (Include Zip Code)
X ___________________________ (The Address provided above must be the
Signature of Holder -- Date registered address of the Holder.)
-----------
____________________________
Printed Name of Holder Telephone (Home) ( ) ______________________
Telephone (Work) ( ) ______________________
Capacity (Full Title): __________
- --------------------------------------------------------------------------------
GUARANTEE OF SIGNATURE(S)
Authorized
Signature:_____________________ Name of Eligible Institution: _____________
Name: _________________________ Address: __________________________________
Date: _________________________ Telephone: ( ) ___________________________
- --------------------------------------------------------------------------------
4
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
- ------------------------------------ --------------------------------------------
SPECIAL PAYMENT INSTRUCTIONS SPECIAL DELIVERY INSTRUCTIONS
(See Instructions 2, 3, 9 and 10) (See Instructions 2, 3, 9 and 10)
To be completed ONLY if the To be completed ONLY if the
check for the purchase price check for the purchase price
of Units purchased or of Units purchased or
Depositary Receipts for Units Depositary Receipt(s) for
not tendered or not purchased Units not tendered or not
are to be issued in the name purchased are to be mailed to
of someone other than the someone other than the
signatory, or if Units Signatory or to the Signatory
tendered by book-entry at an address other than that
transfer that are not shown above next to the
purchased are to be returned signatory.
by credit to an account at the
Book-Entry Transfer Facility [ ] Mail (check appropriate box(es):
other than that designated
above. [ ] Check [ ] Depositary Receipt(s) to:
[ ] Issue (check appropriate box(es): Name:______________________________________
(Please Print or Type)
[ ] Check [ ] Depositary Receipt(s) to:
Address:___________________________________
Name:______________________________________
(Please Print or Type) ___________________________________________
Address:___________________________________ ___________________________________________
(Include Zip Code)
___________________________________________
___________________________________________
(Include Zip Code)
___________________________________________
(Tax Identification or Social Security No.)
(See Substitute Form W-9)
[ ] Credit unpurchased Units tendered by
book-entry transfer to the account set
forth below:
___________________________________________
Name of Account Party
Account No.___________________________ at
[ ] The Depository Trust Company
- --------------------------------------------- --------------------------------------------
</TABLE>
Unless otherwise indicated herein in the box entitled "Special Payment
Instructions," the Depositary will issue the check with respect to tendered
Units accepted for purchase, and return any Depositary Receipts not tendered or
not accepted for purchase, in the name(s) of the registered Holder(s) appearing
above in the box entitled "Description of Shares Tendered." Similarly, unless
otherwise indicted herein in the box entitled "Special Delivery Instructions,"
the Depositary will mail the check with respect to tendered Units accepted for
purchase, together with any Depositary Receipts not tendered or not accepted
for purchase (and any accompanying documents, as appropriate) to the
address(es) of the registered Holder(s) appearing above in the box entitled
"Description of Shares Tendered." If either the "Special Payment Instructions"
box and the "Special Delivery Instructions" box are completed, the Depositary
will issue the check with respect to any tendered Units accepted for purchase
and return any Depositary Receipts not tendered or not accepted for payment in
the name(s) of, and will mail the check and any such Units not tendered or not
accepted for payment and return any Depositary Receipts not tendered or not
accepted for payment in the name(s) of, and will mail the check and any such
Units not tendered or not accepted for payment to, the person(s) at the
address(es) so indicated. Unless otherwise indicated herein under "Special
Payment Instructions," in the case of a book-entry transfer of Units, please
credit the account maintained at the Book-Entry Transfer Facility indicated
above with respect to any Units not accepted for payment. The Signatory
recognizes that the Purchaser has no obligations pursuant to the "Special
Payment Instructions" box or "Special Delivery Instructions" box provisions of
this Letter of Transmittal to transfer any Units from the name of the
registered Holder(s) thereof if the Purchaser does not accept for payment any
of the principal amount of such Units.
Please note that a tendering beneficial owner of Units whose Units are
owned of record by an IRA or other qualified plan will not receive direct
payment of the purchase price; rather, payment will be made to the custodian of
such account or plan.
5
<PAGE>
TAX CERTIFICATES
===============================================================================
PLEASE COMPLETE
BOX A
SUBSTITUTE FORM W-9
(See Instruction 5)
The person signing this Letter of Transmittal hereby certifies to the
Purchaser under penalties of perjury:
Part 1 -- The Taxpayer Identification Number (TIN) furnished in the space below
is the correct TIN of the Holder;
TIN: ________________________________
Part 2 -- If no TIN is provided in the space above and this box [ ] is checked,
the Holder has applied for a TIN, a TIN has not been issued to the Holder and
either (i) the Holder has mailed or delivered an application to receive a TIN to
the appropriate Internal Revenue Service ("IRS") Center or Social Security
Administration office or (ii) the Holder intends to mail or deliver an
application in the near future and it is understood that if the Holder does not
provide a TIN to the Purchaser within 60 days, 31% of all reportable payments
made to the Holder thereafter will be withheld until a TIN is provided to the
Purchaser; and
Part 3 -- Unless this box [ ] is checked, the Holder is NOT subject to backup
withholding either because the Holder (i) is exempt from backup withholding,
(ii) has not been notified by the IRS that the Holder is subject to backup
withholding as a result of a failure to report all interest or dividends or
(iii) has been notified by the IRS that such Holder is no longer subject to
backup withholding.
===============================================================================
===============================================================================
PLEASE COMPLETE
BOX B
FIRPTA AFFIDAVIT - CERTIFICATE OF NON-FOREIGN STATUS
(See Instruction 5)
Under Section 1445(c)(5) of the Code and Treas. Reg. 1.1445-11T(d), a
transferee of a U.S. real property interest must withhold tax if the transferor
is a foreign person. To inform the Purchaser that no withholding is required
with respect to the Holder's interest in the Partnership, the person signing
this Letter of Transmittal hereby certifies the following under penalties of
perjury:
Part 1 -- Unless this box [ ] is checked, the Holder is a U.S. citizen or a
resident alien for purposes of U.S. income taxation, and if not an individual,
is not a foreign corporation, foreign partnership, foreign trust, or foreign
estate (as those terms are defined in the Code and Treasury regulations,
promulgated thereunder);
Part 2 -- The name of the Holder is_________________________________________;
Part 3 -- The Holder's Social Security Number (for individuals) or Employer
Identification Number (for non-individuals) is _________________________; and
Part 4 -- The Holder's home address (in the case of an individual) or office
address (in the case of an entity) is
______________________________________________________________________________ .
===============================================================================
6
<PAGE>
INSTRUCTIONS
------------
for Completing the Letter of Transmittal for
AMERICAN REAL ESTATE PARTNERS, L.P.
Forming Part of the Terms and Conditions of the Offer
FOR ASSISTANCE IN COMPLETING THIS LETTER OF TRANSMITTAL, PLEASE CALL:
BEACON HILL PARTNERS, INC. AT (212) 843-8500 (COLLECT) OR
(800) 792-2829 (TOLL FREE).
1. DELIVERY OF LETTER OF TRANSMITTAL.
For convenience in responding to the Offer, a pre-addressed envelope has
been enclosed with the Offer to Purchase. To ensure the Depositary's receipt of
the Letter of Transmittal along with any and all Depositary Receipts, it is
suggested that you use an overnight courier or, if the Letter of Transmittal is
to be delivered by United States mail, that you use certified or registered
mail, return receipt requested. The method of delivery of the Letter of
Transmittal and all other required documents, including delivery through any
book-entry transfer facility, is at the option and risk of the tendering Holder
and delivery will be deemed made only when actually received by the Depositary.
In all cases, sufficient time should be allowed to assure timely delivery.
This Letter of Transmittal is to be used only if Units tendered hereby are
to be forwarded herewith. All physically tendered Depositary Receipts (or in
the case of book-entry transfer, an Agent's Message), together with a properly
completed and validly executed Letter of Transmittal (or manually signed
facsimile thereof) and any other documents required by this Letter of
Transmittal must be received by the Depositary at one of its addresses set
forth on the cover page hereof on or prior to the Expiration Date (except as
otherwise provided pursuant to the Notice of Guaranteed Delivery). If
Depositary Receipts are forwarded to the Depositary in multiple deliveries, a
properly completed and validly executed Letter of Transmittal must accompany
each such delivery.
To be effective, a properly completed and duly executed original Letter of
Transmittal along with any and all Depositary Receipts, any required signature
guarantees and any other required documents must be received by the Depositary
at one of its addresses set forth below prior to 12:00 Midnight, New York City
time on December 18, 1998, unless extended (the "Expiration Date").
By Mail: HARRIS TRUST COMPANY OF NEW YORK
Wall Street Station
P.O. Box 1023
New York, New York 10268-1023
By Hand/Overnight Delivery: HARRIS TRUST COMPANY OF NEW YORK
Receive Window
Wall Street Plaza
88 Pine Street, 19th Floor
New York, New York 10005
To Confirm: (212) 701-7624
2. GUARANTEE OF SIGNATURES.
No signature guarantee is required if either:
(a) this Letter of Transmittal is signed by the registered Holder of the
Units (which term, for purposes hereof, shall include any participant in the
Book-Entry Transfer Facility whose name appears on a security position listing
as the owner of such Units) tendered hereby and payment and delivery are to be
made directly to such owner and such owner has not completed the box entitled
"Special Payment Instructions" or the box entitled "Special Delivery
Instructions" above; or
(b) such Units are tendered for the account of a bank, broker, dealer,
credit union, savings association or other entity which is a member in good
standing of the Securities Transfer Agents Medallion Program (each of the
foregoing constituting an "Eligible Institution").
IN ALL OTHER CASES, AN ELIGIBLE INSTITUTION MUST GUARANTEE ALL SIGNATURES
ON THIS LETTER OF TRANSMITTAL.
3. SIGNATURES ON LETTER OF TRANSMITTAL.
If the Letter of Transmittal is signed by the registered Holder(s) of the
tendered Units, the signature(s) must correspond exactly with the name(s) as
shown on the records of the Partnership without alteration, enlargement or any
change whatsoever.
If the Letter of Transmittal is signed by trustees, executors,
administrators, guardians, attorneys-in-fact, agents, officers of corporations
or others acting in a fiduciary or representative capacity, such persons should
so indicate when signing, and proper evidence satisfactory to the Depositary
and the Purchaser of their authority so to act must be submitted (see
Instruction 4). With respect to most trusts, generally only the signature of
the named trustee will be required. For Units held in a custodial account for
minors, only the signature of the custodian will be required.
7
<PAGE>
For IRA custodial accounts, the beneficial owner should return the
executed Letter of Transmittal to the Depositary as specified in Instruction 1
herein. Such Letter of Transmittal will then be forwarded by the Depositary to
the custodian for additional execution. Such Letter of Transmittal will not be
considered duly completed until after it has been executed by the custodian.
If any tendered Units are registered in different names, it will be
necessary to complete, sign and submit as many separate Letters of Transmittal
as there are different Depositary Receipts.
If this Letter of Transmittal is signed by the registered Holder(s) of the
Units tendered hereby, no endorsements of Depositary Receipts or separate stock
powers are required unless payment of the purchase price is to be made, or
Units not tendered or not purchased are to be returned, in the name of any
person other than the registered Holder(s). Signatures on any such Depositary
Receipts or stock powers must be guaranteed by an Eligible Institution.
If this Letter of Transmittal is signed by a person other than the
registered Holder(s) of the Units tendered hereby, the Depositary Receipt must
be endorsed or accompanied by, appropriate stock powers, in either case, signed
exactly as the name(s) of the registered Holder(s) appear(s) on the
certificates for such Units. Signature(s) on any such certificates or stock
powers must be guaranteed by an Eligible Institution.
If this Letter of Transmittal or any certificate or stock power is signed
by a trustee, executor, administrator, guardian, attorney-in-fact, officer of a
corporation or other person acting in a fiduciary or representative capacity,
such person should so indicate when signing, and proper evidence satisfactory
to the Purchaser of the authority of such person so to act must be submitted.
4. DOCUMENTATION REQUIREMENTS.
In addition to information required to be completed on the Letter of
Transmittal, additional documentation may be required by the Purchaser under
certain circumstances including, but not limited to those listed below.
Questions on documentation should be directed to Beacon Hill Partners, Inc. at
(212) 843-8500 (Collect) or (800) 792-2829 (Toll Free).
Deceased Owner (Joint Tenant) Certified copy of death certificate.
Deceased Owner (Others) Certified copy of death certificate (See
also Executor/Administrator/Guardian
below).
Executor/Administrator/Guardian (a) Certified copies of court appointment
documents for executor or administrator
dated within 60 days of the date of
execution of the Letter of Transmittal; and
(b) Copy of applicable provisions of the
will (title page, executor(s)' powers,
asset distribution); OR
(c) Certified copy of estate distribution
documents.
Attorney-In-Fact Current power of attorney.
Corporations/Partnerships Certified copy of corporate resolution(s)
(with raised corporate seal) or other
evidence of authority to act. Partnerships
should furnish copy of their partnership
agreement.
Trust/Pension Plans Copy of cover page of the trust or pension
plan, along with copy of the section(s)
setting forth names and powers of
trustee(s) and any amendments to such
sections or appointment of successor
trustee(s).
<PAGE>
5. U.S. PERSONS.
A Holder who or which is a United States citizen or a resident alien
individual, a domestic corporation, a domestic partnership, a domestic trust or
a domestic estate (collectively, "United States persons") as those terms are
defined in the Code and Treasury regulations, promulgated thereunder, should
follow the instructions with respect to certifying Boxes A and B.
Taxpayer Identification Number. To avoid 31% federal income tax
withholding, the Holder or other payee must provide the Depositary with the
Holder's correct TIN in the blanks provided for that purpose in Boxes A and B.
In the case of an individual person, such person's social security number is
his or her TIN.
WHEN DETERMINING THE TIN TO BE FURNISHED, PLEASE NOTE: Individual accounts
should reflect their own TIN; joint accounts should reflect the TIN of the
person whose name appears first; trust accounts should reflect the TIN assigned
to the Trust; custodial accounts for the benefit of minors should reflect the
TIN of the minor; corporations or other businesses should reflect the TIN
assigned to that entity.
Substitute Form W-9 -- Box A. Each tendering Holder is required to provide
the Depositary with a correct TIN on Substitute Form W-9 and to certify, under
penalties of perjury, that (i) the TIN provided on Substitute Form W-9 is
correct (or that such Holder is awaiting a TIN) and (ii) the Holder either (a)
is exempt from backup withholding, (b) has not been notified by the IRS that
the Holder is subject to backup withholding as a result of a failure to report
all interest or dividends or (c) has been notified by the IRS that the Holder
is no longer subject to backup withholding. Failure to provide the information
on the form may subject the tendering Holder to 31% federal income tax
withholding on the payments made to the Holder or other payee with respect to
Units purchased pursuant to the Offer.
8
<PAGE>
The box in Box A, Part 2 of the form may be checked if the tendering
Holder has not been issued a TIN and has applied for a TIN or intends to apply
for a TIN in the near future. If the box in Part 2 is checked, backup
withholding, if applicable, will begin 7 days after the Depositary receives an
Awaiting TIN Certification and will continue until the Holder's TIN is provided
to the Depositary. If within 60 days the Depositary receives the Holder's TIN
on a new IRS Form W-9 or copy of the Substitute Form W-9 provided above, the
Depositary will return amounts withheld through the date such IRS Form W-9 or
Substitute Form W-9 is received.
DO NOT CHECK THE BOX IN BOX A, PART 3 UNLESS YOU HAVE BEEN NOTIFIED BY THE
IRS THAT YOU ARE SUBJECT TO BACKUP WITHHOLDING.
FIRPTA Affidavit -- Box B. To avoid potential withholding of tax pursuant
to Section 1445 of the Code in an amount equal to 10% of the purchase price for
Units purchased pursuant to the Offer, plus the amount of any liabilities of
the Partnership allocable to such Units, each Holder who or which is a United
States person must complete the FIRPTA Affidavit stating, under penalties of
perjury, such Holder's TIN and address, and that such Holder is not a foreign
person. Tax withheld under Section 1445 of the Code is not an additional tax.
If withholding results in an overpayment of tax, a refund may be obtained from
the IRS. CHECK THE BOX IN BOX B, PART 1 ONLY IF YOU ARE NOT A U.S. PERSON AS
DESCRIBED THEREIN.
6. FOREIGN PERSONS.
In order for a Holder who is a foreign person (i.e., not a United States
person as defined in Instruction 5 above) to qualify as exempt from 31% backup
withholding, such foreign Holder must complete and deliver to the Depositary,
along with the Letter of Transmittal, Substitute Form W-8 which can be obtained
from the Information Agent.
7. CONDITIONAL TENDERS.
No alternative, conditional or contingent tenders will be accepted.
8. NUMBER OF UNITS TENDERED; PARTIAL TENDERS.
LETTERS OF TRANSMITTAL WHICH HAVE BEEN DULY EXECUTED, BUT WHERE NO
INDICATION IS MARKED IN THE "NUMBER OF UNITS TENDERED" COLUMN IN THE BOX
ENTITLED "DESCRIPTION OF UNITS TENDERED," SHALL BE DEEMED TO HAVE TENDERED ALL
UNITS PURSUANT TO THE OFFER. ALL UNITS REPRESENTED BY DEPOSITARY RECEIPTS
DELIVERED TO THE DEPOSITARY WILL BE DEEMED TO HAVE BEEN TENDERED UNLESS
OTHERWISE INDICATED. If fewer than all the Units evidenced by any Depositary
Receipt submitted are to be tendered, new Depositary Receipt(s) for the
remainder of the Units that were evidenced by the old Depositary Receipt(s)
will be sent to the tendering Holder as soon as practicable after the
expiration of the Offer. No fractional Units will be purchased (except from a
Holder who is tendering all of the Units owned by that Holder). All tendering
Holders, by execution of the Letter of Transmittal (or manually signed
facsimile thereof), waive any right to receive any notice of the acceptance of
their Units for payment.
9. SPECIAL PAYMENT AND DELIVERY INSTRUCTIONS.
If the check for the purchase price of any Units purchased is to be
issued, or any Units not tendered or not purchased are to be returned in the
name of, a person other than the person(s) signing this Letter of Transmittal
or if the check or any Depositary Receipts for Units not tendered or not
purchased are to be mailed to someone other than the person(s) signing this
Letter of Transmittal or to the person(s) signing this Letter of Transmittal at
an address other than that shown above, the appropriate boxes on this Letter of
Transmittal should be completed. Holders tendering Units by book-entry transfer
may request that Units not purchased be credited to such account at any of the
Book-Entry Transfer Facility as such Holder may designate under "Special
Payment Instructions."
10. STOCK TRANSFER TAXES.
The Purchaser will pay any stock transfer taxes with respect to the sale
and transfer of any Units to it or its order pursuant to the Offer. If,
however, payment of the purchase price is to be made to, or Units not tendered
or not purchased are to be returned in the name of, any person other than the
registered Holder(s), then the amount of any stock transfer taxes (whether
imposed on the registered Holder(s), such other person or otherwise) payable on
account of the transfer to such person will be deducted from the purchase price
unless satisfactory evidence of the payment of such taxes, or exemption
therefrom, is submitted.
<PAGE>
11. WAIVER OF CONDITIONS.
The conditions of the Offer may be waived by the Purchaser in whole or in
part at any time and from time to time in its sole discretion.
12. LOST, DESTROYED OR STOLEN DEPOSITARY RECEIPT(S).
If any Depositary Receipt evidencing Units has been lost, destroyed or
stolen, the Holder should promptly notify the Depositary. The Holder will then
be instructed as to the steps that must be taken in order to replace the
Depositary Receipt. This Letter of Transmittal and related documents cannot be
processed until the procedures for replacing lost or destroyed Depositary
Receipts have been followed.
9
<PAGE>
13. WITHDRAWAL RIGHTS.
Holders who have tendered and wish to exercise their right of withdrawal
with respect to the Offer must give a timely notice of withdrawal by writing or
facsimile transmission, which notice must be received by the Depositary at one
of its addresses set forth on the front cover of this Letter of Transmittal on
or prior to the time provided in Section 4 of the Offer to Purchase. For a
withdrawal to be effective, a written or facsimile transmission notice of
withdrawal must be timely received by the Depositary at one of its addresses
set forth on the back cover of the Offer to Purchase. Any notice of withdrawal
must specify the name of the person who tendered the Units to be withdrawn, the
number of Units to be withdrawn and the name of the registered Holder, if
different from that of the person who tendered such Units. If Depositary
Receipts evidencing Units to be withdrawn have been delivered or otherwise
identified to the Depositary, then, prior to the physical release of such
Depositary Receipts, the serial numbers shown on such Depositary Receipts must
be submitted to the Depositary and the signature(s) on the notice of withdrawal
must be guaranteed by an Eligible Institution, unless such Units have been
tendered for the account of an Eligible Institution. If Units have been
tendered pursuant to the procedure for book-entry transfer as set forth in
Section 3 of the Offer to Purchase, any notice of withdrawal must specify the
name and number of the account at the Book-Entry Transfer Facility to be
credited with the withdrawn Units. Withdrawals of tenders of Units may not be
rescinded and any Units withdrawn thereafter will be deemed not validly
tendered for purposes of the Offer. However, properly withdrawn Units may be
retendered by following the procedures described in Section 3 of the Offer to
Purchase at any time prior to the Expiration Date.
14. VALIDITY OF LETTER OF TRANSMITTAL.
All questions as to the validity, form, eligibility (including time of
receipt) and acceptance of the Letter of Transmittal will be determined by the
Purchaser and such determination will be final and binding. The Purchaser's
interpretation of the terms and conditions of the Offer (including these
Instructions for the Letter of Transmittal) also will be final and binding. The
Purchaser will have the right to waive any irregularities or conditions as to
the manner of tendering. And any irregularities in connection with tenders must
be cured within such time as the Purchaser shall determine unless waived by it.
The Letter of Transmittal will not be valid unless and until any
irregularities have been cured or waived. Neither the Purchaser, the Depositary
nor the Information Agent are under any duty to give notification of any
defects in a Letter of Transmittal and will incur no liability for failure to
give such notification.
15. REQUESTS FOR ASSISTANCE AND ADDITIONAL COPIES.
Questions or requests for assistance may be directed to the Information
Agent, Beacon Hill Partners, Inc. at (212) 843-8500 (collect) or (800) 792-2829
(toll free). Copies of the Offer to Purchase and the Letter of Transmittal may
be obtained from the Information Agent by calling either number.
16. INADEQUATE SPACE.
If the space provided herein is inadequate, additional information may be
provided on a separate schedule signed and attached hereto.
17. DIVIDEND REINVESTMENT PLAN.
Certain persons may hold Units issued under the Partnership's dividend
reinvestment plan ("DRIP Units"). LETTERS OF TRANSMITTAL WHICH HAVE BEEN DULY
EXECUTED, BUT WHERE NO INDICATION IS MARKED IN THE "NUMBER OF DRIP UNITS
TENDERED" COLUMN IN THE BOX ENTITLED "DESCRIPTION OF UNITS TENDERED," SHALL BE
DEEMED TO HAVE TENDERED ALL DRIP UNITS PURSUANT TO THE OFFER. If the Holders of
DRIP Units do not indicate in the box entitled "Description of Units Tendered"
what type of Units are being tendered or do not complete the box entitled "No.
of DRIP Units Tendered" and tender more Units than the Units that they hold
which are not DRIP Units, they shall be deemed to have first tendered their
Units which are not DRIP Units and then their DRIP Units.
IMPORTANT: A PROPERLY COMPLETED AND DULY EXECUTED LETTER OF TRANSMITTAL
(ALONG WITH AND ANY AND ALL DEPOSITARY RECEIPTS, AND ANY REQUIRED SIGNATURE
GUARANTEES AND ANY OTHER REQUIRED DOCUMENTS) MUST BE RECEIVED BY THE DEPOSITARY
ON OR PRIOR TO 12:00 MIDNIGHT, NEW YORK CITY TIME ON DECEMBER 18, 1998, UNLESS
EXTENDED.
<PAGE>
IMPORTANT TAX INFORMATION
Under federal income tax law, in order to prevent backup withholding on
amounts payable to a Holder whose tendered Units are accepted for payment, such
Holder is required to provide the Depositary with such Holder's correct TIN on
Substitute Form W-9 above or otherwise establish a basis for exemption from
backup withholding. If the Depositary is not provided with the correct TIN, the
Holder or other payee may be subject to penalties imposed by the IRS. In
addition, payments that are made to such Holder or other payee with respect to
Units purchased pursuant to the Offer may be subject to backup withholding.
Certain Holders (including, among others, all corporations and certain
foreign persons) are not subject to these backup withholding and reporting
requirements. Exempt Holders should indicate their exempt status on Substitute
Form W-9. In order for a foreign person to qualify as an exempt recipient, that
Holder must deliver to the Depositary a Substitute Form W-8, signed under
penalties of perjury, attesting to that Holder's exempt status.
If backup withholding applies, the Depositary is required to withhold 31%
of any reportable payments made to the Holder or other payee. Backup
withholding is not an additional tax. Rather, the federal income tax liability
of persons subject to backup withholding will be reduced by the amount of tax
withheld. If withholding results in an overpayment of taxes, a refund may be
obtained from the IRS.
10
Exhibit (a)(3)
<PAGE>
Offer to Purchase for Cash
Up to 10 Million Depositary Units
Representing Limited Partner Interests
in
AMERICAN REAL ESTATE PARTNERS, L.P.
for
$10.50 Net Per Unit
by
LEYTON LLC
THE OFFER WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON
DECEMBER 18, 1998, UNLESS EXTENDED (THE "EXPIRATION DATE").
November 20, 1998
To Our Clients:
We enclose for your consideration the Offer to Purchase dated November
20, 1998 (the "Offer to Purchase") and the accompanying Letter of Transmittal
(which together constitute the "Offer") in connection with the offer by Leyton
LLC, a Delaware limited liability company (the "Purchaser"), to purchase up to
10 million depositary units representing limited partner interests ("Units") in
American Real Estate Partners, L.P. (the "Partnership") for $10.50 per Unit
pursuant to the terms of the Offer, all upon the terms and subject to the
conditions set forth in the Offer.
We are the registered holder of Units held for your account. A tender
of such Units may be made only by us as the holder of record and pursuant to
your instructions. The specimen Letter of Transmittal is furnished to you for
your information only and cannot be used by you to tender Units held by us for
your account.
Accordingly, we request your instructions as to whether you wish us to
tender any or all of the Units held by us for your account upon the terms and
subject to the conditions set forth in the Offer.
We urge you to read the enclosed Offer to Purchase and Letter of
Transmittal carefully before instructing us to tender your Units.
Capitalized terms used herein and not otherwise defined herein shall
have their respective meanings set forth in the Offer to Purchase.
Your attention is also directed to the following:
1. The tender price is $10.50 per Unit, net to the seller in cash,
subject to applicable withholding taxes, upon the terms and subject to the
conditions set forth in the Offer.
2. The Offer is being made for up to 10 million Units.
3. Consummation of the Offer is subject to certain conditions as
described in the Offer to Purchase. See the Offer to Purchase under the caption
"Section 14 - Conditions of the Offer." Subject to the conditions specified in
the Offer, all of which conditions may be waived by the Purchaser at any time in
whole or in part, the Purchaser will accept for payment up to 10 million Units
validly tendered on or prior to the Expiration Date.
4. Tendering holders of Units will not be required to pay, except as
otherwise provided in the Instructions to the Letter of Transmittal, transfer
taxes with respect to the tendering of the Units pursuant to the Offer.
<PAGE>
If you wish to have us tender Units pursuant to the Offer, please so
instruct us by completing, executing, detaching and returning to us the
instruction form attached hereto. An envelope to return your instructions to us
is enclosed. If you authorize the tender of your Units, all such Units will be
tendered unless otherwise specified on the instruction form.
Payment for Units purchased pursuant to the Offer will in all cases be
made only after timely receipt by the Depositary of (a) Depositary Receipts or
timely confirmation of the book-entry transfer of such Units into the account
maintained by the Depositary at The Depository Trust Company (the "Book-Entry
Transfer Facility"), pursuant to the procedure set forth in Section 3 of the
Offer to Purchase, (b) the Letter of Transmittal (or a manually signed facsimile
thereof), properly completed and duly executed with any required signature
guarantees, or an Agent's Message (as defined in the Offer to Purchase) in
connection with a book-entry delivery and (c) any other documents required by
the Letter of Transmittal.
Your instructions should be forwarded to us in sufficient time to
permit us to submit a tender on your behalf by the Expiration Date for the
Offer, which is 12:00 Midnight, New York City time, on December 18, 1998, unless
extended.
The Purchaser is not aware of any jurisdiction where the making of the
Offer is not in compliance with the laws of such jurisdiction. If the Purchaser
becomes aware of any jurisdiction where the making of the Offer would not be in
compliance with such laws, the Purchaser will make a good faith effort to comply
with any such laws or seek to have such laws declared inapplicable to the Offer.
If, after such good faith effort, the Purchaser cannot comply with any such
applicable laws, the Offer will not be made to (nor will tenders be accepted
from or on behalf of) the holders of units residing in such jurisdiction.
<PAGE>
Instructions with Respect to the
Offer to Purchase for Cash Up to 10 Million Depositary Units
Representing Limited Partner Interests
in
American Real Estate Partners, L.P.
The undersigned acknowledge(s) receipt of your letter and the enclosed
Offer to Purchase dated November 20, 1998 and the related Letter of Transmittal
in connection with the offer by Leyton LLC, a Delaware limited liability company
(the "Purchaser"), to purchase for cash up to 10 million depositary units
representing limited partner interests ("Units") in the American Real Estate
Partners, L.P. for $10.50 per Unit pursuant to the terms of the Offer.
This will instruct you to tender to the Purchaser the number of Units
indicated below (or if no number is indicated below, all Units) which are held
by you for the account of the undersigned, upon the terms and subject to the
conditions set forth in the Offer.
- -------------------------------------------------------------------------------
Number of Units to be Tendered: Units*
----------------------------------------
Date:
--------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
SIGN HERE
Signature(s)
-------------------------------------------------------------------
(Print Name(s))
----------------------------------------------------------------
(Print Address(es))
------------------------------------------------------------
(Area Code and
Telephone Number(s))
-----------------------------------------------------------
(Taxpayer Identification or
Social Security Number(s)
-----------------------------------------------------
- -------------------------------------------------------------------------------
- ---------
* Unless otherwise indicated, it will be assumed that all of the Units held by
us for your account are to be tendered.
Exhibit (a)(4)
<PAGE>
Beacon Hill Partners, Inc.
90 Broad Street
20th Floor
New York, New York 10004
Offer to Purchase for Cash
Up to 10 Million Depositary Units
Representing Limited Partner Interests
in
AMERICAN REAL ESTATE PARTNERS, L.P.
for
$10.50 Net Per Unit
by
LEYTON LLC
THE OFFER WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME,
ON DECEMBER 18, 1998, UNLESS EXTENDED (THE "EXPIRATION DATE").
November 20, 1998
To Brokers, Dealers, Commercial Banks,
Trust Companies and other Nominees:
We have been retained by Leyton LLC, a Delaware limited liability
company (the "Purchaser"), to act as Information Agent in connection with its
offer to purchase for cash up to 10 million depositary units representing
limited partner interests (the "Units") in American Real Estate Partners, L.P.
(the "Partnership") for $10.50 per Unit pursuant to the terms of the Offer (as
herein defined), upon the terms and subject to the conditions set forth in the
Offer to Purchase dated November 20, 1998 (the "Offer to Purchase), and in the
accompanying Letter of Transmittal (which together constitute the "Offer").
The purchase price of $10.50 per Unit for the Units which are tendered,
accepted for payment and paid for by the Purchaser pursuant to the Offer will be
in full satisfaction of all amounts due for such tendered Units.
Consummation of the Offer is subject to certain conditions as described
to the Offer to Purchase. See the Offer to Purchase under the caption "Section
14. - Conditions of the Offer." Subject to the terms and conditions specified in
the Offer, all of which conditions may be waived by the Purchaser at any time in
whole or in part, the Purchaser will accept for payment up to 10 million Units
validly tendered on or prior to the Expiration Date.
We are asking you to contact your clients for whom you hold Units
registered in your name or in the name of your nominee. You will be reimbursed
by the Purchaser for customary clerical and mailing expenses incurred by you in
forwarding materials to your clients. The Purchaser will not pay any fees or
commissions to any broker or dealer or other person (other than Beacon Hill
Partners, Inc. (the "Information Agent") and Harris Trust Company of New York
(the "Depositary"), in each case as described in the Offer) for soliciting
tenders of Units pursuant to the Offer. Tendering holders of Units will not be
required to pay, except as otherwise provided in the Instructions to the
enclosed Letter of Transmittal, transfer taxes with respect to the tendering of
the Units pursuant to the Offer.
<PAGE>
For your information and for forwarding to your clients for whom you
hold Units registered in your name or in the name of your nominee or for
forwarding to your clients who hold Units registered in their own names, we are
enclosing the following documents:
1. The Offer to Purchase;
2. Letter of Transmittal to be used in accepting the Offer;
3. Letter which may be sent to your clients for whose accounts you hold
Units in your name or in the name of your nominee, together with an Instruction
Form for obtaining such clients' instructions with regard to the Offer;
4. Notice of Guaranteed Delivery to be used to accept the Offer if
depositary receipts representing such Units ("Depositary Receipts") are not
immediately available, or if the procedure for book-entry transfer cannot be
completed on or prior to the Expiration Date; and
5. Return envelope addressed to Harris Trust Company of New York, the
Depositary.
We urge you to contact your clients as promptly as possible. Please
note that the Offer will expire at 12:00 Midnight, New York City time, on
December 18, 1998, unless extended. See the Offer to Purchase under the caption
"Section 5.-Extension of Tender Period; Termination; Amendment."
In order to take advantage of the Offer, (i) a duly executed and
properly completed Letter of Transmittal with any required signature guarantees,
or an Agent's Message (as defined in the Offer to Purchase) in connection with a
book-entry delivery of Units, and any other required documents should be sent to
the Depositary, and (ii) Depositary Receipts representing the tendered Units
should be delivered to the Depositary, or such Units should be tendered by
book-entry transfer into the Depositary's account maintained at the Book-Entry
Transfer Facility (as described in the Offer to Purchase), all in accordance
with the instructions set forth in the Letter of Transmittal and the Offer to
Purchase.
If a holder of Units desires to tender Units pursuant to the Offer, and
(i) the Depositary Receipts are not immediately available, or (ii) such holder
cannot deliver such Depositary Receipts and other required documents to reach
the Depositary before the Expiration Date, (iii) such holder cannot complete the
procedures for book-entry transfer on a timely basis, then in each case such
holder must tender such Units according to procedures for guaranteed delivery
set forth in the Offer to Purchase under the caption "Section 3. - Procedure for
Tendering Units."
Requests for information or additional copies of the Offer to Purchase
or the Letter of Transmittal should be directed to either the Information Agent
or the Depositary. All deliveries, correspondence and questions sent or
presented to the Information Agent or the Depositary relating to the Offer
should be directed to one of the addresses or telephone numbers set forth on the
back cover of the Offer to Purchase.
Very truly yours,
BEACON HILL PARTNERS, INC.
NOTHING CONTAINED HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL CONSTITUTE
YOU OR ANY OTHER PERSON AS AN AGENT OR AFFILIATE OF THE PURCHASER,
THE INFORMATION AGENT OR THE DEPOSITARY, OR AUTHORIZE YOU OR ANY
OTHER PERSON TO MAKE STATEMENTS ON BEHALF OF ANY OF THEM WITH
RESPECT TO THE OFFER, EXCEPT FOR STATEMENTS EXPRESSLY MADE IN
THE OFFER TO PURCHASE OR THE LETTER OF TRANSMITTAL.
<PAGE>
Exhibit (a)(5)
NOTICE OF GUARANTEED DELIVERY
for
TENDER OF DEPOSITARY UNITS REPRESENTING
LIMITED PARTNER INTERESTS IN
AMERICAN REAL ESTATE PARTNERS, L.P.
(Not to be used for Signature Guarantees)
------------------------------------------------------------------
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT,
NEW YORK CITY TIME, ON DECEMBER 18, 1998, UNLESS EXTENDED.
------------------------------------------------------------------
This Notice of Guaranteed Delivery or one substantially equivalent
hereto must be used to accept the Offer (as defined below) if depositary
receipts ("Depositary Receipts") evidencing depositary units representing the
limited partner interests (the "Units") in American Real Estate Partners, L.P.
(the "Partnership"), are not immediately available or the procedures for
book-entry transfer cannot be completed on a timely basis or time will not
permit all required documents to reach the Harris Trust Company of New York (the
"Depositary") prior to the Expiration Date (as defined in the Offer to
Purchase). This Notice of Guaranteed Delivery may be delivered by hand or
transmitted by facsimile transmission or mail to the Depositary. See Section 3
of the Offer to Purchase.
The Depositary for the Offer is:
THE HARRIS TRUST COMPANY OF NEW YORK
By Mail: By Hand/Overnight Delivery:
Harris Trust Company of New York Harris Trust Company of New York
Wall Street Station Receive Window
P.O. Box 1023 Wall Street Plaza
New York, NY 10268-1023 88 Pine Street, 19th Floor
New York, NY 10005
By Facsimile Transmission:
(212) 701-7636
(for Eligible Institutions Only)
Confirm by Telephone
For Information call (212) 701-7624 (Collect) or (800) 792-2829 (Toll Free)
DELIVERY OF THIS NOTICE OF GUARANTEED DELIVERY TO AN ADDRESS OTHER THAN
AS SET FORTH ABOVE OR TRANSMISSION OF INSTRUCTIONS VIA A FACSIMILE TRANSMISSION
TO A NUMBER OTHER THAN THE ONES LISTED ABOVE WILL NOT CONSTITUTE A VALID
DELIVERY.
This Notice of Guaranteed Delivery is not to be used to guarantee
signatures. If a signature on a Letter of Transmittal is required to be
guaranteed by an Eligible Institution (as defined in Section 3 of the Offer to
Purchase) under the instructions thereto, such signature guarantee must appear
in the applicable space provided in the signature box on the Letter of
Transmittal.
The Eligible Institution that completes this form must communicate the
guarantee to the Depositary and must deliver the Letter of Transmittal and
Depositary Receipts to the Depositary within the time period shown herein.
Failure to do so could result in a financial loss to such Eligible Institution.
THE GUARANTEE ON THE NEXT PAGE MUST BE COMPLETED
<PAGE>
Ladies and Gentlemen:
The undersigned hereby represents that it "owns" the Units tendered
hereby within the meaning of Rule 14e-4 under the Securities Exchange Act of
1934, as amended ("Rule 14e-4"), and hereby tenders to Leyton LLC, a Delaware
limited liability company, upon the terms and subject to the conditions set
forth in the Offer to Purchase, dated November 20, 1998 (the "Offer to
Purchase"), and in the related Letter of Transmittal (which, together with any
supplements or amendments thereto, collectively constitute the "Offer"), receipt
of each of which is hereby acknowledged, the number of Units indicated below
pursuant to the guaranteed delivery procedures set forth in Section 3 of the
Offer to Purchase.
<TABLE>
<S> <C>
Number of Units: _______________________________ Name(s) of Record Holder(s):
Depositary Receipt Nos. (if available): ________ _______________________________________________
________________________________________________ _______________________________________________
(Please type or print)
Check the box if Units will be tendered by Address(es): __________________________________
book-entry transfer:
[ ] The Depository Trust Company _______________________________________________
(Zip Code)
Area Code and Tel. No.: _______________________
Account Number: ________________________________ Signature(s): _________________________________
Dated: _________________________________________ _______________________________________________
</TABLE>
THE GUARANTEE SET FORTH BELOW MUST BE COMPLETED
GUARANTEE
(Not to be used for signature guarantee)
The undersigned, an Eligible Institution (as such term is defined in
Section 3 of the Offer to Purchase), hereby guarantees to deliver to the
Depositary the Depositary Receipts representing the Units tendered hereby, in
proper form for transfer, or a Book-Entry Confirmation (as defined in Section 2
of the Offer to Purchase) with respect to such Units, in either case together
with a properly completed and duly executed Letter of Transmittal (or a manually
signed facsimile thereof), together with any required signature guarantees (or,
in the case of a book-entry transfer, an Agent's Message (as defined in Section
2 of the Offer to Purchase)), and any other documents required by the Letter of
Transmittal, all within three New York Stock Exchange, Inc. trading days after
the date hereof.
<TABLE>
<S> <C>
Name of Firm: __________________________________ _______________________________________________
(Authorized Signature)
Address: _______________________________________ Name: _________________________________________
________________________________________________ Title: ________________________________________
(Zip Code)
Area Code and Tel. No.: ________________________ Date: _________________________________________
</TABLE>
NOTE: DO NOT SEND DEPOSITARY RECEIPTS WITH THIS NOTICE OF GUARANTEED DELIVERY.
DEPOSITARY RECEIPTS SHOULD BE SENT ONLY TOGETHER WITH YOUR LETTER OF
TRANSMITTAL.
Exhibit (a)(6)
<PAGE>
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
Guidelines for Determining the Proper Identification Number to Give the
Payer. Social Security numbers have nine digits separated by two hyphens: i.e.,
000-00-0000. Employer identification numbers have nine digits separated by only
one hyphen: i.e., 00-0000000. The table below will help determine the number to
give the payer.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Give the
Give the EMPLOYER
For this type of account: SOCIAL SECURITY For this type of account: IDENTIFICATION
number of -- number of --
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1. An individual account The individual 9. A valid trust, estate or Legal entity (Do not furnish
pension trust the identifying number of the
2. Two or more individuals The actual owner of the account personal representative or
(joint account) or, if combined funds, any one trustee unless the legal entity
of the individuals(1) itself is not designated in the
account title.)
3. Husband and wife The actual owner of the account
(joint account) or, if joint funds, either
person(1)
4. Custodian account of a The minor(2) 10. Corporate account The Corporation
minor (Uniform Gift to
Minors Act)
5. Adult and minor The adult or, if the minor is the 11. Religious, charitable, or The organization
(joint account) only contributor, the minor(1) educational organization
account
6. Account in the name of The ward, minor, or incompetent 12. Partnership account held The partnership
guardian or committee for person(3) in the name of the business
a designated ward, minor,
or incompetent person
7. a. The usual revocable The grantor-trustee(1) 13. Association, club, or The organization
savings trust account other tax-exempt
(grantor is also trustee) organization
b. So-called trust account The actual owner(1) 14. A broker or registered The broker or nominee
that is not a legal or nominee
valid trust under state
law 15. Account with the Department The public entity
of Agriculture in
8. Sole proprietorship The Owner(4) the name of a public
account entity (such as a State or
local government, school
district, or prison) that
receives agricultural
program payments
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</TABLE>
(1) List first and circle the name of the person whose number you furnish.
(2) Circle the minor's name and furnish the minor's social security number.
(3) Circle the ward's, minor's or incompetent person's name and furnish such
person's social security number.
(4) Show the name of the owner.
(5) List first and circle the name of the legal trust, estate or pension trust.
NOTE: If no name is circled when there is more than one name, the number will
be considered to be that of the first name listed.
<PAGE>
GUIDELINES FOR CERTIFICATION OF TAXPAYER
IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
Page 2
Obtaining a Number
If you don't have a taxpayer identification number or you don't know your
number, obtain Form SS-5, Application for a Social Security Number Card, or Form
SS-4, Application for Employer Identification Number, at the local office of the
Social Security Administration or the Internal Revenue Service and apply for a
number.
Payees Exempt from Backup Withholding
Payees specifically exempted from backup withholding on All payments include the
following:
o A corporation
o A financial institution.
o An organization exempt from tax under section 501(a), or an individual
retirement plan.
o The United States or any agency or instrumentality thereof.
o A State, the District of Columbia, a possession of the United States, or any
subdivision or instrumentality thereof.
o A foreign government, a political subdivision of a foreign government, or any
agency or instrumentality thereof.
o An international organization or any agency, or instrumentality thereof.
o A registered dealer in securities or commodities registered in the U.S. or a
possession of the U.S.
o A real estate investment trust.
o A common trust fund operated by a bank under section 584(a).
o An exempt charitable remainder trust, or a non-exempt trust described in
section 4947(a)(1)
o An entity registered at all times under the Investment Company Act of 1940.
o A foreign central bank of issue.
Payments of dividends and patronage dividends not generally subject to backup
withholding include the following:
o Payments to nonresident aliens subject to withholding under section 1441.
o Payments to partnerships not engaged in a trade or business in the U.S. and
which have at least one nonresident partner.
o Payments of patronage dividends where the amount received is not paid in
money.
o Payments made by certain foregoing organizations.
o Payments made to certain nominees.
Payments of interest not generally subject to backup withholding include the
following:
o Payments of interest on obligations issued by individuals.
Note: You may be subject to backup withholding if this interest is $600 or more
and is paid in the course of the payer's trade or business and you have not
provided your correct taxpayer identification number to the payer.
<PAGE>
o Payments of tax-exempt interest (including exempt-interest dividends under
section 852).
o Payments described in section 6049(b)(5) to nonresident aliens.
o Payments on tax-free covenant bonds under section 1451.
o Payments made by certain foreign organizations.
o Payments made to certain nominees.
Exempt payees described above should file Form W-9 to avoid possible erroneous
backup withholding. FILE THIS FORM WITH THE PAYER, FURNISH YOUR TAXPAYER
IDENTIFICATION NUMBER, WRITE "EXEMPT" ON THE FACE OF THE FORM, AND RETURN IT TO
THE PAYER. IF THE PAYMENTS ARE INTEREST, DIVIDENDS, OR PATRONAGE DIVIDENDS, ALSO
SIGN AND DATE THE FORM.
Certain payments other than interest, dividend, and patronage dividends,
that are not subject to information reporting are also not subject to backup
withholding. For details, see the regulations under sections 6041, 6041A(a),
6045, and 6050A.
Privacy Act Notice. -- Section 6109 requires most recipients of dividend,
interest, or other payments to give taxpayer identification numbers to payers
who must report the payments to the IRS. IRS uses the numbers for identification
purposes. Payers must be given the numbers whether or not recipients are
required to file tax returns. Beginning January 1, 1984 payers must generally
withhold 20% of taxable interest, dividend, and certain other payments to a
payee who does not furnish a taxpayer identification number to a payer. Certain
penalties must also apply.
Penalties.
(1) Penalty for failure to Furnish Taxpayer Identification Number. -- If you
fail to furnish your taxpayer identification number to a payer, you are subject
to a penalty of $50 for each such failure unless your failure is due to
reasonable cause and not to willful neglect.
(2) Civil Penalty for False Information With Respect to Withholding. -- If you
make a false statement with no reasonable basis which results in no imposition
of backup withholding, you are subject to a penalty of $500.
(3) Criminal Penalty for Falsifying Information. Falsifying certifications or
affirmations may subject you to criminal penalties including fines and/or
imprisonment.
FOR ADDITIONAL INFORMATION CONTACT
YOUR TAX CONSULTANT OR THE
INTERNAL REVENUE SERVICE.
Exhibit (a)(7)
<PAGE>
This announcement is neither an offer to purchase nor a solicitation of an offer
to sell Units. The Offer is being made solely by the Offer to Purchase of Leyton
LLC, dated November 20, 1998, and the related Letter of Transmittal and is not
being made to, nor will tenders be accepted from or on behalf of, Holders
residing in any jurisdiction in which making or accepting the Offer would
violate that jurisdiction's laws. In those jurisdictions where the securities,
blue sky or other laws require the Offer to be made by a licensed broker or
dealer, the Offer shall be made on behalf of Leyton LLC, if at all, only by one
or more registered brokers or dealers licensed under the laws of such
jurisdiction.
Notice of Offer to Purchase for Cash
Up to Ten Million Depositary Units
Representing Limited Partner Interests
in
AMERICAN REAL ESTATE PARTNERS, L.P.
at
$10.50 Net Per Unit
by
LEYTON LLC
Leyton LLC (the "Purchaser"), a limited liability company affiliated
with Carl C. Icahn, is offering to purchase up to 10 million depositary units
representing limited partner interests in American Real Estate Partners, L.P., a
Delaware limited partnership (the "Partnership"), at a purchase price (the
"Purchase Price") of $10.50 per Unit, net to the seller in cash, without
interest thereon, upon the terms and subject to the conditions set forth in the
Purchaser's Offer to Purchase dated November 20, 1998 (the "Offer to Purchase"),
and in the Letter of Transmittal (which, together with any supplements or
amendments, constitute the "Offer"). All outstanding depositary units of limited
partner interests in the Partnership are referred to herein as "Units" and the
holders of such Units are referred to herein as "Holders."
==================================================================
THE OFFER, THE WITHDRAWAL RIGHTS AND PRORATION PERIOD WILL
EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON DECEMBER 18,
1998, UNLESS THE OFFER IS EXTENDED.
==================================================================
Mr. Icahn currently owns the general partner of the Partnership and is
the beneficial owner of in excess of 68% of the Units. As a result, Mr. Icahn
may be deemed to control the Partnership.
The Offer will expire at 12:00 midnight, New York City time, on
December 18, 1998, unless and until the Purchaser, in its sole discretion, shall
have extended the period of time for which the Offer is open (such date and
time, as extended, the "Expiration Date").
<PAGE>
If the Purchaser makes a material change in the terms of the Offer, or
if it waives a material condition to the Offer, the Purchaser will extend the
Offer and disseminate additional tender offer materials to the extent required
by Rules 14d-4(c) and 14d-6(d) under the Securities Exchange Act of 1934, as
amended (the "Exchange Act"). The minimum period during which the Offer must
remain open following any material change in the terms of the Offer, other than
a change in price or a change in percentage of securities sought or a change in
any dealer's soliciting fee, will depend upon the facts and circumstances,
including the materiality of the change. With respect to a change in price or,
subject to certain limitations, a change in the percentage of securities sought
or a change in any dealer's soliciting fee, a minimum of ten business days from
the date of such change is generally required to allow for adequate
dissemination to Holders. Accordingly, if prior to the Expiration Date, the
Purchaser increases (other than increases of not more than two percent of the
outstanding Units) or decreases the number of Units being sought, or increases
or decreases the consideration offered pursuant to the Offer, and if the Offer
is scheduled to expire at any time earlier than the tenth business day from the
date that notice of such increase or decrease is first published, sent or given
to Holders, the Offer will be extended at least until the expiration of such ten
business days. For purposes of the Offer, a "business day" means any day other
than a Saturday, Sunday or a federal holiday and consists of the time period
from 12:01 a.m. through 12:00 midnight, New York City time. The period of time
during which the Offer is open may be extended by the Purchaser, at any time and
from time to time. If the Purchaser extends the Offer, such extension will be
followed by a press release or public announcement thereof, which will be issued
no later than 9:00 a.m., New York City time, on the next business day after the
scheduled Expiration Date.
For purposes of the Offer, the Purchaser will be deemed to have
accepted for payment pursuant to the Offer, and thereby purchased, validly
tendered Units if, as and when the Purchaser gives oral or written notice to the
Depositary of the Purchaser's acceptance of those Units for payment pursuant to
the Offer.
Tenders of Units made pursuant to the Offer are irrevocable, except
that Holders who tender their Units in response to the Offer will have the right
to withdraw their tendered Units at any time prior to the Expiration Date by
sending a written or facsimile transmission notice of withdrawal to the
Depositary (as defined in the Offer to Purchase) at one of its addresses set
forth on the back cover of the Offer to Purchase. Any notice of withdrawal must
specify the name of the person who tendered the Units to be withdrawn, the
number of Units to be withdrawn and the name of the registered holder, if
different from that of the person who tendered such Units. If depositary
receipts evidencing Units to be withdrawn have been delivered or otherwise
identified to the Depositary, then, prior to the physical release of such
depositary receipts, the serial numbers shown on such depositary receipts must
be submitted to the Depositary and the signature(s) on the notice of withdrawal
must be guaranteed by an Eligible Institution (as defined in the Offer to
Purchase), unless such Units have been tendered for the account of an Eligible
Institution. If Units have been tendered pursuant to the procedure for
book-entry transfer as set forth in Section 3 of the Offer to Purchase any
notice of withdrawal must specify the name and number of the account at the
Book-Entry Transfer Facility (as defined in the Offer to Purchase) to be
credited with the withdrawn Units. In addition, tendered Units may be withdrawn
at any
<PAGE>
time after January 18, 1999, unless the tender has theretofore been accepted for
payment as provided in the Offer to Purchase.
If tendering Holders tender more than the number of Units that the
Purchaser seeks to purchase pursuant to the Offer, the Purchaser will take into
account the number of Units so tendered and take up and pay for as nearly as may
be pro rata, disregarding fractions, according to the number of Units tendered
by each tendering Holder during the period during which the Offer remains open.
Each of the Tender Offer Documents (as defined below) contains
important information which should be read carefully before any decision is made
with respect to the Offer.
The terms of the Offer are more fully set forth in the Offer to
Purchase with respect to the Offer and the related Letter of Transmittal (the
"Tender Offer Documents"). Questions and requests for assistance or requests for
copies of the Tender Offer Documents may be directed to the Information Agent,
as set forth below, and copies will be furnished promptly at the Purchaser's
expense. No fees or commissions will be payable to brokers, dealers or other
persons for soliciting tenders of Units pursuant to the Offer. The Tender Offer
Documents contain terms and conditions, and the information required by Rule
14d-6(e)(1)(vii) under the Exchange Act, which are incorporated herein by
reference.
The Information Agent for the Offer is:
Beacon Hill Partners, Inc.
90 Broad Street
New York, New York 10004
(212) 843-8500 (Collect)
or
(800) 755-5001 (Toll Free)
November 20, 1998
<PAGE>
Exhibit (a)(8)
FOR IMMEDIATE RELEASE
---------------------
Contact: Susan Gordon 702-4309
ICAHN UNIT TO INITIATE TENDER OFFER
Mount Kisco, N.Y., November 16, 1998 - Carl C. Icahn announced today that he
will initiate a tender offer (the "Offer") for up to ten million Depositary
Units of American Real Estate Partners, L.P. (NYSE:ACP), a Delaware limited
partnership, at a purchase price of $10.50 per Unit, net to the seller in cash.
The bidder will be a newly formed entity controlled by Mr. Icahn.
It is anticipated that the Offer will commence on or before November
20, 1998.
The Units sought constitute approximately 21.7% of the outstanding
Units of the Partnership. Mr. Icahn currently is the beneficial owner of
approximately 68% of the outstanding Units.
The Offer is not subject to financing.
<PAGE>
Exhibit (c)(1)
UNDERTAKING
UNDERTAKING entered into this 20th day of November, 1998, by
STARFIRE HOLDING CORPORATION, a Delaware corporation (the "Indemnitor"), for the
benefit of AMERICAN REAL ESTATE PARTNERS, L.P., a Delaware limited partnership
("AREP") and its subsidiaries (collectively with AREP, the "Indemnitees" and
each of such Indemnitees individually, an "Indemnitee").
WHEREAS, Leyton LLC, a Delaware limited liability company (the
"Purchaser"), a company affiliated with Mr. Carl C. Icahn, has commenced a
tender offer (the "Offer") for depositary units ("Units") representing limited
partner interests in AREP pursuant to an Offer to Purchase dated November 20,
1998 (the "Offer to Purchase");
WHEREAS, entities directly or indirectly owned by Carl C.
Icahn that are under common control or members of a controlled group, in each
case within the meaning of Section 4001 of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA") and Section 414 of the Internal
Revenue Code of 1986, as amended (the "Code") and the rules and regulations
promulgated thereunder (the "Controlled Group"), are subject to liability under
ERISA and the Code with respect to certain pension plan minimum funding and
termination liabilities (such minimum funding and termination liabilities, as
more fully described in Section 10 of the Offer to Purchase entitled
"Information Concerning the Purchaser and Certain Affiliates of the Purchaser;
Pension Liability Considerations," the "Pension Liabilities");
WHEREAS, the Indemnitor is an indirect beneficial owner of
interests in the Purchaser;
NOW, THEREFORE, in consideration of the premises and other
good and valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the Indemnitor hereby undertakes and agrees as follows:
1. Defined Terms. Unless otherwise defined herein, each
capitalized term used herein shall have the meaning attributed to it below:
"Effective Date" shall mean that date, if any, on
which the Purchaser acquires pursuant to the Offer a number of
Units such that the Partnership is deemed under ERISA or the
Code to be a member of the Controlled Group .
"Entity" shall mean any partnership, limited
liability company, joint venture, corporation, trust or other
business entity or vehicle.
"Losses" shall mean any and all losses, costs,
damages, fees or expenses (including, without limitation,
reasonable attorneys fees and disbursements) arising
<PAGE>
from Pension Liabilities imposed upon any Indemnitee as a
result of such person being deemed, under ERISA or the Code,
to a member of the Controlled Group.
"Net Worth" shall mean, as to any Entity, the amount
by which its total assets exceed its total liabilities, all as
determined on a consolidated basis in accordance with
generally accepted accounting principles applicable in the
United States of America.
"Termination Date" shall mean that date, if any,
on which the Indemnitees are no longer subject to any: (x)
Pension Liability; or (y) any contingency that could result in
the imposition of any Losses upon an Indemnitee.
2. Indemnity. The Indemnitor agrees that from the Effective
Date and through the Termination Date, at its sole cost and expense, it will
indemnify and defend and hold harmless, each Indemnitee, from any and all Losses
imposed on any Indemnitee or its assets.
3. Net Worth. Any Indemnitor that is an Entity agrees that
from the Effective Date and through the Termination Date, the Indemnitor will
not make any distributions to its stockholders or other owners that would reduce
its Net Worth to less than $250 million.
4. Delegation. Any Indemnitor may delegate its duties and
obligations under this Undertaking to Mr. Icahn, or to an Entity affiliated with
Mr. Icahn, so long as Mr. Icahn or such Entity agrees to assume and fully
perform all of the obligations of the Indemnitor hereunder (the "Assumed
Obligations"). Any such delegation may be made without the consent of any
Indemnitee.
In the case of any such delegation to any Entity, the
Entity to which such delegation is made shall have a Net Worth in an amount
greater than the lesser of: (i) $250 million, or (ii) the Net Worth of the
delegating Indemnitor at the time of such delegation.
5. Release. Following any delegation in accordance with the
terms of this Section 4 of this Undertaking: (i) the delegating Indemnitor shall
be, and shall be deemed to be, released from all of its duties and obligations
hereunder and shall have no liability to any Indemnitee in respect of this
Undertaking, and all of the same shall, for all purposes be deemed to have been
included in the Assumed Obligations; and (ii) thereafter the person or Entity
assuming such duties and obligations shall be deemed for all purposes to be the
"Indemnitor" (and no other person or Entity shall be deemed to be the Indemnitor
for any purpose) until such time, if any, of a subsequent delegation pursuant
hereto.
6. Effect; Termination. Notwithstanding the other provisions
hereof, the duties and obligations of the Indemnitor hereunder will: (i) be
effective and enforceable only from the Effective Date, if any; and (ii)
terminate on the Termination Date, if any.
7. Enforcement. Each Indemnitee shall be an express third
party beneficiary of this Undertaking and shall be entitled to enforce the same
as if it were a party hereto.
2
<PAGE>
8. Waiver; Amendment. The provisions of this Undertaking may
be changed, waived, discharged or terminated only by an instrument in writing
signed by the Indemnitor and AREP.
9. Governing Law. This Undertaking shall in all respects be
governed by, and construed and enforced in accordance with, the laws of the
State of New York.
IN WITNESS WHEREOF, the Indemnitor has caused this Undertaking
to be executed as of the date first written above.
INDEMNITOR:
STARFIRE HOLDING CORPORATION
/s/ Carl C. Icahn
---------------------------
Name: Carl C. Icahn
Title: President
[SIGNATURE PAGE FOR UNDERTAKING BY
STARFIRE HOLDING CORPORATION DATED NOVEMBER 20, 1998]
3
<PAGE>
Manually signed facsimile copies of the Letter of Transmittal will be
accepted. The Letter of Transmittal and any other required documents should be
sent or delivered by each Holder or such Holder's broker, dealer, bank, trust
company or other nominee to the Depositary as set forth below.
THE DEPOSITARY FOR THE OFFER IS:
HARRIS TRUST COMPANY OF NEW YORK
BY MAIL:
Wall Street Station
P.O. Box 1023
New York, New York 10268-1023
BY HAND/OVERNIGHT DELIVERY:
Receive Window
Wall Street Plaza
88 Pine Street, 19th Floor
New York, New York 10005
CONFIRM BY TELEPHONE:
(212) 701-7624
Questions and requests for assistance or for additional copies of the
Offer to Purchase and the Letter of Transmittal may be directed to the
Information Agent at its telephone number and address listed below. You may also
contact your broker, dealer, bank, trust company or other nominee for assistance
concerning the Offer.
THE INFORMATION AGENT FOR THE OFFER IS:
BEACON HILL PARTNERS, INC.
90 Broad Street
New York, New York 10004
(212) 843-8500 (Collect)
or
(800) 792-2829 (Toll Free)
